MANAC Chemical Partners Co.,Ltd FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.80B
• Operating Income: ¥452M
• Net Income: ¥465M
• EPS: ¥57.27

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: A strong FY2026 Q2 with robust top-line growth and solid cash conversion, albeit with sub-target ROIC signaling room for capital efficiency improvement. Revenue rose 29.2% YoY to 58.04, lifting gross profit to 13.34 and operating income to 4.52. Gross margin printed at 23.0%, and operating margin at approximately 7.8%, supported by disciplined SG&A (8.81). Ordinary income reached 5.03, aided by 0.56 in non-operating income, and net income was 4.65, translating to an 8.0% net margin. EPS (basic) was 57.27 JPY on an average share count of roughly 8.12 million. Cash generation outpaced earnings, with operating cash flow of 9.91 (OCF/NI = 2.13x), indicating high earnings quality. Liquidity is ample: current assets of 99.36 versus current liabilities of 29.52 yield a current ratio of 336.6% and a quick ratio of 269.5%. The balance sheet is conservative, with total equity of 108.56 (equity ratio ~75%) and a D/E of 0.33x; long-term loans are modest at 4.45. Working capital is well-managed with accounts receivable at 24.87, inventories at 19.80, and accounts payable at 18.92. ROE stands at 4.3% with a net margin of 8.0%, asset turnover of 0.401, and financial leverage of 1.33x. ROIC is 4.6%, falling below the 5% warning threshold, flagging capital efficiency as the primary improvement lever. With capex of 8.35, the company remains in an investment phase; estimated FCF (OCF minus capex) is about 1.56, leaving room for a modest dividend (payout ratio indicated at 23.2%). Margin expansion versus last year cannot be quantified due to limited YoY margin disclosures; however, the current margin mix suggests improved operating leverage. Non-operating income contributed ~12% of pretax earnings, but core operating profit was the main driver of ordinary income. Forward-looking, sustained growth and margin discipline could lift ROE and ROIC, but the company needs better asset turns or higher operating margins to approach a 7–8% ROIC benchmark. Overall, the quarter demonstrates healthy growth, cash discipline, and a strong balance sheet, with the key medium-term focus on raising capital efficiency.

Profitability Analysis

ROE decomposition: Net Profit Margin (8.0%) × Asset Turnover (0.401) × Financial Leverage (1.33x) = ROE 4.3%. The profitability pillar (net margin 8.0%) is the current strength relative to modest asset turnover; leverage is low by design, limiting ROE uplift from gearing. Without prior-period component data, the largest change driver cannot be quantified, but the current profile implies ROE is constrained mainly by asset turnover (0.401) and conservative leverage rather than insufficient net margins. Business context: revenue growth of 29.2% alongside a 23.0% gross margin and ~7.8% operating margin indicates decent operating leverage, suggesting mix/volume gains and SG&A discipline supported profitability. Sustainability: operating margin levels appear supported by core operations (non-operating income only 0.56), but durability hinges on maintaining gross margin and pricing power amid input cost volatility. Watch for SG&A growth outpacing revenue in subsequent quarters; currently, there is no evidence of SG&A overshoot versus revenue expansion. Quality of margins is acceptable given EBITDA of 6.23 (10.7% margin) and effective tax of 20.9%. The main headroom for ROE improvement is higher asset turns and incremental margin expansion rather than added financial leverage.

Growth Assessment

Top-line growth was strong at +29.2% YoY to 58.04, indicating robust demand or improved pricing/mix. Gross profit of 13.34 and operating income of 4.52 show operating leverage at work, but lack of YoY comparatives for margins limits precise attribution. Non-operating income (0.56) bolstered ordinary income to 5.03 but is not the primary earnings driver. Net margin at 8.0% is healthy for a specialty chemical profile, suggesting improved mix or cost pass-through. EBITDA margin of 10.7% provides a cushion for continued investment (capex 8.35) without unduly stressing cash flows. With ROIC at 4.6%, growth appears investment-led but not yet converting to target capital returns; improving asset utilization and project ramp-up are key to sustain growth quality. Outlook: if revenue momentum continues and cost discipline holds, incremental margin and ROIC uplift are achievable; however, commodity/raw material and energy cost trends remain swing factors. Near term, focus on sustaining gross margin at ~23% and converting revenue growth to cash, as evidenced by OCF/NI of 2.13x.

Financial Health

Liquidity is strong: current ratio 336.6% and quick ratio 269.5% comfortably exceed benchmarks, with cash and deposits of 35.33 and current assets of 99.36 versus current liabilities of 29.52. No warning on current ratio (<1.0) or D/E (>2.0); D/E of 0.33x is conservative. Equity ratio is approximately 75.1% (108.56 / 144.61), indicating a solid capital base. Maturity mismatch risk is low: current assets cover current liabilities by 3.4x; short-term loans are unreported, but accounts payable (18.92) is well supported by cash, receivables, and inventories. Long-term loans of 4.45 are modest, and interest coverage cannot be calculated due to unreported interest expense; nonetheless, leverage is light. No off-balance-sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF of 9.91 versus net income of 4.65 yields OCF/NI of 2.13x, indicating high-quality earnings and strong cash conversion. Working capital appears well managed given positive OCF alongside growth, suggesting timely collections and inventory discipline; however, without YoY WC deltas, we cannot rule out timing effects. Estimated FCF (OCF minus capex) is approximately 1.56, acknowledging that full investing CF is unreported and could include other items (e.g., financial investments, proceeds). Dividend and buyback cash outflows are unreported; thus, aggregate coverage cannot be fully assessed. No clear signs of working capital manipulation are evident from the snapshot; cash, AR, and inventory levels appear proportionate to scale.

Dividend Sustainability

The indicated payout ratio is 23.2%, which is conservative and consistent with sustainable policy ranges (<60%). With OCF at 9.91 and estimated FCF of roughly 1.56 after capex of 8.35, ordinary dividends (exact DPS unreported) appear coverable in the base case; the strong cash position (35.33) and ample retained earnings (69.37) add buffer. Lack of disclosed DPS and total dividends paid limits precision, but current earnings and cash generation support continuity of a modest dividend. Sustainability hinges on maintaining OCF above capex during the current investment phase and gradually lifting ROIC.

Risk Assessment

Business Risks:

• Raw material and energy price volatility impacting gross margin sustainability
• Demand cyclicality in end-markets (e.g., electronics/automotive/industrial) affecting volumes and mix
• Potential pricing pressure from competitors in specialty chemicals
• Environmental and regulatory compliance costs
• Supply chain disruptions affecting procurement and delivery timelines

Financial Risks:

• ROIC at 4.6% below 5% warning threshold, indicating capital efficiency risk
• Interest coverage unquantified due to unreported interest expense (measurement risk)
• Potential FX exposure if exports or imported inputs are significant (not disclosed)
• Concentration risk in customers or products (not disclosed)

Key Concerns:

• Sub-target ROIC despite strong balance sheet, requiring better asset turns or margins
• Dependence on maintaining current gross margin levels to support operating leverage
• Limited disclosure on investing cash flows and dividends impedes full FCF and payout analysis

Investment Implications

Key Takeaways:

• Strong quarter with 29.2% YoY revenue growth and solid operating profitability (~7.8% margin)
• High earnings quality with OCF/NI of 2.13x and positive estimated FCF after sizable capex
• Robust balance sheet: equity ratio ~75%, D/E 0.33x, current ratio 336.6%
• ROE at 4.3% constrained by low asset turnover and conservative leverage
• ROIC at 4.6% below target range, highlighting need for higher utilization or margin uplift
• Non-operating income modest (0.56), performance mainly driven by core operations
• Dividend likely sustainable given low payout (~23.2%) and strong cash, though DPS unreported

Metrics to Watch:

• Gross and operating margin trajectory (vs ~23% and ~7.8% this quarter)
• Asset turnover improvement toward >0.5 to lift ROE/ROIC
• Capex execution and payback, with ROIC trend toward 7–8%
• Working capital efficiency (AR and inventory turns) and OCF/NI >1.0
• Any change in dividend policy/DPS disclosure and total payout
• Non-operating items and their recurrence
• FX and raw material cost trends impacting COGS

Relative Positioning: Versus domestic specialty chemical mid-caps, liquidity and leverage are stronger than average, margins are respectable, but capital efficiency (ROIC 4.6%, ROE 4.3%) trails peers targeting 7–8% ROIC; the path to re-rating likely requires sustained margin/turn improvement and visible returns on current capex.

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