Taihei Machinery Works,Limited FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.69B
• Operating Income: ¥489M
• Net Income: ¥765M
• EPS: ¥253.32

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

For FY2026 Q2, 株式会社 太平製作所 reported revenue of ¥3,695 million, declining 18.8% year over year, indicating a softer demand environment or timing effects in project recognition. Operating income fell to ¥489 million, down 55.0% YoY, showing meaningful operating deleverage as fixed costs weighed on a smaller revenue base. Net income was ¥328 million, down 57.1% YoY, with a reported net margin of 8.88%, suggesting that profitability compressed more than top line. The company’s DuPont-based ROE is 4.61%, driven by a low asset turnover of 0.376 and modest financial leverage of 1.38, implying returns are primarily constrained by efficiency rather than capital structure. Gross profit margin is reported at a healthy 45.9%, and EBITDA margin at 14.4%, implying underlying product/service economics remain solid despite the revenue contraction. Ordinary income of ¥499 million is close to operating income, indicating limited non-operating distortions this quarter. Liquidity appears strong with a current ratio of 249.1% and quick ratio of 248.7%, and working capital of ¥4,612 million, supporting near-term obligations and execution capacity. The balance sheet leverage is moderate with a debt-to-equity ratio of 0.49x, and interest burden is very light, reflected in an interest coverage ratio of 266.1x. Operating cash flow was negative at ¥314 million, while net income was positive, resulting in an OCF/Net Income ratio of -0.96, pointing to weak cash conversion this period, likely driven by working capital movements. Reported inventories are very small relative to the business scale, and several cash flow and balance sheet items are undisclosed; therefore, interpretation of working capital drivers is limited. The reported income tax expense of ¥358 million contrasts with a calculated effective tax rate of 0.0% in the provided metrics; given this discrepancy and potential timing/prior-period effects, the effective tax rate should be treated as not comparable for this quarter. Equity ratio is shown as 0.0%, which is not consistent with reported total equity of ¥7,122 million; the equity ratio item appears undisclosed rather than truly zero. Free cash flow is shown as 0 due to undisclosed investing cash flows; thus, FCF cannot be reliably assessed from the provided data. No dividend (DPS ¥0.00) is disclosed for the period, resulting in a payout ratio of 0.0%, but this may reflect timing of interim distributions rather than policy change. Overall, profitability remains positive but has weakened materially on a smaller revenue base; the balance sheet is resilient, but cash flow quality was soft in Q2, warranting close monitoring.

Profitability Analysis

ROE of 4.61% is explained by a net profit margin of 8.88%, asset turnover of 0.376, and financial leverage of 1.38. The relatively low asset turnover is the principal drag on ROE, suggesting underutilized assets or timing of revenue recognition. Gross margin of 45.9% indicates healthy unit economics; however, operating margin compression to roughly 13% (¥489m/¥3,695m) points to operating deleverage as revenue fell 18.8% YoY. EBITDA margin at 14.4% is only modestly above operating margin, implying limited D&A intensity this period (D&A ¥44.6m). Ordinary income is close to operating income, indicating minimal non-operating gains or losses. Interest expense is very low (¥1.84m) with coverage at 266x, confirming that financing costs are not a profitability headwind. The large YoY decline in operating income (−55.0%) versus revenue (−18.8%) signals elevated fixed cost absorption and underscores sensitivity of earnings to volume. Margin quality appears fundamentally sound at the gross level, but operating leverage is negative in the short term due to lower sales. Given the data inconsistency between reported COGS and gross profit, the provided gross margin metric (45.9%) is used as the primary reference for margin assessment.

Growth Assessment

Revenue declined 18.8% YoY to ¥3,695 million, indicating headwinds in demand, order timing, or project mix. Operating income decreased by 55.0% YoY to ¥489 million, highlighting negative operating leverage and a tougher pricing or cost environment. Net income fell 57.1% YoY to ¥328 million, reflecting both weaker operating earnings and possible tax/timing effects. The stability of ordinary income relative to operating income suggests no material one-off financial gains propping up earnings. Given the high gross margin, the top-line contraction rather than cost inflation appears to be the main driver of profit pressure. Sustainability of revenue will hinge on order intake and backlog conversion, which are not disclosed. Profit quality this quarter is challenged by negative OCF relative to positive earnings, indicating working capital build or slower collections. Near-term outlook depends on normalization of working capital and stabilization of demand; absent a recovery in sales volume, margins may remain pressured by fixed costs. No guidance is provided here; thus, visibility is limited. Monitoring sequential trends in revenue and operating margin will be key for assessing recovery momentum.

Financial Health

Liquidity is strong: current ratio 249.1% and quick ratio 248.7% indicate ample short-term coverage. Working capital totals ¥4,612 million, providing a meaningful buffer for operations. Solvency appears sound with debt-to-equity at 0.49x and interest coverage of 266.1x, reflecting low funding costs and conservative leverage. Total assets are ¥9,824 million against total equity of ¥7,122 million, implying a capital structure that leans toward equity. The equity ratio is shown as 0.0%, which conflicts with the reported equity; we treat the equity ratio as undisclosed rather than zero. Current liabilities are ¥3,093 million versus current assets of ¥7,705 million, supporting the strong liquidity profile. Despite solid balance sheet metrics, the negative OCF in the period warrants attention, as persistent outflows could erode liquidity over time if not offset by subsequent cash generation.

Cash Flow Quality

Operating cash flow was -¥314 million against net income of ¥328 million, yielding an OCF/Net Income ratio of -0.96—weak cash conversion for the quarter. This likely reflects a build in working capital (e.g., receivables or contract assets), though specific drivers cannot be confirmed due to limited disclosure (notably, investing CF and cash balances are undisclosed, and inventories appear understated relative to scale). D&A of ¥44.6 million is modest, consistent with the narrow gap between EBITDA and operating income, indicating limited non-cash support to earnings. Free cash flow is shown as 0 due to undisclosed investing cash flows; thus, FCF cannot be reliably assessed. Earnings quality appears pressured in the short term by timing/cycle effects, and a reversion to positive OCF will be an important indicator of normalization. Monitoring quarterly working capital swings (receivables days, payables days, and any contract assets) is necessary to validate accruals.

Dividend Sustainability

No dividend per share (DPS ¥0.00) and a payout ratio of 0.0% are disclosed for the period; this may reflect timing and does not necessarily indicate a change in policy. Given negative operating cash flow and reduced earnings, a conservative stance on distributions would be consistent with balance sheet preservation. FCF coverage cannot be assessed because investing cash flows are undisclosed, and FCF is shown as 0 by placeholder. With debt-to-equity at 0.49x and strong liquidity, the company has capacity, but sustainable dividends require a return to consistent positive OCF. Until cash conversion improves, dividend sustainability assessment remains data-limited and tilted toward caution due to current-period cash outflow.

Risk Assessment

Business Risks:

• Revenue volatility and order timing sensitivity evidenced by an 18.8% YoY sales decline
• Operating deleverage due to fixed cost base, amplifying earnings swings on volume changes
• Potential pricing pressure or adverse mix affecting operating margin
• Dependence on working capital cycles (collections/contract assets) impacting cash conversion
• Limited disclosure on backlog and pipeline, reducing visibility

Financial Risks:

• Negative operating cash flow despite positive earnings (OCF/NI -0.96) indicating weak cash conversion in the period
• Potential for continued working capital outflows if demand softens further
• Data limitations (undisclosed equity ratio, investing CF, cash) complicate solvency and liquidity trend analysis
• Tax expense volatility and inconsistencies with calculated effective tax rate

Key Concerns:

• Sustained decline in revenue could keep operating margins compressed
• Persistence of negative OCF would weaken the otherwise strong liquidity position
• Low asset turnover (0.376) constrains ROE and may reflect underutilized assets or timing of revenue recognition
• Data inconsistencies between COGS and gross profit require caution in interpreting cost structure

Investment Implications

Key Takeaways:

• Top line contracted 18.8% YoY to ¥3,695m; operating income down 55.0% YoY to ¥489m, indicating negative operating leverage
• Margins: gross margin 45.9%, EBITDA margin 14.4%, net margin 8.88%—unit economics intact but operating deleverage present
• ROE 4.61% constrained by low asset turnover (0.376) and modest leverage (1.38)
• Liquidity robust (current ratio 249%), leverage moderate (D/E 0.49x), interest burden minimal (coverage 266x)
• Cash conversion weak this quarter (OCF/NI -0.96); FCF not assessable due to undisclosed investing CF

Metrics to Watch:

• Order intake, backlog, and book-to-bill to gauge revenue recovery
• Operating cash flow and OCF/Net Income ratio for earnings quality
• Asset turnover and working capital days (DSO/DPO/DIO) for efficiency
• Operating margin trajectory versus volume to assess operating leverage
• Tax rate normalization and any one-off tax items

Relative Positioning: Within Japanese small/mid-cap industrials, the company shows stronger-than-average liquidity and low financing risk but weaker ROE and cash conversion this quarter, with earnings more sensitive to volume changes due to operating leverage.

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