NICHIBAN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥24.15B
• Operating Income: ¥1.02B
• Net Income: ¥809M
• EPS: ¥32.23

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Nichiban Co., Ltd. (4218) reported FY2026 Q2 consolidated results showing modest top-line growth but margin compression. Revenue increased 1.6% year over year to 24.15 billion yen, while operating income declined 12.6% to 1.03 billion yen, indicating cost pressures and/or higher SG&A intensity. Gross profit was 7.24 billion yen with a 30.0% gross margin, roughly stable, but the operating margin fell to 4.2%, implying deleveraging in SG&A. Net income decreased 19.0% to 656 million yen, resulting in a net margin of 2.72% for the half. The DuPont decomposition shows ROE of 1.52%, driven by a low asset turnover of 0.359 and modest financial leverage of 1.56x; the margin element is the key drag in the period. Liquidity remains strong with a current ratio of 233% and a quick ratio of 200%, signaling ample short-term coverage. Interest burden is minimal (interest expense 19 million yen) with interest coverage at 53.9x, reinforcing low financial risk. Operating cash flow was solid at 2.27 billion yen, 3.47x net income, supported by depreciation and amortization of 1.55 billion yen and likely favorable working capital effects. Ordinary income was 1.05 billion yen, and the tax expense of 363 million yen implies an effective tax rate in the mid-30% range despite a reported metric of 0.0% in the feed (likely unreported). Inventory stood at 5.63 billion yen, a manageable 14% of current assets, with working capital of 22.72 billion yen. Total assets were 67.22 billion yen versus equity of 43.07 billion yen, indicating a conservative capital structure. EBITDA was 2.58 billion yen with a margin of 10.7%, leaving room for incremental margin improvement if costs normalize or price increases stick. The softness in operating income despite revenue growth suggests input cost pressure or higher expenses in marketing, R&D, or logistics. Cash and equivalents, investing cash flow, dividends, and shares outstanding appear unreported; these zeros should not be interpreted as true zeros. Overall, the company exhibits strong balance sheet health and cash generation quality but faces near-term profitability headwinds.

Profitability Analysis

ROE_decomposition: ROE 1.52% = Net margin 2.72% x Asset turnover 0.359 x Financial leverage 1.56. The principal constraint is low net margin and subdued asset turnover (partly influenced by using end-period assets for a half-year period). Leverage is modest and not a major driver. margin_quality: Gross margin at 30.0% is relatively resilient, but the operating margin is 4.2% (1.03b/24.15b), implying SG&A of ~6.22b or 25.7% of sales. The gap between gross and operating margins suggests elevated operating costs. Net margin at 2.72% is compressed by taxes (~34–35% implied) and non-operating items are minimal (ordinary income close to operating income). operating_leverage: With revenue up 1.6% YoY and operating income down 12.6% YoY, negative operating leverage is evident in the half, likely from higher fixed costs or inflation in logistics/materials not fully offset by pricing. EBITDA margin of 10.7% versus operating margin of 4.2% highlights sizeable non-cash charges; if volumes recover, incremental margins could improve, but current run-rate indicates cost pressure.

Growth Assessment

revenue_sustainability: Top-line growth of 1.6% YoY is modest and suggests stable but unspectacular demand across core tape/medical adhesive lines. Sustainability will hinge on pricing retention and volume recovery in domestic and export markets. profit_quality: Ordinary income closely tracks operating income, implying limited reliance on non-operating gains. The implied effective tax rate (~34–35%, based on tax expense of 363m versus pre-tax approximated by ordinary income) is normalizing; the reported 0.0% is unreported data. Profitability is currently constrained by SG&A and input costs rather than revenue shortfalls. outlook: Near-term outlook is for stable revenue but pressured margins unless cost inflation eases or further price/mix improvement is achieved. Given strong OCF and low interest burden, the company has capacity to invest in productivity and product mix upgrades; however, the half-year ROE at 1.52% (roughly ~3% annualized, directional) indicates returns are below typical cost of equity, necessitating margin recovery to improve growth quality.

Financial Health

liquidity: Current ratio 233.3% and quick ratio 200.3% indicate ample liquidity and conservative working capital management. Inventories of 5.63b yen are reasonable at ~14% of current assets. solvency: Total assets 67.22b vs equity 43.07b implies liabilities at ~24.42b (36% of assets). Debt-to-equity of 0.57x (as provided) and interest expense of 19m yen suggest limited interest-bearing debt and very low financial risk. capital_structure: Financial leverage at 1.56x (Assets/Equity) is conservative. The equity ratio figure of 0.0% in the feed is unreported; based on provided balances, the equity ratio is approximately 64% (43.07b/67.22b), underscoring a strong capital base.

Cash Flow Quality

earnings_quality: OCF of 2.27b is 3.47x net income, supported by 1.55b in D&A and likely favorable working capital movements, indicating high-quality earnings and strong cash conversion. FCF_analysis: Investing cash flow is unreported (0 in feed). Without capex data, FCF cannot be reliably computed; mechanically, OCF less capex (unknown) would likely still be positive given OCF strength, but this is an assumption. working_capital: Working capital stands at 22.72b yen, with robust liquidity. Inventory appears controlled; monitoring receivables and payables turnover is advisable to confirm whether OCF strength is sustainable versus one-off timing benefits.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are unreported (zeros in the feed should not be taken as actual). EPS for the half is 32.23 yen, which, if annualized directionally, provides earnings capacity but current payout practice cannot be assessed from this dataset. FCF_coverage: FCF is unreported due to missing investing cash flow and capex data; thus, coverage of dividends by FCF cannot be determined here. policy_outlook: Given strong liquidity and OCF, the balance sheet could support dividends; however, absent disclosed DPS or a stated policy in the data, we cannot infer sustainability or trajectory. Margin recovery will be a key determinant of distributable capacity.

Risk Assessment

Business Risks:

• Input cost inflation for petrochemical-based raw materials impacting gross margin
• Demand variability in industrial tapes and office/consumer products
• Exposure to healthcare reimbursement/pricing dynamics for medical adhesive products
• Competitive pricing pressure from domestic and Asian peers
• FX volatility affecting import costs and export competitiveness

Financial Risks:

• Potential working capital swings affecting OCF in subsequent quarters
• Margin compression leading to lower internal funding for capex or R&D
• Concentration in certain materials suppliers (implied for adhesives/tapes industry)

Key Concerns:

• Operating income decline (-12.6% YoY) despite revenue growth (+1.6% YoY)
• Low half-year ROE (1.52%) versus typical equity return hurdles
• Insufficient disclosure on investing cash flows and dividends in the provided data

Investment Implications

Key Takeaways:

• Top line is stable (+1.6% YoY) but margins are under pressure (OP margin 4.2%)
• Strong liquidity and conservative leverage mitigate financial risk
• High cash conversion (OCF/NI 3.47x) underscores solid earnings quality
• ROE is subdued at 1.52% for the half; margin recovery is required to lift returns
• Interest burden is minimal (coverage 53.9x), providing flexibility for strategic spend

Metrics to Watch:

• Gross and operating margin trajectory (pricing versus input cost trends)
• SG&A ratio to sales and operating leverage effects
• Inventory and receivables turnover to validate OCF sustainability
• Capex levels and investing cash flows (to assess true FCF)
• Ordinary income versus operating income (non-operating items), and effective tax rate

Relative Positioning: Nichiban appears financially conservative with strong liquidity and cash conversion, but operates with mid-to-low single-digit operating margins; relative to larger diversified peers, it is a niche player with stable revenues yet more sensitive to cost pressures, making margin management and mix improvement central to competitiveness.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis