DAIHEN CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥105.25B
• Operating Income: ¥6.93B
• Net Income: ¥4.52B
• EPS: ¥216.41

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

Daihen Co., Ltd. (TSE: 6622) reported FY2026 Q2 consolidated results under JGAAP showing solid top-line growth and stronger operating leverage. Revenue reached ¥105.253bn, up 9.5% YoY, supported by a 26.5% gross margin (gross profit ¥27.925bn). Operating income rose 36.9% YoY to ¥6.932bn, lifting the operating margin to approximately 6.6%, indicating improved cost absorption and/or mix benefits. Ordinary income was ¥7.896bn, exceeding operating income by roughly ¥0.96bn, suggesting positive non-operating contributions more than offset interest expense of ¥0.39bn. Net income grew 22.7% YoY to ¥5.173bn, with a reported net margin of 4.91% and EPS of ¥216.41. DuPont metrics indicate ROE of 3.23%, driven by net margin of 4.91%, asset turnover of 0.356x, and financial leverage of 1.85x. Liquidity is robust with a current ratio of 222.8% and a quick ratio of 186.7%, underpinned by ¥193.568bn in current assets and ¥86.891bn in current liabilities. The balance sheet is conservative: total equity is ¥159.993bn against total assets of ¥295.816bn, implying an equity ratio around 54.1% (the 0.0% shown is an unreported metric rather than an actual value). Operating cash flow was strong at ¥10.4bn, more than 2x net income, signaling good earnings quality and healthy working capital dynamics in the period. EBITDA was ¥10.051bn, yielding a 9.5% margin, and interest coverage is comfortable at 17.8x (operating income basis). Inventories of ¥31.329bn appear manageable relative to the half-year revenue base but will bear monitoring given macro uncertainty and supply-chain normalization. Reported free cash flow is shown as 0 due to unreported investing cash flows; therefore, underlying FCF cannot be determined from the disclosed figures. Dividend data for the period is not disclosed (DPS and payout shown as 0, indicating not reported), so capital return policy updates for FY2026 cannot be inferred from this dataset. Overall, the company exhibits improving profitability, ample liquidity, and strong cash generation from operations, with modest financial leverage and resilience to interest rate pressure. Data limitations (notably zero placeholders for equity ratio, cash balance, investing CF, and DPS) constrain full assessment of capital allocation and FCF. If annualized, current profitability would imply a mid–single-digit ROE, with room for improvement via margin expansion and asset turnover.

Profitability Analysis

ROE_decomposition: ROE 3.23% = Net margin 4.91% × Asset turnover 0.356× × Financial leverage 1.85×. The leverage factor (Assets/Equity ≈ 295.816/159.993 ≈ 1.85×) aligns with the DuPont input, and the math is internally consistent with the reported ROE. margin_quality: Gross margin 26.5% (¥27.925bn/¥105.253bn) demonstrates healthy value-add. Operating margin improved to about 6.6% with operating income +36.9% YoY versus revenue +9.5% YoY, indicating favorable mix and cost control. Ordinary income margin is ~7.5% (¥7.896bn/¥105.253bn), aided by non-operating gains net of ¥0.39bn interest. Net margin is 4.91%. Based on income tax of ¥1.768bn and ordinary income, an implied effective tax rate is roughly low-20s% (the 0.0% shown is an unreported metric). operating_leverage: Revenue grew 9.5% YoY while operating income rose 36.9% YoY, evidencing positive operating leverage. EBITDA margin of 9.5% vs operating margin ~6.6% indicates a D&A load of ~3.0% of sales; as volumes rise, fixed-cost absorption likely supports incremental margins. Focus areas: sustaining gross margin gains and controlling SG&A to maintain leverage.

Growth Assessment

revenue_sustainability: Top-line growth of 9.5% YoY is solid for the sector and suggests healthy demand across core businesses. Sustainability will depend on end-market conditions in factory automation/robotics, power equipment, and welding solutions, and the company’s order backlog (not disclosed). profit_quality: Operating margin expansion and OCF exceeding net income (OCF/NI 2.01x) indicate that earnings are backed by cash. Ordinary income exceeding operating income implies supportive non-operating items; durability of these items should be monitored. outlook: With improved operating leverage and strong liquidity, the company is positioned to continue margin-focused growth. Risks include macro slowdown, FX volatility affecting ordinary income, and potential normalization of non-operating gains. Absent order and backlog disclosures, near-term growth visibility is moderate.

Financial Health

liquidity: Current ratio 222.8% and quick ratio 186.7% signal ample short-term coverage. Working capital totals ¥106.677bn. Cash and equivalents are shown as 0 due to non-disclosure; nonetheless, current assets of ¥193.568bn provide a strong buffer. solvency: Total liabilities ¥136.949bn vs equity ¥159.993bn implies an equity ratio of ~54.1% and assets/equity leverage of ~1.85x. Interest coverage is 17.8x, indicating low refinancing risk under current earnings. capital_structure: Debt-to-equity is reported at 0.86x (likely inclusive of interest-bearing debt within liabilities). The structure appears conservative with substantial equity backing; absolute debt levels and maturity profile are not disclosed in this dataset.

Cash Flow Quality

earnings_quality: OCF of ¥10.4bn vs net income of ¥5.173bn (OCF/NI 2.01x) suggests strong cash conversion and prudent working capital management in the period. FCF_analysis: Investing cash flow is not disclosed (shown as 0), so FCF cannot be determined. D&A of ¥3.119bn indicates an ongoing capital intensity that likely requires steady capex; absent capex data, we refrain from inferring FCF. working_capital: Inventories are ¥31.329bn; relative to half-year revenue, inventory appears reasonable but sensitive to demand shifts. The large working capital base (¥106.677bn) is a core liquidity source; continued monitoring of receivables collection and inventory turns is key.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as 0, indicating not disclosed for the period. Therefore, we cannot compute payout against earnings. FCF_coverage: Free cash flow is shown as 0 due to missing investing CF; FCF coverage of dividends cannot be assessed. policy_outlook: Without disclosed dividend data or guidance, we cannot comment on policy changes. With strong liquidity and positive OCF, the capacity for distributions appears supported by fundamentals, but clarity depends on capex needs and capital allocation priorities.

Risk Assessment

Business Risks:

• End-market cyclicality in industrial automation, welding, and power equipment
• FX volatility impacting ordinary income and export competitiveness
• Supply chain and component availability potentially affecting lead times and margins
• Pricing pressure and competition in capital goods and robotics
• Project execution risk in power systems and grid-related businesses

Financial Risks:

• Potential capex intensity not disclosed, which could constrain future FCF
• Working capital swings impacting cash conversion in downcycles
• Exposure to interest rate changes despite strong coverage
• Non-operating income variability influencing ordinary income

Key Concerns:

• Lack of disclosed investing cash flows and cash balance limits visibility on FCF and net cash/debt
• Dividend data not reported, obscuring shareholder return trajectory
• Inventory levels need monitoring versus demand to avoid de-stocking impact on margins

Investment Implications

Key Takeaways:

• Revenue up 9.5% YoY to ¥105.253bn with broad-based strength
• Operating income up 36.9% YoY; operating margin ~6.6% indicates stronger operating leverage
• OCF/NI at 2.01x evidences high earnings quality
• Balance sheet conservative with equity ratio ~54% and interest coverage 17.8x
• ROE at 3.23% with scope to improve via margin expansion and asset turnover
• Data gaps (investing CF, cash, dividend) limit assessment of FCF and capital returns

Metrics to Watch:

• Order intake and backlog (not disclosed) to gauge revenue sustainability
• Gross and operating margin trajectory vs input costs
• Working capital turns, especially inventory turnover
• Investing cash flows and capex to derive true FCF
• Ordinary income components (FX gains/losses, investment income) durability
• Effective tax rate normalization

Relative Positioning: Within Japanese electrical equipment/capital goods peers, Daihen shows improving operating leverage and strong liquidity with moderate leverage; near-term visibility is tempered by limited disclosures on capex, cash, and dividends.

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