MAEZAWA KYUSO INDUSTRIES CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.74B
• Operating Income: ¥1.40B
• Net Income: ¥1.66B
• EPS: ¥80.69

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

Maezawa Kyuso Industries (TSE:6485) reported FY2026 Q2 (single-entity, JGAAP) results showing resilient top-line performance with revenue up 1.1% YoY to ¥15.739bn, but a notable deterioration in operating profitability. Gross profit was ¥4.715bn, implying a solid 30.0% gross margin, yet operating income fell 15.1% YoY to ¥1.402bn and operating margin compressed to 8.9%, indicating negative operating leverage in the period. Ordinary income of ¥1.528bn exceeded operating income, suggesting positive non-operating contributions (e.g., interest/dividend income or other financial/affiliate-related gains) with no interest expense reported. Net income rose 28.5% YoY to ¥1.664bn, outpacing both revenue and operating profit trends, implying the presence of material non-operating or extraordinary gains and/or tax effects that more than offset operating weakness. Based on net income and income tax disclosed, implied pretax income is roughly ¥2.230bn (¥1,664m + ¥566m), indicating around ¥0.70bn of gains above ordinary income; consequently, the effective tax rate is approximately 25–26% despite the “0.0%” figure in the calculated snapshot, which reflects unreported items. Depreciation was modest at ¥307m, and EBITDA reached ¥1.709bn (10.9% margin), underscoring a relatively light capital intensity profile but tighter operating spreads this half. DuPont analysis points to low asset turnover (0.338x) and minimal financial leverage (1.16x), yielding a calculated ROE of 4.15% despite a healthy net margin of 10.57%; the company’s very strong equity base dilutes returns. Liquidity remains exceptionally strong, with a current ratio of 599% and quick ratio of 457%, supported by current assets of ¥29.5bn against current liabilities of ¥4.9bn. The balance sheet is conservative: total liabilities of ¥6.15bn versus equity of ¥40.14bn implies an equity ratio near 86% (computed), even though the reported equity ratio shows 0.0% due to disclosure conventions. Working capital is sizable at ¥24.61bn, reflecting the inventory-heavy nature of the business (inventories ¥7.01bn), which is typical for engineered water supply fittings and related products. Operating cash flow was ¥1.021bn (OCF margin ~6.5%), equating to an OCF/NI ratio of 0.61, indicating weaker cash conversion in the half, likely due to working-capital absorption. Financing cash outflows were ¥1.273bn, consistent with shareholder returns and/or debt repayment, though DPS and share data were not disclosed in XBRL. Overall, the period illustrates strong financial stability with modest growth, but also highlights margin pressure at the operating level and a heavier reliance on non-operating/extraordinary factors to support bottom-line growth. Data gaps (e.g., DPS, cash balance, share count) limit precision in dividend and per-share analytics, but the core picture is of a highly liquid, under-levered balance sheet and mid-to-high single-digit operating margins under near-term pressure. Key watchpoints include raw material cost pass-through, SG&A control, inventory discipline, and the sustainability of non-operating gains. The company’s low leverage and ample liquidity provide resilience, but structurally low asset turnover and high working capital temper ROE. Absent continued non-operating support, further improvement in operating efficiency will be needed to lift earnings quality and returns.

Profitability Analysis

ROE_decomposition: - Net profit margin: 10.57%; Asset turnover: 0.338x; Financial leverage: 1.16x. Calculated ROE: 4.15%, consistent with the reported figure. The main ROE constraint is low asset turnover and very low leverage, despite a double-digit net margin.

• ROA (approx.): 3.6% (¥1.664bn / ¥46.563bn), consistent with the low turnover profile. margin_quality: - Gross margin: 30.0% remains healthy, indicating solid product pricing/mix and/or cost control at the manufacturing level.
• Operating margin: 8.9% (¥1.402bn/¥15.739bn), down YoY given -15.1% operating income vs +1.1% revenue, evidencing negative operating leverage.
• Ordinary margin: 9.7% (¥1.528bn/¥15.739bn) exceeds operating due to non-operating gains.
• Net margin: 10.57% benefited from non-operating/extraordinary items; implied effective tax rate about 25–26% based on net income and income tax data. operating_leverage: Revenue grew 1.1% YoY while operating income fell 15.1% YoY, indicating cost inflation and/or higher SG&A outweighed modest sales growth. SG&A is inferred at ~¥3.313bn (gross profit minus operating income), ~21.1% of sales, suggesting fixed-cost absorption challenges in the half.

Growth Assessment

revenue_sustainability: Top-line growth of 1.1% YoY is modest and consistent with stable demand in core end-markets. Given the inventory levels (¥7.01bn) and large working capital, execution on deliveries and public/private demand cycles will influence sustainability. profit_quality: Bottom-line outperformance (+28.5% YoY net income) was driven by factors outside core operations (ordinary/extraordinary). Core profitability softened (operating income -15.1% YoY), pointing to lower quality of earnings in this half. outlook: Without continued non-operating tailwinds, earnings trajectory will depend on gross margin resilience, the pace of cost pass-through, and SG&A discipline. Stabilization of input costs and improved utilization could restore operating leverage; otherwise, growth may remain modest.

Financial Health

liquidity: Current ratio 598.8% and quick ratio 456.6% indicate very strong near-term liquidity. Working capital is ¥24.61bn (CA ¥29.54bn – CL ¥4.93bn), providing ample buffer for operations and procurement cycles. solvency: Total liabilities of ¥6.15bn vs equity of ¥40.14bn imply a computed equity ratio of ~86.2% and leverage of 1.16x, reflecting a conservative capital structure and low solvency risk. capital_structure: Debt-to-equity is listed at 0.15x using total liabilities; interest expense is nil, suggesting minimal or no interest-bearing debt. The firm is under-levered, which supports resilience but dampens ROE.

Cash Flow Quality

earnings_quality: OCF/NI at 0.61 indicates weaker cash conversion; net income exceeded operating cash generation due to working-capital needs and/or non-cash gains. EBITDA margin of 10.9% vs operating margin of 8.9% shows limited non-cash burden (D&A ~2.0% of sales). FCF_analysis: Free cash flow cannot be precisely determined because investing cash flows are undisclosed (reported as 0). However, with OCF of ¥1.021bn and conservative capex historically typical for similar businesses, underlying FCF is likely positive unless capex was unusually elevated. working_capital: Inventories of ¥7.01bn (~44.6% of half-year sales) and high working capital intensity point to cash tied in operations. Monitoring inventory turnover and receivables collection will be key to improving OCF/NI.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio show 0.00, reflecting non-disclosure rather than true zeros. Without share data, an exact payout ratio cannot be computed for the period. FCF_coverage: With OCF at ¥1.021bn and strong liquidity, dividend capacity appears supported in principle; however, lack of investing CF data and undisclosed DPS prevent a precise FCF coverage assessment. policy_outlook: Net cash profile and low leverage support flexibility for shareholder returns, but sustainability should be tied to improvements in operating cash conversion and the degree to which non-operating gains normalized.

Risk Assessment

Business Risks:

• Input cost volatility (metals/commodities) pressuring gross and operating margins.
• Demand cyclicality linked to public infrastructure budgets and housing starts.
• Project timing and seasonality affecting shipments and working capital.
• Competitive pricing pressure in water-supply fittings and related components.
• Supply chain constraints and lead times impacting inventory levels.

Financial Risks:

• Earnings reliance on non-operating/extraordinary gains in the half.
• High working capital intensity dampening cash conversion (OCF/NI 0.61).
• Potential inventory obsolescence or carrying cost risk if demand slows.
• ROE constrained by low asset turnover and minimal leverage.

Key Concerns:

• Negative operating leverage (-15.1% YoY operating income vs +1.1% sales).
• Sustainability of non-operating/extraordinary gains supporting net income.
• Cash conversion below earnings; need for tighter working-capital control.

Investment Implications

Key Takeaways:

• Top line resilient (+1.1% YoY) but operating margin compressed to 8.9%.
• Net income strength (+28.5% YoY) driven by non-operating/extraordinary factors.
• Balance sheet exceptionally strong (computed equity ratio ~86%).
• OCF/NI at 0.61 signals weaker cash conversion in the half.
• ROE 4.15% constrained by low turnover and low leverage.

Metrics to Watch:

• Gross and operating margin progression and cost pass-through rates.
• OCF/NI, inventory turnover, and receivables collection cycle.
• Ordinary vs operating income gap and nature of non-operating/extraordinary items.
• SG&A as a percentage of sales and operating leverage sensitivity.
• Capex trends (once disclosed) and true FCF generation.
• Backlog/order intake and public-sector demand indicators.

Relative Positioning: Financially conservative with superior liquidity and low solvency risk versus many industrial peers, but with structurally lower asset turnover and ROE; near-term earnings quality leans on non-operating contributions while core operating leverage is currently unfavorable.

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