SANSEI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.64B
• Operating Income: ¥240M
• Net Income: ¥-113M
• EPS: ¥22.69

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

Sansei Co., Ltd. (63070) reported FY2026 Q2 (cumulative) consolidated results under JGAAP with solid top-line growth but weaker profitability. Revenue grew 20.6% year over year to 2,641,000,000 yen, indicating healthy demand or improved project progress. Despite higher sales, operating income declined 11.9% YoY to 240,000,000 yen, signaling negative operating leverage and/or mix deterioration. Gross profit was 309,953,000 yen, implying a gross margin of 11.7%, which is modest for an engineered-product/project business and places pressure on downstream margins. Operating margin compressed to approximately 9.1% (240,000,000 / 2,641,000,000), down YoY given the reported operating income decline versus revenue growth. Ordinary income was 241,000,000 yen, broadly in line with operating income given minimal interest expense (2,024,000 yen). Net income fell 13.3% YoY to 176,000,000 yen, with an implied net margin of 6.66%. A negative income tax figure (-13,034,000 yen) suggests a tax benefit and potential presence of extraordinary items; based on net income and the tax credit, implied pre-tax profit is approximately 162,966,000 yen, below ordinary income, indicating non-operating or extraordinary losses not fully disclosed. The DuPont profile shows a net margin of 6.66%, asset turnover of 0.410x, and financial leverage of 1.36x, producing a calculated ROE of 3.72% (consistent with the reported ROE). Balance sheet strength is notable: total assets are 6,441,000,000 yen, liabilities 1,724,834,000 yen, and equity 4,737,000,000 yen, implying an equity ratio around 73.5% (derived), despite the table showing 0.0% (not disclosed). Liquidity is ample with a current ratio of 278.3% and working capital of 2,223,508,000 yen. Interest coverage is strong at 118.6x (operating income/interest expense), reflecting low financial risk from leverage. Cash flow statement line items are all zero (unreported), limiting assessment of earnings-to-cash conversion and free cash flow; similarly, depreciation and EBITDA are unreported. Dividend data show DPS of 0.00 and payout ratio of 0.0%, but with cash flows unreported, dividend capacity cannot be reliably assessed; this may reflect either a no-dividend stance or missing disclosure. Overall, the company exhibits robust balance sheet quality and strong solvency but faces margin pressure and negative operating leverage in the period despite double-digit revenue growth. Data limitations are material (notably cash flows, depreciation, inventory, share data), and conclusions on cash generation and capital intensity should be treated as provisional.

Profitability Analysis

ROE_decomposition: ROE 3.72% = Net margin 6.66% × Asset turnover 0.410 × Financial leverage 1.36. The principal drag is low asset turnover and modest net margins; leverage contributes only marginally given a conservative balance sheet. margin_quality: Gross margin is 11.7% (309,953,000/2,641,000,000), indicating tight project/product economics or mix with limited pricing power. Operating margin of ~9.1% is down YoY given operating profit decline against strong sales growth. Ordinary margin is ~9.1% (241,000,000/2,641,000,000), with minimal interest burden. Net margin of 6.66% benefited from a tax credit (-13,034,000 yen), but appears to have been offset by non-operating/extraordinary losses versus ordinary income. operating_leverage: Revenue increased 20.6% YoY while operating income fell 11.9% YoY, evidencing negative operating leverage. This suggests higher cost of sales or SG&A pressure (e.g., input inflation, subcontracting, delivery/installation costs, project slippage), and/or adverse mix (lower-margin projects recognized in the period). Absent depreciation disclosure, true fixed-cost absorption cannot be quantified.

Growth Assessment

revenue_sustainability: The 20.6% YoY revenue growth indicates healthy order execution or backlog conversion. As a likely order/project-driven business, growth sustainability will hinge on backlog quality, timing of large projects, and repeat orders; these data are not disclosed here. profit_quality: Profitability deteriorated despite higher sales, signaling execution cost pressure and/or unfavorable mix. The negative tax expense complicates comparability; excluding the tax credit and non-operating/extraordinary items, underlying earnings may be weaker than reported net income suggests. outlook: With strong liquidity and low leverage, the company has capacity to invest or absorb volatility. Near-term earnings trajectory will depend on margin recovery (procurement, pricing, change-order capture) and stabilization of non-operating items. Absent order/backlog data and cash flows, visibility is limited.

Financial Health

liquidity: Current assets 3,470,248,000 yen vs. current liabilities 1,246,740,000 yen yields a current ratio of 278.3% and working capital of 2,223,508,000 yen, indicating ample short-term liquidity. Quick ratio is shown as 278.3% due to inventories being unreported (0), so true quick ratio may be lower but still likely robust. solvency: Total liabilities of 1,724,834,000 yen vs. equity of 4,737,000,000 yen implies a debt-to-equity of ~0.36x (provided) and an equity ratio around 73.5% (derived; reported 0.0% is undisclosed). Interest coverage is very strong at 118.6x, indicating minimal refinancing risk. capital_structure: Leverage is conservative (financial leverage 1.36x), providing resilience but limiting ROE uplift. The balance sheet can support working capital swings typical of project businesses.

Cash Flow Quality

earnings_quality: Operating CF is unreported (0), resulting in an OCF/Net Income ratio of 0.00 on the provided table; this should not be interpreted as weak cash conversion but as data unavailability. The negative tax line suggests timing or deferred tax effects, complicating period cash taxes. FCF_analysis: Free cash flow is unreported (0). Without OCF and capex (depreciation also unreported), we cannot judge reinvestment needs, capex intensity, or true FCF generation in the period. working_capital: Inventories are unreported (0); therefore, we cannot assess inventory turns or project WIP dynamics. With sizable working capital of 2,223,508,000 yen, cash conversion will be sensitive to receivables collection, milestone billing, and payables terms—key areas to monitor.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is shown as 0.00 and payout ratio 0.0%. With EPS of 22.69 yen, this could indicate no interim dividend or missing disclosure. Given unreported cash flows, we cannot assess sustainable payout levels based on internal cash generation. FCF_coverage: FCF coverage is shown as 0.00x due to unreported OCF/FCF; no inference can be made on coverage quality. policy_outlook: Given a strong balance sheet (equity ratio ~73.5%) and low interest burden, the company has capacity for distributions, but the prudent course in a project-based business often ties payouts to cash realization. Explicit dividend policy and past track record are not provided.

Risk Assessment

Business Risks:

• Project timing and backlog conversion risk leading to revenue and margin volatility
• Cost inflation in materials and subcontracting impacting gross margins
• Execution risks on large projects (installation, warranty, penalties)
• Product/mix shifts toward lower-margin offerings
• Customer concentration and cyclical capital expenditure in end markets
• Supply chain disruptions affecting delivery schedules and costs
• Potential FX exposure on exports or imported components (not disclosed)

Financial Risks:

• Working capital swings impacting operating cash flow and liquidity needs
• Non-operating/extraordinary losses observed implied by gap between ordinary and pre-tax income
• Tax volatility (negative tax expense this period) affecting net income comparability
• Data limitations on cash flows and inventories hindering monitoring of cash conversion

Key Concerns:

• Negative operating leverage despite +20.6% revenue growth
• Low gross margin (11.7%) constraining earnings resilience
• Unreported cash flow and depreciation data limiting assessment of capital intensity and FCF

Investment Implications

Key Takeaways:

• Top-line growth robust at +20.6% YoY to 2.64 billion yen
• Operating income down 11.9% YoY to 240 million yen, indicating margin pressure
• Net margin at 6.66% with a tax credit; underlying earnings may be lower adjusting for non-operating items
• Strong balance sheet with derived equity ratio ~73.5% and D/E ~0.36x
• Interest coverage very strong at 118.6x; low financial risk
• Cash flow data absent; earnings-to-cash conversion cannot be evaluated
• ROE modest at 3.72% driven by low turnover and tight margins

Metrics to Watch:

• Backlog/orders and book-to-bill trends
• Gross margin trajectory and cost pass-through effectiveness
• SG&A ratio and fixed-cost absorption (proxy for operating leverage)
• Operating cash flow and working capital movements (receivables, WIP, payables)
• Capex and depreciation once disclosed to gauge capital intensity
• Non-operating/extraordinary items and tax normalization

Relative Positioning: Within Japanese industrial/project-oriented peers, Sansei demonstrates stronger-than-average balance sheet strength and interest coverage but weaker profitability momentum this period, with negative operating leverage despite healthy sales growth; cash generation and order quality cannot be benchmarked due to missing disclosures.

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