Advanex Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.54B
• Operating Income: ¥626M
• Net Income: ¥-924M
• EPS: ¥94.08

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

Advanex (TSE: 59980) posted FY2026 Q2 consolidated results under JGAAP showing solid top-line growth and sharp operating profit improvement, but with weak cash conversion and a still-leveraged balance sheet. Revenue grew 5.1% year over year to ¥14.54bn, supported by stable demand in core precision components. Gross profit reached ¥3.24bn with a gross margin of 22.3%, indicating some cost pass-through or mix benefits amid input cost normalization. Operating income rose 86.4% YoY to ¥626m, lifting the operating margin to roughly 4.3% and evidencing material operating leverage on modest sales growth. Ordinary income was ¥565m, below operating income, reflecting financing costs and non-operating items. Net income was ¥386m (EPS ¥94.08), flat YoY despite the jump in operating income, implying higher non-operating burdens and taxes versus the prior year. DuPont decomposition yields ROE of 4.53% with a net margin of 2.66%, asset turnover of 0.454x, and financial leverage of 3.76x, indicating that leverage is a meaningful component of equity returns. EBITDA was ¥1.42bn, translating to a 9.7% margin, and interest coverage was 3.3x, adequate but not generous given cyclical end markets. Operating cash flow was negative at -¥456m against net income of ¥386m (OCF/NI = -1.18), flagging weak cash conversion likely tied to working capital. Liquidity is thin with a current ratio of 105.1% and quick ratio of 91.6%, indicating limited short-term buffer. Total assets were ¥32.05bn and total equity ¥8.52bn; based on these non-zero datapoints, the implied equity ratio is about 26.6% even though the reported equity ratio metric is undisclosed (shown as 0.0%). Debt-to-equity stands at 2.40x, highlighting reliance on borrowings. Working capital was ¥708m, modest relative to current liabilities of ¥13.95bn. Dividends were not disclosed (DPS shown as 0.00), and the payout ratio metric is 0.0%, implying either non-payment or non-disclosure; we treat this as a data limitation rather than evidence of a zero dividend. Several metrics commonly used for cash flow and capital allocation assessment (investing cash flow, cash balance, shares outstanding) were not disclosed in the dataset provided, constraining precision of free cash flow and per-share diagnostics. Overall, the quarter showcases improved operating performance and margin traction, but also highlights execution needs around cash conversion, careful management of leverage, and maintenance of adequate liquidity.

Profitability Analysis

roe_decomposition: ROE 4.53% = Net profit margin 2.66% × Asset turnover 0.454x × Financial leverage 3.76x. The modest margin and low asset turnover are partially offset by elevated leverage. margin_quality: Gross margin 22.3% and EBITDA margin 9.7% indicate improved contribution and operating efficiency. Operating margin is ~4.3% (¥626m/¥14,537m), a significant YoY uplift given +86.4% operating income on +5.1% revenue. Ordinary income trails operating income due to financing costs (interest expense ¥188m) and other non-operating items. operating_leverage: Strong: operating income grew +86.4% YoY on +5.1% revenue, implying positive fixed-cost absorption and/or mix. Sustaining this will depend on volumes and cost discipline, as interest costs remain a drag.

Growth Assessment

revenue_sustainability: Revenue +5.1% YoY to ¥14.54bn suggests steady demand in core industrial/automotive components. Sustainability hinges on industrial production trends and customer program ramps. profit_quality: Net income flat YoY despite operating profit surge implies profit quality tempered by non-operating charges and taxes. EBITDA margin at 9.7% supports improved underlying earnings power, but negative OCF undermines quality. outlook: If volumes hold and cost tailwinds persist, operating margin could remain above prior-year levels. However, higher interest expense and working capital needs could cap bottom-line growth and cash generation in the near term.

Financial Health

liquidity: Current ratio 105.1% and quick ratio 91.6% indicate tight short-term liquidity with limited cushion. Working capital is ¥708m versus current liabilities of ¥13,945m. solvency: Debt-to-equity 2.40x highlights meaningful leverage. Interest coverage at 3.3x is acceptable but leaves less room for earnings volatility. capital_structure: Total assets ¥32.05bn, total equity ¥8.52bn. While the reported equity ratio metric is undisclosed (0.0%), the implied equity ratio from available balances is ~26.6%, indicating a leveraged but not excessively thin capital base.

Cash Flow Quality

earnings_quality: OCF/Net income is -1.18 (OCF -¥456m vs NI ¥386m), indicating poor cash conversion this period. This gap suggests working capital build or timing effects. fcf_analysis: Free cash flow metric is shown as 0 due to undisclosed investing cash flows; thus, true FCF cannot be determined from the provided data. EBITDA of ¥1.42bn provides capacity, but negative OCF signals near-term strain. working_capital: Inventories are ¥1,877m, and the modest working capital buffer implies sensitivity to receivables and payables timing. The negative OCF suggests a net outflow tied to working capital in the half.

Dividend Sustainability

payout_ratio_assessment: Payout ratio shown as 0.0% reflects the undisclosed DPS (0.00). With net income of ¥386m, there is theoretical capacity to pay; however, leverage and negative OCF would argue for prudence. fcf_coverage: FCF coverage is shown as 0.00x due to unavailable FCF. Without investing cash flow details, we cannot assess coverage rigorously. policy_outlook: Given liquidity tightness and leverage, management is likely to prioritize balance sheet resilience over distributions if faced with trade-offs. Absence of disclosed DPS in this dataset limits definitive conclusions.

Risk Assessment

Business Risks:

• Cyclical demand from automotive and industrial customers impacting volumes and pricing
• Raw material cost volatility (e.g., steel) affecting margins
• Customer concentration risk common in precision components
• FX fluctuations affecting export competitiveness and translated results
• Supply chain disruptions impacting lead times and inventory levels

Financial Risks:

• Elevated leverage (D/E 2.40x) increasing sensitivity to earnings downturns
• Thin liquidity (current ratio 105.1%, quick ratio 91.6%) raising refinancing/working capital risk
• Interest burden (¥188m) depressing ordinary income and limiting coverage (3.3x)
• Negative operating cash flow (-¥456m) indicating cash conversion challenges

Key Concerns:

• Sustainability of margin gains amid modest revenue growth
• Restoring positive operating cash flow and managing working capital
• Maintaining adequate liquidity while servicing debt

Investment Implications

Key Takeaways:

• Top-line up 5.1% YoY with significant operating margin expansion
• ROE 4.53% is modest and relies in part on leverage (3.76x)
• Cash conversion weak: OCF/NI at -1.18 with limited liquidity buffers
• Interest coverage 3.3x and D/E 2.40x require disciplined capital allocation
• Dividend information not disclosed; preserving cash may remain a focus

Metrics to Watch:

• Operating cash flow rebound and OCF/NI ratio trajectory
• Working capital movements (receivables, inventories, payables)
• Operating and EBITDA margins sustainability
• Interest coverage and effective borrowing costs
• Net debt to EBITDA (when debt and cash disclosures are available)

Relative Positioning: Within Japanese precision components peers, Advanex shows improving operating profitability but below-average cash conversion and above-average leverage; maintaining margins while normalizing cash flow will be key to narrowing the gap with stronger-balanced peers.

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