Tenryu Saw Mfg.Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.75B
• Operating Income: ¥927M
• Net Income: ¥680M
• EPS: ¥93.36

Income Statement

Balance Sheet

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

Tenryu Saw Mfg. Co., Ltd. posted steady topline and operating performance in FY2026 Q2 (cumulative), with revenue of ¥6.75bn (+2.8% YoY) and operating income of ¥0.93bn (+1.2% YoY). Gross profit reached ¥2.27bn, translating to a robust gross margin of 33.6%, while operating margin stood at 13.7%, indicating disciplined SG&A management but slight operating deleverage versus revenue growth. Ordinary income rose to ¥1.24bn, materially exceeding operating income by ¥0.31bn, implying sizable non-operating gains (likely FX or investment income), with negligible interest burden (¥88k). Net income increased a strong 23.8% YoY to ¥0.84bn, and net margin printed at 12.46%, helped by the positive non-operating line and a moderate effective tax rate. DuPont-based ROE is 2.34% for the period, driven by high margins offset by low asset turnover (0.172) and very low leverage (1.09x), reflecting a fortress balance sheet but subdued capital efficiency. The balance sheet is exceptionally conservative: total assets ¥39.32bn against total liabilities ¥3.24bn and equity ¥35.94bn (implied equity ratio roughly 91–92%). Liquidity is ample, with current assets at ¥20.40bn versus current liabilities of ¥1.41bn, yielding a current ratio of about 14.5x and quick ratio near 12.5x. Working capital is sizable at approximately ¥19.0bn, underlining strong short-term solvency but also contributing to lower asset turnover. Inventory of ¥2.88bn looks manageable relative to half-year revenue; however, without cash flow data, we cannot assess inventory turns or cash conversion in this period. Reported cash flow line items and DPS are unreported (zero values in the feed denote non-disclosure), limiting assessment of earnings-to-cash conversion and dividend sustainability. Despite these data gaps, qualitative signals—strong margins, minimal financial costs, and high ordinary income—suggest earnings quality is supported by operations plus non-operating contributions. Tax expense of ¥280.4m versus pre-tax profit (approx. net + tax) implies an effective tax rate around 25%, not 0% as the mechanical metric shows. The key medium-term challenge is improving capital efficiency: high equity and large working capital depress ROE despite healthy profitability. Near-term outlook depends on demand in woodworking/metalworking end-markets and continued cost pass-through for materials like specialty steels and carbide. Overall, Tenryu appears financially resilient with sound profitability and extraordinary balance sheet strength, though a clearer picture of cash generation and capital allocation is needed.

Profitability Analysis

ROE_decomposition: DuPont: ROE 2.34% = Net margin 12.46% × Asset turnover 0.172 × Financial leverage 1.09. Profitability is healthy at the margin level, but low turnover and low leverage materially cap ROE. margin_quality: Gross margin 33.6% and operating margin ~13.7% (¥927m/¥6,752m) indicate solid value-add and cost control. SG&A (incl. R&D if any) is inferred at ~¥1,342m (gross profit − operating income), ~19.9% of sales. Net margin 12.46% benefited from non-operating gains (ordinary income exceeds operating income by ¥312m) and a moderate tax rate (~25%). Interest burden is negligible. operating_leverage: Revenue +2.8% YoY vs operating income +1.2% YoY suggests mild negative operating leverage in the period (slight margin compression or higher fixed costs). Ordinary income growth outpaced operating due to non-operating tailwinds.

Growth Assessment

revenue_sustainability: Topline growth of +2.8% YoY appears steady but modest, consistent with mature end-markets. Sustainability depends on demand across woodworking and metalworking, housing-related activity, and export momentum. profit_quality: Operating profit growth (+1.2%) lagged revenue, implying limited operating leverage this half. Net income growth (+23.8%) relied on non-operating items (¥312m delta vs operating income). Core earnings quality is acceptable, but headline profit is partially supported by non-operating gains. outlook: Key swing factors include materials cost trends and price pass-through, FX impacts on both revenue and non-operating income, and product mix (premium carbide/PCD saws). With strong balance sheet capacity, strategic investments could support medium-term growth, but current period data do not evidence acceleration.

Financial Health

liquidity: Current assets ¥20,398.9m vs current liabilities ¥1,407.4m → current ratio ~1449% and quick ratio ~1245% (inventory ¥2,880.8m). Working capital ~¥18,991.5m indicates abundant liquidity. solvency: Total liabilities ¥3,239.0m vs equity ¥35,942.0m imply a very conservative capital structure (implied equity ratio ~91–92%; the reported 0% is an unreported placeholder). Interest expense is only ¥88k with interest coverage ~10,534x, indicating negligible financial risk. capital_structure: Financial leverage at 1.09x is low, consistent with minimal debt and large equity. This underpins resilience but depresses ROE.

Cash Flow Quality

earnings_quality: Operating CF was not disclosed in the dataset (reported as zero). Consequently, we cannot quantify earnings-to-cash conversion (OCF/NI shown as 0.00 is not meaningful). FCF_analysis: Investing CF and capex were not disclosed; therefore, free cash flow cannot be assessed for the period. The company’s strong profitability and low interest burden suggest potential for positive FCF, but data are insufficient. working_capital: Inventory of ¥2.88bn within current assets appears reasonable versus half-year sales, but without cash flow and detailed WC movements, we cannot gauge turns or cash conversion cycle dynamics.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are not disclosed (zeros are placeholders). EPS for the period is ¥93.36, but without DPS we cannot compute payout or assess historical consistency. FCF_coverage: FCF is not available, so dividend cash coverage cannot be evaluated. policy_outlook: Given the very strong balance sheet, the capacity to sustain dividends appears high in principle; however, absent explicit policy and cash flow disclosure for the period, we cannot assess the trajectory or stability.

Risk Assessment

Business Risks:

• End-market cyclicality in woodworking, housing, and industrial production impacting saw blade demand
• Raw material cost volatility (high-grade steel, carbide/diamond tips) and price pass-through timing
• Foreign exchange fluctuations affecting export competitiveness and non-operating gains/losses
• Competition from global and regional blade manufacturers, including pricing pressure on standard products
• Product mix risk between premium, high-margin blades and commoditized offerings
• Supply chain lead times affecting inventory and service levels

Financial Risks:

• Low asset turnover and large working capital tying up capital and depressing ROE
• Potential reliance on non-operating income to bridge to ordinary income targets
• Concentration of cash and equivalents (undisclosed this period) possibly generating low returns
• Exposure to input cost spikes that could compress gross margin if pass-through lags

Key Concerns:

• Limited visibility on cash generation due to non-disclosure of cash flows
• ROE constrained by very low leverage and slow asset turnover despite solid margins
• Operating profit growth lagging revenue growth, indicating modest operating deleverage

Investment Implications

Key Takeaways:

• Healthy gross and operating margins with disciplined cost structure
• Ordinary income boosted by sizable non-operating gains; net profit up sharply
• Exceptionally strong balance sheet with minimal financial risk
• Capital efficiency is the main weakness: low asset turnover and low leverage suppress ROE
• Data gaps on cash flows and dividends limit assessment of cash conversion and shareholder returns

Metrics to Watch:

• Gross margin and SG&A ratio for evidence of cost pass-through and operating leverage
• Composition of non-operating income (FX gains, dividends/interest) and its sustainability
• Inventory levels and implied turns; receivables and payables movements when cash flow is disclosed
• Order trends and export mix; sensitivity to USD/JPY and EUR/JPY
• Capital allocation: capex levels, M&A, and any dividend/buyback policy disclosures
• Asset turnover improvement initiatives (working capital optimization)

Relative Positioning: Within Japan’s industrial tools and machinery consumables space, Tenryu exhibits above-average balance sheet strength and solid margins but sits below peers on capital efficiency due to very low leverage and modest asset turnover; earnings quality is good at the operating level, with current-period headline profits aided by non-operating 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