Japan Display Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥66.43B
• Operating Income: ¥-14.43B
• Net Income: ¥-16.82B
• EPS: ¥-1.84

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

Japan Display Inc. (JDI) reported FY2026 Q2 consolidated results under JGAAP showing significant top-line contraction and continued operating losses, alongside a stressed balance sheet. Revenue was ¥66.43bn, down 35.5% YoY, reflecting ongoing demand softness and/or portfolio rationalization in core display businesses. Gross profit was negative at ¥-0.70bn, implying gross margin of -1.1%, which underscores acute pricing pressure and/or under-absorption of fixed costs amid weak volumes. Operating loss was ¥-14.43bn (operating margin -21.7%), with EBITDA at ¥-12.37bn, indicating limited contribution from depreciation to bridge the gap to positive cash earnings. Ordinary loss widened to ¥-19.10bn, suggesting meaningful non-operating headwinds including interest expense of ¥1.79bn and other non-operating losses of roughly ¥2.9bn. Net loss stood at ¥-11.36bn (net margin -17.1%), with income tax expense of ¥0.56bn despite losses, likely due to non-deductible items, regional tax, or valuation allowance effects. Operating cash flow was negative at ¥-16.54bn, which is more adverse than the net loss, indicating cash burn from working capital and/or non-cash gains not present, and highlighting earnings quality pressure. Financing cash flow was positive at ¥10.30bn, suggesting reliance on external funding; investing cash flow and cash balance were not disclosed in the provided XBRL items (zeros here reflect non-disclosure rather than actual zero). Total assets were ¥149.43bn and total liabilities ¥141.14bn, while reported total equity was negative at ¥-4.07bn and equity ratio 0.0%, pointing to accumulated deficits; note that liabilities/asset arithmetic would ordinarily imply positive equity, so we rely on the reported negative equity figure and acknowledge possible classification differences under JGAAP. Liquidity appears tight with a current ratio of 80.2%, quick ratio of 69.0%, and negative working capital of ¥-24.69bn, increasing near-term refinancing and supplier-payment risks. Interest coverage was -8.1x on an EBIT basis, underscoring an unsustainable interest burden without a swift earnings turnaround. DuPont ROE was reported at 279.5%, but this is not an economic positive; it is mechanically distorted by negative equity and should not be interpreted as strong return generation. Inventory stood at ¥14.03bn; with revenues falling sharply, inventory risk and potential write-downs warrant close monitoring. The dividend remains suspended (DPS ¥0), appropriate given losses and negative equity. Overall, the quarter reflects severe profitability and cash flow challenges, tight liquidity, and leveraged capital structure, with limited visibility on investment needs due to missing investing CF disclosure. Data limitations include undisclosed cash & equivalents, investing cash flows, and share count details; analysis below focuses on available, non-zero items.

Profitability Analysis

ROE decomposition (DuPont): reported net margin -17.1%, asset turnover 0.445, and financial leverage -36.76 yield a mathematically high ROE of 279.5% due to negative equity; this is not economically meaningful and indicates capital impairment. Gross margin was -1.1% (¥-0.70bn gross loss on ¥66.43bn sales), evidencing severe pricing/mix and/or fixed-cost under-absorption. Operating margin was -21.7% (¥-14.43bn/¥66.43bn), revealing substantial operating deleverage as volumes fell 35.5% YoY. Ordinary margin deteriorated to -28.7%, reflecting interest and other non-operating losses (ordinary loss ¥-19.10bn vs operating loss ¥-14.43bn; delta ≈ ¥-4.67bn). EBITDA was ¥-12.37bn (margin -18.6%), indicating that even before D&A the core business is loss-making. Interest expense of ¥1.79bn with EBIT at ¥-14.43bn yields interest coverage of -8.1x, highlighting that the cost of debt materially burdens earnings. Effective tax rate is shown as 0.0% despite ¥0.56bn tax expense; given the loss position, tax metrics are distorted and may include valuations or regional taxes. Operating leverage: a 35.5% revenue decline coincides with sharp deterioration in margins, implying high fixed-cost intensity; breakeven volumes appear materially above current run-rate. Margin quality: negative gross margin suggests that near-term improvements likely require both price/mix gains and utilization recovery; one-off restructuring or inventory effects could also be present but are not disclosed.

Growth Assessment

Revenue contracted 35.5% YoY to ¥66.43bn, implying significant end-demand weakness or deliberate pruning of low-margin lines; sustainability hinges on design wins and customer mix in smartphone/automotive/IoT displays (not disclosed here). The negative gross margin indicates that current revenue is not profitable, suggesting the portfolio may require further restructuring or price resets to restore contribution margins. Ordinary and net losses point to recurring non-operating drag, particularly from interest cost, which will weigh on growth investments. With OCF at ¥-16.54bn, internally funded growth is constrained; reliance on external financing (¥10.30bn inflow) may continue in the absence of a turnaround. Profit quality is weak: cash burn exceeds accounting loss (OCF/NI = 1.46 in absolute terms), indicating adverse working capital or cash costs not captured by accruals. Outlook near term is challenged by negative working capital and interest burden; any stabilization would require volume recovery, improved utilization, and pricing discipline. Given data gaps for investing CF and capex, visibility on capacity realignment and technology spend is limited. Sequential trends are not provided; therefore, we cannot assess intra-year momentum and must treat YoY change in operating income marked as +0.0% with caution.

Financial Health

Liquidity: current ratio 80.2% and quick ratio 69.0% indicate short-term liabilities exceed liquid assets, with working capital at ¥-24.69bn. Inventories are ¥14.03bn; in a declining sales environment, inventory turnover risk and potential write-downs increase. Cash & equivalents not disclosed; thus, immediate cash runway cannot be assessed from this dataset alone, but negative OCF suggests tight liquidity. Solvency: total liabilities are ¥141.14bn versus total assets ¥149.43bn, while reported total equity is negative at ¥-4.07bn and equity ratio 0.0%; we rely on the reported negative equity, implying accumulated deficits and limited loss-absorption capacity. Debt-to-equity ratio of -34.72x is not economically interpretable due to negative equity but signals high leverage. Interest expense of ¥1.79bn with negative EBIT indicates debt service strain. Capital structure: external financing inflow of ¥10.30bn in the period highlights dependence on creditors/investors for liquidity. Overall, both liquidity and solvency are weak with elevated refinancing risk.

Cash Flow Quality

Earnings quality: OCF was ¥-16.54bn versus net loss of ¥-11.36bn, implying cash burn worse than accrual loss; this suggests unfavorable working capital movements (e.g., receivable collection, inventory build, or payables reduction) and/or cash costs not reflected in current expenses. EBITDA is negative (¥-12.37bn), so core operations are not generating cash even before D&A. Free cash flow cannot be reliably assessed because investing cash flow is undisclosed (reported as 0 due to non-disclosure); the provided FCF of 0 should not be interpreted as genuine breakeven. Depreciation & amortization totaled ¥2.06bn, modest relative to the operating loss, implying that non-cash charges are not the primary driver of losses. Working capital: negative working capital of ¥-24.69bn indicates reliance on supplier credit; if payables normalize, cash outflows could intensify. Financing inflow of ¥10.30bn offset part of the OCF deficit, underscoring reliance on external sources.

Dividend Sustainability

The company paid no dividend (DPS ¥0) with a reported payout ratio of 0.0%. Given negative earnings and negative equity, distributions are appropriately suspended. Free cash flow coverage cannot be assessed due to undisclosed investing cash flows; the reported FCF coverage of 0.00x is a placeholder and not decision-useful. Policy outlook: until profitability, OCF, and equity are restored, dividend resumption appears unlikely. Key conditions for future dividends would include sustained positive EBITDA/OCF, recapitalization to restore positive net assets, and reduction of interest burden.

Risk Assessment

Business Risks:

• Demand volatility in core display end-markets leading to revenue declines (-35.5% YoY).
• Pricing pressure and negative gross margin (-1.1%) indicating weak bargaining power and/or unfavorable mix.
• High fixed-cost base causing severe operating deleverage (operating margin -21.7%).
• Inventory obsolescence/write-down risk with inventories at ¥14.03bn amid falling sales.
• Technology transition risk (e.g., OLED/MicroLED vs. legacy LCD) potentially requiring capex not visible here.
• Customer concentration risk typical in display supply chains (not disclosed but industry-typical).

Financial Risks:

• Negative equity (¥-4.07bn) and equity ratio 0.0%, limiting loss-absorption capacity.
• Weak liquidity: current ratio 80.2%, quick ratio 69.0%, working capital ¥-24.69bn.
• High interest burden (¥1.79bn) with negative EBIT; interest coverage -8.1x.
• Sustained negative OCF (¥-16.54bn) requiring external financing (¥10.30bn inflow).
• Refinancing risk given reliance on financing and tight liquidity.
• Potential covenant pressure if debt agreements include profitability or net asset covenants.

Key Concerns:

• Ability to restore gross profitability and utilization amid a 35.5% revenue decline.
• Near-term liquidity management given negative working capital and undisclosed cash balance.
• Sustainability of financing access while operating losses persist.
• Risk of further equity erosion and potential need for recapitalization.
• Limited visibility on capex/investing needs due to missing investing CF disclosure.

Investment Implications

Key Takeaways:

• Top line contracted 35.5% YoY to ¥66.43bn; demand and mix remain weak.
• Gross margin turned negative (-1.1%), signaling severe pricing/utilization pressure.
• Operating loss ¥-14.43bn and EBITDA ¥-12.37bn; core business cash-negative.
• OCF ¥-16.54bn exceeds net loss, indicating pressured earnings quality.
• Liquidity tight: current ratio 80.2%, quick ratio 69.0%, working capital ¥-24.69bn.
• Negative equity (¥-4.07bn) with 0.0% equity ratio; leverage risk elevated.
• Interest burden material (¥1.79bn), ordinary loss ¥-19.10bn.
• External financing inflow ¥10.30bn highlights dependence on funding.
• Dividend suspended (DPS ¥0), appropriate under current financial profile.
• Data gaps (cash, investing CF, share metrics) limit precision of valuation metrics.

Metrics to Watch:

• Sequential revenue and order trends; book-to-bill if disclosed.
• Gross margin recovery and capacity utilization rates.
• EBITDA trajectory and operating margin improvement.
• Operating cash flow and working capital movements (DSO/DPO/DIO).
• Cash & equivalents balance and undrawn facilities (when disclosed).
• Interest expense run-rate and refinancing outcomes.
• Equity position (net assets) and any recapitalization plans.
• Capex/investing cash flows to assess technology roadmap and restructuring.

Relative Positioning: Within the Japanese display and components peer set, JDI’s FY2026 Q2 profile reflects weaker profitability (negative gross and operating margins), tighter liquidity (sub-1.0x current ratio), and higher financial stress (negative equity, external funding reliance) versus stronger peers that maintain positive gross margins and self-funded operations; execution on restructuring and product-mix upgrades will be critical to narrow the gap.

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