METALART CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥22.23B
• Operating Income: ¥1.46B
• Net Income: ¥1.25B
• EPS: ¥325.35

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

Metalart Co., Ltd. (56440) reported FY2026 Q2 consolidated results under JGAAP with modest top-line growth and resilient operating profits, but weaker bottom-line performance. Revenue rose 2.2% year over year to ¥22.233 billion, while operating income increased 0.6% to ¥1.463 billion, indicating limited operating leverage in the period. Gross profit reached ¥2.626 billion, translating to an 11.8% gross margin, which supports an 11.4% EBITDA margin (¥2.541 billion) and a 6.6% operating margin. Ordinary income of ¥1.623 billion exceeded operating income, suggesting positive non-operating contributions (e.g., forex gains or equity-method income) and minimal interest burden. Despite this, net income fell 13.3% YoY to ¥934 million, implying either higher tax burden, unfavorable extraordinary items, or other below-the-line factors. The DuPont framework indicates a calculated ROE of 3.47%, driven by a 4.20% net margin, 0.492x asset turnover, and 1.68x financial leverage, pointing to restrained profitability within a capital-intensive model. Operating cash flow was strong at ¥3.501 billion, 3.75x net income, reflecting solid earnings quality and favorable non-cash items and/or working capital movements. The balance sheet appears conservative: total assets of ¥45.208 billion against total liabilities of ¥17.746 billion imply a recalculated equity ratio near 59.5% (the provided 0.0% is an undisclosed placeholder). Liquidity is sound with a current ratio of 166.7% and working capital of ¥9.788 billion, though the quick ratio equals the current ratio due to inventories being undisclosed, not zero. Interest expense was only ¥11 million, yielding very high interest coverage of about 133x, and financial leverage is moderate at 0.66x liabilities-to-equity. Dividend distributions were absent (DPS ¥0, payout 0%), consistent with a cautious stance amid earnings volatility and potential capex needs typical for forging and metal-processing businesses. Growth quality appears mixed: limited operating leverage despite revenue growth and a decline in net income indicate pressure from non-operating or extraordinary factors. Cash generation strength contrasts with the lower reported ROE and net margin, suggesting the potential for earnings normalization if below-the-line items abate. Data limitations are material: inventories, cash balance, investing cash flow, and share data were not disclosed in the extract, constraining precision on liquidity buffers, capex intensity, and FCF. Overall, the company exhibits stable operations, high cash conversion, and a strong balance sheet, offset by modest profitability metrics, compressed net income, and incomplete disclosures that limit full evaluation of capital allocation and dividend capacity.

Profitability Analysis

DuPont decomposition shows ROE of 3.47% = net margin 4.20% × asset turnover 0.492 × leverage 1.68. Operating margin is 6.6% (¥1.463bn/¥22.233bn), indicating a reasonable spread over an 11.8% gross margin given the capital-intensive manufacturing profile. EBITDA margin of 11.4% and D&A of ¥1.078bn highlight significant capital consumption; depreciation equals roughly 42% of EBITDA, consistent with heavy assets. Ordinary margin of 7.3% (¥1.623bn/¥22.233bn) exceeds operating margin, implying net non-operating gains offsetting minimal interest cost; interest expense of ¥11m yields an interest coverage ratio near 133x. Net margin at 4.20% trails ordinary margin, indicating pressure from taxes and/or extraordinary losses; reported effective tax rate in the summary table (0.0%) is not reflective of the ¥409m tax expense and should be recalculated around mid-20s to low-30s versus the appropriate pretax base under JGAAP. Operating leverage appears low this quarter: revenue grew 2.2% YoY while operating income rose only 0.6%, suggesting cost inflation, product mix headwinds, or limited pricing power. Margin quality is decent at EBITDA level but compresses through to net margin, which along with modest asset turnover (0.492x) caps ROE. The business remains sensitive to volume/mix and energy/materials costs, typical for forging/metal processing, with scope for margin improvement via productivity and mix upgrades.

Growth Assessment

Revenue growth of 2.2% YoY is modest, pointing to stable demand conditions but limited expansion. Operating income growth of 0.6% YoY lags sales growth, indicating weak incremental margins and potential input cost or SG&A headwinds. Net income declined 13.3% YoY to ¥934m despite higher ordinary income than operating income, suggesting adverse extraordinary items and/or higher tax burdens weighing on bottom-line growth. Profit quality is supported by strong cash conversion (OCF/NI 3.75x) and sizable non-cash charges (¥1.078bn D&A), implying underlying operations generated cash even as reported earnings softened. Sustainability hinges on ability to pass through raw material and energy costs, maintain utilization rates, and manage product/geographic mix. Outlook is cautiously stable: modest top-line growth with potential for operating margin stabilization if cost pressures ease, though bottom-line volatility may persist given exposure to non-operating/extraordinary items and tax. With asset turnover at 0.492x, growth will likely require either capacity/utilization gains or product mix upgrades rather than significant balance sheet leverage. Absent disclosed order backlog or segment detail, we assume growth tracks core end-markets (e.g., autos, industrial machinery), which are typically cyclical and sensitive to FX and global capex cycles.

Financial Health

Liquidity appears sound: current assets of ¥24.461bn vs current liabilities of ¥14.673bn result in a current ratio of 166.7% and working capital of ¥9.788bn. The quick ratio equals the current ratio because inventories are undisclosed in this dataset; true quick liquidity is likely lower but still solid given the current ratio. Solvency is strong with total liabilities of ¥17.746bn and total equity of ¥26.889bn; recalculated equity ratio is approximately 59.5% (the reported 0.0% is an undisclosed placeholder). Debt-to-equity at 0.66x (liabilities/equity) and minimal interest expense (¥11m) indicate a conservative capital structure and low refinancing risk. Interest coverage is very high (~133x), providing ample cushion against rate increases or earnings dips. Cash and equivalents are undisclosed (shown as 0), so we cannot assess the immediate cash buffer or net cash/debt position from the provided data. No apparent near-term balance sheet stress is evident given liquidity and leverage metrics.

Cash Flow Quality

Operating cash flow of ¥3.501bn far exceeds net income of ¥934m, yielding an OCF/NI ratio of 3.75x, which indicates strong earnings quality supported by non-cash charges (¥1.078bn D&A) and likely favorable working capital movements. EBITDA of ¥2.541bn bridges to OCF with positive working capital release and/or other non-cash add-backs. Investing cash flow is undisclosed (shown as 0), preventing calculation of capex and therefore true free cash flow; the reported FCF of 0 is a placeholder and not economically meaningful. Given the asset intensity implied by D&A, maintenance capex is likely material; without capex disclosure we cannot confirm FCF sufficiency after investment needs. Financing cash flow was a net outflow of ¥156m, suggesting modest debt service or other financing uses, consistent with low financial leverage. Overall, cash conversion from earnings is strong, but the absence of capex and cash balance disclosures limits assessment of sustainable FCF and liquidity runway.

Dividend Sustainability

The company paid no dividends in the period (DPS ¥0; payout ratio 0%). With net income of ¥934m and strong OCF, capacity for distributions may exist, but lack of capex data and cash balance disclosure precludes assessing true FCF coverage. Given the capital-intensive nature of operations (D&A ¥1.078bn) and potential ongoing investment needs, a conservative dividend stance is understandable. Policy outlook cannot be inferred from the provided data; if management prioritizes balance sheet strength and capex, payouts may remain cautious. FCF coverage metrics shown as 0.00x are placeholders due to undisclosed investing cash flows and should not be interpreted as a constraint on dividends.

Risk Assessment

Business Risks:

• Exposure to cyclical end-markets (automotive, industrial machinery) affecting volume and pricing
• Raw material and energy cost volatility impacting gross margins
• FX fluctuations influencing non-operating income and export competitiveness
• Customer concentration risk typical in forging/metal components supply chains
• Operational execution risk including yield, downtime, and labor availability
• Potential environmental/regulatory costs related to metal processing and emissions

Financial Risks:

• Earnings sensitivity to extraordinary items and tax, causing net income volatility
• Capex intensity potentially absorbing operating cash flows in certain periods
• Limited disclosure on cash and capex impedes visibility into FCF and liquidity buffer
• Working capital swings that can materially affect operating cash flow
• Interest rate risk is limited currently but could rise if leverage increases

Key Concerns:

• Net income declined 13.3% YoY despite stable operating performance
• Low reported ROE (3.47%) due to modest margins and low asset turnover
• Incomplete disclosures (inventories, cash, investing CF, shares outstanding) constrain analysis
• Operating leverage appears weak with revenue up 2.2% and operating income up only 0.6%

Investment Implications

Key Takeaways:

• Stable top-line with limited operating leverage this quarter
• Solid operating efficiency at EBITDA level but compression to net margin
• Strong OCF relative to earnings supports earnings quality
• Conservative balance sheet with high interest coverage and moderate leverage
• Dividend suspended/absent; capital allocation priorities not discernible without capex data
• ROE held back by modest asset turnover and net margin

Metrics to Watch:

• Capex and investing cash flows to assess sustainable FCF
• Inventories and receivables trends for working capital health
• Gross and operating margin progression versus raw material and energy cost trends
• Extraordinary items and effective tax rate normalization
• Order trends/end-market demand, especially auto and industrial cycles
• Asset turnover improvements via utilization and mix

Relative Positioning: Within capital-intensive metal processing peers, the company shows strong cash conversion and a conservative balance sheet but delivers below-peer ROE due to modest asset turnover and compressed net margins; visibility on capex and liquidity is limited by disclosures.

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