ZUIKO CORPORATION FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥15.94B
• Operating Income: ¥660M
• Net Income: ¥432M
• EPS: ¥17.26

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: FY2026 Q3 marked a clear turnaround to profitability for ZUIKO (6279), but margins and capital efficiency remain subpar versus benchmarks. Revenue rose 14.4% YoY to 159.37, lifting operating income to 6.60 from a loss of -2.99 in the prior period. Gross profit reached 27.67, with a gross margin of 17.4%. Operating margin improved to 4.1% from -2.1% a year ago, a 629 bps expansion, while net margin improved to 2.9% from -5.2%, an 810 bps expansion. Ordinary income was 7.83, supported by non-operating income of 1.75 (notably 0.84 interest income), indicating a sizable cash position contributing to earnings. Net income printed 4.57, translating to EPS of 17.26 yen; however, total comprehensive income was negative (-1.67), implying other comprehensive losses (likely securities valuation/FX) offsetting net profit. ROE is low at 1.4%, driven by slim net margins (2.9%), slow asset turnover (0.323x), and modest leverage (1.46x). Liquidity is very strong with a current ratio of 252% and quick ratio of 252%, backed by cash and deposits of 136.44. Leverage is conservative (Debt/Capital 5.2%; interest coverage 26.8x), mitigating financial risk. Dividend policy signals normalization with an annual DPS of 10 yen (interim 5, year-end 5), implying a payout ratio of about 63%, slightly above the <60% sustainability benchmark without visibility on FCF. Cash flow data were not disclosed, limiting earnings quality assessment (OCF/NI not calculable). Quality Alerts are relevant: EBIT margin of 4.1% (<5%) confirms low operating efficiency, and ROIC of 2.0% (<5%) points to weak capital productivity despite recovery. Forward-looking, sustained recovery hinges on mix/pricing improvements, utilization gains, and working capital discipline to lift ROIC above 5%; absent this, returns may remain below cost of capital. Overall, the quarter is a step in the right direction, but margin quality and capital efficiency need further improvement to support durable shareholder returns.

Profitability Analysis

ROE decomposition (DuPont 3-factor): Net Profit Margin 2.9% × Asset Turnover 0.323 × Financial Leverage 1.46x = ROE 1.4% (matches reported). The biggest swing YoY came from margin expansion: operating margin improved from -2.1% to 4.1% (+629 bps), and net margin from -5.2% to 2.9% (+810 bps), converting losses to profits. Business drivers likely include higher top-line on improved order execution, partial recovery in utilization, and better pricing/mix, while SG&A remained heavy at 13.2% of sales (21.06/159.37), absorbing most of the 17.4% gross margin. Asset turnover is low at 0.323x, reflecting a capital-heavy balance sheet relative to revenue—large cash holdings and modest revenue base dilute turnover. Interest burden is light (EBT/EBIT 0.980) and not the constraint; tax burden is normal (0.707; effective tax ~33%). Sustainability: margin gains look cyclical/recovery-driven but still below industry mid-cycle; further improvement requires higher gross margin (through mix/pricing) and tighter SG&A control. Watch for any warning trend where SG&A growth outpaces revenue; with current SG&A ratio at 13.2% against a 4.1% operating margin, operating leverage remains limited until gross margin expands materially.

Growth Assessment

Revenue grew 14.4% YoY to 159.37, reversing prior-year operating losses to operating profit of 6.60. Growth appears driven by improved demand/order delivery rather than acquisitions (no disclosure of M&A). Non-operating income (0.84 interest) contributed meaningfully to ordinary income, indicating the balance sheet aided profit. Quality and sustainability: Net margin at 2.9% is still below the 5–10% “good” range, suggesting recovery is in early stage. With comprehensive income negative (-1.67), equity value faced market/FX headwinds that could persist. Outlook constraints: no backlog or segment detail provided; however, to sustain growth, the company needs better product mix (higher-margin lines), stable input costs, and currency tailwinds for exports. Given low asset turnover, incremental revenue should improve ROIC if working capital is contained; otherwise capital efficiency will remain depressed.

Financial Health

Liquidity is strong: Current ratio 252.4% and quick ratio 251.9% indicate ample short-term coverage; no warning on current ratio. Working capital stands at 199.13, with cash and deposits 136.44 forming a substantial liquidity buffer. Solvency is conservative: Interest-bearing debt totals 18.67; Debt/Capital is 5.2%, and the provided D/E ratio (total liabilities/equity) is 0.46x—well below the 1.0x conservative threshold. Interest coverage is robust at 26.76x, reflecting low interest expense (0.25) and sufficient operating earnings. Maturity mismatch risk appears low: current assets (329.78) comfortably exceed current liabilities (130.65); short-term debt detail is unreported, but long-term loans are modest at 18.67. Off-balance sheet obligations are not disclosed; absence of data limits assessment of lease or guarantees.

Cash Flow Quality

Operating cash flow, investing, and financing cash flows were not disclosed, so OCF/Net Income and FCF cannot be assessed. As a result, we cannot validate earnings quality via cash conversion benchmarks (OCF/NI > 1.0). No CapEx or depreciation data were provided, preventing CapEx/Depreciation analysis and FCF coverage of dividends. Working capital accounts show low reported inventories (0.62) and modest receivables (16.56) relative to cash; without period-end comparisons or turnover metrics, we cannot infer manipulation or structural shifts. Overall, cash flow quality is indeterminable this quarter due to disclosure gaps.

Dividend Sustainability

Announced DPS totals 10 yen (interim 5, year-end 5). The calculated payout ratio is approximately 63%, slightly above the <60% guideline for comfort. With missing OCF/FCF disclosure, coverage cannot be confirmed; however, strong cash holdings (136.44) and low leverage mitigate near-term payout risk. Sustainability hinges on maintaining positive operating profit and converting earnings to cash; if margins remain ~4% and growth normalizes, a 10-yen DPS looks maintainable but leaves limited buffer absent stronger FCF.

Risk Assessment

Business Risks:

• Low operating efficiency: EBIT margin 4.1% below 5% threshold limits resilience to demand shocks.
• Capital efficiency risk: ROIC 2.0% below 5% suggests value dilution versus cost of capital.
• Order volatility and project timing typical of capital goods can swing quarterly results.
• Product mix and pricing power constraints in competitive machinery markets keep gross margin at 17.4%.
• Negative comprehensive income indicates exposure to market/FX valuation swings.

Financial Risks:

• Earnings reliance on financial income (0.84 interest) could decline if cash is deployed or rates fall.
• Limited visibility on cash generation due to absent cash flow disclosures.
• Potential inventory shortfall risk if the low reported inventory (0.62) reflects tight supply buffer.

Key Concerns:

• ROE at 1.4% well below 8% benchmark—requires both margin and turnover improvement.
• SG&A intensity at 13.2% leaves a thin operating margin cushion.
• Payout ratio ~63% without FCF disclosure reduces dividend headroom if earnings soften.

Investment Implications

Key Takeaways:

• Clear earnings turnaround: operating loss to 4.1% operating margin and 2.9% net margin.
• Margins remain below industry norms; further gross margin and SG&A discipline needed.
• ROIC 2.0% and ROE 1.4% are too low to drive strong TSR without efficiency gains.
• Balance sheet strength (cash-rich, low debt) reduces downside financial risk.
• Dividend normalized to 10 yen; near-term coverage likely supported by cash, but FCF unknown.

Metrics to Watch:

• Order intake/backlog and book-to-bill to gauge revenue sustainability.
• Gross margin trajectory and pricing/mix improvements.
• SG&A ratio versus revenue growth for operating leverage.
• OCF/Net Income and CapEx once disclosed to assess FCF durability.
• ROIC progression toward >5% and ultimately 7–8%.
• Comprehensive income drivers (FX/valuation effects) impacting equity.

Relative Positioning: Within Japanese industrial machinery peers, ZUIKO currently sits in the lower tier on profitability (EBIT margin ~4%, ROIC 2%) but in the upper tier on balance sheet strength (high cash, low leverage). The recovery narrative is intact, yet the return profile lags peers until margins and turnover improve.

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