DAIDO KOGYO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥29.19B
• Operating Income: ¥892M
• Net Income: ¥688M
• EPS: ¥44.02

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Daido Kogyo Co., Ltd. (6373) delivered modest top-line growth in FY2026 Q2, with revenue up 1.6% year over year to ¥29,193 million. Operating income rose 17.6% to ¥892 million, indicating operating leverage and/or improved cost discipline despite soft demand in some end markets. Gross margin was 19.1%, and operating margin improved to approximately 3.1%, both consistent with an improving profit mix and better overhead absorption. Ordinary income (¥877 million) tracked close to operating income, suggesting limited net non-operating gains/losses, though interest expense remained meaningful at ¥197 million. Despite higher operating profit, net income declined 17.7% to ¥446 million, implying the presence of below-the-line pressures (e.g., extraordinary losses or higher non-controlling interests), as tax expense alone does not explain the gap. The effective tax rate shown as 0.0% is likely an artifact of disclosure timing/classification; the reported tax expense of ¥134 million indicates some tax burden, but other non-operating or extraordinary factors appear to have weighed on the bottom line. Cash generation was strong: operating cash flow reached ¥2,294 million, equating to an OCF/Net Income ratio of 5.14, which points to solid earnings quality for the period. Balance sheet liquidity is sound, with a current ratio of 213.7% and a quick ratio of 179.9%, supported by inventories of ¥5,979 million. Total assets were ¥78,728 million and total equity ¥37,205 million, implying an equity ratio of about 47.3% (the reported 0.0% is an undisclosed item rather than an actual zero). Total liabilities were ¥41,016 million, yielding a debt-to-equity ratio of 1.10x; interest coverage of 4.5x indicates manageable, but not trivial, financial leverage. EBITDA was ¥2,340 million (8.0% margin), highlighting headroom above interest expense, even as the company invests in maintaining and upgrading its asset base (capex figures not disclosed this quarter). Free cash flow cannot be assessed due to non-disclosure of investing cash flows this period; financing cash flows were an outflow of ¥774 million, likely reflecting net debt repayments and/or lease obligations. Dividend disclosure shows ¥0.00 DPS and a 0.0% payout ratio for the period, which may simply reflect interim timing rather than a definitive policy stance. Asset turnover was 0.371 and financial leverage 2.12x, producing a calculated ROE of 1.20%, which is low in absolute terms and reflects subdued net margins despite improved operations. Overall, the quarter shows encouraging operational traction and strong cash conversion, tempered by lower net income and limited visibility on extraordinary items and capex. Data limitations (notably zero placeholders for equity ratio, cash, investing CF, and share data) constrain depth of certain per-share and FCF analyses, but the available metrics indicate improving core profitability and healthy liquidity.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.53%
• asset_turnover: 0.371x
• financial_leverage: 2.12x
• calculated_ROE: 1.20%
• commentary: ROE is dampened primarily by a thin net margin despite reasonable asset turnover and moderate leverage. Ordinary income is close to operating income, suggesting net non-operating items were limited; the drag from extraordinary items or minority interests likely depressed net margin. margin_quality:
• gross_margin: 19.1%
• operating_margin: 3.1%
• ordinary_margin: 3.0%
• net_margin: 1.53%
• EBITDA_margin: 8.0%
• interpretation: Gross and operating margins indicate improved cost control versus revenue growth of 1.6%. The step-down from operating to net margin is sizable, pointing to below-the-line pressures (interest, extraordinary losses, or minority interests). operating_leverage: Operating income grew 17.6% on 1.6% revenue growth, evidencing positive operating leverage from fixed-cost absorption and/or mix. The EBITDA margin of 8.0% versus operating margin of 3.1% shows a meaningful non-cash cost base (D&A ¥1,448 million) that could yield incremental operating profit with volume recovery.

Growth Assessment

revenue_sustainability: Revenue growth of 1.6% is modest; sustainability will depend on end-market demand in motorcycles/industrial chains and overseas exposure. Pricing discipline and product mix appear supportive of gross margin. profit_quality: Operating profit expansion outpaced sales, indicating underlying efficiency gains. However, the decline in net income suggests transitory or non-operating headwinds that diluted bottom-line growth. outlook: If demand stabilizes and input costs/FX remain manageable, the company can sustain improved operating margins. Visibility on extraordinary items and minority interests will be key to translating operating gains into net income growth.

Financial Health

liquidity:

• current_ratio: 213.7%
• quick_ratio: 179.9%
• working_capital: ¥20,075 million
• commentary: Ample liquidity with strong coverage of short-term obligations; inventory levels (¥5,979 million) are moderate relative to current assets. solvency:
• debt_to_equity: 1.10x (Total liabilities / Equity)
• interest_coverage: 4.5x
• equity_ratio: Approximately 47.3% (computed as Equity/Total Assets; the reported 0.0% is undisclosed)
• commentary: Balance sheet leverage is moderate; interest burden is serviceable but meaningful. Maintaining EBITDA growth is important to preserve coverage ratios. capital_structure: Total assets ¥78,728 million, liabilities ¥41,016 million, and equity ¥37,205 million indicate a balanced structure with room to fund operations; financing CF outflows (¥774 million) suggest net repayments or lease payments this period.

Cash Flow Quality

earnings_quality: OCF of ¥2,294 million versus net income of ¥446 million (OCF/NI 5.14x) indicates strong cash conversion and low accrual intensity this period. FCF_analysis: Free cash flow cannot be calculated due to non-disclosure of investing cash flows (Investing CF shows as 0 because it is unreported). As such, capex intensity and true FCF coverage are not assessable from this dataset. working_capital: Healthy liquidity and positive OCF suggest effective working capital management; inventories of ¥5,979 million appear manageable relative to sales and current liabilities.

Dividend Sustainability

payout_ratio_assessment: Reported DPS is ¥0.00 and payout 0.0%, likely reflecting interim timing rather than policy. Without full-year earnings and capex data, a structural payout assessment is not possible. FCF_coverage: Not assessable because investing cash flows are undisclosed; therefore FCF is not available. policy_outlook: Given improving operating profit and strong OCF, capacity for distributions may exist, but visibility is limited pending full-year results and disclosure of capex and extraordinary items.

Risk Assessment

Business Risks:

• End-market cyclicality in motorcycles, bicycles, and industrial chain demand
• Input cost volatility, especially steel and energy
• Foreign exchange fluctuations affecting export competitiveness and overseas earnings
• Competitive pricing pressure from domestic and Asian peers
• Customer concentration risk with major OEMs
• Supply chain disruptions impacting lead times and inventory

Financial Risks:

• Exposure to interest expense (¥197 million) with interest coverage of 4.5x
• Potential extraordinary losses or non-controlling interests reducing net income
• Uncertain capex profile (investing CF undisclosed) affecting future FCF
• Refinancing and covenant risks if profitability weakens

Key Concerns:

• Net income decline (-17.7% YoY) despite stronger operating profit
• Limited transparency on extraordinary items/minority interests driving the gap from operating to net
• Non-disclosure of investing cash flows and cash balance impeding FCF and liquidity granularity

Investment Implications

Key Takeaways:

• Core operations improved, with operating income up 17.6% on 1.6% revenue growth
• Strong cash generation (OCF/NI 5.14x) supports earnings quality
• Bottom-line weakness suggests below-the-line pressures that require monitoring
• Balance sheet liquidity is strong; leverage is moderate with serviceable coverage
• Data gaps (investing CF, cash, share data) limit per-share and FCF analyses

Metrics to Watch:

• Operating margin and EBITDA margin trajectory
• Interest expense and coverage ratios
• Extraordinary gains/losses and non-controlling interest impact
• Capex and investing cash flows (to assess FCF and capital intensity)
• Inventory turnover and working capital trends
• FX rates (JPY/USD, JPY/Asia) and steel input costs
• Order backlog and demand indicators in motorcycle/industrial segments

Relative Positioning: Within Japan’s chain and power transmission space (e.g., vs. larger peers), Daido Kogyo exhibits lower absolute margins but improving operational efficiency; liquidity is robust and leverage moderate, positioning the company to benefit from stable demand and disciplined cost control if below-the-line drags normalize.

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
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