JAPAN INSULATION CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥7.24B
• Operating Income: ¥693M
• Net Income: ¥318M
• EPS: ¥55.28

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

Nihon Insulation Co., Ltd. (5368) delivered a strong FY2026 Q2 performance under JGAAP on a consolidated basis, highlighted by double-digit top-line growth and outsized operating profit expansion. Revenue rose 27.5% YoY to ¥7,236mn, while operating income climbed 78.1% YoY to ¥693mn, signaling meaningful operating leverage and improved cost discipline or pricing power. Net income increased 50.7% YoY to ¥478mn, with EPS of ¥55.28, underscoring improved profitability versus the prior-year period. Gross profit of ¥1,522mn equates to a gross margin of 21.0%, and EBITDA of ¥837mn implies an EBITDA margin of 11.6%, both consistent with an upward margin trajectory in H1. Ordinary income of ¥701mn exceeded operating income modestly, indicating benign non-operating items and negligible financing drag (interest expense only ¥3.29mn). The DuPont breakdown shows a net margin of 6.61%, asset turnover of 0.392x, and financial leverage of 1.32x, yielding an ROE of 3.42% for the interim period, with low leverage constraining return amplification. Liquidity is exceptionally strong: current ratio 388%, quick ratio 368%, and working capital of ¥8,571mn. The balance sheet is conservatively financed, with total liabilities of ¥4,112mn against total equity of ¥13,997mn, implying a low debt-to-equity ratio of 0.29x and an equity-to-asset ratio of roughly 76%. Operating cash flow was ¥420mn, equating to an OCF/Net Income ratio of 0.88—broadly healthy for an interim period though slightly below 1.0, suggesting some working capital absorption. Financing cash outflow of ¥443mn likely reflects debt repayment and/or shareholder returns, though annual DPS is currently reported as ¥0 and payout 0%, consistent with either undisclosed interim dividends or a year-end-only policy. Free cash flow is shown as ¥0 due to undisclosed investing cash flows; as a result, FCF-based conclusions are limited at this stage. Interest coverage is very robust at 210.6x, indicating minimal refinancing or solvency risk under current conditions. Overall, the company demonstrates improving profitability, solid cash generation from operations, and a fortress-like balance sheet, positioning it well to navigate input cost fluctuations and demand variability. Data limitations persist—especially for equity ratio (reported as 0%), cash and equivalents (reported as 0), investing cash flows (0), and share data—which appear undisclosed rather than truly zero and should not be interpreted as null economic values. Despite these gaps, the available non-zero data points support a view of strengthening fundamentals in FY2026 H1.

Profitability Analysis

ROE_decomposition: ROE 3.42% = Net Margin 6.61% × Asset Turnover 0.392 × Financial Leverage 1.32. The main driver is improved profitability at the operating level; leverage contributes modestly given a strong equity base. margin_quality: Gross margin 21.0% and EBITDA margin 11.6% reflect improved pricing/cost control versus revenue growth. Operating income grew 78.1% YoY vs revenue +27.5%, implying mix and/or cost tailwinds. Ordinary income slightly above operating income (¥701mn vs ¥693mn) indicates non-operating effects are neutral-to-positive and financing costs are de minimis (interest expense ¥3.29mn). operating_leverage: Operating leverage is evident: a 27.5% rise in sales translated to a 78.1% increase in operating profit, suggesting lower incremental SG&A intensity and better fixed-cost absorption. Sustaining current gross margin and SG&A discipline would continue to support leverage in H2.

Growth Assessment

revenue_sustainability: Top-line growth of +27.5% YoY to ¥7.24bn is strong for H1; sustainability hinges on end-demand in construction-related markets and the company’s ability to pass through input costs. Current margin profile suggests successful pricing and/or product mix enhancement. profit_quality: Net margin at 6.61% and EBITDA margin at 11.6% are supported by modest non-operating noise and minimal interest burden, indicating profits are predominantly operating in nature. OCF/NI of 0.88 is acceptable for an interim period but merits monitoring to ensure earnings convert to cash as the year progresses. outlook: With low leverage and strong liquidity, the company is positioned to continue investing in efficiency and capacity if demand persists. Growth sustainability will depend on construction activity, insulation demand driven by energy-efficiency regulations, and stability in raw material and energy costs.

Financial Health

liquidity: Current ratio 388.4% and quick ratio 368.1% indicate ample short-term liquidity. Working capital stands at ¥8,571mn. Cash and equivalents are reported as 0, which likely reflects undisclosed data rather than actual zero. solvency: Debt-to-equity is 0.29x, and equity constitutes roughly 75.8% of total assets (equity ¥13,997mn / assets ¥18,450mn), pointing to strong solvency. Interest coverage of 210.6x underscores minimal financial stress. capital_structure: Total liabilities of ¥4,112mn against total equity of ¥13,997mn provide a conservative capital structure. The low financial leverage (1.32x per DuPont) moderates ROE but enhances resilience.

Cash Flow Quality

earnings_quality: OCF of ¥420mn versus net income of ¥478mn yields an OCF/NI ratio of 0.88, slightly below 1.0 but acceptable mid-year; continued monitoring is warranted for full-year conversion. FCF_analysis: Free cash flow is shown as ¥0 due to undisclosed investing cash flows (reported as 0). Without capex data, FCF sufficiency cannot be reliably assessed for H1. working_capital: High liquidity ratios suggest manageable receivables and inventories (inventories ¥604mn). The sub-1.0 OCF/NI implies some working capital usage, typical for seasonal patterns in the sector.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are reported as 0, which likely reflects timing/undisclosed data rather than policy cessation. With net income of ¥478mn in H1 and low leverage, the balance sheet appears capable of supporting dividends if policy permits. FCF_coverage: FCF coverage cannot be determined because investing cash flows are undisclosed (reported as 0). OCF of ¥420mn provides a base for potential distributions, but capex needs are unknown. policy_outlook: Given conservative leverage and robust liquidity, a stable or modest dividend policy would be financially supportable; however, confirmation depends on management guidance and full-year cash flow disclosure.

Risk Assessment

Business Risks:

• Exposure to construction cycle and housing starts affecting insulation demand
• Raw material and energy cost volatility impacting margins
• Competitive pricing pressure within building materials/insulation markets
• Regulatory changes in energy efficiency standards affecting product mix and compliance costs
• Supply chain disruptions influencing lead times and working capital needs

Financial Risks:

• Potential working capital swings that could depress cash conversion in H2
• Uncertainty around capex intensity due to undisclosed investing cash flows
• Currency and energy price fluctuations affecting input costs (if imports/energy-intensive processes are material)

Key Concerns:

• Limited visibility on free cash flow due to missing investing CF data
• Reported zeros for cash and equivalents, equity ratio, and shares limit per-share and capital allocation analyses
• Sustainability of elevated operating leverage if volume growth moderates

Investment Implications

Key Takeaways:

• Revenue +27.5% YoY with operating income +78.1% YoY indicates strong operating leverage
• Margins solidifying: gross margin 21.0%, EBITDA margin 11.6%
• Balance sheet strength: D/E 0.29x and equity ~76% of assets
• Healthy OCF at ¥420mn; OCF/NI 0.88 suggests reasonable earnings quality
• Non-operating items benign; interest burden minimal (coverage 210.6x)
• Data gaps on investing CF and cash balances constrain FCF and liquidity precision

Metrics to Watch:

• Gross and operating margin trajectory in H2
• OCF/NI and working capital turns (receivables, inventories)
• Capex disclosures and full-year investing cash flows
• Pricing vs. input cost indices (raw materials, energy)
• Order trends/end-market indicators (construction/housing starts)
• Dividend announcements and capital allocation (debt repayment vs. returns)

Relative Positioning: Versus domestic building materials peers, the company exhibits above-average balance sheet strength and currently improving margins with low financing risk; ROE is tempered by low leverage but benefits from recent profitability gains.

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