G-TEKT CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥154.51B
• Operating Income: ¥4.47B
• Net Income: ¥3.91B
• EPS: ¥84.14

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

G-TEKT (5970) reported FY2026 Q2 consolidated results under JGAAP showing top-line contraction and margin pressure, offset by solid cash generation and a strong balance sheet. Revenue was 154.5 billion yen, down 7.7% YoY, indicating softer demand or pricing/mix headwinds in its auto components business. Gross profit was 14.0 billion yen, implying a gross margin of 9.0%, which is modest for a metal-forming/auto parts profile and suggests cost pass-through or utilization challenges. Operating income declined 16.6% YoY to 4.47 billion yen, compressing the operating margin to about 2.9%, evidencing negative operating leverage as revenue fell faster than costs adjusted. Ordinary income reached 5.24 billion yen, supported by non-operating items relative to operating profit, while net income was 3.60 billion yen, a net margin of 2.33%. DuPont shows a calculated ROE of 1.65%, driven by thin margins (2.33%), moderate asset turnover (0.457x), and low financial leverage (1.55x). EBITDA was 14.25 billion yen (9.2% margin), with depreciation and amortization of 9.78 billion yen, highlighting a capital-intensive asset base. Operating cash flow was strong at 10.63 billion yen, 2.95x net income, signaling good earnings-to-cash conversion in the period. Liquidity appears solid with a current ratio of 182.8% and working capital of 64.0 billion yen; solvency is conservative with total liabilities of 109.0 billion yen against equity of 218.4 billion yen. Using the balance sheet figures, the equity ratio (equity/total assets) is approximately 64.6%, notwithstanding the 0.0% figure shown in the summary metrics (zeros represent unreported values). Interest coverage is healthy at 12.1x, consistent with manageable interest expense of 0.37 billion yen. The company reported DPS as 0.00 in the period and a payout ratio of 0.0%, which may reflect timing of dividend declarations rather than a definitive full-year policy shift. Several key items—such as inventories, cash and equivalents, investing cash flows, and share count—are unreported (shown as zero), which constrains some analyses (e.g., free cash flow and per-share metrics). Overall, profitability is subdued and sensitive to volume, but cash generation and the balance sheet provide resilience. Near-term focus should be on margin recovery, fixed-cost absorption, and visibility into capex and free cash flow once investing cash flows are disclosed.

Profitability Analysis

ROE of 1.65% reflects weak net profitability rather than leverage-driven returns: Net margin 2.33% x asset turnover 0.457x x financial leverage 1.55x. Operating margin is about 2.9% (4.466b/154.510b), down more than revenue, indicating negative operating leverage and fixed-cost rigidity. Gross margin at 9.0% leaves a relatively narrow spread to operating margin, implying SG&A and R&D are controlled but not enough to offset lower volumes. EBITDA margin of 9.2% versus operating margin of 2.9% highlights heavy depreciation (9.78b) linked to a capital-intensive tooling/press business. Ordinary income exceeds operating income, suggesting non-operating gains or financial income provided a cushion. Interest expense is modest (0.369b), and EBIT/interest coverage of 12.1x is comfortable. The effective tax indicator listed as 0.0% appears non-representative; income tax expense of 1.034b against earnings implies taxes are indeed being incurred. Margin quality is mixed: cash conversion is strong, but accounting profitability is thin and sensitive to sales declines. Cost pass-through and utilization will be key to stabilizing margins in subsequent quarters.

Growth Assessment

Revenue declined 7.7% YoY to 154.5b, pointing to end-market softness or adverse mix/pricing, potentially reflecting auto production adjustments. Operating income fell 16.6% YoY to 4.47b, a steeper drop than sales, indicating negative operating leverage and cost under-absorption. Net income decreased 7.6% YoY to 3.60b, cushioned by non-operating items versus operating trends. With EBITDA at 14.25b and strong OCF, underlying cash earnings remain solid despite weaker accounting margins. Sustainability of revenue depends on auto OEM schedules, regional demand, and product mix; no segment/geographic breakdown was provided, limiting attribution. Profit quality is acceptable given OCF/NI of 2.95x, suggesting limited accrual risk in the period. Outlook hinges on cost normalization, material cost pass-through, and production stability; absent explicit guidance, base-case is a muted recovery trajectory contingent on demand stabilization.

Financial Health

Total assets are 338.4b and equity is 218.4b, implying an equity ratio around 64.6% (computed), signifying a conservative capital structure. Total liabilities are 109.0b, and the debt-to-equity ratio provided (0.50x) aligns with total liabilities-to-equity of ~0.50x. Liquidity is strong: current assets 141.4b vs current liabilities 77.4b yield a current ratio of 182.8% and working capital of 64.0b. Quick ratio is shown as 182.8% because inventories are unreported (zero), so true quick liquidity may be slightly lower but still likely robust. Interest expense is modest at 0.369b, and interest coverage of 12.1x denotes low refinancing risk. Ordinary income exceeds operating income, which may reflect FX or other financial income; however, reliance on non-operating items should not be assumed persistent. Overall solvency and liquidity are comfortable, providing capacity to absorb cyclical volatility.

Cash Flow Quality

Operating cash flow of 10.63b is 2.95x net income, indicating strong earnings quality and favorable working capital movements or non-cash charges. D&A of 9.78b is substantial relative to operating income (4.47b), reinforcing that cash earnings (EBITDA) underpin OCF. Investing cash flow is unreported (shown as 0), preventing derivation of free cash flow; the stated FCF of 0 should be treated as not available rather than zero. Without capex detail, it is unclear whether OCF is being reinvested at elevated levels (typical for tooling cycles) or translating into surplus FCF. Working capital specifics (receivables, inventories, payables) are not disclosed; however, the high OCF/NI suggests either disciplined collections or inventory normalization in the period. Overall, cash conversion appears solid, but sustainability depends on future capex and working capital needs tied to production schedules.

Dividend Sustainability

Annual DPS is listed as 0.00 and payout ratio 0.0%, which likely reflects timing/non-disclosure rather than a definitive full-year stance. Net income for the half is 3.60b, and OCF is 10.63b; based on these, near-term capacity to fund dividends exists, but capex requirements (unreported investing CF) are the key swing factor for FCF coverage. With FCF unreported, dividend coverage by free cash flow cannot be assessed precisely. The conservative balance sheet (approx. 64.6% equity ratio computed) provides flexibility to sustain a modest payout if policy supports it. Outlook on dividends should be tied to visibility on capex, full-year earnings, and any stated shareholder return policy not provided here.

Risk Assessment

Business Risks:

• Automotive production volatility affecting volumes and utilization
• Material cost inflation and pricing pass-through timing
• Model mix shifts and program rollovers impacting margins
• Customer concentration typical of tier-1/2 auto suppliers
• FX volatility affecting overseas operations and translation
• Capital intensity leading to depreciation burden and fixed-cost leverage

Financial Risks:

• Earnings sensitivity to volume declines, evidenced by negative operating leverage
• Potentially high maintenance and growth capex (investing CF undisclosed)
• Working capital swings tied to OEM schedules
• Non-operating items contribution to ordinary income may be non-recurring

Key Concerns:

• Thin operating margin of ~2.9% leaves limited buffer against further downturns
• Revenue down 7.7% YoY with operating income down 16.6% suggests cost rigidity
• Incomplete disclosure on investing cash flows and cash balance obscures FCF and liquidity granularity
• Low ROE at 1.65% despite low leverage points to structural profitability challenges

Investment Implications

Key Takeaways:

• Revenue contraction of 7.7% YoY and operating margin of ~2.9% indicate negative operating leverage
• Net margin at 2.33% and ROE at 1.65% highlight subdued profitability
• Strong OCF at 10.63b (2.95x NI) supports earnings quality
• Balance sheet conservative with computed equity ratio ~64.6% and D/E ~0.50x (liabilities/equity)
• EBITDA margin 9.2% vs operating margin 2.9% underscores high depreciation from capital intensity

Metrics to Watch:

• Sales trajectory and utilization rates over the next two quarters
• Operating margin recovery and SG&A/fixed-cost absorption
• Capex and investing cash flows to assess true FCF
• Working capital trends (DSO/DPO/inventory once disclosed)
• Non-operating income components and FX sensitivity
• Dividend policy announcements and payout intent for the full year

Relative Positioning: Within Japanese auto parts peers, G-TEKT exhibits lower ROE and thinner operating margins but stronger balance sheet conservatism and solid cash conversion; near-term positioning depends on demand stabilization and capex discipline.

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
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