Marumae Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥4.24B
• Operating Income: ¥701M
• Net Income: ¥434M
• EPS: ¥34.32

Income Statement

Balance Sheet

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

Verdict: Solid top-line growth with healthy operating margin but margin compression and low capital efficiency amid elevated leverage. Revenue rose 50.8% YoY to 42.44, with operating income up 33.1% to 7.01 and net income up 25.4% to 4.34. Gross margin printed at 31.4% and operating margin at 16.5%, while net margin reached 10.2%. Operating margin compressed by about 215 bps YoY (from ~18.7% to 16.5%), and net margin contracted by roughly 210 bps (from ~12.3% to 10.2%). Ordinary income increased 34.3% YoY to 6.55, aided by limited non-operating drag (interest burden ratio 0.984). The tax burden ratio (0.629) implies a relatively high effective tax rate of ~37%, dampening net profit conversion. Working capital discipline looks strong: DSO around 52 days, DIO roughly 9 days, and DPO about 52 days, implying an efficient cash conversion cycle near zero. Liquidity is robust (current ratio 215%, quick ratio ~210%), underpinned by healthy cash (41.78) versus minimal short-term borrowings (1.50). However, balance sheet leverage is high (D/E 2.10x; debt/capital 59.1%), concentrated in long-term loans (118.35). DuPont shows ROE of 5.2% driven by solid net margin but muted asset turnover (0.165) and high financial leverage (3.10x). ROIC is weak at 2.7%, signaling under-earning on a larger asset base (notably intangibles/goodwill of ~46–47). Earnings quality cannot be verified due to missing cash flow disclosure this quarter (OCF/NI and FCF unreported). Dividends indicated (Q2 ¥15, YE ¥25) imply a calculated payout of ~120% against Q1 earnings, which is likely not a like-for-like comparison and appears aggressive without FCF data. Forward-looking, the key swing factors are semicon demand durability, utilization of acquired/intangible assets to lift ROIC above 5%, and deleveraging progress to lower balance sheet risk. Overall, execution on growth is credible, but capital efficiency and leverage remain the binding constraints on valuation and resilience.

Profitability Analysis

DuPont (3-factor): ROE 5.2% = Net Profit Margin (10.2%) × Asset Turnover (0.165) × Financial Leverage (3.10x). The largest drag relative to value creation is the very low asset turnover (0.165), reflecting a sizable asset base (total assets 257.59) including intangibles/goodwill (~46–47), while quarterly revenue is 42.44. Net margin remains healthy at 10.2% but fell ~210 bps YoY due to operating margin compression (~215 bps), likely from mix/pricing and cost inflation (materials, labor) outpacing productivity gains. Interest burden is benign (EBT/EBIT 0.984) despite high leverage, indicating low average funding cost; the tax burden (NI/EBT 0.629) is the other drag, with an effective tax rate of 37%. Sustainability: Net margin should stabilize if pricing and product mix normalize and cost pass-through improves; interest burden could rise as rates reset; asset turnover improvement hinges on ramping utilization of the expanded asset base. Watch for SG&A operating leverage: SG&A was 6.31 this quarter; while absolute SG&A grew YoY to support higher volumes, the ratio to sales (14.9%) suggests reasonable cost control, though top-line growth outpaced operating profit growth (50.8% vs 33.1%), indicating some negative operating leverage in the quarter.

Growth Assessment

Revenue growth of +50.8% YoY is strong, likely driven by semicon-related demand and order execution; however, the slower operating profit growth (+33.1%) signals pricing/mix or cost inflation pressures. The gross margin of 31.4% supports a solid value-add profile for precision components/equipment parts, but operating margin compression to 16.5% vs ~18.7% last year suggests incremental costs, potentially higher labor or material inputs, or a shift toward lower-margin programs. Non-operating items had limited net impact (interest expense 0.54 versus interest coverage 13x), so core operations drove results. Outlook hinges on semiconductor capex and utilization: if demand persists, fixed-cost absorption and better mix could re-expand margins; conversely, a downcycle would pressure volumes and magnify the low asset turnover issue. With ROE 5.2% and ROIC 2.7%, management focus should be on improving capital turns and project returns. Near-term growth sustainability is plausible given Q1 momentum, but margin trajectory is the key variable to watch.

Financial Health

Liquidity is strong: current ratio 215% and quick ratio ~210%, with cash 41.78 comfortably covering short-term loans of 1.50 (cash/short-term debt 27.85x). No warning on current ratio (<1.0) is needed. Solvency is the main pressure point: D/E is 2.10x (warning), debt/capital 59.1% (near concern threshold), and interest-bearing debt is 119.85, mostly long-term (118.35). Maturity mismatch risk is limited in the near term given low short-term debt and ample cash, but refinancing/interest rate reset risk exists on the large long-term tranche. Off-balance sheet obligations are not disclosed; none can be assessed from the data. Equity base totals 83.02, with retained earnings 55.12, providing some buffer, but leverage elevates cyclicality risk.

Cash Flow Quality

Earnings quality cannot be validated this quarter due to missing OCF and FCF disclosures (OCF/NI, accrual metrics not calculable). Working capital indicators infer reasonable discipline: receivables ~24.41 imply DSO ~52 days; inventory 2.83 suggests DIO ~9 days; payables 16.78 imply DPO ~52 days; estimated CCC near zero indicates efficient cash conversion and limited working capital drag. Without capex and depreciation, FCF sustainability for dividends and deleveraging cannot be confirmed. No signs of working capital manipulation are evident from the limited data, but verification requires OCF and balance sheet average balances.

Dividend Sustainability

Indicated dividends (Q2 ¥15, YE ¥25) imply a calculated payout of ~120% when compared to Q1 net income alone (4.34), which overstates payout aggressiveness because dividends are annual and earnings are quarterly. With FCF unreported, coverage cannot be assessed; under standard benchmarks, a sustainable payout would be <60% of annual earnings and comfortably covered by FCF after capex. Given ROE 5.2% and ROIC 2.7%, retaining earnings to improve capital efficiency and deleverage could be value-accretive unless cash generation is structurally strong. Watch for full-year guidance, cash flow statements, and capex plans before judging sustainability.

Risk Assessment

Business Risks:

• Semiconductor capital expenditure cyclicality impacting order flow and utilization
• Margin pressure from material and labor cost inflation and competitive pricing
• Customer concentration risk typical in equipment/precision parts supply chains
• Goodwill/intangible-heavy balance sheet increases impairment risk if growth underperforms

Financial Risks:

• High leverage (D/E 2.10x; debt/capital 59.1%) magnifies cycle downside
• Refinancing and interest rate reset risk on sizable long-term loans (118.35)
• Low ROIC (2.7%) versus cost of capital implies value erosion if not improved
• Tax burden high (effective tax rate ~37%), suppressing net returns

Key Concerns:

• ROIC 2.7% well below 5% threshold despite strong revenue growth
• Operating and net margin compression (~210–215 bps YoY) reducing earnings leverage
• Lack of OCF/FCF disclosure limits validation of earnings quality and dividend coverage
• Potential sensitivity to JPY fluctuations on imported materials and export pricing

Investment Implications

Key Takeaways:

• Strong revenue momentum (+50.8% YoY) with solid operating margin (16.5%) but evident margin compression
• ROE of 5.2% and ROIC of 2.7% indicate capital efficiency is the primary bottleneck
• Balance sheet shows high leverage concentrated in long-term debt; liquidity near term is sound
• Interest burden is currently light (coverage ~13x), but tax burden is heavy (~37%)
• Working capital efficiency is good, supporting potential cash generation once disclosed

Metrics to Watch:

• Operating cash flow and free cash flow for validation of earnings quality
• ROIC progression toward >5% and ideally 7–8% medium term
• Operating margin trajectory and gross-to-operating spread
• Net debt/EBITDA and interest coverage as rates evolve
• Order backlog, book-to-bill, and capacity utilization in semiconductor end-markets

Relative Positioning: Versus Japan precision manufacturing peers, Marumae exhibits above-average operating margin but below-average capital efficiency (low ROIC, low asset turnover) and higher financial leverage; working capital discipline is a relative strength, while balance sheet risk and ROIC improvement are the main gaps.

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
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