EBRAINS,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.94B
• Operating Income: ¥237M
• Net Income: ¥170M
• EPS: ¥112.89

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

Verdict: A solid margin-driven beat with resilient cash generation despite flat top-line growth in FY2026 Q2. Revenue was 19.37, up 0.3% YoY, while operating income rose 26.3% to 2.37 and net income increased 36.7% to 1.70. Operating margin expanded to 12.2%, supported by disciplined SG&A (2.00, or 10.3% of sales) and a stable gross margin of 22.6%. We estimate operating margin expanded by about 252 bps YoY (from ~9.7% to 12.2%), underpinning the strong profit delta relative to revenue. Ordinary income increased 33.7% to 2.53, implying ordinary margin expansion of roughly 328 bps YoY (from ~9.8% to 13.1%). Net margin improved to 8.8%, about a 234 bps expansion versus the prior year’s implied ~6.4%. Cash conversion was strong with operating cash flow of 2.39 exceeding net income (OCF/NI 1.41x), indicating high-quality earnings. The balance sheet remains highly conservative: current ratio of 756%, quick ratio of 735%, and cash and deposits of 28.90 against current liabilities of 6.16. Financial leverage is modest (DuPont financial leverage 1.21x; debt-to-equity 0.21x as reported), anchoring risk at low levels but also capping ROE. DuPont-calculated ROE is 3.5%, reflecting good margin gains but low asset turnover (0.328) and low leverage. ROIC is reported at 8.0%, which is at the high end of typical targets and signals efficient deployment of invested capital. The effective tax rate is 32.7%, broadly in line with statutory expectations. Non-operating income contributed 0.15 (non-operating income ratio ~9%), with minor interest income and other items; no material non-operating expenses were reported. Free cash flow is not fully disclosed, but with CapEx at 0.01 and strong OCF, FCF likely covered dividends given a calculated payout ratio of 36.1%. Overall, operating leverage and cost control are the key themes this quarter, with cash generation and liquidity providing ample buffer. Forward-looking, sustaining margin discipline amid flat revenue will be pivotal, and utilization of the cash-rich balance sheet (for growth capex, R&D, or shareholder returns) could be a catalyst.

Profitability Analysis

ROE decomposition (DuPont): ROE 3.5% = Net Profit Margin 8.8% × Asset Turnover 0.328 × Financial Leverage 1.21x. The most notable movement YoY is the improvement in profitability (net margin up ~234 bps to 8.8%), as revenue grew only 0.3% and leverage stayed low. Business explanation: operating margin expanded on tight SG&A control (SG&A at 10.3% of sales) and steady gross margin (22.6%), indicating operating efficiency rather than one-off gains. Sustainability: cost discipline looks repeatable, but with revenue relatively flat, further ROE improvement likely requires either mix-driven gross margin uplift or higher asset turnover; leverage is deliberately conservative. Asset turnover at 0.328 indicates a capital-light, cash-heavy balance sheet dampens efficiency metrics; redeploying cash could raise turnover and ROE. Watch for any reversal in non-operating items (0.15 contribution this quarter) that could affect ordinary margin. Concerning trends: none evident from available data; we cannot confirm SG&A growth vs revenue growth due to lack of YoY SG&A disclosure.

Growth Assessment

Top-line growth was essentially flat at +0.3% YoY (19.37), but profit growth was strong: operating income +26.3% to 2.37 and net income +36.7% to 1.70. The quality of growth is high, driven by margin expansion rather than non-recurring items; non-operating income was modest at 0.15. Operating margin improved to 12.2% and ordinary margin to 13.1%, implying effective cost control and possibly better product mix or pricing. With ROIC at 8.0%, invested capital is generating returns at the target/healthy threshold, suggesting current operations are efficiently managed. However, sustainability of profit growth will hinge on reigniting revenue momentum; continued flat sales could limit incremental operating leverage. Near-term outlook: maintain margins via mix/pricing and SG&A discipline; medium-term growth may depend on end-market demand recovery, new product introductions, and potential use of excess cash for growth investments or accretive M&A. No segment breakdown was disclosed to assess growth drivers by product/region.

Financial Health

Liquidity is exceptionally strong: current assets 46.52 vs current liabilities 6.16 (current ratio 7.56x) and cash 28.90 alone covers all current liabilities 4.7x. Solvency is conservative: total liabilities 10.33 vs equity 48.73 (D/E 0.21x as reported), and DuPont financial leverage is just 1.21x. There is no indicated maturity mismatch: cash, receivables (4.88), and inventories (1.29) comfortably exceed payables (1.07). No short-term or long-term loans were disclosed; zeros may reflect unreported items rather than true zeros. Noncurrent liabilities are modest at 4.18. No off-balance sheet obligations were reported in the provided data.

Cash Flow Quality

OCF/Net Income is 1.41x (2.39 vs 1.70), indicating good earnings quality and cash conversion. Working capital appears well managed with modest receivables (4.88) and inventories (1.29) relative to sales and payables (1.07), aligning with positive OCF. CapEx is minimal at 0.01, so a proxy FCF (OCF − CapEx) would be approximately 2.38, though full investing cash flows were not disclosed; treat this as indicative rather than definitive. There are no clear signs of working capital manipulation from the available snapshot. Financing CF was −0.60, likely reflecting shareholder returns or routine items; details unreported. Overall cash generation supports operations and potential distributions.

Dividend Sustainability

Calculated payout ratio is 36.1%, comfortably below the 60% benchmark, implying room for maintenance or gradual increases. Using a proxy for FCF (OCF 2.39 less CapEx 0.01 ≈ 2.38), coverage of dividends appears strong, though we lack full investing CF details and exact dividend cash outflow. The cash balance of 28.90 further underpins flexibility for dividends. Policy outlook is not disclosed; given low leverage and strong liquidity, the balance sheet can support stable dividends even through moderate earnings volatility. Monitor any step-up in CapEx or strategic investments that could temporarily increase cash needs.

Risk Assessment

Business Risks:

• Top-line stagnation risk: revenue grew only 0.3% YoY, limiting operating leverage.
• Product and customer mix risk: margin improvements may revert if mix/pricing normalizes.
• Supply chain and component availability risk typical for electronics/industrial manufacturers.
• Execution risk on deploying excess cash into value-accretive growth or returns.

Financial Risks:

• Low asset turnover (0.328) constrains ROE despite good margins.
• Potential interest rate/financial income volatility affecting non-operating income (0.15 this quarter).
• Data limitations on debt: zeros may reflect unreported items; actual leverage profile could differ.

Key Concerns:

• Sustainability of margin gains without clear revenue acceleration.
• Limited disclosure on SG&A breakdown and investing cash flows.
• Small-cap liquidity and potential earnings volatility from customer order timing.

Investment Implications

Key Takeaways:

• Margin-led earnings beat with operating margin up ~252 bps YoY to 12.2%.
• High-quality cash earnings: OCF/NI 1.41x and proxy FCF solid.
• Balance sheet strength (cash 28.90; current ratio 7.56x) provides strategic flexibility.
• ROE 3.5% held back by low leverage and low asset turnover despite improved margins.
• ROIC at 8.0% indicates efficient capital deployment at current scale.

Metrics to Watch:

• Revenue growth re-acceleration and order backlog/book-to-bill (if disclosed).
• Gross margin and SG&A ratio to confirm durability of operating margin >12%.
• Asset turnover and utilization of cash to enhance ROE/ROIC.
• Non-operating income volatility and its contribution to ordinary profit.
• CapEx trajectory and any growth investment announcements.

Relative Positioning: Within small-cap industrial/electronics peers, the company screens defensively with superior liquidity, low leverage, and improving margins, but lags on ROE due to low asset turnover and conservative leverage; catalysts would include sustained top-line growth and effective cash deployment.

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