TOYO DRILUBE CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.32B
• Operating Income: ¥184M
• Net Income: ¥156M
• EPS: ¥85.69

Income Statement

Balance Sheet

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

Toyo Dry Lube (4976) reported FY2026 Q1 consolidated results under JGAAP showing top-line resilience but profit compression. Revenue increased 5.5% YoY to ¥1,323 million, indicating stable to modestly improving demand in its specialty coatings/lubricants niches. Gross profit was ¥489.7 million, yielding a healthy gross margin of 37.0%. Operating income declined 10.4% YoY to ¥184 million, with an operating margin of 13.9%, implying either gross margin pressure versus the prior year or higher SG&A intensity. Ordinary income of ¥223 million (16.9% margin) benefited from non-operating items, while net income fell 26.6% YoY to ¥113 million, compressing the net margin to 8.54%. The DuPont decomposition shows Net Margin 8.54%, Asset Turnover 0.103, and Financial Leverage 1.24, resulting in an ROE of 1.09% for the quarter. Liquidity is very strong: current ratio 447.6% and quick ratio 443.1%, supported by substantial working capital of ¥4,876 million. The balance sheet is conservative with liabilities/equity of roughly 0.24x and an implied equity ratio around 80.6% (equity ¥10,328 million over assets ¥12,819 million), despite the equity ratio field showing 0.0% (not disclosed in XBRL format). Interest burden is minimal with interest expense of only ¥1.15 million, and interest coverage at 160x underscores ample debt-servicing capacity. Cash flow line items are unreported this quarter, so operating and free cash flow quality cannot be assessed from disclosed OCF/FCF data. EPS was ¥85.69 for the quarter, while dividend data were not disclosed (DPS and payout shown as zero are placeholders for non-disclosure). Overall, the company exhibits strong financial health and high liquidity, but faces near-term margin and earnings pressure despite revenue growth. The YoY decline in operating and net profits suggests either input cost headwinds, less favorable product mix, or deliberate growth investments in SG&A. Asset turnover remains low on a quarterly basis; annualized ATO would be roughly ~0.41x, consistent with a niche, capital-light specialty materials model. Given limited cash flow disclosure, conclusions on earnings-to-cash conversion must be tentative. The outlook hinges on managing SG&A and preserving gross margin as the topline grows, while continuing to leverage a robust balance sheet.

Profitability Analysis

ROE (DuPont) for the quarter is 1.09% = Net Margin (8.54%) × Asset Turnover (0.103) × Financial Leverage (1.24). Operating margin is 13.9% (¥184m/¥1,323m), below revenue growth, indicating margin compression YoY. Gross margin at 37.0% (¥490m/¥1,323m) is solid for specialty chemicals/coatings, but operating income declined, implying SG&A deleverage or mix pressure. Ordinary income margin of 16.9% exceeds operating margin, suggesting positive non-operating contributions or financial income. Net margin is 8.54%, down YoY given the 26.6% drop in net income versus 5.5% revenue growth. Operating leverage was negative this quarter: costs grew faster than sales, which compressed operating income. Interest expense is negligible (¥1.15m), and interest coverage of ~160x indicates profits are not constrained by financing costs. The implied effective tax rate from reported taxes (¥97.3m) relative to pre-tax profits appears in the mid-40% range when inferred from net income, although the displayed “effective tax rate 0.0%” metric is not reflective of the disclosed tax expense.

Growth Assessment

Revenue growth of +5.5% YoY (to ¥1,323m) indicates stable demand and potential incremental share gains or pricing. However, profit growth lags: operating income -10.4% YoY and net income -26.6% YoY, signaling cost inflation, unfavorable mix, or higher SG&A (e.g., R&D, sales expansion). Gross margin at 37.0% suggests product value-add remains, but incremental margin on growth was muted this quarter. Ordinary income outpaced operating income, hinting at supportive non-operating items that may not be recurring. Sustainability of revenue growth will depend on customer end-markets (e.g., autos, electronics/semiconductor equipment) and pricing power amidst input volatility. Profit quality is mixed near-term: core operations are profitable, but deleverage in SG&A reduced operating profit despite higher sales. Without cash flow disclosure, we cannot corroborate earnings quality via OCF; working capital dynamics (very low inventories reported and high receivables/cash not disclosed) limit inference. Outlook hinges on restoring operating leverage through cost control, mix upgrades, and maintaining pricing, while preserving gross margin.

Financial Health

Total assets ¥12,819m and equity ¥10,328m imply an equity ratio of ~80.6% (though the provided equity ratio field is undisclosed). Total liabilities are modest at ¥2,446m, yielding liabilities/equity of ~0.24x, indicating a very conservative capital structure. Current assets ¥6,279m vs current liabilities ¥1,403m produce a current ratio of 447.6% and a quick ratio of 443.1%, pointing to ample short-term liquidity. Working capital is strong at ¥4,876m, providing operational flexibility. Interest expense is minimal (¥1.15m), and interest coverage at ~160x reflects negligible refinancing risk. There is no disclosure of cash and equivalents in the cash flow section; hence, exact net cash cannot be confirmed from this dataset. Overall solvency is strong, with low leverage and high equity buffer supporting resilience.

Cash Flow Quality

Operating cash flow (OCF), investing cash flow (CFI), and financing cash flow (CFF) are not disclosed this quarter (zeros indicate non-reporting). As a result, OCF/Net Income and Free Cash Flow (FCF) cannot be interpreted from this dataset despite the displayed 0.00 ratios. Earnings quality assessment must therefore rely on accrual measures: margins indicate solid gross profitability, but operating deleverage suggests higher period costs; the absence of OCF disclosure prevents verification of cash conversion. Working capital appears ample, but the inventory balance reported (¥62m) is unusually small for the scale of sales, and receivables/cash components are not itemized here, restricting insights on collection cycles. With limited CF data, we cannot assess capex intensity or FCF sustainability this quarter.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed for the period (zeros reflect non-reporting). EPS is ¥85.69 for Q1, but without DPS or FCF disclosure, payout affordability cannot be evaluated quantitatively. The strong balance sheet (implied ~80.6% equity ratio, low leverage) would typically support dividend capacity over a cycle, but near-term profit contraction and absent cash flow data reduce visibility. Policy outlook cannot be inferred from this dataset alone; monitoring full-year guidance, historical payout practices, and upcoming interim dividend announcements is necessary to assess sustainability.

Risk Assessment

Business Risks:

• Input cost volatility affecting gross margins (e.g., specialty chemicals, solvents, metals).
• Customer concentration and cyclical exposure to automotive and electronics end-markets.
• Product mix shifts that reduce incremental margins despite revenue growth.
• Technology substitution and competition in solid lubricant and coating solutions.
• Export/FX exposure impacting pricing and margins.

Financial Risks:

• Potential margin squeeze from SG&A deleverage if growth slows.
• Limited near-term visibility on cash generation due to undisclosed OCF/FCF.
• Tax rate volatility; implied ETR appears elevated relative to net income.
• Working capital swings that could affect cash conversion in growth periods.

Key Concerns:

• Operating income down 10.4% YoY despite +5.5% revenue growth, signaling negative operating leverage.
• Net income down 26.6% YoY; preserving net margin will require cost discipline or pricing.
• Cash flow statements not disclosed, limiting assessment of earnings quality and FCF.
• Maintaining gross margin at or above 37% amid input and FX headwinds.

Investment Implications

Key Takeaways:

• Top-line growth of +5.5% YoY but operating and net profits declined, indicating near-term margin pressure.
• Healthy gross margin (37.0%) and minimal interest burden support underlying profitability.
• Very strong liquidity (current ratio 447.6%, quick ratio 443.1%) and low leverage (~0.24x liabilities/equity).
• Quarterly ROE at 1.09% reflects modest asset turnover and compressed margins.
• Cash flow and dividend data are not disclosed, constraining FCF and payout analysis.

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio trends over coming quarters.
• Gross margin stability versus input costs and FX.
• Asset turnover (quarterly and annualized) and working capital days.
• OCF and FCF once disclosed; capex intensity and cash conversion.
• Effective tax rate normalization relative to ordinary income.

Relative Positioning: Within Japan-listed specialty materials/coatings peers, Toyo Dry Lube exhibits a conservative balance sheet, strong liquidity, and low financing risk, but currently faces weaker operating leverage and lower quarterly ROE due to margin compression; outlook depends on cost control and maintaining product mix advantages.

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