EBRAINS,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.94B
• Operating Income: ¥237M
• Net Income: ¥125M
• 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

Eblen Co., Ltd. (TSE: 65990) delivered solid profit expansion in FY2026 Q2 despite essentially flat topline growth. Revenue was ¥1,937 million (+0.3% YoY), while operating income rose 26.3% to ¥237 million, indicating meaningful margin improvement and cost discipline. Gross profit was ¥402 million, implying a gross margin of 20.8%, and operating margin expanded to 12.2%. Ordinary income reached ¥253 million, and net income increased 36.7% YoY to ¥170 million, resulting in a net margin of 8.78%. DuPont analysis shows ROE of 3.49%, driven by a modest net margin (8.78%), low asset turnover (0.328x), and low financial leverage (1.21x). The balance sheet is conservative with total assets of ¥5,907 million and total liabilities of ¥1,118 million; computed equity/asset ratio is approximately 82.5% (the reported equity ratio of 0.0% appears undisclosed rather than zero). Liquidity is very strong, with a current ratio of 657% and a quick ratio of 633%, supported by current assets of ¥4,646 million versus current liabilities of ¥707 million. Working capital is ample at ¥3,939 million, reducing refinancing and short-term liquidity risk. Interest burden is negligible (¥42 thousand), and interest coverage based on operating income is an exceptional 5,642.9x. However, cash conversion was weak: operating cash flow (OCF) was ¥16.38 million, only 10% of net income and roughly 6.7% of EBITDA, suggesting working capital absorption or timing effects. Investing cash flow was undisclosed (reported as 0), and financing cash flow was an outflow of ¥57.34 million, possibly reflecting shareholder returns or debt repayment (details not disclosed). EPS was ¥112.89; shares outstanding were not disclosed in the provided data. Overall, profitability improved on an operating basis, the capital structure remains under-levered, and liquidity is abundant, but cash flow conversion is a key watchpoint. Revenue momentum appears subdued, implying margin management rather than volume growth was the main driver of earnings. Absent detailed disclosures on cash and investing activities, free cash flow and dividend capacity cannot be precisely assessed this period. Key data gaps include the equity ratio (undisclosed), cash balance, investing cash flow details, dividend policy, and share count, which constrain precision of per-share and capital allocation analysis. The outlook hinges on sustaining cost efficiencies, normalizing working capital to lift OCF, and re-accelerating revenue growth.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 8.78% (¥170m / ¥1,937m)
• asset_turnover: 0.328x (¥1,937m / ¥5,907m)
• financial_leverage: 1.21x (Assets/Equity = ¥5,907m/¥4,873m)
• calculated_ROE: 3.49% (matches reported 3.49%) margin_quality:
• gross_margin: 20.8% (¥402m/¥1,937m)
• operating_margin: 12.2% (¥237m/¥1,937m)
• ordinary_margin: 13.1% (¥253m/¥1,937m)
• net_margin: 8.78% (¥170m/¥1,937m)
• commentary: Operating margin expanded markedly versus modest sales growth, implying effective SG&A control and/or product mix improvement. Net margin benefited further from minimal interest expense and likely a normalized tax rate. operating_leverage: Revenue grew +0.3% YoY while operating income grew +26.3% YoY, evidencing positive operating leverage from fixed-cost dilution and expense discipline.

Growth Assessment

revenue_sustainability: Top-line growth was essentially flat at +0.3% YoY, suggesting end-demand softness or stable volumes/pricing. Without segment/order disclosures, sustainability is uncertain. profit_quality: Profit growth outpaced sales due to margin expansion. With minimal interest and an estimated tax burden in the mid-20s percent range, earnings appear primarily operationally driven. outlook: Near-term earnings resilience depends on maintaining improved cost structure and mix; to sustain double-digit profit growth, a reacceleration in revenue will likely be required. Normalization of working capital could bolster cash earnings conversion.

Financial Health

liquidity:

• current_ratio: 657.3% (¥4,645.8m / ¥706.8m)
• quick_ratio: 632.6% ((¥4,645.8m - ¥174.1m) / ¥706.8m)
• working_capital: ¥3,938.9m
• assessment: Exceptional liquidity with substantial current asset buffer; near-term funding risk is minimal. solvency_capital_structure:
• total_assets: ¥5,907m
• total_liabilities: ¥1,118m
• total_equity: ¥4,873m
• debt_to_equity: 0.23x (Liabilities/Equity)
• equity_ratio_computed: ≈82.5% (Equity/Assets) – reported 0.0% is undisclosed, not zero
• interest_coverage: 5,642.9x (Operating income ¥237m / Interest ¥0.042m)
• assessment: Very conservative balance sheet with low leverage and negligible interest burden.

Cash Flow Quality

earnings_quality: Net income of ¥170m converted to only ¥16.38m of OCF (OCF/NI = 0.10), indicating significant working capital outflows and/or timing effects this period. FCF_analysis: Investing cash flow is undisclosed (reported as 0). Without capex detail, true FCF cannot be determined; proxy FCF based solely on OCF would be limited at ¥16.38m. working_capital: Inventories stood at ¥174.1m (about 11% of gross profit), but receivables and other current asset components are not disclosed; the weak OCF suggests receivable growth or other current asset build.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are undisclosed (reported as 0.00). With EPS at ¥112.89 and strong balance sheet capacity, potential payout appears supportable in principle, but current-period cash conversion was weak. FCF_coverage: Cannot be assessed due to undisclosed investing cash flows and capex; OCF alone provides limited coverage. policy_outlook: Capital allocation stance is unclear given lack of dividend disclosure and a negative financing cash flow (¥57.34m) that could reflect dividends or debt repayment; further disclosure is needed.

Risk Assessment

Business Risks:

• Muted revenue growth (+0.3% YoY) suggests demand softness or pricing pressure risk.
• Potential customer concentration typical in industrial electronics could elevate volume volatility.
• Supply chain and component procurement risks (lead times, pricing) could affect margins.
• Product mix and project timing can introduce lumpiness in quarterly performance.
• Macroeconomic and capex cycle sensitivity in end-markets.

Financial Risks:

• Weak cash conversion (OCF/NI = 0.10) indicating working capital strain.
• Limited disclosure on cash balance and capex impedes FCF assessment.
• Small interest expense implies minimal risk from rates, but low ROE (3.49%) could persist if asset turnover remains subdued.
• Potential FX exposure if exports or imported components are material (not disclosed).

Key Concerns:

• Sustainability of margin gains without corresponding revenue growth.
• Normalization of working capital and recovery of OCF.
• Visibility on investing needs (capex) and dividend policy.

Investment Implications

Key Takeaways:

• Earnings leverage: Operating income up 26.3% on +0.3% sales underscores strong cost control.
• Conservative balance sheet: Computed equity ratio ~82.5%, debt-to-equity 0.23x, and very high interest coverage.
• Low ROE (3.49%): Driven by low asset turnover and conservative leverage.
• Cash conversion weak: OCF ¥16.38m vs NI ¥170m; WC management is critical.
• Margin profile improving: Operating margin 12.2% and EBITDA margin 12.7%.
• Revenue momentum subdued: Top line essentially flat YoY.

Metrics to Watch:

• OCF/Net income and OCF/EBITDA conversion ratios
• Receivables days and inventory turns (when disclosed)
• Gross and operating margins for signs of sustained mix/efficiency gains
• Capex and investing cash flows to gauge FCF capacity
• Order backlog/book-to-bill (if disclosed) for revenue visibility
• Tax rate normalization and any extraordinary items affecting bottom line

Relative Positioning: Versus small-cap industrial electronics peers, Eblen exhibits stronger balance sheet conservatism and liquidity, mid-teens EBITDA/operating margins, but lower ROE due to low asset turnover and under-levered capital structure; current cash conversion trails best-in-class peers pending working capital normalization.

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