NIC Autotec,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.28B
• Operating Income: ¥17M
• Net Income: ¥45M
• EPS: ¥8.37

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

NIC Autotec (単体, JGAAP) delivered FY2026 Q2 results with solid top-line growth but sharp profit compression. Revenue increased 13.7% year over year to ¥3,279 million, indicating healthy demand and likely order inflows in core aluminum frame/FA-related solutions. Despite the sales growth, gross profit was ¥644 million and the gross margin stood at 19.6%, which is reasonable but leaves limited room to absorb higher operating costs. Operating income declined to ¥17 million (down 68.7% YoY), implying an operating margin of 0.5% and signaling pronounced deleveraging at the operating line, likely from elevated SG&A, wage inflation, and/or pricing/mix pressure. Ordinary income of ¥22 million benefited from modest non-operating gains that more than offset interest expense of ¥5 million. Net income was ¥45 million, down 31.6% YoY, supported by a negative tax charge (tax benefit), raising questions on one-off items or loss carryforwards. DuPont analysis shows ROE of 1.34% driven by a slim net margin (1.37%), moderate asset turnover (0.485x), and financial leverage of about 2.0x. Liquidity appears adequate with a current ratio of 141% and quick ratio of 134%, underpinned by working capital of ¥1,093 million. The balance sheet shows total assets of ¥6,755 million and equity of ¥3,370 million (implied equity ratio roughly 49.9% based on assets/equity), with a debt-to-equity ratio of 1.17x suggesting moderate leverage. Operating cash flow was slightly negative at ¥0.465 million, indicating weak conversion of accounting earnings into cash in the period. Financing cash outflow of ¥84 million implies debt service or other financing uses in the absence of a reported dividend. DPS is reported as zero with a payout ratio of 0%, aligning with a conservative stance amid margin pressure. Cash and equivalents, investing cash flow, and several per-share metrics are unreported, limiting precision in cash runway and capital allocation analysis. Overall, the quarter highlights a growth-versus-margins trade-off, with cost control and pricing discipline emerging as key priorities. Near-term focus should be on restoring operating margin, improving cash conversion, and maintaining balance sheet resilience. Data gaps (e.g., cash, capex, equity ratio reporting) constrain full assessment, so conclusions are based on available non-zero datapoints and standard interpretations under JGAAP.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.37%
• asset_turnover: 0.485x
• financial_leverage: 2.00x
• calculated_ROE: 1.34%
• commentary: ROE is subdued, primarily constrained by thin net margins; leverage is moderate and not the main driver. Improving margin quality is the most effective lever for ROE. margin_quality:
• gross_margin: 19.6%
• operating_margin: 0.5%
• ordinary_margin: 0.7%
• net_margin: 1.4%
• drivers: ['SG&A intensity likely elevated relative to sales, compressing operating margin despite revenue growth.', 'Pricing/mix and possibly input cost inflation appear to have outweighed scale benefits.', 'Negative tax charge supported net margin; sustainability of this benefit is uncertain under JGAAP.'] operating_leverage:
• assessment: Negative operating leverage this period: +13.7% revenue growth contrasted with a 68.7% decline in operating income.
• implications: Cost structure rigidity and/or temporary costs (e.g., labor, logistics, development) are limiting scale benefits. Margin recovery hinges on SG&A discipline and pricing power.

Growth Assessment

revenue_sustainability: Double-digit revenue growth (+13.7% YoY) suggests healthy underlying demand in factory automation/aluminum framing solutions. Sustainability will depend on domestic capex cycles in electronics, automotive, and machinery customers. profit_quality: Ordinary income exceeded operating income, implying supportive non-operating items. Net income benefited from a tax credit/benefit; excluding this, underlying profitability is weaker than headline net suggests. outlook: Short-term focus should be on restoring operating margin through cost containment and selective price actions. If demand holds, normalization of SG&A and improved mix could lift OPM back toward low-single digits. Absent this, ROE will remain subdued.

Financial Health

liquidity:

• current_ratio: 141.2%
• quick_ratio: 134.4%
• working_capital: ¥1,092,855,000
• commentary: Liquidity is adequate with minimal inventory dependence (quick ratio near current ratio). Near-term obligations appear covered by current assets. solvency:
• debt_to_equity: 1.17x
• interest_coverage: 3.4x (operating income / interest expense)
• equity_base: Equity ¥3,370 million vs assets ¥6,755 million (implied equity ratio ~49.9%).
• commentary: Leverage is moderate; coverage is positive but thin given low EBIT. Maintaining or improving operating profit is key to preserving coverage headroom. capital_structure: Balanced between debt and equity with an implied near-50% equity ratio; capacity for incremental leverage exists but is not advisable until margins and cash conversion stabilize.

Cash Flow Quality

earnings_quality: OCF was slightly negative (−¥0.465 million) against net income of ¥45 million, yielding an OCF/NI ratio of −0.01, indicating weak cash conversion this period. FCF_analysis: Investing cash flow and capex are unreported (0 indicates undisclosed), so FCF cannot be reliably computed; reported FCF of 0 reflects data limitations rather than true cash generation. working_capital: With inventories at ¥179 million and sizable working capital of ¥1,093 million, timing effects in receivables/payables likely weighed on OCF. Monitoring DSO/DPO trends is essential. additional_notes: Depreciation of ¥129 million is material relative to EBIT, implying an asset base that requires ongoing reinvestment; without capex disclosure, maintenance vs. growth spending cannot be assessed.

Dividend Sustainability

payout_ratio_assessment: Reported DPS is ¥0.00 and payout ratio is 0.0%. Given compressed earnings and weaker cash conversion, a conservative payout stance is consistent with balance sheet protection. FCF_coverage: FCF coverage cannot be determined due to unreported capex; the reported 0.00x reflects data limitations, not actual capacity. policy_outlook: Dividend capacity depends on restoring operating margins and positive OCF. If margins normalize and cash conversion improves, resumption or increase of payouts is feasible given moderate leverage; near-term visibility is limited.

Risk Assessment

Business Risks:

• Exposure to domestic capex cycles in FA-related end markets (electronics, automotive, machinery).
• Pricing pressure and input cost volatility impacting gross margin.
• Operating cost rigidity (labor/logistics) limiting operating leverage.
• Project timing and mix shifts affecting quarterly profitability.
• Customer concentration risk typical in B2B industrial components.

Financial Risks:

• Low operating margin reduces interest coverage headroom (3.4x).
• Weak cash conversion this period (OCF/NI −0.01) increases reliance on working capital management.
• Potential for negative surprises if tax benefits reverse in subsequent periods.
• Moderate leverage (D/E 1.17x) could become burdensome if earnings weaken further.

Key Concerns:

• Sustained margin compression despite double-digit sales growth.
• Dependence on non-operating/tax items to support net income.
• Limited visibility due to unreported cash, capex, and detailed working capital metrics.

Investment Implications

Key Takeaways:

• Top-line growth is solid (+13.7% YoY) but not translating into operating profit growth.
• Operating margin at 0.5% and ROE at 1.34% highlight subdued underlying returns.
• Liquidity is adequate; leverage is moderate but requires EBIT recovery to maintain coverage.
• Cash conversion is weak this period; capex data gaps hinder FCF assessment.
• Dividend stance is conservative (DPS 0), appropriate until margin and OCF recover.

Metrics to Watch:

• Gross margin trajectory and SG&A-to-sales ratio.
• Operating margin recovery toward 2–3%+ as evidence of improved leverage.
• Order intake/backlog and book-to-bill for revenue sustainability.
• OCF/NI ratio and working capital turns (DSO/DPO/DIO).
• Interest coverage and net debt trends.
• Any recurrence or reversal of tax benefits/extraordinary items.

Relative Positioning: Within domestic industrial components/FA ecosystem, the company shows competitive revenue growth momentum but lags peers on margin resilience and cash conversion this period; balance sheet flexibility is comparatively sound, offering a platform for recovery if cost discipline and pricing improvements materialize.

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