TEIKOKU ELECTRIC MFG. CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.64B
• Operating Income: ¥2.39B
• Net Income: ¥1.51B
• EPS: ¥141.43

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

For FY2026 Q2 (consolidated, JGAAP), Teikoku Electric Mfg. Co., Ltd. reported revenue of ¥13,637 million, down 5.2% year over year, with operating income of ¥2,394 million, down 11.7% YoY. Despite the top-line softness and lower operating profit, net income rose sharply by 65.0% YoY to ¥2,349 million, implying material contribution from non-operating or below-operating-line factors and/or tax effects. Profitability at the gross level remains robust with a gross margin of 46.9%, indicating solid pricing/mix and/or favorable product cost position. Operating margin was 17.6% (¥2,394m/¥13,637m), and ordinary income margin was 18.6% (¥2,539m/¥13,637m), both healthy for an industrial equipment manufacturer. DuPont decomposition yields a net profit margin of 17.23%, asset turnover of 0.325x, and financial leverage of 1.26x, producing an ROE of 7.07% for the period. The relatively low asset turnover indicates a capital- and working-capital-intensive model, while leverage remains conservative. Liquidity is strong with a current ratio of 414% and working capital of ¥23,989 million, underpinned by current assets of ¥31,624 million versus current liabilities of ¥7,634 million. The balance sheet is solid: with total assets of ¥41,915 million and equity of ¥33,203 million, the implied equity ratio is approximately 79% (based on available non-zero data), highlighting low balance-sheet risk. Interest expense was only ¥12 million and interest coverage was 198x, confirming ample debt-servicing capacity. Cash flow statements and several items (e.g., depreciation, cash and equivalents, inventories, DPS) were not disclosed in the provided dataset; zeros in these fields should be interpreted as unreported, not actual zero values. Consequently, operating cash flow to net income, free cash flow, and dividend coverage cannot be assessed directly from the provided cash flow and dividend data. The sharp divergence between operating income (-11.7% YoY) and net income (+65.0% YoY) suggests non-recurring gains and/or tax factors elevated bottom-line results in the half, so the quality and repeatability of net income should be assessed cautiously. Operating leverage appears meaningful: a 5.2% revenue contraction produced an 11.7% decline in operating income, implying a degree of operating leverage of roughly 2.2x. Overall, the company exhibits strong margins and a very conservative capital structure, partially offset by weaker revenue and operating profit momentum. Key near-term questions include the sustainability of the high net margin, the trajectory of orders and backlog, and normalization of tax and non-operating items. Given the limited disclosure of cash flow and dividend data, our confidence is stronger on profitability and balance sheet conclusions, and weaker on cash conversion and payout capacity. We base our analysis strictly on the available non-zero data and derived ratios.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 17.23% × Asset turnover 0.325 × Financial leverage 1.26 = ROE 7.07%. Margin quality: Gross margin is strong at 46.9% (¥6,397m/¥13,637m), indicating favorable mix and pricing power; operating margin is 17.6%, and ordinary income margin is 18.6%, reflecting limited financing burden and positive non-operating balance. Net margin at 17.23% outpaces operating margin due to non-operating/tax effects in the half. Operating leverage: With revenue down 5.2% YoY and operating income down 11.7% YoY, the implied degree of operating leverage is approximately 2.25x, signaling a relatively high fixed-cost base or under-absorption amid lower volumes. Interest burden is negligible (interest expense ¥12.1m; coverage ~198x), so profitability is dominated by operating and non-operating factors rather than financing costs. The divergence between operating and net income growth suggests one-off or volatile items supporting bottom-line results; sustainability should be monitored.

Growth Assessment

Revenue declined 5.2% YoY to ¥13,637 million, indicating softer demand or shipment timing effects in the period. Operating income fell 11.7% YoY to ¥2,394 million, underperforming revenue due to operating leverage and/or cost mix headwinds. Net income rose 65.0% YoY to ¥2,349 million, a marked outlier relative to operating trends; this likely reflects non-operating gains and/or favorable taxation in the half, which may not persist. Asset turnover of 0.325x suggests modest capital efficiency; sustaining growth will likely require improved throughput (orders-to-sales conversion) and working capital efficiency. The high gross margin (46.9%) supports medium-term earnings resilience if volumes stabilize; however, the half’s negative operating momentum warrants caution on near-term earnings trajectory. Absent order/backlog data, revenue sustainability cannot be confirmed; watch for book-to-bill and backlog coverage to gauge second-half visibility. Outlook hinges on volume recovery, cost discipline, and normalization of below-the-line items; if non-operating tailwinds fade, net income growth should converge toward operating trends.

Financial Health

Total assets are ¥41,915 million and total equity is ¥33,203 million, implying an equity ratio of roughly 79% based on available figures. Total liabilities are ¥8,892 million (liabilities-to-equity ~0.27x), indicating low leverage. Current assets of ¥31,624 million versus current liabilities of ¥7,634 million yield a current ratio of 414% and working capital of ¥23,989 million, pointing to strong short-term liquidity. Interest expense is minimal at ¥12.1 million, and interest coverage is ~198x, indicating very low solvency risk. Financial flexibility appears ample given the conservative balance sheet; however, the lack of reported cash and inventory detail in the dataset limits granularity on liquidity composition and inventory risks.

Cash Flow Quality

Cash flow statements are not disclosed in the provided data (OCF, investing CF, FCF all shown as zero due to non-reporting), so earnings-to-cash conversion cannot be directly assessed. The reported OCF/Net Income ratio of 0.00 reflects data unavailability rather than true performance. With operating income of ¥2,394 million and high working capital (¥23,989 million), cash conversion is sensitive to receivables and inventory movements; however, inventories and cash balances are not disclosed here. Depreciation is also unreported, preventing an EBITDA view and non-cash expense assessment. In the absence of cash flow data, FCF coverage and sustainability cannot be quantified from this dataset; monitoring future filings for OCF, capex, and working capital changes is essential.

Dividend Sustainability

Dividend per share and payout metrics are not disclosed in the provided data (DPS and payout ratio show as zero due to non-reporting). As a result, we cannot assess payout ratio, FCF coverage, or alignment with a stated dividend policy from this dataset. Balance sheet strength (implied equity ratio ~79%, limited leverage) would typically support dividend stability, but without OCF/FCF and actual DPS, sustainability analysis is inconclusive. Future disclosure of DPS, earnings guidance, and cash generation will be key to evaluating dividend capacity and policy consistency.

Risk Assessment

Business Risks:

• Volume sensitivity and operating leverage: a 5.2% revenue decline led to an 11.7% drop in operating income (DOL ~2.2x).
• Potential end-market cyclicality typical of industrial equipment (timing of large orders/projects).
• Margin risk from input cost inflation and product mix shifts impacting the 46.9% gross margin.
• Execution risk in converting orders to revenue given low asset turnover (0.325x) and high working capital needs.
• Dependence on non-operating and/or tax effects to sustain net income growth, which may not recur.

Financial Risks:

• Cash flow visibility risk: OCF, capex, and FCF not disclosed, limiting assessment of earnings quality and coverage.
• Working capital intensity could absorb cash in downcycles without robust OCF.
• Tax rate volatility: limited visibility on effective tax rate drivers given partial disclosures.
• Concentration risk if a small number of large orders or customers drive revenue (not disclosed here).

Key Concerns:

• Divergence between operating income (-11.7% YoY) and net income (+65.0% YoY) raises sustainability questions.
• Lack of cash flow and dividend disclosures impedes evaluation of cash conversion and payout capacity.
• Operating leverage magnifies earnings sensitivity to revenue trends in the near term.

Investment Implications

Key Takeaways:

• Revenue down 5.2% YoY to ¥13.6bn; operating income down 11.7% to ¥2.39bn, evidencing operating leverage.
• Net income up 65.0% YoY to ¥2.35bn, likely aided by non-operating/tax factors; repeatability uncertain.
• Strong profitability profile: 46.9% gross margin, 17.6% operating margin, and 18.6% ordinary margin.
• Conservative balance sheet: liabilities-to-equity ~0.27x; implied equity ratio ~79%; interest coverage ~198x.
• Asset turnover of 0.325x and high working capital point to efficiency opportunities and cash conversion sensitivity.

Metrics to Watch:

• Order intake, backlog, and book-to-bill for revenue visibility into H2 and beyond.
• Gross and operating margins to track pricing/mix and cost absorption as volumes fluctuate.
• Operating cash flow, capex, and free cash flow once disclosed to assess earnings quality.
• Working capital turns (receivables and inventories) to gauge cash conversion.
• Effective tax rate normalization and non-operating income items that influenced the half’s net income.
• FX sensitivity and pricing pass-through (if disclosed) given industrial export exposure typical for the sector.

Relative Positioning: Within Japanese industrial equipment peers, the company shows above-average margins and very conservative leverage, offset by softer near-term growth and low asset turnover; near-term earnings quality appears more reliant on non-operating and tax effects than on core operating expansion.

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