Niitaka Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.14B
• Operating Income: ¥1.14B
• Net Income: ¥912M
• EPS: ¥154.31

Income Statement

Balance Sheet

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 solid FY2026 Q2 with healthy margin expansion and double-digit profit growth despite modest topline growth. Revenue rose 3.8% YoY to 121.39 (100M JPY), while operating income grew 30.2% YoY to 11.44 and net income climbed 50.0% YoY to 9.12. Gross profit reached 45.35, translating to a gross margin of 37.4%. Operating margin improved to 9.4% (11.44/121.39) from approximately 7.5% a year ago, an expansion of roughly 191 bps. Net profit margin increased to 7.5% (9.12/121.39) versus about 5.2% in the prior period, a ~231 bps uplift. The DuPont analysis indicates ROE of 5.8% driven by a 7.5% net margin, asset turnover of 0.510, and low financial leverage of 1.52x. Ordinary income increased 32.5% YoY to 12.00, aided by net positive non-operating items (interest burden > 1.0), while financing costs remain de minimis (interest expense 0.03). Liquidity is strong with a current ratio of 272.9% and quick ratio of 252.8%, and cash of 72.66 comfortably exceeds current liabilities of 55.52. Balance sheet leverage is conservative: interest-bearing debt is 11.47 against equity of 156.48 (IBD/E ~0.07x), and debt/capital is 6.8%. Interest coverage is exceptionally high at ~400x, implying minimal refinancing risk. Earnings quality cannot be fully assessed due to unreported cash flow data (OCF/NI N/A), so the sustainability of working-capital gains or cash conversion remains a blind spot. Dividend policy implies an approximately 60% payout based on EPS (92 JPY DPS vs 154.31 JPY EPS), though there is a units inconsistency in reported NI vs EPS that should be clarified. Overall, profitability momentum and balance sheet strength support a constructive near-term outlook, but low ROE (5.8%) versus the 8–15% benchmark and limited asset turnover temper medium-term returns. Forward-looking, continued price/mix discipline and cost control will be key to maintain margins amid potential raw material and FX volatility.

Profitability Analysis

ROE decomposition (DuPont 3-factor): ROE 5.8% = Net Profit Margin 7.5% × Asset Turnover 0.510 × Financial Leverage 1.52x. The most notable change versus last year is the margin component, evidenced by operating income +30.2% YoY against revenue +3.8%, implying operating margin expansion (~+191 bps). Business drivers likely include price optimization and/or favorable product mix in core cleaning chemicals and institutional markets, alongside contained SG&A as a percent of sales (27.9% this period). The interest burden (>1.0 at 1.127) indicates non-operating income net benefit (e.g., interest income of 0.17 > interest expense of 0.03), further supporting ordinary income. Sustainability: price/mix gains can persist if competitive dynamics allow, but are sensitive to raw material costs (petrochemical/palm-derived inputs) and FX on imports; non-operating boosts are typically modest and not a structural driver. Concerning trends: ROE remains below the 8% threshold despite better margins, reflecting modest asset turnover (0.510) and low leverage. While low leverage is prudent, sluggish turnover suggests capital intensity or conservative working capital; if SG&A growth were to outpace revenue, operating leverage would reverse—this risk cannot be fully assessed due to lacking SG&A breakdown YoY.

Growth Assessment

Top-line growth was modest at +3.8% YoY (121.39), but profit growth was robust: operating income +30.2% and net income +50.0% YoY. The step-up in profitability primarily reflects margin improvement rather than volume expansion. Gross margin printed at 37.4%, and operating margin reached 9.4%, moving the company from the lower end toward the middle of industry profitability brackets. Non-operating results contributed modestly (net +0.56), but the core driver was operating leverage. Sustainability hinges on maintaining pricing and cost discipline amid potential raw material inflation and energy/logistics normalization. With cash abundant and leverage low, the company has flexibility to invest for growth; however, unreported R&D and capex limit visibility into organic growth drivers. Near-term outlook is stable-to-positive assuming input costs remain manageable and institutional demand (food service, industrial cleaning) continues to recover. Watch for any adjustments to guidance tied to cost pass-through and procurement conditions.

Financial Health

Liquidity is strong: current ratio 2.73x and quick ratio 2.53x, with cash and deposits of 72.66 exceeding current liabilities of 55.52—no liquidity warning. Solvency is conservative: interest-bearing debt 11.47 vs equity 156.48 implies IBD/E ~0.07x and debt/capital 6.8%. Note: the reported D/E of 0.52x appears to represent total liabilities/equity (81.71/156.48), not debt/equity; by debt-only, leverage is much lower. Interest coverage is extremely robust (~400x), indicating negligible financial strain. Maturity mismatch risk is low given ample cash, receivables (37.82), and inventories (11.14) versus current liabilities. No off-balance sheet obligations were reported; absence of disclosures limits assessment of leases/guarantees.

Cash Flow Quality

Operating cash flow, free cash flow, and capex are unreported, so OCF/NI and FCF coverage cannot be calculated. As such, we cannot validate earnings quality through cash conversion metrics or working capital trends this quarter. Balance sheet data suggest conservative working capital (cash-rich, low debt), which reduces near-term liquidity risk. No signs of working capital manipulation can be inferred or dismissed without OCF and component detail; monitoring receivables and inventory days vs payables days is advised once disclosed.

Dividend Sustainability

Declared DPS totals 92 JPY (interim 40 + year-end 52). Using reported EPS of 154.31 JPY, the payout ratio is approximately 60%, which aligns with the stated figure. However, there is a units inconsistency between net income (presented as 9.12 in 100M JPY) and EPS; the EPS-DPS relationship appears internally consistent while NI vs shares suggests a 10x discrepancy. In the absence of cash flow data, FCF coverage cannot be assessed, but the strong net cash position and low leverage support dividend capacity. Sustainability looks reasonable if operating margins hold and capex remains disciplined; a payout at or below ~60% is generally sustainable for low-leverage, stable-margin businesses. Clarification of the NI/EPS units is needed to finalize payout analysis and yen-based dividend coverage.

Risk Assessment

Business Risks:

• Raw material cost volatility (petrochemicals, palm-derived inputs) impacting gross margin
• Demand sensitivity in institutional/food-service channels affecting volume and mix
• Competitive pricing pressure in commodity-like cleaning and sanitation products
• Regulatory/ESG changes affecting chemical formulations and compliance costs

Financial Risks:

• Earnings quality uncertainty due to lack of OCF/FCF disclosure this quarter
• Potential FX exposure on imported inputs affecting COGS
• Data inconsistencies (NI vs EPS units) complicating ratio accuracy

Key Concerns:

• ROE at 5.8% below the 8–15% benchmark despite profit growth
• Sustainability of margin gains if input costs or FX turn adverse
• Limited visibility into capex and R&D, constraining assessment of long-term growth investments

Investment Implications

Key Takeaways:

• Margin-led profit beat: operating margin expanded ~190 bps with net margin up ~230 bps YoY
• ROE improved but remains modest at 5.8% due to low asset turnover and conservative leverage
• Balance sheet is very strong (net cash, IBD/E ~0.07x, interest coverage ~400x)
• Dividend payout appears ~60% on EPS basis; balance sheet supports continuity
• Cash flow disclosure gap is the key missing piece for confirming earnings quality

Metrics to Watch:

• OCF, FCF and working capital movements (AR and inventory turns)
• Gross and operating margin trajectory vs raw material cost indices and FX
• Asset turnover trends and utilization
• Confirmed payout ratio once NI/EPS unit consistency is clarified
• SG&A run-rate vs revenue growth for signs of operating leverage persistence

Relative Positioning: Within Japan small/mid-cap chemicals and institutional cleaning peers, Niitaka demonstrates improving margins and a superior balance sheet (net cash) but delivers below-peer ROE due to modest asset turnover and low leverage; continued execution on pricing/mix and efficiency is needed to close the ROE 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