Sintokogio,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥85.71B
• Operating Income: ¥1.43B
• Net Income: ¥-288M
• EPS: ¥1.41

Income Statement

Balance Sheet

Cash Flow Statement

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

Shinto Kogyo (6339) reported FY2026 Q2 consolidated results under JGAAP showing strong top-line growth but weak bottom-line conversion and mixed cash flow signals. Revenue rose 26.1% YoY to ¥85.71bn, reflecting robust demand or improved project progress. Gross profit reached ¥19.29bn, implying a 22.5% gross margin, which is reasonable for a heavy machinery/project-type business. Operating income increased 125.9% YoY to ¥1.43bn, signaling operating leverage on higher volumes off a low base. However, ordinary income fell to ¥0.75bn, below operating income, indicating material non-operating costs (notably interest expense of ¥0.42bn) and other non-operating losses. Net income was only ¥0.07bn (EPS ¥1.41), up 8.8% YoY but reflecting substantial drag below the operating line and a heavy tax/extraordinary burden. Interest coverage on an EBIT basis was 3.4x, adequate but not comfortable for a cyclical capital goods company. DuPont analysis illustrates the issue: net profit margin is just 0.09%, asset turnover 0.36x, and financial leverage 1.85x, yielding a very low ROE of 0.06%. Liquidity appears ample with a current ratio of 221% and calculated equity ratio around 53.9% (equity ¥128.44bn / assets ¥238.10bn), although inventory details were not disclosed. Operating cash flow was negative at ¥0.42bn despite positive operating profit, implying working capital absorption amid growth or project timing. Financing cash flow showed a large inflow of ¥16.81bn, suggesting new borrowings or other financing support to fund working capital and/or strategic uses; investing cash flow was not disclosed. Dividend was not disclosed (DPS 0.00), and payout ratio is shown as 0% alongside negative OCF, pointing to a conservative stance pending profit and cash recovery. Overall, the quarter shows improving operating momentum but weak net profitability, pressure from non-operating items, and cash conversion challenges—typical for project-heavy cycles but a key focus area for the next periods. Data limitations (inventories, investing CF, cash balance, share count) constrain precision, but available figures indicate a solid balance sheet with subdued returns and cash headwinds. Sustained revenue growth, normalization of non-operating burdens, and improved working capital discipline will be critical to lift ROE and support any dividend resumption. Near-term outlook hinges on order intake durability, execution on large projects, and financing costs in a higher-rate environment.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 0.09% (Net income ¥73m / Revenue ¥85.71bn)
• asset_turnover: 0.36x (Revenue ¥85.71bn / Assets ¥238.10bn; using period-end assets as proxy)
• financial_leverage: 1.85x (Assets ¥238.10bn / Equity ¥128.44bn)
• calculated_ROE: 0.06%
• interpretation: ROE is constrained almost entirely by the very low net margin; leverage is moderate and asset turnover is typical for capital goods, leaving margin improvement as the main lever. margin_quality:
• gross_margin: 22.5% (¥19.29bn/¥85.71bn), stable for engineered equipment/project mix
• operating_margin: 1.7% (¥1.43bn/¥85.71bn), improved YoY but thin
• ordinary_margin: 0.9% (¥0.75bn/¥85.71bn), reflecting non-operating losses/interest burden
• net_margin: 0.09%, depressed by taxes/extraordinary or other below-ordinary items
• SGA_to_sales_estimate: ≈20.8% (Gross profit ¥19.29bn – OP ¥1.43bn = ¥17.87bn)
• DandA_to_sales: ≈2.7% (¥2.28bn/¥85.71bn)
• takeaway: Core unit economics improved (OP up >100% YoY), but non-operating and tax/extraordinary effects materially dilute earnings quality. operating_leverage: Revenue +26.1% YoY while operating income +125.9% YoY suggests strong positive operating leverage off a low base; sustainability depends on mix and SG&A discipline.

Growth Assessment

revenue_sustainability: 26.1% YoY revenue growth indicates solid order execution or backlog conversion; confirmation requires visibility on orders/backlog (not disclosed). profit_quality: Operating profit growth outpaced sales, but translation to net income was weak due to non-operating items and taxes; interest expense (¥415m) and other non-operating losses compressed ordinary income. outlook: If order momentum persists and cost pass-through holds, operating margins could continue to recover; however, FX, interest costs, and project timing remain swing factors for ordinary and net income.

Financial Health

liquidity:

• current_ratio: 221.1% (CA ¥119.72bn / CL ¥54.15bn)
• quick_ratio: 221.1% (inventories not disclosed; treat as an upper bound)
• working_capital: ¥65.58bn
• comment: Ample short-term liquidity, though the lack of inventory disclosure limits precision on true quick liquidity. solvency_and_capital_structure:
• total_assets: ¥238.10bn
• total_equity: ¥128.44bn
• total_liabilities: ¥109.64bn
• calculated_equity_ratio: ≈53.9% (vs reported 0.0% placeholder)
• debt_to_equity: 0.85x (implies moderate leverage for the sector)
• interest_coverage: 3.4x (EBIT ¥1.43bn / Interest ¥0.42bn)
• assessment: Balance sheet strength is solid with moderate leverage; interest coverage is adequate but should improve to better cushion cyclicality.

Cash Flow Quality

earnings_to_cash_conversion:

• OCF: ¥-0.42bn vs Net income ¥0.07bn; OCF/NI = -5.78
• interpretation: Negative OCF despite positive EBIT indicates working capital absorption consistent with growth and project timing; requires monitoring for normalization in H2. free_cash_flow:
• FCF: Not assessable (investing cash flow/capex not disclosed; reported FCF 0 is a placeholder)
• comment: Without capex data, true FCF coverage and sustainability cannot be evaluated; D&A is ¥2.28bn, implying ongoing maintenance needs. working_capital_dynamics: High current assets and strong growth suggest inventory/WIP and receivables build; inventories not disclosed, limiting diagnosis of the main driver.

Dividend Sustainability

payout_ratio_assessment: Dividend per share not disclosed (DPS 0.00 placeholder); with EPS at ¥1.41 and OCF negative, prudence suggests retention until profit and cash improve. FCF_coverage: Not determinable due to missing investing cash flows; reported 0.00x is a placeholder. policy_outlook: Given low ROE (0.06%) and cash conversion pressure, emphasis likely remains on balance sheet stability and funding of working capital and strategic investments before dividend increases/resumption.

Risk Assessment

Business Risks:

• Project execution risk affecting revenue recognition and margins
• Cyclical demand in industrial/machinery end markets
• Cost inflation and supply chain volatility impacting gross margin
• Foreign exchange volatility affecting non-operating income and costs
• Customer concentration or large-order lumpiness affecting quarterly volatility

Financial Risks:

• Negative OCF amid growth leading to higher reliance on external financing
• Interest rate risk given interest expense of ¥415m and 3.4x EBIT coverage
• Working capital swings creating cash strain in downcycles
• Potential extraordinary items/tax effects causing earnings volatility

Key Concerns:

• Ultra-thin net margin (0.09%) despite revenue growth
• Ordinary income below operating income indicating sizable non-operating drag
• OCF/NI of -5.78 highlighting weak cash conversion in the period
• Large financing inflow (¥16.81bn) suggests dependence on funding while OCF is negative
• Data gaps (inventories, investing CF, cash balance) limit visibility on FCF and liquidity buffers

Investment Implications

Key Takeaways:

• Top-line growth is strong (+26.1% YoY) with evidence of operating leverage.
• Net profitability remains subdued due to non-operating and tax/extraordinary burdens.
• Liquidity is ample (current ratio 221%), and calculated equity ratio is robust (~54%).
• Interest coverage at 3.4x is adequate but should improve for comfort.
• Cash conversion is weak this half (OCF negative), likely from working capital build.
• Leverage is moderate (D/E 0.85x), but financing inflow was large in H1.
• ROE at 0.06% underscores the need for margin enhancement and better cash discipline.

Metrics to Watch:

• Order intake and backlog to validate revenue sustainability
• Operating margin progression and SG&A efficiency
• Ordinary income bridge (FX, equity-method, other non-operating items) and interest costs
• Working capital turns (DSO, inventory/WIP, DPO) and OCF normalization
• Capex vs D&A to assess maintenance vs growth investment and true FCF
• Effective tax rate and extraordinary items impacting net income
• Equity ratio and debt mix post the ¥16.81bn financing inflow

Relative Positioning: Versus domestic industrial machinery peers, Shinto Kogyo shows stronger balance sheet solidity and moderate leverage but below-average profitability and weaker cash conversion in this half; improvement in ordinary income quality and working capital discipline is needed to converge toward sector norms.

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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