Sansei Technologies,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥31.98B
• Operating Income: ¥2.03B
• Net Income: ¥218M
• EPS: ¥65.50

Income Statement

Balance Sheet

Cash Flow Statement

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

Sansei Technologies (TSE:6357) delivered strong FY2026 Q2 results with notable operating leverage. Revenue grew 16.9% YoY to ¥31.98bn, supported by a 23.4% gross margin, yielding operating income of ¥2.03bn (+326.6% YoY) and ordinary income of ¥2.17bn. Net income rose 294.2% YoY to ¥1.20bn, implying a 3.74% net margin for the half-year period. EBITDA reached ¥2.67bn (8.4% margin), and interest coverage was a comfortable 14.8x, indicating solid debt service capacity. The DuPont framework shows ROE at 2.6%, driven by a modest net margin (3.74%), low asset turnover (0.357x), and moderate financial leverage (1.94x). Liquidity is strong with a current ratio of 196.3% and working capital of ¥26.57bn, providing operational flexibility for project execution. Operating cash flow was ¥2.39bn, approximately 2.0x net income, indicating robust cash conversion in the period. Total assets stood at ¥89.57bn and equity at ¥46.06bn, with a debt-to-equity proxy (total liabilities/equity) of 0.92x; solvency appears sound. The company reported no dividends for the period (DPS ¥0.00; payout 0%), consistent with a focus on strengthening the balance sheet and/or funding growth, though explicit policy guidance is not provided here. Reported effective tax rate in the calculated metrics is 0.0%, which is inconsistent with disclosed income tax expense of ¥0.525bn; this likely reflects data limitations rather than a true zero tax rate. Several items (inventories, investing cash flows, cash and equivalents, equity ratio, shares outstanding, book value per share) appear as zero due to non-disclosure in the extract, not because values are actually zero; this constrains certain ratio analyses. Despite these limitations, the picture shows improving profitability, healthy cash generation, and adequate financial flexibility. The significant YoY growth in operating profit suggests better project mix, cost control, or normalization post-supply chain disruptions, but the sustainability of these drivers should be monitored into H2. Overall, Sansei is executing well on margin recovery with conservative leverage, though ROE remains subdued for now given asset intensity and mid-year timing. Backlog visibility, project delivery timing, and capital allocation priorities will be key to assessing earnings durability through FY-end.

Profitability Analysis

ROE (DuPont) = Net margin (3.74%) × Asset turnover (0.357x) × Financial leverage (1.94x) ≈ 2.6%, matching the reported figure. Operating margin is 6.34% (¥2.029bn / ¥31.981bn), indicating material operating leverage versus last year’s weak base (OI +326.6% YoY). Ordinary margin is 6.79%, reflecting modest non-operating contributions versus operating income. Gross margin of 23.4% provides room for operating cost absorption; the spread to operating margin (~17pp) reflects SG&A and R&D burden typical for project/machinery businesses. EBITDA margin at 8.4% (¥2.674bn) suggests improving capacity utilization and cost discipline. Interest coverage at 14.8x (EBIT/interest) indicates minimal pressure from financing costs. Margin quality appears sound given positive OCF/NI of 2.0x, suggesting earnings are cash-backed in the period. Asset turnover of 0.357x highlights the asset-intensive, project-based nature of the business; improving turns would be a key lever for ROE expansion. Overall, profitability is recovering with clear operating leverage, but absolute ROE remains modest given asset base and mid-year measurement.

Growth Assessment

Top-line growth of 16.9% YoY to ¥31.98bn is solid and suggests healthy project execution and/or backlog realization. The disproportionate increase in operating income (+326.6% YoY) versus revenue indicates strong operating leverage from improved mix, pricing discipline, or fixed-cost absorption. Net income growth of +294.2% YoY further confirms broad-based P&L improvement. Sustainability hinges on backlog, order intake, and timing of large projects, which are not disclosed here. The ordinary income exceeding operating income suggests minor non-operating tailwinds (e.g., FX or financial income), but core profit is the main driver. Given the project-centric model, H2 seasonality can be significant; monitoring revenue recognition cadence and delivery milestones will be important to assess run-rate continuity. With EBITDA margin at 8.4% and OCF/NI at 2.0x, profit quality looks reasonable for the half. Outlook appears constructive if current margin structure holds and execution risks remain contained; however, absent disclosure on orders/backlog and investing plans, visibility beyond Q2 is limited.

Financial Health

Liquidity is strong: current ratio 196.3% and working capital ¥26.57bn provide cushion for project working capital swings. Quick ratio equals the current ratio in the provided metrics due to non-disclosed inventories, so true liquidity could be lower; nonetheless, current assets of ¥54.17bn vs current liabilities of ¥27.60bn indicate headroom. Solvency appears solid with total liabilities of ¥42.48bn versus equity of ¥46.06bn (liabilities/equity 0.92x). Total assets are ¥89.57bn; financial leverage per DuPont is 1.94x, consistent with a moderately levered but not aggressive capital structure. Interest burden is manageable given 14.8x coverage. The reported equity ratio of 0.0% is a non-disclosure artifact and should not be interpreted literally. Absence of disclosed cash and equivalents limits fine-grained liquidity assessment (e.g., net debt), but there is no immediate indication of stress from the available data.

Cash Flow Quality

Operating cash flow of ¥2.391bn vs net income of ¥1.197bn yields OCF/NI = 2.0x, a strong conversion indicating that earnings are cash-generative this half, likely aided by milestone collections and/or disciplined working capital. Depreciation and amortization of ¥0.645bn supports EBITDA to OCF bridge, though detailed working capital components (receivables, inventories, advances) are not disclosed here. Investing cash flow is shown as ¥0 due to non-disclosure; therefore, Free Cash Flow cannot be reliably assessed from this extract (the listed FCF of 0 is not economically meaningful). Financing cash flow was an outflow of ¥0.554bn, likely reflecting debt repayments or other financing uses, as no dividends are reported; specifics are not available. With several cash-related items undisclosed (cash balance, investing CF), we infer earnings quality as good in-period based on OCF, but maintain caution on sustainability given project timing effects common in this sector.

Dividend Sustainability

Annual DPS is reported as ¥0.00 and payout ratio 0.0%, indicating no distribution in the period. Without investing cash flow and cash balance data, FCF coverage cannot be evaluated; the reported FCF coverage of 0.00x is a placeholder rather than an economic measure. From a capacity standpoint, the company generated ¥2.39bn in OCF in H1 and has a solid liquidity position (current ratio ~196%), suggesting room to consider distributions if policy permits and H2 cash generation remains positive. However, management may prioritize balance sheet strength and growth investments in a project-based business. Dividend outlook therefore depends on full-year profitability, order visibility, and capital allocation policy, none of which are disclosed here.

Risk Assessment

Business Risks:

• Project execution risk: schedule delays and cost overruns can compress margins.
• Revenue recognition and milestone timing risk leading to earnings volatility between quarters/halves.
• Customer concentration and lumpy orders typical of large amusement/ride and stage equipment projects.
• Supply chain and component availability potentially affecting delivery schedules and costs.
• Input cost inflation (steel, electrical components) and pricing pass-through risk.
• Safety, regulatory, and certification requirements specific to rides/stage equipment.
• FX exposure from overseas projects and procurement (if applicable).

Financial Risks:

• Working capital volatility (receivables, advances, and inventories) impacting OCF.
• Moderate leverage (liabilities/equity ~0.92x) could rise if project timing shifts.
• Interest rate risk on floating-rate borrowings (debt breakdown not disclosed).
• Limited visibility on cash balance and investing needs constrains assessment of liquidity buffers.
• Potential need for performance guarantees/bonds typical in project businesses.

Key Concerns:

• Low interim ROE (2.6%) relative to improving profits due to asset intensity and turnover.
• Several key disclosures are not available (cash, inventories, investing CF, equity ratio), reducing analytical precision.
• Sustainability of margin expansion into H2 without order/backlog disclosure.

Investment Implications

Key Takeaways:

• Strong operating leverage: revenue +16.9% YoY with operating income +326.6% YoY; operating margin 6.34%.
• Healthy cash conversion: OCF/NI ~2.0x in H1 supports earnings quality.
• Balance sheet soundness: liabilities/equity ~0.92x and current ratio ~196% indicate financial flexibility.
• ROE still modest at 2.6% given low asset turnover (0.357x); improving turns is pivotal for returns.
• Data gaps (cash, inventories, investing CF) limit FCF and net debt assessment.

Metrics to Watch:

• Order intake and backlog to gauge revenue visibility into H2 and next fiscal year.
• Gross and operating margin trajectory to confirm sustainability of operating leverage.
• Working capital components (receivables, advances, inventories) and OCF consistency.
• Capex and investing CF to assess true FCF and capital intensity.
• Net debt and interest coverage as rates and financing conditions evolve.
• ROE drivers: asset turnover improvement and capital allocation (buybacks/dividends) post FY-end.

Relative Positioning: Within Japanese machinery/project-oriented peers, Sansei exhibits improving mid-cycle margins and strong interim cash conversion with moderate leverage; however, asset turnover and interim ROE remain below best-in-class, and disclosure gaps constrain full comparability on FCF and net debt.

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