SHINPO CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.66B
• Operating Income: ¥208M
• Net Income: ¥98M
• Earnings per Unit (EPU): ¥25.14

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: A solid FY2026 Q1 with margin-led earnings outperformance and strong balance sheet resilience, albeit with low capital efficiency and limited cash flow disclosure. Revenue grew 2.4% YoY to 16.58, while operating income rose 22.4% YoY to 2.08, and net income surged 41.2% YoY to 1.38. Gross profit was 5.80, implying a gross margin of 35.0%. Operating margin improved to 12.5% (2.08/16.58), supported by contained cost growth relative to sales. Using YoY backsolves, prior-year operating margin was roughly 10.5%, implying c.+210 bps expansion YoY. Net margin improved to 8.3% (from an estimated ~6.0% a year ago), a c.+230 bps expansion, aided by lean non-operating drag and stable effective tax rate (~35.8%). Ordinary income margin stands at 12.6% versus an estimated ~10.6% last year, c.+200 bps improvement. Earnings quality cannot be validated due to unreported operating cash flow; OCF/NI is not calculable. Financial leverage remains conservative (assets/equity 1.27x) and liquidity is strong (current ratio 313.7%, quick ratio 306.7%). The company carries modest debt (long-term loans 3.93, short-term loans 0.20) and ample cash (21.36), driving an exceptionally high interest coverage (2363.64x). ROE is low at 2.0%, constrained by low asset turnover (0.191) despite stronger margins and low leverage; ROIC is flagged at 2.6% (<5% benchmark). Reported payout ratio (calculated) of 186.9% suggests potential overdistribution if accurate, but dividend data are unreported and cannot be reconciled to cash flow. With stronger margins and a robust balance sheet, near-term earnings resilience looks reasonable; however, improving capital efficiency (asset turnover, ROIC) and verifying cash conversion will be key to sustaining performance. Forward-looking, maintaining the expanded operating margin while lifting turnover will be the primary lever to raise ROE. Data limitations (notably cash flow and SG&A breakdown) constrain deeper diagnostics on earnings quality and cost structure.

Profitability Analysis

ROE decomposition (DuPont): ROE ≈ Net Profit Margin (8.3%) × Asset Turnover (0.191) × Financial Leverage (1.27x) ≈ 2.0%. The largest driver of YoY improvement appears to be net profit margin expansion: revenue grew 2.4% while operating income rose 22.4% and net income 41.2%, implying stronger operating leverage and lower relative non-operating drag. Business reason: a higher operating margin (12.5%) likely reflects favorable mix/pricing and/or fixed-cost dilution; SG&A-to-sales is 24.7%, and with operating profit growth outpacing revenue, fixed costs were better absorbed. Sustainability: margin gains may be partly sustainable if driven by mix/pricing and efficiency, but without SG&A and COGS detail or OCF, persistence is uncertain; any normalization in demand or input costs could compress margins. Asset turnover remains low at 0.191 (quarter data vs total assets), limiting ROE; raising utilization or trimming idle assets is needed for structural improvement. Leverage is conservative (1.27x), providing safety but capping ROE. Watch for any trend where SG&A growth exceeds revenue growth; unavailable disclosures prevent confirmation this quarter, though operating leverage suggests SG&A discipline held in Q1.

Growth Assessment

Top-line grew modestly (+2.4% YoY to 16.58), but profit growth was strong: operating income +22.4% to 2.08 and net income +41.2% to 1.38. Operating margin of 12.5% improved by an estimated ~210 bps YoY, evidencing positive operating leverage. Non-operating impact was minimal (net +0.02), indicating that profit growth was predominantly operational. Effective tax rate at ~35.8% is stable, not a driver of the delta. Revenue sustainability depends on maintaining demand in core end-markets; with only a single quarter and limited segment detail, visibility is modest. Profit quality appears better given operating-led expansion, but absent OCF we cannot validate conversion. Outlook: if the company preserves the 12–13% operating margin on a slightly expanding revenue base, full-year earnings should improve; the key upside lever is enhancing asset turnover to lift ROE/ROIC from currently low levels. Near-term comparisons may remain favorable given low base for net income and fixed-cost leverage, though normalization of costs could temper incremental margin gains.

Financial Health

Liquidity is strong: current ratio 313.7% and quick ratio 306.7%; cash (21.36) covers short-term liabilities (10.91) nearly 2x, and short-term loans are minimal (0.20). No warning on liquidity (current ratio well >1.0). Solvency is conservative: total liabilities 18.19 vs equity 68.48 (liabilities/equity ~0.27x). Interest-bearing debt specifics are unreported, but disclosed loans total 4.13 (ST 0.20, LT 3.93), small relative to cash. Interest coverage is extremely high (2363.64x), reflecting low interest burden. Maturity mismatch risk appears low: current assets 34.23 vs current liabilities 10.91 provide ample cushion. Equity ratio (calculated) is ~79.0% (68.48/86.67), indicating a very solid capital base. No off-balance sheet obligations are disclosed in the data provided.

Cash Flow Quality

Operating cash flow is unreported; thus OCF/Net Income and FCF cannot be calculated, limiting our ability to assess earnings quality. With minimal non-operating items (net +0.02) and no apparent financial income dependence, earnings appear operationally driven, but cash conversion remains unverified. Working capital positioning at quarter-end looks conservative (cash-rich; receivables 6.04; inventories 0.77), but without beginning balances or OCF we cannot detect working capital-driven earnings management. Dividend and capex cash commitments are unavailable; therefore, FCF coverage of dividends/capex cannot be assessed.

Dividend Sustainability

Dividend data are unreported; the provided calculated payout ratio of 186.9% indicates potential overdistribution relative to earnings if accurate, but the inputs cannot be cross-checked against cash flows or declared dividends. With strong liquidity and low leverage, the balance sheet can temporarily support distributions above earnings; however, sustainability requires FCF coverage, which is unassessable due to missing OCF and capex. Policy outlook cannot be inferred from disclosures; watch for full-year guidance and board resolutions on DPS. Until OCF/FCF data are available, treat payout sustainability as uncertain.

Risk Assessment

Business Risks:

• Margin normalization risk after a strong Q1 operating margin (12.5%) expansion.
• Demand cyclicality in end-markets (e.g., commercial equipment/capex sensitivity) that could pressure revenue growth (+2.4% YoY this quarter).
• Input cost volatility (materials, components) potentially squeezing gross margin (35.0%).
• Execution risk in improving asset utilization given low asset turnover (0.191) and ROIC (2.6%).

Financial Risks:

• Limited cash flow disclosure (OCF/FCF unreported) obscures earnings quality and dividend coverage.
• Potential payout strain if the calculated payout ratio (186.9%) reflects actual policy and persists without FCF support.
• Concentration of cash holdings (21.36) introduces reinvestment/return discipline risk if not deployed efficiently.

Key Concerns:

• Low capital efficiency: ROE 2.0% and ROIC 2.6% below 5% benchmark.
• Data gaps: OCF, capex, and SG&A breakdown unreported, limiting visibility on cost structure and cash conversion.
• Sensitivity to tax rate (~35.8%), leaving less room for net margin if pre-tax profits fluctuate.

Investment Implications

Key Takeaways:

• Earnings beat pace: net income +41.2% on +2.4% revenue showcases meaningful operating leverage.
• Operating margin improved to ~12.5%, with estimated ~+210 bps YoY expansion.
• Balance sheet is very strong (equity ratio ~79%, cash 21.36 > total loans 4.13).
• Capital efficiency remains weak (ROE 2.0%, ROIC 2.6%); improving asset turnover is essential.
• Dividend sustainability unclear; calculated payout ratio 186.9% suggests risk if accurate, but cash data missing.

Metrics to Watch:

• Operating cash flow and OCF/NI (>1.0 desirable) once disclosed.
• Asset turnover trend and ROIC (target >7–8%).
• SG&A-to-sales ratio and gross margin stability amid input cost moves.
• Order backlog or book-to-bill (if disclosed) to gauge revenue visibility.
• Dividend announcements vs. FCF and balance sheet impact.

Relative Positioning: Operationally improving with superior balance sheet defensiveness versus peers, but lagging on capital efficiency (ROIC/ROE) and transparency due to absent cash flow 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