DIJET INDUSTRIAL CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.34B
• Operating Income: ¥145M
• Net Income: ¥10M
• EPS: ¥55.10

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

Daijet Industrial Co., Ltd. (6138) delivered a solid FY2026 Q2 performance, with revenue of ¥4.343 billion growing 2.3% YoY and a sharp rebound in profitability. Operating income rose 136.7% YoY to ¥145 million, indicating strong operating leverage as modest top-line growth translated into significant margin improvement. Gross profit reached ¥1.406 billion, implying a gross margin of 32.4%, which supports the view that product mix and/or pricing held up despite cost pressures. Ordinary income of ¥189 million exceeded operating income, pointing to net financial and other non-operating gains that buttressed earnings. Net income increased 70.4% YoY to ¥163 million, driving a net margin of 3.75%. DuPont analysis shows ROE at 2.0%, decomposed into a 3.75% net margin, 0.267x asset turnover, and 1.99x financial leverage. While ROE remains modest, the sharp improvement in operating income suggests earnings momentum into the second half if demand conditions persist. Cash generation was strong: operating cash flow (OCF) of ¥799 million was 4.9x net income, supported by sizeable non-cash charges (depreciation and amortization of ¥459 million) and likely favorable working capital movements. Liquidity is robust with a current ratio of 238.9% and working capital of ¥4.881 billion, providing a buffer against cyclical swings. Leverage appears manageable with a debt-to-equity ratio of 0.98x and EBIT-based interest coverage at roughly 3.0x, improving when viewed on an EBITDA basis. Inventory of ¥2.140 billion represents about 25.5% of current assets, which is reasonable for a cutting tools and tooling business but warrants monitoring for obsolescence and demand normalization. The effective tax rate appears low based on the provided tax expense of ¥21 million relative to ordinary income, supporting net profitability. Dividend payout is indicated as 0% for the period, implying retention of cash to fund operations and potential investment; however, certain reported zeros (e.g., equity ratio, investing cash flow, cash balance) likely reflect non-disclosure rather than actual zero values. Overall, the company’s financial position is sound, cash conversion is strong, and profitability is on an improving trajectory, though ROE remains below capital market norms and sustainability depends on demand stabilization and cost discipline. Given the capital intensity (as implied by depreciation) and cyclical end-demand exposure (industrial, automotive, aerospace), maintaining OCF strength and prudent working capital management will be key. Reported EPS of ¥55.10 implies approximately 2.96 million shares outstanding (derived), which helps contextualize per-share metrics in absence of share count disclosures. We note data limitations in several line items, so conclusions prioritize the disclosed non-zero figures.

Profitability Analysis

ROE stands at 2.0%, driven by a 3.75% net margin, 0.267x asset turnover, and 1.99x financial leverage (DuPont). Operating margin is 3.3% (¥145m / ¥4,343m), up meaningfully YoY given operating income growth of +136.7% on +2.3% sales growth, evidencing strong operating leverage from cost control and improved gross margin execution. Gross margin is 32.4% (¥1,405.8m / ¥4,343m), a healthy level for cutting tools, suggesting price discipline and/or favorable mix. Ordinary margin is 4.35% (¥189m / ¥4,343m), indicating supportive non-operating items. EBITDA is ¥604.0m, with an EBITDA margin of 13.9%, providing a substantial cushion over the ¥47.6m interest expense; EBITDA/interest is ~12.7x while EBIT/interest coverage is ~3.0x. The low effective tax burden implied by ¥21.2m tax vs. ordinary income also aided net margin. Overall profitability quality improved, but ROE remains constrained by modest asset turnover (0.267x), implying a capital-intensive balance sheet. Sustaining the margin gains will require continued gross margin stability and disciplined SG&A.

Growth Assessment

Revenue grew 2.3% YoY to ¥4.343bn, a modest pace consistent with mixed industrial demand. Operating income surged 136.7% YoY to ¥145m, reflecting operating leverage from prior cost actions and improved factory utilization. Net income increased 70.4% YoY to ¥163m, translating top-line growth more efficiently to the bottom line. Ordinary income exceeding operating income suggests a tailwind from non-operating items which may not recur at the same magnitude, so core growth should be judged primarily on operating profit expansion. Depreciation of ¥459m underscores ongoing capital intensity, suggesting that medium-term growth will rely on efficient capacity utilization and targeted capex for tooling and product development. Revenue sustainability will depend on end-markets such as automotive, general machinery, and aerospace; the modest top-line growth coupled with significant profit improvement suggests internal productivity gains rather than demand acceleration. Outlook hinges on maintaining gross margin near the current 32%+ level, controlling input costs (e.g., carbide materials like tungsten and cobalt), and avoiding excess discounting. With asset turnover at 0.267x, incremental sales should carry attractive drop-through if fixed costs are largely covered, supporting further operating leverage in a stable demand scenario. Cash generation supports potential reinvestment in process automation and product refreshes, which could underpin future growth.

Financial Health

Total assets are ¥16.256bn against total liabilities of ¥8.016bn and total equity of ¥8.155bn, implying a leverage profile near 1.0x liabilities-to-equity. Current assets of ¥8.394bn and current liabilities of ¥3.514bn produce a current ratio of 238.9% and quick ratio of 178.0%, evidencing ample short-term liquidity. Working capital stands at ¥4.881bn, providing resilience against supply chain and demand fluctuations. Interest expense is ¥47.6m; EBIT-based coverage is ~3.0x and EBITDA-based coverage ~12.7x, indicating manageable solvency risk provided earnings remain stable. Inventory of ¥2.140bn equals about 25.5% of current assets; inventory levels appear reasonable but should be monitored for turns and obsolescence in a cyclical environment. The reported equity ratio (0.0%) appears undisclosed rather than economically accurate given equity of ¥8.155bn; using disclosed totals implies an equity-to-assets ratio around 50% at period end. Overall, the balance sheet supports ongoing operations and strategic flexibility.

Cash Flow Quality

Operating cash flow was ¥799.5m, or 4.9x net income (¥163m), indicating high earnings quality supported by non-cash depreciation of ¥459.0m and likely favorable working capital movements. EBITDA of ¥604.0m also supports the strength of cash earnings versus accounting profits. Investing cash flow is reported as zero, which likely reflects non-disclosure in this dataset; thus, true free cash flow (FCF) cannot be reliably computed despite the “0” placeholder. Financing cash flow of -¥346.8m suggests net repayments or dividend-related outflows; absent detail, we attribute this primarily to debt reduction given the payout ratio is listed at 0%. Working capital appears well-managed given strong OCF relative to modest profit; specific drivers (inventory, receivables, payables) are not disclosed, so sustainability of OCF at this level is uncertain. Overall, cash conversion is strong this period and provides headroom for capex, but verification requires actual investing cash flow and cash balance disclosures.

Dividend Sustainability

Annual DPS is shown as ¥0.00 and payout ratio 0.0%, indicating no dividend for the period in the provided data. With OCF of ¥799.5m and modest leverage, internal capacity to fund distributions appears adequate; however, true FCF is not available because investing cash flows are undisclosed and the reported FCF and cash balance figures are placeholders. Given the capital intensity implied by ¥459.0m in depreciation, maintenance and growth capex needs could be significant, potentially constraining distributable cash. Policy-wise, the company may be prioritizing reinvestment and balance sheet strength amid cyclical uncertainty. Dividend capacity would be best assessed once capex and cash balances are disclosed; current-period operating cash generation alone would have supported some level of payout, but sustainability hinges on normalized FCF after capex.

Risk Assessment

Business Risks:

• Demand cyclicality in core end-markets (automotive, general machinery, aerospace) affecting order flow and utilization
• Raw material price volatility (tungsten, cobalt) impacting gross margins
• Competitive pricing pressure in cutting tools and tooling solutions
• Inventory obsolescence risk due to product proliferation and short lifecycle tooling
• FX fluctuations affecting export competitiveness and imported material costs
• Customer concentration and capex deferrals by industrial clients

Financial Risks:

• Interest rate risk given interest expense of ¥47.6m and ~3.0x EBIT coverage
• Potential working capital swings impacting OCF sustainability
• Capital intensity requiring ongoing capex, with investing cash flows undisclosed in this dataset
• ROE at 2.0% below cost of equity, posing long-term value creation challenges if not improved

Key Concerns:

• Sustainability of operating margin gains given modest top-line growth
• Lack of disclosure on investing cash flows and cash balance limiting FCF visibility
• Low asset turnover (0.267x) constraining ROE despite improved margins

Investment Implications

Key Takeaways:

• Strong operating leverage: +2.3% revenue translated to +136.7% operating income
• Healthy gross margin at 32.4% and EBITDA margin at 13.9%
• ROE at 2.0% remains modest due to low asset turnover (0.267x)
• Robust liquidity with 239% current ratio and ¥4.881bn working capital
• OCF strong at ¥799.5m (4.9x net income), indicating high cash earnings quality
• Ordinary income exceeds operating income, suggesting non-operating tailwinds
• Dividend currently not indicated; true FCF unknown due to undisclosed investing CF

Metrics to Watch:

• Operating margin progression and SG&A efficiency
• Gross margin versus raw material cost trends (tungsten/cobalt)
• Order intake, backlog, and book-to-bill ratio
• Inventory days and receivables days (working capital turns)
• Capex and investing cash flows (to assess FCF)
• EBIT/interest and EBITDA/interest coverage
• Asset turnover improvement and ROE trajectory
• FX rates and export mix sensitivity

Relative Positioning: Within Japan’s cutting tool and precision tooling space, profitability is improving but margins and ROE appear below top-tier peers; balance sheet liquidity is strong, leverage moderate, and cash conversion this quarter is favorable, providing room to invest for competitiveness.

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