TECHNOLOGIES,Inc. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥5.78B
• Operating Income: ¥728M
• Net Income: ¥404M
• EPS: ¥4.67

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

Verdict: Despite a steep revenue decline, profitability ratios held up better than expected at the operating level, but bottom-line earnings were weak and leverage remains elevated. Revenue fell 31.1% YoY to 57.82, yet operating income declined only 8.2% YoY to 7.28, implying improved operating efficiency. Ordinary income decreased 13.9% YoY to 6.38, and net income fell 20.4% YoY to 0.78. The operating margin is approximately 12.6% (7.28/57.82), and the net margin is 1.4% (in line with the provided DuPont metric). Based on the reported YoY changes, we estimate operating margin expanded by roughly 315 bps YoY (from ~9.5% to ~12.6%), cushioning the revenue shock. Net margin likely improved slightly by about 18 bps YoY (~1.17% to ~1.35%), though the absolute level remains very low. Gross margin stands at 35.7%, supporting the view that cost controls and mix helped protect profitability; however, cost line disclosures are limited and partially inconsistent, so this should be treated cautiously. Interest coverage is solid at 8.80x, but the company’s leverage is high with D/E at 3.12x and financial leverage at 4.23x. Liquidity is adequate but not robust, with a current ratio of 116.0% and quick ratio of 115.5%, both above 1.0 but below our preferred 1.5 threshold. Effective tax rate is elevated at 47.4%, which, combined with below-the-line items and potential minority interest effects, contributed to the weak net income. Total comprehensive income of 4.57 notably exceeds net income of 0.78, indicating positive OCI items offsetting weak bottom-line profit. ROE is low at 1.7%, constrained by the slim net margin despite reasonable asset turnover (0.293) and high leverage (4.23x). Cash flow data are unreported, limiting our ability to verify earnings quality through OCF conversion or to appraise free cash flow coverage. Balance sheet shows sizeable short-term loans (40.35), which raises refinancing and maturity concentration considerations despite acceptable current ratios. Forward-looking, sustaining the improved operating margin will be crucial as demand normalizes; deleveraging and improved tax efficiency would be key levers to lift ROE from a low base. Overall, Q3 shows good cost discipline under top-line pressure but highlights structural issues around leverage, tax burden, and bottom-line conversion.

Profitability Analysis

ROE (1.7%) decomposition: Net Profit Margin (1.4%) × Asset Turnover (0.293) × Financial Leverage (4.23x) ≈ 1.7%. The most material YoY change appears in operating efficiency: with revenue down 31.1% but operating income down only 8.2%, the operating margin likely expanded by ~315 bps to ~12.6%, indicating improved cost control/mix. Business drivers likely include SG&A discipline (reported SG&A 12.72 vs revenue 57.82, ~22% of sales), pricing/mix tailwinds, and lower variable costs; the limited SG&A breakdown restricts a more granular view. Sustainability: some margin gains may be structural (cost base rightsizing), but given the steep revenue decline, part of the improvement could reflect temporary cost deferrals or project timing; without OCF and capex data, persistence is uncertain. Net margin remains thin at 1.4% due to high effective tax rate (47.4%), interest costs (0.83), and below-the-line impacts (gap between PBT 7.67 and NI 0.78 suggests non-controlling interests or special losses). Watch for adverse operating leverage if revenue stabilizes lower while fixed costs re-accelerate. Also note potential concern if SG&A growth outpaces future revenue when demand recovers; current period suggests SG&A discipline, but visibility is limited due to unreported sub-lines.

Growth Assessment

Revenue contracted 31.1% YoY to 57.82, signaling significant demand softness or project timing slippage. Operating income decreased 8.2% to 7.28, outperforming sales due to cost controls, supporting near-term resilience. Ordinary income (-13.9%) and net income (-20.4%) lagged operating profit, reflecting higher non-operating burden and taxes. The slight net margin improvement (estimated +18 bps YoY to ~1.35%) is from a very low base and remains vulnerable to tax and financing costs. With no order/backlog or segment data disclosed, sustainability of revenue is uncertain; the magnitude of the top-line decline raises questions about customer concentration or cyclical exposure. Forward outlook hinges on stabilizing sales, maintaining the widened operating margin, and easing the tax rate. Absent cash flow disclosure, we cannot confirm whether profit resilience is supported by cash conversion.

Financial Health

Liquidity: Current ratio 116.0% and quick ratio 115.5% are above 1.0 (no immediate warning) but below the >1.5 comfort threshold. Working capital is 14.31. Solvency: D/E at 3.12x is high (explicit warning) and leverage (assets/equity) at 4.23x amplifies equity risk. Interest coverage at 8.80x is strong currently, but cushion could narrow if operating profit softens or rates rise. Maturity profile: Short-term loans of 40.35 are sizable relative to cash (23.59) and receivables (32.39); while current assets exceed current liabilities, reliance on short-term funding elevates rollover risk. Off-balance sheet: No disclosures provided; cannot assess leases/guarantees. Note: Some line-item inconsistencies (e.g., partial mismatches across reported totals) and limited breakdowns constrain a more precise assessment; conclusions rely on the provided ratios.

Cash Flow Quality

OCF and FCF are unreported, so we cannot compute OCF/NI or FCF coverage—key limitation for earnings quality assessment. Earnings risk flags: a large gap between PBT (7.67) and NI (0.78) suggests below-the-line charges, high minority interest, or extraordinary items, which can reduce recurring earnings quality. Working capital: Receivables (32.39) are sizable relative to revenue, but without period flow data, we cannot detect collection changes or end-period pushes. Interest coverage is healthy, implying current operating cash generation likely covers interest, but sustainability is unverified without OCF. Dividend and capex coverage cannot be assessed due to missing cash flow and capex data.

Dividend Sustainability

Dividend data are unreported; payout ratio and DPS are not calculable. With NI of 0.78 and no OCF/FCF disclosed, we cannot test coverage. Retained earnings are modest at 4.04 within owners’ equity of 13.36, suggesting limited retained buffers. High leverage (D/E 3.12x) and reliance on short-term loans could prioritize balance sheet strengthening over distributions if conditions tighten. Policy outlook is therefore uncertain; visibility is low until cash flow and policy disclosures are provided.

Risk Assessment

Business Risks:

• Revenue contraction of 31.1% YoY indicates demand volatility and potential customer/project concentration.
• Execution risk: sustaining elevated operating margin (~12.6%) amid lower scale may be difficult if fixed costs re-accelerate.
• High effective tax rate (47.4%) depresses net profitability and ROE.
• Potential reliance on specific end-markets (not disclosed) increases cyclicality risk.

Financial Risks:

• High leverage: D/E 3.12x and financial leverage 4.23x amplify earnings volatility.
• Refinancing risk from large short-term loans (40.35) despite adequate current ratio.
• Bottom-line sensitivity to non-operating items; gap between PBT (7.67) and NI (0.78) suggests below-the-line drag.
• Absence of OCF/FCF data limits assessment of debt service capacity and dividend cover.

Key Concerns:

• Sustainability of margin gains in the face of a materially lower revenue base.
• Tax and financing costs constraining net margin at 1.4% and ROE at 1.7%.
• Data limitations (no cash flow, limited SG&A detail) hindering validation of earnings quality.
• Exposure to interest rate increases given leverage and short-term borrowing.

Investment Implications

Key Takeaways:

• Operating margin resilience (approx. 12.6%) despite a 31.1% sales drop indicates effective cost control.
• Net margin remains thin at 1.4% due to taxes and non-operating burdens, limiting ROE to 1.7%.
• Leverage is elevated (D/E 3.12x; financial leverage 4.23x), raising balance sheet risk.
• Liquidity is adequate (current ratio 116.0%), but short-term loans (40.35) suggest refinancing dependence.
• Cash flow invisibility (OCF/FCF unreported) is a key constraint on assessing sustainability.

Metrics to Watch:

• Order intake/backlog and revenue trajectory post the 31.1% YoY decline
• OCF/Net income conversion once disclosed
• Operating margin sustainability and SG&A trajectory
• Effective tax rate normalization
• Leverage metrics (D/E, net debt) and interest coverage
• Short-term debt rollover profile and cash balance trends

Relative Positioning: Within a typical TSE small/mid-cap context, the company shows above-average operating margin resilience under pressure but below-average balance sheet strength due to high leverage and limited visibility on cash flow; bottom-line profitability and ROE are currently subpar.

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