ELECOM CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥58.83B
• Operating Income: ¥6.19B
• Net Income: ¥4.28B
• EPS: ¥56.10

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

Verdict: Solid FY2026 Q2 with margin-led earnings outperformance and healthy cash conversion, supported by a fortress balance sheet. Revenue grew 3.9% YoY to 588.3, while operating income rose a faster 13.5% YoY to 61.9, evidencing operating leverage. Gross profit reached 235.6 with a 40.1% gross margin, indicating stable-to-better product mix and/or pricing discipline. Operating margin expanded to 10.5% (≈+90 bps YoY by our estimate), as SG&A intensity fell to 29.5% of sales. Ordinary income rose 24.8% YoY to 63.1, aided modestly by net non-operating income of 1.21 (interest income 3.02 outpacing expenses 0.02). Net income climbed 26.2% YoY to 42.8, lifting net margin to 7.3% (≈+130 bps YoY by our estimate) despite a 32.0% effective tax rate. Earnings quality is good: operating cash flow of 48.0 exceeds net income (OCF/NI 1.12x), signaling solid cash realization. Liquidity is very strong with current ratio 343% and quick ratio 298%, and leverage is conservative (liabilities-to-equity ≈0.35x; interest coverage ~3,096x). ROE is 5.0% via DuPont (7.3% margin × 0.511 turnover × 1.35x leverage), reflecting conservative leverage and moderate asset turnover. EBITDA was 76.5 with a 13.0% margin, offering ample coverage of modest capex (9.0). A key watch-out is the calculated payout ratio of 103.3% and sizeable share buybacks (70.1) that exceed proxy FCF, implying cash returns are funded partly by existing cash balances. The balance sheet (cash and deposits 452.2) can support this near term, but sustaining >100% payout absent earnings growth or lower capex/buybacks is unlikely. Strategic implication: with ROIC at 10.5% (above 8% excellence benchmark), reinvestment remains attractive; however, management is currently prioritizing shareholder returns. Forward-looking, margin discipline and cash conversion provide resilience, but demand normalization, FX, and price competition remain key external variables. Data gaps (investing CF, dividend amounts, SG&A breakdown) limit deeper granularity, but available data point to a healthy quarter with improving profitability.

Profitability Analysis

ROE decomposition (DuPont): ROE 5.0% = Net Profit Margin 7.3% × Asset Turnover 0.511 × Financial Leverage 1.35x. The largest driver of YoY improvement appears to be net profit margin expansion (≈+130 bps by our estimate), outpacing any changes in asset turnover or leverage. Business rationale: revenue growth of 3.9% combined with contained SG&A (29.5% of sales) delivered operating margin expansion to 10.5%, while net non-operating income and manageable tax rate (32%) supported bottom-line flow-through. Asset turnover remains modest for a distribution-centric peripherals business, and leverage is deliberately conservative, limiting ROE amplification. Sustainability: margin gains look partly structural (mix/pricing, SG&A discipline) but may be partly cyclical if demand or FX turns; leverage policy appears stable, so further ROE gains will rely on continued mix/efficiency improvements. Watch-outs: if SG&A growth re-accelerates ahead of revenue or promotional intensity rises, operating leverage could reverse. Note: SG&A line-item granularity is unreported, limiting deeper cost analytics.

Growth Assessment

Topline grew 3.9% YoY to 588.3, a moderate pace consistent with stable peripheral demand. Operating income grew 13.5% YoY to 61.9, signaling positive operating leverage from mix/pricing and cost control. Ordinary income rose 24.8% YoY to 63.1, aided by higher interest income, though non-operating contributions remain modest to total profit. Net income rose 26.2% YoY to 42.8; net margin uplift indicates improved profitability quality rather than one-off gains. Revenue sustainability: product breadth and channel coverage support stability, but end-demand for PC/smartphone accessories can be cyclical and sensitive to replacement cycles. Profit quality: EBITDA margin of 13.0% and OCF/NI 1.12x indicate healthy conversion; depreciation (14.6) is manageable relative to EBITDA. Outlook: continued focus on SG&A discipline, working capital efficiency, and selective pricing should sustain mid- to high-10% operating margin range, contingent on demand holding and FX not turning adverse. Key external swing factors: JPY movements (import costs), component/input pricing, and competitive pricing pressure.

Financial Health

Liquidity is robust: current ratio 342.8% and quick ratio 298.5%—no warning flags (well >1.0). Solvency: liabilities-to-equity ≈0.35x (301.6/849.7); interest coverage ~3,096x reflects minimal interest burden (interest expense 0.02). Cash and deposits 452.2 provide substantial flexibility for working capital and shareholder returns. Maturity mismatch risk is low: current assets 946.5 far exceed current liabilities 276.1, with accounts receivable 206.5 and inventory 122.4 comfortably covered by cash 452.2 alone. No explicit off-balance sheet obligations are disclosed in the provided data. Equity base is strong (owners’ equity 848.2), and goodwill/intangibles are modest (goodwill 10.6; intangibles 30.3), lowering impairment risk.

Cash Flow Quality

OCF/NI is 1.12x, indicating solid earnings quality and limited accrual risk this quarter. Proxy FCF (OCF minus reported capex only) is approximately 39.0, but full investing cash flow is unreported; true FCF may differ due to other investments or acquisitions. Working capital: period-end cash 452.2, AR 206.5, and inventory 122.4 suggest ample liquidity, but lack of prior-period data prevents assessment of WC release vs build. No signs of aggressive working capital manipulation are evident from available metrics, but confirmation requires period-over-period deltas. Financing CF of -18.2 alongside share repurchases of -70.1 implies other financing inflows/offsets (e.g., short-term borrowing, share issuance), though details are not fully disclosed in the data set.

Dividend Sustainability

Payout ratio (calculated) is 103.3%, which is above the <60% benchmark for comfort and would be unsustainable if maintained. Dividend amounts and total dividends paid are unreported; therefore, coverage analysis relies on the calculated payout and cash flow proxies. Proxy FCF of ~39.0 (OCF minus capex) is below the magnitude of share repurchases (70.1), indicating total cash returns exceed internally generated cash this half and are effectively funded by cash on hand. With cash and deposits of 452.2 and minimal debt service needs, near-term dividend safety is supported by the balance sheet, but sustaining a >100% payout absent earnings growth or lower buybacks would be a medium-term risk. Policy outlook: management appears shareholder-return friendly (large buybacks); continuation likely depends on earnings trajectory and inventory/capex needs.

Risk Assessment

Business Risks:

• Demand cyclicality in PC/smartphone peripherals affecting sell-through and channel inventory
• Price competition and promotional intensity compressing margins
• Product mix shifts toward lower ASP/lower margin categories
• Supply chain and logistics cost variability impacting COGS

Financial Risks:

• Calculated payout ratio >100% and repurchases exceeding proxy FCF, increasing reliance on cash balances
• FX volatility (weak JPY) raising import costs and pressuring margins if not fully passed through
• Potential working capital swings (AR/inventory) that could reduce OCF in a downturn
• Interest income normalization reducing non-operating support to ordinary income

Key Concerns:

• Sustainability of margin expansion if demand softens
• Limited disclosure on investing cash flows and SG&A breakdown obscures cost/investment visibility
• Tax rate at 32% leaves less room for net margin upside vs peers with lower effective rates

Investment Implications

Key Takeaways:

• Margin-led beat: operating margin ~10.5% with estimated ~+90 bps YoY expansion
• Strong cash conversion: OCF/NI at 1.12x with ample cash reserves (452.2)
• ROE 5.0% constrained by conservative leverage; ROIC 10.5% indicates efficient deployment
• Shareholder returns elevated (70.1 buybacks), but total cash returns exceed proxy FCF
• Balance sheet resilience (current ratio ~3.4x, liabilities/equity ~0.35x) mitigates near-term shocks

Metrics to Watch:

• Operating margin trajectory and SG&A ratio versus revenue growth
• Working capital turns (AR days, inventory days) and OCF sustainability
• FX impacts on gross margin and pricing pass-through
• Actual investing cash flows (M&A, capex beyond maintenance) and FCF
• Dividend policy versus payout ratio normalization and buyback pace

Relative Positioning: Within Japan consumer electronics/peripherals peers, Elecom exhibits above-average balance sheet strength, improving margins, and high ROIC, but delivers a mid-single-digit ROE due to conservative leverage; shareholder returns are aggressive relative to internal cash generation this period.

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