SHOWA SHINKU CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.69B
• Operating Income: ¥129M
• Net Income: ¥-40M
• EPS: ¥14.89

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

Showa Shinku (6384) reported strong top-line growth in FY2026 Q2 (cumulative), with revenue of ¥3,695 million, up 42.7% YoY, translating into operating income of ¥129 million (+48.1% YoY) and net income of ¥91 million (+1.4% YoY). The reported gross profit margin of 23.3% indicates modest pricing power and a relatively materials/production-cost-sensitive model. Operating leverage was positive as operating income grew faster than revenue, albeit off a low base and with margins still in the mid‑single digits at the EBITDA level (5.8%). Ordinary income of ¥151 million exceeded operating income, suggesting a positive contribution from non-operating items. Interest expense was minimal at ¥0.86 million and interest coverage was very strong at 150.5x, highlighting limited financial burden. Cash generation was a key positive: operating cash flow of ¥1,342 million vastly exceeded net income (OCF/NI 14.75x), implying favorable working capital movements and high earnings-to-cash conversion in the period. Balance sheet strength is notable, with total assets of ¥14,688 million, equity of ¥11,166 million, and liabilities of ¥3,861 million; the implied debt-to-equity ratio stands at a comfortable 0.35x. Liquidity appears ample with a current ratio of 402.8% and sizable working capital of ¥8,814 million. The equity ratio was shown as 0.0% in the dataset, but this reflects non-disclosure rather than a true value; based on total equity and total assets, the implied equity ratio would be high. Dividend information appears not disclosed (annual DPS 0.00, payout 0.0%), and share data (shares outstanding, treasury) were also not disclosed; hence per-share capital metrics cannot be evaluated. There is an internal inconsistency between the reported cost of sales and gross profit figures; we rely on the provided gross margin metric for analysis of profitability. The effective tax rate in the calculated metrics (0.0%) is not consistent with the reported income tax of ¥23.77 million and net income of ¥91 million; a back-of-the-envelope estimate suggests an effective tax rate around 20–21%. Inventories were reported at ¥0.745 million, which appears unusually low for this business and likely reflects partial disclosure; thus quick and current ratios may be overstated. Investing cash flow and cash & equivalents were not disclosed, limiting visibility into free cash flow and liquidity buffers. Overall, the company shows strong revenue momentum, improving operating leverage, robust cash generation, and a conservative balance sheet, albeit with incomplete disclosures on several items that temper certainty of conclusions. Near-term outlook hinges on order intake, backlog conversion, and sustainability of working-capital-driven cash inflows. Monitoring margin progression and capex needs will be key to assessing earnings durability through the cycle.

Profitability Analysis

roe_decomposition: Reported DuPont: Net profit margin 2.46% × Asset turnover 0.252 × Financial leverage 1.32 = ROE 0.81%. The low ROE is driven primarily by thin net margins and modest asset turnover, while leverage is conservatively low. margin_quality: Gross margin reported at 23.3% indicates moderate value-add. EBITDA margin of 5.8% and operating margin (129/3,695 ≈ 3.5%) are modest, suggesting limited pricing power and/or elevated operating costs. Ordinary income exceeds operating income, indicating non-operating tailwinds (e.g., financial income or FX). The tax expense reported implies an effective tax rate around 20–21%, despite the calculated metric showing 0.0%. operating_leverage: Revenue grew 42.7% YoY while operating income rose 48.1% YoY, demonstrating positive operating leverage. However, absolute margin levels remain low, so incremental margin expansion will be important to lift ROE.

Growth Assessment

revenue_sustainability: The 42.7% YoY revenue increase signals strong end-market demand and/or backlog execution. Sustainability will depend on order intake, delivery schedules, and customer capex cycles in vacuum equipment-related markets. profit_quality: Net income growth (+1.4% YoY) lagged revenue and operating income growth, reflecting margin compression below the operating line or differences in non-operating and tax items. OCF substantially exceeded net income (14.75x), but this likely includes favorable working capital timing; durability of this gap is uncertain. outlook: With positive operating leverage and strong cash conversion this period, further upside depends on maintaining gross margins, controlling SG&A, and securing repeat orders. Monitor any normalization of working capital and potential capex needs that could moderate free cash flow in subsequent quarters.

Financial Health

liquidity: Current ratio 402.8% and working capital ¥8,814 million indicate ample short-term liquidity. Quick ratio equals current ratio due to very low disclosed inventories, which may be understated; true quick ratio is likely lower but still appears strong given the scale of current assets (¥11,725 million) vs current liabilities (¥2,911 million). solvency: Debt-to-equity ratio is 0.35x, implying conservative leverage. Interest coverage is 150.5x, indicating minimal interest burden and high capacity to service debt. capital_structure: Total equity ¥11,166 million vs liabilities ¥3,861 million suggests a predominantly equity-funded balance sheet. The disclosed equity ratio of 0.0% is not meaningful due to non-disclosure; implied equity ratio (equity/assets) would be roughly 76% if calculated directly from provided totals.

Cash Flow Quality

earnings_quality: OCF ¥1,342 million vs net income ¥91 million (OCF/NI 14.75x) indicates strong earnings-to-cash conversion this period, likely aided by working capital inflows and non-cash charges (D&A ¥86.9 million). Such a large multiple may not be recurring. fcf_analysis: Investing cash flow was not disclosed (reported as 0), so free cash flow cannot be reliably determined. EBITDA of ¥215.9 million provides capacity for reinvestment, but without capex detail, FCF sustainability is unclear. working_capital: Given the scale of OCF relative to earnings, working capital movements (collections/advance payments) likely drove cash generation. Inventories are reported at ¥0.745 million, which appears unusually low and may understate inventory investment; future periods may see working capital normalization and lower OCF.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is shown as 0.0%, and annual DPS is 0.00, indicating no dividend disclosed for the period. Given incomplete disclosure of share and dividend data, we cannot confirm an actual payout. fcf_coverage: FCF coverage is reported as 0.00x due to unreported investing cash flows; thus, FCF coverage of dividends cannot be assessed. policy_outlook: With strong operating cash flow and low leverage, the balance sheet could support distributions, but absent disclosure of dividend policy and per-share data, near-term dividend visibility is low.

Risk Assessment

Business Risks:

• Cyclical demand in vacuum equipment and semiconductor/display-related capital spending
• Pricing pressure and input cost volatility impacting gross margins
• Customer concentration and order timing risk affecting revenue visibility
• Supply chain constraints that could delay deliveries or raise costs
• Technology and product obsolescence risks in precision equipment markets

Financial Risks:

• Working capital normalization potentially reducing operating cash flow in future periods
• Limited disclosure on cash balances and investing cash flows increases liquidity and FCF uncertainty
• Foreign exchange exposure in procurement or sales impacting ordinary income
• Potential capex requirements that could compress free cash flow

Key Concerns:

• Inconsistency between reported cost of sales and gross profit figures introduces uncertainty in margin analysis
• Effective tax rate in calculated metrics (0.0%) conflicts with disclosed tax expense, suggesting care in interpreting tax effects
• Lack of disclosure for cash & equivalents, investing cash flow, and share data impedes per-share and FCF assessments

Investment Implications

Key Takeaways:

• Revenue rose 42.7% YoY to ¥3,695 million with positive operating leverage (operating income +48.1% YoY)
• Net margin remains thin (2.46%); ROE is low at 0.81% due to low margins and moderate asset turnover
• Operating cash flow was very strong at ¥1,342 million (14.75x net income), likely aided by working capital
• Balance sheet is conservative with D/E of 0.35x and interest coverage of 150.5x
• Disclosure gaps (cash, investing CF, equity ratio, DPS, shares) limit precision of FCF and per-share analysis

Metrics to Watch:

• Order intake/backlog and book-to-bill
• Gross margin and EBITDA margin trends
• Working capital turns (receivables, inventories, payables) and OCF sustainability
• Capex and investing cash flows to assess true FCF
• Leverage and liquidity buffers (cash & equivalents disclosure)
• Tax rate normalization and non-operating income contributions

Relative Positioning: Within precision/vacuum equipment peers, the company exhibits stronger near-term cash generation and conservative leverage, but maintains lower profitability (EBITDA/operating margins, ROE) and provides less complete disclosure, which may position it as financially resilient yet profitability-challenged relative to higher-margin peers.

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