NASU DENKI-TEKKO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.06B
• Operating Income: ¥1.34B
• Net Income: ¥1.13B
• EPS: ¥955.76

Income Statement

Balance Sheet

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

Verdict: Solid H1 performance with double-digit profit growth, stronger operating leverage, and a very healthy balance sheet, albeit with low capital efficiency and limited cash flow disclosure. Revenue rose 8.7% YoY to 110.6, while operating income increased 15.9% YoY to 13.43, and ordinary income advanced 19.9% YoY to 15.26. Net income was 11.14 (+13.2% YoY), yielding a net margin of 10.1% and an operating margin of about 12.1%. Gross profit came in at 23.20, implying a gross margin of 21.0% and SG&A ratio of 8.8% (9.76/110.6). Non-operating items were a net positive: income of 3.03 versus expenses of 1.21 delivered a roughly 1.82 uplift to ordinary profit; dividend income alone contributed 1.35. Interest expense was modest at 0.47, supporting a strong interest coverage of 28.6x, helped by low financial leverage (D/E 0.45x). Margins improved in tandem with profit growth outpacing revenue growth; although exact basis-point changes are not disclosed, the mix points to operating leverage from cost control and positive non-operating contributions. Comprehensive income of 23.62 notably exceeded net income (11.14), indicating sizeable unrealized gains (likely from investment securities at 73.69), introducing some OCI-driven volatility. ROE stands at 3.6%, with DuPont showing moderate profitability (10.1% margin), very low asset turnover (0.247), and conservative leverage (1.45x). ROIC is 3.6%, below the 5% warning threshold, underscoring capital efficiency as the main structural weakness. Liquidity is excellent: current ratio 350% and substantial net cash (cash 63.09 vs. loans of about 25.56), minimizing refinancing risk. Earnings quality cannot be fully assessed as operating and free cash flows are unreported; this remains the key data gap. The calculated payout ratio of 48.5% appears manageable against current profitability, but FCF coverage cannot be evaluated. Forward-looking, the company’s profitability trend and non-operating tailwinds support near-term stability, but sustaining improvements will require better asset turns and clarity on cash conversion. We see limited financial risk but elevated sensitivity to investment valuation swings and potential raw material and project execution dynamics. Overall, a quality quarter on profitability and balance sheet strength, with capital efficiency and cash flow transparency as the principal watch items.

Profitability Analysis

ROE decomposition: 3.6% = Net Profit Margin (10.1%) × Asset Turnover (0.247) × Financial Leverage (1.45x). The most constraining component is asset turnover at 0.247, indicating a sizeable asset base (assets 448.6) relative to sales (110.6). Operating margin is healthy at 12.1% (13.43/110.6), supported by a 21.0% gross margin and an 8.8% SG&A ratio; ordinary profit was further boosted by net non-operating gains (+1.82). The primary change driver versus revenue growth was operating leverage—profits grew faster than sales, implying some margin expansion; non-operating income (notably dividends of 1.35) also contributed. Business reason: cost discipline within SG&A and possibly improved project mix/pricing, plus portfolio income from investment securities. Sustainability: operating margin gains can be partially sustainable if mix and pricing hold; non-operating gains (dividends/valuation) are inherently more variable. Flags: capital efficiency is weak (ROIC 3.6%), and dependence on non-operating items (non-operating income ratio high teens-to-20s vs operating income) elevates volatility. Also note that profit growth exceeded revenue growth; if SG&A rises faster than sales in future periods, leverage could reverse.

Growth Assessment

Top line grew 8.7% YoY to 110.6, indicating steady demand. Operating income rose 15.9% YoY to 13.43, outpacing sales, pointing to improved operating leverage and/or mix. Ordinary income increased 19.9% to 15.26, reflecting added uplift from non-operating items. Net income rose 13.2% to 11.14, translating to a 10.1% net margin. With comprehensive income at 23.62, valuation effects on securities were significant; these are not directly repeatable as operating drivers. Growth sustainability hinges on backlog/ordering and project execution; absent order metrics, we treat the current run-rate as stable but subject to project timing. The low asset turnover suggests growth has relied more on margin than on asset efficiency; unlocking working capital and utilizing assets more effectively would support sustained growth. No R&D or capex data were disclosed; absent these, we cannot comment on organic reinvestment intensity or future capacity additions. Overall outlook: cautiously positive on operations given margin traction, but growth quality would be better evidenced by cash conversion and clearer investment discipline.

Financial Health

Liquidity is very strong: current ratio 349.6% and quick ratio 349.6% (inventory unreported), with cash and deposits of 63.09 and accounts receivable of 32.77 exceeding current liabilities of 50.52. No warning triggers: Current Ratio >> 1.0 and D/E 0.45x well below the 2.0 threshold. Maturity mismatch risk appears low: cash alone exceeds current liabilities, and short-term loans are small at 0.70. Solvency is conservative: long-term loans of 24.86 against total equity of 309.69 implies low leverage; likely a net cash position (~37.5) after debt. Interest coverage is strong at 28.56x, reducing refinancing risk under higher-rate environments. Off-balance sheet obligations were not reported; we cannot assess guarantees/lease commitments from the provided data.

Cash Flow Quality

Operating cash flow and free cash flow were unreported; thus OCF/Net Income and FCF coverage cannot be calculated. We cannot assess whether earnings are cash-backed, which is a key limitation. Working capital indicators imply potential support: cash (63.09) and receivables (32.77) comfortably cover current liabilities (50.52), though inventory levels and changes are unknown. Non-operating contributions (dividends, OCI gains) are not cash flow from operations, so reliance on these can decouple NI from OCF in volatile periods. Until OCF is disclosed, we cannot confirm sustainability of dividends or capacity to self-fund capex.

Dividend Sustainability

The calculated payout ratio is 48.5%, within a generally sustainable range (<60%). However, DPS/total dividends and FCF are unreported, so FCF coverage cannot be verified. Balance sheet strength (net cash and low leverage) provides a buffer to maintain dividends through cycles. Sustainability hinges on cash conversion of earnings and stability of non-operating income; without OCF and capex data, we cannot conclusively assess long-term coverage. Policy signals were not provided in the data.

Risk Assessment

Business Risks:

• Project execution and delivery risk on large steel/construction-related contracts (schedule, cost overrun).
• Raw material price volatility (steel and related inputs) affecting gross margins.
• Demand cyclicality tied to public works and private construction capex cycles.
• Customer concentration or order timing risk (backlog variability) – order book not disclosed.
• Supply chain and labor availability constraints impacting costs and delivery.

Financial Risks:

• Capital efficiency risk: ROIC at 3.6% (<5% warning) limiting value creation.
• Earnings volatility from non-operating items (dividend income; valuation changes) versus core operations.
• Potential OCI-driven equity fluctuations given sizeable investment securities (73.69).
• Data limitations on cash flows impede assessment of cash conversion and FCF coverage.

Key Concerns:

• Low asset turnover (0.247) suppresses ROE and ROIC despite healthy margins.
• Heavy contribution from non-operating items to ordinary profit elevates earnings volatility.
• Lack of OCF/FCF disclosure prevents verification of earnings quality and dividend coverage.

Investment Implications

Key Takeaways:

• Profitability improved with double-digit YoY growth and double-digit operating margin (~12.1%).
• Balance sheet is robust with net cash, current ratio ~350%, and low D/E (0.45x).
• Capital efficiency is weak (ROIC 3.6%), making asset utilization a central improvement lever.
• Non-operating contributions (dividends/valuation) are meaningful—watch for volatility.
• Comprehensive income far above net income highlights market-driven gains in the portfolio.

Metrics to Watch:

• Order intake and backlog to gauge revenue visibility.
• Operating cash flow and free cash flow conversion (target OCF/NI > 1.0).
• Gross and operating margin trajectory versus steel input costs.
• Composition and performance of investment securities; OCI sensitivity.
• Capex plans and asset turnover improvements.

Relative Positioning: Compared to domestic steel-fabrication/construction component peers, the company exhibits stronger liquidity and lower leverage with competitive operating margins, but lags on capital efficiency (ROIC/asset turnover), leaving medium-term value creation dependent on improving asset utilization and sustaining core margin gains.

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