YUKEN KOGYO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.94B
• Operating Income: ¥883M
• Net Income: ¥554M
• EPS: ¥119.75

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

Yuken Kogyo (6393) delivered a steady top-line and strong operating performance in FY2026 Q2 on a consolidated JGAAP basis, with revenue of ¥15.944bn (+1.9% YoY) and operating income of ¥0.883bn (+26.5% YoY). Gross profit was ¥4.133bn, implying a gross margin of 25.9%, and operating margin improved to 5.5%, evidencing cost control and operating leverage despite modest sales growth. Ordinary income of ¥0.722bn trailed operating income, indicating net non-operating losses (approximately ¥0.16bn), likely comprising interest expense of ¥0.086bn and other non-operating items. Net income was ¥0.449bn (-1.5% YoY), reflecting tax expense of ¥0.204bn and potential additional below-the-line items; the implied effective tax rate from reported figures is roughly 31%, not 0% (the 0% metric is a placeholder due to data gaps). DuPont decomposition shows a net margin of 2.82%, asset turnover of 0.341x, and financial leverage of 1.76x, yielding an ROE of 1.69% on an interim basis. Liquidity is strong with a current ratio of 232% and quick ratio of 199%, supported by working capital of ¥16.78bn. The balance sheet is conservative, with total equity of ¥26.60bn versus total assets of ¥46.81bn; the computed equity ratio is about 56.8% (the reported 0% is an unreported field, not an actual value). Interest coverage is solid at 10.3x on an EBIT basis, indicating manageable financial risk under current earnings power. Operating cash flow of ¥1.156bn comfortably exceeds interim net income (OCF/NI 2.57x), signaling good earnings quality; however, investing cash flows and cash balances are unreported, limiting free cash flow analysis. EBITDA was ¥1.518bn (9.5% margin), with depreciation and amortization of ¥0.635bn pointing to a capital-intensive base consistent with hydraulics manufacturing. Inventory of ¥4.23bn against H1 cost of sales implies roughly 67 inventory days, reasonable for the sector. Dividend data are unreported (DPS and payout shown as zero reflect non-disclosure), so distribution capacity cannot be assessed with precision. Overall, the company demonstrates resilient profitability, positive operating leverage, and a strong financial position, but the gap between operating and ordinary income highlights some non-operating headwinds, and missing investment cash flow data constrains full cash flow and dividend sustainability assessment. Interim nature and sector cyclicality (machine tools, construction equipment) imply results may be seasonally affected; monitoring order trends and backlog is important for the second half. Key data limitations (unreported investing CF, cash, share data) necessitate cautious interpretation of cash and per-share metrics.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 2.82% × asset turnover 0.341 × financial leverage 1.76 = 1.69% ROE (interim). Operating margin of 5.5% (¥0.883bn on ¥15.944bn sales) improved versus revenue growth, confirming operating leverage from SG&A containment and/or better product mix. Gross margin at 25.9% is healthy for hydraulics and suggests pricing discipline or input cost normalization. The gap from operating income to ordinary income (¥161m) indicates non-operating losses beyond interest (interest expense ¥85.9m), possibly FX or investment-related losses; this drags margin quality at the ordinary level. Net margin at 2.82% reflects normalization of tax expense (~31% implied), narrowing from ordinary income. EBITDA margin at 9.5% provides additional buffer for interest and maintenance capex. Overall profitability quality is solid at the operating level, but non-operating items are a swing factor; sustaining recent operating leverage amid modest top-line growth will be key.

Growth Assessment

Revenue grew 1.9% YoY to ¥15.944bn, indicating stable demand despite macro softness in some capital goods end-markets. Operating income expanded 26.5% YoY, implying strong incremental margin and cost efficiency; ordinary and net income lag due to non-operating losses and taxes. Sustainability hinges on backlog, orders in hydraulics for machine tools/construction equipment, and pricing; no order data provided. Mix and pricing appear supportive given gross margin of 25.9%, but ordinary income sensitivity to FX/financial items could cap bottom-line growth. With asset turnover at 0.341x, utilization can improve if shipments accelerate in H2. Outlook: cautiously positive on operating profit if input costs remain stable and utilization improves; bottom-line growth will depend on controlling non-operating losses and maintaining tax efficiency. Data gaps (no segment or regional disclosure) limit granularity on growth drivers.

Financial Health

Liquidity is strong: current ratio 232% and quick ratio 199% indicate ample short-term coverage; working capital of ¥16.78bn provides cushion. Solvency is conservative: total equity ¥26.60bn vs liabilities ¥18.70bn; computed equity ratio ~56.8% (assets ¥46.81bn), notwithstanding the unreported equity ratio field. Debt-to-equity is listed at 0.70x; with interest expense of ¥85.9m, leverage appears moderate and serviceable under current EBITDA of ¥1.518bn. Interest coverage (EBIT/interest) at 10.3x and EBITDA-based coverage ~17.7x suggest low refinancing risk near term. Asset base includes inventories of ¥4.23bn; working capital intensity is material but manageable given liquidity metrics. No cash balance disclosed; hence, gross vs net debt cannot be determined, but overall capital structure appears sound.

Cash Flow Quality

Operating CF of ¥1.156bn is 2.57x net income, indicating strong earnings-to-cash conversion, likely aided by non-cash D&A of ¥0.635bn and potentially favorable working capital. Investing CF is unreported (shown as zero), preventing assessment of capex and free cash flow; reported FCF of zero is a placeholder, not an actual value. Financing CF of -¥0.730bn suggests debt repayment and/or dividends/buybacks, but distributions are unconfirmed due to DPS being unreported. With D&A at ¥0.635bn, maintenance capex could be of similar magnitude; if so, underlying FCF would likely be positive, but this remains an assumption without investing CF disclosure. Working capital dynamics cannot be fully assessed; however, inventories appear reasonable (~67 days), which supports cash conversion stability.

Dividend Sustainability

Dividend fields (DPS, payout, FCF coverage) are unreported; thus, no confirmed distributions for the period. Payout ratio cannot be reliably computed without DPS and comprehensive cash flow data. From a capacity perspective, interim OCF of ¥1.156bn and solid balance sheet would generally support dividends, contingent on capex needs and non-operating cash uses; however, absence of investing CF and cash balance data prevents a robust coverage analysis. Policy outlook is unclear from provided data; historical practice and full-year guidance (not provided) would be necessary to assess sustainability and potential trajectory.

Risk Assessment

Business Risks:

• Cyclicality in capital goods end-markets (machine tools, construction equipment) affecting order intake and utilization
• Commodity/input cost volatility impacting gross margins
• FX fluctuations influencing both operating performance and non-operating gains/losses
• Customer concentration risk typical in industrial components (not disclosed but common in sector)
• Supply chain and lead time disruptions affecting deliveries and inventory
• Technology/competition in hydraulic systems potentially pressuring pricing

Financial Risks:

• Exposure to non-operating losses (FX, securities, other) depressing ordinary income relative to operating income
• Interest rate risk on variable-rate borrowings (interest expense ¥85.9m implies some leverage)
• Working capital intensity and potential inventory obsolescence
• Data gaps on cash and capex obscure true net leverage and FCF resilience

Key Concerns:

• Gap between operating and ordinary income (~¥161m) indicates earnings sensitivity to non-operating items
• Missing investing CF and cash balance prevent clear view on FCF and dividend capacity
• Interim ROE is modest (1.69%), requiring sustained margin expansion or higher asset turnover for improvement

Investment Implications

Key Takeaways:

• Solid operating leverage: operating income +26.5% on revenue +1.9%
• Healthy gross margin (25.9%) and EBITDA margin (9.5%) underscore resilient core profitability
• Ordinary income underperformed operating income due to non-operating losses; monitoring FX/financial items is key
• Strong liquidity (current ratio 232%, quick ratio 199%) and robust equity cushion (~56.8% equity ratio computed)
• OCF exceeds net income (2.57x), indicating good earnings quality, but capex/FCF are unreported

Metrics to Watch:

• Orders and backlog for hydraulics across machine tools/construction equipment
• Ordinary income bridge (FX gains/losses, non-operating items) and interest expense trend
• Capex and investing CF disclosure to gauge true FCF
• Inventory days and overall working capital turns
• Gross and operating margins sustainability into H2

Relative Positioning: Within Japanese hydraulics and industrial components peers, the company shows above-average liquidity and a conservative balance sheet with improving operating leverage, but bottom-line sensitivity to non-operating items and limited disclosure on capex/FCF place it mid-pack on earnings quality transparency.

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