YAMASHIN-FILTER CORP. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.29B
• Operating Income: ¥1.37B
• Net Income: ¥870M
• EPS: ¥12.99

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 Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

Yamashin Filter Co., Ltd. (TSE:6240) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth and resilient profitability with strong cash conversion. Revenue rose 3.8% YoY to ¥10.29bn, but operating income was essentially flat at ¥1.37bn (-0.3% YoY), indicating mild margin pressure despite a solid gross margin profile. Net income increased 4.5% YoY to ¥0.91bn, supported by low financial costs and stable non-operating items. The DuPont framework points to an ROE of 4.07%, driven by an 8.83% net margin, low asset turnover of 0.381x, and conservative leverage (financial leverage 1.21x). Gross profit margin remains high at 43.1%, and operating margin is a healthy ~13.3%, reflecting differentiation and pricing power in filtration, albeit with limited operating leverage in the quarter. EBITDA was ¥1.74bn with a 16.9% margin, and interest coverage is very comfortable at 119x, underscoring minimal reliance on debt. Liquidity is very strong, with a current ratio of 426% and quick ratio of 371%, and we estimate an equity ratio of approximately 82.8% (equity ¥22.36bn / assets ¥27.00bn), despite a placeholder equity ratio of 0.0% in the dataset. Operating cash flow was robust at ¥1.44bn, exceeding net income (OCF/NI 1.58x), indicating high earnings quality and either favorable working capital movements or prudent expense accruals. Investing cash flow was not disclosed, limiting free cash flow analysis; reported FCF of 0 should be treated as “not available,” not zero. Financing cash outflows of ¥0.69bn suggest debt repayment and/or other financing uses in the absence of dividends, consistent with the company’s conservative balance sheet posture. The company reported DPS of ¥0.00 and a payout ratio of 0%, implying cash redeployment to balance sheet strength, internal investment, or buybacks (unconfirmed; treasury share data were not disclosed). Overall, the profile is one of high capital solidity, solid profitability, and strong cash conversion, offset by modest growth and low asset turnover. The quarter reflects negative operating leverage: revenue grew but operating income edged down, suggesting higher SG&A or product/geographic mix shift. With low leverage and ample liquidity, the company has capacity to fund growth and manage cyclical swings in construction machinery demand. Data limitations (notably investing cash flows, cash balance, equity ratio disclosure, and share count) constrain precision on FCF, per-share metrics, and capital allocation assessment.

From Earnings Presentation: Yamashin-Filter Corp.'s Q2 FY2026/3 earnings presentation reported record-high revenue and quarterly net income while announcing an upward revision to full-year guidance that incorporates upfront investments and cost increases associated with new business launches. While core construction equipment filters saw revenue growth due to recovering new vehicle demand, operating income remained nearly flat due to aftermarket parts inventory adjustments and sluggish air filter business performance. The MAVY's corporate value indicator, which tracks mid-term plan progress, improved steadily (0.4%), and ROIC also cleared target levels at 8.4%. Financial soundness is extremely strong with an equity ratio of 80.4% and interest coverage ratio of 119x. Dividend forecast was revised upward from 6 yen to 18 yen per share, with share buybacks of 1,267 million yen planned (total payout ratio of 130.9%). ESG evaluation is steadily advancing with CDP Climate Change A-List recognition and inclusion in FTSE Blossom Japan Index. The announcement of a new long-term vision, YAMASHIN FILTER VISION 2030, is anticipated, clearly demonstrating a commitment to balancing growth investments with shareholder returns.

Financial Analysis

Profitability

ROE_decomposition: ROE 4.07% = Net Profit Margin 8.83% × Asset Turnover 0.381 × Financial Leverage 1.21. The low asset turnover tempers ROE despite healthy margins and modest leverage. margin_quality: Gross margin 43.1% indicates strong value-add and pricing discipline in filtration media/components. Operating margin ~13.3% (¥1.37bn / ¥10.29bn) is solid but slightly compressed given operating income declined -0.3% on +3.8% revenue. Net margin 8.83% benefits from minimal interest expense (¥11.5m) and an estimated effective tax rate around 36% (¥509.8m tax vs ~¥1.42bn PBT), despite a placeholder 0.0% in the dataset. operating_leverage: Negative operating leverage this quarter: revenue +3.8% YoY while operating income -0.3% YoY. This suggests higher SG&A, R&D, or an adverse mix. EBITDA margin 16.9% vs operating margin ~13.3% shows reasonable fixed-cost absorption, but incremental margins were limited.

Growth

revenue_sustainability: Top-line grew 3.8% YoY, indicative of stable demand in core construction machinery filtration and aftermarket. Sustainability likely hinges on OEM production volumes, China/ASEAN excavator cycles, and aftermarket resilience. profit_quality: Net income +4.5% YoY with OCF/NI at 1.58x supports quality of earnings. Minimal financial costs and limited non-operating noise underpin profit stability. outlook: With high gross margins and ample liquidity, the company is positioned to navigate cyclical softness; however, low asset turnover (0.381x) and negative operating leverage limit near-term profit expansion unless cost discipline improves or volume accelerates. FX and raw material costs remain key swing factors.

Financial Health

liquidity: Current ratio 425.9%, quick ratio 370.8%, and working capital of ¥11.05bn indicate very strong liquidity. Inventories at ¥1.87bn appear manageable relative to sales scale. solvency: Debt-to-equity 0.18x and interest coverage 119.4x reflect low financial risk. Estimated equity ratio ~82.8% (¥22.36bn/¥27.00bn), despite the undisclosed figure shown as 0.0%. capital_structure: Balance sheet is equity-heavy with modest liabilities (¥4.02bn) against assets (¥27.00bn), providing flexibility for investment and downturns without dilutive or debt-heavy financing.

Cash Flow

earnings_quality: OCF ¥1.44bn vs NI ¥0.91bn (1.58x) indicates strong cash realization, supported by non-cash D&A (¥372m) and likely favorable working capital. Interest burden is negligible. FCF_analysis: Investing cash flows were not disclosed; reported FCF of 0 should be treated as ‘not available.’ Given D&A of ¥372m, maintenance capex could be material but cannot be quantified here; thus true FCF coverage cannot be assessed from this dataset. working_capital: Large positive working capital (¥11.05bn) and robust liquidity suggest room to support operations. Without detail on receivables/payables turns or inventory days, we cannot parse the OCF uplift between D&A and working capital normalization.

Dividend Sustainability

payout_ratio_assessment: DPS ¥0.00 and payout ratio 0.0% indicate a suspended or minimal dividend policy for the period. With NI at ¥909m and strong OCF, capacity exists, but policy appears conservative. FCF_coverage: Not assessable due to undisclosed investing CF; reported FCF 0.00x is a placeholder. On a cash basis, operating inflows exceed earnings, but capex needs are unknown. policy_outlook: Given a near-debt-free balance sheet and stable profitability, reinstatement or increase of shareholder returns is feasible if management prioritizes it; however, current signals point to balance sheet fortification and/or reinvestment.

Business Outlook

Full-year revenue revised upward to 20,840 million yen (+2.1% vs. initial budget) and operating income to 2,870 million yen (+5.5%). Construction equipment filters projected to increase revenue in both line products and aftermarket parts (total 18,520 million yen, +4.2%) through market share expansion strategy leveraging new vehicle demand recovery and high-value-added product supply. Air filters, while completing shipment system establishment after core system migration and expecting H2 recovery, will continue to underperform for full year at 2,320 million yen (△12.5%). Despite incorporating upfront investments and cost increases of approximately 110 million yen for new businesses (details undisclosed), operating margin of 13.8% secured through progress of PAC25 cost reduction initiatives (81 million yen achieved through Q2, 42.8% progress rate for full year). By region, new vehicle demand increase centered in North America, China recovering with increased demand for large construction equipment, and Europe remaining solid. Aftermarket parts market gradually completing inventory adjustments with full-scale recovery expected from H2 onward.

Management Guidance

Management emphasizes balancing long-term growth foundation building through new business investments with short-term profit growth under the slogan 'Fly to the next stage!' while evaluating steady progress of mid-term plan (MAVY's improvement, ROIC target achievement). Annual dividend significantly increased to 18 yen (DOE 5.6%, consolidated payout ratio 63.6%) with share buybacks of 1,267 million yen planned (total payout ratio 130.9%). Through capital policy review, maintaining appropriate equity ratio of 80.4% while utilizing financial leverage of 1.24x to reduce WACC (7.9%) and improve ROE (8.7% outlook). For non-financial KPIs, achieved FY2028 target ahead of schedule through CDP Climate Change A-List recognition, realized inclusion in FTSE Blossom Japan Index, promoting ESG management. In the upcoming long-term vision YAMASHIN FILTER VISION 2030, policy is to specify growth strategy centered on new businesses. Foreign exchange sensitivity is limited at △0.25% (70% of transaction currency is JPY), assessing exchange rate fluctuation risk as generally controllable.

Strategic Initiatives

• Market share expansion strategy through 3 axes: customer axis (deepening OEM collaboration), technology axis (high-value-added product development), regional axis (strengthening North America, Europe, Asia)
• Expanding supply of high-value-added products: new product development (improving OEM adoption rate), PFAS/PFOS-free filters, CO2 reduction and power consumption reduction filters
• Evolution of aftermarket: stable capture of aftermarket parts demand, pioneering new distribution channels (BtoB strengthening), expanding dealer and sales networks
• Promoting PAC25 cost reduction initiatives: manufacturing cost improvements (yield improvement, purchasing power enhancement), SG&A efficiency (workforce allocation optimization, investment plan review)
• Supply chain optimization: thorough inventory level management (improving inventory turnover), strengthening receivables/payables management to improve CCC (143.5 days → 137.2 days)
• New business launch: details undisclosed, but creating long-term growth engine with upfront investment scale of 110 million yen (to be detailed in YAMASHIN FILTER VISION 2030)
• Capital policy review: achieving total payout ratio of 130.9% through increased payout ratio (63.6%) and share buybacks (1,267 million yen), improving ROE through appropriate financial leverage
• Deepening ESG management: maintaining CDP Climate Change A-List, continuing inclusion in FTSE Blossom Japan Index, aiming to raise FTSE score above 4.0
• Promoting digitalization: completion of core system renewal (air filters), reducing shipment delay risk through production and sales system efficiency
• Global base strategy: strengthening production and sales systems in North America and Europe, expanding market share for large construction equipment in China and Asia, optimizing regional revenue composition

Risk Assessment

Business Risks:

• Cyclical exposure to construction machinery OEM and aftermarket demand (excavator production cycles in China/ASEAN/Japan).
• Customer concentration with major OEMs; volume volatility can impact operating leverage.
• Raw material and component cost fluctuations affecting gross margin.
• FX volatility (USD, CNY, EUR vs JPY) impacting exports and procurement.
• Technological shifts in hydraulics and filtration media; new entrants and substitution risk.
• Geopolitical/trade frictions affecting supply chains and OEM production scheduling.

Financial Risks:

• Potential working capital swings if demand slows, which could compress OCF.
• Limited asset turnover (0.381x) dampens ROE; inefficiencies could tie up capital.
• Visibility on capex is limited (investing CF not disclosed), creating uncertainty around future FCF.
• Concentration of cash or deposits (cash balance undisclosed) may affect yield and capital efficiency.

Key Concerns:

• Negative operating leverage despite revenue growth indicates cost pressure or mix headwinds.
• Low asset turnover constrains ROE at 4.07% despite strong margins.
• Lack of disclosed investing cash flows and cash balance limits clarity on FCF and capital allocation.

Risk Factors from Presentation:

• Gross margin pressure risk from persistently high prices of key raw materials (resins, non-woven fabrics, metal components, etc.)
• Manufacturing cost increase risk from persistently high energy costs (electricity, fuel)
• Fluctuations in new construction equipment demand (OEM line products): order volatility stemming from macroeconomic and geopolitical risks
• Risk of prolonged inventory adjustments in aftermarket parts market: demand stagnation due to continued excess inventory at dealers and distributors
• Delayed profitability improvement in air filter business: pace of shipment recovery after core system migration, delays in pioneering new distribution channels
• Foreign exchange rate fluctuation risk: impact on revenue and profit from USD/JPY and EUR/JPY fluctuations (sensitivity limited at △0.25% but continued monitoring)
• Logistics cost increase from rising ocean freight rates (confirmed impact of ▲88 million yen on operating income)
• SG&A increase risk from rising personnel costs (base salary increases, etc.) (impact of ▲85 million yen)
• Investment recovery risk associated with new business launches (upfront investment scale of 110 million yen, uncertainty due to undisclosed details)
• Risk of recurrence of delivery delays and cost deterioration due to supply chain disruptions (parts procurement, logistics)
• Demand fluctuation risk for large construction equipment in Chinese market (dependent on real estate market and infrastructure investment trends)
• Risk of stalled ROE improvement pace due to delayed asset efficiency improvement (total asset turnover ratio at low level of 0.9x)

Investment Implications

Key Takeaways:

• Stable top-line growth (+3.8% YoY) with resilient gross margin (43.1%).
• Operating income slightly down (-0.3% YoY), signaling mild margin compression.
• ROE of 4.07% constrained by low asset turnover (0.381x).
• Very strong balance sheet: estimated equity ratio ~82.8%, interest coverage 119x.
• High cash conversion: OCF/NI 1.58x; earnings quality solid.
• Dividend on hold (DPS ¥0); financing outflow suggests deleveraging or other uses.
• Data gaps on investing CF and cash balance limit FCF and policy analysis.

Metrics to Watch:

• Order trends and OEM production (excavator shipments in China/Japan/ASEAN).
• Gross and operating margin trajectory vs raw material and FX movements.
• Operating leverage (incremental margin) as revenue changes.
• OCF/NI ratio and working capital turns (inventory and receivables days).
• Capex and investing CF disclosures to gauge true FCF.
• Asset turnover improvement initiatives and utilization of excess capital.
• Shareholder return policy updates (dividends/buybacks).

Relative Positioning: Compared with Japan-listed industrial component peers, Yamashin exhibits stronger solvency (low D/E and high estimated equity ratio), healthy mid-teens operating margins, and superior interest coverage, offset by slower growth and lower asset turnover which depress ROE relative to margin peers.

Supplementary Insights (Key Highlights)

• Achieved record-high revenue since founding of 10,289 million yen and quarterly net income of 909 million yen in H1 cumulative
• Revised full-year outlook upward to record-high consolidated revenue of 20,840 million yen and operating income of 2,870 million yen since founding
• Significantly raised annual dividend forecast from 6 yen to 18 yen (increase from 12 yen in previous year), strengthening shareholder returns with total payout ratio of 130.9%
• Full-year outlook already incorporates upfront investments and cost increases (operating income impact of -110 million yen) associated with new business launches
• Steadily achieving mid-term plan targets of MAVY's improvement (0.4%) and ROIC improvement (8.4%), promoting corporate value management
• Line products saw significant revenue growth (+572 million yen, +20.9%) driven by recovering construction equipment new vehicle demand, with aftermarket parts also performing steadily
• Air filters are in recovery phase from temporary shipment delays due to core system migration (▲330 million yen, △12.5%)
• Recognized as CDP Climate Change 2024 A-List company, achieving FY2028/3 mid-term plan target ahead of schedule
• Initially included in FTSE Blossom Japan Sector Relative Index (achieved FTSE score of 3.8)
• Long-term vision YAMASHIN FILTER VISION 2030 based on new businesses scheduled for announcement (details to be disclosed)
• CCC (Cash Conversion Cycle) improved from 143.5 days to 137.2 days, enhancing capital efficiency
• Maintaining sound capital structure with financial leverage of 1.24x and WACC of 7.9% while projecting ROE improvement to 8.7%

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