NIPPON THOMPSON CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥30.25B
• Operating Income: ¥1.54B
• Net Income: ¥-511M
• EPS: ¥24.62

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

Nippon Thompson (TSE:6480) reported FY2026 Q2 (cumulative first half) consolidated results under JGAAP with clear profit recovery and solid cash conversion. Revenue reached ¥30.254bn, up 13.3% YoY, reflecting demand normalization and mix resilience across core segments. Gross profit was ¥8.329bn with a gross margin of 27.5%, indicating improved cost pass-through and/or better utilization compared to the prior year. Operating income doubled YoY to ¥1.543bn, lifting the operating margin to approximately 5.1%, supported by operating leverage as topline growth outpaced fixed cost inflation. Ordinary income of ¥1.776bn exceeded operating income, implying positive non-operating items (e.g., FX gains or investment income) outweighing interest expense of ¥0.1bn. Net income surged 418% YoY to ¥1.706bn, and EPS was ¥24.62 for the half, evidencing strong bottom-line recovery. DuPont metrics show net profit margin at 5.64%, asset turnover at 0.247x, and financial leverage at 1.56x, yielding a calculated ROE of 2.17% on a half-year basis; annualization would raise the implied full-year ROE if momentum persists. Cash generation was robust: operating cash flow (OCF) of ¥4.041bn implies an OCF/net income ratio of 2.37x, signaling high earnings quality and favorable working capital dynamics in the half. Balance sheet strength is notable: total assets ¥122.594bn and equity ¥78.788bn imply a derived equity ratio of roughly 64.3%, despite the reported equity ratio showing as 0.0% (unreported). Liquidity appears ample, with a current ratio of 467% and quick ratio of 351%, underpinned by sizeable current assets of ¥79.602bn and working capital of ¥62.556bn. Leverage appears moderate with a reported debt-to-equity of 0.57x (likely based on total liabilities/equity), and interest coverage is a comfortable 15.4x on EBIT, indicating low refinancing risk. Dividend data show DPS at 0.00 and payout ratio at 0.0%, which likely reflects interim disclosure timing rather than a definitive policy shift. Some calculated metrics (e.g., effective tax rate 0.0%) appear placeholder due to data gaps; given income tax of ¥1.109bn and net income of ¥1.706bn, the implied tax burden is non-trivial. Free cash flow cannot be assessed because investing cash flow and capex details were not disclosed (reported as 0). Overall, the company exhibits improved profitability, strong liquidity, and healthy cash conversion, but the sustainability of H2 growth and mix, the nature of non-operating gains, and capex needs are key to monitor. Data limitations (notably cash balance, investing CF, share count, and dividend resolution) constrain precision in some ratios and payout analysis.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 5.64% × asset turnover 0.247 × financial leverage 1.56 = ~2.17% ROE for H1. Margin quality improved: gross margin at 27.5% supports pricing power and/or easing input costs; operating margin ~5.1% reflects operating leverage as revenue growth (+13.3% YoY) outpaced opex growth. Ordinary income above operating income suggests positive non-operating contributions; interest expense of ¥0.1bn is manageable, and other financial income likely aided results. EBITDA of ¥3.156bn implies an EBITDA margin of 10.4%, providing a cushion for fixed costs and maintenance capex. Operating leverage is visible in the +101.3% YoY rise in operating income versus +13.3% revenue, pointing to improved cost absorption; sustaining this into H2 will depend on volume stability and mix. Effective tax rate is shown as 0.0% in the metrics, but income tax expense of ¥1.109bn indicates a meaningful tax burden; reported ETR is not reliable due to data limitations. Overall profitability trajectory is positive, but part of the ordinary-to-net uplift likely includes non-operating items that may not recur at the same magnitude.

Growth Assessment

Revenue grew 13.3% YoY to ¥30.254bn in H1, signaling demand recovery in core markets. The quality of growth appears solid given simultaneous gross margin expansion to 27.5% and the doubling of operating income, suggesting improved mix and cost management. Ordinary income outperformance versus operating income indicates supplemental non-operating tailwinds; sustainability of these drivers should be treated cautiously. Net income growth (+418% YoY) reflects both operating recovery and favorable below-OP items; normalization in H2 could temper YoY rates. With asset turnover at 0.247x on an H1 base, utilization remains conservative; if H2 volumes seasonally strengthen, turnover could improve. Outlook hinges on end-market demand (industrial automation, automotive, and machinery cycles), FX trends, and input cost stability; no explicit guidance is provided in the data. Absent capex disclosure, visibility on capacity-led growth is limited; monitoring order backlog, book-to-bill, and utilization would clarify sustainability.

Financial Health

Liquidity is strong: current assets ¥79.602bn vs current liabilities ¥17.046bn yield a current ratio of 467% and quick ratio of 351%, indicating ample short-term coverage. Working capital of ¥62.556bn and inventories of ¥19.752bn suggest buffer but also execution risk if demand normalizes; inventory turns should be monitored. Solvency is solid: total equity ¥78.788bn vs total assets ¥122.594bn implies a derived equity ratio of ~64.3% (the reported 0.0% is unreported, not actual). Debt-to-equity is cited at 0.57x, but the breakdown of interest-bearing debt vs. other liabilities is not provided; nonetheless, interest coverage of 15.4x indicates manageable financial risk. Financing cash flow was a net inflow of ¥6.563bn, suggesting new borrowing and/or reduced distributions; specifics are not disclosed. Overall, the balance sheet shows substantial resilience with headroom to absorb shocks and invest.

Cash Flow Quality

Earnings quality is strong with OCF of ¥4.041bn vs net income of ¥1.706bn (OCF/NI = 2.37x), indicating cash-backed profits and favorable working capital dynamics in H1. EBITDA of ¥3.156bn supports cash generation, and depreciation/amortization of ¥1.613bn implies a material non-cash component in operating expenses. Free cash flow cannot be determined, as investing cash flow and capex are not disclosed (reported as 0 indicates unreported). Working capital appears to have been a tailwind to OCF this half, but the inventory balance of ¥19.752bn warrants monitoring for potential reversal if demand slows. Absent cash and equivalents data (reported as 0/unreported), liquidity assessment relies on current assets composition; cash buffer cannot be precisely evaluated.

Dividend Sustainability

Dividend metrics show DPS at 0.00 and payout ratio at 0.0%, which likely reflects interim timing and/or no dividend decision disclosed at Q2 rather than a structural suspension. With strong OCF relative to net income and low interest burden, coverage capacity appears adequate, but lack of capex/FCF data prevents a robust payout sustainability assessment. Financing cash inflow (+¥6.563bn) and absence of disclosed cash balance blur visibility on distributable resources. Policy outlook cannot be inferred without management guidance; historical payout tendencies and FY-end decisions will be more indicative. For now, dividend sustainability assessment is constrained by missing investing CF and cash data.

Risk Assessment

Business Risks:

• End-market cyclicality in industrial and automotive demand affecting volumes and pricing
• Potential inventory normalization leading to margin pressure or cash flow headwinds
• FX volatility impacting non-operating income and gross margin via imported inputs
• Competitive pressures in bearings/linear motion components affecting mix and ASPs
• Supply chain and raw material cost fluctuations influencing cost of sales

Financial Risks:

• Limited visibility on interest-bearing debt composition despite positive financing CF
• Capex requirements unknown due to unreported investing CF, creating FCF uncertainty
• Potential reversal of working capital tailwinds impacting OCF in H2
• Tax rate variability; implied taxes significant despite calculated metric showing 0.0%

Key Concerns:

• Sustainability of non-operating gains that lifted ordinary income above operating income
• Absence of investing cash flow and cash balance disclosures, limiting FCF and liquidity clarity
• High inventories requiring careful management if demand slows in H2

Investment Implications

Key Takeaways:

• Topline up 13.3% YoY with notable operating leverage; operating income +101.3% YoY
• Gross margin at 27.5% and EBITDA margin at 10.4% signal improved margin structure
• Strong cash conversion (OCF/NI 2.37x) supports earnings quality
• Robust balance sheet with derived equity ratio ~64% and interest coverage 15.4x
• Non-operating gains contributed meaningfully; sustainability uncertain
• FCF and dividend visibility limited due to unreported investing CF and cash balance

Metrics to Watch:

• Order backlog and book-to-bill to gauge H2 demand sustainability
• Inventory turns and days to monitor potential working capital reversal
• Capex and investing cash flows for FCF outlook
• Ordinary income composition (FX, valuation gains) vs core operating income
• Gross margin trajectory amid input cost and FX movements
• Tax rate normalization and effective tax expense in H2

Relative Positioning: Within Japanese industrial components peers, Nippon Thompson currently exhibits improving profitability, strong liquidity, and conservative leverage; visibility on capex and the durability of non-operating contributions will determine whether the earnings rebound translates into sustained ROE improvement versus 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