DAISHIN CHEMICAL CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.95B
• Operating Income: ¥630M
• Net Income: ¥251M
• EPS: ¥98.68

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

Daishin Chemical Co., Ltd. (TSE:46290) reported FY2026 Q2 (cumulative) results showing resilient profitability despite a mild top-line contraction. Revenue declined 1.8% YoY to ¥16.95bn, but operating income surged 87.2% YoY to ¥0.63bn, indicating strong operating leverage from cost controls and/or improved mix. Gross profit was ¥2.06bn, implying a gross margin of 12.2%, while operating margin improved to 3.7% and ordinary margin reached 4.0%. Net income increased 80.0% YoY to ¥0.45bn, with a net margin of 2.66%, confirming improved earnings quality versus the prior year period. DuPont decomposition shows ROE of 2.68%, driven by a modest net margin (2.66%), asset turnover of 0.656x, and low financial leverage of 1.54x. Liquidity remains very strong with a current ratio of 229.6% and quick ratio of 227.0%, backed by working capital of approximately ¥10.97bn. The balance sheet is conservatively structured: total liabilities are ¥8.68bn versus equity of ¥16.82bn, for a debt-to-equity ratio of 0.52x. Interest expense is minimal at ¥0.75m, yielding an interest coverage ratio above 800x, indicating negligible financial strain. Operating cash flow was robust at ¥2.24bn, translating to an OCF/Net Income ratio of 4.97x, which supports the quality of earnings. Reported effective tax rate is shown as 0.0% due to data limitations; however, the presence of income tax expense of ¥122.6m suggests an implied tax rate near the low 20% range based on simple estimation. Cash and equivalents, investing cash flow, and some per-share balance sheet data show as zero, which reflects non-disclosure rather than actual zeros and limits full cash/FCF assessment. Despite these limitations, the combination of improved margins, strong operating cash conversion, and conservative leverage indicates improving fundamentals. The decline in revenue alongside a sharp profit rebound suggests favorable input cost dynamics and/or improved pricing discipline. Inventory is reported at ¥220.3m, which is unusually low for the revenue scale, implying either classification differences or partial disclosure; this constrains working capital diagnostics. Dividend information appears unreported (DPS shown as zero), so distribution policy and payout sustainability cannot be concluded from the provided data. Overall, the company exhibits strengthening profitability and solid financial health, with room to enhance ROE via further margin gains and asset efficiency improvements.

Profitability Analysis

ROE_decomposition: ROE 2.68% = Net Margin 2.66% × Asset Turnover 0.656 × Financial Leverage 1.54. The primary constraint on ROE is the modest net margin, while leverage is conservatively low and asset turnover is moderate. margin_quality: Gross margin 12.2% and operating margin 3.7% reflect improved cost structure versus last year (operating income +87.2% YoY despite revenue -1.8%). Ordinary margin stands at ~4.0% and net margin at 2.66%. Interest expense is negligible (¥0.75m), so below-the-line drag is minimal. Tax expense of ¥122.6m implies a normalized tax rate in the low 20% range (estimated) despite the reported 0.0% metric, suggesting the net margin is not flattered by tax holidays. operating_leverage: High operating leverage evident: small revenue decline accompanied by a large increase in operating profit implies significant fixed-cost absorption improvements and/or lower raw material costs. EBITDA of ¥838.9m (4.9% margin) vs. operating income of ¥630.0m indicates modest D&A intensity (~1.2% of sales), leaving room for further operating leverage if volumes stabilize or grow.

Growth Assessment

revenue_sustainability: Revenue declined 1.8% YoY to ¥16.95bn, pointing to softer demand or pricing in certain end-markets. Given chemicals exposure, macro and customer inventory cycles likely influenced volumes. Stability around this level would support continued operating leverage if cost improvements persist. profit_quality: Operating income +87.2% YoY and net income +80.0% YoY indicate improved mix/pricing and cost discipline. OCF/Net Income of 4.97x supports the cash nature of earnings in the period, though working-capital specifics are partially unreported. outlook: If raw material costs remain benign and pricing discipline holds, margins can remain above prior-year levels. Asset turnover at 0.656x suggests potential for ROE improvement through inventory/receivables efficiency. Near-term growth will likely track end-market demand in industrial/specialty applications and FX-driven input costs.

Financial Health

liquidity: Current assets ¥19.44bn vs. current liabilities ¥8.47bn => current ratio 229.6%; quick ratio 227.0%. Working capital is ¥10.97bn, providing ample short-term headroom. solvency: Total liabilities ¥8.68bn vs. equity ¥16.82bn => D/E 0.52x. Interest coverage ~845x (operating income/interest expense), indicating negligible refinancing risk. Equity ratio is shown as 0.0% due to non-disclosure in the dataset, but assets of ¥25.84bn and equity of ¥16.82bn imply an equity ratio near 65%. capital_structure: Leverage is conservative with low interest burden. The company has capacity for investment without stressing the balance sheet. Absence of disclosed cash balance limits net debt assessment.

Cash Flow Quality

earnings_quality: OCF ¥2.24bn vs. net income ¥0.45bn yields OCF/NI of 4.97x, indicating strong conversion and likely favorable working-capital movements and/or non-cash charges supporting cash generation. FCF_analysis: Investing cash flow is shown as 0, so Free Cash Flow cannot be reliably calculated from the provided data (reported FCF = 0 reflects non-disclosure). Without capex detail, true FCF coverage and sustainability cannot be assessed. working_capital: Inventory is reported at ¥220.3m (unusually low relative to revenue), suggesting classification differences or partial disclosure. Nevertheless, the large positive OCF suggests efficient working-capital management in the period (e.g., receivables collection and/or payables optimization).

Dividend Sustainability

payout_ratio_assessment: Annual DPS is shown as 0.00 and payout ratio 0.0%, likely reflecting non-disclosure rather than a definitive no-dividend policy. With EPS at ¥98.68 for the period, an actual payout ratio cannot be confirmed without DPS. FCF_coverage: FCF is reported as 0 due to missing investing cash flow; thus, FCF coverage of dividends cannot be evaluated. OCF strength suggests capacity for distributions, but capex needs are unknown. policy_outlook: Given conservative leverage and strong liquidity, the balance sheet could support dividends; however, absent disclosed DPS and capex trajectory, no conclusion can be drawn on policy direction or sustainability.

Risk Assessment

Business Risks:

• Raw material price volatility (e.g., naphtha/petrochemical feedstocks) impacting gross margin
• Demand cyclicality in key end-markets (automotive, electronics, industrial applications)
• Foreign exchange fluctuations affecting imported inputs and export competitiveness
• Environmental, safety, and chemical regulatory compliance (PRTR/REACH and domestic regulations)
• Customer concentration risk and pricing pressure from large OEMs
• Operational risks at chemical production sites (process safety, outages)
• Energy cost volatility impacting manufacturing costs

Financial Risks:

• Working-capital swings affecting quarterly OCF despite strong current period
• Uncertain capex requirements given lack of disclosed investing cash flows
• Potential impairment risk if end-market demand weakens (affecting margins/asset utilization)
• Limited visibility on cash balances and net debt due to non-disclosure

Key Concerns:

• Sustainability of margin expansion amid declining revenue
• Data limitations (cash, investing CF, DPS, share count) constraining full valuation and FCF analysis
• Very low reported inventory balance relative to sales, indicating classification or reporting gaps

Investment Implications

Key Takeaways:

• Sharp profit recovery on modestly lower sales demonstrates operating leverage and cost discipline
• ROE at 2.68% remains modest but has upside via margin and asset-turn improvements
• Balance sheet is strong with low leverage (D/E 0.52x) and ample liquidity (current ratio ~230%)
• OCF robustness (¥2.24bn; OCF/NI ~5x) supports earnings quality
• Interest burden is negligible (coverage >800x), reducing financial risk
• Incomplete disclosure on investing CF and cash obscures true FCF and net cash/debt
• Dividend outlook unclear due to unreported DPS despite healthy financial footing

Metrics to Watch:

• Gross and operating margin trends versus raw material indices
• Asset turnover and working-capital intensity (receivables/inventory days once disclosed)
• Capex and investing cash flows to assess sustainable FCF
• OCF/Net Income ratio as an earnings quality gauge
• FX (USD/JPY) and energy cost impacts on input costs
• Order trends and volume recovery in key end-markets

Relative Positioning: Within Japanese specialty/industrial chemicals peers, the company exhibits conservative leverage, strong liquidity, and improving profitability, but current ROE and margins remain mid-pack; enhanced asset efficiency and sustained margin gains would improve its relative standing.

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