TOWA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥23.45B
• Operating Income: ¥2.49B
• Net Income: ¥3.83B
• EPS: ¥24.66

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

TOWA (63150) reported FY2026 Q2 consolidated results under JGAAP showing a clear slowdown in demand and pronounced operating leverage. Revenue declined 14.4% year over year to ¥23.45 billion, while operating income fell 52.6% to ¥2.49 billion and net income decreased 51.7% to ¥1.85 billion. Despite the top-line pressure, gross margin remained robust at 44.7%, indicating resilient pricing and/or product mix, but higher fixed-cost dilution and elevated operating expenses compressed operating margin to 10.6%. Ordinary income of ¥2.39 billion was slightly below operating income, implying modest net non-operating costs, including interest expense of ¥41 million. Net profit margin printed at 7.89%, aligning with the DuPont inputs provided. The DuPont decomposition yields ROE of 2.90% for the period, driven by a moderate financial leverage factor (1.43x), low asset turnover (0.258x on a period basis), and the mid-single-digit net margin. Balance sheet strength is notable: total assets were ¥91.01 billion and total equity ¥63.83 billion; this implies an equity ratio around 70% (based on period-end balances), notwithstanding the 0.0% placeholder shown in the dataset. Liquidity appears strong with a current ratio of 281% and quick ratio of 260%, supported by working capital of ¥32.64 billion and relatively modest inventories of ¥3.83 billion. Interest coverage is high at roughly 60.7x, reflecting low financial leverage and manageable interest burden. The earnings decline outpaced revenue contraction, highlighting meaningful operating leverage typical of semiconductor production equipment suppliers during a downcycle. Reported EPS was ¥24.66 for the cumulative first half; this implies ~75 million shares outstanding when dividing net income by EPS (approximation, given limited share data). Cash flow statements and depreciation were not disclosed in the extract (zeros indicate unreported), constraining our ability to assess EBITDA and free cash flow. The implied effective tax rate is difficult to pin down from the provided items; using net income plus income taxes suggests roughly low-40s percent, but the absence of a clear pre-tax profit line introduces estimation noise. Overall, TOWA’s profitability compressed significantly on lower sales, but balance sheet and liquidity remain solid, positioning the company to navigate cyclical headwinds. Order intake and backlog trends (not provided) will be crucial to gauge the timing and strength of recovery. Given the unavailability of cash flow data and dividends, conclusions on cash conversion and payout sustainability are necessarily tentative. We focus on cost discipline, working capital efficiency, and second-half order momentum as the main determinants of near-term earnings trajectory.

Profitability Analysis

ROE_decomposition: ROE 2.90% = Net margin 7.89% × Asset turnover 0.258× × Financial leverage 1.43×. The main drag is low asset turnover for the period, while leverage is modest and net margin mid-single digit. margin_quality: Gross margin is strong at 44.7%, suggesting resilient pricing/mix in molding/encapsulation tools and services. Operating margin compressed to 10.6% (¥2,493m / ¥23,449m), reflecting fixed-cost under-absorption and higher SG&A. Ordinary margin is 10.2%, with limited non-operating drag (interest expense only ¥41m). Net margin at 7.89% remains profitable but materially lower YoY alongside the revenue decline. operating_leverage: Revenue fell 14.4% YoY while operating income fell 52.6%, indicating high operating leverage. SG&A is estimated at ¥7,977m (gross profit ¥10,470m minus operating income ¥2,493m), equal to ~34.0% of sales, which amplified the profit drop. Maintaining gross margin above 40% mitigates downside, but cost base rigidity remains evident.

Growth Assessment

revenue_sustainability: The 14.4% YoY revenue decline is consistent with a cyclical slowdown in semiconductor-related capex. The sustainability of revenue will hinge on order backlog, lead times, and customer utilization rates, which are not disclosed here. profit_quality: Profitability weakened disproportionately to revenue, reflecting fixed-cost absorption; however, solid gross margins point to underlying product strength. Non-operating items had a limited adverse effect; interest burden is minimal. outlook: Absent order and backlog data, near-term growth hinges on a second-half pickup common in equipment cycles. Watch for book-to-bill normalization above 1.0, stabilization in SG&A ratio, and mix shifts (e.g., advanced packaging demand) to support margin recovery.

Financial Health

liquidity: Current ratio 281.2% and quick ratio 260.0% indicate ample short-term liquidity. Working capital of ¥32.64bn provides a cushion against order volatility. solvency: Total liabilities of ¥21.84bn against equity of ¥63.83bn imply low leverage; debt-to-equity of 0.34x (based on total liabilities) and interest coverage of ~60.7x indicate low solvency risk. capital_structure: Implied equity ratio ≈ 70% (¥63.83bn / ¥91.01bn), underscoring a conservative balance sheet. Financial leverage factor in DuPont is 1.43×, consistent with limited reliance on debt.

Cash Flow Quality

earnings_quality: Lack of disclosed operating cash flow (reported as 0 due to non-disclosure) prevents direct assessment of accrual intensity and cash conversion. The strong gross margin suggests healthy unit economics, but working capital swings in equipment businesses can temporarily depress OCF. FCF_analysis: Free cash flow cannot be calculated without OCF and capex disclosures. Depreciation/amortization is also not disclosed, preventing EBITDA triangulation. working_capital: Current assets ¥50.65bn vs current liabilities ¥18.01bn; inventories are ¥3.83bn (~7.6% of sales for the period), which appears manageable. Monitoring receivables DSO and advance payments (not disclosed) is important for cash conversion.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed in the extract (zeros indicate unreported). Based on EPS of ¥24.66 for H1, interim earnings capacity exists, but payout feasibility depends on full-year profitability and cash generation. FCF_coverage: Undeterminable due to absent OCF and capex data. Strong balance sheet provides flexibility, but sustainable dividends require consistent OCF. policy_outlook: In cyclical downturns, Japanese equipment makers often prioritize balance sheet strength and investment over higher payouts. Any payout policy updates should be evaluated alongside order recovery and cash conversion.

Risk Assessment

Business Risks:

• Semiconductor capital expenditure cyclicality impacting orders and utilization.
• Product concentration in molding/encapsulation and advanced packaging niches.
• Demand sensitivity to advanced packaging roadmaps and customer qualification cycles.
• Supply chain constraints and component lead times affecting deliveries.
• FX volatility (JPY) influencing competitiveness and translation effects.
• Geopolitical/export control risks affecting certain end-markets.

Financial Risks:

• Working capital swings (receivables and advance payments) impacting OCF.
• Potential inventory obsolescence in fast-evolving packaging technologies.
• Tax rate volatility; implied rate is uncertain given limited disclosure.
• Capital expenditure requirements for capacity/technology upgrades reducing FCF in downcycles.

Key Concerns:

• Operating leverage evidenced by a 52.6% drop in operating income on a 14.4% sales decline.
• Limited visibility on orders/backlog and cash flow due to non-disclosure.
• Maintaining SG&A discipline while preserving R&D and service capability.

Investment Implications

Key Takeaways:

• Revenue down 14.4% YoY to ¥23.45bn with outsized profit decline due to operating leverage.
• Gross margin resilient at 44.7%, but operating margin compressed to 10.6%.
• ROE for the period at 2.90%, primarily constrained by low asset turnover (0.258×).
• Balance sheet conservative with implied ~70% equity ratio and high liquidity (current ratio 281%).
• Interest coverage strong at ~60.7×; financial risk is low.
• Cash flow and dividend data not disclosed, limiting FCF and payout assessment.

Metrics to Watch:

• Order intake, backlog, and book-to-bill ratio.
• Operating cash flow and working capital metrics (DSO/DIO/DPO).
• SG&A ratio trajectory and operating margin recovery.
• Gross margin stability and product mix (advanced packaging exposure).
• Capex and R&D spending versus sales.
• FX rates and geographic/customer concentration.

Relative Positioning: Within Japan-listed semiconductor production equipment peers, TOWA remains a niche leader in molding/encapsulation with a strong balance sheet but currently depressed profitability due to cycle-driven operating leverage; liquidity and low leverage compare favorably with many mid-cap peers, while near-term growth visibility hinges on order recovery.

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