TPR CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥90.34B
• Operating Income: ¥4.37B
• Net Income: ¥6.25B
• EPS: ¥74.76

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

Verdict: FY2026 Q2 was a mixed quarter for TPR—core profitability softened on lower sales, but bottom-line surged on strong non-operating gains and solid cash generation. Revenue declined 4.8% YoY to 903.4, reflecting a softer demand environment and/or pricing pressure. Operating income fell 9.2% YoY to 43.7, with operating margin at 4.8%. Ordinary income decreased a milder 2.8% YoY to 67.7, buoyed by sizable non-operating income of 27.1 versus non-operating expenses of only 3.1. Net income jumped 48.0% YoY to 49.5, as the non-operating tailwind and a 21.4% effective tax rate supported earnings. Operating margin compressed by roughly 23 bps YoY (from ~5.07% to 4.84%), while net margin expanded by roughly 196 bps (from ~3.52% to 5.48%) on the back of non-operating income. Gross margin printed at 21.6%, but we lack prior-year gross profit to quantify the YoY change. Cash quality was strong: OCF of 103.1 exceeded net income by 2.08x, indicating robust cash conversion (likely aided by working capital). Liquidity and solvency remain conservative with a 237.5% current ratio and 0.45x debt-to-equity, and interest coverage is strong at 22.1x. However, capital efficiency is weak: ROE at 2.5% and ROIC at 2.1% are well below cost of capital benchmarks. Total comprehensive income was only 9.1, sharply below net income, likely reflecting valuation losses on securities or FX OCI—this is a notable equity headwind despite the healthy net profit. Non-operating income (dividends 4.9; interest 3.0) played an outsized role, with a high non-operating income ratio of 54.7%, raising questions on earnings durability if financial markets or interest income normalize. Financing cash flow was negative (-85.1), including share repurchases of -9.6, signaling continued shareholder returns, but dividend data were not disclosed to triangulate payout and FCF coverage. Balance sheet strength mitigates near-term risk, but sustained growth will require restoring operating leverage and improving ROIC through better asset turns and margin initiatives. Forward-looking, watch demand normalization in autos, input cost trends, and the persistence of non-operating gains; improving core margins and ROIC are necessary to underpin a healthier earnings mix.

Profitability Analysis

DuPont Decomposition (TTM proxy using the period data provided): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 5.5% × 0.317 × 1.45 = ~2.5%. The biggest driver of the current ROE is low asset turnover (0.317) and modest financial leverage (1.45x), while net margin is being flattered by non-operating gains rather than core operations. YoY, operating margin fell from ~5.07% to 4.84% (-23 bps), pointing to weaker operating leverage as revenue declined 4.8% while SG&A (absolute 151) remained sticky; this operating softness was more than offset at the bottom line by a higher non-operating contribution, expanding net margin from ~3.52% to 5.48% (+196 bps). Business drivers likely include: softer OEM demand/pricing, cost inflation (energy/materials), and an increased financial income/dividend stream boosting below-the-line items. Sustainability: the operational margin compression is a concern if demand remains soft; the non-operating windfall (dividend and interest income) is partly recurring but vulnerable to market rates and investee performance—less controllable than operating earnings. Watch for cost discipline: with revenue -4.8% and operating income -9.2%, cost base adjustment lagged top line, indicating negative operating leverage. Also note comprehensive income far below net income, suggesting valuation losses in OCI that could continue to weigh on equity if markets remain volatile.

Growth Assessment

Revenue contracted 4.8% YoY to 903.4, indicating a cyclical pause or share pressure in core auto-related end markets. Operating income fell 9.2% YoY to 43.7, outpacing the sales decline, confirming negative operating leverage. Ordinary income declined only 2.8% YoY to 67.7 due to strong non-operating income (27.1) and limited non-operating costs (3.1). Net income surged 48.0% YoY to 49.5, largely due to higher non-operating contributions and a manageable tax rate. EBITDA reached 101.8 with an 11.3% margin, providing cushion for interest (22.1x coverage). Outlook hinges on: stabilization of auto production, cost pass-through on materials/energy, and retention of non-operating gains. Without a rebound in core demand or incremental efficiency gains, sustaining earnings growth purely via non-operating items is unlikely. ROIC at 2.1% signals that growth investing must be more selective and returns-focused. Near-term catalysts would include inventory normalization at OEMs, FX tailwinds for exports, and cost-down benefits; headwinds include EV mix shifts, raw material volatility, and potential rate normalization reducing financial income.

Financial Health

Liquidity is strong: current ratio 237.5% and quick ratio 210.1%; there is no warning on liquidity (both >1.0). Cash and deposits of 584.6 exceed short-term loans of 171.8, implying low refinancing pressure and minimal maturity mismatch risk; current assets (1,407.1) comfortably cover current liabilities (592.4). Solvency is conservative with debt-to-equity at 0.45x and interest coverage at 22.1x. Total liabilities are 888.6 against total equity of 1,958.1, indicating ample buffer. Long-term loans are modest at 93.3; the firm could delever further if desired. No off-balance sheet obligations are disclosed in the data provided. Comprehensive income significantly below net income (9.1 vs 49.5) indicates OCI headwinds (e.g., securities valuation/FX) that can erode equity despite positive profits; monitor AFS securities (investment securities 393.1) sensitivity.

Cash Flow Quality

OCF of 103.1 is 2.08x net income, indicating high-quality earnings and strong cash conversion; no warning on OCF/NI (<0.8) is triggered. Free cash flow and investing CF are unreported, preventing a full assessment of capex intensity and maintenance vs growth spending. Financing CF was -85.1, including share repurchases of -9.6; dividend cash outflow was unreported, limiting payout/FCF triangulation. The strong OCF likely benefited from working capital (A/R 431.1, inventory 162.3, A/P 170.7); however, without cash flow detail, we cannot confirm whether the cash strength was driven by one-time working capital releases. No signs of aggressive working capital manipulation are evident from the limited data; DSO/DIO/DPO cannot be assessed due to lack of comparative metrics.

Dividend Sustainability

Reported DPS and total dividends are unreported, but a calculated payout ratio of 138.5% suggests distributions (likely including share repurchases and/or interim dividends) exceed current period earnings. With OCF at 103.1, cash generation appears strong enough to support ordinary dividends in the near term; however, absent FCF and capex data, sustainability beyond the short term is unclear. Balance sheet strength (cash > short-term debt; D/E 0.45x) provides flexibility to maintain shareholder returns temporarily. Key watchpoints: true cash payout (dividends + buybacks) vs FCF, trajectory of core operating profit (to reduce reliance on non-operating gains), and management’s capital policy amid low ROIC (2.1%). If the payout ratio remains >100% without improving FCF, a policy recalibration may be needed.

Risk Assessment

Business Risks:

• Auto sector demand cyclicality leading to volume/pricing pressure (revenue -4.8% YoY).
• Negative operating leverage as SG&A stays sticky amid lower sales (operating margin -23 bps YoY).
• Input cost and energy price volatility affecting gross margin (21.6% current).
• Product mix and EV transition potentially disrupting legacy component demand.
• Customer concentration to large OEMs increasing bargaining power risk.

Financial Risks:

• Earnings reliance on non-operating income (non-operating income ratio 54.7%) may not be durable.
• Low capital efficiency (ROIC 2.1%, ROE 2.5%) vs likely WACC, risking value dilution.
• OCI volatility: total comprehensive income 9.1 far below net 49.5, reflecting securities/FX valuation risk.
• Potential rate normalization could reduce interest income (3.0) and market dividends (4.9).

Key Concerns:

• Sustained weakness in operating profit if sales do not recover.
• High implied payout ratio (138.5%) vs unreported FCF raises sustainability questions.
• Asset turnover low at 0.317, constraining ROE absent higher leverage (which is currently conservative).
• Visibility limited by unreported capex/investing CF and DPS details.

Investment Implications

Key Takeaways:

• Core operations softened: revenue -4.8% YoY, operating income -9.2% YoY, operating margin 4.84% (-23 bps).
• Bottom line strength was non-operating-driven: net income +48.0% YoY; non-operating income 27.1 vs expenses 3.1.
• Cash quality strong with OCF/NI at 2.08x; liquidity and leverage profiles are conservative.
• Capital efficiency weak (ROIC 2.1%, ROE 2.5%), signaling need for improved asset turns/margins.
• Comprehensive income lag (9.1) vs net (49.5) highlights valuation/OCI headwinds impacting equity.

Metrics to Watch:

• Share of non-operating income in ordinary profit and its sustainability.
• Operating margin trajectory and SG&A discipline versus revenue trend.
• ROIC improvement (targeting >5% as a first milestone) and asset turnover.
• Working capital efficiency (AR/inventory levels) and OCF/NI consistency.
• Actual dividends paid and total shareholder return outflows vs FCF once disclosed.
• OCI movements tied to investment securities and FX sensitivity.

Relative Positioning: Within Japan auto-parts peers, TPR exhibits stronger-than-average balance sheet liquidity and low leverage, but weaker capital efficiency and a higher reliance on non-operating income to support earnings this quarter; improving core operating margins and ROIC is essential to close the gap with best-in-class peers.

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