Sanoh Industrial Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥78.52B
• Operating Income: ¥3.36B
• Net Income: ¥1.48B
• EPS: ¥83.18

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

Sanoh Industrial Co., Ltd. (TSE: 6584) delivered mixed but improving fundamentals in FY2026 Q2 (cumulative). Revenue declined 3.2% year over year to ¥78.5bn, but profitability improved substantially, with operating income up 41.0% to ¥3.36bn and net income up 158.3% to ¥2.98bn. Gross margin stood at 15.0%, and operating margin rose to 4.3%, indicating effective cost control and better operating leverage despite lower sales. Ordinary income of ¥2.44bn was below operating income, reflecting financing costs (interest expense ¥0.43bn), but net income exceeded ordinary income, implying non-operating or extraordinary positives and/or low taxes. The reported effective tax rate rounds to 0.0%, suggesting the benefit of tax credits, loss carryforwards, or one-off factors in the period. DuPont analysis shows ROE at 6.01%, driven by a 3.79% net margin, 0.633x asset turnover, and 2.50x financial leverage; this is an improvement but remains modest versus typical auto-parts cost of capital. Cash flow quality is strong: operating cash flow was ¥6.93bn, 2.32x net income, indicating earnings backed by cash. Financing cash outflow of ¥4.72bn points to debt reduction or other financing uses; dividends were not paid (DPS ¥0.00), consistent with capital preservation. Liquidity appears sound with a current ratio of 168% and working capital of ¥28.47bn, and leverage is manageable with debt-to-equity at 1.39x and interest coverage at 7.9x. The equity ratio is shown as 0.0% due to disclosure limitations, but total equity is ¥49.6bn, implying an actual equity ratio of roughly 40% if computed from reported totals. EBITDA of ¥6.57bn (8.4% margin) provides additional buffer against interest and cyclicality. While revenue softness likely reflects auto production mix or pricing pressure, the margin expansion suggests successful cost pass-through and productivity efforts. Dividend payments remain suspended; sustainability analysis therefore hinges on potential policy changes once balance sheet priorities are met. Key data gaps include unreported inventories, cash balance, and investing cash flows/capex, limiting precision on working capital dynamics and free cash flow. Overall, the company shows improving earnings quality and profitability resilience amid top-line pressure, but ROE is still moderate, and visibility on capex and capital allocation remains limited.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 3.79%
• asset_turnover: 0.633
• financial_leverage: 2.5
• calculated_ROE: 6.01%
• interpretation: ROE uplift in the period was mainly driven by improved margins, with modest asset efficiency and moderate leverage supporting returns. margin_quality:
• gross_margin: 15.0%
• operating_margin: 4.3%
• ordinary_margin: 3.1%
• net_margin: 3.79%
• EBITDA_margin: 8.4%
• drivers: ['Lower cost base and operating efficiency offsetting revenue decline', 'Non-operating positives and low taxes buoying net margin', 'Financing costs (¥0.43bn) tempering ordinary margin'] operating_leverage:
• evidence: Operating income rose 41.0% on a 3.2% revenue decline, indicating favorable operating leverage and cost control.
• interest_coverage: 7.9x (EBIT/interest ≈ 3.36/0.43)
• notes: EBITDA of ¥6.57bn provides additional cushion; continued leverage benefits depend on stable volumes and pricing.

Growth Assessment

revenue_sustainability: Revenue decreased 3.2% YoY to ¥78.5bn, suggesting near-term headwinds in end-market demand or pricing. Sustainability will depend on auto production schedules, model mix, and ability to pass through material and logistics costs. profit_quality: Margin expansion amid lower sales indicates improved mix and cost discipline. Net income outpaced operating income due to non-operating/extraordinary factors and minimal taxes, which may not be recurring. outlook: If cost discipline holds and volumes stabilize, operating margin could remain in the 4–5% range near term. ROE at 6% is improving but requires either higher asset turnover or sustained margin gains to move meaningfully higher. Visibility is constrained by missing disclosures (inventories, capex).

Financial Health

liquidity:

• current_ratio: 168.0%
• quick_ratio: 168.0% (inventories unreported)
• working_capital: ¥28.47bn
• commentary: Solid short-term liquidity, though cash balance is unreported; receivables and payables quality not assessable from provided data. solvency:
• debt_to_equity: 1.39x
• interest_expense: ¥0.43bn
• interest_coverage: 7.9x
• equity_ratio_note: Reported as 0.0% due to disclosure; computed equity/asset ratio approximates 40% (¥49.6bn/¥124.0bn). capital_structure: Moderate leverage supported by improving cash generation; financing outflows (¥4.72bn) imply debt reduction or other liability management during the period.

Cash Flow Quality

earnings_quality: OCF/Net Income at 2.32 indicates strong cash conversion and low accrual risk for the period. FCF_analysis: Investing cash flow was unreported (0), preventing calculation of true free cash flow; headline FCF shown as 0 reflects data limitation, not economic zero. working_capital: Inventories are unreported; while working capital is ¥28.47bn, drivers of OCF (receivables, payables, inventory changes) cannot be decomposed. Nonetheless, positive OCF suggests favorable working capital movements or robust underlying earnings.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is 0.0% as DPS is ¥0.00 despite positive EPS of ¥83.18; management appears to prioritize balance sheet and investment over distributions. FCF_coverage: Not assessable due to unreported investing cash flow; reported FCF coverage of 0.00x reflects missing data rather than weak cash generation. policy_outlook: With improving profitability and OCF, the capacity to reinstate dividends could build, but timing depends on capex requirements, debt reduction goals, and sustained earnings visibility.

Risk Assessment

Business Risks:

• End-market cyclicality in automotive production volumes
• Raw material and logistics cost volatility with potential lag in price pass-through
• Customer concentration and platform/model change risks
• FX exposure from overseas operations and procurement
• Execution risk in footprint optimization and cost reduction programs

Financial Risks:

• Moderate leverage (D/E 1.39x) and exposure to interest rate changes
• Potential normalization of tax rate from effectively ~0% could reduce net income
• Unreported cash and inventory figures limit visibility on liquidity buffers and inventory risk
• Unknown capex profile (investing CF unreported) could pressure future FCF

Key Concerns:

• Revenue contraction despite margin gains—sustainability of earnings if volumes remain soft
• Dependence on non-operating/low tax effects to support bottom line
• Data limitations (inventories, cash, investing CF) constrain assessment of working capital and FCF durability

Investment Implications

Key Takeaways:

• Profitability inflected positively: OPM ~4.3% and net income +158% YoY despite revenue -3.2%
• ROE improved to 6.0% on better margins and moderate leverage, but remains modest
• Strong cash conversion (OCF/NI 2.32) underpins balance sheet resilience
• Liquidity is solid (current ratio 168%), and interest coverage is comfortable at 7.9x
• Dividend remains suspended; capital allocation tilts to deleveraging or reinvestment

Metrics to Watch:

• Revenue trajectory by region/customer and pass-through mechanisms
• Operating margin sustainability and SG&A/COGS discipline
• OCF/NI ratio and detailed working capital movements (DSO, DPO, inventory once disclosed)
• Capex and investing cash flows to assess true FCF and capacity for distributions
• Leverage (D/E) and interest coverage as financing outflows continue
• Effective tax rate normalization and its impact on net margin and ROE

Relative Positioning: Within Japanese auto-parts peers, profitability is improving but remains mid-pack with OPM in the low-to-mid single digits and ROE around 6%; leverage is moderate, and cash conversion currently compares favorably, albeit with incomplete visibility on capex.

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