EAGLE INDUSTRY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥85.51B
• Operating Income: ¥5.55B
• Net Income: ¥4.51B
• EPS: ¥105.13

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

Eagle Industry Co., Ltd. (TSE: 6486) posted solid FY2026 Q2 (cumulative first half) results under JGAAP on a consolidated basis, with revenue of ¥85.5bn (+3.1% YoY) and operating income of ¥5.55bn (+30.1% YoY). Profitability improved meaningfully: operating margin rose to 6.5% (operating income/revenue), ordinary income reached ¥7.23bn, and net income increased 75.5% YoY to ¥4.76bn, yielding a 5.6% net margin. The DuPont framework indicates ROE of 3.66%, driven by a 5.57% net margin, 0.407x asset turnover, and 1.61x financial leverage. Gross profit of ¥19.59bn equates to a 22.9% gross margin, suggesting better cost pass-through and/or mix improvements. Operating income growth far outpaced revenue (+30% vs +3%), indicating positive operating leverage and disciplined SG&A control. Interest coverage is robust at 22.6x (operating income/interest expense), implying low interest burden relative to earnings. Balance sheet strength is notable: equity of ¥130.0bn vs assets of ¥209.9bn implies an equity ratio of roughly 61.9% (reported equity ratio is un-disclosed in XBRL), with a current ratio of 236% and quick ratio of 212%, supported by ¥64.2bn in working capital. Debt-to-equity is a moderate 0.62x, consistent with conservative leverage. Ordinary-to-net income conversion appears healthy; taxes paid of ¥1.48bn suggest an implied effective rate around the low-20%s on a more typical pretax base, despite the displayed 0.0% metric (the latter reflects data limitations). Cash flow statements are not disclosed in the dataset (zeros indicate unreported), preventing direct assessment of OCF and FCF quality. Dividend data (DPS, payout, FCF coverage) are also unreported, so distribution capacity cannot be measured from this extract. Given the company’s end-market exposure (mechanical seals and related components for automotive/industrial/marine applications), the modest revenue growth coupled with sharp profit growth likely reflects pricing/mix discipline, cost optimization, and possibly FX tailwinds. While H1 performance is encouraging, ROE remains mid-single-digit at the half-year level; annualization, seasonality, and capital efficiency improvements will determine full-year ROE. Inventory of ¥11.6bn looks manageable relative to current assets, consistent with strong quick liquidity, but we lack turnover metrics to evaluate working capital efficiency trends. Overall, the company demonstrates improving profitability, strong liquidity, and conservative leverage, with incomplete disclosure on cash flows and dividends limiting conclusions on capital returns and cash conversion.

Profitability Analysis

ROE_decomposition: ROE 3.66% = Net margin 5.57% × Asset turnover 0.407 × Financial leverage 1.61. This reflects modest profitability, moderate asset utilization, and conservative leverage. margin_quality: Gross margin is 22.9% (¥19.59bn/¥85.51bn). Operating margin is 6.5% (¥5.55bn/¥85.51bn). Ordinary margin is ~8.5% (¥7.23bn/¥85.51bn). Net margin is 5.57% (¥4.76bn/¥85.51bn). The expansion in operating income (+30.1% YoY) versus revenue (+3.1% YoY) indicates improved operating efficiency and/or pricing power. operating_leverage: High in the period: small topline growth translated into a disproportionately larger increase in operating income, implying fixed cost absorption and SG&A discipline. Sustainability depends on volume stability and cost inflation control.

Growth Assessment

revenue_sustainability: Revenue grew 3.1% YoY to ¥85.51bn, a modest pace consistent with a steady demand environment. Given exposure to automotive/industrial end-markets, growth likely reflects a blend of price/mix and stable unit volumes. profit_quality: Operating income outpaced sales growth (+30.1% YoY), suggesting better mix, pricing, and cost control. Interest expense (¥245m) is small vs. operating income, supporting quality of ordinary profit. outlook: If pricing discipline and cost control persist, margins could remain elevated relative to prior periods. However, growth trajectory is sensitive to auto/industrial cycles, FX trends, and raw material costs. H2 seasonality and demand normalization will determine whether H1 margin gains can be sustained.

Financial Health

liquidity: Current ratio 236.3%, quick ratio 211.7%, working capital ¥64.23bn. Inventories ¥11.59bn are moderate vs. current assets. Liquidity appears strong. solvency: Debt-to-equity 0.62x and interest coverage 22.6x indicate conservative leverage and ample capacity to service debt. Ordinary income comfortably exceeds interest expense. capital_structure: Equity ¥130.01bn vs assets ¥209.93bn implies an equity ratio ~61.9% (reported equity ratio not disclosed). Financial leverage (Assets/Equity) is 1.61x, consistent with a solid capital base.

Cash Flow Quality

earnings_quality: Cannot be directly assessed due to unreported OCF and FCF. That said, strong interest coverage and moderate leverage reduce immediate concern about earnings sustainability. FCF_analysis: Operating and investing cash flows are undisclosed in this dataset (zeros indicate unreported), so FCF cannot be calculated. Capex intensity and depreciation are also undisclosed, limiting visibility into maintenance vs. growth spending. working_capital: Working capital stands at ¥64.23bn with inventories at ¥11.59bn. Lack of cash flow data and turnover metrics prevents evaluation of cash conversion and working capital efficiency trends.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are unreported. With H1 net income of ¥4.76bn and a strong balance sheet, there appears to be capacity for distributions, but actual policy cannot be inferred from this dataset. FCF_coverage: FCF is unreported; consequently, dividend coverage by FCF cannot be assessed. policy_outlook: Absent disclosed DPS and cash flows, assessment hinges on historical policy and full-year guidance. If margin gains persist and capex remains disciplined, future distribution capacity would improve, but confirmation requires complete cash flow statements and management guidance.

Risk Assessment

Business Risks:

• Exposure to automotive and industrial demand cycles affecting order volumes
• Product mix and pricing pressure amid competition in seals and precision components
• Raw material and energy cost inflation impacting gross margin
• Supply chain disruptions affecting lead times and delivery
• Customer concentration risk in OEMs or large industrial clients
• Technological shifts (e.g., EV platforms) requiring product adaptation
• FX volatility (JPY) influencing export competitiveness and translation effects

Financial Risks:

• Potential working capital swings affecting cash conversion (OCF undisclosed)
• Interest rate changes impacting financing costs (though current coverage is strong)
• Capex needs for capacity/technology potentially elevating leverage if internally funded cash is insufficient
• Pension/retirement obligations (if material) impacting equity and cash flows under JGAAP

Key Concerns:

• Inability to verify cash flow generation and FCF due to unreported OCF/ICF
• Dividend policy and payout capacity unclear in the absence of DPS and FCF data
• Sustainability of margin expansion given modest topline growth and cyclical exposure

Investment Implications

Key Takeaways:

• Revenue growth modest at +3.1% YoY, but operating income up +30.1% indicates positive operating leverage
• Net margin at 5.57% and ROE at 3.66% (H1 basis) suggest room for further capital efficiency improvements
• Balance sheet is strong with an implied equity ratio ~61.9% and current ratio >2x
• Interest coverage at 22.6x and debt-to-equity of 0.62x indicate low financial risk
• Cash flow and dividend data are unreported, limiting assessment of cash conversion and shareholder returns

Metrics to Watch:

• Order intake and backlog/book-to-bill for visibility into H2 revenue
• Gross and operating margin trajectory, especially price-cost spread
• FX impact and hedging effectiveness on ordinary income
• Working capital turns (inventory and receivables days) and OCF conversion
• Capex and depreciation trends to gauge FCF and asset efficiency
• ROE progression and capital allocation (buybacks/dividends) once DPS disclosed

Relative Positioning: Within Japanese machinery/precision component peers, Eagle Industry exhibits conservative leverage and improving margins, with profitability momentum outpacing modest sales growth; however, incomplete cash flow disclosure constrains relative assessment of cash conversion and shareholder return capacity.

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