KOKUSAI ELECTRIC CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥117.20B
• Operating Income: ¥22.71B
• Net Income: ¥15.56B
• EPS: ¥66.72

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

KOKUSAI ELECTRIC (65250) reported FY2026 Q2 consolidated IFRS results with modest top-line growth but meaningful profit compression and strong cash generation. Revenue was 1,172.05, up 2.3% YoY, indicating resilient demand in a mixed semiconductor capital equipment cycle. Gross profit came in at 513.66 with a gross margin of 43.8%, suggesting stable product economics despite input cost and mix headwinds. Operating income declined 17.2% YoY to 227.10, translating to an operating margin of roughly 19.4%, evidencing negative operating leverage in the period. SG&A reached 241.00 (about 20.6% of revenue), indicating higher opex intensity relative to sales. EBITDA was 286.50, an EBITDA margin of 24.4%, which remains solid for the sector but below prior-year profitability. Net income decreased 13.8% YoY to 155.58, with an elevated effective tax rate of 44.6% weighing on the bottom line. DuPont analysis indicates ROE of 7.5%, comprised of a 13.3% net margin, 0.341x asset turnover, and 1.65x financial leverage. Asset turnover of 0.341 reflects the capital-intensive nature of the business and likely under-absorption amid softer utilization. The balance sheet is robust with total assets of 3,433.20 and equity of 2,083.09, implying an equity ratio of 60.7%. Total liabilities to equity (approximate debt-to-equity proxy) is 0.70x, with reported loans of 582.12 across short- and long-term buckets. Operating cash flow was strong at 187.22, exceeding net income (OCF/NI of 1.20x), demonstrating reasonable earnings quality. Free cash flow was positive at 20.50 after capital expenditures of 165.60, funding only a fraction of shareholder returns amid 185.18 of buybacks and 25.60 of dividends. Working capital intensity increased, with inventories at 832.00 and receivables at 428.35, consistent with cycle dynamics and shipments timing. Several items are unreported (e.g., ordinary income, R&D, interest expense, current liabilities), which constrains full ratio analysis; zeros are not data issues but simply unreported. Overall, the company maintains healthy liquidity and solvency, but profitability compression, high taxes, and inventory build warrant monitoring.

Profitability Analysis

ROE_decomposition: ROE 7.5% = Net margin 13.3% × Asset turnover 0.341 × Financial leverage 1.65x. The primary drag versus prior year appears to be margin compression and lower turnover, with leverage moderate. margin_quality: Gross margin at 43.8% is healthy for deposition/thermal process tools, but operating margin fell to ~19.4% as SG&A intensity (20.6% of sales) increased. EBITDA margin at 24.4% shows solid operating economics but below last year given a 17.2% YoY decline in operating income on a 2.3% sales increase. operating_leverage: Negative in the period: +2.3% revenue vs -17.2% operating income suggests higher fixed costs/mix and under-absorption. Elevated inventory and flat revenue imply capacity utilization pressures.

Growth Assessment

revenue_sustainability: Revenue +2.3% YoY indicates resilient service/aftermarket and/or selective tool demand amid a recovering but uneven WFE cycle. Receivables at 428.35 (≈36.6% of period revenue) imply shipment concentration and potential longer collection cycles. profit_quality: Net margin 13.3% and OCF/NI of 1.20x support reasonable earnings quality. However, a 44.6% effective tax rate depressed net profits, and the operating margin decline signals mix or pricing pressure. outlook: With inventories at 832.00 and capex at 165.60, the company is positioned for subsequent demand, but near-term margins may remain subdued until volume recovery improves absorption. Watch order intake/book-to-bill (not disclosed), gross margin trajectory, and tax normalization.

Financial Health

liquidity: Current assets are 1,728.52; current liabilities are unreported, preventing current/quick ratio calculation. Cash and deposits are unreported, but cash and equivalents at period-end are 447.55. Working capital reported as 1,728.52 likely reflects current assets only; true working capital cannot be confirmed without current liabilities. solvency: Equity ratio is 60.7%, indicating a strong capital base. Total liabilities to equity are about 0.70x (1,453.44 / 2,083.09). Interest-bearing debt disclosed sums to 582.12 (ST 113.49 + LT 468.63), but total interest-bearing debt is otherwise unreported. capital_structure: Leverage is moderate with 1.65x financial leverage in DuPont. The mix of short- vs long-term loans is conservative with a heavier long-term component, supporting liquidity.

Cash Flow Quality

earnings_quality: OCF 187.22 exceeds net income 155.58 (1.20x), indicating healthy conversion despite working capital needs. Non-cash items include D&A of 59.40, supporting OCF. FCF_analysis: FCF was 20.50 after capex of 165.60. The modest positive FCF suggests disciplined investment while maintaining positive internal funding capacity. working_capital: Inventories of 832.00 are high vs accounts payable of 236.06, implying cash tied up in WIP/FG as the cycle normalizes. Accounts receivable at 428.35 is sizable relative to H1 revenue, pointing to elongated collections or shipment timing. Current liabilities are unreported, limiting full working capital analysis.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 56.6%, which is elevated given declining profits and a high effective tax rate. EPS (basic) was 66.72 JPY for the period; DPS by quarter is unreported. FCF_coverage: FCF coverage of dividends is 0.23x, indicating dividends were not fully covered by FCF in the period. Cash dividends paid were 25.60 against FCF of 20.50. policy_outlook: Buybacks of 185.18 and total financing outflows of -247.71 underscore active shareholder returns beyond internal FCF. Sustainability depends on cash on hand (447.55), forward cash generation, and capital needs; explicit dividend policy details are not disclosed.

Risk Assessment

Business Risks:

• Semiconductor capital equipment cycle volatility impacting orders and utilization
• Customer concentration and timing of large projects
• Product mix shifts affecting gross margin
• Export controls and geopolitical restrictions (e.g., China-related)
• Supply chain constraints and parts lead times
• Technology transition risks in advanced nodes and materials processes

Financial Risks:

• Elevated tax rate (44.6%) reducing net profitability
• Working capital build (high inventories and receivables) pressuring cash conversion
• Potential margin compression from pricing or under-absorption
• Dependence on capital markets if large buybacks persist beyond FCF
• Interest coverage cannot be assessed due to unreported interest expense

Key Concerns:

• Negative operating leverage with operating income down 17.2% on modest revenue growth
• High effective tax rate suppressing net income
• Inventory and receivable levels increasing cash tied up
• Dividend and buybacks exceeding FCF in the period

Investment Implications

Key Takeaways:

• Top-line growth of 2.3% YoY with margin compression to ~19.4% operating margin
• ROE at 7.5% driven by moderate leverage and low asset turnover
• Strong OCF (1.20x of NI) but modest FCF after sizable capex
• Healthy balance sheet with 60.7% equity ratio and liabilities/equity of ~0.70x
• High tax rate (44.6%) and working capital intensity are near-term drags
• Shareholder returns (buybacks/dividends) outpaced FCF

Metrics to Watch:

• Order intake and book-to-bill (not disclosed)
• Gross and operating margin trajectory
• Inventory turns and receivable days
• OCF/NI ratio and FCF margin
• Effective tax rate normalization
• Capex-to-sales and capacity utilization
• Net cash position and leverage metrics

Relative Positioning: Profitability remains solid but below top-tier sector leaders; balance sheet strength is a positive differentiator, while ROE and asset turnover suggest room for efficiency gains as the cycle improves.

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
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