Mipox Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.69B
• Operating Income: ¥235M
• Net Income: ¥266M
• Earnings per Unit (EPU): ¥18.96

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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

Verdict: Soft quarter with severe profit compression and weak cash conversion despite modest top-line growth. Revenue grew 1.1% YoY to 56.93, but operating income fell 63.1% YoY to 2.35, indicating significant operating deleverage. Gross profit reached 22.04, implying a gross margin of 38.7%, while SG&A of 19.68 consumed 89% of gross profit. Operating margin compressed to 4.1%, down roughly 710–720 bps from an implied ~11.3% a year ago (based on -63% OI vs roughly flat sales). Ordinary income declined 56.2% to 1.94 as non-operating expenses (1.17) exceeded non-operating income (0.76), with interest expense at 0.41 weighing on finance costs. Profit before tax rebounded to 4.19 due to an estimated 2.25 of extraordinary gains (PBT exceeds ordinary income), which boosted the bottom line. Net income decreased 42.0% YoY to 2.65, but the net margin still printed at 4.7% thanks to non-recurring items; effective tax rate was 36.6%. ROE calculated at 3.1% is weak, driven by thin net margin (4.7%), low asset turnover (0.329x), and moderate leverage (2.05x). ROIC at 1.4% is well below a 5% warning threshold, signaling poor capital efficiency. Cash flow quality is a concern: operating cash flow was -2.84 versus positive net income of 2.65 (OCF/NI -1.07x), pointing to working capital outflows or earnings not backed by cash. Capital expenditures of 3.89 and share repurchases of 2.00 were funded via financing inflows of 9.41, increasing reliance on debt in the period. Liquidity is adequate (current ratio 146%, quick ratio 134%), but leverage measured by Debt/EBITDA is elevated at 8.8x despite D/E of 1.05x appearing moderate. Dividend payout ratio is 54.5% on earnings, but coverage by free cash is weak this half given negative OCF and heavy capex. Forward-looking, the key is whether SG&A can be realigned to sales and whether extraordinary gains recur (unlikely); absent margin repair, ROE and ROIC will remain depressed. Monitoring cost controls, working capital normalization, and interest burden management will be critical for the second half.

Profitability Analysis

DuPont decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 4.7% × 0.329 × 2.05 ≈ 3.1%. The largest driver of deterioration YoY is net profit margin, reflecting a sharp contraction in operating margin to 4.1% (down ~710–720 bps from an implied ~11.3%). Operating deleverage is evident: revenue was +1.1% YoY while operating income fell 63.1% as SG&A stayed elevated at 19.68 (34.6% of sales), leaving little buffer after gross margin. Non-operating balance was slightly negative (net -0.41) due to interest costs, and PBT benefited from an estimated 2.25 in extraordinary gains, which do not enhance recurring profitability. Asset turnover at 0.329x is low, suggesting underutilized assets; combined with low margins, this drags ROE. Financial leverage at 2.05x is moderate and not the key ROE lever. The margin compression appears driven by cost inflation and/or higher fixed costs rather than revenue pressure, and the reliance on extraordinary gains indicates non-recurring support. Sustainability: absent SG&A right-sizing or mix/pricing tailwinds, current operating margin is not comfortably sustainable. Concerning trends include SG&A intensity outpacing revenue growth and elevated interest burden relative to diminished EBITDA, which could further pressure ordinary income.

Growth Assessment

Top-line growth was modest at +1.1% YoY to 56.93, suggesting stable demand but limited volume/price tailwinds. Profitability deteriorated disproportionally: operating income fell 63.1% YoY, ordinary income fell 56.2%, and net income fell 42.0%, implying negative operating leverage. Gross margin at 38.7% is reasonable, but SG&A at 34.6% of revenue left an operating margin of only 4.1%, highlighting cost discipline issues. Profit before tax rose above ordinary income due to extraordinary gains (~2.25), inflating earnings quality for the period. EBITDA of 6.03 (10.6% margin) provides some cushion, but interest burden (0.41) and high Debt/EBITDA (8.8x) limit flexibility. Near-term outlook hinges on cost control, potential normalization of working capital (to restore OCF), and avoidance of one-time gain reliance. Without margin recovery, full-year growth in profits appears challenging despite steady revenue.

Financial Health

Liquidity: Current ratio 146% and quick ratio 134% are above 1.0 and broadly sound, though marginally below a 150% comfort benchmark. Working capital stands at 30.78, and cash plus receivables (52.09) comfortably exceed short-term loans (33.71). Solvency: Debt-to-equity is 1.05x (acceptable), but total debt of ~53.03 against EBITDA of 6.03 results in high Debt/EBITDA of 8.8x, indicating leverage strain from an earnings-power perspective. Interest coverage is 5.67x, at the lower end of the ‘strong’ threshold; deterioration in EBITDA would quickly compress coverage. Maturity profile: current liabilities 66.84 vs current assets 97.62 indicates limited near-term mismatch, yet dependence on short-term loans (33.71) introduces refinancing sensitivity. Off-balance sheet obligations: none reported in the provided data.

Cash Flow Quality

OCF/Net Income is -1.07x, flagging poor cash conversion and potential earnings quality concerns for the half. Negative OCF alongside modest revenue growth suggests a working capital outflow (likely receivables/inventory build or payables drawdown), though detailed drivers are unreported. Capex of 3.89 combined with negative OCF implies internally generated cash was insufficient, leading to reliance on financing CF of 9.41 to fund both investments and 2.00 in share buybacks. While specific FCF is unreported, the combination of negative OCF and capex indicates weak free cash coverage for shareholder returns and debt service this period. No clear signs of manipulation are evident from the data, but the divergence between NI and OCF warrants monitoring for reversals in H2.

Dividend Sustainability

The payout ratio is 54.5% on reported earnings, within a typical sustainability threshold (<60%). However, cash coverage is weak given negative OCF and meaningful capex in the half, implying dependence on external funding to maintain distributions and buybacks. With ROE at 3.1% and ROIC at 1.4%, capital efficiency is low; sustaining dividends without margin and cash flow recovery could pressure balance sheet flexibility. Policy is unreported; absent explicit guidance, prudence suggests moderating shareholder returns if cash conversion does not improve in H2.

Risk Assessment

Business Risks:

• Operating deleverage: SG&A intensity (34.6% of sales) amid modest revenue growth compresses margins.
• Execution risk in cost control needed to restore operating margin from 4.1%.
• Dependence on extraordinary gains (~2.25) to support PBT, which are non-recurring.
• Potential input cost inflation or pricing pressure not offset by mix/pricing actions.

Financial Risks:

• Weak cash conversion (OCF/NI -1.07x) and negative OCF in the half.
• High Debt/EBITDA at 8.8x despite moderate D/E, increasing vulnerability if EBITDA weakens.
• Refinancing risk due to sizable short-term loans (33.71) vs. earnings headroom.
• Interest rate sensitivity from interest expense burden (0.41) with compressed operating profit.

Key Concerns:

• ROIC at 1.4% well below 5% threshold indicates poor capital efficiency.
• Ordinary income erosion (-56.2% YoY) despite stable revenue suggests structural cost issues.
• Dividend and buybacks funded by financing CF, not by free cash, reducing financial flexibility.
• Limited disclosure on segment drivers and SG&A breakdown obscures root causes.

Investment Implications

Key Takeaways:

• Revenue resilient (+1.1% YoY) but profit collapse (OI -63.1% YoY) signals negative operating leverage.
• Operating margin compressed ~710–720 bps YoY to 4.1%; SG&A discipline is the swing factor.
• Extraordinary gains (~2.25) boosted PBT, masking weak ordinary income and core earnings.
• Cash flow quality is poor (OCF negative) with capex outlays funded externally.
• Leverage looks high on an EBITDA basis (8.8x) even if D/E appears moderate (1.05x).
• ROE 3.1% and ROIC 1.4% highlight subdued returns; improvement requires margin and cash conversion recovery.

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio each quarter
• Working capital movements (AR, inventory, AP turnover) and OCF/NI ratio
• Ordinary income vs. reliance on extraordinary gains
• Debt/EBITDA and interest coverage trajectory
• Capex cadence vs. returns (ROIC improvement)
• Dividend and buyback cash coverage from FCF

Relative Positioning: Versus domestic industrial peers, the company shows weaker profitability (low ROE/ROIC) and higher leverage on an EBITDA basis, with adequate liquidity but inferior cash conversion; near-term recovery depends on cost realignment and stabilization of non-recurring items.

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