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

Financial Highlights

• Net Sales: ¥24.34B
• Operating Income: ¥1.10B
• Net Income: ¥308M
• 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

Tokyo Ink Co., Ltd. (TSE: 4635) reported FY2026 Q2 (cumulative) consolidated revenue of ¥24.336bn, up 9.3% YoY, demonstrating solid top-line momentum. Gross profit reached ¥3.165bn, translating to a gross margin of 13.0%, which indicates a modest margin structure typical of materials/inks businesses but likely improved from the prior year given the sharp profit rebound. Operating income surged to ¥1.096bn (+309.5% YoY), evidencing strong operating leverage and effective cost discipline. Ordinary income was ¥1.203bn and net income ¥785m (+157.8% YoY), with EPS of ¥308.64, underscoring significant earnings recovery in the half. The company’s DuPont profile shows a net profit margin of 3.23%, asset turnover of 0.467x, and financial leverage of 1.71x, yielding an ROE of 2.58% for the period. Operating margin is 4.5% (¥1.096bn/¥24.336bn) and EBITDA margin is 7.5%, supported by ¥723m in depreciation and amortization. Interest burden remains negligible with interest expense of ¥17m and interest coverage of 64.5x, highlighting limited financial risk from borrowing costs. The balance sheet is conservative: total assets ¥52.098bn, total liabilities ¥21.0bn, and total equity ¥30.485bn, implying an equity ratio of roughly 58.5% (calculated) despite the equity ratio line item not being disclosed. Liquidity is healthy with a current ratio of 181.8% and quick ratio of 151.5%, and working capital of ¥13.372bn. Operating cash flow was ¥239m, materially below net income (OCF/NI of 0.30), suggesting a working-capital drag in the half. Investing cash flow was not disclosed (reported as 0), limiting visibility on capex and free cash flow; consequently, the reported FCF is shown as 0 and should be treated as not disclosed rather than actual zero. Financing cash flow was an outflow of ¥127m, likely reflecting debt service and/or minor shareholder returns, though dividends were not disclosed. Overall, the company delivered strong profit recovery and maintained a solid financial position, but cash conversion lagged earnings. Visibility into capital allocation (capex, dividends) is limited due to missing disclosures, which constrains assessment of long-term FCF and payout capacity. The near-term outlook appears supported by revenue growth and cost control, while monitoring cash conversion, inventory dynamics, and potential pricing/cost pass-through remains key.

Profitability Analysis

ROE_decomposition: ROE 2.58% = Net margin 3.23% × Asset turnover 0.467 × Financial leverage 1.71. The low-to-mid single-digit margin and moderate turnover, combined with conservative leverage, produce a modest ROE for the half. margin_quality: Gross margin 13.0% and EBITDA margin 7.5% indicate improved profitability YoY, with operating margin at 4.5%. The spread between gross and operating margins suggests tighter SG&A control versus last year. Ordinary income exceeding operating income points to minor non-operating gains (e.g., FX, equity-method, or financial income) offsetting small interest costs. operating_leverage: Revenue grew 9.3% YoY, while operating income rose 309.5% YoY, highlighting substantial operating leverage—likely from pricing actions, mix improvements, and fixed-cost absorption. Sustainability will depend on demand resilience and raw material costs.

Growth Assessment

revenue_sustainability: Top-line growth of 9.3% YoY indicates healthy demand in core inks/materials segments or improved pricing. Given asset turnover of 0.467x for the half, capacity utilization appears reasonable. Monitoring order intake and regional/segment mix is important for sustainment. profit_quality: Net profit margin is 3.23%, supported by strong operating rebound and minimal interest expense. However, OCF/NI of 0.30 flags weaker cash conversion in the period, likely from working-capital build (inventory/receivables). outlook: Assuming stable macro and raw material inputs, the company can likely retain part of the margin gains achieved in H1. Key sensitivities include print demand trends, specialty materials mix, and input cost/price pass-through dynamics. Near-term growth should remain moderate with focus on cash conversion.

Financial Health

liquidity: Current ratio 181.8% and quick ratio 151.5% reflect ample short-term liquidity. Working capital totals ¥13.372bn; inventories are ¥4.945bn within a ¥29.729bn current asset base, suggesting manageable inventory risk. solvency: Calculated equity ratio is ~58.5% (¥30.485bn equity/¥52.098bn assets), evidencing a strong capital base. Interest coverage is 64.5x on minimal interest expense (¥17m), indicating low refinancing risk. capital_structure: Total liabilities of ¥21.0bn versus equity of ¥30.485bn imply conservative leverage (total liabilities/equity ~0.69x as provided). Balance sheet strength provides resilience against cyclical swings.

Cash Flow Quality

earnings_quality: Operating cash flow of ¥239m versus net income of ¥785m (OCF/NI 0.30) points to weaker earnings-to-cash conversion in H1, likely due to working capital increases. Depreciation of ¥723m supports underlying cash earnings, but timing effects weighed on OCF. FCF_analysis: Investing cash flow is not disclosed (shown as 0), so true capex and free cash flow cannot be determined. The reported FCF of 0 should be treated as undisclosed rather than an actual zero. working_capital: With inventories at ¥4.945bn and strong current ratios, the company likely built working capital to support growth. Monitoring DSO/DIO/DPO and inventory turns will be critical to improve OCF in H2.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are not disclosed (shown as 0.00). With EPS at ¥308.64 for H1, the capacity for dividends depends on full-year earnings and cash generation. FCF_coverage: FCF is not determinable due to missing investing cash flow; thus, FCF coverage of dividends cannot be assessed. OCF was positive but modest relative to earnings. policy_outlook: No dividend policy information is provided for this period. Given the conservative balance sheet, the company has flexibility; however, any payout strategy should be anchored to improved cash conversion and visibility on capex.

Risk Assessment

Business Risks:

• End-market cyclicality in printing and packaging demand affecting volumes.
• Raw material price volatility (resins, pigments, solvents) impacting margins and price pass-through timing.
• Product mix risk between commodity inks and higher-margin functional materials.
• Customer concentration risk if large accounts influence pricing and volumes.
• FX fluctuations affecting imported raw materials and overseas earnings.

Financial Risks:

• Weaker cash conversion (OCF/NI 0.30) increasing reliance on working capital funding.
• Potential inventory build raising obsolescence and carrying cost risk if demand slows.
• Limited disclosure on investing cash flows, complicating assessment of capex and FCF.
• Exposure to interest rate normalization on any floating-rate debt, albeit current interest burden is low.

Key Concerns:

• Sustainability of margin gains achieved in H1 amid input cost and demand uncertainties.
• Conversion of earnings to cash, given current working-capital drag.
• Lack of visibility on capex and dividend policy due to undisclosed investing and payout data.

Investment Implications

Key Takeaways:

• Strong profit rebound: operating income +309.5% YoY on 9.3% revenue growth indicates robust operating leverage.
• Conservative balance sheet: calculated equity ratio ~58.5%, interest coverage 64.5x.
• Cash conversion lagged: OCF/NI 0.30 implies working-capital headwinds in H1.
• Margins improving but still modest: gross margin 13.0%, operating margin 4.5%, EBITDA margin 7.5%.
• ROE at 2.58% for the half remains subdued versus typical Japanese chemicals benchmarks.
• Disclosure gaps: investing CF, cash balance, DPS not disclosed, limiting FCF and payout assessment.

Metrics to Watch:

• OCF/NI and working capital ratios (DSO, DIO, DPO) to confirm improving cash conversion.
• Gross and operating margins to gauge sustainability of price/cost mix benefits.
• Capex and investing cash flows for visibility on maintenance vs. growth investments.
• Inventory levels and turnover given potential demand normalization.
• Ordinary income drivers (non-operating gains/losses) and interest expense trends.

Relative Positioning: Within Japan’s inks and specialty materials space, Tokyo Ink demonstrates stronger balance-sheet resilience than many smaller peers and low interest burden, but profitability (ROE 2.58%, operating margin 4.5%) appears below higher-margin specialty chemicals players; execution on mix upgrade and cash conversion will be key to closing the 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
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