PUNCH INDUSTRY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥20.56B
• Operating Income: ¥989M
• Net Income: ¥215M
• EPS: ¥20.33

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

Punch Industry Co., Ltd. (TSE:6165) delivered a solid FY2026 Q2 performance with revenue of ¥20.564bn (+2.9% YoY) and strong operating leverage, lifting operating income to ¥0.989bn (+42.8% YoY) and net income to ¥0.559bn (+163.4% YoY). Gross margin was 25.6%, and operating margin improved to 4.8%, indicating better cost control and/or mix and pricing discipline. Ordinary income of ¥1.035bn exceeded operating income, reflecting positive non-operating balance despite modest interest expense of ¥22m. The net margin of 2.72% and DuPont ROE of 2.65% reflect improving but still modest profitability. Asset turnover of 0.648 and low financial leverage of 1.51 indicate a conservatively financed balance sheet, consistent with a manufacturing components business with significant working capital. Liquidity is strong with a current ratio of 271% and quick ratio of 243%, underpinned by ¥23.5bn in current assets and ¥8.7bn in current liabilities. Total liabilities are ¥10.9bn against equity of ¥21.1bn, implying a debt-to-equity of 0.52x and an equity ratio of approximately 66% (computed from the balance sheet; the reported 0.0% equity ratio appears undisclosed, not zero). Operating cash flow of ¥0.632bn exceeded net income (OCF/NI 1.13), aided by non-cash depreciation of ¥0.594bn, supporting reasonable earnings quality. Financing cash outflow of ¥0.738bn suggests debt repayment and/or shareholder returns, though dividends are shown as 0 (likely undisclosed). Investing cash flow is shown as 0, which is likely an unreported figure; therefore, Free Cash Flow is not assessable from the provided data despite a placeholder of 0. Interest coverage is very comfortable at ~45x, highlighting low financial risk. Effective tax rate shown as 0% is inconsistent with the presence of ¥282m tax expense and likely reflects an undisclosed calculated metric rather than an actual zero. Overall, the company displays improved profitability, robust liquidity, and prudent leverage, with some data limitations around cash, capex/FCF, equity ratio disclosure, and dividend details.

Profitability Analysis

ROE of 2.65% decomposes into Net Margin 2.72% × Asset Turnover 0.648 × Financial Leverage 1.51. Margin improvement is the primary ROE driver this quarter, with operating income growth (+42.8% YoY) far outpacing revenue growth (+2.9% YoY). Gross margin at 25.6% and EBITDA margin at 7.7% indicate healthy cost absorption and pricing/mix benefits. Operating margin stands at ~4.8% (989/20,564), up meaningfully YoY given the outsized operating income growth. Ordinary margin is ~5.0% (1,035/20,564), supported by benign non-operating items; interest costs are de minimis. Net margin at 2.72% reflects taxes (¥282m) and other below-ordinary items; the difference between ordinary income and net income (¥476m) suggests the presence of taxes and potential extraordinary/minority impacts. Operating leverage is evident: limited top-line growth delivered substantial profit gains, implying effective fixed-cost control and/or efficiency gains. Asset turnover at 0.648 is modest for a component manufacturer and may reflect elevated working capital; further turnover improvement could unlock ROE upside. Financial leverage is low (assets/equity 1.51), so ROE is predominantly an operating story rather than one driven by leverage.

Growth Assessment

Top-line growth of +2.9% YoY is modest, likely reflecting steady demand in core mold/die components across automotive, electronics, and industrial end-markets. Profit growth was strong (OP +42.8%, NI +163.4%), indicating improved mix, pricing pass-through, and cost discipline, rather than volume-driven expansion. The sustainability of margin gains will depend on maintaining utilization, controlling input costs (steel and energy), and managing FX effects on overseas subsidiaries and exports. Given the small interest burden and improved ordinary income, non-operating drag is limited; however, extraordinary items can add volatility under JGAAP. Near-term outlook hinges on capex cycles in autos, semiconductors, and precision machinery; recent yen depreciation may support overseas earnings translation and export competitiveness. Order trends, backlog, and book-to-bill (not provided) are key to assessing the durability of revenue growth. With asset turnover at 0.648, incremental growth could further leverage fixed costs, but working-capital intensity could temper free cash conversion. Overall, growth quality appears acceptable with emphasis on margin-led gains rather than high-volume expansion.

Financial Health

Liquidity is strong: current ratio 271.3% and quick ratio 242.6%, with working capital of ¥14.85bn (CA ¥23.52bn minus CL ¥8.67bn). Solvency is robust with total liabilities of ¥10.93bn versus equity of ¥21.07bn (debt-to-equity ~0.52x). Computed equity ratio (equity/assets) is ~66.3% (21.065/31.736), indicating a conservative capital structure; the reported 0.0% equity ratio appears undisclosed rather than factual. Interest expense is minimal at ¥22m and interest coverage is ~45x, suggesting low refinancing risk and ample buffer against rate increases. The balance sheet shows significant current assets, including inventories of ¥2.49bn; efficient management of receivables and inventories will be important to preserve liquidity and cash conversion. Overall solvency and liquidity positions are healthy, providing resilience through cyclical swings.

Cash Flow Quality

Operating cash flow of ¥0.632bn exceeds net income of ¥0.559bn (OCF/NI 1.13), supported by non-cash D&A of ¥0.594bn, indicating acceptable earnings quality for the period. Working capital movements are not detailed, but the OCF level suggests limited drag this half despite sizable working capital on the balance sheet. Investing cash flow is shown as 0, which is likely an undisclosed figure; capex cannot be assessed from the provided data. Free Cash Flow is therefore not determinable despite a placeholder of 0; FCF coverage metrics should be treated as unavailable. Financing cash flow of -¥0.738bn implies net outflows (debt repayment and/or shareholder returns), which the strong liquidity position appears to support. With EBITDA of ¥1.583bn and low cash interest, internal cash generation capacity is adequate; the key variable for true FCF is capex, which is not disclosed here.

Dividend Sustainability

Annual DPS is shown as 0 and payout ratio as 0.0%, which likely reflect undisclosed figures for the half-year rather than actual zero distributions. Without capex and FCF detail, we cannot compute dividend coverage from free cash flow. On an earnings basis, net income of ¥0.559bn provides capacity for distributions depending on policy and full-year normalization; however, the appropriate payout level depends on growth capex needs and cyclical considerations. The balance sheet’s low leverage and strong liquidity could support stable dividends, but confirmation requires actual DPS guidance and capex plans. Until investing cash flows and stated dividend policy are available, dividend sustainability assessment remains data-limited.

Risk Assessment

Business Risks:

• Cyclical demand across automotive, electronics, and industrial tooling end-markets
• Raw material and energy cost volatility impacting gross margin
• FX fluctuations affecting export competitiveness and overseas subsidiary earnings
• Customer concentration risk typical in precision components/tooling supply chains
• Inventory and receivables management risk given working-capital intensity
• Exposure to China and broader Asian manufacturing cycles
• Semiconductor and EV-related capex cycle volatility influencing orders

Financial Risks:

• Working capital expansion could compress operating cash flow in downturns
• Potential capex requirements (undisclosed) could reduce free cash flow
• Extraordinary items under JGAAP can introduce earnings volatility
• Interest rate risk is low currently but not zero; refinancing terms could tighten

Key Concerns:

• Sustainability of margin gains with only modest revenue growth
• Lack of disclosed investing cash flows and capex, limiting FCF visibility
• Data gaps on dividends and equity ratio in reported metrics
• Asset turnover at 0.648 indicates efficiency improvement opportunity but also reliance on high working capital

Investment Implications

Key Takeaways:

• Strong operating leverage drove significant profit growth on modest sales increase
• Margins improved across the P&L with gross margin at 25.6% and operating margin ~4.8%
• Balance sheet is conservative with an estimated equity ratio of ~66% and interest coverage ~45x
• OCF exceeded net income, indicating acceptable earnings quality this half
• Working capital remains sizable; turnover improvements could lift ROE and cash conversion
• FCF and dividend visibility are limited due to undisclosed investing cash flows and DPS

Metrics to Watch:

• Order backlog and book-to-bill ratio
• Gross and operating margin trends (pricing and input cost pass-through)
• Inventory and receivables turnover (days on hand)
• OCF/NI and FCF once capex is disclosed
• Asset turnover and ROE progression
• FX impacts on overseas segments and hedging effectiveness

Relative Positioning: Within Japanese precision components and mold/die suppliers, Punch Industry currently exhibits stronger-than-peer operating leverage and conservative leverage, with profitability improving but still moderate ROE; cash conversion and capex intensity will determine how it stacks up on FCF versus 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
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