SANYO INDUSTRIES,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.72B
• Operating Income: ¥493M
• Net Income: ¥467M
• EPS: ¥126.68

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

Sanyo Kogyo Co., Ltd. (59580) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥12.722bn, down 4.7% YoY, indicating a softer top line likely driven by demand normalization or project timing. Gross profit was ¥3.885bn, translating to a solid gross margin of 30.5%, suggesting pricing and product mix remain resilient despite the revenue contraction. Operating income declined 29.3% YoY to ¥493m, compressing the operating margin to 3.9%, which points to operating deleverage and/or cost inflation not fully offset by pricing. Ordinary income reached ¥600m, benefitting from non-operating balance, while net income was ¥383m (-17.9% YoY), yielding a net margin of 3.01%. DuPont decomposition indicates ROE of 1.84% = 3.01% net margin × 0.433x asset turnover × 1.41x financial leverage; profitability pressure and subdued asset turnover together drive modest equity returns. Liquidity remains strong with a current ratio of 252.7% and a quick ratio of 234.4%, supported by sizeable working capital of ¥12.305bn. The balance sheet is conservative: total liabilities of ¥8.925bn against equity of ¥20.793bn (D/E 0.43x) and negligible interest burden (¥1m) underpin an interest coverage of 493x. Operating cash flow of ¥508m exceeds net income (OCF/NI 1.33x), a positive signal for earnings quality, although investing cash flows were not disclosed in this period, limiting visibility on free cash flow. EBITDA was ¥707m (EBITDA margin ~5.6%), consistent with D&A of ¥214m and operating income of ¥493m, underscoring moderate operating cash generation capacity. The reported effective tax rate metric of 0.0% is not meaningful; using disclosed tax expense and net income, the implied tax burden appears elevated, suggesting one-off items between ordinary and pretax profit. Dividend data (DPS and payout) appear unreported this period; financing cash outflow of ¥628m hints at debt repayment and/or distributions, but details are not disclosed. Asset turnover at 0.433x reflects a relatively asset-heavy or inventory/order cycle-sensitive model; improvement here is key to ROE recovery. Despite cyclical softness in revenue and margin compression, the company’s strong liquidity and low leverage provide ample financial flexibility to navigate near-term pressure. Data gaps (e.g., equity ratio, cash balance, investing cash flow, share counts) constrain precision, but available metrics collectively indicate healthy solvency, decent cash conversion, and pressure on operating leverage in the half. Outlook hinges on demand recovery in the second half, cost normalization, and utilization to restore operating margin toward historical levels.

Profitability Analysis

ROE_decomposition: ROE 1.84% = Net margin 3.01% × Asset turnover 0.433 × Financial leverage 1.41. The low asset turnover and compressed net margin are the primary drags; leverage is modest and not a meaningful ROE driver. margin_quality: Gross margin 30.5% is robust, but operating margin slipped to ~3.9% (¥493m/¥12.722bn), indicating higher SG&A or weaker operating leverage. Net margin at 3.01% benefited from non-operating items (ordinary income ¥600m > operating income), but below-the-line items and taxes ultimately reduced net profit. operating_leverage: Revenue fell 4.7% YoY while operating income declined 29.3% YoY, evidencing negative operating leverage in the half. EBITDA margin ~5.6% suggests limited buffer against fixed cost absorption; cost control and utilization recovery will be important to re-expand margins.

Growth Assessment

revenue_sustainability: Top line of ¥12.722bn declined 4.7% YoY, implying soft end-market demand or shipment timing effects. Gross margin resilience suggests pricing discipline; however, volume/mix likely weighed on growth. profit_quality: OCF/NI at 1.33x indicates earnings are backed by cash generation. The divergence between operating and ordinary income suggests non-operating support; elevated implied tax burden (based on disclosed tax expense) reduced net profit. outlook: A recovery path depends on order intake and backlog conversion in H2, normalization of input costs, and operating expense discipline. Improving asset turnover and restoring operating margins toward mid-single digits would be key for earnings growth and ROE uplift.

Financial Health

liquidity: Current assets ¥20.362bn vs current liabilities ¥8.057bn (current ratio 252.7%, quick ratio 234.4%), with working capital of ¥12.305bn. Liquidity appears ample. solvency: Total liabilities ¥8.925bn vs equity ¥20.793bn (D/E 0.43x). Interest expense is minimal (¥1m) with interest coverage ~493x, indicating very low financial risk from leverage. capital_structure: Financial leverage (Assets/Equity) at 1.41x is conservative. Equity ratio was shown as 0.0% but is unreported; based on Assets and Equity, implied equity ratio approximates 70.7%.

Cash Flow Quality

earnings_quality: Operating CF of ¥508m exceeds net income of ¥383m (1.33x), suggesting healthy cash conversion, likely aided by working capital inflows or disciplined receivables/ payables management. FCF_analysis: Investing CF was not disclosed (reported as 0), preventing precise FCF estimation; EBITDA of ¥707m and D&A of ¥214m imply capacity to fund maintenance capex, but capex intensity cannot be assessed this quarter. working_capital: Current assets are high relative to liabilities, and inventories are modest at ¥1.474bn. The strong quick ratio suggests limited inventory risk; however, without detailed AR/AP movements, the durability of OCF uplift is uncertain.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio were shown as 0.00 but appear unreported for this period. With net income of ¥383m and positive OCF, the company has capacity for distributions, but actual policy cannot be inferred from the provided data. FCF_coverage: FCF not available due to undisclosed investing CF; hence, cash coverage of dividends cannot be evaluated. Financing CF outflow of ¥628m may reflect debt repayment and/or shareholder returns, but details are not provided. policy_outlook: Given low leverage and solid liquidity, the balance sheet could support stable dividends if policy targets steady returns; however, near-term earnings softness and lack of FCF disclosure warrant caution in inferring changes.

Risk Assessment

Business Risks:

• Demand cyclicality impacting volumes and utilization
• Negative operating leverage during downturns compressing margins
• Input cost volatility affecting gross-to-operating margin conversion
• Product mix shifts potentially weighing on profitability
• Project timing and shipment delays influencing quarterly revenue

Financial Risks:

• Potential working capital swings affecting OCF despite positive current period
• Limited visibility on capex and investment needs due to undisclosed investing CF
• Tax volatility implied by divergence between ordinary and pretax profit
• Customer credit risk embedded in sizeable current assets (receivables not disclosed)

Key Concerns:

• Operating income declined 29.3% YoY despite only a 4.7% revenue decrease
• ROE at 1.84% is subdued, driven by low asset turnover and compressed margins
• Data gaps: equity ratio, cash balance, investing CF, and share counts not disclosed

Investment Implications

Key Takeaways:

• Revenue down 4.7% YoY to ¥12.722bn; gross margin resilient at 30.5%
• Operating margin compressed to ~3.9%; operating income down 29.3% YoY
• Net margin 3.01% with ROE 1.84%; asset turnover 0.433x is the key drag
• Liquidity strong (current ratio 252.7%, quick ratio 234.4%); D/E 0.43x and 493x interest cover
• OCF/NI at 1.33x signals solid earnings quality, but FCF unassessable due to undisclosed investing CF

Metrics to Watch:

• Order backlog and book-to-bill to gauge H2 revenue recovery
• Operating margin trajectory and SG&A efficiency
• Asset turnover improvement (revenue/asset base)
• Capex and investing cash flows to assess FCF and reinvestment
• Working capital movements (AR/AP/inventory days) and OCF sustainability

Relative Positioning: Within domestic industrial components/engineering peers, Sanyo Kogyo exhibits stronger-than-average balance sheet conservatism and liquidity, but currently weaker operating leverage and ROE due to lower asset turnover and margin compression in the half.

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
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