TAKAGI SEIKO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥20.21B
• Operating Income: ¥565M
• Net Income: ¥327M
• EPS: ¥138.25

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

Takagi Seiko (TSE: 4242) posted FY2026 Q2 consolidated results showing resilient profitability despite top-line pressure. Revenue declined 7.0% YoY to ¥20.2bn, but operating income edged up 1.3% YoY to ¥565m, indicating effective cost control and/or favorable mix. Gross profit of ¥3.32bn translates to a gross margin of 16.4%, which is modest for a plastics/industrial components profile yet stable enough to support EBITDA of ¥1.67bn (8.3% margin). Ordinary income reached ¥638m, exceeding operating income by ¥73m, suggesting a small net positive from non-operating items. Net income surged 199.3% YoY to ¥385m, lifting net margin to 1.91%, although the improvement likely reflects below-the-line factors as well as cost actions. DuPont decomposition yields a calculated ROE of 2.81% based on a 1.91% net margin, 0.652x asset turnover, and 2.27x financial leverage—an improvement, but still low for equity efficiency. Cash generation was strong: operating cash flow (OCF) was ¥1.52bn, 3.94x net income, signaling high earnings quality and favorable working capital contribution this half. Liquidity appears sound with a current ratio of 133.6% and a quick ratio of 108.5%, supported by working capital of ¥5.21bn. The balance sheet shows total assets of ¥30.99bn and total liabilities of ¥21.04bn; debt-to-equity of 1.54x and interest coverage of 8.7x indicate manageable leverage and serviceability. Reported equity ratio and several cash flow line items show as zero, which reflect non-disclosure rather than actual zeros; hence, leverage and cash buffers should be interpreted with caution. The effective tax rate metric shown as 0.0% is not reliable given disclosed income tax expense of ¥217m; tax normalization likely occurred versus the prior year. Dividend data (DPS, payout, FCF coverage) are not disclosed for the period, so distribution policy cannot be assessed from the provided figures. Operating leverage appears contained: despite lower sales, operating profit grew, implying cost discipline and efficiency gains. Overall, the company generated solid operating cash, maintained adequate liquidity, and improved bottom-line performance, but profitability levels and ROE remain modest. Key uncertainties include the sustainability of margin improvements amid revenue softness and the trajectory of capital expenditures not visible due to undisclosed investing cash flows.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.91%
• asset_turnover: 0.652
• financial_leverage: 2.27
• calculated_ROE: 2.81%
• commentary: Low net margin and moderate asset turnover constrain ROE; leverage is not excessive but does provide a lift. The YoY surge in net income improved ROE, though underlying operating margins remain thin. margin_quality:
• gross_margin: 16.4%
• EBITDA_margin: 8.3%
• operating_margin: 2.8%
• net_margin: 1.91%
• observations: Gross margin indicates limited pricing power or product mix constraints; operating margin expansion versus revenue decline points to cost control and/or mix improvement. Ordinary income exceeded operating income, implying some support from non-operating gains. operating_leverage: Revenue fell 7.0% YoY while operating income rose 1.3% YoY, evidencing positive operating leverage from cost containment and efficiency. However, the low absolute operating margin (2.8%) suggests limited buffer against further top-line pressure.

Growth Assessment

revenue_sustainability: The 7.0% YoY revenue decline indicates demand softness. Without segment or end-market disclosure, sustainability is uncertain and likely tied to cyclical industrial demand and customer inventory adjustments. profit_quality: Net income growth (+199.3% YoY) outpaced operating income (+1.3% YoY), implying contributions from non-operating items and/or lower non-recurring charges versus the prior year. OCF/Net Income of 3.94 supports the quality of earnings for the period. outlook: Near-term outlook hinges on demand normalization and the ability to sustain cost efficiencies. If revenue stabilizes, operating leverage could improve margins from a low base; conversely, further volume declines would pressure profitability given modest gross margins.

Financial Health

liquidity:

• current_ratio: 133.6%
• quick_ratio: 108.5%
• working_capital: ¥5,213m
• commentary: Short-term liquidity appears adequate; inventory levels (¥3,899m) are meaningful but the quick ratio above 100% reduces near-term refinancing risk. solvency:
• debt_to_equity: 1.54x
• interest_coverage: 8.7x
• commentary: Leverage is moderate, and interest coverage is comfortable, indicating manageable solvency risk in the current earnings environment. capital_structure: Total assets of ¥30.99bn and total liabilities of ¥21.04bn imply a balanced structure, but the reported equity ratio of 0% is a non-disclosure artifact and not indicative of actual capital adequacy.

Cash Flow Quality

earnings_quality: OCF of ¥1,517m versus net income of ¥385m (OCF/NI = 3.94) indicates strong cash conversion, suggesting accruals were favorable and working capital was a source of cash. FCF_analysis: Investing cash flow was not disclosed (reported as zero due to non-disclosure), so free cash flow cannot be reliably calculated. The headline FCF figure shown as zero should not be interpreted as an actual zero. working_capital: With inventories at ¥3,899m and current assets of ¥20,709m against current liabilities of ¥15,496m, the period likely benefited from receivables collection and/or inventory normalization, contributing to strong OCF.

Dividend Sustainability

payout_ratio_assessment: Payout ratio data are not disclosed for the period (reported as 0% due to non-disclosure). With ROE at 2.81% and improving cash generation, capacity exists but cannot be confirmed without policy guidance. FCF_coverage: Free cash flow is not determinable due to missing investing cash flows; thus, dividend coverage from FCF cannot be assessed. policy_outlook: No dividend policy detail is available in the provided data. Any assessment of dividends should await management guidance and full-year cash flow visibility, especially capex plans.

Risk Assessment

Business Risks:

• End-market cyclicality affecting order volumes and pricing power
• Raw material (resin) and energy cost volatility compressing margins
• Customer concentration risk typical in industrial components supply chains
• Potential FX exposure impacting input costs and competitiveness
• Supply chain disruptions impacting production schedules and deliveries

Financial Risks:

• Margin compression risk given low operating margin (2.8%)
• Leverage sensitivity with debt-to-equity at 1.54x if earnings weaken
• Refinancing and interest rate risk despite current 8.7x coverage
• Working capital swings that could dilute cash conversion in weaker quarters
• Tax expense variability given mismatch between reported tax metric and actual tax charge

Key Concerns:

• Sustainability of cost-driven margin gains amid a 7% revenue decline
• Limited visibility on capex and FCF due to undisclosed investing cash flows
• Low ROE (2.81%) versus typical cost of equity, signaling modest capital efficiency

Investment Implications

Key Takeaways:

• Revenue softness (-7.0% YoY) contrasts with stable-to-improving operating profit (+1.3% YoY), indicating effective cost control.
• Cash generation is strong (OCF/NI 3.94), supporting liquidity and balance sheet flexibility.
• Margins remain thin (operating margin 2.8%), leaving limited cushion against further demand weakness.
• Leverage is moderate (D/E 1.54x) with comfortable interest coverage (8.7x).
• Lack of disclosure on investing cash flows limits visibility into capex intensity and true FCF.
• Dividend status is unclear due to non-disclosure; policy and payout capacity cannot be inferred.

Metrics to Watch:

• Order trends and revenue trajectory in 2H FY2026
• Gross and operating margin progression versus input cost movements
• Capex disclosures and investing cash flows to determine FCF
• Working capital metrics (DSO/DIO/DPO) and OCF sustainability
• Leverage and interest coverage as rates and earnings evolve
• Any updates to dividend policy and capital allocation

Relative Positioning: Within industrial/plastics peers, Takagi Seiko exhibits stronger cash conversion this period and adequate liquidity, but operates with thinner margins and lower ROE than high-return specialty peers; visibility on capex and FCF is below average due to disclosure gaps.

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