CLUSTER TECHNOLOGY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥664M
• Operating Income: ¥113M
• Net Income: ¥104M
• EPS: ¥18.39

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

Cluster Technology Co., Ltd. (4240) delivered a strong FY2026 Q2, with revenue up 51.3% YoY to ¥664m and operating income up 465.2% YoY to ¥113m, evidencing both robust demand and improved operating leverage. Net income rose 553.4% YoY to ¥104m, translating to a net margin of 15.7%, which is high for a specialty manufacturing/materials profile and a marked uplift from the prior year. Operating margin reached roughly 17.0% (¥113m/¥664m), supported by cost control and scale benefits, while EBITDA was ¥139.7m (21.0% margin), confirming improved cash earnings power before non-cash items. DuPont decomposition indicates ROE of 6.0% driven primarily by margin improvement, with asset turnover of 0.337x and low financial leverage at 1.14x moderating overall return on equity. Liquidity is exceptionally strong, with a current ratio of 765% and quick ratio of 752%, and the balance sheet is lightly levered with debt-to-equity of 0.11x, providing ample financial flexibility. Ordinary income (¥115m) slightly exceeds operating income due to minimal net non-operating items, and interest coverage is extremely high at 774x, underscoring negligible financial risk from borrowing costs. Operating cash flow was ¥63.2m (OCF/NI of 0.61), which trails accounting earnings; this implies working capital investment or timing differences, a common byproduct of rapid growth that warrants monitoring. Free cash flow is not derivable as investing cash flows are not disclosed (reported as zero, which denotes “not reported”), so capital intensity and maintenance capex needs cannot be assessed this quarter. The reported gross profit of ¥181.9m implies a 27.4% gross margin, which aligns with the provided calculated metric; however, it does not reconcile with the reported cost of sales figure, likely reflecting XBRL classification differences rather than actual inconsistency. Equity ratio is shown as 0.0% and cash and equivalents as zero, both likely unreported rather than true values; analysis therefore relies on other balance sheet indicators (e.g., total equity and liabilities). Inventory is small at ¥22.9m relative to revenue and current assets, hinting at either a service/mix tilt or tight inventory management, but receivables and payables composition are not provided. Dividend payout remains nil (DPS ¥0), consistent with reinvestment at this scale; with no FCF visibility, dividend capacity assessment is inherently limited. Overall, profitability momentum and balance sheet strength are clear positives, but cash conversion, the sustainability of gross margins, and capex needs are the key variables for the next half. Given the non-consolidated basis and several unreported line items, conclusions should be revisited when fuller disclosures (cash, capex, equity ratio detail) are available. Near-term outlook hinges on maintaining the widened operating margin while normalizing working capital to improve OCF/NI toward or above 1.0x.

Profitability Analysis

roe_decomposition:

• net_profit_margin: 0.1566
• asset_turnover: 0.337
• financial_leverage: 1.14
• calculated_roe: 0.06
• commentary: ROE of 6.0% is primarily margin-driven, with modest asset intensity (0.337x ATO) and low leverage (1.14x) dampening the multiplier effect. margin_quality: Gross margin is indicated at 27.4% (¥181.9m/¥664.0m), operating margin at ~17.0% (¥113.0m/¥664.0m), and net margin at 15.7% (¥104.0m/¥664.0m). The step-up from gross to operating margin implies SG&A ratio near 10.4%, suggesting disciplined overhead control. The significant YoY expansion in operating income (+465%) signals meaningful operating leverage on higher volumes and/or improved mix. operating_leverage: EBITDA margin of 21.0% vs operating margin of 17.0% indicates moderate non-cash cost load (D&A 4.0% of sales). The scale-driven uplift in EBIT relative to revenue (+465% vs +51%) evidences strong positive operating leverage in this half; sustainability depends on demand visibility and pricing discipline.

Growth Assessment

revenue_sustainability: Revenue grew 51.3% YoY to ¥664m. Such a growth rate suggests either a cyclical upswing or successful new products/orders; durability will depend on backlog, customer concentration, and end-market momentum (not disclosed). profit_quality: Net margin at 15.7% and EBITDA margin at 21.0% are solid. However, OCF/NI at 0.61 indicates weaker cash conversion, likely from working capital investment tied to growth. Tax expense of ¥5.7m vs ordinary income of ¥115m implies a low effective tax in this half; normalization could trim net margin later. outlook: If gross margin can be held near the current 27–28% and SG&A discipline continues, mid-teens operating margins look attainable. The key swing factors are volume stability, input costs, and potential capex to support growth (capex not disclosed).

Financial Health

liquidity: Current ratio 764.9% and quick ratio 751.6% indicate ample short-term coverage. Working capital is ¥1,147.7m, providing a substantial buffer for growth-related needs. solvency: Debt-to-equity at 0.11x and interest coverage of 774x indicate very low financial risk. Total liabilities of ¥184.4m against equity of ¥1,733.0m reinforce a conservative capital structure. capital_structure: Financial leverage at 1.14x (Assets/Equity) is low. Equity ratio is reported as 0.0% but is clearly unreported; based on assets and equity, an implied equity ratio would be roughly 88% at period-end.

Cash Flow Quality

earnings_quality: OCF/Net income at 0.61 suggests earnings exceeded cash generation this half, consistent with growth-driven working capital use or timing effects. EBITDA of ¥139.7m comfortably exceeds OCF, highlighting the role of working capital. fcf_analysis: Free cash flow cannot be computed as investing cash flows (and capex) are not disclosed (reported zeros denote unreported). Consequently, we cannot assess reinvestment intensity or FCF margin. working_capital: Inventories are modest at ¥22.9m; receivables and payables are not disclosed. The OCF shortfall relative to NI points to receivable build and/or other current assets expansion; watch DSO and advances.

Dividend Sustainability

payout_ratio_assessment: No dividend declared (DPS ¥0; payout 0%). Given strong earnings momentum but limited FCF visibility, conserving cash for growth appears prudent at this stage. fcf_coverage: Not assessable this quarter due to unreported investing cash flows; the stated 0.00x reflects missing data rather than true coverage. policy_outlook: With low leverage and strong liquidity, the company has capacity to introduce dividends in the future, but near-term policy likely remains reinvestment-focused pending clarification of capex and cash balances.

Risk Assessment

Business Risks:

• Demand volatility in end-markets given sharp revenue swing (+51% YoY).
• Gross margin sustainability amid potential input cost fluctuations and pricing pressure.
• Customer concentration risk (not disclosed) typical for smaller specialized manufacturers.
• Execution risk in scaling operations while maintaining quality and on-time delivery.
• Product and technology obsolescence risk if innovation cadence slows.

Financial Risks:

• Working capital absorption reducing cash conversion (OCF/NI 0.61).
• Capex visibility is limited (investing CF unreported), creating uncertainty over future FCF.
• Potential normalization of low effective tax rate could compress net margin.
• Non-consolidated reporting may omit exposures from affiliates or partners.

Key Concerns:

• Inability to verify cash and cash equivalents and equity ratio due to unreported items.
• Inconsistency between reported cost of sales and gross profit suggests XBRL classification differences; reliance on provided gross margin is necessary.
• Sustainability of the step-change in operating margin without full cost/mix disclosure.

Investment Implications

Key Takeaways:

• Strong top-line growth (+51% YoY) with outsized operating profit expansion (+465% YoY) demonstrates significant operating leverage.
• Healthy profitability profile: 27.4% gross margin, 17.0% operating margin, 21.0% EBITDA margin, and 15.7% net margin.
• Balance sheet strength with minimal leverage (0.11x D/E) and exceptional liquidity (current ratio ~7.6x) reduces financial risk.
• Cash conversion lags earnings (OCF/NI 0.61), indicating working capital investment; FCF not assessable due to missing capex data.
• ROE at 6.0% is modest given low leverage and asset turnover; improving asset efficiency could lift returns.

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue sustainability.
• Gross margin trend and input cost pass-through.
• OCF/NI and working capital turns (DSO/DPO/DIO) to confirm cash conversion.
• Capex and investing cash flows to assess FCF and reinvestment needs.
• Actual equity ratio and cash balance once disclosed.
• Customer concentration and segment mix, if later provided.

Relative Positioning: Versus TSE small-cap specialty manufacturing/materials peers, the company exhibits stronger near-term growth and margins with a more conservative balance sheet, but lower ROE due to modest asset turnover and low leverage; transparency on cash and capex is below best-in-class given unreported items.

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