NAKANISHI MFG. CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.91B
• Operating Income: ¥544M
• Net Income: ¥389M
• EPS: ¥62.56

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

For FY2026 Q2 (single-entity, JGAAP), Nakanishi Seisakusho reported modest top-line growth alongside pressure on profitability and cash flow. Revenue grew 1.5% YoY to ¥16,912m, but operating income declined 14.4% YoY to ¥544m, and net income fell 14.9% YoY to ¥389m, indicating margin compression and negative operating leverage. Gross profit was ¥4,179m, implying a gross margin of 24.7%, while the operating margin narrowed to about 3.2%. Ordinary income reached ¥618m, yielding an ordinary margin of roughly 3.7%, supported by minimal interest expense of ¥2.3m and very strong interest coverage of ~235x. Net margin stood at 2.30%, reflecting the combined impact of softer operating profit and a normalizing tax burden. The DuPont decomposition yields a calculated ROE of 1.91%, driven by a modest net margin (2.30%), moderate asset turnover (0.573x), and conservative financial leverage (1.45x). Cash flow quality was weak this half: operating cash flow was negative at ¥-1,214m despite positive earnings, resulting in an OCF/Net Income ratio of -3.12, typically a sign of substantial working capital absorption. Liquidity remains solid with a current ratio of 178.9% and quick ratio of 158.0%, supported by ¥6,892m of working capital; solvency looks conservative with total liabilities of ¥10,018m against equity of ¥20,380m (debt-to-equity 0.49x). Depreciation and amortization were ¥270m, putting EBITDA at ¥814m and the EBITDA margin at about 4.8%. The reported effective tax rate in the calculated metrics appears placeholder; using disclosed tax expense of ¥254m against ordinary income of ¥618m suggests an indicative tax rate in the low 40% range this period. Dividend information is not disclosed in the data provided (DPS and payout figures appear as zero placeholders), so distribution policy and payout sustainability cannot be inferred from this release alone. Share data (outstanding, treasury, BVPS) are also undisclosed here, limiting per-share and capital policy analysis. Overall, the company demonstrates conservative balance sheet management and strong coverage metrics but faces profit dilution from costs and/or mix, alongside a working capital-driven cash outflow in the half. The near-term focus should be on margin recovery drivers and normalization of operating cash flow. Given the single-entity scope and partial-period nature, full-year trends and consolidated dynamics (if any) may differ; caution is warranted when extrapolating. Data limitations (notably cash balance, investing cash flows, dividends, and share counts) constrain depth of certain assessments, but the available non-zero items provide a clear read on core profitability, leverage, and liquidity.

Profitability Analysis

ROE is 1.91% per DuPont, comprised of a 2.30% net margin, 0.573x asset turnover, and 1.45x financial leverage. The margin profile is tight: gross margin is 24.7%, operating margin about 3.2%, ordinary margin about 3.7%, and net margin 2.30%. Operating income declined 14.4% YoY against a 1.5% YoY revenue increase, indicating negative operating leverage and cost pressure and/or adverse sales mix. EBITDA was ¥814m (4.8% margin), implying limited buffer for cost inflation before earnings are impacted. Interest expense is de minimis (¥2.3m), and interest coverage is very strong at ~235x, so financing costs are not constraining profitability. The decline in net income (-14.9% YoY) broadly tracks the operating income decline, suggesting limited offset from non-operating items. Tax expense of ¥254m against ordinary income of ¥618m implies an indicative effective tax rate in the low 40% range this period, which weighs on net margin.

Growth Assessment

Revenue increased 1.5% YoY to ¥16,912m, implying modest top-line momentum. However, operating income decreased 14.4% YoY and net income declined 14.9% YoY, signaling that growth was not accompanied by margin improvement. The deterioration in operating margin (to ~3.2%) despite higher sales points to cost inflation, execution timing, or less favorable product/project mix. Ordinary income of ¥618m suggests limited contribution from non-operating gains/losses; the earnings trajectory is primarily driven by core operations. With OCF negative despite positive earnings, a portion of reported growth may be tied to working capital expansion (e.g., receivables or inventory timing), which may normalize but adds near-term cash strain. Outlook hinges on the company’s ability to pass through costs, improve utilization, and stabilize project margins in subsequent quarters; absent these, profit growth may lag revenue growth.

Financial Health

Liquidity is strong: current ratio 178.9% and quick ratio 158.0%, with working capital of ¥6,892m (current assets ¥15,632m vs current liabilities ¥8,740m). Solvency is conservative with total liabilities of ¥10,018m against equity of ¥20,380m, implying a debt-to-equity ratio of 0.49x. Interest burden is negligible (¥2.3m) and coverage is robust (~235x), indicating ample headroom under current operating earnings. Total assets stand at ¥29,538m; the implied leverage from DuPont (assets/equity ~1.45x) is modest. The reported equity ratio field is undisclosed in this dataset and should not be interpreted as zero.

Cash Flow Quality

Operating cash flow was ¥-1,214m versus net income of ¥389m, resulting in an OCF/NI ratio of -3.12, which indicates earnings did not convert to cash in the half and that working capital likely absorbed significant cash. Depreciation of ¥270m and EBITDA of ¥814m confirm that non-cash charges are present, so the OCF shortfall is most plausibly tied to changes in receivables, payables, and/or inventory timing. Investing cash flow is not disclosed in the provided data (the zero shown should be treated as unreported), so free cash flow cannot be reliably calculated. Absent investing and cash balance disclosures, liquidity reliance on existing cash and credit lines cannot be precisely assessed, though the strong liquidity ratios suggest cushion.

Dividend Sustainability

Dividend information (DPS, payout ratio, and FCF coverage) is not disclosed in the provided dataset; zeros here should be treated as placeholders rather than actual figures. With EPS of ¥62.56 for the half and negative operating cash flow, cash-based coverage of any distribution, if paid, would depend on working capital normalization and the undisclosed investing cash flows. Given the conservative balance sheet and low interest burden, sustainability would hinge more on operating cash conversion and capital allocation priorities than on financing constraints. Without confirmed DPS and full-year guidance, no firm conclusion on dividend sustainability can be drawn from this release.

Risk Assessment

Business Risks:

• Margin compression from input cost inflation and/or unfavorable mix, as evidenced by operating income decline against modest sales growth
• Execution and project timing risk leading to working capital swings and negative OCF
• Pricing power limitations that may hinder cost pass-through
• Demand cyclicality in end markets relevant to the company’s product set (not specified here)
• Dependence on single-entity operations for this disclosure; group-level dynamics (if any) not captured

Financial Risks:

• Negative operating cash flow in the period, increasing reliance on working capital normalization
• Potential inventory and receivables buildup elevating cash conversion risk
• Earnings sensitivity to tax rate (indicative ETR in low 40% range) compressing net margin
• Limited visibility on capex and investing cash flows due to non-disclosure in this dataset

Key Concerns:

• OCF/Net Income ratio of -3.12 indicates weak cash conversion in the half
• Operating margin compressed to ~3.2% with operating income down 14.4% YoY
• Dividend and share-related data (DPS, shares outstanding, BVPS) are undisclosed, limiting capital policy assessment

Investment Implications

Key Takeaways:

• Top-line growth of 1.5% YoY did not translate into profit growth; operating income fell 14.4% YoY
• ROE at 1.91% reflects tight margins and modest asset efficiency with conservative leverage
• Liquidity is solid and leverage is low (D/E 0.49x), providing financial flexibility
• Operating cash flow was negative (¥-1,214m), indicating working capital absorption and weak cash conversion
• Interest burden is minimal (interest coverage ~235x), so funding costs are not an immediate constraint

Metrics to Watch:

• Operating margin trajectory and gross margin recovery
• Working capital turns (receivables, payables, inventories) and OCF normalization
• EBITDA margin and cost pass-through effectiveness
• Tax rate stability and impact on net margin
• Capex and investing cash flow once disclosed
• Order backlog and pricing (if available) to gauge revenue sustainability

Relative Positioning: Based on the disclosed single-entity figures, the company appears conservatively financed with strong liquidity and very low interest burden, but currently trails on profitability growth due to margin compression and weak cash conversion; visibility on dividends and capital intensity is limited due to non-disclosure of investing and share data.

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