TOKYO PRINTING INK MFG.CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥24.34B
• Operating Income: ¥1.10B
• Net Income: ¥790M
• EPS: ¥308.64

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: FY2026 Q2 was a strong earnings rebound for Tokyo Printing Ink (4635), with sharp profit growth on modest top-line expansion and healthy cash conversion. Revenue rose 9.3% YoY to 243.36, while operating income surged 309.5% YoY to 10.96 and ordinary income climbed 314.2% YoY to 12.03, evidencing substantial operating leverage. Net income increased 157.8% YoY to 7.85, with EPS of 308.64 JPY. Operating margin improved to 4.5% (10.96/243.36), implying an estimated expansion of about 330 bps YoY based on reconstructed prior-period figures. Ordinary margin rose to 4.9%, an estimated ~364 bps expansion YoY, supported by non-operating income (mainly dividend income of 0.92). Net margin improved to 3.2%, an estimated ~187 bps expansion YoY. Gross profit reached 40.14 (GPM 16.5%), suggesting improved pricing and/or input cost normalization, although prior gross margin is not disclosed to quantify bps change. Earnings quality is solid: operating cash flow of 14.60 exceeded net income, yielding an OCF/NI of 1.86x and implying limited accrual risk. Balance sheet strength underpinned the quarter with a current ratio of 173.7% and quick ratio of 143.8%, and interest coverage of 42.15x, mitigating near-term refinancing risk. Leverage remains conservative-to-moderate (D/E 0.71x), and working capital is ample (125.61). That said, capital efficiency remains weak: ROE is 2.6% and ROIC is just 2.3%, well below a typical 7–8% target for value creation. Non-operating income contributed 19.0% of ordinary profit, indicating some reliance on financial income streams (notably dividends) alongside core operations. Capex of 9.80 was covered by OCF, implying positive pre-financing free cash flow of about 4.8, even after reinvestment. The reported payout ratio of 66.0% looks elevated versus common sustainability thresholds, warranting monitoring if profits normalize. Forward-looking, margin resilience will depend on raw material cost trends, pricing discipline in packaging/industrial inks, and demand recovery in print-adjacent markets, while the low ROIC flags a strategic need for mix improvement and tighter capital allocation.

Profitability Analysis

ROE (2.6%) decomposes as: Net Profit Margin (3.2%) × Asset Turnover (0.467) × Financial Leverage (1.71x). The largest YoY change driver is margin expansion: operating income grew +309.5% vs revenue +9.3%, lifting operating margin to 4.5% (estimated +330 bps YoY) and net margin to 3.2% (estimated +187 bps YoY). Business drivers likely include improved input cost environment (petrochemical feedstocks), pricing carryover from prior hikes, and SG&A discipline (SG&A 29.17 versus gross profit 40.14), together translating into stronger operating leverage. Non-operating income (1.49, with dividend income 0.92) also aided ordinary profit, though it's less central than the operating swing. Sustainability: part of the margin recovery should persist if pricing holds and raw materials remain stable; however, the scale of YoY improvement suggests a partial one-time normalization from a weaker base. Asset turnover at 0.467 indicates moderate efficiency for a mid-sized chemicals/ink manufacturer and may drift only gradually; leverage at 1.71x is stable and unlikely to be the primary ROE lever. Watch for any adverse trend where SG&A growth outpaces revenue; currently, operating expense intensity improved (operating margin up substantially), indicating favorable operating leverage this period.

Growth Assessment

Top-line growth of 9.3% YoY to 243.36 is solid, likely reflecting steady demand in packaging and industrial inks; however, structural headwinds in publication printing remain a medium-term drag. Profit growth vastly outpaced sales (OP +309.5%, NI +157.8%), driven by margin normalization and cost control. Gross profit of 40.14 (GPM 16.5%) and EBITDA of 19.00 (margin 7.8%) underscore improved mix/pricing, though the absence of prior-period gross margin limits precise attribution. Non-operating income contributed meaningfully to ordinary profit (19.0% ratio), led by 0.92 in dividend income; this is helpful but not a core growth driver. With OCF of 14.60 covering capex of 9.80, the company generated an estimated positive FCF of ~4.8, supporting reinvestment and shareholder returns. Outlook hinges on sustaining price/cost spreads, stabilizing demand in domestic and overseas markets, and avoiding raw-material inflation. The low ROIC (2.3%) indicates growth is not yet translating into adequate returns on invested capital, implying a need for product mix upgrade, capacity rationalization, or portfolio actions to lift returns. Near term, earnings run-rate looks healthier than last year; medium term, growth sustainability remains contingent on cost discipline and end-market recovery.

Financial Health

Liquidity is strong: current ratio 173.7% and quick ratio 143.8%, comfortably above benchmarks. No warning triggers (Current Ratio < 1.0 or D/E > 2.0) are present; D/E is 0.71x, indicating conservative leverage for the sector. Maturity profile appears manageable: current liabilities of 170.52 are well covered by current assets of 296.13; short-term loans of 32.50 are backed by cash of 34.95 plus 104.76 in receivables. Long-term loans are 23.85 against total equity of 304.85, indicating low structural leverage. Interest coverage is very strong at 42.15x, leaving ample buffer against rate volatility. No off-balance sheet obligations are disclosed in the provided data; absence of disclosure prevents further assessment. Working capital of 125.61 provides operational flexibility and cushions supply chain variability.

Cash Flow Quality

Earnings quality is high this quarter: OCF/Net Income is 1.86x (>1.0 threshold), indicating cash-backed earnings and benign accruals. Estimated free cash flow (OCF – Capex) is positive at ~4.8, supporting reinvestment and potential shareholder returns; however, full investing cash flows are unreported, so this FCF proxy may over/understate true FCF. Financing cash flow was -5.32, including share repurchases of -2.83; dividend cash outflows are unreported. Working capital quality appears reasonable given strong OCF, but without period-over-period balance sheet deltas, we cannot isolate contributions from receivables, inventory, or payables. No signs of aggressive working capital pulls are evident from the summary metrics.

Dividend Sustainability

The reported payout ratio is 66.0%, modestly above a typical <60% sustainability benchmark and therefore a mild watch point if earnings normalize downward. Cash flow coverage looks acceptable this period given estimated positive FCF of ~4.8, but dividend cash payments are unreported, preventing a formal FCF coverage test. Balance sheet strength (current ratio 173.7%, low leverage) provides additional flexibility to sustain dividends through cycles. Policy outlook is unclear from disclosures; if management targets stable dividends, near-term coverage appears manageable, but longer-term sustainability will hinge on maintaining improved operating margins and raising ROIC toward or above cost of capital.

Risk Assessment

Business Risks:

• Raw material price volatility (petrochemical derivatives impacting resin/solvent costs) could compress margins.
• Structural decline in publication printing demand; offset trajectory in packaging/industrial inks uncertain.
• Customer pricing pressure and competitive dynamics in domestic/Asian markets.
• Execution risk in lifting ROIC from 2.3% toward value-creating levels.

Financial Risks:

• Moderate leverage (D/E 0.71x) could rise if capex or M&A accelerates without cash flow growth.
• Reliance on non-operating income (19.0% of ordinary profit) introduces variability if dividend income declines.
• FX risk from import costs and overseas revenues with potential yen volatility.
• Potential working capital swings affecting OCF despite current strength.

Key Concerns:

• Low capital efficiency (ROIC 2.3%) versus a typical 7–8% target.
• Margin gains may partly reflect one-time normalization; durability through input cost cycles is untested.
• Limited disclosure granularity (e.g., R&D, full SG&A breakdown, investing CF) constrains visibility.

Investment Implications

Key Takeaways:

• Strong profit recovery with operating margin up to 4.5% and net margin to 3.2%.
• Cash-backed earnings (OCF/NI 1.86x) and positive estimated FCF despite capex.
• Balance sheet remains healthy (current ratio 173.7%, interest coverage 42.15x).
• Capital efficiency is the main weakness: ROE 2.6% and ROIC 2.3%.
• Non-operating income (notably dividends) provided a meaningful boost to ordinary income.

Metrics to Watch:

• Operating and net margin trajectory (bps) versus raw material indices.
• ROIC progression relative to WACC; asset turnover improvements.
• OCF sustainability and working capital turns (AR and inventory days).
• Payout ratio versus cash generation; actual dividend cash outflow and any policy guidance.
• FX sensitivity and pricing discipline in export and domestic markets.

Relative Positioning: Within Japanese mid-cap specialty chemicals/ink peers, the company shows improved near-term profitability and strong liquidity but continues to lag on capital efficiency (ROIC/ROE), suggesting a defensively financed, operationally recovering profile rather than a high-return compounder.

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