Bando Chemical Industries,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥59.09B
• Operating Income: ¥6.57B
• Net Income: ¥3.32B
• EPS: ¥115.97

Income Statement

Balance Sheet

Cash Flow Statement

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

Bando Chemical (5195) FY2026 Q2 (IFRS, consolidated) shows resilient profitability improvement on modest topline growth. Revenue grew 1.7% YoY to 590.94, while operating income rose 30.1% YoY to 65.69, driving operating margin expansion to roughly 11.1%. Net income increased 46.2% YoY to 48.19 with an effective tax rate of 18.2%, and total comprehensive income reached 65.07. Gross margin was 27.7% (gross profit 163.66), and EBITDA margin was 16.2% (EBITDA 95.44), indicating solid cost control and better mix/pricing. DuPont analysis yields a 5.6% ROE, comprised of an 8.2% net margin, 0.493x asset turnover, and 1.39x financial leverage, reflecting conservative balance sheet usage. Cash generation was healthy: operating cash flow of 56.10 exceeded net profit (OCF/NI 1.16x), and free cash flow was positive at 30.43 after capex of 23.92. The balance sheet is strong with total assets of 1,198.96, equity of 861.34 (equity ratio 71.6%), and modest loans (ST 53.50, LT 17.87). Working capital intensity remains meaningful, with receivables 229.78 and inventories 195.30; our estimate suggests a cash conversion cycle around the mid-70s days, typical for an industrial components maker. Profit before tax of 65.91 was close to operating income, implying limited net non-operating drag; equity-method income of 7.99 is reported but classification under IFRS may differ, which could explain part of the bridge within operating or below operating lines. Financing cash flow was an outflow of 44.62, including share repurchases of 9.82 and likely dividends and some debt movements (dividends amount not separately disclosed). The calculated payout ratio is 69.7% and FCF coverage is 0.91x, suggesting dividends are almost covered by internally generated cash, albeit slightly tight in this period. Debt-to-equity is a modest 0.44x and liquidity appears ample, supported by cash and equivalents of 177.15. Overall, earnings quality is solid with positive OCF conversion and margin gains despite subdued revenue growth. Outlook hinges on end-market demand in autos/industrial, raw material pricing, and FX; the current mix and cost discipline provide a buffer. Data gaps exist (e.g., non-operating details, dividends paid, current liabilities), but the available non-zero metrics support a view of improving profitability and robust financial health.

Profitability Analysis

ROE_decomposition: ROE 5.6% = Net margin 8.2% x Asset turnover 0.493 x Financial leverage 1.39x. The result indicates moderate profitability, conservative balance sheet leverage, and modest asset utilization. margin_quality: Gross margin 27.7% (163.66/590.94) and EBITDA margin 16.2% (95.44/590.94) support improved operating efficiency; operating margin ~11.1% (65.69/590.94). The sharp YoY operating income growth vs. revenue (+30.1% vs. +1.7%) indicates pricing/mix gains and cost containment. The bridge from gross profit minus SG&A to operating income implies other operating income/expense items under IFRS within operating profit. operating_leverage: Revenue +1.7% YoY versus operating income +30.1% YoY demonstrates strong operating leverage. Fixed-cost absorption and better mix likely contributed, with D&A at 29.75 supporting scale benefits.

Growth Assessment

revenue_sustainability: Topline growth of 1.7% YoY is modest, consistent with stable demand in autos/industrial applications. Receivables (229.78) and inventories (195.30) indicate continued activity but working-capital intensity remains. profit_quality: Net income up 46.2% YoY with a tax rate of 18.2% suggests underlying improvement rather than tax-driven earnings. PBT (65.91) closely tracks operating income (65.69), implying limited non-operating volatility; equity-method income of 7.99 is present but classification under IFRS may place it within operating or below, limiting clear attribution. outlook: Margin momentum should benefit from cost normalization and pricing discipline, while FX and raw material trends (e.g., synthetic rubber, chemicals, energy) are key swing factors. End-market exposure to autos and industrial machinery implies sensitivity to global capex cycles and OEM production schedules; a stable to mildly improving demand environment would support steady revenue with maintained margins.

Financial Health

liquidity: Cash and equivalents 177.15 provide a solid liquidity buffer. Current ratio/quick ratio are not calculable due to unreported current liabilities, but the equity ratio is high at 71.6%. Estimated cash conversion cycle ~77 days (DSO ~71, DIO ~85, DPO ~79), consistent with working-capital-intensive operations. solvency: Debt-to-equity 0.44x with loans of ~71.37 (ST 53.50, LT 17.87) indicates low leverage. Interest coverage is not calculable (interest expense unreported), but low debt and strong EBITDA (95.44) suggest ample coverage. capital_structure: Total assets 1,198.96 vs. equity 861.34 (leverage 1.39x) reflects a conservative structure. Retained earnings are substantial at 594.18, supporting future investments and distributions.

Cash Flow Quality

earnings_quality: OCF/Net income at 1.16x indicates good cash conversion. PBT closely aligned with operating income suggests limited below-the-line noise in this period. FCF_analysis: Free cash flow was 30.43 (OCF 56.10 minus capex 23.92), positive despite shareholder returns and investment. Investing CF was -25.67, broadly in line with capex, indicating limited M&A or one-off outflows. working_capital: Receivables 229.78 and inventories 195.30 imply significant tied-up capital; estimated DSO ~71 days and DIO ~85 days, offset by DPO ~79 days, producing a cash conversion cycle near 77 days. Further improvements in inventory management and collections could enhance OCF sustainability.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 69.7%, within a manageable range given net margin of 8.2% and ROE of 5.6%, though on the higher side relative to growth needs. FCF_coverage: FCF coverage is 0.91x, indicating dividends were nearly covered by free cash flow but slightly exceeded it in this period. Continued positive OCF and disciplined capex are important to maintain coverage. policy_outlook: With an equity ratio of 71.6% and stable cash generation, the company appears capable of sustaining dividends, assuming stable earnings. However, partial data on dividends paid and lack of full non-operating detail warrant caution in extrapolating the run-rate.

Risk Assessment

Business Risks:

• Demand cyclicality in automotive and industrial end markets
• Raw material price volatility (rubber, petrochemicals, reinforcement materials)
• Foreign exchange fluctuations affecting exports and input costs
• Supply chain disruptions and logistics cost variability
• Customer concentration risk with major OEMs or Tier-1 suppliers
• Competitive pricing pressure in belting and industrial components
• Energy cost and wage inflation impacting manufacturing costs

Financial Risks:

• Working capital intensity leading to OCF volatility
• Potential dividend coverage tightness if FCF weakens (FCF coverage 0.91x)
• Exposure to interest rate changes on short-term borrowings (ST loans 53.50)
• Equity-method income variability (7.99) if associate/JV performance fluctuates

Key Concerns:

• Sustainability of margin expansion if raw materials rise or pricing power weakens
• Limited disclosure on non-operating items and interest expense complicates coverage assessment
• Inventory levels (195.30) require active management to avoid write-down and cash drag

Investment Implications

Key Takeaways:

• Profitability improved materially with operating margin ~11.1% and EBITDA margin 16.2% on modest revenue growth
• ROE at 5.6% reflects conservative leverage; scope to enhance via asset efficiency and margin preservation
• Cash generation is solid (OCF/NI 1.16x; FCF 30.43), supporting ongoing distributions and investment
• Balance sheet strength (equity ratio 71.6%, debt-to-equity 0.44x) provides resilience
• Dividend payout appears high but near-covered by FCF (0.91x), requiring continued cash discipline

Metrics to Watch:

• Gross and operating margin trajectory vs. raw material cost trends
• OCF/Net income and working-capital days (DSO, DIO, DPO)
• Capex vs. growth/maintenance needs and FCF coverage of shareholder returns
• FX impact on revenue and costs
• Equity-method income stability and classification effects on operating vs. non-operating lines

Relative Positioning: Within Japanese rubber/industrial components peers, Bando exhibits conservative leverage and solid margin improvement but a moderate ROE (5.6%) relative to typical cost of equity; operational execution and working-capital discipline are 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
• 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