H-ONE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥97.22B
• Operating Income: ¥5.19B
• Net Income: ¥3.99B
• EPS: ¥105.41

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

H-One (5989) reported FY2026 Q2 consolidated IFRS results showing revenue of 972.21 and operating income of 51.90, down 14.8% and 30.7% YoY respectively, indicating significant top-line pressure and operating deleverage. Net income was 29.64 (-37.2% YoY), translating to a net margin of 3.0% and ROE of 4.2%, well below typical mid-cycle cost of equity levels. Gross profit of 157.89 implies a gross margin of 16.2%, while EBITDA of 103.73 suggests an EBITDA margin of 10.7%, evidencing intact but compressed profitability versus the prior year. The DuPont breakdown (net margin 3.0%, asset turnover 0.507x, leverage 2.70x) highlights that subdued margins are the primary drag on ROE, rather than asset efficiency or balance sheet leverage. Cash generation was a clear bright spot: operating cash flow of 149.59 was 5.05x net income, supporting positive free cash flow of 73.66 despite capex of 77.44. The balance sheet shows total assets of 1,917.33 and equity of 710.72 (equity ratio 35.6%), with total liabilities of 1,129.92 (D/E on a total-liability basis 1.59x), and interest-bearing loans totaling 653.44, indicating moderate leverage. Profit before tax of 52.92 and a low effective tax rate of 15.2% supported bottom-line resilience relative to operating income, aided by equity-method gains of 4.80. Total comprehensive income of 65.34 exceeded net income, suggesting favorable OCI items (e.g., FX translation or valuation gains), bolstering equity. Liquidity assessment is constrained by unreported current liabilities; however, cash and equivalents were 193.10 and current assets 863.62, offering a buffer against near-term volatility. Revenue contraction and a steeper decline in operating income imply volume headwinds and/or mix/price pressures, common for auto parts suppliers during OEM production adjustments. Operating margin around the mid-single digits (circa 5.3%) remains below historical peaks, reflecting tight cost control but limited pricing power. Capital allocation appears conservative: dividends paid were modest at 2.23 with a calculated payout ratio of 47.9%, and financing cash flow was negative (-40.45), pointing to net debt reduction. The company’s cash flow strength alongside manageable leverage reduces solvency risk even amid cyclical softness. Data gaps remain for non-operating items, interest expense, and current liabilities, which limits precision on interest coverage and liquidity ratios. Overall, the quarter reflects cyclical softness in the top line with resilient cash conversion and a still-prudent balance sheet, but ROE and margins remain subdued, leaving the medium-term outlook dependent on demand recovery, cost pass-through, and program ramp-ups.

Profitability Analysis

ROE_decomposition: ROE 4.2% = Net margin 3.0% × Asset turnover 0.507 × Financial leverage 2.70x. The margin component is the primary constraint; asset efficiency is reasonable for a capital-intensive auto parts supplier, and leverage is moderate. margin_quality: Gross margin 16.2% and EBITDA margin 10.7% indicate adequate contribution after materials, with SG&A of 84.12 absorbing roughly half of gross profit. Operating margin is ~5.3% (51.90/972.21), pressured by volume decline and likely unfavorable mix/price. Net margin at 3.0% benefited from a low effective tax rate (15.2%) and equity-method gains (4.80). operating_leverage: Operating income fell 30.7% on a 14.8% revenue decline, evidencing negative operating leverage as fixed costs could not be flexed fully with volume. D&A of 51.83 (~5.3% of sales) underscores a fixed cost base typical of body/frame manufacturing.

Growth Assessment

revenue_sustainability: Revenue decreased 14.8% YoY to 972.21, suggesting OEM production adjustments, model changeovers, or geographic weakness. Asset turnover at 0.507x is consistent with subdued volumes. profit_quality: Despite profit compression, cash conversion is strong (OCF/NI 5.05x), indicating earnings are backed by cash and working-capital inflows or disciplined capex. The low tax rate and equity-method income boosted reported profit quality at the bottom line. outlook: Recovery hinges on OEM production normalization, ramp-up of new programs (including EV platforms), and cost pass-through (particularly steel prices). FX and regional mix will influence margins; comprehensive income strength suggests some FX tailwind this period. Near-term growth visibility remains constrained by auto cycle volatility.

Financial Health

liquidity: Cash and equivalents were 193.10; current assets 863.62. Current liabilities are unreported, so current/quick ratios cannot be computed. Operating CF of 149.59 supports liquidity in lieu of full ratio visibility. solvency: Total liabilities/equity = 1,129.92/710.72 = 1.59x; interest-bearing loans total 653.44 (ST 411.27, LT 242.17), implying gross debt/equity ~0.92x. Equity ratio is 35.6%, adequate for the sector. capital_structure: Leverage is moderate, with a mix of short-term and long-term loans. Financing CF of -40.45 indicates net repayments, improving the structure. Comprehensive income added to equity, partially offsetting earnings shortfall.

Cash Flow Quality

earnings_quality: OCF/Net income of 5.05x indicates strong cash realization of earnings, likely supported by working capital release and non-cash charges (D&A 51.83). FCF_analysis: FCF was 73.66 after capex of 77.44 and robust OCF of 149.59. Investing CF of -75.93 broadly aligns with maintenance and selective growth investment levels relative to depreciation. working_capital: Accounts receivable 363.45 and inventories 265.44 are significant; absolute working capital movement is not disclosed, but the high OCF suggests a positive swing or disciplined management this period.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 47.9%, implying dividends are below earnings capacity but not trivial relative to depressed profits. DPS is unreported, so per-share inference is limited. FCF_coverage: FCF coverage at 5.19x (vs dividends paid of 2.23) indicates ample headroom to fund dividends from free cash flow this period. policy_outlook: With moderate leverage and strong OCF, the company appears able to maintain a conservative dividend policy through the cycle; however, sustainability depends on maintaining positive FCF amid investment needs for new programs and EV-related tooling.

Risk Assessment

Business Risks:

• OEM production volatility impacting volumes and utilization
• Customer concentration risk typical of auto body/frame suppliers
• Material cost fluctuations (steel) and timing of pass-through
• Program transition risk during model changeovers and EV platform shifts
• Geopolitical and FX exposure affecting cross-border operations and OCI
• Competitive pricing pressure in commoditized components

Financial Risks:

• Refinancing and interest rate risk given 411.27 in short-term loans
• Margin compression leading to weaker interest coverage (interest expense unreported)
• Working capital swings tied to OEM schedules and inventory cycles
• Potential capex intensity for new tooling straining FCF in downturns

Key Concerns:

• Double-digit YoY revenue decline (-14.8%) and sharper operating income drop (-30.7%)
• ROE at 4.2% below typical cost of equity benchmarks
• Limited visibility on liquidity metrics and interest coverage due to unreported items

Investment Implications

Key Takeaways:

• Top line declined 14.8% YoY, with negative operating leverage compressing operating margin to ~5.3%
• Net margin of 3.0% and ROE of 4.2% reflect subdued profitability
• Cash generation is strong: OCF 149.59 and FCF 73.66 despite lower earnings
• Balance sheet is moderate in leverage (liabilities/equity 1.59x; debt/equity ~0.92x) with equity ratio 35.6%
• Comprehensive income (65.34) exceeded net income, adding to equity via OCI gains
• Dividend appears well covered by FCF (5.19x) at the current run-rate

Metrics to Watch:

• Volume trends and OEM production schedules impacting revenue
• Gross and operating margin trajectory vs. steel price pass-through
• OCF/Net income ratio and working capital turns (DSO, DIO) for cash quality
• Capex requirements vs. depreciation as programs ramp (EV/platform tooling)
• Debt mix and tenor, especially short-term loan rollovers and interest rates
• FX impacts on OCI and translation effects on equity

Relative Positioning: Within TSE auto parts peers, H-One exhibits below-average ROE and mid-single-digit operating margins, but demonstrates above-average cash conversion and a conservative-to-moderate leverage profile, positioning it as a cyclical cash generator with margin recovery leverage upon volume normalization.

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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