JCU CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.26B
• Operating Income: ¥5.78B
• Net Income: ¥3.38B
• 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

JCU reported robust FY2026 Q2 consolidated results under JGAAP with clear signs of margin expansion and operating leverage. Revenue grew 12.0% year over year to ¥14,258 million, while operating income rose 23.9% to ¥5,781 million, outpacing top-line growth. Net income increased 28.8% to ¥4,360 million, underscoring strong cost control and favorable mix. Profitability remains exceptional with a gross margin of 60.4% and operating margin of approximately 40.6%, reflecting the company’s high-value-add specialty chemicals and solutions positioning. DuPont metrics indicate a net margin of 30.58%, asset turnover of 0.259, and low financial leverage of 1.10, producing an ROE of 8.74% in line with the reported figure. The implied ROA is roughly 8.0%, which is strong for a specialty materials/chemicals business with a capital-light model. Ordinary income (¥5,780 million) is essentially aligned with operating income, suggesting minimal non-operating noise and very low interest burden. Cash generation is solid: operating cash flow (¥4,627 million) covered net income (¥4,360 million) with an OCF/NI ratio of 1.06, indicating good earnings quality. The balance sheet is conservative with total liabilities of ¥7,028 million versus equity of ¥49,872 million, driving a low debt-to-equity ratio of 0.14x. Liquidity appears very strong with a current ratio of 633.7% and quick ratio of 610.2%, supported by sizeable current assets of ¥40,223 million. Working capital is ample at ¥33,876 million, offering flexibility to manage demand cycles and inventory needs. Interest expense is negligible at ¥2 million, and interest coverage is extremely high at ~2,890x. Based on ordinary income and income tax disclosed (¥1,595 million), the effective tax rate is approximately 27–28%, despite the calculated metric showing 0.0%, which likely reflects limitations in metric tagging rather than economics. Several data points such as equity ratio, cash balance, investing cash flow, and dividend details are not disclosed in the dataset and appear as zeros; these should be treated as unreported rather than actual zeros. Overall, JCU enters the second half with strong momentum, high margins, and a fortress balance sheet, although visibility on capex, cash balances, and dividend policy would improve the completeness of the assessment.

Profitability Analysis

ROE decomposition: Net profit margin of 30.58% x asset turnover of 0.259 x financial leverage of 1.10 yields an ROE of 8.74%, matching the provided calculation. ROA is implied at roughly 7.9–8.0% (0.3058 x 0.259), highlighting strong profitability on assets despite modest turnover typical of a specialty chemicals solutions provider. Operating margin is approximately 40.6% (¥5,781m / ¥14,258m), up faster than revenue given the 23.9% YoY growth in operating income vs. 12.0% revenue growth, confirming operating leverage. Gross margin of 60.4% indicates strong pricing power, favorable product mix, and/or efficiencies in cost of sales (cost of sales ¥4,121m). EBITDA of ¥6,181m yields a 43.4% margin, suggesting limited D&A burden at present (D&A ¥400m). Ordinary income aligns with operating income, so non-operating items are immaterial; interest expense of ¥2m confirms minimal financial drag. Margin quality appears high, underpinned by recurring specialty chemistry demand and process know-how; however, sustainability will depend on end-market dynamics (electronics/automotive/PCB) and raw material trends. Effective tax rate, estimated at ~27.6% (¥1,595m tax / ¥5,780m pre-tax), is consistent with Japan statutory norms and suggests no unusual tax items. Overall, JCU demonstrates best-in-class margins among specialty peers with disciplined cost control and low financial leverage.

Growth Assessment

Top-line growth of 12.0% YoY to ¥14,258m indicates healthy demand momentum in core segments. The outsized growth in operating income (+23.9% YoY) versus revenue implies positive operating leverage, likely driven by product mix upgrades, scale benefits, and/or pricing. Net income growth of 28.8% further confirms enhanced cost discipline and low financial charges. Revenue sustainability appears supported by differentiated technology and high customer switching costs typical in plating chemicals and surface finishing solutions; however, it remains sensitive to electronics and auto supply chains. Profit quality is strong: net margin 30.58%, OCF/NI 1.06, and limited non-operating noise suggest that earnings are cash-convertible and recurring. Asset turnover of 0.259 is modest, consistent with high-margin, lower-capital-intensity models; additional scale could improve utilization and sales per asset. Near-term outlook: continued margin resilience is plausible provided demand in smartphones, automotive electronics, and high-density interconnect substrates remains firm, and raw material cost volatility is contained. FX could be a tailwind or headwind depending on JPY levels versus USD/CNY, given potential overseas sales and procurement. Absence of disclosed capex and investing cash flows in the period constrains visibility into capacity expansion and future growth catalysts. Overall, we expect growth to remain above industry averages if the company maintains product leadership and customer qualification advantages.

Financial Health

Liquidity is robust with a current ratio of 633.7% and a quick ratio of 610.2%, backed by ¥40,223m in current assets versus ¥6,347m in current liabilities. Working capital stands at ¥33,876m, providing substantial buffer against cyclical swings and enabling timely inventory and receivables management. Solvency is strong: total liabilities are ¥7,028m against equity of ¥49,872m, producing a low debt-to-equity ratio of 0.14x. Interest expense is only ¥2m, and interest coverage is ~2,890x, implying negligible refinancing risk. Total assets are ¥55,025m, implying an equity-to-asset buffer of roughly 91% based on liabilities and equity composition, even though the equity ratio is shown as 0.0% due to non-disclosure in that specific metric. Inventories are modest at ¥1,496m relative to revenue, suggestive of efficient supply chain management; however, receivables and payables are not disclosed, limiting deeper working capital analysis. Overall balance sheet strength supports strategic flexibility for R&D, capacity additions, or shareholder returns.

Cash Flow Quality

Operating cash flow of ¥4,627m modestly exceeds net income of ¥4,360m, delivering an OCF/NI ratio of 1.06, which indicates high earnings quality and limited accrual risk in the period. EBITDA of ¥6,181m vs. OCF of ¥4,627m implies cash conversion after working capital and taxes of about 75% of EBITDA, consistent with a quality cash profile for a specialty chemicals firm. Investing cash flow is undisclosed (shown as 0), and capital expenditures are not provided, preventing direct calculation of free cash flow; the reported FCF of 0 should be treated as a placeholder rather than an economic figure. Working capital movements cannot be decomposed due to missing receivables and payables data; inventories are ¥1,496m, relatively light. The low interest burden (¥2m) and substantial current asset base support future cash generation. Overall, cash flow quality appears solid, but greater transparency on capex and cash balances would refine FCF assessment.

Dividend Sustainability

Dividend data for the period indicate Annual DPS of 0.00 and payout ratio of 0.0%, which should be interpreted as not disclosed rather than an actual zero dividend for the full year. With net income of ¥4,360m and strong OCF of ¥4,627m, the company would have ample capacity to fund dividends if policy so dictates. The balance sheet’s low leverage (D/E 0.14x) and high liquidity suggest headroom for shareholder returns alongside growth investments. However, absent disclosed capex and investing cash flow, full free cash flow coverage cannot be assessed; the FCF coverage metric of 0.00x should be treated as unreported. Historical policy signals are not provided in this dataset; therefore, outlook on dividends remains uncertain pending company guidance. In sum, fundamentals support dividend sustainability, but confirmation requires actual DPS guidance and capex plans.

Risk Assessment

Business Risks:

• End-market cyclicality in electronics, smartphones, and automotive electronics impacting plating chemical demand
• Raw material price volatility (e.g., nickel, copper, specialty reagents) affecting margins
• Customer qualification and substitution risk in high-specification plating processes
• Geopolitical and supply chain disruptions, particularly in Asian manufacturing hubs
• Environmental and regulatory compliance costs related to chemical handling and wastewater treatment
• Technology displacement risk from process changes or alternative materials in substrates/PCBs

Financial Risks:

• FX exposure to USD/CNY versus JPY affecting revenue and procurement costs
• Working capital swings tied to customer inventory adjustments (receivables/payables data not disclosed)
• Limited visibility on capex and investing cash flows, potentially leading to lumpiness in FCF
• Concentration risk if large customers represent a significant share of sales (not disclosed)

Key Concerns:

• Sustainability of exceptionally high operating margins amid input cost and pricing dynamics
• Dependence on electronics cycle timing for growth continuity
• Data gaps on cash, capex, and dividend policy limiting full cash return analysis

Investment Implications

Key Takeaways:

• Strong quarter with 12.0% revenue growth and 23.9% operating profit growth, indicating operating leverage
• Exceptional margins: 60.4% gross and ~40.6% operating, supporting a 30.58% net margin
• Solid ROE at 8.74% with low leverage (1.10x), implying high-quality returns driven by margins not leverage
• Cash conversion healthy with OCF/NI of 1.06; minimal interest burden (¥2m) and ~2,890x coverage
• Balance sheet conservative: D/E 0.14x; liquidity very strong with current ratio 633.7%
• Visibility needed on capex, investing CF, and dividend policy to refine FCF and capital return outlook

Metrics to Watch:

• Order trends and book-to-bill across key electronics and automotive end-markets
• Gross and operating margin trajectory vs. raw material cost changes
• FX sensitivity (USD/JPY, CNY/JPY) to revenue and COGS
• Capex commitments, investing cash flows, and resulting FCF
• Working capital intensity (receivables days, inventory turns, payables days) as disclosures become available
• ROE and ROIC progression relative to margin and asset turnover changes

Relative Positioning: Within TSE-listed specialty chemical and materials peers, JCU appears to occupy a premium profitability tier with high gross and operating margins and a net cash-like balance sheet profile, supporting resilient returns and flexibility through cycles.

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