SUNCORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.70B
• Operating Income: ¥-144M
• Net Income: ¥4.44B
• EPS: ¥199.85

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

Verdict: Mixed quarter with weak core operations (negative operating income) masked by large non/extraordinary gains that drove headline profit. Revenue was 47.01 (−18.9% YoY), with gross profit of 12.13 and a gross margin of 25.8%, but SG&A of 13.57 pushed operating income to −1.44. Ordinary income surged to 21.86 (+772.1% YoY) on significant non-operating income of 23.65 versus non-operating expenses of 0.34. Profit before tax reached 44.20 and net income was 44.42 (−75.0% YoY), implying material extraordinary income and a net tax benefit (income tax −0.22). EBITDA was slightly negative at −0.27, underscoring weak core profitability. The non-operating income ratio was high at 53.2%, and ROIC was −0.3%, indicating that invested capital did not earn its cost in the period. DuPont-based ROE was 9.5%, driven by an inflated net margin (94.5%) on a small revenue base, with low asset turnover (0.089) and low leverage (1.13x). Liquidity is strong with a current ratio of 239.5% and D/E of 0.13x; cash and deposits were 31.53 against short-term loans of 26.20. Operating cash flow was 8.73, only 0.20x net income, flagging earnings quality issues and suggesting a heavy contribution from non-cash gains. Financing cash outflows were large at −28.65, mainly due to share repurchases of −20.61, indicating aggressive capital returns relative to internal cash generation. Capex was modest at −0.54, consistent with an asset-light profile, but ROIC underperformance suggests limited return from existing invested capital. Given falling revenue and negative operating profit, sustainability of current earnings is questionable absent recurring non-operating/extraordinary gains. Forward-looking, margin repair in the core business and improved cash conversion are key; continued reliance on investment gains poses volatility risk. The balance sheet can absorb near-term volatility, but negative operating leverage and capital efficiency metrics require close monitoring.

Profitability Analysis

ROE decomposition (DuPont): ROE 9.5% = Net Profit Margin (94.5%) × Asset Turnover (0.089) × Financial Leverage (1.13x). The dominant change driver is the net margin, which is abnormally high due to outsized non-operating and likely extraordinary gains relative to a small revenue base. Business reason: core operations were loss-making (OP −1.44) amid a 18.9% YoY revenue decline, while large gains outside operations (non-operating 23.65 and inferred extraordinary income lifting PBT to 44.20) boosted the bottom line. Sustainability: low; such gains are typically one-off or volatile and not indicative of recurring profitability. Asset turnover is very low (0.089), reflecting a large asset base (notably investment securities 111.80 and noncurrent assets 390.71) against modest sales; improving turnover will require revenue growth or portfolio reshaping. Financial leverage is low (1.13x), so ROE is not leverage-driven and could fall materially if special gains normalize. Concerning trends: SG&A (13.57) exceeded gross profit (12.13), yielding negative operating margin (−3.1%), and revenue contracted 18.9% YoY—i.e., cost structure did not flex with demand, indicating negative operating leverage.

Growth Assessment

Revenue fell 18.9% YoY to 47.01, indicating demand softness or portfolio downsizing. Gross margin stood at 25.8%, but the operating margin was negative due to SG&A exceeding gross profit. Ordinary income rose sharply (+772.1% YoY) on non-operating items, not operational improvement. Net income declined 75.0% YoY despite being elevated at 44.42, implying unusually high gains in the prior-year base; current period also benefited from substantial non/extraordinary gains and a small tax benefit (−0.22). EBITDA was −0.27, pointing to weak core earnings power. Non-operating income of 23.65 and inferred extraordinary gains (bridging ordinary income 21.86 to PBT 44.20) dominated profit composition. With ROIC at −0.3%, incremental growth from the current asset base is not creating value. Outlook hinges on restoring operating profitability (pricing, mix, or cost reduction) and lessening reliance on volatile gains; without that, earnings trajectory is vulnerable if investment-related income normalizes.

Financial Health

Liquidity is strong: current ratio 239.5% and quick ratio 239.5%. No explicit warning thresholds breached (Current Ratio > 1.0, D/E far below 2.0). Solvency profile is conservative with D/E 0.13x and total liabilities 60.41 versus equity 468.92. Maturity mismatch risk appears limited: current assets 138.62 comfortably exceed current liabilities 57.88; cash 31.53 plus receivables 14.04 cover short-term loans of 26.20. Interest-bearing debt detail is partly unreported, but disclosed loans total 28.13 (short + long). Interest coverage is negative on EBITDA basis (−10.19x) due to weak operating earnings, but absolute interest burden is small (interest expense 0.14). Off-balance sheet obligations are not reported; no explicit contingent liabilities disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 0.20x, indicating low cash conversion and a quality concern given heavy reliance on non-cash gains or working capital effects. Operating CF was 8.73 versus net income of 44.42; the divergence suggests gains recognized below operating income and possibly fair value/realization effects not captured in OCF. Capex was modest at −0.54, implying limited reinvestment needs, but also aligning with low ROIC (−0.3%). Investing CF is unreported, so Free Cash Flow cannot be reliably computed; using a narrow proxy (OCF − Capex) suggests c. 8.19, but this excludes acquisitions/disposals and thus is not definitive. Financing CF of −28.65 was driven by share buybacks (−20.61) and possibly debt changes; these outflows exceeded OCF, implying dependence on cash reserves or asset sales. No obvious working capital manipulation is evident from the limited detail, but margin of safety is provided by strong liquidity; still, sustained underperformance in OCF would pressure future distributions.

Dividend Sustainability

Calculated payout ratio is 54.0%, within the general sustainability threshold (<60%), but it is based on a bottom line inflated by non/extraordinary gains and low cash conversion (OCF/NI 0.20x). FCF coverage is not calculable given unreported investing CF; a proxy (OCF − Capex ≈ 8.19) suggests limited headroom if dividends plus buybacks are sizable. Share repurchases of 20.61 materially exceeded operating cash generation, funded likely by balance sheet resources. With ROIC at −0.3% and operating loss, sustaining or increasing shareholder returns without a recovery in core cash earnings would be risky. Policy outlook: likely to emphasize flexible buybacks aligned with portfolio gains; dividend growth would prudently track improvements in OCF and operating margin.

Risk Assessment

Business Risks:

• Core operating loss (OP −1.44) amid 18.9% YoY revenue decline, indicating demand softness and negative operating leverage.
• High dependence on non-operating and extraordinary gains to drive earnings (non-operating income 23.65; inferred extraordinary gains lifting PBT to 44.20).
• Low asset turnover (0.089) and negative ROIC (−0.3%) suggest capital inefficiency.
• Potential margin pressure from SG&A rigidity (SG&A 13.57 > gross profit 12.13).
• Industry demand cyclicality in electronics/security-related businesses (exposure to product cycles and project timing).

Financial Risks:

• Earnings quality risk: OCF/Net Income 0.20 (<0.8) indicating low cash conversion.
• Negative interest coverage on EBITDA basis (−10.19x), though absolute interest burden is small.
• Exposure to valuation/realization risk on investment securities (111.80) that influence non-operating and extraordinary results.
• Potential reliance on balance sheet to fund buybacks (−20.61) if OCF remains weak.

Key Concerns:

• Sustainability of current earnings without one-off gains.
• Execution risk in restoring operating margins to positive territory.
• Volatility in profits if investment-related gains reverse.
• Data gaps (investing CF, dividend breakdown, extraordinary items) reduce visibility on recurring cash flows and payout capacity.

Investment Implications

Key Takeaways:

• Headline profitability driven by non-operating/extraordinary items; core operations are loss-making.
• Cash conversion is weak (OCF/NI 0.20x), questioning the durability of earnings.
• Balance sheet is strong (current ratio 239.5%, D/E 0.13x) and provides near-term flexibility.
• Capital returns (buybacks −20.61) were aggressive relative to operating cash generation.
• ROIC (−0.3%) and low asset turnover (0.089) highlight capital efficiency challenges that need addressing.

Metrics to Watch:

• Operating margin and EBITDA turning positive; SG&A as % of sales trending down.
• OCF/Net Income ratio moving toward >1.0 and working capital changes.
• Breakdown of non-operating and extraordinary gains (nature, recurrence).
• ROIC improvement toward >5% and asset turnover trajectory.
• Investment securities valuation sensitivity and realized gains/losses.
• Net cash position (cash 31.53 vs loans 28.13) after buybacks and any new investments.

Relative Positioning: Versus domestic peers with similar scale, liquidity and leverage are conservative, but core profitability and ROIC are weaker, with a higher reliance on investment-related gains to support earnings and capital returns.

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