MORIO DENKI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.65B
• Operating Income: ¥86M
• Net Income: ¥76M
• EPS: ¥51.54

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

Morio Electric (TSE: 66470) reported FY2026 Q2 consolidated results under JGAAP showing a top-line contraction and compressed profitability, but with a still-solid liquidity profile and manageable leverage. Revenue declined 9.7% YoY to ¥3,654 million, reflecting weaker demand or delivery timing shifts, while operating income fell 22.6% YoY to ¥86 million, indicating negative operating leverage. Net income was ¥68 million (-9.1% YoY), implying a net margin of 1.86%, and EPS was ¥51.54. EBITDA reached ¥188 million, with a modest EBITDA margin of 5.2%, highlighting limited operating buffer. Gross profit was reported at ¥657 million, implying an 18.0% gross margin; however, the disclosed cost of sales figure does not reconcile arithmetically with revenue and gross profit, so margin analysis relies on the stated gross profit and calculated margin. The DuPont framework indicates low ROE of 1.28%, driven by thin net margins (1.86%), moderate asset turnover (0.44x), and modest financial leverage (1.56x). Ordinary income of ¥94 million exceeded operating income, suggesting some positive non-operating balance despite interest expense of ¥13.6 million and an effective tax rate noted as 0.0% in the summary metrics; we assume this rate is not representative for the full year. Operating cash flow was negative at ¥-141 million, materially below net income (OCF/NI = -2.07x), pointing to weak cash conversion in the half, likely due to working capital outflows. Liquidity remains adequate with a current ratio of 182.5% and a quick ratio of 178.9%, supported by working capital of ¥2,592 million. The balance sheet shows total assets of ¥8,313 million and equity of ¥5,331 million, implying a debt-to-equity ratio of 0.70x and financial leverage of 1.56x, which appear conservative. Free cash flow and cash balance were not disclosed (zeros indicate unreported), limiting cash runway analysis; investing cash flow was also unreported, so capex visibility is low for the period. Dividend per share and payout ratio were not disclosed (zeros represent non-disclosure), so distribution policy for the period cannot be inferred; historically, dividend decisions would depend on full-year results and cash flows. Overall, the quarter reflects demand softness and margin pressure with negative cash conversion, offset by a sound liquidity and leverage position. Outlook hinges on 2H revenue recovery, stabilization of input costs, and normalization of working capital. Data limitations (notably unreported cash, investing CF, equity ratio, and shares) and an internal line-item inconsistency warrant caution in interpreting certain ratios.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.86%
• asset_turnover: 0.440x
• financial_leverage: 1.56x
• calculated_ROE: 1.28%
• interpretation: Low ROE is primarily margin-driven; asset utilization is moderate and leverage is conservative, so improvements must come mainly from operating margins. margin_quality:
• gross_margin: 18.0% (gross profit ¥656.8m on revenue ¥3,654m; note cost of sales inconsistency in source line items)
• operating_margin: 2.35% (¥86m / ¥3,654m)
• ordinary_margin: 2.57% (¥94m / ¥3,654m)
• net_margin: 1.86% (¥68m / ¥3,654m)
• EBITDA_margin: 5.2% (¥188.3m / ¥3,654m)
• commentary: Margins compressed YoY as operating income fell faster than revenue, indicating negative operating leverage and/or unfavorable mix and cost pass-through lag. operating_leverage:
• evidence: Operating income -22.6% on revenue -9.7%
• implication: Fixed-cost absorption appears pressured; incremental gross profit likely declined more than sales, suggesting sensitivity to volume and pricing.

Growth Assessment

revenue_sustainability: Top-line declined 9.7% YoY to ¥3,654m. Without segment disclosure, the drop likely reflects cyclical weakness or shipment timing. Sustained recovery will require stabilization in core end-markets and backlog conversion in H2. profit_quality: Ordinary income exceeds operating income due to net non-operating gains net of interest. However, the small absolute profit and thin margins indicate limited cushion against cost volatility. outlook: A return to prior revenue levels and improved cost pass-through could lift margins and ROE. Monitoring order intake, backlog, and price-cost dynamics in 2H is essential, as second-half seasonality may be a driver.

Financial Health

liquidity:

• current_ratio: 182.5% (CA ¥5,735m / CL ¥3,143m)
• quick_ratio: 178.9% (inventory ¥112m is small relative to current assets)
• working_capital: ¥2,592m
• assessment: Short-term liquidity appears comfortable, supporting operations despite negative OCF in the half. solvency:
• debt_to_equity: 0.70x (TL ¥3,746m / TE ¥5,331m)
• interest_coverage: 6.3x (operating income ¥86m / interest expense ¥13.6m)
• leverage: Financial leverage 1.56x indicates a conservative capital structure.
• assessment: Leverage is moderate with sufficient interest coverage, though sustained margin pressure could erode coverage if not addressed. capital_structure: Equity of ¥5,331m versus assets of ¥8,313m suggests ample equity buffer. Equity ratio was not disclosed; reliance on calculated leverage shows a balanced structure.

Cash Flow Quality

earnings_quality: OCF/NI of -2.07x indicates weak cash conversion, likely due to working capital outflows. Earnings in the period did not translate into cash. FCF_analysis: Investing cash flow was unreported; therefore, free cash flow cannot be derived from the provided data. On a pre-investing basis, negative OCF implies negative pre-capex FCF. working_capital: Current assets significantly exceed current liabilities, but period OCF suggests increases in receivables or other current assets and/or declines in payables. Inventory appears low relative to CA, implying receivables or other items are the main swing factors.

Dividend Sustainability

payout_ratio_assessment: Payout ratio and DPS were not disclosed for the half (zeros indicate non-disclosure). With thin profitability and negative OCF in H1, near-term distribution capacity depends on H2 recovery. FCF_coverage: Not assessable given unreported investing CF; OCF negative suggests limited coverage in the period without drawing on cash or balance sheet. policy_outlook: Absent disclosure, assume a conservative stance tied to full-year earnings and cash flow normalization. Balance sheet strength provides flexibility but should be weighed against cash generation.

Risk Assessment

Business Risks:

• Demand cyclicality in end-markets leading to revenue volatility
• Cost inflation and pricing lag compressing margins
• Negative operating leverage due to fixed-cost base
• Project timing and delivery slippage affecting quarterly results
• Supplier lead-times and component availability impacting production

Financial Risks:

• Weak cash conversion and working capital outflows in the period
• Potential decline in interest coverage if margins deteriorate
• Limited visibility on cash and capex due to unreported cash and investing CF
• Exposure to credit risk if receivables increased materially

Key Concerns:

• OCF/NI at -2.07x signals pressure on cash generation
• Operating income down 22.6% on a 9.7% revenue decline indicates margin fragility
• Internal inconsistency between reported cost of sales and gross profit figures necessitates caution in gross margin interpretation

Investment Implications

Key Takeaways:

• Revenue down 9.7% YoY with operating income down 22.6% indicates negative operating leverage
• ROE at 1.28% is margin constrained; leverage is not a driver
• Liquidity is solid (current ratio 182.5%, quick ratio 178.9%) and leverage moderate (D/E 0.70x)
• OCF negative at ¥-141m; cash conversion a key near-term issue
• Data gaps (cash balance, investing CF, dividends) limit full assessment

Metrics to Watch:

• Order backlog and book-to-bill to gauge H2 revenue recovery
• Gross margin trends and price-cost spread
• Operating cash flow and working capital days (DSO/DPO/DIO)
• Interest coverage and ordinary income sustainability
• Capex intensity once investing CF is disclosed

Relative Positioning: Within Japanese small-cap industrials/electrical equipment, Morio Electric exhibits conservative leverage and decent liquidity but currently weaker cash conversion and thin margins; near-term positioning will depend on H2 demand recovery and 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