Tri Chemical Laboratories Inc. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥18.01B
• Operating Income: ¥4.56B
• Net Income: ¥3.23B
• EPS: ¥123.76

Income Statement

Balance Sheet

Cash Flow Statement

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

Trichemical Research (4369) reported robust FY2026 Q3 consolidated results under JGAAP, highlighted by strong top-line growth and solid profitability. Revenue rose 37.4% YoY to ¥18.01bn, indicating healthy demand, likely tied to semiconductor-related chemical precursors and specialty materials. Gross profit reached ¥5.47bn with a gross margin of 30.4%, reflecting good pricing discipline and/or product mix resilience despite input cost volatility. Operating income was ¥4.56bn (+30.2% YoY), translating to a 25.3% operating margin, which is high relative to typical specialty chemical peers. Ordinary income of ¥5.46bn suggests additional non-operating gains or financial income contributing to earnings above operating level. Net income was ¥4.02bn (+24.6% YoY), implying a net margin of 22.33%, underscoring efficiency and cost control. DuPont analysis yields ROE of 11.65%, driven by a 22.33% net margin, 0.427x asset turnover, and modest 1.22x financial leverage. EBITDA was ¥5.58bn (31.0% margin), further confirming strong operating cash generation capacity before non-cash charges. Interest expense was minimal at ¥17.7m, producing an exceptional interest coverage of 257.7x and signaling negligible financial risk from debt servicing. Operating cash flow was ¥3.64bn, equating to 0.91x net income, a respectable conversion ratio with only modest working capital drag. The balance sheet is conservative: total liabilities of ¥5.36bn against total equity of ¥34.52bn (D/E ~0.16x), and current ratio of 513% indicate ample liquidity. Working capital of ¥17.27bn and quick ratio of 508% suggest strong short-term solvency and a cash-lean operating model. Asset turnover at 0.427x is typical for an asset-intensive specialty chemical producer with ongoing capacity investments. The reported “effective tax rate: 0.0%” in the supplied metrics appears inconsistent with disclosed income tax of ¥1.125bn and net income of ¥4.021bn; an implied rate around 20–21% is more realistic for this period. Several data fields are unreported (e.g., investing CF, cash and equivalents, equity ratio, DPS, shares), so certain analyses (e.g., FCF and per-share metrics) are constrained. Overall, the company demonstrates strong growth, high margins, disciplined leverage, and solid operating cash generation, though assessment of capex intensity and dividend capacity is limited by missing disclosures.

Profitability Analysis

ROE of 11.65% is decomposed into a 22.33% net margin, 0.427x asset turnover, and 1.22x financial leverage. The operating margin of 25.3% (¥4.561bn/¥18.01bn) and EBITDA margin of 31.0% indicate high value-added products and effective cost control. Gross margin at 30.4% is healthy, suggesting pricing power and/or favorable mix in specialty chemicals, albeit with some compression vs EBITDA implying meaningful SG&A and R&D support. Ordinary income exceeds operating income by ~¥897m, indicating positive non-operating contributions (e.g., FX gains, financial income, or equity-method earnings), which boosts overall profitability quality for the quarter. Interest burden is de minimis with coverage at 257.7x, so financing costs do not dilute margins. Effective tax expense of ¥1.125bn on ordinary income of ¥5.458bn implies an effective tax rate near the low 20s, despite the provided 0.0% metric; profitability after tax remains strong. Operating leverage appears positive: revenue growth of 37.4% YoY outpaced operating income growth of 30.2% but still delivered high incremental margins, suggesting some reinvestment and cost scaling; fixed-cost absorption appears favorable. Margin quality is supported by high EBITDA/Revenue and low interest expense; however, confirmation of sustainability would benefit from visibility into raw material cost trends and any one-off non-operating gains.

Growth Assessment

Revenue grew 37.4% YoY to ¥18.01bn, pointing to robust end-market demand, likely tied to semiconductor equipment/materials cycles and advanced node adoption. Operating income increased 30.2% YoY to ¥4.56bn, slightly lagging revenue growth, consistent with reinvestment, R&D, or labor cost scaling to support growth. Net income rose 24.6% YoY to ¥4.02bn, reflecting tax normalization and potentially less pronounced non-operating tailwinds versus operating gains. Asset turnover at 0.427x indicates growth is being supported by a growing asset base; this often reflects capacity expansions to serve future demand. Profit quality appears solid with a net margin of 22.33% and EBITDA margin of 31.0%, indicating that growth is not purely volume-driven but also supported by profitable mix. The OCF/Net Income ratio of 0.91 suggests earnings are largely cash-backed, with some working capital investment as growth proceeds. Sustainability will hinge on capex plans (unreported here), customer qualification cycles, and stability of semiconductor capex. Given the high operating margin and low interest burden, the company has scope to fund growth internally, subject to capex intensity. Outlook considerations include wafer fab investment cycles, customer concentration in leading-edge nodes, and potential ASP normalization; margins provide a cushion against moderate demand volatility. Overall growth trajectory appears positive, but visibility on forward capacity and order backlog is needed to gauge durability.

Financial Health

Liquidity is very strong: current assets of ¥21.46bn vs current liabilities of ¥4.18bn yield a current ratio of 513% and a quick ratio of 508.4% (inventories ¥195m are small relative to current assets). Working capital stands at ¥17.27bn, providing ample buffer for operational needs and growth-related working capital. Solvency is conservative with total liabilities of ¥5.36bn and total equity of ¥34.52bn, producing a debt-to-equity ratio of ~0.16x. Interest expense of ¥17.7m is minimal relative to operating income, supporting excellent interest coverage (257.7x). Asset base totals ¥42.19bn, implying modest financial leverage (assets/equity ~1.22x). The reported equity ratio of 0.0% is an unreported metric; based on the balance sheet, the implied equity ratio is approximately 81.8% (¥34.52bn/¥42.19bn). Overall balance sheet strength reduces refinancing risk and provides flexibility for strategic investments. Cash and equivalents are unreported here, so the precise liquidity buffer in cash terms cannot be assessed, but the aggregate working capital remains strong.

Cash Flow Quality

Operating cash flow of ¥3.64bn is 0.91x net income (¥4.02bn), indicating solid but slightly sub-1.0 conversion, consistent with growth-driven working capital needs. Depreciation and amortization of ¥1.02bn and EBITDA of ¥5.58bn corroborate substantial cash-generating capacity from operations. Free cash flow is unreported because investing cash flows are not disclosed in this dataset; therefore, true FCF cannot be determined. The negative financing cash flow of ¥1.43bn suggests distributions and/or debt repayments occurred, but details are not available from the provided data. Working capital management appears disciplined given high liquidity metrics; inventories are reported at ¥195m, but full working capital components (receivables, payables) are not provided, limiting turnover analysis. Earnings quality looks good given strong margins, high interest coverage, and positive OCF; confirmation would improve with disclosure of capex, receivables, and payables trajectories.

Dividend Sustainability

Annual DPS and payout ratio are reported as 0.00, which in this context should be treated as unreported rather than actual zeros. Consequently, we cannot conclude on dividend levels or changes this period. With operating cash flow at ¥3.64bn and low leverage, the balance sheet could likely support distributions; however, absent capex data and dividend policy disclosure, FCF coverage cannot be assessed. Financing cash outflow of ¥1.43bn may include dividends and/or buybacks or debt repayments, but specific allocation is unknown. Given the company’s growth profile and industry, a policy balancing reinvestment and shareholder returns is plausible, yet unconfirmed here. A robust assessment of dividend sustainability requires data on capex (to compute FCF), retained earnings trajectory, and stated payout targets.

Risk Assessment

Business Risks:

• Semiconductor cycle sensitivity affecting order timing and utilization rates
• Customer concentration and qualification risk in advanced materials
• Stringent purity/quality requirements leading to potential yield or scrap risk
• Raw material cost volatility and potential supply chain disruptions
• Technological obsolescence risk if customers migrate to new chemistries
• Regulatory and environmental compliance for chemical manufacturing
• Execution risk in capacity expansions and ramp-up

Financial Risks:

• Capex intensity potentially elevating cash outflows and depressing near-term FCF
• Working capital swings during rapid growth affecting OCF conversion
• FX exposure if sales or inputs are denominated in foreign currencies
• Potential non-operating income volatility influencing ordinary income

Key Concerns:

• Investing cash flows and capex are unreported, limiting FCF visibility
• Dividend and share data are unreported, restricting per-share and payout analysis
• Equity ratio and cash balance are unreported, constraining precise liquidity appraisal

Investment Implications

Key Takeaways:

• Strong revenue growth (+37.4% YoY) with high operating margin (~25.3%) underscores competitive positioning
• ROE at 11.65% driven by exceptional net margin and modest leverage
• Cash generation solid with OCF at ¥3.64bn (0.91x NI), though full FCF unknown
• Balance sheet conservative (D/E ~0.16x) with ample liquidity (current ratio ~5.1x)
• Non-operating gains/losses contribute meaningfully as ordinary income exceeds operating income by ~¥0.9bn
• Visibility on capex and dividend policy is a key missing piece for capital allocation assessment

Metrics to Watch:

• Order backlog and book-to-bill to gauge demand sustainability
• Capex and investing cash flows to quantify FCF and capacity expansion
• OCF/NI conversion and working capital turns (AR, inventory, AP)
• Gross and operating margin trends amid input cost and pricing dynamics
• Customer concentration and node/product mix exposure
• FX impact on ordinary income and non-operating line items

Relative Positioning: Compared to Japan-listed specialty chemical peers supplying the semiconductor value chain, Trichemical exhibits above-average margins, low leverage, and strong liquidity, positioning it favorably on profitability and balance sheet quality while data gaps prevent a full assessment of FCF efficiency and shareholder return profile.

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
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