KITAGAWA SEIKI CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.15B
• Operating Income: ¥203M
• Net Income: ¥-116M
• EPS: ¥19.02

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

Kitagawa Seiki (63270) reported FY2026 Q1 consolidated results under JGAAP showing a sharp top-line recovery but notable margin compression and data inconsistencies within cost and gross profit reporting. Revenue surged to ¥1,151m (+237.2% YoY), yet operating income declined 18.0% YoY to ¥203m, implying significantly lower gross margin and/or higher operating costs versus the prior year. The reported gross profit of ¥59.9m (GPM 5.2%) is inconsistent with the disclosed cost of sales figure of ¥281.6m; using revenue minus cost of sales would imply a much higher gross profit, so the gross profit and/or cost lines appear misclassified or partially reported. Despite this, ordinary income rose to ¥225m, and net income was ¥154m (-19.5% YoY), with a net margin of 13.38%, supported by light interest expense and a net tax credit. DuPont decomposition based on provided metrics yields ROE of 2.98%, driven by net margin of 13.38%, asset turnover of 0.134x, and financial leverage of 1.67x. Liquidity is strong with a current ratio of 2.28x and sizable working capital of ¥3.65bn, while solvency appears comfortable with total liabilities/equity of 0.68x. The equity ratio was listed as 0.0%, but this is an unreported metric; based on totals, equity/assets are approximately 60%, indicating a conservative capital structure. Interest coverage is robust at 60.5x, reflecting modest interest burden against operating income. Cash flow statements show zeros, indicating non-disclosure for the quarter; therefore, OCF/NI and FCF-based metrics are not interpretable. Inventory was reported at only ¥3.6m, unusually low relative to current assets; this likely reflects partial disclosure under different account labels rather than true inventory scarcity. EPS was ¥19.02, though shares outstanding and BVPS were unreported, limiting per-share capital metrics analysis. Dividend DPS was reported as zero for the period; payout ratio and FCF coverage are therefore not meaningful without cash flow data. Overall, the quarter exhibits strong sales momentum but lower profitability, suggesting adverse mix, project timing, or cost pressures. Balance sheet strength provides resilience, but the quality of earnings is difficult to assess without operating cash flow and with gross profit inconsistencies. Key monitoring items include normalization of gross margin, operating cost trajectory, and conversion of earnings into cash.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 13.38% (NI ¥154m / Revenue ¥1,151m)
• asset_turnover: 0.134x (Revenue ¥1,151m / Assets ¥8,620m)
• financial_leverage: 1.67x (Assets ¥8,620m / Equity ¥5,173m)
• calculated_ROE: 2.98% (matches reported)
• commentary: ROE is modest given strong net margin because asset turnover is low and leverage is conservative. margin_quality: Reported gross profit (¥59.9m, 5.2% GPM) is inconsistent with disclosed cost of sales (¥281.6m) and revenue (¥1,151m). Operating margin is ~17.6% (¥203m/¥1,151m), which is illogical if gross margin is 5.2%—indicating data mapping/disclosure issues at the gross profit level. Net margin at 13.38% benefits from modest interest expense and a net tax credit. operating_leverage: Despite +237% YoY sales growth, operating income declined 18% YoY, implying significant margin compression and negative operating leverage in the quarter. Likely drivers include adverse product mix, lower pricing, project execution timing, or elevated SG&A/R&D to support growth.

Growth Assessment

revenue_sustainability: Top-line growth of +237.2% YoY suggests recovery in order backlog conversion and/or a surge in shipments, potentially cyclical or tied to large projects. Sustainability will depend on order intake, backlog quality, and delivery schedules. profit_quality: The disconnect between gross profit and operating income figures clouds margin analysis. Net income was supported by a tax credit; underlying operating profitability appears pressured relative to the prior year. outlook: If the sales ramp is sustained and mix normalizes, margins could recover; however, absent visibility on backlog, pricing, and cost normalization, near-term profit trajectory is uncertain. Monitoring subsequent quarters for stabilization of gross margin and SG&A intensity is key.

Financial Health

liquidity: Current ratio 2.28x (CA ¥6,503.9m / CL ¥2,855.3m) and working capital ¥3,648.6m indicate ample short-term headroom. Quick ratio is reported at 2.28x as well; the near-equality to the current ratio suggests inventory reporting is incomplete or minimal. solvency: Total liabilities/equity at ~0.68x (¥3,513.6m/¥5,173.0m) and an inferred equity ratio near 60% (Equity/Assets) reflect a strong balance sheet. Interest coverage is 60.5x, indicating low financial risk from borrowing costs. capital_structure: Leverage is conservative (assets/equity 1.67x). No details on interest-bearing debt composition or maturities are provided; however, overall liability load appears manageable relative to equity.

Cash Flow Quality

earnings_quality: OCF was not disclosed (reported as zero), preventing assessment of cash conversion. The net tax credit and margin inconsistencies heighten uncertainty around recurring earnings power. FCF_analysis: Free cash flow is not available due to missing operating and investing cash flows. Capex cannot be assessed as depreciation and investing CF were unreported this quarter. working_capital: High working capital (¥3.65bn) relative to revenue suggests a working capital-heavy model or timing effects; inventory and receivables details are insufficient due to partial disclosure.

Dividend Sustainability

payout_ratio_assessment: No dividend was reported for the period (DPS = 0), and payout ratio is listed as 0%. Without OCF and FCF data, coverage cannot be evaluated. FCF_coverage: Not assessable for the quarter due to non-disclosure of operating and investing cash flows. policy_outlook: Given conservative leverage and inferred equity ratio, the balance sheet could support distributions in normal conditions; however, with profitability volatility and absent cash flow data, policy signals remain unclear.

Risk Assessment

Business Risks:

• Margin volatility due to product mix, pricing, and project execution timing.
• Cyclical demand in capital equipment and exposure to order timing/backlog conversion.
• Supply chain and component cost pressures affecting gross margin.
• Customer concentration risk (not disclosed but common in niche machinery segments).
• FX exposure impacting export competitiveness and input costs (if applicable).

Financial Risks:

• Limited visibility on cash generation due to non-disclosed cash flows.
• Potential working capital swings tied to project-based billing and inventory/receivables.
• Earnings reliance on tax credits in the quarter; normalization could reduce net margin.
• Data inconsistencies at the gross profit level complicate performance tracking.

Key Concerns:

• Inconsistency between revenue, cost of sales, and reported gross profit/margin.
• Operating income decline despite large revenue increase, indicating margin compression.
• Absence of OCF/FCF data, limiting earnings quality assessment.

Investment Implications

Key Takeaways:

• Sales rebounded strongly (+237% YoY) to ¥1,151m in Q1.
• Operating income fell 18% YoY to ¥203m, signaling margin pressure.
• ROE at 2.98% reflects solid net margin but low asset turnover and conservative leverage.
• Balance sheet is strong with ~60% inferred equity ratio and 2.28x current ratio.
• Interest burden is minimal (coverage 60.5x).
• Cash flow information is unavailable; earnings-to-cash conversion cannot be confirmed.
• Gross profit disclosure conflicts with cost of sales, requiring caution in margin analysis.

Metrics to Watch:

• Order intake and backlog levels vs. revenue to gauge sustainability.
• Gross margin normalization and reconciliation of COGS/gross profit reporting.
• SG&A as a percentage of sales and operating margin trend.
• Operating cash flow and free cash flow once disclosed.
• Working capital components (receivables, inventories, advances) and their turnover.
• Tax rate normalization post-credit and impact on net margin.

Relative Positioning: Financially conservative with strong liquidity and low leverage, but currently exhibiting negative operating leverage and unclear margin quality relative to peers due to disclosure inconsistencies.

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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