SEIKO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥21.51B
• Operating Income: ¥801M
• Net Income: ¥425M
• EPS: ¥85.83

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

For FY2026 Q2 (cumulative), the company delivered solid top-line and profit growth, with revenue of ¥21,508 million (+15.3% YoY), operating income of ¥801 million (+21.1% YoY), and net income of ¥554 million (+30.3% YoY). Gross profit of ¥4,280 million implies a gross margin of 19.9%, evidencing an improvement in scale and product mix relative to cost of sales. Operating margin stands at approximately 3.7%, and ordinary margin at roughly 4.1%, indicating positive non-operating contributions. The net margin is 2.58%, consistent with reported DuPont inputs and reflecting tax and any minority/extraordinary impacts between ordinary and bottom line. ROE is reported and calculated at 3.33%, driven by a net margin of 2.58%, asset turnover of 0.753x, and financial leverage of 1.72x. Balance sheet strength appears sound: total assets are ¥28,570 million against total equity of ¥16,656 million and total liabilities of ¥11,731 million, implying a calculated equity ratio of about 58% (the reported 0.0% equity ratio is an undisclosed placeholder). Liquidity is robust with a current ratio of 152% and a quick ratio of 124%, supported by ¥5,340 million of working capital and inventories equal to roughly 19% of current assets. Financial risk from interest is low, with interest expense of ¥10.8 million covered 73.8x by operating income. The effective tax rate reported as 0.0% is clearly a placeholder; the presence of ¥295.9 million in income tax suggests an implied tax rate of roughly 34% using ordinary income as a proxy for pre-tax profit. Cash flow statements show zeros (undisclosed), so operating cash flow and free cash flow cannot be assessed from the provided data. Dividend data are also undisclosed (DPS and payout show as zero placeholders), so no inference on policy can be made. EPS is ¥85.83 on a consolidated basis, but shares outstanding are undisclosed, limiting per-share valuation context beyond EPS. Overall, profitability momentum is positive with operating leverage evident, the balance sheet is conservatively structured, and financing costs are minimal. The principal analytical limitation is the absence of cash flow and capex data, which constrains assessment of earnings quality, working capital dynamics, and dividend coverage. Near-term focus should be on whether margin gains are sustainable and supported by cash conversion rather than solely by revenue growth.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 2.58%
• asset_turnover: 0.753x
• financial_leverage: 1.72x (Assets/Equity ≈ 28,570/16,656)
• calculated_ROE: 3.33% (matches reported) margin_quality:
• gross_margin: 19.9% (GP ¥4,280m / Revenue ¥21,508m)
• operating_margin: ≈3.7% (OP ¥801m / Revenue)
• ordinary_margin: ≈4.1% (Ordinary ¥873m / Revenue)
• net_margin: 2.58%
• commentary: Expansion in operating and net income outpaced revenue growth (+21.1% and +30.3% vs +15.3%), indicating improving margin mix and operating efficiency. Ordinary income above operating income suggests net non-operating gains (e.g., interest income or other non-operating income) more than offset interest expense. operating_leverage: Positive: operating income growth (+21.1% YoY) exceeds revenue growth (+15.3% YoY), implying fixed-cost absorption and/or better pricing/product mix. Sustainability depends on demand, cost control, and backlog quality.

Growth Assessment

revenue_sustainability: Revenue grew +15.3% YoY to ¥21.5bn, a strong cadence for a capital goods-oriented business. Without order/backlog data, sustainability cannot be confirmed; watch order intake and book-to-bill. profit_quality: Operating income rose faster than sales, implying efficiency gains. Ordinary income outpaced operating income, indicating non-operating tailwinds; reliance on non-operating components may not be structural. outlook: Assuming stable demand and input costs, modest continued margin improvement is plausible. Key determinants include cost pass-through, mix/pricing, and utilization. Lack of cash flow disclosure introduces uncertainty around working capital intensity as growth scales.

Financial Health

liquidity:

• current_ratio: 152.3% (1.52x)
• quick_ratio: 123.8% (1.24x)
• working_capital: ¥5,340,455,000
• inventories_to_current_assets: ≈18.7% (¥2,907m / ¥15,545m) solvency_capital_structure:
• total_assets: ¥28,570,000,000
• total_liabilities: ¥11,731,422,000
• total_equity: ¥16,656,000,000
• debt_to_equity: 0.70x (using total liabilities as a proxy for debt under JGAAP aggregation)
• equity_ratio: ≈58% (Equity/Assets; reported 0.0% is undisclosed placeholder)
• interest_coverage: 73.8x (Operating income ¥801m / Interest expense ¥10.8m)
• commentary: Balance sheet is conservative with ample equity buffer and minimal interest burden. Short-term obligations are well-covered by current assets.

Cash Flow Quality

earnings_quality: Cannot be directly assessed due to undisclosed cash flow data (OCF shows zero placeholder). Reported profit growth and low interest burden are positives, but cash conversion remains unverified. FCF_analysis: Free cash flow cannot be computed without OCF and capex. Depreciation is undisclosed; true EBITDA and maintenance vs growth capex split are unknown. working_capital: Inventories are ¥2,907m; receivables/payables not disclosed. Growth phase may require incremental working capital. Monitor inventory turnover and receivables collection to validate earnings cash conversion.

Dividend Sustainability

payout_ratio_assessment: Payout ratio shows 0.0% due to undisclosed DPS; EPS is ¥85.83 for the period. Without an announced DPS, payout cannot be evaluated. FCF_coverage: Not assessable; OCF and capex data are undisclosed (zeros are placeholders). policy_outlook: No dividend policy information provided. Balance sheet capacity appears adequate for dividends, but sustainability assessment requires confirmed OCF and capex visibility.

Risk Assessment

Business Risks:

• Demand cyclicality typical of capital goods and equipment markets
• Input cost inflation and pricing power uncertainty
• Project execution and delivery timing affecting revenue recognition
• Supply chain and component availability risks
• Potential foreign exchange exposure on imports/exports (if applicable)

Financial Risks:

• Working capital intensity during growth potentially suppressing OCF
• Customer concentration risk (not disclosed but common in industrials)
• Non-operating income reliance to boost ordinary profit
• Capex requirements not disclosed; potential for future cash outlays

Key Concerns:

• Cash flow statements undisclosed, limiting earnings quality assessment
• Depreciation and EBITDA undisclosed, obscuring underlying operating cash generation
• Equity ratio reported as 0.0% despite strong calculated ratio, highlighting data disclosure gaps
• Shares outstanding undisclosed, limiting per-share and capital allocation analyses

Investment Implications

Key Takeaways:

• Strong YoY growth with operating leverage: revenue +15.3%, OP +21.1%, NI +30.3%
• Margins improving but remain low-to-mid single digits at the operating line (≈3.7%)
• Solid balance sheet with calculated equity ratio ≈58% and interest coverage 73.8x
• Non-operating gains lift ordinary profit above operating profit; sustainability uncertain
• Cash conversion unverified due to undisclosed cash flow data

Metrics to Watch:

• Order intake and backlog/book-to-bill to gauge revenue visibility
• Gross and operating margins (pricing and mix) and cost pass-through
• Operating cash flow, free cash flow, and working capital turns
• Capex and depreciation to understand maintenance vs growth investment
• Inventory and receivables turnover as growth scales
• Tax rate normalization relative to ordinary income

Relative Positioning: Compared with typical TSE small/mid-cap industrials, profitability is moderate with improving trends, leverage is conservative, and interest burden is minimal; the main differentiator versus peers will be demonstrated cash conversion and backlog visibility.

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