SHINTO PAINT COMPANY,LIMITED FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.67B
• Operating Income: ¥122M
• Net Income: ¥216M
• EPS: ¥1.47

Income Statement

Balance Sheet

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

Shinto Paint Co., Ltd. posted FY2026 Q2 consolidated results under JGAAP with revenue of ¥10.669bn (+5.3% YoY), indicating modest top-line expansion despite a challenging operating environment for coatings. Gross profit was ¥1.789bn, translating to a gross margin of 16.8%, which is consistent with a mid-teens structure typical for general industrial and construction coatings. Operating income rose to ¥122m (+61.1% YoY), lifting the operating margin to 1.1%, suggesting meaningful incremental margin capture on modest sales growth. Ordinary income of ¥242m exceeded operating income, implying positive non-operating contributions (e.g., financial income, equity-method income, or FX gains) that more than offset interest expense of ¥28m. However, net income was only ¥50m (−69.7% YoY), signaling significant below-the-line pressures (taxes and/or extraordinary items) that diluted the flow-through from ordinary income to the bottom line. The DuPont profile remains subdued: net margin of 0.47%, asset turnover of 0.332x, and financial leverage of 2.21x yield a calculated ROE of 0.34% for the period. Liquidity is tight, with a current ratio of 105% and a quick ratio of 87.5%, and working capital of ¥575m, pointing to limited short-term headroom. Capital structure appears moderate with total liabilities of ¥17.393bn against equity of ¥14.559bn (implied equity ratio ~45%), and interest coverage at roughly 4.4x based on operating income. Inventory at ¥2.022bn is a material component of current assets, making working capital management a key lever for operating cash generation. Reported cash flow figures are undisclosed (zeros reflect non-reporting), which limits assessment of earnings quality and free cash flow. Depreciation and EBITDA are also undisclosed, preventing a view on non-cash components of earnings and operating leverage intensity. Dividend data are not disclosed for the period, so payout sustainability cannot be assessed from available figures. Overall, the quarter demonstrates improved operating momentum and disciplined cost execution, but the weak net result and tight liquidity temper the quality of earnings. The outlook hinges on sustaining gross margin, converting profits to cash via working capital, and stabilizing below-the-line items that compressed net income. Data limitations—especially the absence of cash flow disclosures—are a notable constraint on our confidence in earnings quality assessment.

Profitability Analysis

ROE_decomposition: Net margin 0.47% × asset turnover 0.332 × financial leverage 2.21 = ROE 0.34% (calculated), consistent with the reported 0.34%. The primary constraint on ROE is the very low net margin, despite reasonable asset turnover and moderate leverage. margin_quality: Gross margin is 16.8% (¥1.789bn/¥10.669bn), indicating reasonable product spread but with limited pricing power typical of the coatings industry. Operating margin is 1.1% (¥122m/¥10.669bn), implying significant SG&A and fixed-cost absorption challenges. Ordinary margin of 2.3% (¥242m/¥10.669bn) benefited from non-operating income, but the net margin fell to 0.47% due to tax/extraordinary impacts, diluting margin quality. operating_leverage: With revenue up ~¥535m YoY (est.) and operating income up ~¥46m YoY (est.), incremental operating margin approximates 8–9%, suggesting positive operating leverage on modest growth. However, the low absolute OPM (1.1%) implies limited cushion against shocks and room for further fixed-cost optimization.

Growth Assessment

revenue_sustainability: Top-line growth of 5.3% YoY suggests resilient demand across end-markets; sustainability will depend on downstream sectors such as construction, housing renovation, and industrial production, as well as pricing retention against raw material cost swings. profit_quality: The divergence between operating income growth (+61.1% YoY) and net income decline (−69.7% YoY) indicates profit quality concerns below the operating line (taxes, extraordinary losses, or minority interests). Ordinary income exceeding operating income highlights reliance on non-operating gains, which may be less durable. outlook: If gross margin can be maintained near the high-teens and SG&A discipline continues, operating income trajectory appears constructive. The key swing factors for bottom-line recovery are stabilization of below-the-line items and improved cash conversion through working capital normalization. Absent cash flow disclosure, visibility on durability is limited.

Financial Health

liquidity: Current ratio 105% (¥12.139bn/¥11.564bn) and quick ratio 87.5% reflect tight short-term liquidity. Working capital is ¥575m, giving limited buffer against shocks in receivables collection or inventory turns. solvency: Debt-to-equity is 1.19x (liabilities/equity). Interest coverage is ~4.4x (operating income/interest expense), which is adequate but not robust; downside to operating income would quickly compress coverage. capital_structure: Total assets ¥32.135bn vs. equity ¥14.559bn implies an equity ratio around 45% (although the reported equity ratio field is undisclosed). Leverage appears moderate, providing some flexibility but necessitating ongoing earnings and cash generation to maintain balance sheet strength.

Cash Flow Quality

earnings_quality: Operating cash flow is undisclosed, so OCF/NI cannot be assessed from reported data despite the calculated metric placeholder. The reliance on non-operating income (ordinary > operating) and the large gap to net income raise questions on cash earnings durability. FCF_analysis: Free cash flow is undisclosed. Without depreciation and capex information, ability to convert operating profits to FCF is unclear. Given tight liquidity, sustaining positive FCF via disciplined working capital and capex prudence is critical. working_capital: Inventories at ¥2.022bn are significant; quick ratio of 87.5% suggests potential dependence on inventory and receivables to support liquidity. Monitoring inventory turns and receivable days is essential to improve cash conversion.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed for the period. With EPS of ¥1.47 for H1, any payout would need to consider the low net margin and tight liquidity. FCF_coverage: FCF is undisclosed, preventing a coverage analysis. Dividend sustainability cannot be evaluated without operating and investing cash flow data. policy_outlook: Absent disclosure on DPS or policy, we cannot infer changes. Given the earnings profile and liquidity position, a conservative stance would be typical in the sector, but confirmation requires management guidance.

Risk Assessment

Business Risks:

• Raw material price volatility (resins, pigments, solvents) impacting gross margin.
• Demand cyclicality in construction, housing renovation, automotive, and general industrial end-markets.
• Competitive pricing pressure in commoditized coatings segments.
• Product mix risk between higher-margin specialty coatings and lower-margin general-purpose products.
• Supply chain and logistics disruptions affecting lead times and costs.

Financial Risks:

• Tight liquidity with current ratio ~1.05x and quick ratio ~0.88x.
• Moderate leverage (D/E ~1.19x) and modest interest coverage (~4.4x) sensitive to earnings volatility.
• Potential below-the-line losses or higher effective taxes that compress net income.
• Working capital concentration in inventories/receivables, exposing cash conversion.
• FX exposure if raw materials are imported or if overseas sales are material (not disclosed).

Key Concerns:

• Large gap between ordinary income and net income in the period.
• Absence of cash flow disclosures limiting assessment of earnings quality and FCF.
• Low operating margin (1.1%) leaves limited cushion for cost shocks.
• Liquidity headroom is narrow; inventory and receivables management will be critical.

Investment Implications

Key Takeaways:

• Solid top-line growth (+5.3% YoY) with strong operating income growth (+61.1% YoY).
• Operating margin remains thin at 1.1%, but incremental margins appear positive.
• Ordinary income benefited from non-operating items; net income weakened significantly.
• Liquidity is tight (current ratio ~1.05x; quick ratio ~0.88x) with limited working capital buffer.
• Leverage is moderate (D/E ~1.19x) and interest coverage acceptable at ~4.4x.
• Cash flow and dividend data are not disclosed, constraining FCF and payout analysis.

Metrics to Watch:

• Gross and operating margins, and the gap between operating and ordinary income.
• Net-to-ordinary income conversion and any extraordinary items.
• Operating cash flow, free cash flow, and capex once disclosed.
• Inventory days, receivable days, and overall working capital turns.
• Interest coverage and implied equity ratio to monitor balance sheet resilience.
• Pricing actions versus raw material cost trends.

Relative Positioning: Within Japan’s coatings peer set, the company exhibits modest growth and moderate leverage but thinner operating margins and tighter liquidity than larger, more diversified peers; improved operating leverage is a positive, yet cash flow visibility remains the key differentiator to close the quality 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