Topre Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥177.75B
• Operating Income: ¥10.47B
• Net Income: ¥7.32B
• Earnings per Unit (EPU): ¥145.26

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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 beat on margin improvement and strong non-operating gains despite flat sales; cash generation outpaced earnings and liquidity remains robust. Revenue declined slightly to 1,777.6 (−0.5% YoY), but operating income rose to 104.7 (+4.4% YoY), lifting the operating margin to 5.9%. Ordinary income surged to 109.9 (+121.0% YoY), aided by higher interest and dividend income and low interest burden. Net income jumped to 72.2 (+163.5% YoY), with net margin at 4.1%. Gross profit was 201.7, translating into an 11.3% gross margin; EBITDA of 221.9 implies a 12.5% EBITDA margin. Operating margin expanded by about 25 bps YoY (from roughly 5.6% to 5.9%), while ordinary margin expanded by about 340 bps (from circa 2.8% to 6.2%). Net margin expanded by roughly 253 bps (from about 1.5% to 4.1%), reflecting both margin improvement and non-operating tailwinds. Earnings quality is strong: OCF was 118.0, 1.63x net income, indicating healthy cash conversion. Capex was 159.1, exceeding OCF, implying a negative proxy FCF of roughly −41.1 this period, but financing CF outflows (−93.6), including share buybacks (−22.2), were manageable given cash on hand. Balance sheet strength is evident with current ratio 161.7% and quick ratio 123.4%, and interest coverage is very strong at 108x. Leverage is moderate (D/E 0.60x), and cash and deposits of 549.4 provide ample liquidity. That said, capital efficiency remains a key weakness: ROE is 3.1% and ROIC is 3.4%, both below typical cost-of-capital benchmarks. Non-operating income (12.6) meaningfully supported ordinary profit; sustainability depends on interest/dividend trends and financial asset performance. The effective tax rate was elevated at 36.8%, which modestly capped bottom-line upside. Forward-looking, modest top-line pressure and heavy capex point to a focus on structural efficiency and product mix; maintaining improved operating margin while funding investments will be central. Near-term catalysts include stabilization of auto production schedules, steel/raw material cost pass-through, and FX tailwinds that could sustain ordinary income. Overall, the quarter demonstrates improving profitability and cash generation quality, but low capital returns and capex intensity temper the outlook.

Profitability Analysis

ROE (3.1%) = Net Profit Margin (4.1%) × Asset Turnover (0.484) × Financial Leverage (1.60x). The largest change driver YoY is net profit margin, which expanded by ~253 bps (from 1.5% to 4.1%), far outpacing any likely movement in asset turnover or leverage. Business drivers include: (1) improved operating margin (+25 bps) despite flat sales, suggesting better mix/pricing or cost control; and (2) stronger non-operating income (interest/dividends) with minimal interest expense, pushing ordinary income up 121% YoY. This margin uplift is partially sustainable if operating efficiencies and pricing discipline persist; however, the non-operating contribution is more variable and may not repeat at the same magnitude. Asset turnover at 0.484 indicates a capital-intensive base relative to sales; no evidence of meaningful YoY improvement given revenue decline and likely asset growth. Financial leverage at 1.60x is conservative and relatively stable; leverage is not the ROE driver. Watchpoints: SG&A was 96.9 (absolute), but without YoY detail we cannot confirm operating leverage quality; nonetheless, operating income growth outpaced sales (positive operating leverage). Low ROIC (3.4%) versus a 7–8% target range highlights structural profitability constraints despite the quarter’s improvements.

Growth Assessment

Top line was slightly negative (−0.5% YoY), indicating end-demand or pricing softness, possibly offset by mix. Operating income grew +4.4% YoY, implying margin-driven growth. Ordinary income surged +121% YoY, reflecting material non-operating tailwinds (interest/dividends), while net income rose +163.5% YoY aided by the same and a low base. EBITDA of 221.9 (12.5% margin) demonstrates adequate cash earnings capacity to fund operations, though capex intensity remains high. Revenue sustainability hinges on auto production schedules and ability to pass through input cost fluctuations; absent volume acceleration, growth will likely be margin-led. Profit quality improved via stronger core margin and minimal interest expense; however, the non-operating component introduces volatility. Outlook: expect moderate margin resilience if cost controls continue, but ordinary profit normalization is a risk if financial income fades or tax rate remains high. Execution on capex to lift ROIC will be a key medium-term growth lever.

Financial Health

Liquidity is healthy: current ratio 161.7% and quick ratio 123.4%, with working capital of 623.4. No warning on liquidity thresholds (Current Ratio well >1.0). Solvency is comfortable: D/E 0.60x and interest coverage 108x; no leverage stress flags (D/E <2.0). Cash and deposits of 549.4 provide solid flexibility. Maturity mismatch risk appears limited: current assets (1,634.1) comfortably exceed current liabilities (1,010.7); accounts receivable (560.1) and inventory (386.6) levels appear supported by payables (595.1). Long-term loans are 177.6; short-term loans and total interest-bearing debt are unreported, limiting precision on debt structure. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 1.63x (>1.0), indicating high-quality earnings with strong cash conversion. Proxy FCF is approximately −41.1 (OCF 118.0 minus Capex 159.1), suggesting capex outlays exceeded operating cash this period; full investing CF is unreported, so actual FCF may differ depending on asset sales or other investing flows. Financing CF was −93.6, including share repurchases of −22.2, implying cash deployment alongside investment. Working capital appears disciplined given strong OCF despite flat sales; without period-to-period WC deltas, we cannot confirm any manipulation. Sustainability: ongoing capex will require either sustained OCF, moderation of investment pace, or selective financing; current liquidity can bridge near term.

Dividend Sustainability

The calculated payout ratio is 63.6%, modestly above the <60% benchmark and somewhat elevated relative to the company’s low ROE (3.1%) and ROIC (3.4%). DPS and total dividends paid were unreported, limiting cross-checks. Proxy FCF is negative this period given capex > OCF; thus, dividend coverage by FCF is uncertain and potentially tight in the near term if capex remains elevated. However, cash on hand and low interest burden provide buffer capacity. Policy outlook likely prioritizes investment to lift ROIC while maintaining stable dividends; any acceleration of shareholder returns would depend on sustained OCF and/or capex normalization.

Risk Assessment

Business Risks:

• Auto cycle exposure and OEM production volatility impacting volumes and mix
• Raw material price volatility (e.g., steel) affecting cost of sales and gross margin
• FX fluctuations (JPY vs USD/EUR) influencing non-operating income and competitiveness
• Execution risk on capex projects to lift productivity and ROIC
• Customer concentration with major automakers potentially pressuring pricing

Financial Risks:

• Capex outflows (159.1) exceeding OCF (118.0), creating negative proxy FCF
• Low ROIC (3.4%) below cost-of-capital benchmarks, risking value dilution
• Potential normalization of non-operating income (interest/dividends) reducing ordinary profit
• Tax rate variability (effective 36.8%) pressuring net profit

Key Concerns:

• Capital efficiency weakness (ROE 3.1%, ROIC 3.4%) despite improved margins
• Dependence on non-operating gains to drive ordinary income growth in the quarter
• Sustained investment needs may constrain free cash flow and dividend flexibility

Investment Implications

Key Takeaways:

• Margin-led profit growth with operating margin up ~25 bps YoY amid flat sales
• Ordinary and net profit surges driven partly by non-operating income tailwinds
• Strong cash conversion (OCF/NI 1.63x) but negative proxy FCF due to heavy capex
• Balance sheet strength (current ratio 162%, D/E 0.60x, interest coverage 108x)
• Capital efficiency remains the main structural challenge (ROIC 3.4%, ROE 3.1%)

Metrics to Watch:

• Operating margin trajectory and SG&A efficiency versus sales
• OCF versus capex (FCF trend) and progress on ROIC uplift
• Non-operating income components (interest and dividends) and sustainability
• Working capital turns (AR and inventory) and asset turnover improvement
• Effective tax rate normalization and any changes in shareholder return policy

Relative Positioning: Within the Japanese auto-parts/metal forming peer set, the company shows improved profitability and strong liquidity, but lags on capital efficiency (low ROIC/ROE) and faces higher capex intensity near term; dependence on non-operating income this quarter contrasts with peers emphasizing core 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