TERASAKI ELECTRIC CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥29.16B
• Operating Income: ¥2.67B
• Net Income: ¥1.58B
• EPS: ¥148.09

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

Terasaki Electric Industry (6637) delivered a solid FY2026 Q2 performance with revenue of ¥29,155 million, up 8.3% YoY, indicating healthy demand and execution in its core businesses. Gross profit was ¥7,477 million, translating to a gross margin of 25.6%, which supports the view of stable pricing and cost control amid input cost volatility. Operating income increased 18.9% YoY to ¥2,669 million, expanding the operating margin to 9.1% and evidencing positive operating leverage as revenue growth outpaced operating cost growth. Ordinary income of ¥2,830 million (9.7% margin) benefited from low financing costs, with interest expense at just ¥46 million. Net income rose 22.3% YoY to ¥1,929 million, yielding a net margin of 6.62% and EPS of ¥148.09. The DuPont breakdown shows a calculated ROE of 3.58%, driven by a 6.62% net margin, asset turnover of 0.372x, and modest financial leverage of 1.45x. Operating cash flow was strong at ¥4,486 million, equating to 2.33x net income, indicating robust earnings quality with favorable working capital dynamics. Liquidity appears very strong with a current ratio of 308% and quick ratio of 263%, supported by current assets of ¥51,199 million against current liabilities of ¥16,608 million. The capital structure is conservative, with total liabilities of ¥22,464 million against equity of ¥53,942 million (liabilities-to-equity 0.42x). Although the reported equity ratio field shows 0.0% (unreported), the implied equity ratio is approximately 68.9% (¥53,942m / ¥78,276m). Interest coverage is high at 57.7x (operating income vs. interest), underscoring low financial risk. EBITDA of ¥3,445 million implies an EBITDA margin of 11.8%, consistent with improved operating efficiency. Free cash flow is shown as 0 in the dataset due to unreported investing cash flows; thus FCF and dividend coverage cannot be reliably assessed from the provided figures. The effective tax rate in the calculated metrics is shown as 0.0%, but this is inconsistent with the reported income tax of ¥671 million and should be treated as unreported. Several items (equity ratio, cash and equivalents, investing cash flows, dividends, share count, BVPS) are zero in the dataset and likely reflect non-disclosure rather than true zeros. Overall, the company exhibits improved profitability, strong cash generation from operations, and a very solid balance sheet, though full capital allocation and payout assessment is constrained by missing disclosures.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 6.62%
• asset_turnover: 0.372
• financial_leverage: 1.45
• calculated_ROE: 3.58%
• commentary: ROE is modest at 3.58%, primarily constrained by low asset turnover typical of project-based and equipment businesses, while margins improved and leverage remains conservative. margin_quality:
• gross_margin: 25.6%
• operating_margin: 9.15%
• ordinary_margin: 9.71%
• net_margin: 6.62%
• EBITDA_margin: 11.8%
• insights: YoY growth in operating income (+18.9%) outpaced revenue growth (+8.3%), indicating improved mix and/or SG&A efficiency. Low interest burden supports ordinary margin. Net margin expansion is consistent with operating leverage and disciplined costs. operating_leverage: Positive operating leverage is evident: operating income growth (+18.9% YoY) exceeded revenue growth (+8.3% YoY). Fixed-cost absorption likely improved, and cost control in SG&A flowed through to higher operating margin.

Growth Assessment

revenue_sustainability: Revenue of ¥29,155 million grew 8.3% YoY, suggesting healthy underlying demand across key end markets (e.g., power distribution/switchgear for industrial and marine). Backlog/order intake data are not provided, so visibility into future quarters is limited. profit_quality: Operating income rose to ¥2,669 million with margin expansion to 9.1%, and net income increased to ¥1,929 million. Low interest expense (¥46 million) indicates minimal reliance on debt for profit growth, and OCF/NI of 2.33x supports earnings quality. outlook: With strong liquidity and conservative leverage, the company appears well-positioned to fund growth. However, the absence of investing cash flow and capex data limits visibility into capacity expansion and medium-term growth drivers. Continued margin discipline and order trends will be key to sustaining mid- to high-single-digit revenue growth.

Financial Health

liquidity:

• current_ratio: 308.3%
• quick_ratio: 262.6%
• working_capital: ¥34,590,913,000
• note: Cash and equivalents are shown as 0 in the dataset (unreported). Nonetheless, large current assets vs. current liabilities imply ample short-term liquidity. solvency:
• total_assets: ¥78,276,000,000
• total_liabilities: ¥22,463,871,000
• total_equity: ¥53,942,000,000
• debt_to_equity: 0.42x
• equity_ratio_implied: 68.9%
• interest_coverage: 57.7x
• commentary: Low leverage and strong coverage indicate limited solvency risk and capacity to absorb shocks. capital_structure: Balance sheet is equity-heavy, with liabilities at ~29% of assets and implied equity ratio near 69%. This provides flexibility for investment or shareholder returns.

Cash Flow Quality

earnings_quality: OCF of ¥4,485,880,000 versus net income of ¥1,929,000,000 (OCF/NI 2.33x) indicates strong conversion, likely aided by working capital inflows and non-cash charges (depreciation ¥776 million). FCF_analysis: Free cash flow is shown as 0 due to unreported investing cash flows. Without capex and acquisition data, true FCF cannot be determined. Based on OCF alone, internal funding capacity appears robust. working_capital: Current assets ¥51.2bn vs. current liabilities ¥16.6bn; inventories at ¥7.59bn. The strong quick ratio suggests limited reliance on inventory for liquidity; however, absent receivables and payables data, detailed turns and cash conversion cycle cannot be assessed.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.0% in the dataset and should be treated as unreported. With EPS of ¥148.09 and strong OCF, capacity for dividends appears supported in principle, but actual policy and payouts are not disclosed here. FCF_coverage: FCF is unreported; therefore, dividend coverage by FCF cannot be evaluated. OCF is sufficiently strong to suggest coverage potential, subject to capex needs. policy_outlook: No dividend policy information is provided. Given the conservative balance sheet, the company has optionality for payouts, but clarity depends on management’s capital allocation priorities (growth capex vs. shareholder returns).

Risk Assessment

Business Risks:

• Exposure to cyclical end markets (industrial plants, marine, and infrastructure) affecting order intake and backlog.
• Project execution and timing risk causing revenue and margin volatility across quarters.
• Raw material cost volatility (e.g., copper and steel) impacting margins despite recent resilience.
• Supply chain constraints and lead-time variability for electrical components.
• Customer concentration risk on large projects and potential delay/cancellation risk.
• FX fluctuations affecting import costs and overseas project profitability.

Financial Risks:

• Working capital swings typical of project businesses could temporarily depress OCF.
• Potential increase in capex (unreported) could reduce near-term FCF.
• Interest rate normalization could modestly increase financing costs, though current leverage is low.
• Accounting presentation differences under JGAAP may limit comparability of certain items (e.g., other income/expenses).

Key Concerns:

• Lack of disclosed investing cash flows limits visibility on FCF and capital intensity.
• Dividend data (DPS, payout ratio) unreported, constraining assessment of capital return framework.
• Reported equity ratio and cash balance fields show zero (unreported), limiting direct validation of certain solvency and liquidity metrics.

Investment Implications

Key Takeaways:

• Revenue growth of 8.3% YoY with stronger operating leverage drove operating income up 18.9% YoY.
• Margins are healthy: gross 25.6%, operating 9.1%, net 6.62%; EBITDA margin at 11.8%.
• ROE at 3.58% is modest, constrained by asset turnover, but supported by improved margins and low leverage.
• Cash generation is strong with OCF/NI at 2.33x; liquidity robust (current ratio 308%, quick 263%).
• Balance sheet conservative: liabilities-to-equity 0.42x; implied equity ratio ~68.9%; interest coverage 57.7x.
• Data gaps on investing cash flows and dividends prevent firm conclusions on FCF and payout capacity.

Metrics to Watch:

• Order backlog and book-to-bill for demand visibility.
• Gross margin and SG&A ratio to gauge persistence of operating leverage.
• OCF/NI and working capital movements (receivables, payables, inventory turns).
• Capex and investing cash flows to assess true FCF and growth investments.
• ROE trajectory via asset turnover improvements and margin expansion.
• Dividend announcements and shareholder return policy clarity.

Relative Positioning: Within Japanese electrical equipment and switchgear peers, Terasaki exhibits a conservative balance sheet, strong operating cash conversion, and improving margins, though ROE is lower than high-ROE peers due to modest asset turnover; visibility on capital allocation is currently limited by unreported investing and dividend data.

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