POVAL KOGYO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.84B
• Operating Income: ¥243M
• Net Income: ¥52M
• EPS: ¥59.35

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

Poval Kogyo (4247) reported solid FY2026 Q2 (cumulative) results under JGAAP on a consolidated basis, with clear signs of operating leverage and improved profitability. Revenue rose 13.0% year over year to ¥1,842 million, while operating income surged 102.9% to ¥243 million, reflecting strong margin expansion. Gross profit of ¥585.9 million implies a gross margin of 31.8%, which is healthy for an industrial materials/processing business and suggests improved mix and/or cost pass-through. Operating margin expanded to 13.2%, supported by SG&A discipline (SG&A estimated at ¥342.9 million, roughly 18.6% of sales). Ordinary income of ¥252 million exceeded operating income, indicating positive non-operating contributions; interest expense was negligible at ¥47 thousand. Net income advanced 190.8% YoY to ¥156 million, with a reported net margin of 8.47%. The DuPont breakdown shows net margin of 8.47%, asset turnover of 0.261x, and financial leverage of 1.21x, yielding an ROE of 2.68% for the period. Liquidity is strong: current ratio stands at 318% and working capital at approximately ¥2,067 million. The balance sheet is conservative, with total equity of ¥5,822 million versus liabilities of ¥1,435 million; the implied equity ratio is about 82.5% (equity/assets), despite the reported field showing 0% (unreported). Cash generation was solid, with operating cash flow (OCF) of ¥205.8 million exceeding net income (OCF/NI = 1.32), indicating good earnings quality. EBITDA was ¥308.0 million (16.7% margin), and interest coverage was extremely high at over 5,000x, underscoring minimal financial risk from borrowing. The effective tax rate calculated from disclosed figures is approximately 13.2% (¥33.2 million tax on roughly ¥252 million pre-tax), despite a reported 0.0% field likely reflecting a disclosure gap. Working capital appears well-managed given low inventories (¥85.9 million) relative to cost of sales. Free cash flow cannot be assessed due to unreported investing cash flows and cash balances. Dividend information is not disclosed in this dataset (DPS and payout shown as zero should be treated as unreported). Overall, the company demonstrates improving profitability, strong cash conversion, and a robust balance sheet, though asset turnover remains modest and some disclosures are incomplete.

Profitability Analysis

ROE_decomposition: Reported DuPont ROE is 2.68%, derived from Net Margin 8.47% × Asset Turnover 0.261 × Financial Leverage 1.21. Profitability (net margin) is the principal driver, while leverage is low and asset turnover is modest for a first-half period. margin_quality: Gross margin at 31.8% suggests improved pricing and/or input cost control. Operating margin of 13.2% (up sharply YoY given +103% OI vs +13% sales) indicates SG&A discipline and scale benefits. Ordinary margin of 13.7% benefited slightly from non-operating income; interest burden is negligible. operating_leverage: Revenue growth of 13.0% translated into a 102.9% increase in operating income, evidencing strong operating leverage. The incremental margin on YoY growth appears high, implying favorable mix and cost structure improvements. Sustainability will depend on volume retention and input cost stability.

Growth Assessment

revenue_sustainability: Top-line growth of 13.0% YoY is solid for the segment and likely supported by demand normalization and potential price adjustments. Inventory levels are low relative to COGS, suggesting a build-to-order model with limited overhang. profit_quality: Net income growth (+190.8% YoY) significantly outpaced sales, driven by margin expansion. With OCF exceeding net income (1.32x), earnings quality appears good. Ordinary income closely tracks operating income, indicating limited reliance on financial items. outlook: If current demand and pricing hold, margins should remain elevated, though asset turnover (0.261x for the half) still constrains ROE. Key watchpoints include raw material costs, pass-through efficacy, and order momentum in core industries.

Financial Health

liquidity: Current ratio 318.3%, quick ratio 309.2%, and working capital of approximately ¥2,067 million indicate ample short-term liquidity. Low inventories (¥85.9 million) reduce obsolescence risk. solvency: Total equity of ¥5,822 million vs total liabilities of ¥1,435 million implies an equity ratio around 82.5% (calculated). Interest coverage is ~5,170x, and leverage is conservative; reported debt-to-equity of 0.25x suggests low interest-bearing debt relative to equity. capital_structure: Balance sheet is equity-heavy with modest liabilities, providing financial flexibility to absorb shocks and fund selective capex without straining leverage.

Cash Flow Quality

earnings_quality: OCF of ¥205.8 million exceeds net income of ¥156.0 million (OCF/NI = 1.32), indicating solid accrual quality and effective cash conversion. FCF_analysis: Free cash flow cannot be determined due to unreported investing cash flows and capex. EBITDA of ¥308.0 million and low interest burden suggest capacity to generate FCF, but confirmation awaits capex disclosure. working_capital: Low inventories relative to COGS point to efficient inventory management. The strong current and quick ratios indicate healthy receivables/cash profile, though detailed receivables and payables movements are not disclosed.

Dividend Sustainability

payout_ratio_assessment: Payout metrics are not assessable; DPS and payout ratio fields show zero but should be treated as undisclosed. EPS for the period is ¥59.35, but without dividend disclosure we cannot compute payout. FCF_coverage: FCF coverage cannot be evaluated because investing cash flows are unreported; OCF is positive and healthy, which is supportive in principle. policy_outlook: No dividend policy information is provided in the dataset. Given the strong balance sheet and improving profitability, the company has financial capacity, but actual policy depends on management’s capital allocation priorities.

Risk Assessment

Business Risks:

• End-market cyclicality in industrial/automation and OEM customer demand
• Raw material price volatility (e.g., polyurethane, rubber, chemicals) and pass-through timing
• Customer concentration risk typical for component suppliers
• Execution risk in maintaining improved margins as volumes normalize
• Supply chain and logistics disruptions affecting lead times and costs
• FX exposure on imported materials and export sales (if applicable)

Financial Risks:

• Asset turnover remains modest, constraining ROE despite higher margins
• Potential working capital swings given small inventory buffer
• Capex visibility is limited; unexpected investment needs could pressure FCF
• Disclosure gaps (cash, capex, dividends) reduce transparency for cash return assessment

Key Concerns:

• Sustainability of margin gains achieved in H1 amid input cost and pricing dynamics
• Limited visibility on capex and investing cash flows, hindering FCF analysis
• Incomplete disclosure on equity ratio, cash, and dividends in the provided data

Investment Implications

Key Takeaways:

• Strong operating leverage: +13% sales translated to +103% operating income
• Healthy gross (31.8%) and operating (13.2%) margins indicate improved mix/cost control
• OCF/Net income of 1.32 signals solid earnings quality
• Very conservative balance sheet with implied ~82.5% equity ratio and >5,000x interest coverage
• Asset turnover at 0.261x (half-year) limits ROE; efficiency improvements could lift returns
• Dividend and capex visibility are insufficient in this dataset; FCF not determinable

Metrics to Watch:

• Order trends and backlog/book-to-bill
• Gross margin trajectory and input cost pass-through
• OCF to net income ratio and working capital movements (receivables days, inventory days)
• Capex and investing cash flows to establish FCF
• Asset turnover and utilization rates
• Dividend policy disclosures and capital allocation updates

Relative Positioning: Within Japan small-cap industrial materials/components peers, Poval Kogyo currently exhibits stronger margin momentum and a more conservative balance sheet, but lags on capital efficiency (asset turnover). Transparency on capex/FCF and dividend policy is below best-in-class based on the provided data.

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