JCU CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.26B
• Operating Income: ¥5.78B
• Net Income: ¥4.36B
• EPS: ¥175.06

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: A strong FY2026 Q2 with double-digit top-line growth and outsized profit expansion, underpinned by very high margins and robust cash generation. Revenue rose 12.0% YoY to 142.58, while operating income grew 23.9% YoY to 57.81 and net income increased 28.8% YoY to 43.60, indicating clear operating leverage. Gross profit reached 98.10 with a gross margin of 68.8%, reflecting favorable mix/pricing and disciplined cost of sales at 44.48. Operating margin was an exceptional 40.6% (57.81/142.58), and net margin stood at 30.6%, both indicative of strong profitability for a specialty chemicals/surface finishing player. Although exact basis-point changes cannot be computed due to missing prior-period margin data, the faster growth in operating income vs revenue implies margin expansion YoY. Ordinary income rose 16.0% YoY to 57.80, with non-operating items essentially neutral (income 1.26 vs expenses 1.27). Earnings quality was solid with OCF of 39.84 equating to 0.91x of net income, suggesting only a modest working capital drag. Balance sheet strength is a standout: current ratio at 862%, quick ratio at 826%, and net cash position anchored by 265.32 in cash against minimal debt (short-term loans 3.00; long-term loans 0.30). Interest coverage is extraordinarily high at 2,890x, reflecting negligible financial risk. Comprehensive income (33.65) lagged net income (43.60), implying negative OCI (likely marketable securities valuation or FX), a point to monitor. ROE is 8.7%, driven predominantly by a very high net margin (30.6%), with low asset turnover (0.259) and very low leverage (1.10x) acting as drags. Capex was 13.69, leaving ample room for positive (calculated) FCF and shareholder returns including 3.67 in buybacks; the calculated payout ratio of 46.2% appears sustainable. Forward-looking, the high margin base sets a strong run-rate, but normalization risks exist given cyclical end-markets (electronics/automotive/semiconductor supply chains) and FX/commodity dynamics. The company’s sizable cash reserves and low leverage provide flexibility for investment and stable dividends even under a softer demand scenario. Overall, the quarter demonstrates healthy growth, excellent profitability, and strong financial resilience.

Profitability Analysis

ROE decomposition (DuPont): ROE 8.7% = Net Profit Margin (30.6%) × Asset Turnover (0.259) × Financial Leverage (1.10x). The dominant driver of ROE is the elevated net profit margin; asset turnover is modest, and leverage is minimal. The component that changed the most YoY is likely the margin (given OI +23.9% > revenue +12.0%), indicating operating leverage and mix/pricing benefits; precise magnitude is not quantifiable due to missing prior margins. Business explanation: improved gross margin (68.8%) and disciplined SG&A (40.29) supported operating margin of 40.6%, while non-operating items were neutral and tax rate was 24.2%, collectively lifting net margin. Sustainability: parts of the margin expansion may be cyclical (product mix, utilization, FX tailwinds) and could normalize if end-market demand eases or input costs/FX shift; structural efficiencies and pricing power could sustain above-average margins, but 40%+ OPM is a high bar to maintain. Concerning trends: none apparent; SG&A of 40.29 does not appear to outpace revenue growth, and operating leverage is positive. Monitor any future SG&A growth exceeding revenue growth and potential gross margin compression from raw material or competitive pricing pressures.

Growth Assessment

Top-line grew 12.0% YoY to 142.58, with operating income up 23.9% and net income up 28.8%, signaling healthy operating leverage. Gross profit of 98.10 implies strong pricing/mix and cost control (COGS at 31.2% of sales). Non-operating items net to roughly zero, so profit growth is predominantly operational, enhancing quality. Revenue sustainability hinges on demand in key end-markets (electronics/PCB plating, automotive, semiconductors) and customer capex/inventory cycles; current metrics show no stress in receivables or inventories (AR 74.92; inventories 16.59) relative to sales. Outlook: near-term growth momentum is intact given margin strength and cash-financed flexibility; medium-term growth could moderate if the cycle turns or if FX reverses. With ROIC reported at 18.5% (well above 8% benchmark), reinvestment at current returns would support durable value creation, subject to cycle risk. Watch for order trends, regional demand (especially China/ASEAN), and new product introductions to sustain mix and pricing.

Financial Health

Liquidity is exceptionally strong: current ratio 862% and quick ratio 826%, with cash and deposits of 265.32 far exceeding current liabilities of 45.54. No warning on current ratio (<1.0) or leverage (D/E 0.10x well below 2.0). Maturity mismatch risk is negligible: short-term loans 3.00 are fully covered by cash; accounts payable of 12.37 are comfortably supported by current assets of 392.75. Long-term debt is minimal at 0.30, and interest expense is de minimis (0.02). Total equity is 498.72 vs total liabilities 51.53, underscoring a conservative balance sheet. Off-balance sheet obligations are not reported; no indications of guarantees/contingent liabilities in the provided data.

Cash Flow Quality

OCF of 39.84 equals 0.91x of net income (threshold for concern is <0.8), indicating reasonably good earnings quality with modest working capital investment. Calculated free cash flow approximates 26.15 (OCF 39.84 minus capex 13.69), comfortably positive. Financing CF of -14.07 reflects shareholder returns (share repurchases of 3.67) and possibly dividends (not disclosed), funded by internal cash generation. No obvious signs of working capital manipulation: inventories remain modest (16.59), and AR levels are proportionate to sales. Sustainability: current FCF supports both dividend capacity (payout ratio 46.2%) and ongoing capex, with ample cash buffer.

Dividend Sustainability

With a calculated payout ratio of 46.2%, dividends appear within a sustainable range (<60% benchmark). Using net income of 43.60, implied dividends would be ~20.1, which are broadly covered by OCF 39.84 and by calculated FCF of ~26.15, leaving a cushion even after share repurchases of 3.67. Substantial retained earnings (474.49) and net cash provide further support for stable or gradually rising dividends. Policy specifics (DOE/target payout) are unreported; stability will depend on profit resilience against cycle and FX. Given current profitability and balance sheet strength, the dividend looks well-covered under base-case conditions.

Risk Assessment

Business Risks:

• End-market cyclicality in electronics/PCB plating and automotive leading to demand volatility
• Commodity/raw material price fluctuations impacting gross margin
• FX volatility (JPY vs USD/CNY/EUR) affecting both revenue and input costs
• Customer concentration risk typical in specialty chemical supply chains
• Technology/innovation risk in surface finishing chemistries (need for continual R&D and product refresh)
• Regulatory/environmental compliance costs (chemical handling and discharge regulations)

Financial Risks:

• Low asset turnover (0.259) and large cash balance reduce ROE sensitivity to growth
• Negative other comprehensive income (OCI) this period (comprehensive income 33.65 vs NI 43.60) implying valuation/FX swings in securities
• Potential reinvestment risk if excess cash is not deployed at ROIC comparable to current 18.5%

Key Concerns:

• Sustainability of exceptionally high operating margin (40.6%) amid competitive and input cost pressures
• Cyclical normalization from current elevated profitability levels
• Data gaps on R&D, dividend amount/timing, and detailed non-operating items that could mask one-off effects

Investment Implications

Key Takeaways:

• Strong quarter with 12.0% revenue growth and 23.9% operating income growth, indicating positive operating leverage
• Exceptional profitability: gross margin 68.8%, operating margin 40.6%, net margin 30.6%
• Solid earnings quality: OCF/NI at 0.91x and calculated FCF ~26.15
• Fortress balance sheet: current ratio 862%, D/E 0.10x, cash 265.32 vs total liabilities 51.53
• ROE 8.7% driven by high margins; low leverage and asset turnover cap upside to ROE
• Comprehensive income below net income highlights OCI sensitivity (FX/securities)
• Shareholder returns ongoing (buybacks 3.67) with room for sustained dividends (payout ~46%)

Metrics to Watch:

• Order trends and backlog in electronics/automotive/semiconductor end-markets
• Gross and operating margin trajectory (any signs of compression)
• OCF/Net Income ratio and working capital turns (AR and inventory days)
• FX rates (USD/JPY, CNY/JPY) and raw material price trends
• Capex pipeline and ROIC vs 18.5% benchmark
• Comprehensive income movements (securities valuation/FX translation)
• Payout policy disclosures (DPS/DOE) and pace of share repurchases

Relative Positioning: Within Japan specialty chemicals/surface finishing peers, JCU exhibits above-peer margins and an exceptionally strong balance sheet, translating to high ROIC and defensible cash flows; ROE is respectable but constrained by conservative leverage and cash-heavy assets.

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