NHK SPRING CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥393.93B
• Operating Income: ¥18.53B
• Net Income: ¥22.39B
• EPS: ¥68.58

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

Nippon Hatsujo (NHK Spring, 5991) reported FY2026 Q2 consolidated JGAAP results with modest top-line growth but clear margin pressure. Revenue was ¥393.9bn, up 0.7% YoY, indicating relatively stable demand across core segments despite a challenging auto supply chain backdrop. Gross profit of ¥52.6bn implies a 13.4% gross margin, which is thin for a diversified auto/industrial components supplier and suggests input-cost pressure or unfavorable mix. Operating income declined 19.2% YoY to ¥18.5bn, compressing the operating margin to approximately 4.7%, evidencing higher cost ratios and limited pricing power. Net income fell 35.5% YoY to ¥13.9bn, driving a net margin of 3.53%, with deleveraging from lower operating profit as the primary driver. DuPont analysis indicates ROE of 3.27%, with asset turnover of 0.565 and financial leverage of 1.64; lower profitability, rather than asset efficiency, is the key drag. EBITDA was ¥32.8bn, yielding an 8.3% margin, which highlights a meaningful D&A load (¥14.3bn) and underscores capital intensity. Interest expense is minimal at ¥0.108bn, and interest coverage is very strong at 171.6x, so financial costs are not a constraint. Liquidity appears robust: current ratio 200.9% and quick ratio 185.3%, underpinned by ¥390.4bn of current assets versus ¥194.3bn of current liabilities. The balance sheet is conservatively structured with total liabilities of ¥273.2bn versus equity of ¥425.0bn, implying a debt-to-equity ratio of 0.64x. Operating cash flow of ¥23.6bn exceeds net income by 69%, a positive indicator for earnings quality in the period. Reported effective tax rate is shown as 0.0% in the summary metrics, but tax expense of ¥6.58bn versus ordinary income of ¥19.83bn implies a roughly one-third effective rate; the 0.0% figure should be treated as unreported. Several items are not disclosed in the dataset (equity ratio, cash and equivalents, investing cash flow, free cash flow, DPS, share counts), so conclusions on capital return and FCF generation are constrained. Overall, the quarter shows resilient sales but margin compression, with cash conversion better than earnings and ample liquidity to navigate near-term cost headwinds. Looking ahead, sustaining profitability will hinge on cost pass-through, mix improvement in automotive components, and capital discipline given the capital-intensive footprint.

Profitability Analysis

ROE of 3.27% reflects: net profit margin 3.53% × asset turnover 0.565 × financial leverage 1.64. The primary headwind is margin compression versus the prior year, as operating income fell 19.2% YoY on revenue growth of only 0.7%, indicating negative operating leverage in the period. Gross margin is 13.4%, and operating margin roughly 4.7%, which suggests elevated materials, energy, and logistics costs or adverse product/region mix, with limited pricing offset. EBITDA margin of 8.3% versus operating margin of 4.7% shows a meaningful depreciation burden consistent with capital intensity. Ordinary income exceeds operating income (¥19.8bn vs ¥18.5bn), indicating modest non-operating gains/financial income (or FX tailwinds). Interest expense is negligible (¥0.108bn) and interest coverage is 171.6x, so financing costs did not pressure profits. Margin quality is mixed: OCF exceeds net income (OCF/NI 1.69x), supporting earnings quality, but the thin gross margin and YoY decline in operating profit point to cost passthrough challenges. With asset turnover at 0.565, efficiency is reasonable for an auto parts supplier but not enough to counter margin pressure. Overall profitability is adequate but below mid-cycle potential for the sector, requiring margin repair to lift ROE.

Growth Assessment

Revenue grew 0.7% YoY to ¥393.9bn, implying stable volumes/pricing overall but no clear acceleration. Given operating income fell 19.2% YoY, the growth profile is not currently translating into profit growth, reflecting cost inflation or less favorable mix (e.g., product lines with lower margin growth outpacing higher-margin segments). Net income declined 35.5% YoY, signaling incremental deleverage at the bottom line and possibly higher below-OP headwinds in the prior comparison base. Sustainability of revenue appears moderate, with the auto cycle and customer production plans dictating near-term trajectory; no data on order backlog is provided. Profit quality is better than earnings alone suggest because cash conversion is strong this period (OCF/NI 1.69x), but repeatability depends on working-capital normalization, which is not fully visible. Outlook hinges on cost control, localization/sourcing strategies to mitigate FX and logistics, and mix upgrades (e.g., higher-content components for electrification, seating comfort systems). Without disclosed capex or segment details, we assume growth will be incremental rather than transformative in the near term.

Financial Health

Liquidity: current assets ¥390.4bn vs current liabilities ¥194.3bn yields a current ratio of 200.9% and quick ratio of 185.3%, indicating strong short-term coverage. Working capital stands at ¥196.1bn, providing ample buffer for operations and supply-chain volatility. Solvency: total liabilities ¥273.2bn against equity ¥425.0bn equate to a debt-to-equity ratio of 0.64x, a conservative capital structure for the industry. Financial leverage in DuPont (1.64x) corroborates moderate gearing. Interest burden is light with ¥0.108bn interest expense and coverage of 171.6x, suggesting substantial headroom under potential rate or spread increases. Equity ratio is shown as 0.0% in the dataset (not disclosed); however, total equity of ¥425.0bn versus total assets of ¥696.7bn implies an equity ratio around the low-60% range on a simple calculation, underscoring balance-sheet strength. Overall, the company exhibits solid solvency and liquidity to absorb cyclical shocks.

Cash Flow Quality

Operating cash flow of ¥23.56bn exceeds net income of ¥13.91bn, yielding an OCF/NI ratio of 1.69x, supportive of earnings quality in the half. This likely reflects favorable working-capital movements and non-cash expenses (D&A ¥14.28bn). Free cash flow is not disclosed because investing cash flows and capex are not provided; thus, true FCF generation cannot be assessed from the dataset. Given the capital-intensive profile (EBITDA less D&A gap), capex is typically significant; absent data, we assume FCF was positive but sensitive to capex timing. Working capital details beyond inventories (¥30.41bn) are not available; however, the strong liquidity ratios suggest no acute WC stress. Overall, cash conversion appears healthy for the period, but sustainability needs confirmation once investing outflows are known.

Dividend Sustainability

Annual DPS is shown as 0.00 and payout ratio 0.0%, which indicates non-disclosure rather than an actual zero. Without dividend or capex data, we cannot calculate FCF coverage of dividends. From an earnings perspective, a notional payout would be supported by current profitability and strong liquidity; however, margin compression and unknown capex intensity argue for caution in inferring capacity. Historically, Japanese auto-parts suppliers target stable or progressive dividends aligned with earnings cycles, but no explicit policy is provided here. Conclusion: dividend sustainability cannot be assessed quantitatively due to missing DPS and FCF data; earnings capacity and balance-sheet strength are supportive in principle, conditional on capex and margin recovery.

Risk Assessment

Business Risks:

• Automotive production volatility and model mix shifts affecting volumes and margins
• Raw material and energy cost inflation with lagged price pass-through
• Customer pricing pressure from OEMs and tier-1s compressing margins
• Electrification transition potentially disrupting legacy product lines and content per vehicle
• Foreign exchange fluctuations impacting both revenue and input costs
• Supply chain disruptions (logistics, semiconductors) affecting delivery and costs
• Demand weakness in non-automotive segments (e.g., HDD-related precision components)

Financial Risks:

• Potential capex intensity reducing free cash flow in investment upcycles
• Working-capital swings that could dampen cash conversion in weaker quarters
• Exposure to interest rate normalization, albeit mitigated by low current interest burden
• Currency translation and transaction impacts on earnings volatility

Key Concerns:

• Operating margin compression despite revenue growth (OP -19.2% YoY)
• Low ROE at 3.27% versus typical mid-cycle targets for the sector
• Insufficient disclosure on investing cash flows and free cash flow, limiting visibility on capital allocation and dividend capacity

Investment Implications

Key Takeaways:

• Top line resilient (+0.7% YoY) but profitability compressed at gross and operating levels
• ROE of 3.27% is primarily constrained by thin margins rather than asset efficiency or leverage
• Cash conversion strong this period (OCF/NI 1.69x), supporting earnings quality
• Balance sheet and liquidity are solid (current ratio 200.9%, D/E 0.64x, interest coverage 171.6x)
• Limited visibility on FCF and shareholder returns due to missing investing cash flow and DPS data

Metrics to Watch:

• Operating margin trajectory and gross margin recovery
• Capex and investing cash flows to assess true FCF
• OCF/NI ratio sustainability and working-capital trends
• Revenue growth by segment/region and mix toward higher-margin products
• Price pass-through effectiveness versus material and energy cost inflation
• ROE progression via margin improvement

Relative Positioning: Versus domestic auto-parts peers, NHK Spring shows stronger liquidity and low financing risk, but profitability and ROE are currently subdued; improved cost pass-through and mix upgrades are needed to close the margin gap.

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