IKEGAMI TSUSHINKI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.18B
• Operating Income: ¥-1.11B
• Net Income: ¥-1.32B
• EPS: ¥-178.71

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

Ikegami Tsushinki (TSE: 6771) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth but continued operating and bottom-line losses. Revenue rose 11.3% year over year to ¥6.18bn, indicating some recovery in project deliveries and demand normalization in broadcast/industrial video systems. Gross profit was ¥1.62bn, implying a gross margin of 26.2%, which is acceptable for a project-heavy equipment manufacturer but not sufficient to cover the operating cost base. Operating income remained deeply negative at -¥1.11bn, though the YoY change (+57.1%) suggests the operating loss narrowed versus the prior-year period. Ordinary income was -¥1.12bn and net income was -¥1.15bn, with the net loss improving by 15.2% YoY, reflecting incremental operating discipline but still a significant deficit. EBITDA was -¥0.87bn, highlighting that the loss is not purely a function of depreciation; cash operating costs remain elevated relative to gross profit. The DuPont decomposition yields a net margin of -18.54%, asset turnover of 0.213x, and financial leverage of 2.29x, resulting in ROE of -9.05%. This profile indicates that weak profitability, rather than balance sheet leverage or asset intensity, is the principal drag on equity returns. Liquidity metrics appear strong (current ratio 214.9%, quick ratio 206.2%) and working capital of ¥12.59bn provides near-term flexibility, though the quality of this working capital (receivables timing, unbilled work) will be crucial. Operating cash flow was -¥3.90bn, materially worse than the accounting loss, implying unfavorable working capital movements or project cash collection timing; financing inflows of ¥1.25bn likely bridged the cash shortfall. Equity stands at ¥12.65bn against total assets of ¥28.98bn, with a debt-to-equity ratio of 1.20x that is manageable but requires attention given negative OCF. The interest coverage ratio of -26.4x reflects loss-making status; interest expense (¥42m) is small in absolute terms but still not covered by EBITDA. No dividend was paid (DPS ¥0), which is consistent with ongoing losses and negative operating cash flow. Several items are not disclosed in the dataset (e.g., cash and equivalents, investing cash flow, equity ratio reported as 0.0%), so conclusions are drawn from available non-zero items only. Overall, while revenue improved and operating losses narrowed YoY, cash generation deteriorated significantly, and the path to sustainable profitability will depend on improving gross margin, tightening SG&A, and normalizing working capital.

Profitability Analysis

ROE is -9.05% per DuPont (Net margin -18.54% × Asset turnover 0.213 × Leverage 2.29). The primary driver of negative ROE is the weak net margin; asset turnover is low as is typical for project-based capital goods vendors, and leverage is moderate rather than excessive. Gross margin at 26.2% suggests pricing and mix are not the core issue; instead, SG&A and fixed costs are the pressure point. Implied SG&A is approximately ¥2.73bn (gross profit ¥1.62bn minus operating income -¥1.11bn), indicating a high fixed-cost base relative to H1 revenue. EBITDA of -¥0.87bn vs. depreciation/amortization of ¥0.24bn shows operating losses are predominantly cash in nature. Operating leverage appears present: revenue grew 11.3% YoY and operating loss narrowed by 57.1% YoY, suggesting incremental volumes benefit earnings, but the current scale remains insufficient to cover fixed costs. Interest expense is modest at ¥42m, so the gap from operating to ordinary income is minimal; core operations are the constraint. Effective tax rate is 0% due to losses, with no tax shield benefit noted beyond interest.

Growth Assessment

Revenue increased 11.3% YoY to ¥6.18bn, pointing to some recovery in orders and deliveries. The sustainability of growth depends on the order pipeline, broadcast capex cycles (TV stations, production houses), and public-sector/industrial video demand; the dataset does not include backlog/book-to-bill, which limits visibility. Profit quality remains weak: despite growth, EBITDA is negative and operating losses persist, implying that either pricing, utilization, or cost base alignment needs further improvement. The YoY improvement in operating income (+57.1%) is encouraging and suggests operating leverage could materialize with continued top-line traction. However, the sharp deterioration in operating cash flow (-¥3.90bn) indicates that growth is currently cash consumptive, likely due to working capital build (receivables/unbilled revenue) or milestone timing. Near-term outlook hinges on converting backlog to revenue with improved cash terms, raising gross margins via mix and execution, and reducing SG&A intensity. If H2 seasonality is favorable (common in project businesses), profitability could improve, but sustained break-even will require tighter cost control and better cash discipline.

Financial Health

Total assets are ¥28.98bn, equity ¥12.65bn, and liabilities ¥15.18bn. Leverage is moderate with debt-to-equity of 1.20x; however, loss-making status raises the importance of preserving capital. Liquidity metrics are strong: current ratio 214.9%, quick ratio 206.2%, and working capital of ¥12.59bn indicate ample near-term coverage of obligations. Interest burden is low (¥42m) but interest coverage is negative due to operating losses. Financing cash inflow of ¥1.25bn in the period suggests reliance on external funding to offset operating cash burn. The reported equity ratio is listed as 0.0% in the dataset, but this appears undisclosed rather than truly zero; the balance sheet shows equity of ¥12.65bn implying an equity ratio around 43.7% (12.65/28.98), which is solid. Solvency remains acceptable for now, but prolonged negative OCF would erode flexibility.

Cash Flow Quality

Operating cash flow of -¥3.90bn vs. net income of -¥1.15bn yields an OCF/NI ratio of 3.40 (both negative), indicating cash outflows substantially exceeded accounting losses. This points to adverse working capital movements—likely growth in receivables/unbilled revenue or reductions in advances received—consistent with milestone-based projects. EBITDA was -¥0.87bn, so the delta to OCF reflects working capital rather than non-cash charges. Investing cash flow is not disclosed (reported as 0), so free cash flow cannot be reliably assessed from the dataset; reported FCF of 0 should be treated as non-comparable. Financing inflow of ¥1.25bn likely covered part of the operating cash deficit. Going forward, improved cash conversion (shorter DSO, better milestone invoicing, tighter inventory management) is critical to validating earnings quality.

Dividend Sustainability

DPS is ¥0 with a payout ratio of 0%, appropriate given negative earnings and operating cash outflows. With EBITDA and OCF both negative, there is no coverage for dividends from internal cash generation. Reported FCF coverage is 0.00x, but investing cash flows are undisclosed; regardless, cash burn precludes distributions without drawing on the balance sheet. The prudent policy stance is to prioritize liquidity and turnaround execution over shareholder distributions until sustained profitability and positive OCF are achieved.

Risk Assessment

Business Risks:

• Project timing and milestone risk leading to revenue and cash flow volatility
• Customer concentration in broadcasters and public-sector video markets
• Pricing pressure and competitive intensity in broadcast/industrial imaging equipment
• Supply chain lead times and component cost variability affecting margins
• Execution risk on large, complex systems integration projects

Financial Risks:

• Negative operating cash flow requiring continued external financing
• Operating losses driving negative interest coverage
• Potential working capital build in receivables/unbilled revenue
• Margin sensitivity to utilization and fixed-cost absorption
• Risk of covenant pressure if leverage rises amid losses

Key Concerns:

• OCF of -¥3.90bn materially worse than net loss, indicating weak cash conversion
• EBITDA of -¥0.87bn shows core operations are cash-negative
• Dependence on financing inflows (¥1.25bn) to fund operations
• High SG&A relative to gross profit (implied ~¥2.73bn in H1)
• Limited disclosure for cash, investing CF, and share data, reducing transparency

Investment Implications

Key Takeaways:

• Top-line improved 11.3% YoY, but scale remains insufficient to cover fixed costs
• Operating loss narrowed (+57.1% YoY) yet EBITDA stayed negative at -¥0.87bn
• Cash burn is significant (OCF -¥3.90bn), necessitating tighter working capital control
• Balance sheet liquidity is currently strong (current ratio 214.9%, quick 206.2%)
• Leverage moderate (D/E 1.20x) but vulnerable if losses persist

Metrics to Watch:

• Order backlog and book-to-bill ratio
• Gross margin progression and project mix
• SG&A as a percentage of revenue and cost-reduction progress
• Operating cash flow and DSO/inventory turns
• EBITDA trajectory and breakeven revenue level
• Net debt and available committed facilities

Relative Positioning: Within Japan’s broadcast and industrial imaging equipment space, Ikegami remains smaller-scale with higher volatility tied to project timing; while liquidity is better than peers with stressed balance sheets, profitability and cash conversion lag sector leaders that exhibit steadier service/recurring mix and higher utilization.

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