GLORY LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥153.89B
• Operating Income: ¥6.85B
• Net Income: ¥3.23B
• EPS: ¥61.39

Income Statement

Balance Sheet

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

Verdict: FY2026 Q2 was weak, with sharp profit compression and subpar capital efficiency despite solid liquidity. Revenue fell 16.9% YoY to 1,538.9, and operating income plunged 65.2% YoY to 68.5, driving operating margin down to 4.5%. Ordinary income dropped 60.2% YoY to 59.5, with net income down 57.1% YoY to 33.7, implying a net margin of 2.2%. We estimate operating margin compressed by about 619 bps YoY (from roughly 10.6% to 4.5%), reflecting negative operating leverage as SG&A stayed elevated at 651.0. Net margin likely compressed by about 205 bps YoY (from ~4.2% to 2.2%). Gross margin is 46.8% this quarter, but prior-year gross margin is not disclosed, limiting comparability on cost pass-through. Non-operating items were a net drag (non-op income 13.4 vs non-op expenses 22.5), and interest expense of 11.4 reduced ordinary income; the non-operating income ratio is indicated at 39.8%, suggesting material reliance/volatility around below-OP lines. The effective tax rate was high at 51.0%, further pressuring bottom line. ROE calculated at 1.5% is weak, driven by low net margin and sluggish asset turnover of 0.359. ROIC is flagged at 1.5%, well below the 5% warning threshold, underscoring poor capital productivity against likely cost of capital. Liquidity remains solid with a current ratio of 189.6% and quick ratio of 147.9%, and working capital of 1,022.4, mitigating near-term refinancing risk. Leverage is moderate with D/E at 0.89x and interest coverage at 6.0x (above the 5x comfort line but down with weaker EBIT). Cash flow disclosure is missing this quarter, preventing validation of earnings quality (OCF vs NI) and free cash flow sufficiency. The calculated payout ratio of 188.7% (basis not fully disclosed) raises caution on dividend cover absent FCF data. Forward-looking, the key swing factors are: normalization of the tax rate, stabilization of non-operating items (especially interest costs), and recovering operating margins through cost control and demand recovery in cash handling/automation solutions. Without evidence of order intake recovery or OCF strength, we see limited visibility on near-term earnings re-acceleration.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 2.2% × 0.359 × 1.89 ≈ 1.5%. The dominant driver of the YoY decline is the net profit margin: revenue fell 16.9% YoY but operating income fell 65.2% YoY, implying significant negative operating leverage. Operating margin fell to 4.5% and we estimate ~619 bps compression YoY (from ~10.6% to 4.5%) as SG&A (651.0) remained high relative to the revenue base. Asset turnover is low at 0.359, reflecting a heavy balance sheet (intangibles 1,059.0; goodwill 612.2) against reduced sales; turnover likely deteriorated YoY given the revenue contraction and relatively stable asset base. Financial leverage at ~1.89x appears broadly stable, offering little ROE support. Business reasons: weaker demand/pricing in core cash handling/automation markets and possibly delayed project deliveries weighed on volume and mix, while fixed cost absorption deteriorated; non-operating burden (net -9.1) and a high effective tax rate (51%) further depressed net margin. Sustainability: cost base looks sticky in the short term, so margin recovery hinges on revenue rebound and cost actions; tax rate normalization could provide some relief but is uncertain. Watch for SG&A discipline—current SG&A intensity is ~42.3% of sales, which is high; if SG&A growth exceeds revenue growth in coming quarters, ROE pressure will persist.

Growth Assessment

Top-line declined 16.9% YoY to 1,538.9, suggesting end-market softness or delay in large projects. Operating income fell 65.2% YoY to 68.5, a far steeper decline than revenue, confirming negative operating leverage. Ordinary income (-60.2% YoY) and net income (-57.1% YoY) were also weak, compounded by higher tax rate and non-operating drag. With gross margin at 46.8%, product/service mix could still be supportive, but the scale drop overwhelmed fixed costs. Non-operating income of 13.4 (including dividend income 1.5 and interest income 0.8) partially offset 22.5 in non-operating expenses (notably interest expense 11.4). Near-term outlook depends on order backlog conversion, cost containment, and any price/cost tailwinds; absent disclosures on backlog, OCF, and capex, visibility is limited. Structural growth headwinds remain from cashless proliferation, though replacement cycles, security features, and overseas automation may provide offsets.

Financial Health

Liquidity is strong: current ratio 189.6% and quick ratio 147.9%, with working capital of 1,022.4. No warning on current ratio (<1.0) or D/E (>2.0); D/E stands at 0.89x, a moderate leverage profile. Cash and deposits are 518.6 versus short-term loans of 204.0 and accounts payable of 136.5, indicating manageable near-term obligations. Maturity mismatch risk appears contained given current assets (2,163.0) comfortably exceed current liabilities (1,140.6). Long-term loans are 329.4, and total noncurrent liabilities 871.3, manageable relative to total equity of 2,269.7. However, goodwill (612.2) and intangibles (1,059.0) are sizable, elevating impairment risk in a downturn. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

Operating cash flow is unreported, so we cannot validate earnings quality via OCF/NI (benchmark >1.0). Free cash flow is also unreported, preventing assessment of coverage for dividends and capex. Given the revenue decline and inventory balance of 476.2, working capital could be a headwind if sell-through remains weak; conversely, inventory normalization could support OCF in subsequent quarters. Interest coverage is 6.0x (EBIT/interest), adequate but trending sensitive to EBIT volatility. Without OCF, we cannot rule out earnings quality issues; we flag the absence of cash flow disclosure as a limitation.

Dividend Sustainability

Dividend per share and total dividends paid are not disclosed for the period. The calculated payout ratio of 188.7% suggests dividends (likely based on company guidance or TTM) exceed current earnings capacity, which is unsustainable absent robust FCF. With FCF unreported, coverage cannot be confirmed. Given ROIC at 1.5% and compressed profitability, maintaining a high payout would likely depend on cash reserves (518.6) and balance sheet flexibility; prudence would suggest aligning payouts with normalized earnings and cash generation. Monitor management’s dividend policy stance and any revisions post-results.

Risk Assessment

Business Risks:

• Demand softness and project timing in cash handling/automation impacting scale and fixed-cost absorption
• Structural shift toward cashless payments pressuring long-term growth in traditional cash handling
• Pricing and mix headwinds affecting operating margin
• High effective tax rate (51%) reducing net profitability
• Large goodwill (612.2) and intangibles (1,059.0) raising impairment risk if performance weakens

Financial Risks:

• Interest expense (11.4) and net non-operating drag (-9.1) pressuring ordinary income
• Low ROIC (1.5%) vs likely WACC, indicating value dilution risk if not improved
• Potential working capital build (inventories 476.2; receivables 552.9) in a down revenue environment
• Dividend sustainability risk with a calculated payout ratio of 188.7% and unreported FCF

Key Concerns:

• Operating margin compression (~619 bps YoY) and weak net margin (2.2%)
• Asset turnover at 0.359 indicating underutilized asset base
• Dependence on non-operating items volatility (non-operating income ratio 39.8% flagged)
• Data gaps (OCF, capex, dividends) limit verification of cash generation and capital allocation efficacy

Investment Implications

Key Takeaways:

• Significant profit compression with operating margin down to 4.5% and net margin 2.2%
• ROE at 1.5% and ROIC at 1.5% signal weak capital efficiency
• Liquidity is solid (current ratio 189.6%, quick ratio 147.9%) and leverage moderate (D/E 0.89x)
• Non-operating drag and a high 51% tax rate weigh on bottom line
• Dividend cover looks stretched based on a 188.7% payout ratio, but FCF is undisclosed

Metrics to Watch:

• Order intake/backlog and revenue recovery trajectory
• Operating margin and SG&A-to-sales ratio
• OCF/Net income and inventory turns to assess cash conversion
• Effective tax rate normalization
• Interest expense trend and net non-operating impact
• Impairment indicators for goodwill/intangibles and ROIC improvement vs cost of capital

Relative Positioning: Within capital goods/automation peers, profitability and ROIC are currently below average, while balance sheet liquidity is comparatively strong; near-term performance hinges on restoring operating leverage and cash conversion.

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