TOREX SEMICONDUCTOR LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.88B
• Operating Income: ¥414M
• Net Income: ¥6M
• EPS: ¥31.72

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

Torex Semiconductor (6616) reported FY2026 Q2 (cumulative) consolidated results under JGAAP showing mixed dynamics: topline softness but improved operating profit and strong operating cash flow. Revenue declined 5.1% YoY to ¥11.88bn, reflecting a continued industry digestion phase, yet operating income rose 23.1% YoY to ¥0.41bn as cost control and mix benefits supported margin resilience. Gross profit was ¥3.35bn, translating to a 28.2% gross margin; while modest for analog/power IC peers, it held firm despite lower sales. Operating margin improved to roughly 3.5%, indicating tighter SG&A and potentially lower variable opex, though profitability remains subdued in absolute terms. Ordinary income was ¥0.38bn and net income ¥0.34bn (EPS ¥31.72), with net margin at 2.83%, consistent with a trough-like phase in the cycle. DuPont decomposition yields ROE of 1.92%, driven by a low net margin (2.83%), slow asset turnover (0.339x), and moderate financial leverage (about 2.0x). Liquidity is strong: current ratio 295% and quick ratio 203%, supported by working capital of ¥13.78bn and inventories of ¥6.49bn. The balance sheet shows assets of ¥35.06bn and equity of ¥17.50bn, implying liabilities/equity of roughly 0.93x; interest coverage is adequate at around 5.0x. Operating cash flow was robust at ¥2.28bn, equating to 6.8x net income, underpinned by sizable non-cash D&A (¥1.07bn) and likely working capital release. However, investing cash flow and cash balances were not disclosed in the XBRL feed, limiting visibility into free cash flow and net debt. Dividend data were not disclosed (DPS and payout shown as zero represent unreported values), so dividend policy and coverage cannot be evaluated from this dataset. The effective tax rate field shows 0%, but based on the disclosed income tax of ¥0.12bn and net income of ¥0.34bn, the implied tax rate is approximately 26–27%. Year-to-date EBITDA of ¥1.48bn (12.5% margin) indicates the core earnings base remains intact despite cyclical headwinds. Overall, the company appears to be navigating the downturn with disciplined costs, solid liquidity, and improving operating profit leverage, though absolute profitability and ROE remain low. Key watch points include gross margin trajectory, inventory normalization, and any capex commitments that could affect free cash flow once investing cash flows are disclosed. Given several unreported items (equity ratio, cash position, investing CF, dividend data), conclusions are based on available non-zero figures and should be revisited when full disclosures are available.

Profitability Analysis

ROE_decomposition: ROE 1.92% = Net margin 2.83% × Asset turnover 0.339 × Financial leverage 2.00. The low ROE is primarily constrained by thin net margins; leverage is moderate and not the bottleneck. margin_quality: Gross margin 28.2% on ¥11.88bn sales, EBITDA margin 12.5%, operating margin ~3.5%, ordinary margin ~3.2%, net margin 2.83%. The margin stack suggests meaningful opex (R&D/SG&A) relative to gross profit. Interest burden (¥83.6m) is manageable given EBITDA of ¥1.48bn. operating_leverage: Despite a 5.1% YoY revenue decline, operating income rose 23.1% YoY, indicating positive operating leverage from cost controls and mix. Approximate DOL vs. sales is negative (improvement despite lower sales), pointing to disciplined expense management and/or FX/mix tailwinds.

Growth Assessment

revenue_sustainability: Revenue contracted 5.1% YoY, consistent with inventory corrections in analog/power management end markets. Sustainability hinges on industrial/automotive demand normalization and customer inventory burn-down timing. profit_quality: Profit growth outpaced sales due to opex efficiency and non-cash supports (D&A). Interest coverage ~5.0x indicates earnings quality is sufficient to service financial costs. Ordinary-to-operating income gap is small, suggesting limited non-operating drag. outlook: Near-term growth depends on order recovery and mix (e.g., higher-value PMICs). A return to mid/high-single-digit sales growth would likely expand operating margins given demonstrated cost discipline, but visibility is limited by cycle and absent backlog/book-to-bill data.

Financial Health

liquidity: Current ratio 295%, quick ratio 203%, working capital ¥13.78bn support strong short-term solvency. Inventories at ¥6.49bn appear manageable relative to sales but require monitoring for obsolescence risk. solvency: Total assets ¥35.06bn, equity ¥17.50bn, liabilities/equity ~0.93x; financial leverage ~2.0x is moderate. Interest coverage ~5.0x provides cushion though not robust for deep downturns. capital_structure: Debt-to-equity is approximately 0.93x when using total liabilities; mix of interest-bearing debt vs. payables not disclosed. Equity ratio not reported in XBRL; inference from assets/equity suggests ~50%, but we refrain from stating a precise figure without the disclosed metric.

Cash Flow Quality

earnings_quality: OCF of ¥2.28bn vs. net income of ¥0.34bn (OCF/NI 6.79x) indicates strong cash conversion aided by D&A (¥1.07bn) and likely favorable working capital movements. FCF_analysis: Investing cash flow is unreported; therefore, Free Cash Flow cannot be determined from this dataset. The provided FCF figure of zero should be treated as undisclosed, not zero. working_capital: Current assets ¥20.84bn and current liabilities ¥7.05bn imply a healthy buffer. The OCF suggests a release from receivables/inventories or disciplined payables management; however, period-over-period WC deltas are not provided.

Dividend Sustainability

payout_ratio_assessment: Payout ratio shown as 0% reflects undisclosed dividend data in XBRL, not an actual zero payout. EPS is ¥31.72, but without DPS we cannot compute the true payout. FCF_coverage: FCF is not computable due to missing investing cash flow; coverage ratios are therefore indeterminable. policy_outlook: Absent disclosed dividends, we cannot assess policy consistency. If the firm targets stability, sustainability would hinge on maintaining positive OCF and moderate capex; confirmation awaits full cash flow disclosures.

Risk Assessment

Business Risks:

• Cyclical demand in analog/power management semiconductors (industrial, consumer, and automotive exposure).
• Customer inventory adjustments delaying shipment recovery.
• Pricing pressure and competitive intensity from global analog IC peers.
• Product and customer concentration risks typical for niche PMIC suppliers.
• Supply chain/foundry capacity constraints and potential backend bottlenecks.
• Technology obsolescence and R&D execution risk.
• FX volatility (USD/JPY, CNY/JPY) impacting both revenue and costs.
• Geopolitical/export control risks affecting sourcing and certain end markets.

Financial Risks:

• Moderate leverage with interest coverage around 5x during a soft earnings phase.
• Potential working capital re-expansion as demand normalizes, which could compress OCF.
• Limited visibility on capex and investing cash flows impedes FCF assessment.
• Unknown cash balance and net debt position due to undisclosed cash and investing CF.

Key Concerns:

• Sustained low ROE (1.92%) unless margins and asset turnover improve.
• Revenue decline (-5.1% YoY) amid industry correction.
• Dependence on cost discipline to sustain operating profit in a weak topline environment.
• Incomplete disclosures (cash, investing CF, dividend data) constraining full analysis.

Investment Implications

Key Takeaways:

• Revenue softness persists, but operating income growth shows effective cost control.
• Liquidity is strong with ample working capital and high current/quick ratios.
• Earnings quality is solid given OCF significantly exceeds accounting profit.
• Absolute profitability and ROE remain low; margin expansion is needed for value creation.
• Capex and cash position are key unknowns that could materially affect FCF and leverage.

Metrics to Watch:

• Gross margin trajectory and operating margin progression.
• Inventory levels and days on hand, alongside receivables collection.
• Order trends/book-to-bill (if disclosed) and end-market mix (auto/industrial vs. consumer).
• Capex and investing cash flows to derive true FCF.
• Interest-bearing debt levels and interest coverage.
• FX sensitivity and hedging outcomes.
• ROIC versus WACC once full capital employed and tax are confirmed.

Relative Positioning: Within Japanese small/mid-cap semiconductor peers, EBITDA margin (12.5%) is respectable but operating margin (~3.5%) is on the low side for the group during a downcycle; liquidity compares favorably, while ROE (1.92%) trails peers that have recovered margins more quickly.

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