AIDA ENGINEERING,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥38.69B
• Operating Income: ¥3.08B
• Net Income: ¥2.64B
• EPS: ¥47.46

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

Verdict: Aida Engineering delivered a modestly better-than-expected FY2026 Q2 with margin expansion and double-digit bottom-line growth, but cash conversion lagged and ROIC remains below target. Revenue grew 3.2% YoY to 386.9, while operating income rose 6.8% YoY to 30.8, and net income increased 12.4% YoY to 26.4. Gross profit reached 87.0, implying a gross margin of 22.5%. Operating margin improved to 7.95%, up about 30 bps YoY by our reconstruction. Ordinary income margin rose to 8.17%, an expansion of roughly 102 bps YoY, helped by non-operating income (net +0.83) mainly from dividends (1.85) and interest (1.15). Net margin improved to 6.82%, an estimated +57 bps YoY, aided by a 5.11 in pre-tax gains above ordinary income that appear non-recurring. SG&A was 56.2, or 14.5% of sales, providing slight operating leverage as opex grew slower than revenue. Earnings quality is mixed: Operating cash flow was 15.3 versus net income of 26.4, yielding an OCF/NI of 0.58x, which is below the 0.8x quality threshold. Balance sheet remains a key strength with net cash of about 291 (cash 337.6 vs interest-bearing debt 46.6), a 266% current ratio, and working capital of 541.9. Interest coverage is strong at 59x, and financial leverage is conservative at 1.47x (assets/equity). However, ROIC is 4.2%, below the 5% warning threshold and below common cost-of-capital estimates, indicating capital efficiency headwinds. Shareholder returns are active, with 30.0 of buybacks in the period and a high calculated payout ratio of 89.7%, though DPS was not disclosed. Free cash flow (OCF − capex) was approximately 8.6, positive but insufficient to fully fund both capex and the accelerated buybacks without drawing on the cash pile. Forward-looking, margin discipline and order execution must translate into stronger cash conversion; reliance on non-operating and extraordinary gains is not a durable earnings driver. Near-term visibility hinges on demand in automotive and general industry press equipment, FX tailwinds, and order backlog conversion. With liquidity ample, the company can sustain investment and shareholder returns, but sustaining high payout levels will depend on normalizing OCF.

Profitability Analysis

ROE decomposition (DuPont): ROE 3.2% = Net Profit Margin 6.8% × Asset Turnover 0.320 × Financial Leverage 1.47x. The largest change driver this quarter versus last year is margin improvement: operating income grew 6.8% vs revenue 3.2%, implying roughly +30 bps operating margin expansion to 7.95%. Ordinary margin expanded about +102 bps to 8.17% due to higher non-operating income, and net margin expanded about +57 bps to 6.82%, partly supported by a 5.11 pre-tax gain above ordinary income that appears one-time. Asset turnover at 0.320 remains subdued, reflecting a large cash and working capital base relative to revenue; leverage is low at 1.47x, limiting ROE uplift from gearing. Business drivers: better mix/pricing and SG&A discipline (SG&A ratio 14.5%) supported operating margin, while dividends and interest income supplemented ordinary profit amid a large cash/securities position. Sustainability: operating margin gains are more sustainable than the extraordinary items; non-operating income is recurring but variable with cash balances and rates. Concerning trends: ROIC of 4.2% is below the 5% warning threshold; OCF/NI at 0.58x suggests earnings not yet fully backed by cash. No evidence that SG&A grew faster than revenue; implied operating leverage is positive.

Growth Assessment

Top-line growth of 3.2% YoY to 386.9 is modest, consistent with a steady demand environment. Operating income growth of 6.8% outpaced sales, indicating improved mix/pricing and/or cost control. Ordinary income rose 17.6%, benefitting from higher non-operating contributions; net income grew 12.4%, aided by a 5.11 pre-tax gain beyond ordinary income. Revenue sustainability will depend on capex trends in automotive/general industrial customers and FX, which are cyclical; no segment breakdown was disclosed. Profit quality is mixed: core margin expansion is encouraging, but cash conversion lagged (OCF/NI 0.58x), and part of the bottom-line uplift was non-recurring. Outlook: if order backlog converts and pricing holds, mid-single-digit revenue growth with incremental margin expansion is achievable; improvement in working capital discipline is needed to translate profits into cash.

Financial Health

Liquidity is strong: Current ratio 266%, quick ratio 266%, and working capital 541.9. Net cash is robust at about 291 (cash 337.6 vs ST + LT loans 46.6), and interest coverage is 59x. The reported Debt-to-Equity of 0.47x (total liabilities/equity) indicates a conservative capital structure; interest-bearing leverage is even lower. No warning triggers: Current Ratio >> 1.0 and D/E well below 2.0. Maturity mismatch risk appears low as cash and current assets comfortably exceed current liabilities (867.7 vs 325.8). Off-balance sheet obligations not disclosed; no data on leases or guarantees provided.

Cash Flow Quality

OCF was 15.3 versus net income of 26.4, yielding an OCF/NI of 0.58x, below the 0.8x threshold and flagged as a quality issue. Working capital details (especially inventories) were not disclosed, but the gap likely reflects WC build and timing of receivables/payables given AR of 177.4 vs AP of 51.5. Approximate FCF (OCF − capex) was 8.6, positive but modest relative to shareholder returns. Financing CF was -34.3, driven by 30.0 of share repurchases; dividends were not disclosed. Sustainability: current cash balances allow continued distributions near term, but sustained high payouts require OCF improvement and tighter WC management. No clear signs of manipulation, but monitoring DSO/DPO/inventory days is warranted once disclosed.

Dividend Sustainability

The calculated payout ratio is high at 89.7%, though DPS and total dividends were not disclosed. On a cash basis, FCF of about 8.6 does not cover both capex and the 30.0 of buybacks, implying reliance on the existing cash hoard for total shareholder returns. With net cash of ~291, near-term dividend capacity is ample; however, medium-term sustainability of an ~90% payout hinges on improving OCF/NI and ROIC. Policy outlook: given conservative leverage and large cash, management can maintain dividends through cycles, but further buybacks at the recent pace would consume cash without ROIC uplift unless earnings and cash flow strengthen.

Risk Assessment

Business Risks:

• Cyclical demand from automotive and general industrial capex affecting press equipment orders
• FX volatility impacting export competitiveness and translation of overseas profits
• Supply chain and component cost variability affecting gross margins
• Execution risk in converting backlog to revenue given large working capital needs

Financial Risks:

• Earnings quality risk: OCF/NI at 0.58x indicates weak cash conversion
• Capital efficiency risk: ROIC at 4.2% below 5% warning threshold and likely below WACC
• Potential reliance on non-operating and extraordinary gains to support net income
• Shareholder returns (buybacks) outpacing internally generated FCF

Key Concerns:

• Subpar cash conversion despite profit growth
• Low asset turnover (0.320) and large cash/working capital depressing ROE/ROIC
• Non-recurring pre-tax gain (+5.11) elevating reported net income
• Limited disclosure on inventories, SG&A breakdown, and dividends constrains analysis

Investment Implications

Key Takeaways:

• Core profitability improved with ~30 bps operating margin expansion and 12% net income growth
• Net cash balance (~291) and 266% current ratio provide strong financial flexibility
• Earnings quality is a watch point as OCF/NI is 0.58x and ROIC is 4.2%
• Non-operating and extraordinary items contributed meaningfully to bottom line
• Active buybacks (30.0) funded partly from cash; sustainability depends on cash generation

Metrics to Watch:

• Order intake and backlog conversion to sustain revenue growth
• Working capital metrics (AR days, inventory days, AP days) and OCF/NI ratio
• Gross and operating margin trajectory versus input costs and pricing
• ROIC progression toward >7–8% management benchmarks
• Scale and funding of shareholder returns (DPS, buybacks) relative to FCF

Relative Positioning: Within Japanese industrial machinery peers, Aida shows above-average balance sheet strength and interest coverage, modest top-line growth, improving but still mid-single-digit operating margins, and below-peer capital efficiency (ROIC <5%).

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