TACMINA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.57B
• Operating Income: ¥800M
• Net Income: ¥576M
• EPS: ¥83.62

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

Takemina (6322) delivered a solid but modest FY2026 Q2, with steady top-line growth and slightly slower profit growth, indicating mild margin pressure. Revenue rose 6.5% YoY to 55.67, and operating income increased 3.3% YoY to 8.00, implying some deleveraging in costs. Gross profit reached 25.68, putting the gross margin at a healthy 46.1%, consistent with a differentiated, value-added product mix. SG&A was 17.68, equating to an SG&A ratio of 31.8%, which appears to have grown faster than operating profit, compressing margins. Operating margin stands at 14.4%, and ordinary income rose 4.6% to 8.45, with net income up 2.0% to 5.76 (net margin 10.3%). Based on the provided growth rates, we estimate operating margin compressed by roughly 44 bps YoY, and net margin by about 45 bps. Ordinary margin likely compressed by about 29 bps on our estimates, despite a small tailwind from non-operating income (0.47). The effective tax rate is 30.2%, consistent with a normalized tax environment. Balance sheet strength remains a highlight: current ratio is 366%, quick ratio 359%, and debt-to-equity is a conservative 0.34x, underpinned by cash and deposits of 33.83 against minimal short-term loans of 0.38. Interest coverage is extremely robust at ~696x, reflecting negligible interest burden and ample earnings capacity. ROE calculated at 5.3% reflects moderate profitability with modest leverage (1.34x) and asset turnover of 0.386; ROIC is cited at 7.2%, near the typical 7–8% target range. Earnings quality cannot be assessed fully as operating cash flow was not disclosed this quarter, a key limitation when judging sustainability. Dividend payout ratio is calculated at 67.1%, slightly above the typical 60% comfort line, making future dividend progression sensitive to earnings and cash flow delivery. Inventory is lean at 1.83, and working capital is comfortable at 66.66, lowering near-term liquidity risk. Overall, the quarter suggests resilient demand with slight cost pressure, strong balance sheet safety, and a need to monitor cost discipline and cash conversion in the second half. Forward-looking, if revenue momentum holds and cost normalization (especially SG&A) improves, margins could stabilize; however, a payout ratio above 60% elevates the importance of free cash flow execution.

Profitability Analysis

ROE (5.3%) decomposes into Net Profit Margin (10.3%) × Asset Turnover (0.386) × Financial Leverage (1.34x). The most notable moving part this quarter is margin: operating income grew +3.3% vs revenue +6.5%, implying ~44 bps operating margin compression to ~14.4%. This likely reflects higher SG&A intensity (31.8% of sales) and potentially mixed gross profit dynamics, even though gross margin remains high at 46.1%. Non-operating items (0.47) provided only a modest cushion, so core operations drove the outcome. Asset turnover at 0.386 is consistent with a capital-light profile, but without prior-period asset data we cannot confirm the direction of change. Leverage is low at 1.34x, largely unchanged structurally, limiting ROE volatility but also upside amplification. The margin compression appears cyclical/operational rather than structural, and may normalize if price/mix and cost controls tighten in H2. Watch for any trend where SG&A growth persistently outstrips revenue growth; the Q2 pattern suggests some pressure here. Overall, ROE is being most influenced by small changes in profitability, with limited impact from leverage.

Growth Assessment

Top-line growth of 6.5% to 55.67 indicates healthy demand for metering pumps and related solutions. Operating income growth of 3.3% lagged revenue, pointing to cost absorption or higher opex. Non-operating income was modest (0.47), with interest income (0.20) and dividends (0.13) adding small support to ordinary income. Net income rose 2.0% to 5.76, trailing revenue and operating income growth, consistent with mild margin compression and a normalized tax rate (30.2%). Gross margin remains robust at 46.1%, suggesting product differentiation and pricing power, but SG&A at 31.8% of sales is the swing factor for operating leverage. With a strong order-to-cash balance sheet and minimal debt, the company retains capacity to fund growth initiatives. Outlook hinges on second-half demand persistence in end-markets (industrial, water treatment, electronics) and ability to hold price/mix while curbing SG&A growth. Without order backlog and OCF data, we cannot fully gauge sustainability, but near-term growth looks supported by liquidity and capital discipline.

Financial Health

Liquidity is very strong: current ratio 366% and quick ratio 359%, with cash and deposits of 33.83 comfortably exceeding short-term loans of 0.38. Solvency is conservative: total liabilities are 36.28 vs equity of 107.96 (D/E 0.34x), and interest-bearing debt is low (short-term 0.38, long-term 3.50). Interest coverage of ~696x underscores minimal refinancing and interest-rate risk. There is no warning on Current Ratio (<1.0) or D/E (>2.0). Maturity mismatch risk is low given ample liquid assets against current liabilities (25.04) and modest near-term debt. No off-balance sheet obligations were reported in the provided data; however, disclosures may be incomplete.

Cash Flow Quality

Operating cash flow was not disclosed; therefore, we cannot compute OCF/Net Income or free cash flow, limiting earnings quality assessment. As a result, we cannot test the OCF/NI quality threshold of 0.8 or confirm FCF coverage of capex and dividends. Working capital appears healthy (working capital 66.66; lean inventories at 1.83), which generally supports cash conversion, but without cash flow data we cannot rule out temporary working capital build or collection timing effects. No clear signs of working capital manipulation can be inferred from the limited data, but verification requires OCF and detailed WC movements.

Dividend Sustainability

The calculated payout ratio is 67.1%, modestly above the typical <60% comfort zone, suggesting a more generous distribution stance that relies on stable earnings and cash generation. With OCF and FCF unreported, we cannot confirm cash coverage of dividends. Balance sheet strength (net cash position implied by large cash vs small debt) provides near-term flexibility to sustain dividends even if cash conversion is temporarily weaker. However, if the mild margin compression persists or accelerates, payout sustainability would increasingly hinge on maintaining revenue growth and controlling SG&A. Policy-wise, a stable-to-modestly progressive dividend appears feasible near term, contingent on H2 cash flow delivery.

Risk Assessment

Business Risks:

• Margin pressure from SG&A growth outpacing revenue, compressing operating margin by an estimated ~44 bps YoY
• Potential input cost and pricing mix shifts that could erode gross margin from the current 46.1%
• Demand cyclicality in key end-markets (industrial equipment, water treatment, electronics/semiconductor tooling) affecting order intake
• Execution risk in maintaining price discipline and operating efficiency as volume grows

Financial Risks:

• Dividend payout ratio at 67.1% raises sensitivity to earnings volatility and cash conversion
• Lack of disclosed operating cash flow inhibits assessment of earnings quality and FCF coverage
• FX exposure risk (JPY fluctuations) on exports and imported components, affecting margins and translation

Key Concerns:

• Data gaps on cash flows, capex, and detailed SG&A limit visibility into sustainability
• Small absolute interest expense implies high coverage, but also less room for interest income tailwinds if rates normalize
• If SG&A growth remains elevated, operating leverage could turn negative despite revenue growth

Investment Implications

Key Takeaways:

• Solid H1 revenue growth (+6.5%) with modest profit growth (+3.3% OP), indicating mild margin compression
• High gross margin (46.1%) and strong liquidity (current ratio 366%) underpin resilience
• ROE at 5.3% reflects moderate profitability with low leverage; ROIC at ~7.2% is near target range
• Dividend payout ratio (67.1%) is above typical comfort levels, making FCF execution in H2 important
• Non-operating contribution is small; core operations drive outcomes

Metrics to Watch:

• Operating cash flow and FCF (cash conversion vs net income)
• SG&A growth vs revenue growth; SG&A-to-sales ratio trajectory
• Gross margin resilience (price/mix vs input costs, FX impacts)
• Order backlog and book-to-bill to validate revenue sustainability
• Inventory days and receivables days (working capital efficiency)
• H2 operating margin trend vs ~14.4% in H1

Relative Positioning: Within industrial equipment/components peers, Takemina shows above-average balance sheet strength, healthy gross margins, and moderate ROE, but faces near-term margin discipline tests given SG&A intensity and limited non-operating buffers.

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