ELECOM CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥58.83B
• Operating Income: ¥6.19B
• Net Income: ¥3.39B
• 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

ELECOM Co., Ltd. (TSE: 6750) reported FY2026 Q2 consolidated results showing steady top-line growth and notable margin expansion. Revenue rose 3.9% YoY to ¥58.8bn, while operating income increased 13.5% YoY to ¥6.19bn, indicating improved operating leverage. Ordinary income of ¥6.31bn modestly exceeded operating income, suggesting small but positive non-operating contributions. Net income advanced 26.2% YoY to ¥4.28bn, outpacing sales growth on better cost efficiency and disciplined expense control. Gross margin stood at a healthy 36.9%, and operating margin reached approximately 10.5%, underscoring solid pricing power and product mix resilience. EBITDA was ¥7.73bn with a 13.1% margin, providing additional cushion from non-cash charges. DuPont analysis points to a calculated ROE of 5.04%, driven by a 7.28% net margin, 0.511x asset turnover, and modest financial leverage of 1.35x. The balance sheet is conservative: total assets were ¥115.1bn, equity ¥85.0bn, and liabilities ¥32.0bn, implying low leverage and substantial solvency capacity. Liquidity remains strong with a current ratio of 322% and quick ratio of 281%, supported by sizeable working capital of ¥65.0bn. Operating cash flow of ¥5.58bn exceeded net income (OCF/NI of 1.30x), generally indicative of good earnings quality. Inventory was ¥11.94bn; against H1 cost of sales of ¥34.9bn, implied inventory turns are roughly 2.9x for the half (annualized ~5.8x), consistent with stable supply-chain execution. Financing cash outflows of ¥8.81bn suggest shareholder returns or debt servicing; however, detailed breakdowns and dividend data for the period are not disclosed in the provided fields. Some reported zeros (e.g., equity ratio, interest expense, investing cash flow, cash balance, DPS) reflect undisclosed items rather than true zeros; analysis focuses on available non-zero data. Effective tax expense was ¥1.51bn; based on ordinary income this implies an approximate effective tax rate in the mid‑20% range, despite a reported metric of 0.0%. Overall, ELECOM delivered quality earnings progress with healthy cash conversion and a robust balance sheet, though limited disclosures around capital allocation (dividends, buybacks) and investing cash flows constrain full assessment of free cash flow and shareholder return sustainability. The outlook hinges on maintaining gross margin discipline amid FX and input cost swings, and on inventory management through seasonal demand peaks. Data limitations should be acknowledged, but the available indicators collectively point to solid fundamental momentum in the period.

Profitability Analysis

ROE decomposition: With net profit margin at 7.28%, asset turnover at 0.511x, and financial leverage at 1.35x, calculated ROE is 5.04%, consistent with the reported figure. Margin quality: Gross margin is 36.9%, operating margin is approximately 10.5% (¥6.19bn / ¥58.83bn), and EBITDA margin is 13.1%, indicating disciplined opex and mix benefits; ordinary margin at ~10.7% suggests minor support from non-operating items. The YoY gap between revenue growth (+3.9%) and operating income growth (+13.5%) evidences operating leverage and cost efficiencies. Tax expense of ¥1.51bn against ordinary income of ¥6.31bn implies an effective tax rate around 24%–25% (not 0% as the summary metric shows). Interest expense is shown as zero (undisclosed), and interest coverage of 0.0x is not meaningful; leverage is low, reducing financing drag on profitability. Overall profitability improves on both gross margin stability and opex control, with solid conversion from EBITDA to operating income supported by moderate D&A (¥1.54bn).

Growth Assessment

Top-line growth of 3.9% YoY indicates steady demand across key product categories, likely aided by refreshed PC/mobile peripheral cycles and steady e-commerce/channel sell-through. Profit growth outpaced sales (OP +13.5%, NI +26.2%), pointing to favorable mix, pricing discipline, and SG&A efficiency. Ordinary income modestly exceeding OP implies small non-operating tailwinds but core growth remains operating-led. Sustainability hinges on maintaining gross margin near current levels amid FX volatility and component/input cost fluctuations. Inventory turns (~2.9x for H1) and strong liquidity support fulfillment of seasonal demand without excessive working capital ties. Near-term outlook appears constructive given operating leverage, but growth may normalize if pricing power or mix benefits fade. Limited disclosure on segment contributions and geographic mix constrains visibility into growth drivers and durability.

Financial Health

Liquidity is strong: current ratio 322% and quick ratio 281% reflect ample short-term coverage (current assets ¥94.22bn vs. current liabilities ¥29.26bn). Working capital stands at ¥64.96bn, offering significant operational flexibility through peak seasons. Solvency is robust: total liabilities of ¥32.05bn vs. equity of ¥84.97bn imply a debt-to-equity (using total liabilities) of ~0.38x and an equity-to-assets ratio around 73.8% (equity ¥84.97bn / assets ¥115.13bn), despite a reported equity ratio of 0% due to non-disclosure in that field. Low leverage limits financial risk and interest burden. Asset turnover of 0.511x is moderate for a peripherals distributor/brand model, consistent with holding adequate inventory while managing channel needs.

Cash Flow Quality

Operating cash flow of ¥5.58bn exceeds net income of ¥4.28bn (OCF/NI 1.30x), indicating solid earnings quality supported by non-cash D&A (¥1.54bn) and manageable working capital movements. Free cash flow cannot be reliably assessed because investing cash flow is shown as zero (undisclosed) and capex details are not provided; the reported FCF of 0 should not be interpreted as actual zero. Working capital appears well-managed: inventories at ¥11.94bn vs. H1 COGS of ¥34.9bn suggest balanced stock levels; however, receivable/payable dynamics are not disclosed. Non-cash items and tax payments appear appropriately reflected, with no evidence of aggressive accruals based on OCF/NI. Overall, cash conversion supports earnings quality, but lack of investing detail limits full FCF analysis.

Dividend Sustainability

Dividend data fields (DPS, payout ratio, FCF coverage) show zeros due to non-disclosure; they should not be read as actual absence of dividends or payouts. Financing cash outflows of ¥8.81bn suggest possible shareholder returns (dividends and/or buybacks) and/or debt repayment, but the split is not available. Without capex data and with investing CF undisclosed, FCF coverage of dividends cannot be determined. From a balance sheet perspective, high equity and liquidity would support ordinary distributions, but sustainability depends on consistent OCF generation and capex needs. Policy outlook cannot be inferred from the provided data; investors should monitor official guidance and board resolutions.

Risk Assessment

Business Risks:

• Demand cyclicality in PC and mobile peripherals affecting sell-in and sell-through
• Price competition in e-commerce and mass retail channels pressuring gross margins
• FX volatility (JPY vs. USD/CNY) impacting import costs and pricing
• Supply-chain concentration and procurement risks from China/Asia-based OEMs
• Inventory obsolescence risk given short product life cycles and rapid SKU refresh
• Logistics and freight cost fluctuations affecting COGS and delivery lead times
• Potential slowdown in corporate IT peripheral spending or consumer electronics demand
• Execution risk in new categories (gaming, IoT, home/office accessories) and product launches

Financial Risks:

• Working capital swings impacting short-term OCF despite strong liquidity
• FX translation and transaction effects on margins and net income
• Limited visibility on capex and investing CF complicates FCF assessment
• Reliance on non-operating gains is small but could add variability to ordinary income
• Potential inventory write-downs if demand weakens or products become obsolete

Key Concerns:

• Several reported zeros are undisclosed items (equity ratio, DPS, cash, investing CF), limiting completeness
• Free cash flow cannot be assessed due to missing capex/investing details
• Interest coverage metric is not meaningful due to undisclosed interest expense
• Lack of segment/geographic disclosure reduces clarity on growth drivers and risks

Investment Implications

Key Takeaways:

• Revenue up 3.9% YoY with operating income up 13.5%, evidencing margin-driven profit growth
• Gross margin of 36.9% and operating margin ~10.5% reflect effective pricing/mix and opex control
• OCF/NI of 1.30x indicates solid earnings quality and cash conversion
• Very strong balance sheet: equity ratio ~74% (calculated) and low leverage (liabilities/equity ~0.38x)
• Inventory levels appear balanced relative to COGS, supporting healthy turnover
• Financing cash outflow of ¥8.81bn suggests active capital allocation, though details are undisclosed
• DuPont: ROE 5.04% with modest leverage and moderate asset turnover; scope to improve via turnover

Metrics to Watch:

• Gross margin trajectory and pricing power amid FX and component cost changes
• Operating expense ratio and resulting operating margin sustainability
• OCF/NI ratio and working capital movements (receivables, payables, inventory days)
• Capex and investing cash flows to assess true free cash flow
• Shareholder return policy (dividends, buybacks) and payout discipline
• FX rates (USD/JPY, CNY/JPY) and hedging effectiveness
• Sell-through indicators and channel inventory levels, especially into seasonal peaks

Relative Positioning: Within Japan-listed peripherals and consumer IT accessories peers, ELECOM exhibits above-average balance sheet strength and healthy mid-teens EBITDA margin for the category, with profitability supported by brand positioning and channel breadth; asset turnover is moderate, suggesting room to optimize working capital versus peers while maintaining service levels.

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