Toyo Denki Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.75B
• Operating Income: ¥27M
• Net Income: ¥99M
• EPS: ¥12.77

Income Statement

Balance Sheet

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

Toyo Denki Co., Ltd. (66550) reported FY2026 Q2 consolidated results under JGAAP with a clear deceleration in topline and profits amid thin operating margins. Revenue came in at ¥3,755 million, down 16.3% YoY, indicating softer demand or delivery timing effects in the quarter. Operating income was ¥27 million, down 54.6% YoY, reflecting negative operating leverage as fixed costs weighed more heavily on a smaller revenue base. Ordinary income was ¥83 million, suggesting some support from non-operating items relative to operating earnings. Net income was ¥53 million (net margin 1.41%), down 49.2% YoY, consistent with the compression seen at the operating line. Gross profit is shown as ¥1,138,974 million (gross margin 30.3%), which conflicts with the reported cost of sales (¥3,348,168 million) because revenue minus cost of sales would imply gross profit of about ¥407 million; we therefore treat the gross margin as the more internally consistent signal and note cost-of-sales disclosure as likely mis-tagged. The DuPont bridge indicates a low ROE of 0.83%, driven by a modest net margin and low asset turnover (0.357x), with moderate leverage (assets/equity of 1.65x) providing limited amplification. Liquidity remains strong with a current ratio of 260.6% and a quick ratio of 251.7%, supported by ¥7,511 million of current assets versus ¥2,882 million of current liabilities. Solvency appears stable with a debt-to-equity proxy of 0.70x (total liabilities to equity), and an implied equity ratio around 60.5% (equity of ¥6,362 million over assets of ¥10,518 million), despite the disclosed equity ratio showing 0.0% (likely unreported in XBRL). Interest coverage is thin at about 3.0x, leaving limited buffer if earnings weaken further. Cash flow statements are unreported (all zeros), so operating cash flow, free cash flow, and working capital cash conversion cannot be assessed this quarter. Depreciation is also unreported (zero), so EBITDA figures and cash earnings quality cannot be validated. EPS was ¥12.77, but shares outstanding are unreported, limiting per-share context and valuation comparability. No dividend was disclosed (DPS 0), consistent with preserving cash amid lower profitability and incomplete cash flow disclosure. Overall, the quarter reflects pressure on revenue and profitability with negative operating leverage, balanced by strong liquidity and a solid equity base, but cash flow visibility is a key limitation. Data gaps (notably cash flows, depreciation, share count, and the misaligned cost-of-sales line) temper confidence in margin and earnings quality assessments.

Profitability Analysis

ROE of 0.83% decomposes into: net margin 1.41% × asset turnover 0.357× × financial leverage 1.65×. The primary drag is low net margin; asset efficiency is also subdued, and leverage is moderate. Gross margin is indicated at 30.3% (based on gross profit of ¥1,138,974 thousand on ¥3,755,000 thousand revenue), though the reported cost-of-sales number conflicts; we rely on the gross margin as the consistent data point. Operating margin is approximately 0.7% (¥27 million OI on ¥3,755 million revenue), evidencing a thin cost structure buffer. Ordinary margin is roughly 2.2%, showing some non-operating tailwinds versus operating profit. The significant YoY drop in revenue (−16.3%) coupled with a sharper decline in operating income (−54.6%) signals negative operating leverage and limited short-term cost flexibility. Interest expense of ¥9.1 million with operating income of ¥27 million yields interest coverage around 3.0x, indicating constrained headroom. The effective tax rate indicator shows 0.0%, but taxes were booked (¥5.6 million), so the metric is not reliable this quarter. Overall profitability quality is mixed: gross margin looks acceptable if accurate, but operating execution remains weak, and earnings are vulnerable to further revenue softness.

Growth Assessment

Revenue declined 16.3% YoY to ¥3,755 million, pointing to demand softness, delivery timing, or order backlog normalization. Profit contraction outpaced sales (OP −54.6% YoY), underlining negative operating leverage and weaker cost absorption. Net income declined 49.2% YoY to ¥53 million, consistent with the operating profit deterioration. The ordinary income at ¥83 million suggests some support from non-operating income or lower non-operating costs, but not enough to offset operating weakness. With asset turnover at 0.357x, capital deployment is not yet translating into robust revenue generation. The reported 30.3% gross margin suggests some product mix or pricing resilience, but the cost-of-sales inconsistency reduces confidence in precise margin analysis. EPS of ¥12.77 indicates profitability on a per-share basis, but absent share count data, growth per share versus prior periods cannot be verified. Near-term outlook hinges on revenue stabilization and cost discipline; the current margin structure offers limited buffer if volumes stay low. Given the liquidity strength, the company has capacity to navigate near-term volatility, but sustainable growth will require improving throughput and operating efficiency. There are insufficient data to infer order trends or backlog; management commentary (not provided) would be important to assess demand visibility. Without cash flow disclosure, the durability of earnings (cash conversion) is uncertain. Overall, near-term growth momentum appears weak with risks skewed to execution on cost and volumes.

Financial Health

Total assets were ¥10,518 million and total equity ¥6,362 million, implying a calculated equity ratio of about 60.5%, despite the reported equity ratio showing 0.0% (likely unreported). Total liabilities were ¥4,469 million, yielding a liabilities-to-equity ratio of 0.70x. Current assets were ¥7,511 million versus current liabilities of ¥2,882 million, producing a current ratio of 260.6% and a quick ratio of 251.7%, supported by low inventories (¥256 million). Working capital totaled approximately ¥4,629 million, offering ample short-term liquidity. Interest expense was ¥9.1 million with operating income of ¥27 million, for an interest coverage of ~3.0x; while serviceable, this is a narrow cushion if operating profit softens. The capital structure appears conservative with moderate leverage and a solid equity base. No information is available on long-term debt composition, maturities, or covenant terms. The absence of cash and cash equivalents data (reported as zero) is an XBRL disclosure gap rather than an indicator of no cash on hand. Overall solvency and liquidity are sound on balance sheet metrics, but earnings coverage is tight.

Cash Flow Quality

Operating, investing, and financing cash flows are all unreported (shown as zero), so OCF/NI, FCF, and cash conversion cannot be analyzed this quarter. The OCF/Net Income ratio shows 0.00 due to missing OCF, not because OCF is actually zero. Depreciation and amortization are unreported, preventing a reliable EBITDA or cash earnings assessment. Working capital levels are known (current assets and liabilities), but without period flow data, we cannot evaluate whether receivables, payables, or inventory movements drove or absorbed cash. Given thin operating margins and negative operating leverage, cash generation could be fragile if collections slow or inventories build, but this cannot be confirmed from the provided data. Free cash flow coverage of dividends cannot be assessed as both FCF and DPS are effectively unreported for cash purposes. In summary, cash flow quality is indeterminable this quarter due to disclosure gaps, and conclusions must be deferred until OCF and capex data are available.

Dividend Sustainability

Annual DPS is reported as 0.00 with a payout ratio of 0.0%, implying no dividend for the period or no disclosure. With net income of ¥53 million and strong balance sheet liquidity, a modest dividend could be serviceable in principle, but the complete absence of cash flow disclosure prevents assessing FCF coverage. The company may be prioritizing balance sheet strength and flexibility amid profit pressure, but no explicit policy is provided. Until operating cash flow and capex are disclosed, sustainability judgments remain tentative. If DPS remains at zero, payout risk is moot; if reinstated, cash conversion and operating visibility will be key constraints.

Risk Assessment

Business Risks:

• Volume sensitivity and negative operating leverage evidenced by OP falling faster than revenue
• Potential demand softness or order timing leading to a 16.3% YoY revenue decline
• Margin pressure from limited cost flexibility at low volumes
• Product mix or pricing uncertainty given conflicting cost-of-sales disclosure
• Dependence on non-operating items to support ordinary income over operating income

Financial Risks:

• Thin interest coverage (~3.0x) leaves limited buffer if earnings deteriorate
• Cash flow visibility is absent (OCF, capex unreported), obscuring liquidity runway from cash generation
• Data gaps on depreciation and capex hinder assessment of maintenance investment needs
• Equity ratio reported as 0.0% in XBRL despite strong calculated equity base, indicating reporting inconsistency

Key Concerns:

• Discrepancy between reported gross profit and cost of sales suggests data tagging or classification errors
• Operating margin at ~0.7% is vulnerable to small demand shocks
• Unreported cash and cash equivalents and cash flow statements impede dividend and FCF assessments

Investment Implications

Key Takeaways:

• Topline contracted 16.3% YoY; operating income fell 54.6% YoY, showing negative operating leverage
• Net margin is low at 1.41%, yielding a modest ROE of 0.83%
• Liquidity is strong (current ratio 260.6%, quick ratio 251.7%) and leverage moderate (liabilities/equity 0.70x)
• Interest coverage is thin at ~3.0x, making profit recovery important
• Cash flow data are missing; earnings quality and FCF durability cannot be verified
• Gross margin appears 30.3%, but cost-of-sales disclosure conflicts with gross profit

Metrics to Watch:

• Order intake, backlog, and book-to-bill to gauge revenue stabilization
• Operating margin progression and fixed-cost absorption
• Operating cash flow, capex, and FCF once disclosed
• Working capital turns (DSO, DIO, DPO) and inventory levels
• Interest coverage and ordinary income composition
• Clarified cost-of-sales and gross margin reconciliation

Relative Positioning: Balance sheet strength (high calculated equity ratio and strong liquidity) compares favorably to peers with higher leverage, but profitability and cash flow visibility lag due to thin operating margins, negative operating leverage, and unreported cash flow 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