TAKEUCHI MFG.CO.,LTD. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥172.83B
• Operating Income: ¥31.43B
• Net Income: ¥23.47B
• EPS: ¥508.07

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Verdict: Solid top-line growth but margin compression led to a softer operating result; ordinary and bottom-line resilience were supported by favorable non-operating swings. Revenue grew 3.9% year over year to 1,728.3, while operating income declined 7.0% to 314.3. Gross profit slipped to 449.8, with gross margin contracting to 26.0%. SG&A was well contained at 135.4, down slightly year over year, demonstrating cost discipline despite inflationary pressures. Operating margin compressed by roughly 212 bps to 18.2%. Ordinary income increased 1.6% to 328.8, aided by a sharp improvement in non-operating items (non-operating income 17.9 vs 5.0; non-operating expenses 3.5 vs 19.5). Net income inched up 0.4% to 234.7, driving a robust net margin of 13.6%. ROE stands at 13.2%, underpinned by strong profitability and conservative leverage of 1.21x. The effective tax rate rose to 28.6%, marginally dampening net profit conversion. Liquidity remains exceptionally strong with a current ratio of 4.78x and quick ratio of 3.64x. Working capital dynamics are mixed: accounts receivable rose to 548.9, inventories decreased to 421.4, and accounts payable fell to 258.7. The drop in payables and rise in receivables likely created a headwind for operating cash flow versus net income in the period. The balance sheet is lightly levered with a D/E of 0.21x, and current assets comfortably cover current liabilities. Year-end DPS is set at ¥200, implying a 41.7% payout on current earnings and consistent with a disciplined, sustainable return policy. Full-year guidance calls for 223.0 in sales and 38.0 in operating income, implying a softer Q4 but an overall stable trajectory.

Profitability Analysis

ROE decomposes as 13.6% net profit margin × 0.803 asset turnover × 1.21x financial leverage = 13.2%. The component that changed most versus last year-to-date appears to be margin, with gross margin down to 26.0% and operating margin to 18.2%, offset by a favorable shift in non-operating items that lifted ordinary income. Gross margin compression reflects a less favorable price/mix and cost environment in compact construction equipment, partially countered by reduced haulage expenses and controlled SG&A. The improvement in ordinary income despite lower operating income was driven by higher non-operating income and lower non-operating expenses, which is less reliably repeatable than operating leverage. Sustainability: operating margin pressure could persist near term, while non-operating tailwinds may normalize. A noteworthy trend is that SG&A growth was below revenue growth, indicating positive operating discipline even as gross margin compressed.

Growth Assessment

Revenue grew 3.9%, supported by steady demand for compact construction equipment and stable execution in core markets. Operating income declined 7.0% as gross margin compressed despite tight SG&A control. Ordinary income rose 1.6% due to improved non-operating items, including higher non-operating income and lower non-operating expenses. Net income rose 0.4%, maintaining a double-digit net margin of 13.6%. The extended DuPont view shows a tax burden of 0.714 and an interest burden of 1.046, consistent with minimal debt drag and a normal tax rate. Guidance implies full-year operating income of 38.0 and net income of 26.4, suggesting Q4 profitability will be seasonally softer but within a stable band. With ROE at 13.2% and leverage modest, earnings growth will be driven primarily by margin management and asset turns rather than balance sheet expansion.

Financial Health

Liquidity is very strong: current ratio 4.78x and quick ratio 3.64x. Capital structure is conservative with a D/E of 0.21x, well below any stress thresholds. Current assets of 1,765.5 materially exceed current liabilities of 369.6, indicating low near-term refinancing or maturity mismatch risk. Accounts payable declined 28.2% year over year to 258.7, while receivables rose to 548.9; this combination lengthens the cash conversion cycle and warrants monitoring for working capital efficiency. Total liabilities decreased from 507.2 to 377.0, further strengthening the balance sheet. Income taxes payable fell sharply to 15.1, reflecting tax settlements and timing. No off-balance obligations are indicated in the provided data.

Notable B/S Changes

Accounts Payable: -101.5 (-28.2%) - Shorter supplier payment cycle; pressures operating cash flow. Current Liabilities: -13.0 (-26.0%) - Reduced near-term obligations improve liquidity buffer. Total Liabilities: -13.0 (-25.7%) - Balance sheet de-risking and lower leverage. Accounts Receivable: +9.9 (+20.4%) - Sales growth and longer collection cycle; monitor credit terms. Income Taxes Payable: -4.4 (-74.3%) - Tax settlements/timing effects reduced the liability. Work-in-Process: -3.44 (-22.0%) - Progress in production flow and inventory normalization. Other Current Liabilities: +2.0 (+45.9%) - Higher accrued items; manageable given liquidity.

Cash Flow Quality

Working capital movements likely created a headwind to operating cash generation: receivables increased, inventories decreased, and payables decreased, which in aggregate suggests net working capital expanded. This pattern implies operating cash flow likely trailed net income in the period. Free cash flow sufficiency appears adequate for ordinary dividends given the net cash positioning and low leverage, though tighter working capital management would reinforce cash conversion. No indications of aggressive working capital manipulation are evident; the main pressure point is the drop in payables and higher receivables.

Dividend Sustainability

Year-end DPS is ¥200, with an implied payout ratio of approximately 41.7%, comfortably within a sustainable range versus earnings capacity. Guidance indicates full-year DPS of ¥210 alongside EPS of ¥571.44, implying a full-year payout ratio in the high-30s. The company’s strong liquidity and low leverage support ongoing distributions without stressing the balance sheet. Absent outsized capex or unusual cash demands, dividend coverage appears well supported by earnings and balance sheet strength.

Risk Assessment

Business risks include Margin pressure from input costs and product mix affecting gross profitability, Demand cyclicality in construction and compact equipment end-markets, Warranty cost variability, given notable warranty provisions, Foreign currency translation impacts on earnings and equity.

Financial risks include Lengthening cash conversion cycle due to higher receivables and lower payables, Potential volatility in non-operating items that supported ordinary income, Tax burden drift higher, modestly reducing net conversion.

Key concerns include Gross margin compression despite revenue growth, Receivables growth and payables contraction pressuring operating cash flow, Reliance on non-operating tailwinds to sustain ordinary income YoY.

Investment Implications

Key takeaways include Top-line growth of 3.9% with operating margin compression to 18.2%, Ordinary income resilience (+1.6% YoY) driven by improved non-operating items, Net margin sustained at 13.6% with ROE at 13.2% and low leverage, Exceptional liquidity (CR 4.78x, QR 3.64x) and conservative D/E of 0.21x, Working capital shifts likely weighed on operating cash conversion.

Metrics to watch include Gross margin trajectory and pricing/cost pass-through, Receivables collection and payables days (CCC trend), Order intake and backlog for compact equipment, Ordinary income mix between operating and non-operating contributions, Q4 delivery versus guidance for OI 38.0 and NI 26.4.

Regarding relative positioning, Within construction machinery peers, profitability and ROE are competitive, supported by a strong balance sheet and disciplined SG&A; near-term differentiation will hinge on restoring gross margin and tightening working capital conversion.