Tensho Electric Industries Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.39B
• Operating Income: ¥182M
• Net Income: ¥203M
• EPS: ¥-4.42

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

Tenryo Electric Industry Co., Ltd. (TENSEI: 67760) posted FY2026 Q2 consolidated results under JGAAP showing top-line contraction and pressured profitability, but positive operating cash generation. Revenue was ¥10.39bn, down 24.0% YoY, reflecting a sharp demand slowdown and/or portfolio adjustments. Gross profit was ¥1.996bn, implying a gross margin of 19.2%, which is modest for a plastics/industrial components maker and suggests pricing pressure and/or under-absorption. Operating income declined to ¥182m (-37.4% YoY), with the operating margin compressed to 1.8%, indicating weak operating leverage in a down-cycle. Ordinary income of ¥261m exceeded operating income, suggesting positive non-operating contributions (e.g., FX gains, subsidies, or investment income). Despite positive ordinary income, net income was a loss of ¥75m (EPS -¥4.42), likely due to extraordinary losses and/or tax and minority interest effects not fully disclosed. Depreciation and amortization totaled ¥1.103bn, supporting an EBITDA of ¥1.285bn and an EBITDA margin of 12.4%, evidencing underlying cash earnings capacity. The DuPont framework shows a net margin of -0.72%, asset turnover of 0.478x, and financial leverage of 2.15x, yielding a calculated ROE of -0.74%, which aligns with the reported ROE. Operating cash flow was a solid ¥921m despite the net loss, producing an OCF/Net Income ratio of -12.28x, highlighting strong cash conversion in the half and potential working capital release. Liquidity appears adequate with a current ratio of 1.10x and working capital of ¥834m, although inventories and cash balances are unreported, limiting precision. The balance sheet shows total assets of ¥21.74bn and equity of ¥10.09bn; this implies an equity ratio around 46% (vs. the reported 0.0% placeholder) and liabilities-to-equity of 1.14x, indicating a moderate leverage profile. Interest coverage of about 4.0x (EBIT/interest) is acceptable but could tighten if earnings weaken further. Financing cash inflow of ¥1.408bn indicates active balance sheet management, likely to reinforce liquidity during the downturn. No dividend was declared (DPS ¥0), consistent with a cautious stance given negative net income and uncertain demand visibility. Several line items (inventories, cash and equivalents, investing CF, equity ratio, shares outstanding) are shown as zero because they were unreported; therefore, certain ratios such as quick ratio and FCF are based on limited disclosures. Overall, the company is navigating a pronounced revenue contraction with thin operating margins but is preserving cash through working capital discipline and controlled capex, while maintaining a still-solid solvency position.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: -0.72%
• asset_turnover: 0.478x
• financial_leverage: 2.15x
• calculated_ROE: -0.74%
• commentary: Negative ROE is driven primarily by the slim negative net margin despite moderate asset turnover and leverage. Ordinary income remained positive, but below-the-line items and/or taxes pushed to a net loss. margin_quality: Gross margin at 19.2% suggests limited pricing power and/or cost inflation; operating margin at 1.8% indicates high fixed-cost absorption sensitivity. EBITDA margin of 12.4% shows non-cash depreciation burden (¥1.103bn) weighing on EBIT, typical for asset-intensive molding/industrial processing. operating_leverage: YoY revenue decline of 24.0% outpaced the 37.4% decline in operating income, implying negative operating leverage. Cost base rigidity and depreciation create downside sensitivity to volume.

Growth Assessment

revenue_sustainability: The -24.0% YoY revenue drop indicates meaningful end-demand softness or customer destocking. No segment detail was provided; the decline appears broad-based. profit_quality: Ordinary income (¥261m) above operating income (¥182m) suggests some reliance on non-operating gains. Net loss despite positive ordinary income implies extraordinary items or tax/minority effects; profit quality is mixed. outlook: With slender operating margin and negative net margin, near-term earnings depend on stabilization of volumes and further cost control. If the demand environment improves and utilization normalizes, margins could recover given the EBITDA base, but visibility is limited.

Financial Health

liquidity: Current assets ¥8.876bn vs current liabilities ¥8.042bn yields a current ratio of 1.10x and working capital of ¥834m. Quick ratio shows as 1.10x due to unreported inventories; true quick ratio unknown. Operating CF of ¥921m supports short-term liquidity. solvency: Total liabilities ¥11.493bn and equity ¥10.094bn imply liabilities/equity of 1.14x and an inferred equity ratio near 46% (unreported). Interest expense ¥45m vs operating income ¥182m provides ~4.0x interest cover; still adequate but with limited buffer if EBIT softens. capital_structure: Leverage is moderate, with financial leverage (assets/equity) of 2.15x per DuPont. Positive financing CF of ¥1.408bn suggests incremental borrowing or refinancing to bolster liquidity.

Cash Flow Quality

earnings_quality: OCF of ¥921m versus net loss of ¥75m yields OCF/Net Income of -12.28x, indicating strong cash generation despite accounting loss—likely driven by working capital inflows and non-cash D&A (¥1.103bn). FCF_analysis: Free cash flow is shown as 0 due to unreported investing cash flows/capex; true FCF cannot be determined. Given OCF of ¥921m and likely maintenance capex linked to D&A, underlying FCF may be positive, but data is insufficient. working_capital: Working capital improved sufficiently to support OCF; however, inventories and receivables/payables breakdowns are not disclosed, limiting analysis of sustainability.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio 0.0%, aligning with a period of negative net income and margin compression. FCF_coverage: FCF coverage cannot be assessed because FCF is unreported (0 indicates missing). With OCF positive, coverage could improve when profitability normalizes and capex remains disciplined. policy_outlook: Given near-term earnings pressure and focus on liquidity, a conservative dividend stance is prudent. Resumption likely hinges on restoring consistent positive net profit and visibility on cash generation.

Risk Assessment

Business Risks:

• End-market demand volatility leading to under-absorption and margin compression
• Customer concentration and pricing pressure in components/industrial segments
• Raw material cost fluctuations (resins, energy) impacting gross margin
• Operational leverage from fixed-cost base amplifying earnings swings
• Potential extraordinary losses (impairments, restructuring) not fully disclosed in the quarter

Financial Risks:

• Tight but adequate interest coverage (~4.0x) vulnerable to further EBIT softness
• Reliance on financing inflows (¥1.408bn) to reinforce liquidity amid downturn
• Limited visibility on cash and inventories due to unreported items, complicating liquidity assessment
• Potential covenant pressure if earnings weaken and leverage rises

Key Concerns:

• Sustained revenue decline (-24.0% YoY) with thin operating margin (1.8%)
• Net loss (¥75m) despite positive ordinary income, implying below-the-line pressures
• Unreported balance sheet and cash flow items (inventories, cash, capex) constrain full analysis

Investment Implications

Key Takeaways:

• Sharp top-line contraction with negative operating leverage
• Positive OCF (¥921m) despite net loss, aided by non-cash D&A and working capital
• Moderate leverage with inferred equity ratio ~46% and liabilities/equity 1.14x
• Interest coverage ~4.0x provides some buffer but is sensitive to EBIT volatility
• Dividend suspended (DPS ¥0) pending earnings normalization

Metrics to Watch:

• Revenue trajectory and order trends over H2 to assess demand stabilization
• Gross margin recovery and cost pass-through to offset input inflation
• Operating income and interest coverage to monitor solvency headroom
• Working capital movements (receivables, inventories, payables) driving cash conversion
• Capex levels vs D&A to gauge FCF sustainability
• Extraordinary items and tax effects that bridge ordinary income to net income

Relative Positioning: Within Japan small-cap industrial/components peers, profitability is currently below average given the negative net margin and low operating margin, but cash generation and moderate leverage position the company mid-pack on balance sheet resilience.

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