PIOLAX,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥30.06B
• Operating Income: ¥845M
• Net Income: ¥1.25B
• EPS: ¥16.49

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

For FY2026 Q2 (cumulative), Piolax (5988) reported revenue of ¥30.06bn, down 5.9% YoY, with operating income of ¥0.845bn (-33.5% YoY) and net income of ¥0.435bn (-64.5% YoY), indicating material margin compression against a relatively modest sales decline. Gross profit was ¥7.31bn, implying a gross margin of 24.3%, while EBITDA was ¥2.93bn (9.8% margin), highlighting significant pressure at the operating line (operating margin ~2.8%). DuPont metrics point to a weak ROE of 0.67%, driven primarily by a low net profit margin of 1.45% and subdued asset turnover of 0.303, with modest leverage (1.53x) providing limited amplification. Ordinary income of ¥0.787bn sits below operating income, and interest expense of only ¥4m supports an excellent interest coverage of 211x, underscoring very low financial leverage. Liquidity appears strong with a current ratio of 527% and a quick ratio of 478%, supported by ¥64.40bn in current assets against ¥12.22bn in current liabilities and working capital of ¥52.18bn. The balance sheet shows total assets of ¥99.25bn and total liabilities of ¥13.68bn, with reported total equity of ¥65.00bn; the equity ratio line item is unreported in the dataset provided. Cash generation is robust relative to earnings, with operating cash flow of ¥3.93bn, yielding an OCF/Net Income ratio of 9.04x, suggestive of conservative accruals and favorable working capital movements. Investing cash flow and cash & equivalents were not disclosed in this dataset, and free cash flow was not provided (the zero indicator signals non-disclosure). The reported payout metrics (DPS and payout ratio) are also not disclosed in the provided XBRL snapshot. Overall, results indicate cyclical and cost-driven pressure on profitability amid resilient cash conversion and a very conservative balance sheet. Operating leverage appears adverse this half, as a mid-single-digit revenue decline translated into a one-third decline in operating income. The margin structure implies a heavier SG&A burden and/or adverse cost/mix versus last year, despite stable gross margins for the sector context. With limited debt and minimal interest burden, near-term solvency risk is low, but earnings sensitivity to volume, mix, and input costs remains high. Given the company’s automotive exposure, FX and raw materials likely influenced this half’s results, while the reported OCF suggests inventories and receivables were well managed. Data gaps (equity ratio, investing CF, cash, share count, DPS) limit precision on capital allocation, per-share metrics, and free cash flow assessment. The outlook hinges on volume recovery, cost normalization, and FX; absent a demand rebound, ROE could remain subdued despite balance sheet strength.

Profitability Analysis

ROE of 0.67% is decomposed into: net profit margin 1.45% × asset turnover 0.303 × financial leverage 1.53. The principal drag is the depressed net margin (1.45%), reflecting an operating margin of ~2.8% (¥845m/¥30,060m), down markedly from the prior year as operating income fell 33.5% on a 5.9% sales decline. Gross margin is 24.3% (¥7,310m/¥30,060m), which is reasonable for the business model, suggesting the main compression occurred below gross profit, likely in SG&A and/or other operating items. EBITDA margin of 9.8% versus operating margin of 2.8% implies a heavy D&A burden (¥2,086m), consistent with capital intensity of automotive components. Ordinary income margin is 2.6% (¥787m/¥30,060m), in line with minimal financing costs (interest expense ¥4m). The steep YoY decline in operating income vs. modest revenue contraction indicates unfavorable operating leverage and possibly adverse product mix or cost inflation not fully passed through. The net margin deterioration (net income down 64.5% YoY) also implies elevated below-the-line charges and/or higher effective taxes versus last year, though the precise tax rate cannot be reliably inferred from the partial disclosures provided.

Growth Assessment

Top-line contracted 5.9% YoY to ¥30.06bn, pointing to softer demand or mix in key end markets in the first half. Profitability fell disproportionately: operating income -33.5% YoY and net income -64.5% YoY, indicating pressure from operating leverage and below-the-line items. Revenue sustainability will depend on auto production trends across Japan, North America, Europe, and Asia; absent a volume rebound, near-term growth appears challenged. The gross margin at 24.3% suggests stable manufacturing economics, but the operating margin compression signals higher SG&A ratio or increased fixed-cost absorption issues. With EBITDA of ¥2.93bn and strong OCF conversion (OCF/NI 9.04x), profit quality in cash terms is better than headline earnings indicate, supported by favorable working capital. Outlook hinges on cost pass-through, FX (yen level affecting translation of overseas earnings), and raw material trends; easing input costs and stable FX would aid margin recovery. Given seasonality, second-half performance is critical to assess whether the first half represents a trough or a new run-rate for margins.

Financial Health

Liquidity is very strong: current assets of ¥64.40bn vs. current liabilities of ¥12.22bn yield a current ratio of 527% and quick ratio of 478%, indicating ample short-term buffers. Working capital stands at ¥52.18bn. Solvency appears solid with low financial leverage: debt-to-equity of 0.21x and interest expense of only ¥4m, consistent with an interest coverage of 211x. Reported totals are: assets ¥99.25bn, liabilities ¥13.68bn, and equity ¥65.00bn; the equity ratio was not disclosed in this dataset, and subtotal mismatches may reflect unreported components under JGAAP consolidation (e.g., non-controlling interests or other comprehensive items). Capital structure is conservative, providing resilience against earnings volatility.

Cash Flow Quality

Operating cash flow was ¥3.93bn for the half, substantially exceeding net income of ¥0.435bn (OCF/NI 9.04x), indicating strong cash earnings and favorable working capital dynamics. Depreciation of ¥2.09bn supports the reconciliation from operating profit to OCF, consistent with a capital-intensive base. Investing cash flow was not disclosed here, and free cash flow was not provided (the zero indicator denotes non-disclosure), so capex intensity cannot be assessed from this dataset. Working capital appears well managed given the strong OCF despite weaker earnings; inventory reported at ¥6.05bn seems lean relative to current assets, though turnover cannot be calculated without COGS by period averages. Overall, earnings quality looks better on a cash basis than on an accrual basis this half, but the absence of capex and cash balance figures limits full FCF assessment.

Dividend Sustainability

Dividend per share and payout ratio were not disclosed in the provided data, and free cash flow was not reported, preventing a direct coverage analysis. From a capacity standpoint, low leverage (interest expense ¥4m; debt-to-equity 0.21x) and strong OCF relative to earnings suggest room to sustain ordinary shareholder returns if policy targets are unchanged, subject to capex needs and cyclicality. However, with net income down 64.5% YoY and operating margin compressed, near-term payout prudence would be consistent with protecting balance sheet strength. Policy outlook cannot be inferred without historical DPS or explicit guidance; assessment should be revisited upon disclosure of interim dividend resolutions and capex/FCF data.

Risk Assessment

Business Risks:

• Automotive end-market cyclicality impacting volumes and mix
• Cost inflation in resins/metals and wage pressures affecting margins
• FX volatility influencing translated earnings and cost competitiveness
• Customer concentration risk typical of Tier-1/2 auto suppliers
• Program launch and ramp risks affecting fixed-cost absorption
• EV transition altering product content and pricing dynamics

Financial Risks:

• Operating leverage leading to outsized profit swings on modest volume changes
• Potential capex requirements not visible due to undisclosed investing cash flows
• Working capital swings impacting OCF sustainability
• Tax rate variability given partial disclosure of pre-tax items

Key Concerns:

• Operating margin compressed to ~2.8% on a modest 5.9% sales decline
• Net income down 64.5% YoY to ¥0.435bn despite strong OCF, highlighting accrual pressure
• ROE at 0.67% driven by a 1.45% net margin and low asset turnover
• Limited visibility on FCF and dividend policy due to undisclosed capex, cash balance, and DPS

Investment Implications

Key Takeaways:

• Revenue down 5.9% YoY to ¥30.06bn with disproportionate profit decline (OP -33.5% YoY)
• Gross margin 24.3% but operating margin compressed to ~2.8%, indicating adverse operating leverage
• Strong cash conversion (OCF/NI 9.04x) offsets weak accrual earnings in the half
• Very conservative balance sheet (interest coverage 211x; current ratio 527%) underpins resilience
• ROE subdued at 0.67% due to low margin and asset turnover despite modest leverage
• Data gaps (investing CF, cash, equity ratio, DPS, share count) limit conclusions on FCF and capital returns

Metrics to Watch:

• Operating margin trajectory and SG&A ratio in H2
• Gross margin and raw material pass-through effectiveness
• Order trends and regional sales mix tied to global auto production
• Working capital metrics and OCF sustainability; inventory and receivables turnover
• Capex and investing cash flows to determine FCF and dividend capacity
• FX sensitivity (USD/JPY, EUR/JPY) and translation impact on margins

Relative Positioning: Within Japanese auto components peers, Piolax exhibits stronger-than-average liquidity and very low financing risk, but weaker near-term profitability and ROE in this half; recovery depends on restoring operating leverage through volume/mix normalization and cost control.

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