WAIDA MFG.CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.11B
• Operating Income: ¥87M
• Net Income: ¥236M
• EPS: ¥14.69

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

Waida MFG Co., Ltd. (6158) posted FY2026 Q2 consolidated results under JGAAP showing a material cyclical downswing in earnings, driven primarily by a 20.0% YoY decline in revenue to ¥3,107 million. Despite a still-solid gross profit margin of 47.5% (gross profit ¥1,476 million), operating income fell 78.4% YoY to ¥87 million as operating leverage turned adverse on lower volumes and likely higher fixed-cost absorption. Ordinary income was ¥122 million and net income was ¥95 million, implying a net margin of 3.06% and a calculated ROE of 0.91% based on DuPont components provided. EBITDA was ¥271 million (8.7% margin), underlining that non-cash costs (notably ¥184 million depreciation) are a meaningful portion of the cost structure. The company remains conservatively capitalized: total assets were ¥12,025 million versus total liabilities of ¥2,247 million and reported equity of ¥10,423 million. Liquidity metrics are very strong, with a current ratio of 594.8% and working capital of ¥7,316 million, though several reported zeros (e.g., cash & equivalents, equity ratio) reflect non-disclosure rather than true zeros. Cash flow quality in the half was weak: operating cash flow was only ¥1.82 million, implying an OCF/Net Income ratio of 0.02, signaling a significant gap between accrual profits and cash realization in the period. Free cash flow is not derivable given unreported investing cash flows, but the provided FCF metric is shown as zero due to data limitations. Financing cash inflow of ¥94 million suggests reliance on external funding or changes in liabilities during the period, despite low absolute leverage. Interest coverage remains robust at 35.3x given low interest expense (¥2.5 million), indicating low financial risk from debt servicing. The reported effective tax rate metric (0.0%) appears inconsistent with the disclosed income tax expense of ¥159 million against ordinary income of ¥122 million; this likely reflects timing differences, special items, or partial-period effects embedded in Q2 and not a true zero tax rate. Dividend payments were not disclosed for the period (DPS shown as 0.00), consistent with a conservative capital stance during a cyclical trough and the need to preserve cash amid weak operating cash flows. Overall, results reflect a cyclical slowdown (likely in capital goods demand) with resilient gross margins but substantial operating deleverage, strong balance sheet defensiveness, and near-term cash conversion pressure. Key watchpoints for 2H include order intake, backlog conversion, and working capital trends (particularly receivables and contract assets, given the OCF shortfall). Data limitations (e.g., several zero placeholders) warrant caution in interpreting liquidity composition and FCF, but the directional signals—lower sales, pressured operating margins, and weak OCF—are clear. Near-term outlook hinges on the timing of capex recovery in end-markets such as precision tooling, semiconductors, and automotive-related equipment, areas where the company traditionally participates.

Profitability Analysis

ROE of 0.91% is low and consistent with cyclical earnings compression; DuPont components indicate a 3.06% net margin, asset turnover of 0.258x, and low financial leverage of 1.15x, implying that ROE is constrained primarily by margin pressure and modest turnover rather than leverage. Gross margin at 47.5% remains strong, suggesting pricing/mix and technical differentiation are intact; however, the operating margin is only ~2.8% (¥87m/¥3,107m), evidencing negative operating leverage as fixed costs did not flex down with volume. EBITDA margin of 8.7% shows some cushion from non-cash costs, but not enough to offset the sales decline. Ordinary income (¥122m) above operating income (¥87m) indicates positive non-operating balance (e.g., FX gains, subsidies, or financial income) helping bridge the gap. Interest burden is negligible (¥2.5m), with a 35.3x coverage, confirming that interest does not constrain profitability. The sharp YoY drop in operating income (-78.4%) versus revenue (-20.0%) highlights substantial sensitivity of earnings to volumes, typical of capital goods manufacturers with a fixed cost base. Margin quality is mixed: high gross margin quality vs. weak operating margin implies elevated SG&A or R&D intensity relative to the current revenue base. The discrepancy between income tax expense (¥159m) and pre-tax metrics suggests either timing effects or one-off items, so reported net margin could be influenced by non-recurring or period-specific factors.

Growth Assessment

Top-line contracted 20.0% YoY to ¥3,107 million, indicating a pronounced cyclical slowdown in demand. The scale of operating income decline (-78.4%) versus revenue points to deteriorating operating leverage at the trough. Gross margin resilience (47.5%) suggests the core product economics remain healthy, which is constructive for eventual rebound potential when volumes recover. EBITDA of ¥271 million (8.7% margin) demonstrates some capacity to absorb shocks, but profitability remains vulnerable until sales normalize. Revenue sustainability near-term appears challenged by macro capex caution in precision machinery/tooling end-markets (e.g., semiconductors, electronics, and autos). Profit quality is weakened by poor cash conversion (OCF/NI = 0.02), implying revenue recognized has not yet translated into cash—likely receivable growth or contract asset build amid longer project cycles. The ordinary income exceeding operating income indicates non-operating tailwinds that may not be durable. Near-term outlook hinges on order intake recovery, backlog execution, and lead-time normalization; a gradual 2H stabilization is possible if customer capex restarts, but visibility is limited from the provided data. Medium-term growth will depend on exposure to structural themes (precision machining for advanced materials, EV components, and semiconductor equipment), where the firm’s high gross margin suggests competitive positioning.

Financial Health

Balance sheet strength is a key positive: total assets ¥12,025 million vs. total liabilities ¥2,247 million imply low leverage and high solvency. Equity stands at ¥10,423 million, implying an equity ratio near the mid-80% range by calculation (the disclosed 0.0% equity ratio is a placeholder). Debt-to-equity of 0.22x indicates modest borrowings relative to equity. Liquidity appears very strong with current assets of ¥8,795 million and current liabilities of ¥1,479 million, yielding a 594.8% current ratio and working capital of ¥7,316 million. The quick ratio of 589.4% suggests most current assets are liquid or near-liquid; the reported low inventories (¥79 million) likely reflect classification differences rather than actual scarcity. Interest expense is minimal (¥2.5 million) and coverage is high (35.3x), indicating low financial risk. However, the very low operating cash flow in the period raises a short-term liquidity execution risk if cash conversion does not improve, despite ample balance sheet buffers. Financing cash inflow of ¥94 million suggests some reliance on external funding or credit lines in the half. Overall, solvency is strong while cash flow execution requires monitoring.

Cash Flow Quality

Operating cash flow of ¥1.82 million versus net income of ¥95 million yields an OCF/NI ratio of 0.02, signaling weak cash conversion in FY2026 Q2 YTD. The gap points to working capital absorption (likely receivable or contract asset growth and/or timing of collections) and possibly advance payments to suppliers; inventories reported at ¥79 million are likely understated due to classification. Free cash flow cannot be reliably assessed because investing cash flows are undisclosed (shown as 0 by placeholder); thus, the provided FCF of 0 reflects data limitations, not actual zero. EBITDA of ¥271 million and depreciation of ¥184 million show healthy non-cash add-backs, but these did not translate into cash given working capital movements. Financing cash inflow of ¥94 million indicates that some funding needs were met externally in the period. Earnings quality is therefore mixed: accrual profitability exists, but cash realization is weak in the half. Key to watch is the conversion of receivables into cash in 2H and any normalization of customer payment cycles.

Dividend Sustainability

DPS is shown as 0.00 and payout ratio 0.0%, indicating no dividend disclosure for the period. Given the weak operating cash flow (¥1.82 million) relative to net income (¥95 million), near-term dividend capacity from internal cash generation appears constrained absent improved cash conversion. With investing cash flows unreported, FCF coverage cannot be assessed; the displayed FCF coverage of 0.00x reflects data gaps rather than true economics. The balance sheet is strong, which provides theoretical capacity, but management appears conservative amid cyclical headwinds. Policy outlook likely prioritizes liquidity and operational investments over distributions until visibility on order recovery and OCF normalization improves.

Risk Assessment

Business Risks:

• Cyclical demand in precision machinery/tooling end-markets (semiconductor, electronics, automotive) leading to revenue volatility
• High operating leverage to volumes, pressuring margins during downturns
• Project timing and delivery milestones causing quarter-to-quarter lumpiness and working capital swings
• Competitive pressures on pricing and lead times in global machine tool markets
• Supply chain and component availability affecting delivery schedules and costs

Financial Risks:

• Weak cash conversion in the period (OCF/NI = 0.02) raising short-term liquidity execution risk
• Potential receivable/contract asset build increasing credit and collection risk
• Reliance on financing cash inflow (¥94 million) during a weak cash generation half
• Tax expense timing/one-offs creating volatility in bottom-line results
• Currency fluctuations impacting non-operating income and margins

Key Concerns:

• Sustained operating margin compression (operating margin ~2.8%) amid a 20% YoY revenue decline
• Large gap between earnings and operating cash flow
• Visibility on order intake and backlog conversion into 2H is unclear from disclosures
• Data limitations (multiple zero placeholders) obscure precise liquidity composition and FCF

Investment Implications

Key Takeaways:

• Top-line down 20.0% YoY to ¥3,107 million with pronounced operating deleverage (operating income ¥87 million, -78.4% YoY)
• Gross margin remains high at 47.5%, indicating resilient product economics despite volume pressure
• ROE is subdued at 0.91%, constrained by low net margin (3.06%) and modest asset turnover (0.258x)
• Cash conversion is very weak (OCF/NI = 0.02), pointing to working capital absorption in the half
• Balance sheet strength (low leverage, ample working capital) mitigates solvency risk despite weak OCF
• Interest burden is minimal (coverage 35.3x), limiting financial distress risk
• Dividend not disclosed (DPS 0.00), consistent with a conservative stance amid cyclical softness

Metrics to Watch:

• Order intake and book-to-bill ratio to gauge demand trajectory
• Receivables and contract asset turnover; OCF/NI improvement toward >0.8 over the next periods
• Backlog conversion and shipment timing vs. lead times
• Operating margin recovery toward mid-high single digits as volume normalizes
• Capex and R&D levels vs. revenue to assess operating leverage and future growth positioning
• FX gains/losses and non-operating items that affect ordinary income
• Working capital components (DSO/DIO/DPO) once disclosed under consistent classifications

Relative Positioning: Within Japan small-cap precision machine tool peers, Waida appears financially conservative with high equity backing and strong gross margins but is currently experiencing sharper operating leverage on a 20% sales decline and unusually weak cash conversion; balance sheet strength affords resilience relative to more leveraged peers, but near-term earnings quality trails given OCF underperformance.

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
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