Y.A.C.HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.85B
• Operating Income: ¥773M
• Net Income: ¥383M
• EPS: ¥20.04

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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 and operating profit growth, but bottom-line collapsed due to non-operating/extraordinary drag and a high tax burden, resulting in weak ROE and very low ROIC. Revenue rose 13.8% YoY to 128.5, with operating income up 28.5% YoY to 7.73, demonstrating positive operating leverage. Gross profit was 35.49 for a gross margin of 27.6%. Operating margin improved to 6.0% (7.73/128.5). Ordinary income doubled (+109.5% YoY) to 6.58, implying ordinary margin of 5.1%. However, profit before tax of 6.22 and net income of 3.69 reflect meaningful non-operating expenses (1.92, including interest expense of 1.01) and an effective tax rate of 38.4%. Net margin is 2.9%, pulling ROE down to 2.2% and ROIC to 2.2%, indicating subpar capital efficiency. Operating margin expanded by roughly 70 bps YoY (from ~5.3% to ~6.0% based on growth math), and ordinary margin expanded by around 234 bps (from ~2.8% to ~5.1%). In contrast, net income fell 96.6% YoY, a mathematically implied prior-period anomaly that likely reflects large one-time gains last year; this distorts net margin comparability. Earnings quality assessment is constrained because operating cash flow and capex are unreported; OCF/NI cannot be checked. Liquidity is comfortable (current ratio 178%, quick ratio 170%), but leverage is at the upper end of comfort (D/E 1.46x) and short-term loans are sizable (76). Interest coverage is acceptable at 7.65x, yet non-operating expenses remain a drag. The calculated payout ratio is a very high 290.9% despite DPS being unreported, signaling potential unsustainability if cash flows do not improve. Forward-looking, the company must sustain operating margin gains while reducing financing/extraordinary burdens to lift ROE above the cost of equity. Absent cash flow data, visibility on dividend coverage and investment capacity is limited. Monitoring non-operating expense trends, tax normalization, and any extraordinary items is key to stabilizing the bottom line.

Profitability Analysis

ROE decomposition: ROE (2.2%) = Net Profit Margin (2.9%) × Asset Turnover (0.310) × Financial Leverage (2.46x). The most notable change within the P&L is operating leverage: operating income grew 28.5% vs revenue +13.8%, expanding operating margin from 5.3% to 6.0% (+70 bps). Ordinary margin also improved materially to 5.1% (~+234 bps YoY by inference), but this was partly offset by higher non-operating expenses (1.92) and interest expense (1.01), which curtailed the flow-through to PBT. Net margin is depressed by a high effective tax rate (38.4%) and a modest extraordinary loss (PBT 6.22 < ordinary income 6.58). Business reason: stronger gross profit conversion and controlled SG&A (27.76) supported operating margin, while financing costs and other non-operating items diluted ordinary-to-net conversion. Sustainability: operating margin improvement appears more sustainable than the net line, which is distorted by non-operating/extraordinary items and tax; financing cost pressures could persist unless debt is reduced. Watch for SG&A creep: with sales +13.8% and SG&A absolute level at 27.76, any acceleration in SG&A growth above revenue would threaten operating leverage in subsequent quarters.

Growth Assessment

Revenue growth of +13.8% YoY to 128.5 indicates healthy demand and/or backlog conversion; the 28.5% YoY increase in operating income confirms positive operating leverage. Gross margin at 27.6% suggests decent pricing/mix or cost discipline. Ordinary income more than doubled (+109.5% YoY), but non-operating headwinds (interest and other expenses) kept PBT at 6.22. Net income of 3.69 shows a large YoY decline (-96.6%), implying last year's net had substantial one-time benefits; current period appears more normalized but pressured by financing and taxes. With ROIC at 2.2% (warning zone, <5%), incremental growth must come with higher returns or asset turns to be value-accretive. Given limited disclosure on R&D/capex, it's unclear whether growth is being driven by sustainable product cycles or a transient project mix. Near-term outlook hinges on maintaining operating margin around 6%+, reducing non-operating drag, and normalizing the tax rate; otherwise ROE will remain low.

Financial Health

Liquidity is healthy: current ratio 177.6% and quick ratio 170.3% indicate ample coverage of short-term obligations. Debt-to-equity of 1.46x is at the upper bound of a conservative range; not a warning, but financial flexibility is somewhat constrained versus net-cash peers. Short-term loans of 76 are significant, but current assets of 294 (including cash/deposits 69.38 and receivables 85.76) mitigate near-term refinancing risk; maturity mismatch risk is moderate. Interest coverage at 7.65x is acceptable, though further rate hikes or earnings volatility could pressure coverage. No off-balance sheet obligations are reported in the dataset. Equity is 168.50 versus total assets 414.95, aligning with the 2.46x leverage used in DuPont.

Cash Flow Quality

Operating cash flow, investing, and financing cash flows are unreported; OCF/Net Income and FCF cannot be assessed. Therefore, earnings-to-cash conversion quality cannot be validated this quarter. Working capital snapshots show receivables (85.76) and relatively low inventories (11.95), which could be favorable for cash conversion if collections remain timely; however, without OCF we cannot confirm. Dividend cash coverage is indeterminable in the absence of OCF and capex data. No clear signs of working capital manipulation are inferable from the limited point-in-time balance data.

Dividend Sustainability

The calculated payout ratio is 290.9%, which is well above the <60% benchmark for sustainability; however, DPS itself is unreported, so this figure should be treated cautiously. Without OCF and capex, FCF coverage of dividends cannot be evaluated. Given low ROE (2.2%) and ROIC (2.2%), sustaining a high payout would likely require either improved cash generation or balance sheet support; reliance on debt would not be prudent given current leverage. Policy outlook: expect management to prioritize profitability and cash conversion improvements before committing to higher shareholder returns; any dividend guidance should be cross-checked against OCF once disclosed.

Risk Assessment

Business Risks:

• End-market capex cyclicality (industrial/semiconductor/display equipment demand can be volatile).
• Margin pressure from input cost inflation or pricing competition affecting the 27.6% gross margin.
• Project timing risk causing quarterly volatility in revenue recognition and working capital.
• Execution risk on large orders affecting delivery schedules and profit recognition.

Financial Risks:

• Leverage at D/E 1.46x with short-term loans of 76 increases refinancing and interest rate sensitivity.
• Non-operating expense burden (1.92), including interest expense (1.01), dilutes earnings.
• High effective tax rate (38.4%) depresses net income; if persistent, ROE could remain below cost of equity.
• Potential dividend strain given a calculated payout ratio of 290.9% without confirmed cash flow support.

Key Concerns:

• ROIC at 2.2% (warning) indicates capital inefficiency; value creation is questionable without margin or asset turn improvement.
• Net income volatility: -96.6% YoY suggests prior-period one-offs; bottom-line stability remains uncertain.
• Data gaps (OCF, capex, DPS) limit visibility on cash flow quality and capital allocation sustainability.

Investment Implications

Key Takeaways:

• Operating leverage positive: operating margin expanded to ~6.0% with revenue +13.8% YoY.
• Ordinary margin improved meaningfully, but non-operating expenses and taxes limited net conversion.
• ROE 2.2% and ROIC 2.2% highlight subpar capital efficiency; improvement needed to drive valuation upside.
• Balance sheet liquidity is sound, but leverage sits near the conservative threshold.
• Dividend sustainability is uncertain given a very high calculated payout ratio and missing cash flow data.

Metrics to Watch:

• Operating cash flow and FCF (when disclosed) vs dividends and capex.
• Non-operating expenses and interest expense trend; interest coverage sustainability.
• Effective tax rate normalization and any extraordinary items.
• Order backlog, book-to-bill, and segment mix to assess revenue durability and margin trajectory.
• Asset turnover (currently 0.31) and working capital turns to lift ROIC.

Relative Positioning: Within Japan small-mid industrial equipment peers, YAC shows decent operating margin progress but lags on capital efficiency (ROIC 2.2%) and bottom-line stability due to financing and non-operating drag; liquidity is better than average, leverage is moderate-high, and clearer cash flow disclosure is needed to improve investor confidence relative to peers with stronger FCF track records.

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
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