Techno Smart Corp. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.55B
• Operating Income: ¥2.39B
• Net Income: ¥1.52B
• EPS: ¥132.55

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

Techno Smart (TSE:62460, standalone JGAAP) delivered a strong FY2026 Q2 earnings print, with operating momentum reflected in both growth and margins. Revenue reached ¥12,547 million, up 66.6% YoY, indicating robust demand and/or strong order conversion in the period. Operating income was ¥2,386 million, up 63.2% YoY, demonstrating healthy operating leverage despite the rapid top-line expansion. Net income came in at ¥1,522 million (+53.4% YoY), resulting in an EPS of ¥132.55. The DuPont breakdown points to a Net Profit Margin of 12.13%, Asset Turnover of 0.339x, and Financial Leverage of 1.78x, yielding a calculated ROE of 7.31%, which matches the reported figure. EBITDA was ¥2,498.6 million with a 19.9% margin, implying limited non-cash charges (depreciation ¥112.6 million) and minimal interest expense (¥12 thousand). Liquidity is strong: a current ratio of 249.8% and working capital of ¥15,121 million underscore significant short-term headroom. Balance sheet resilience is notable: with total assets of ¥37,037 million and equity of ¥20,832 million, the implied equity ratio is approximately 56.3% despite a reported 0.0% placeholder. Ordinary income of ¥2,395 million is close to operating income, highlighting a clean non-operating line. Operating cash flow was negative at ¥195 million despite strong earnings, pointing to working capital investment/cash timing effects; investing cash flow and cash balances were not disclosed (shown as 0), which limits full cash flow assessment. Financing cash flow was a sizable outflow of ¥1,939 million, consistent with debt repayment or other equity-related uses; dividends are not indicated this period (DPS 0), though DPS data may be timing-driven. The company’s interest burden is negligible (interest coverage over 198,000x), indicating very low financial risk from debt service. Gross margin is shown as 16.2% and EBITDA margin 19.9%; the latter exceeding the former suggests classification effects and/or the presence of other operating income in EBITDA calculations. Given the magnitude of growth and profitability, earnings quality merits monitoring due to the negative OCF and unreported investing cash flows. Overall, Techno Smart exhibits strong cyclical upswing characteristics typical of capital goods, underpinned by a solid balance sheet but with working capital outflows temporarily weighing on operating cash.

Profitability Analysis

ROE_decomposition: ROE 7.31% = Net Profit Margin 12.13% × Asset Turnover 0.339 × Financial Leverage 1.78. The primary ROE driver is margin strength; asset turnover is modest, consistent with a project/engineered equipment model. Leverage is moderate and not the key contributor. margin_quality: EBITDA margin 19.9% and NPM 12.13% suggest healthy operating economics. The reported gross margin of 16.2% being below EBITDA margin indicates either classification of other operating income or data mapping differences; nonetheless, operating income (¥2,386 million) is robust versus revenue (19.0% OPM implied). Tax expense disclosure is inconsistent with the calculated effective tax rate (shown 0.0% despite income tax of ¥496.9 million), so we rely on the provided net margin for bottom-line quality. operating_leverage: Operating income grew 63.2% YoY on 66.6% revenue growth, suggesting roughly neutral to slightly negative operating leverage at this stage (likely reflecting mix and/or ramp costs). However, the absolute OPM near 19% indicates good fixed-cost absorption. Minimal D&A (¥112.6 million) implies a relatively asset-light base or recent capex not yet reflected.

Growth Assessment

revenue_sustainability: Revenue growth of +66.6% YoY suggests strong order conversion and demand in end markets (likely coating/process equipment). Sustainability will depend on backlog replenishment, capex cycles in target industries (e.g., EV battery/display/film), and shipment timing. profit_quality: Net margin (12.13%) and operating margin (~19%) are solid. Ordinary income nearly equals operating income, implying limited reliance on non-operating gains. However, the negative OCF despite profit points to working capital investment or collection timing; monitoring receivables and advance payments is key for confirming earnings cash-conversion. outlook: With a healthy balance sheet and strong 1H momentum, the company appears well-positioned if order intake remains resilient. Near-term growth will hinge on project delivery schedules and macro-sensitive capex trends; any normalization of order timing could moderate growth rates in subsequent quarters.

Financial Health

liquidity: Current assets ¥25,217 million vs. current liabilities ¥10,096 million yield a current ratio of 249.8% and working capital of ¥15,121 million. Quick ratio matches due to undisclosed inventories. Liquidity is ample for operations and project execution. solvency: Total equity ¥20,832 million against total assets ¥37,037 million implies an equity ratio ~56.3% and financial leverage of 1.78x (per DuPont). Debt-to-equity is 0.62x, indicating moderate balance sheet leverage. Interest coverage is extremely high (198,833x), reflecting negligible interest expense. capital_structure: The company maintains a conservative capital structure with significant equity buffer. Financing CF outflow of ¥1,939 million indicates de-leveraging or shareholder-related cash uses; with DPS at 0, the outflow likely relates to debt repayment or other financing actions.

Cash Flow Quality

earnings_quality: Net income of ¥1,522 million contrasts with operating CF of -¥195 million (OCF/NI -0.13), indicating weak cash realization this period driven likely by working capital swings (receivables/inventories/contract assets). FCF_analysis: Investing CF is undisclosed (shown as 0), and FCF is also shown as 0 (unreported). Absent investing inflows, negative OCF suggests FCF was likely negative in the period; however, incomplete disclosure prevents precise quantification. working_capital: Large working capital base (¥15,121 million) and strong revenue growth point to increased project WIP/receivables. Tracking DSO, advance receipts, and contract liabilities is essential to assess normalization potential and cash conversion in 2H.

Dividend Sustainability

payout_ratio_assessment: DPS is shown as ¥0.00 and payout ratio 0.0%, which may reflect timing or non-disclosure rather than policy. With EPS at ¥132.55 and solid profitability, theoretical capacity for distributions exists, but we cannot infer an active payout without confirmed policy. FCF_coverage: Given OCF was negative and FCF is unreported, coverage cannot be assessed quantitatively this quarter. Sustainable dividends would require positive, recurring FCF and stable working capital dynamics. policy_outlook: No explicit policy is provided. Balance sheet strength (implied equity ratio ~56%) supports future optionality for dividends, but management’s capital allocation priorities (growth capex, R&D, balance sheet reinforcement) remain the key determinants.

Risk Assessment

Business Risks:

• Cyclicality of customer capex in target industries (e.g., EV battery, film/display, industrial coatings).
• Order timing and project acceptance risk leading to revenue and profit volatility.
• Supply chain constraints affecting component lead times and cost inflation.
• Foreign exchange exposure on imported components and export contracts.
• Competitive pricing pressure in engineered equipment markets.

Financial Risks:

• Negative operating cash flow due to working capital build, risking cash conversion if collections lag.
• Concentration risk if a few large projects/customers dominate revenue.
• Potential mismatch between revenue recognition and cash receipts (contract accounting).
• Limited visibility on investing cash flows and cash balance due to undisclosed items.

Key Concerns:

• OCF/Net Income at -0.13 indicates weak cash conversion in the period.
• Large financing cash outflow (¥1,939 million) with unclear breakdown in the absence of detailed disclosures.
• Data inconsistencies in margin layers (gross vs EBITDA) suggest classification effects; require confirmation in full filings.

Investment Implications

Key Takeaways:

• Strong growth: revenue +66.6% YoY and operating income +63.2% YoY.
• Healthy profitability: EBITDA margin 19.9%, net margin 12.13%, ROE 7.31%.
• Robust balance sheet: implied equity ratio ~56% and high liquidity (current ratio ~250%).
• Cash conversion weak this quarter: OCF -¥195 million amid growth-related working capital.
• Minimal financial risk from interest burden (coverage ~198,833x).

Metrics to Watch:

• Order intake and backlog trajectory to validate revenue sustainability.
• Operating cash flow, DSO, and contract assets/liabilities for cash conversion.
• Gross and operating margin stability amid mix and cost inflation.
• Capital expenditure and investing cash flows (currently undisclosed).
• Leverage trend and uses of cash within financing CF.

Relative Positioning: Within Japanese capital goods/precision machinery peers, Techno Smart exhibits above-peer growth with solid margins and a conservative balance sheet; the main differentiator to monitor versus peers is the near-term cash conversion from a rapidly expanding order book.

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