FINE SINTER CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥23.04B
• Operating Income: ¥1.20B
• Net Income: ¥-1.17B
• EPS: ¥216.11

Income Statement

Balance Sheet

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

Fine Sinter (TSE:5994) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥23.04bn, up 10.5% YoY, demonstrating solid topline momentum. Operating income surged to ¥1.20bn (+119.5% YoY), indicating strong operating leverage and effective cost control or improved mix. Net income was ¥0.93bn, essentially flat YoY, implying that below-the-line items and tax effects offset operating gains. The calculated net profit margin is 4.01%, with an operating margin of roughly 5.2%, reflecting a meaningful recovery from the prior year. DuPont analysis shows ROE at 5.39%, driven by a 4.01% net margin, 0.472x asset turnover, and 2.84x financial leverage—suggesting modest profitability supported by moderate leverage. Ordinary income of ¥1.00bn is below operating income, indicating net non-operating expenses, with interest expense of ¥217m a notable headwind. The interest coverage ratio of 5.5x is adequate, though not generous for a cyclical manufacturer. Liquidity is tight, with a current ratio of 99.7%, a quick ratio of 94.7%, and working capital slightly negative at ¥-59m. Capital structure is moderately leveraged: liabilities of ¥30.84bn vs. equity of ¥17.18bn (debt-to-equity ~1.80x; assets/equity 2.84x). Based on balance sheet figures, the equity ratio is approximately 35%, though the reported “Equity Ratio” field is 0.0% (likely undisclosed rather than zero). Reported gross profit of ¥2.30bn implies a gross margin of ~10.0%; however, there is an internal inconsistency between revenue, cost of sales, and gross profit totals, so margin analysis relies on the disclosed gross profit and the provided gross margin metric. Cash flow statement items (OCF/ICF/FCF) are not disclosed in this dataset; consequently, EBITDA and D&A show as zero and should not be interpreted as true values. Dividend data are not disclosed (DPS shown as 0.00), so payout and FCF coverage metrics in this feed are not informative for policy assessment. Overall, the company demonstrates healthy revenue growth and a sharp operating profit recovery, but net profit traction is being limited by financing costs and tax/extraordinary effects. The balance sheet appears sound but not conservative, and liquidity is tight, which warrants monitoring in a cyclical environment. The key forward watchpoints are the sustainability of the higher operating margin, management of interest burden, and the restoration of positive working capital and operating cash flow once disclosed.

Profitability Analysis

ROE_decomposition: ROE 5.39% = Net margin 4.01% × Asset turnover 0.472 × Financial leverage 2.84. This indicates modest profitability, middling asset efficiency for a parts manufacturer, and moderate balance-sheet leverage boosting equity returns. margin_quality: Gross margin is reported at ~10.0% (gross profit ¥2.30bn on revenue ¥23.04bn). Operating margin is approximately 5.2% (operating income ¥1.20bn), more than doubling YoY alongside +10.5% revenue growth, implying improved cost structure and/or product mix. Net margin at 4.01% trails operating margin due to financing costs and below-the-line items. Note: revenue, cost of sales, and gross profit figures are internally inconsistent; analysis relies on the disclosed gross profit and provided margin metric. operating_leverage: Operating income +119.5% on revenue +10.5% points to strong operating leverage from fixed-cost absorption and efficiency gains. Sustainability will depend on demand stability, pricing discipline, and input cost normalization.

Growth Assessment

revenue_sustainability: Topline growth of +10.5% YoY suggests resilient demand in core sintered components markets (likely autos/industrial). The level is consistent with volume recovery and/or price pass-through, but cyclicality in transportation and capital goods remains a swing factor. profit_quality: Operating profit growth far outpaced sales, indicating mix/cost improvements. However, ordinary income is below operating income (¥1.00bn vs. ¥1.20bn) due to net non-operating costs, tempering bottom-line conversion. Net income was flat YoY despite the operating surge, implying transitory below-the-line effects (interest expense, possible FX/other non-operating items, and a negative tax expense number in this feed). outlook: If revenue growth normalizes but remains positive, current operating margin levels could be maintained provided cost inflation is contained and utilization stays high. Reducing financing costs or improving non-operating income would enhance ordinary and net profitability. Near-term growth will be sensitive to auto production schedules, China/EU demand, and FX.

Financial Health

liquidity: Current ratio 99.7% and quick ratio 94.7% indicate tight short-term liquidity, with working capital at -¥59m (CA ¥21.36bn vs. CL ¥21.42bn). Inventory reported at ¥1.09bn (~5% of CA) appears low for a manufacturer, possibly reflecting classification; nonetheless, near-cash assets seem substantial given the quick ratio. solvency: Total liabilities ¥30.84bn vs. equity ¥17.18bn imply debt-to-equity ~1.80x and financial leverage (assets/equity) 2.84x. Interest expense of ¥217m yields interest coverage ~5.5x on operating income—adequate but leaves limited cushion if operating conditions deteriorate. capital_structure: Approximate equity ratio is ~35% (equity ¥17.18bn / assets ¥48.85bn), which is reasonable for the sector. Borrowings likely account for a significant share of liabilities given interest expense, underscoring the importance of maintaining margin and cash generation.

Cash Flow Quality

earnings_quality: OCF, ICF, and FCF are not disclosed in this dataset (zeros denote unreported). As a result, the OCF/Net Income ratio shown (0.00) is not meaningful. Earnings quality cannot be validated against cash conversion here. FCF_analysis: Free cash flow is not available in this feed. Given strong operating income and tight working capital, underlying FCF could be positive if capex is moderate; however, without OCF and capex data, this remains an assumption. working_capital: Working capital is slightly negative. With quick ratio near 95%, receivables and other current assets likely fund operations, but rollover risk exists if payables tighten. Monitoring inventory turns, receivable days, and payable terms is essential once disclosed.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as 0.00 in this dataset, indicating non-disclosure rather than true zero. Therefore, a payout-based assessment is not possible from the provided figures. FCF_coverage: FCF coverage cannot be assessed due to absent OCF and capex data. In principle, a ~4% net margin and modest ROE could support a conservative dividend if leverage and liquidity are managed prudently. policy_outlook: Without historical DPS and policy disclosure, outlook is indeterminate. If operating improvements persist and cash generation is confirmed, scope for stable or gradually improving distributions could exist, subject to capex needs and leverage targets.

Risk Assessment

Business Risks:

• Cyclical demand in automotive and industrial end-markets affecting volumes and pricing
• Raw material and energy cost volatility impacting gross margin
• Customer concentration risk typical in Tier-1/2 component supply chains
• FX fluctuations influencing export competitiveness and translation effects
• Technological shifts in mobility (electrification, lightweighting) requiring ongoing capex and R&D

Financial Risks:

• Tight liquidity (current ratio ~1.0x) and slightly negative working capital
• Moderate leverage (D/E ~1.80x) with interest coverage ~5.5x, sensitive to profit swings
• Potential refinancing and interest rate risk if a sizable portion of debt is floating or near maturity
• Limited visibility on cash flow due to non-disclosure, constraining assessment of covenant headroom

Key Concerns:

• Gap between operating profit expansion and flat net income due to non-operating items
• Data inconsistency between cost of sales and gross profit, creating uncertainty around true gross margin
• Undisclosed cash flow and dividend data hindering evaluation of cash conversion and shareholder returns

Investment Implications

Key Takeaways:

• Strong topline growth (+10.5% YoY) with outsized operating profit recovery (+119.5% YoY)
• Net income flat YoY as financing and below-the-line items offset operating gains
• Liquidity is tight (current ratio ~1.0x; working capital slightly negative) and leverage moderate (D/E ~1.80x)
• Interest burden (¥217m) depresses ordinary income; interest coverage ~5.5x is adequate but not robust
• ROE at 5.39% is modest, supported by leverage and improved margins
• Cash flow metrics not disclosed; earnings quality and FCF cannot be validated from this dataset
• Gross margin reported ~10% but internal data inconsistency warrants caution in interpreting COGS

Metrics to Watch:

• Operating margin sustainability and cost pass-through
• Ordinary income vs. operating income gap (net non-operating costs, especially interest)
• Working capital trends: receivables, payables, and inventory turns
• OCF and FCF once disclosed; capex intensity and D&A levels
• Leverage and interest coverage trajectory; refinancing profile and rates
• Order backlog and utilization in auto/industrial end-markets
• FX impact on revenues and costs

Relative Positioning: Within Japanese auto/industrial component peers, Fine Sinter shows a solid rebound in operating profitability and average leverage, but tighter liquidity and limited cash flow disclosure place it mid-pack on financial resilience pending confirmation of cash generation.

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