TAKAMISAWA CYBERNETICS COMPANY,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.71B
• Operating Income: ¥35M
• Net Income: ¥32M
• EPS: ¥7.26

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

Verdict: A weak profitability quarter with severe operating margin compression, but liquidity and cash generation were solid thanks to a large operating cash inflow. Revenue fell 21.0% YoY to 57.10, reflecting soft order execution/timing and likely project delays in core equipment businesses. Gross profit was 15.60 with a 27.3% gross margin, but SG&A of 15.24 absorbed nearly all gross profit, leaving operating income at only 0.35 (-94.6% YoY). Operating margin compressed to roughly 0.6%, down sharply given the magnitude of the operating income decline relative to revenue. Ordinary income was 0.34 (-94.6% YoY) as non-operating income of 0.40 (primarily 0.26 of dividend income) was offset by 0.41 in non-operating expenses including 0.18 of interest. Net income was 0.31 (-92.8% YoY) with a low 5.7% effective tax rate, aided by weak pretax earnings. EBITDA was 2.17 and the EBITDA margin was 3.8%, indicating limited operating leverage at the current revenue run-rate. ROE was 0.5% and ROIC 0.6%, both far below cost of capital, underscoring poor capital efficiency this half. Earnings quality, however, screens strong: operating cash flow of 10.51 was 33.9x net income, likely from a sizable working capital release, and more than covered capex of 0.64. Liquidity is robust with a current ratio of 212% and quick ratio of 194%, supported by 24.75 in cash and 33.13 in receivables versus 44.10 in current liabilities. Financial risk bears monitoring: interest coverage was 1.97x (warning threshold), and D/E is 1.43x, leaving limited buffer if earnings remain depressed. Non-operating reliance is notable: dividend income (0.26) is large versus operating income (0.35), highlighting sensitivity to investment returns. The reported payout ratio of 291.9% suggests dividends exceed earnings if maintained, implying elevated sustainability risk unless profits recover; that said, strong OCF and cash on hand provide near-term flexibility. Forward-looking, recovery hinges on revenue normalization, mix improvements to lift gross margin, and tighter SG&A control to restore operating leverage. Investors should watch order backlog, delivery timing, and service/maintenance revenue contributions to stabilize margins in coming quarters.

Profitability Analysis

ROE decomposition (DuPont): ROE 0.5% = Net Profit Margin (0.5%) × Asset Turnover (0.388) × Financial Leverage (2.43x). The largest deterioration this quarter is in the net profit margin, as operating income collapsed 94.6% YoY amid a 21.0% revenue decline, compressing operating margin to roughly 0.6%. Asset turnover of 0.388 is modest and broadly consistent with a capital-intensive equipment and systems business; leverage at 2.43x reflects assets of 147.12 against equity of 60.65. Business driver: lower revenue throughput and likely unfavorable mix/pricing reduced gross margin carryover while SG&A remained sticky at 26.7% of sales, eroding operating profitability. Sustainability: the margin compression appears driven by volume timing and operating deleverage; margins should improve if revenue normalizes and project mix improves, but sustained cost discipline is required given SG&A near gross profit. Concerning trend: SG&A growth versus revenue is not disclosed this quarter, but SG&A at 26.7% of sales is heavy versus a 27.3% gross margin, leaving little room for profit—this cost structure rigidity is a key risk.

Growth Assessment

Top-line contracted 21.0% YoY to 57.10, implying weaker order conversion and/or project delays in core fare collection/automation systems and related businesses. Operating income fell 94.6% YoY to 0.35 as operating leverage turned negative; EBITDA margin at 3.8% corroborates low throughput. Profit quality is mixed: accounting profit is weak, but cash generation was strong (OCF 10.51) due to working capital release, not structural margin strength. Non-operating dividend income (0.26) cushioned earnings; reliance on such income is not a sustainable growth driver. Outlook hinges on backlog execution, product/service mix, and price/cost management amid component cost normalization. Without disclosed guidance or backlog, we assume a gradual second-half recovery is possible if deliveries accelerate, but restoring mid-single-digit operating margins will require revenue growth plus SG&A containment.

Financial Health

Liquidity is strong: current ratio 212.1% and quick ratio 194.4% comfortably exceed benchmarks, with 24.75 in cash and 33.13 in receivables versus 44.10 in current liabilities. No warning on current ratio (<1.0) is needed. Solvency: debt-to-equity is 1.43x (near the conservative threshold), with short-term loans of 13.63 and long-term loans of 3.00 disclosed; total interest-bearing debt is partially unreported but at least 16.63. Interest coverage is 1.97x, below the 2.0x warning threshold, signaling limited cushion if earnings remain weak. Maturity mismatch risk appears manageable near term given liquid assets (cash + receivables + inventories of 65.70) comfortably exceed short-term obligations (44.10). Off-balance sheet obligations are not disclosed; no data provided on guarantees or leases beyond standard SG&A rent (unreported). Capital structure leaves some headroom, but sustained low profitability could pressure covenants or refinancing costs.

Cash Flow Quality

OCF/Net Income is 33.91x, which is very high and indicates earnings were more than fully backed by cash; the divergence is likely due to working capital release (specific drivers not disclosed). Operating cash flow of 10.51 easily covered capex of 0.64, implying positive implied FCF, though full investing cash flows were unreported. Financing cash flow was -13.15, suggesting debt repayment and/or dividends; the split is not disclosed. There are no clear signs of working capital manipulation from the single-period snapshot, but the magnitude of OCF vs NI warrants monitoring for timing effects (collection of receivables, inventory drawdown, or payable changes). Sustainability: cash generation will normalize with working capital cycles; recurring FCF depends on restoring operating margins above SG&A coverage.

Dividend Sustainability

The reported payout ratio is 291.9%, implying dividends exceed current earnings if applied to this half’s run-rate. Dividends paid were not disclosed, but financing CF of -13.15 may include dividends and debt service. From a cash perspective, OCF of 10.51 and cash on hand of 24.75 provide short-term flexibility to fund dividends and capex (0.64). However, given ROE of 0.5%, ROIC of 0.6%, and interest coverage of 1.97x, sustaining a payout near 292% would be risky without profit recovery. Policy outlook likely hinges on second-half earnings normalization; a stable-to-cautious stance is prudent until operating margins recover and cash generation is supported by earnings rather than working capital release.

Risk Assessment

Business Risks:

• Project timing and order conversion risk leading to revenue volatility (-21.0% YoY this half).
• Margin risk from unfavorable mix/pricing and sticky SG&A (SG&A 26.7% of sales vs gross margin 27.3%).
• Dependence on non-operating dividend income (0.26) to support earnings when core profit is weak.
• Supply chain and component cost risks affecting hardware-centric deliveries.
• Customer concentration in public transportation/infrastructure verticals (not disclosed but typical for the segment).

Financial Risks:

• Interest coverage at 1.97x (<2.0 warning), leaving thin buffer if rates rise or earnings stay weak.
• Debt burden with D/E 1.43x and at least 16.63 of loans outstanding.
• Dividend sustainability risk given a reported payout ratio of 291.9% despite low earnings.
• Earnings sensitivity to working capital swings; OCF significantly exceeds NI this period.

Key Concerns:

• ROIC at 0.6% (<5% threshold) signals poor capital efficiency.
• Operating leverage turned negative; operating income -94.6% YoY vs revenue -21.0%.
• Reliance on cash release rather than operating profit to fund commitments this half.
• Limited visibility due to unreported breakdowns (SG&A details, investing CF, dividends).

Investment Implications

Key Takeaways:

• Profitability deteriorated sharply; operating margin around 0.6% with ordinary income down 94.6% YoY.
• Liquidity is strong (current ratio 212%), providing near-term flexibility.
• Cash generation was robust (OCF 10.51) but driven by working capital release rather than earnings.
• Capital efficiency is weak (ROE 0.5%, ROIC 0.6%) and below benchmarks.
• Interest coverage at 1.97x is a caution flag; deleveraging or earnings recovery is needed.
• Non-operating dividend income meaningfully supports earnings, increasing volatility risk if it declines.

Metrics to Watch:

• Order backlog and quarterly book-to-bill.
• Gross margin and SG&A-to-sales ratio.
• Operating margin and EBITDA margin progression.
• Interest coverage and net debt/EBITDA.
• Working capital metrics (AR days, inventory turns, AP days).
• ROIC trajectory and capex discipline.
• Dividend announcements versus cash generation.

Relative Positioning: Versus domestic industrial electronics/transport automation peers, the company currently lags on profitability (low single-digit EBITDA margin and sub-1% ROE/ROIC) but maintains stronger-than-average liquidity; recovery depends on execution and cost control to restore operating leverage.

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