UNIPRES CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥150.70B
• Operating Income: ¥6.33B
• Net Income: ¥3.81B
• EPS: ¥69.47

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

Verdict: Solid profit recovery despite revenue decline, but cash flow quality is weak and capital efficiency remains subpar. Revenue fell 7.3% YoY to 1,507.0, yet operating income jumped 77.6% to 63.3 as cost control and lower SG&A ratio drove operating leverage. Operating margin rose to 4.2%, expanding by roughly 201 bps from about 2.2% a year ago (based on implied prior figures). Net income surged 213.8% YoY to 30.8, lifting net margin to 2.0% from about 0.6%, an improvement of roughly 145 bps. Gross margin printed at 13.2%, and the SG&A ratio declined to 8.95%, indicating better expense discipline. Non-operating result was a small net expense (-0.69) as higher other costs offset healthy interest income (14.9) and manageable interest expense (8.1). Ordinary income rose 42.3% to 62.6, corroborating the underlying profit recovery. However, operating cash flow was only 0.5 against net income of 30.8 (OCF/NI = 0.02x), signaling significant earnings quality concerns, likely tied to working capital outflows. EBITDA increased to 147.6 (EBITDA margin 9.8%), supporting interest coverage of 7.82x—strong relative to leverage. Balance sheet liquidity is acceptable (current ratio 142.5%, quick ratio 108.7%), though short-term loans are elevated (452.2), creating rollover sensitivity. Net debt is modest given cash of 411.9 vs. total loans of 581.6, implying low net leverage. ROE is still low at 2.0% and ROIC at 3.0% is below the 5% warning threshold, highlighting capital efficiency challenges. The effective tax rate is normal at 19.6%, and comprehensive income (14.2) trails net income, hinting at adverse OCI items. With revenue down and profit up, the improvement appears driven by cost and mix rather than volume, raising questions on sustainability if auto production normalizes unpredictably. Forward-looking, maintaining margin gains while restoring cash conversion is critical; otherwise, dividend capacity (calculated payout 87.6%) may be pressured. Near-term focus should be on working capital normalization, pass-through of input costs, and utilization rates across plants.

Profitability Analysis

ROE (2.0%) = Net Profit Margin (2.0%) × Asset Turnover (0.527) × Financial Leverage (1.89x). The primary driver of the YoY ROE improvement is the expansion in net profit margin, as operating income rose 77.6% despite a 7.3% revenue decline. Operating margin rose to 4.2% from an implied ~2.2% (≈+201 bps), and net margin improved to 2.0% from ~0.6% (≈+145 bps), indicating strong operating leverage and better SG&A efficiency (SG&A ratio 8.95%). Asset turnover at 0.527 reflects moderate utilization of the asset base and likely declined YoY given the revenue drop and a relatively large asset base; leverage (1.89x) appears stable and not the main swing factor. Business reasons for margin improvement likely include cost pass-throughs, lower SG&A intensity, and potentially favorable mix/efficiency gains. Sustainability is mixed: some cost benefits could persist, but the revenue contraction and auto production volatility challenge durability of margins. Watch for any reversal if steel/raw material surcharges or wage inflation are not fully passed through. A cautionary point: SG&A growth appears contained relative to revenue contraction, but if SG&A re-accelerates faster than revenue, operating leverage could turn negative.

Growth Assessment

Top-line contracted 7.3% YoY to 1,507.0, indicating softer demand or production schedules at key OEM customers. Despite this, operating income rose 77.6% to 63.3 as cost structure improvements supported operating leverage. Ordinary income increased 42.3% to 62.6 and net income rose 213.8% to 30.8, showing improved profitability across levels. Gross margin at 13.2% and EBITDA margin at 9.8% suggest better efficiency, but the profit improvement is more cost-driven than volume-led. Non-operating balance was roughly neutral, aided by interest income, implying core operations drove the uplift. With OCF lagging NI significantly, realized cash growth did not match accounting profit, tempering the quality of growth. Outlook hinges on OEM production normalization, FX tailwinds (weak JPY benefits overseas earnings), and continued cost pass-through of materials. If volumes stabilize and working capital unwinds, revenue could recover and cash conversion improve; if not, growth may stall and cash strain persist.

Financial Health

Liquidity is adequate: current ratio 142.5% and quick ratio 108.7% both exceed 1.0 (no warning), though current ratio is slightly below the 1.5x healthy benchmark. Working capital stands at 452.1, supported by cash (411.9), receivables (608.0), and inventories (359.8). Solvency appears manageable: reported D/E is 0.89x, with total loans of 581.6 versus equity of 1,510.5; net debt is modest at ~169.6 after cash, implying low net leverage. Interest coverage is strong at 7.82x. Maturity profile shows concentration in short-term loans (452.2) versus long-term (129.4), implying rollover risk; however, current assets comfortably exceed current liabilities, mitigating near-term pressure. No off-balance sheet obligations were disclosed in the data provided. No explicit warnings triggered: Current Ratio > 1.0 and D/E < 2.0.

Cash Flow Quality

OCF was 0.48 against net income of 30.83, yielding OCF/NI of 0.02x—well below the 0.8 threshold and a clear quality concern. This suggests significant working capital outflows or timing differences, despite higher earnings. Capex was -48.40, implying negative underlying FCF when paired with the minimal OCF, though full investing cash flow is unreported. Financing CF was -28.57, suggesting debt repayment or dividend payments, but dividends were unreported. Sustainability is questionable in the near term: dividends and capex would require either improved OCF, reduced working capital, or incremental financing. Potential manipulation signs include large inventory or receivables build (both sizable balances), but without detailed WC schedules, this remains an indicator rather than confirmation.

Dividend Sustainability

The calculated payout ratio is 87.6%, which is high relative to the <60% benchmark for sustainability. With OCF/NI at 0.02x and implied negative FCF after capex, cash coverage of dividends is weak in this period. Balance sheet liquidity and low net leverage provide some buffer, but sustained distributions at this payout would rely on improved cash conversion or balance sheet usage. Policy outlook likely hinges on H2 cash generation and working capital normalization; if cash conversion improves, maintaining dividends is feasible, otherwise a cautious stance may be warranted. DPS data is unreported, limiting precision in assessment.

Risk Assessment

Business Risks:

• Auto OEM production volatility impacting volumes and utilization
• Raw material price fluctuations (steel) and pass-through timing risk
• FX exposure (JPY weakness/strength affecting overseas operations and input costs)
• Customer concentration risk typical for Tier-1 suppliers
• Operational efficiency risk if cost improvements prove temporary

Financial Risks:

• Very weak cash conversion (OCF/NI 0.02x) creating near-term liquidity strain if persistent
• Short-term debt concentration (452.2) leading to rollover/refinancing exposure
• Potential working capital build in receivables and inventories delaying cash inflows
• ROIC at 3.0% below warning threshold, risking value dilution if investments do not earn cost of capital

Key Concerns:

• Earnings quality flagged by minimal OCF despite higher profits
• Sustainability of margin gains amid declining revenue
• Dividend coverage from cash flow is inadequate in this period
• Comprehensive income (14.2) below net income suggests adverse OCI effects (e.g., FX or securities)

Investment Implications

Key Takeaways:

• Strong margin-driven profit rebound with operating margin up ~201 bps YoY despite a 7.3% sales decline
• Cash flow quality is weak (OCF/NI 0.02x), undermining earnings sustainability
• Liquidity is acceptable and net leverage is modest, but short-term debt concentration increases rollover risk
• Capital efficiency remains low (ROE 2.0%, ROIC 3.0%), below typical cost of capital
• Dividend capacity appears tight on a cash basis given negative implied FCF after capex

Metrics to Watch:

• OCF/Net Income and working capital movements (AR and inventory turns)
• Operating margin trajectory and SG&A ratio
• Capex discipline versus cash generation
• Short-term debt rollover and interest costs
• OEM production schedules and steel cost pass-through
• FX rates (USD/JPY, EUR/JPY) impact on earnings and OCI

Relative Positioning: Within Japan auto-parts peers, Unipres shows improving margins and adequate liquidity but lags on cash conversion and capital efficiency; sustained rerating would require consistent OCF recovery and ROIC improvement above 5–8% thresholds.

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