atect corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.63B
• Operating Income: ¥97M
• Net Income: ¥83M
• EPS: ¥18.73

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Verdict: Atect delivered a solid profit rebound in FY2026 Q2 despite slight top-line contraction, driven by margin improvement and modest non-operating tailwinds. Revenue declined 1.3% YoY to 16.31, but operating income more than doubled to 0.97 (+107.1% YoY), and net income surged to 0.82 (+240.7% YoY). Gross profit was 6.68, implying a gross margin of 41.0%, while SG&A of 5.70 (34.9% of sales) left operating margin at 5.95%. Ordinary income reached 1.03 (+168.6% YoY), supported by net non-operating income of about 0.05 (0.14 income less 0.09 expenses), and profit before tax was 1.23, suggesting roughly 0.20 of extraordinary gains. Net margin expanded to 5.0%, versus roughly 1.5% a year ago (based on back-solving YoY), a material improvement of about 357 bps. Operating margin expanded by an estimated 312 bps YoY (from ~2.83% to ~5.95%), reflecting better cost discipline and operating leverage despite lower sales. Interest coverage is healthy at 11.42x, indicating manageable financing costs even with elevated leverage. However, liquidity is tight: the current ratio is 0.99 and quick ratio 0.83, with working capital slightly negative (-0.10), signaling near-term liquidity stress. Balance sheet leverage is on the higher side with D/E at 1.66x and total liabilities of 29.41 against equity of 17.73. ROE stands at 4.6% via DuPont (5.0% net margin × 0.346 asset turnover × 2.66 leverage), but ROIC is low at 2.2%, highlighting capital inefficiency. Earnings quality is difficult to judge because OCF and FCF are unreported, and a portion of PBT appears to be supported by one-off items. The calculated payout ratio is 54.1%, nominally within a sustainable range, but cannot be validated against free cash flow due to missing cash flow data. While the quarter marks a clear profitability inflection, sustainability will depend on maintaining the gross margin, containing SG&A, and improving capital efficiency. Near-term focus should remain on liquidity management (current ratio <1.0) and on lifting ROIC toward the 5%+ range to underpin medium-term value creation.

Profitability Analysis

DuPont decomposition (ROE 4.6%) = Net Profit Margin (5.0%) × Asset Turnover (0.346) × Financial Leverage (2.66x). The biggest improvement YoY appears to be in the Net Profit Margin, which expanded from roughly 1.5% to 5.0%, given NI +240.7% on slightly lower sales. Operating margin expansion (from ~2.83% to 5.95%) indicates better cost control and operating leverage, despite revenue declining 1.3%. Asset turnover is low at 0.346 (sales 16.31 vs assets 47.13), suggesting underutilized assets or a capital-heavy footprint; there is no evidence of improvement without prior-period asset data. Financial leverage at 2.66x is elevated and largely stable; leverage is supporting ROE, not operational efficiency. Business drivers: higher gross profitability (41.0% GM) and SG&A discipline (SG&A 34.9% of sales) drove OI growth; modest net non-operating gains (+0.05) and likely extraordinary gains (~0.20) boosted PBT and NI. Sustainability: margin gains from SG&A control can persist if maintained, but the contribution from extraordinary items is likely one-time. Watch for any reversal if demand softens or if input costs rise. Concerning trends: sales contraction (-1.3% YoY) alongside high SG&A intensity implies limited operating leverage if revenue weakens; ROIC at 2.2% is well below a 5% warning threshold.

Growth Assessment

Top line: Revenue declined 1.3% YoY to 16.31, indicating soft demand or product mix headwinds. Profit growth: Operating income +107.1% and net income +240.7% were driven by margin expansion rather than growth, which may be less durable without volume recovery. Mix and margins: Gross margin at 41.0% is solid; SG&A at 34.9% of sales leaves limited buffer if gross margin compresses. Non-operating/one-time: Ordinary income benefited from net non-operating income (~0.05), and PBT suggests ~0.20 of extraordinary gains; these are not necessarily repeatable. Outlook: To sustain profit growth, the company needs revenue stabilization or growth, continued SG&A discipline, and improved asset utilization. Key swing factors in coming quarters include demand in end-markets for its products (e.g., electronics-related packaging/components), pricing power to preserve GM around 40%, and cost pass-through. Absent growth, earnings momentum could stall as cost savings mature.

Financial Health

Liquidity is tight: Current ratio 0.99 (warning) and quick ratio 0.83 indicate limited short-term cushion; working capital is slightly negative at -0.10. Cash and deposits are 4.46 versus short-term loans of 3.50, which is a positive coverage for that component, but total current liabilities (16.37) exceed current assets (16.27). Solvency: D/E is 1.66x (above the 1.5x conservative benchmark but below the 2.0x warning threshold); total liabilities are 29.41 against equity of 17.73. Interest-bearing debt, as disclosed by components, totals 15.86 (ST 3.50 + LT 12.36), implying gross debt-to-equity around 0.9x. Interest coverage at 11.42x is comfortable. Maturity mismatch: reliance on short-term borrowings (3.50) alongside negative working capital raises rollover risk if credit conditions tighten. Off-balance sheet obligations: none reported in the provided data. Explicit warnings: Current ratio < 1.0; D/E not > 2.0 but elevated.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are unreported, so OCF/Net Income and FCF coverage cannot be assessed. Given the notable uplift in NI partly from extraordinary gains (~0.20), earnings quality has some one-time elements this quarter. Working capital: receivables (5.18) and inventories (2.67) appear reasonable versus sales, but without period-to-period movement data, we cannot detect working-capital-driven profit management. With liquidity tight (current ratio 0.99), sustained positive OCF will be important to fund operations and any dividends. Red flags: OCF/NI cannot be computed; therefore, quality assessment remains incomplete.

Dividend Sustainability

The calculated payout ratio is 54.1%, within the typical sustainability threshold (<60%). However, DPS and cash flow data are unreported, and FCF coverage cannot be assessed. With ROIC at 2.2% and liquidity tight (current ratio 0.99), maintaining dividends at a >50% payout may constrain reinvestment unless OCF is robust. Capital allocation prudence would suggest aligning payouts with internally generated cash; absent OCF/FCF disclosure, sustainability is uncertain. Policy outlook: No explicit guidance provided in the data; monitor FY guidance, capex plans, and any debt covenant constraints.

Risk Assessment

Business Risks:

• Demand softness evidenced by -1.3% YoY revenue may persist if end-markets remain weak.
• Margin sensitivity: SG&A at 34.9% of sales limits cushion against gross margin compression.
• Potential reliance on one-time gains (~0.20 extraordinary) to meet profit targets.
• Industry cyclicality (electronics/components packaging) could pressure volumes and pricing.

Financial Risks:

• Liquidity risk: Current ratio 0.99 and quick ratio 0.83 with negative working capital (-0.10).
• Elevated leverage: D/E 1.66x; rollover risk on short-term loans (3.50).
• Capital efficiency risk: ROIC at 2.2% well below 5% warning threshold.
• Interest rate risk on floating-rate debt could erode coverage if rates rise.

Key Concerns:

• Earnings quality uncertainty due to unreported OCF/FCF and presence of extraordinary gains.
• Sustainability of margin expansion without revenue growth.
• Potential tightening of credit affecting liquidity and refinancing.

Investment Implications

Key Takeaways:

• Clear profit inflection: OI +107% YoY and NI +241% despite -1.3% revenue.
• Material margin expansion: operating margin to 5.95% (+~312 bps) and net margin to 5.0% (+~357 bps).
• Liquidity tight (current ratio 0.99) and leverage elevated (D/E 1.66x) despite strong interest cover (11.42x).
• ROIC 2.2% highlights need for asset efficiency improvements.
• Non-operating and extraordinary items modestly supported earnings this quarter.

Metrics to Watch:

• Order trends and revenue growth trajectory in H2.
• Gross margin stability around 41% and SG&A ratio vs sales.
• Operating cash flow and free cash flow once disclosed; OCF/NI > 1.0 target.
• Net debt trajectory and current ratio recovery above 1.2–1.5.
• ROIC progression toward 5%+.

Relative Positioning: Within small-cap industrials/components peers, Atect shows improving profitability but trails on capital efficiency (ROIC 2.2%) and maintains tighter liquidity than ideal; balance sheet is serviceable with good interest coverage but leverage is higher than conservative benchmarks.

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