SINFONIA TECHNOLOGY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥55.80B
• Operating Income: ¥6.09B
• Net Income: ¥4.28B
• EPS: ¥161.32

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

SINFONIA TECHNOLOGY’s FY2026 Q2 consolidated results under JGAAP show steady topline and earnings growth with a solid balance sheet backdrop but limited cash flow disclosure. Revenue rose 7.8% YoY to ¥55.8bn, while operating income increased 6.0% to ¥6.1bn, indicating modest operating leverage but also some cost pressure or mix effects. Gross profit reached ¥13.5bn, yielding a 24.3% gross margin, and operating margin stood at approximately 10.9%, both broadly healthy for an industrial/electronics-oriented portfolio. Net income grew 6.4% YoY to ¥4.55bn, translating to an 8.16% net margin, reflecting disciplined SG&A and manageable non-operating items. Ordinary income exceeded operating income by ¥0.17bn, suggesting net positive non-operating contributions (e.g., interest income, FX, or other gains) more than offset the ¥0.08bn interest expense. The DuPont decomposition indicates ROE of 5.5%, driven by an 8.16% net margin, 0.407x asset turnover, and 1.66x financial leverage, consistent with a capital-light but not highly levered profile. Balance sheet quality appears strong: current ratio 201% and quick ratio 194% underscore ample short-term liquidity, and total liabilities/ equity of 0.68x points to conservative leverage. Although the disclosed equity ratio is shown as 0.0% (unreported), the actual equity-to-asset ratio implied by the balance sheet is about 60.3%, reinforcing solvency robustness. Working capital is sizable at ¥38.8bn, and inventories are reported at ¥2.58bn, indicating a lean working capital posture relative to COGS, though caution is warranted given potential disclosure nuances. Earnings quality and cash conversion cannot be fully assessed because operating, investing, and financing cash flows are unreported in this dataset. Similarly, depreciation and amortization are unreported, making EBITDA and non-cash expense analysis unavailable. Dividend information (DPS and payout) is not disclosed here, so dividend sustainability cannot be judged from free cash flow coverage in this period. Despite these data gaps, the combination of margin stability, positive YoY growth, strong liquidity, and moderate leverage supports a fundamentally sound profile. Key monitoring points include order trends, segment mix, cost pass-through, and any emerging capex cycle that could alter cash conversion. Overall, performance trends are constructive, but fuller cash flow disclosure is needed to validate earnings quality and dividend capacity.

Profitability Analysis

ROE is 5.5% via DuPont: Net margin 8.16% x Asset turnover 0.407x x Financial leverage 1.66x. Operating margin is approximately 10.9% (¥6,086m / ¥55,796m), down slightly vs revenue growth (+7.8% revenue vs +6.0% operating income), indicating modest negative operating leverage or mix headwinds. Gross margin is 24.3%, suggesting reasonable pricing power and cost control; however, the slight gap between topline and operating profit growth hints at higher SG&A or mix. Net non-operating items were a small tailwind (ordinary income ¥6,259m vs operating income ¥6,086m), likely from other income offsetting ¥78m interest expense. Interest coverage is strong at about 78x (operating income / interest expense), reflecting low financial risk from interest burden. Effective tax rate recalculated at roughly 24.7% (income tax ¥1,491m divided by pre-tax income approximated at net + tax ≈ ¥6,042m), which is consistent with Japan’s statutory context; the provided 0.0% metric is not reflective of actual tax expense. ROA is roughly 3.3% (¥4,551m / ¥137,197m), with ROE at 5.5%, indicating returns are adequate but not high; improving asset turnover or margin expansion would be needed to lift ROE. Given missing D&A, EBITDA metrics are not available; hence, we cannot comment on cash-adjusted profitability or non-cash cost intensity.

Growth Assessment

Revenue grew 7.8% YoY to ¥55.8bn, a solid pace indicative of healthy demand across key end-markets. Operating income growth of 6.0% lagged revenue, pointing to mild compression in operating margin, potentially due to mix shifts, input cost normalization, or higher operating expenses to support growth. Net income rose 6.4%, supported by stable non-operating items and a normalized tax burden. The sustainability of growth will hinge on order backlog, book-to-bill dynamics, and the durability of end-market demand in factory automation, electronics, or transportation equipment (typical exposures for this issuer). Gross margin at 24.3% suggests acceptable pricing power; close monitoring is warranted for raw material and logistics costs given the small margin delta versus last year’s growth. The positive spread between ordinary and operating income indicates some recurring non-operating gains; these should not be over-relied upon for future growth. With inventories reported at only ¥2.58bn versus COGS of ¥38.2bn for the half, the company appears to be running lean, which supports working capital efficiency but may constrain surge capacity if demand accelerates. Outlook is cautiously positive: if cost pass-through remains effective and demand holds, mid-single digit to high-single digit revenue growth could be sustained, but operating leverage may be muted without further scale efficiencies. Limited disclosure on capex and OCF prevents assessing whether growth is being funded internally without increasing leverage.

Financial Health

Liquidity is strong with a current ratio of 201% (¥77,049m / ¥38,296m) and a quick ratio of 194% given low reported inventories; this indicates substantial capacity to meet short-term obligations. Working capital of ¥38.8bn provides additional buffer against demand volatility and supply chain disruptions. Solvency appears robust: total liabilities are ¥56.3bn against equity of ¥82.7bn, yielding liabilities-to-equity of 0.68x. While the equity ratio is listed as 0.0% in the provided metrics, the balance sheet implies an equity ratio of about 60.3% (¥82,729m / ¥137,197m), signaling conservative capital structure. Interest expense is modest at ¥78m, and high interest coverage (≈78x) reduces refinancing and rate-risk concerns. Cash and equivalents were not disclosed here, limiting visibility into immediate liquidity buffers, but the overall current asset base is substantial. No detail on long-term debt composition or maturities is provided; however, aggregate leverage appears low. Overall balance sheet resilience is a key strength.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported in this dataset, so we cannot directly assess cash earnings or free cash flow. As a proxy, we note that net income is ¥4.55bn and working capital is ample; however, without OCF we cannot confirm cash conversion or the extent of working capital consumption supporting growth. Depreciation and amortization are also unreported, preventing EBITDA estimations and non-cash expense analysis. The lack of cash flow disclosure means FCF cannot be calculated; hence, OCF/Net Income, FCF margin, and reinvestment rates are indeterminate. Inventories appear low relative to COGS, implying efficient inventory management; yet, receivables and payables details are not available, constraining working capital diagnostics. In summary, earnings quality appears sound at the accrual level, but cash validation is pending fuller disclosure.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in this dataset, so we cannot evaluate dividend coverage from earnings or free cash flow. EPS is ¥161.32 for the period; in the absence of DPS, payout cannot be inferred. With strong liquidity, low leverage, and solid profitability, the balance sheet could likely support ordinary dividends; however, without OCF and capex visibility we cannot assess FCF coverage reliability. Policy outlook is therefore uncertain from this data alone; investors should monitor the company’s stated dividend policy, historical payout trends, and cash generation once cash flow statements are available.

Risk Assessment

Business Risks:

• Demand cyclicality in industrial, electronics, and transportation end-markets affecting orders and utilization
• Input cost volatility (materials, components, logistics) potentially pressuring gross margins
• Product and segment mix shifts reducing operating leverage and profitability
• Supply chain constraints that could challenge timely delivery and revenue recognition
• FX fluctuations impacting export competitiveness and non-operating gains/losses
• Technology obsolescence risk requiring ongoing R&D and capex

Financial Risks:

• Limited cash flow disclosure obscures cash conversion and FCF resilience
• Potential working capital swings given lean inventories and project timing
• Interest rate changes, though current interest burden is low
• Unreported debt maturity profile and covenants could pose refinancing risks if leverage rises

Key Concerns:

• Absence of operating cash flow and capex data precludes FCF assessment
• D&A unreported, impairing EBITDA visibility and asset intensity analysis
• Equity ratio shown as 0.0% in metrics is not reflective of the strong implied equity base, highlighting data presentation gaps

Investment Implications

Key Takeaways:

• Solid FY2026 Q2 growth: revenue +7.8% YoY and operating income +6.0% with double-digit operating margin
• Healthy profitability: net margin 8.16%, interest coverage ~78x, and moderate ROE at 5.5%
• Robust balance sheet: implied equity ratio ~60% and liabilities/equity 0.68x, with strong liquidity (current ratio ~2.0x)
• Slight margin compression suggests limited operating leverage; monitor cost pass-through and SG&A discipline
• Cash flow data absent; FCF generation and dividend capacity remain unverified

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue durability
• Gross and operating margin trajectory versus input costs and pricing
• Operating cash flow, capex, and FCF once disclosed
• Working capital components (receivables, payables, inventories) and cash conversion cycle
• ROE improvement levers: asset turnover and margin expansion

Relative Positioning: Within Japanese industrial and electronics component peers, the company demonstrates above-average liquidity, conservative leverage, and stable mid-20s gross margin with double-digit operating margin; however, ROE is modest versus best-in-class peers and cash flow transparency in this period is limited.

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