SANKYO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥100.41B
• Operating Income: ¥39.04B
• Net Income: ¥26.23B
• EPS: ¥135.62

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

SANKYO (6417) delivered solid FY2026 Q2 consolidated results under JGAAP with revenue of ¥100.4bn, up 10.7% YoY, and operating income of ¥39.0bn, up 7.6% YoY, indicating continued strength albeit with slightly moderated operating leverage. Net income rose 9.7% YoY to ¥28.8bn, yielding a net margin of 28.7% and EPS of ¥135.62 for the period. Profitability remains robust: gross margin was 54.0% and operating margin approximately 38.9%, supported by controlled SG&A (implied at ~¥15.2bn, ~15.1% of sales). DuPont decomposition shows ROE of 11.24% driven primarily by high margins, with modest asset turnover (0.336x) and low financial leverage (1.17x), reflecting a balance-sheet-strong, cash-rich model. The balance sheet is highly conservative with total assets of ¥298.7bn and total equity of ¥256.0bn; liabilities are only ¥51.7bn, implying an equity ratio near ~85.7% based on disclosed balances (the reported equity ratio of 0.0% appears undisclosed rather than economically meaningful). Liquidity is exceptional: current ratio 703.6% and quick ratio 695.4%, with working capital of ¥252.7bn, indicating ample capacity to support product launches and working capital seasonality. Operating cash flow was ¥23.6bn, yielding an OCF/Net income ratio of 0.82, which is acceptable for a hardware/content launch-driven business but suggests some working capital build in the period. Investing cash flow and cash & equivalents were not disclosed in XBRL (showing as 0), limiting free cash flow analysis and cash balance precision, though D&A of ¥1.1bn suggests a relatively asset-light capex profile. Financing cash flow was an outflow of ¥11.0bn, likely reflecting shareholder returns or balance sheet optimization; details were not disclosed. The effective tax burden, inferred from income tax expense of ¥10.4bn versus ordinary income of ¥39.9bn, is roughly 26%, consistent with a normalized tax rate for Japan (the provided 0.0% metric is not reflective of the disclosed amounts). The debt-to-equity ratio of 0.20x (liabilities/equity) underscores low solvency risk and meaningful debt capacity if needed. Despite strong profitability and liquidity, dividend data show DPS and payout ratio as 0.0% for the period, implying either no interim distribution or undisclosed dividends; this constrains assessment of shareholder return policy within the half-year snapshot. Operationally, results indicate resilient demand and a healthy title slate, but the slightly slower growth in operating income versus revenue hints at mix or cost normalization. Inventory is modest at ¥3.4bn, suggesting efficient sell-through or build-to-order dynamics, reducing obsolescence risk. Key limitations include the lack of reported cash balance, investing cash flows, and per-share equity metrics, which restrict precise FCF coverage and capital allocation assessments. Overall, SANKYO exhibits high-margin, low-leverage financials with strong liquidity and mid-teens annualized ROE potential, but investors should monitor working capital dynamics, title cadence, and disclosure on cash and investment flows to assess sustainability.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 28.66% (Net income ¥28.8bn / revenue ¥100.4bn)
• asset_turnover: 0.336x (per provided DuPont; reflects large asset base and likely high cash holdings)
• financial_leverage: 1.17x (low leverage; equity-heavy balance sheet)
• calculated_ROE: 11.24% (in line with reported DuPont)
• drivers: ROE is primarily margin-driven; leverage contributes minimally and asset turnover is modest due to a sizable cash/asset base. margin_quality:
• gross_margin: 54.0% (gross profit ¥54.2bn on revenue ¥100.4bn)
• operating_margin: 38.9% (operating income ¥39.0bn / revenue ¥100.4bn)
• EBITDA_margin: 39.9% (EBITDA ¥40.1bn / revenue ¥100.4bn)
• tax_rate_inference: Approx. 26% (income tax ¥10.4bn / ordinary income ¥39.9bn), indicating normalized taxation despite the provided 0.0% metric.
• commentary: Margins are robust, consistent with hit-driven product cycles and disciplined SG&A (implied ~15.1% of sales). The slight underperformance of OP growth vs. revenue suggests some mix/cost headwinds or normalization. operating_leverage: Revenue grew 10.7% YoY while operating income grew 7.6% YoY, indicating positive but moderating operating leverage; fixed-cost absorption remains favorable but likely tempered by launch costs, promotional spend, or product mix.

Growth Assessment

revenue_sustainability: Top-line growth of 10.7% YoY indicates healthy demand, likely stemming from successful titles and steady replacement cycles. Inventory at ¥3.4bn appears lean, supporting the view of strong sell-through and limited channel stuffing. profit_quality: Net margin of 28.7% and EBITDA margin of 39.9% reflect high quality earnings. The OCF/NI ratio of 0.82 is acceptable but below 1.0, hinting at working capital investment (e.g., receivables) typical around shipment cycles. outlook: Sustainability depends on the cadence of new machine launches, regulatory environment, and competitive dynamics. With a large cash-supported asset base and low leverage, the company is positioned to fund development and promotions; however, maintaining double-digit growth will require consistent hit titles and stable regulations.

Financial Health

liquidity: Current ratio 703.6% and quick ratio 695.4% underscore very strong near-term liquidity. Working capital of ¥252.7bn provides ample buffer for production and receivable cycles. solvency: Total liabilities ¥51.7bn versus equity ¥256.0bn imply low solvency risk; debt-to-equity (liabilities/equity) is 0.20x. Implied equity ratio is ~85.7% (vs. reported 0.0% which is undisclosed), reflecting a highly conservative balance sheet. capital_structure: Leverage is minimal (financial leverage 1.17x), with no interest expense reported, implying net cash or de minimis debt. This provides significant flexibility for strategic investments or shareholder returns.

Cash Flow Quality

earnings_quality: OCF/Net income at 0.82 suggests reasonably good cash conversion, albeit with some working capital investment during the period. D&A of ¥1.1bn is low relative to EBITDA, pointing to an asset-light profile and limited non-cash earnings inflation. FCF_analysis: Investing CF was not disclosed (shown as 0), preventing precise FCF calculation. Using OCF alone (¥23.6bn) indicates substantial internal cash generation; true FCF will depend on capex and content/tooling outlays not provided. working_capital: Inventories at ¥3.4bn are modest; the cash conversion likely hinges on receivables timing from pachinko/pachislot halls and channel partners. The large working capital base (¥252.7bn) supports operations but can introduce period-to-period OCF volatility.

Dividend Sustainability

payout_ratio_assessment: Reported payout ratio is 0.0% with DPS 0.00 for the period, implying no dividend recognized or disclosed in this half-year snapshot. With net income of ¥28.8bn and strong balance sheet, coverage capacity appears ample in principle, but actual policy execution cannot be inferred from the provided data. FCF_coverage: FCF coverage cannot be assessed due to undisclosed investing CF (reported as 0). On a simplified basis, OCF of ¥23.6bn would have supported distributions, but capex/content spend is unknown. policy_outlook: Given low leverage and strong liquidity, the balance sheet can support distributions; however, without disclosed DPS or guidance, visibility on dividend sustainability and trajectory is limited.

Risk Assessment

Business Risks:

• Hit-driven sales cycles for pachinko/pachislot titles leading to revenue volatility
• Regulatory changes affecting machine specifications and replacement cycles
• Demand cyclicality tied to player behavior and macro conditions
• Competitive pressure from peers with overlapping launch windows
• Inventory obsolescence risk tied to rapid model turnover (currently mitigated by low inventory)
• Supply chain constraints for specialized components
• Aging demographics and structural decline risk in the domestic market

Financial Risks:

• Working capital swings affecting OCF/NI conversion
• Receivables concentration and credit risk with halls/distributors
• Limited disclosure on investing cash flows, obscuring true FCF
• Potential FX/input cost exposure on imported components (if applicable)
• Low interest expense reduces coverage ratios’ informativeness

Key Concerns:

• Moderating operating leverage despite strong revenue growth
• Lack of disclosed investing CF and cash balance, limiting FCF visibility
• Dependence on consistent hit titles to sustain margins and ROE

Investment Implications

Key Takeaways:

• Strong H1 profitability with 39–40% EBITDA margin and ~39% operating margin
• ROE of 11.24% is margin-led with low leverage, indicating quality earnings
• Exceptional liquidity and low solvency risk provide strategic flexibility
• OCF/NI at 0.82 suggests decent cash conversion but some working capital build
• Limited disclosure on cash and investing flows constrains FCF assessment

Metrics to Watch:

• Order intake and unit shipments for new titles
• OCF/Net income and changes in working capital (receivables, advances)
• SG&A ratio and marketing spend around launches
• Inventory levels and turnover to gauge sell-through
• Regulatory developments impacting machine cycles
• Ordinary income margin and title mix
• Capital allocation disclosures (dividends, buybacks, capex/content spend)

Relative Positioning: Financially conservative with high margins and strong liquidity, positioning SANKYO favorably versus peers more reliant on leverage, though growth durability remains contingent on title cadence and regulatory stability.

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