DaikyoNishikawa Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥81.70B
• Operating Income: ¥4.83B
• Net Income: ¥3.98B
• EPS: ¥55.76

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

Verdict: Mixed quarter with resilient bottom line and strong cash generation despite softer revenue and compressed operating margin. Revenue declined 2.2% YoY to 816.97, reflecting modest top-line headwinds. Gross profit was 108.35, implying a gross margin of 13.3% on current-period numbers. Operating income fell 15.1% YoY to 48.35, with operating margin at 5.9% as cost pressure and negative operating leverage weighed on profitability. Ordinary income was 52.35 (-1.8% YoY), indicating non-operating gains partly cushioned operating softness. Net income increased 19.7% YoY to 38.95, with net margin at 4.8%, aided by a lighter tax rate and favorable non-operating balance. Based on YoY percentages, operating margin compressed by roughly 89 bps (from ~6.8% to 5.9%), while net margin expanded by about 87 bps (from ~3.9% to 4.8%). Ordinary margin was roughly stable (+3 bps to ~6.4%). Earnings quality was strong: OCF of 100.91 was 2.6x net income, indicating robust cash conversion. Liquidity remains ample with a current ratio of 193% and cash/deposits of 419.3 against short-term loans of 15.06. Leverage is conservative to moderate with D/E at 0.82x and interest coverage a solid 13.3x. Comprehensive income was only 4.51, far below net income, signaling sizable other comprehensive losses (likely FX translation or securities valuation), which is a notable equity-dilutive factor. ROE calculated at 4.5% is subdued, consistent with an ROIC of 5.2% that sits below the 7–8% target range for manufacturing peers. Non-operating income ratio of 21.2% highlights a meaningful reliance on non-core items to support ordinary income. Capex was 36.08 and share repurchases totaled 19.99; with strong OCF, internal funding capacity appears adequate, though total investing cash flows are unreported. Forward-looking, margin repair (procurement, productivity) and stabilizing OCI swings will be key to sustaining ROE improvement amid auto demand and resin cost volatility.

Profitability Analysis

ROE (4.5%) = Net profit margin (4.8%) × Asset turnover (0.516) × Financial leverage (1.82x). The largest change vs. last year is at the margin level: operating margin compressed by ~89 bps (estimated from YoY revenue and operating income), but net margin improved by ~87 bps due to better non-operating balance and a 23.7% effective tax rate. Business drivers likely include input cost pressure (resin, energy), unfavorable mix/volume effects given the -2.2% revenue decline, and stable financial leverage. The net margin uplift versus operating shortfall suggests tailwinds from interest income (1.60) and controlled non-operating expenses (4.24), partially offset by interest expense (3.64). This improvement in net margin appears partly cyclical (rates/FX) and may not be fully sustainable if operating headwinds persist. SG&A of 60.00 implies SG&A as % of sales at ~7.3%; without prior-period SG&A we cannot confirm whether SG&A grew ahead of revenue, but the operating deleverage indicates cost absorption challenges.

Growth Assessment

Top-line contracted 2.2% YoY to 816.97, pointing to softer demand or price/mix headwinds in the auto components market. Operating income fell 15.1% YoY to 48.35, a larger decline than revenue, evidencing negative operating leverage. Ordinary income (-1.8% YoY) and net income (+19.7% YoY) suggest below-OP supports (interest income, lower tax rate). EBITDA of 99.20 (12.1% margin) indicates reasonable underlying earnings capacity, but conversion to OP is pressured by depreciation (50.85). With ROIC at 5.2%, returns remain below the typical 7–8% target corridor, highlighting a need for margin and capital efficiency improvement. Outlook hinges on demand normalization, procurement cost relief, and productivity gains; stabilizing FX and rates would help ordinary income but are external. Near-term, management focus should be on cost pass-through, footprint optimization, and disciplined capex to lift ROIC.

Financial Health

Liquidity is strong: current ratio 193% and quick ratio 190%, with cash/deposits of 419.3 comfortably covering current liabilities of 426.19 and short-term loans of 15.06. No warning: Current ratio is well above 1.0; D/E at 0.82x is below the 2.0 threshold. Solvency is solid with interest coverage at 13.28x and long-term loans of 245.68 well supported by cash and operating cash flow. Maturity mismatch risk appears limited as receivables (275.21) plus cash (419.3) exceed payables (230.46) and short-term borrowings. Off-balance sheet obligations are not disclosed in the provided data; no assessment possible.

Cash Flow Quality

OCF of 100.91 is 2.59x net income, indicating high-quality earnings and favorable working capital dynamics. Using a proxy FCF (OCF – Capex), FCF is approximately 64.83, suggesting capacity to fund shareholder returns and deleveraging; however, total investing cash flows are unreported, so true FCF may differ. Financing CF of 66.05 and share repurchases of 19.99 indicate active capital returns alongside possible new borrowings or other financing inflows. No explicit signs of aggressive working capital management are observable from snapshot balances; however, without period-to-period changes in AR/AP/inventory, manipulation risks cannot be fully assessed.

Dividend Sustainability

Payout ratio (calculated) is 65.6%, slightly above the <60% benchmark, implying a moderately stretched payout relative to earnings. With strong OCF and proxy FCF of ~64.83, coverage of ordinary dividends appears manageable, but total dividends are unreported. Share repurchases of 19.99 were executed, and combined with dividends (unknown), total shareholder returns should be monitored against FCF to ensure sustainability. Given ROE of 4.5% and ROIC of 5.2%, prioritizing reinvestment that lifts returns could improve long-term dividend capacity.

Risk Assessment

Business Risks:

• Automotive demand cyclicality impacting volumes and mix
• Raw material (resin) and energy cost volatility pressuring margins
• OEM customer concentration risk typical for auto suppliers
• FX volatility affecting procurement and translation effects

Financial Risks:

• Large gap between net income (38.95) and total comprehensive income (4.51) indicating sizable OCI losses that reduce equity
• Refinancing and interest rate risk on long-term loans of 245.68, partially offset by high cash
• Potential reliance on non-operating items (non-operating income ratio 21.2%) to support ordinary income

Key Concerns:

• Operating margin compression (~89 bps YoY) amid declining revenue
• ROIC at 5.2% below the 7–8% target range, weighing on value creation
• Data gaps on investing CF and dividends limit true FCF and payout assessment

Investment Implications

Key Takeaways:

• Resilient bottom line with net margin expansion despite OP pressure
• Strong cash generation (OCF/NI 2.6x) supports balance sheet strength
• OCI drag materially reduced comprehensive income, a watchpoint for equity
• ROE 4.5% and ROIC 5.2% indicate room for improvement via margin and asset efficiency
• Cost discipline and mix management needed to restore operating margin

Metrics to Watch:

• Operating margin trajectory and SG&A efficiency
• OCI components (FX translation, valuation) given the NI vs. CI gap
• Capex intensity vs. EBITDA and ROIC progression
• Working capital turns (AR, AP, inventory) and cash conversion
• Net debt trend and interest coverage amid rate environment

Relative Positioning: Within Japanese auto parts peers, liquidity and leverage are conservative, cash conversion is strong, but profitability (ROE/ROIC) remains subpar; sustained margin recovery is needed to close the returns gap.

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