SANYU CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.67B
• Operating Income: ¥447M
• Net Income: ¥223M
• EPS: ¥49.90

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

Sanyu Co., Ltd. (56970) reported FY2026 Q2 consolidated results under JGAAP showing steady topline growth and strong profit recovery. Revenue rose 5.8% YoY to ¥12.67bn, while operating income increased 47.2% YoY to ¥447m, indicating meaningful operating leverage. Net income grew 57.6% YoY to ¥301m (EPS ¥49.90), benefiting from improved margins and low financing burden. Gross margin stood at 12.5%, and operating margin at 3.5%, reflecting effective cost control despite a still-thin structural margin profile typical for metal processing/fabrication businesses. DuPont analysis indicates ROE of 2.81%, driven by a 2.38% net margin, 0.656x asset turnover, and 1.80x financial leverage; the improvement in profitability has not yet translated into a high ROE. Cash generation was solid with operating cash flow (OCF) of ¥331m, resulting in an OCF/Net income ratio of 1.10, which supports the quality of earnings. The balance sheet appears sound with total assets of ¥19.30bn and equity of ¥10.73bn (assets-to-equity 1.80x), while current ratio is 169% and quick ratio 136%, demonstrating ample short-term liquidity. Interest expense was just ¥3.8m, producing an exceptionally high interest coverage of 118x, underscoring minimal financial risk from debt service. Working capital of ¥5.63bn provides operational flexibility, though it also implies capital tied up in the business. Ordinary income of ¥483m exceeded operating income, implying net non-operating gains; tax expense of ¥113m suggests an implied tax burden consistent with typical statutory ranges, although some items (e.g., extraordinary gains/losses, minority interest) are not disclosed. Free cash flow cannot be reliably assessed because investing cash flows were not disclosed (reported as 0, which indicates non-disclosure rather than actual zero). Dividend information (DPS, payout, FCF coverage) and cash & equivalents were also not disclosed, limiting capital allocation and liquidity buffer assessment. Despite data gaps, the trajectory shows improving operating efficiency and profitability on moderate sales growth. The company’s thin margins, low but improving ROE, and working capital intensity remain structural considerations. Financial leverage is conservative, providing resilience against cyclical swings in input costs and end-demand. Overall, Sanyu is executing on margin improvement with solid cash conversion, but further evidence of sustainable pricing power and capex discipline will be important to lift ROE and validate durability of the current recovery.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 2.38%
• asset_turnover: 0.656
• financial_leverage: 1.8
• calculated_ROE: 2.81%
• commentary: ROE is primarily constrained by a thin net margin; leverage is modest and asset turnover is adequate for a midstream metals processor. Upside to ROE hinges on sustained margin expansion rather than higher leverage. margin_quality:
• gross_margin: 12.5%
• operating_margin: 3.5%
• EBITDA_margin: 5.3%
• drivers: YoY operating income growth (+47%) far outpaced revenue growth (+5.8%), implying better cost pass-through and operating efficiency. Non-operating items were supportive (ordinary income > operating income). operating_leverage: High in the period: operating income grew ~8x faster than revenue, indicating fixed-cost absorption and/or improved product mix. Sustaining this will depend on stable volumes and pricing discipline.

Growth Assessment

revenue_sustainability: Revenue growth of 5.8% YoY is steady and likely driven by volume recovery and/or pricing actions in core metal-related end markets. No evidence of one-off sales spikes is reported, but backlog and order intake are not disclosed. profit_quality: Net income growth (+57.6% YoY) is supported by operating improvements rather than financial items alone; OCF/Net income at 1.10 corroborates earnings cash conversion. Ordinary income above operating income suggests benign non-operating contributions. outlook: With conservative leverage and improving margins, near-term earnings resilience appears reasonable. Key to sustainability: maintaining gross spread amid raw material cost volatility, controlling SG&A, and avoiding margin dilution from competitive pricing.

Financial Health

liquidity:

• current_ratio: 168.9%
• quick_ratio: 136.0%
• working_capital: ¥5,628,283,000
• commentary: Strong liquidity provides operational headroom and cushions supply chain or demand fluctuations. solvency:
• debt_to_equity: 0.82x (using total liabilities/equity)
• interest_coverage: 117.9x
• commentary: Balance sheet is conservatively positioned with minimal interest burden. Assets-to-equity at 1.80x indicates moderate leverage. capital_structure: Total assets ¥19.30bn; total liabilities ¥8.75bn; equity ¥10.73bn. Equity ratio was not disclosed (reported as 0.0%); however, implied equity ratio by balance sheet is approximately 55.6%.

Cash Flow Quality

earnings_quality: OCF/Net income of 1.10 indicates earnings are backed by cash generation, suggesting limited accrual-driven earnings in the period. FCF_analysis: Free cash flow cannot be determined because investing cash flows (including capex) were not disclosed (reported as 0). Using OCF of ¥331m absent capex data would be incomplete; thus, FCF assessment is indeterminate. working_capital: Inventories at ¥2.69bn within current assets of ¥13.80bn suggest manageable inventory intensity; specific turns and days are not derivable without prior period data. The positive OCF implies net favorable working capital movement or stable operations.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio were not disclosed (reported as 0). With EPS at ¥49.90 and improving profitability, capacity for distributions exists in principle, but actual policy and payout levels cannot be assessed. FCF_coverage: Not assessable due to non-disclosure of investing cash flows and thus FCF. Any dividend sustainability conclusion would be speculative without capex requirements. policy_outlook: Given conservative leverage and positive cash generation, the balance sheet could support distributions; however, absent disclosure on DPS and policy, we cannot infer direction. Monitoring management guidance and historical payout trends is necessary.

Risk Assessment

Business Risks:

• Raw material (steel and metals) price volatility affecting spread management
• Energy and logistics cost inflation impacting gross margin
• Demand cyclicality in key end-markets (automotive, construction, machinery)
• Customer concentration and pricing pressure from large OEMs
• Competitive intensity among domestic processors and import competition
• Operational execution risk in maintaining fixed-cost absorption
• Environmental and safety regulation compliance costs

Financial Risks:

• Thin structural margins leading to earnings sensitivity to volume/mix
• Working capital intensity tying up cash in receivables and inventories
• Potential inventory valuation risk during metal price down-cycles
• ROE below cost of equity, risking capital efficiency concerns
• Limited visibility on capex and cash balances due to non-disclosure

Key Concerns:

• Sustainability of recent margin improvements amid input cost volatility
• Lack of disclosure on cash balances and investing cash flows obscures FCF
• Low ROE (2.81%) despite earnings rebound

Investment Implications

Key Takeaways:

• Revenue up 5.8% YoY with operating income up 47.2%, indicating favorable operating leverage
• Net margin 2.38% and ROE 2.81% remain modest despite improvement
• Strong liquidity (current ratio 169%, quick ratio 136%) and minimal interest burden (coverage 118x)
• OCF of ¥331m supports earnings quality (OCF/NI 1.10), but FCF not ascertainable
• Moderate leverage (assets/equity 1.80x; liabilities/equity 0.82x) provides resilience
• Dividend metrics not disclosed; capital allocation visibility limited

Metrics to Watch:

• Gross and operating margin trajectory and price-cost spread
• OCF/Net income ratio and working capital turns (inventory and receivables days)
• Capex and investing cash flows to assess FCF and ROIC
• ROE progression and drivers (margin vs. asset turnover)
• Order backlog/booking trends and utilization
• Equity ratio disclosure and net cash/debt position
• Dividend policy announcements and payout guidance

Relative Positioning: Relative to domestic metal processing peers, Sanyu exhibits improving profitability with conservative leverage and robust liquidity, but maintains thinner margins and a lower ROE; greater disclosure on FCF and capital allocation would enhance comparability.

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