santec Holdings Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.78B
• Operating Income: ¥4.12B
• Net Income: ¥2.67B
• EPS: ¥260.03

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

santec Holdings (TSE: 6777) delivered solid profitability in FY2026 Q2 under JGAAP, with revenue of ¥12.78bn (+6.5% YoY) and operating income of ¥4.12bn (+6.6% YoY). Gross profit of ¥6.83bn implies a robust 53.5% gross margin, indicating strong pricing power and/or favorable product mix. Operating margin was approximately 32.2%, supported by modest D&A (¥278m) and minimal interest expense (¥3.2m). Net income rose 14.6% YoY to ¥3.06bn, lifting net margin to 23.9%, evidencing good cost discipline and scale benefits. DuPont decomposition yields ROE of 13.3%, driven primarily by elevated margins, moderate asset turnover (0.40x), and conservative leverage (assets/equity 1.39x). Cash generation is healthy: operating cash flow was ¥3.50bn, equating to 1.14x net income, which supports earnings quality. The balance sheet is strong with total assets of ¥31.97bn, equity of ¥23.01bn, and liabilities of ¥8.10bn (D/E 0.35x). Liquidity is ample (current ratio 3.88x; quick ratio 3.73x), and working capital of ¥15.04bn provides operational flexibility. Interest coverage is exceptionally high at ~1,282x, consistent with very low financial risk. While reported effective tax rate is shown as 0.0%, the disclosed income tax of ¥1.24bn versus ordinary income of ¥4.25bn implies a roughly high‑20s effective tax rate; therefore, we treat the 0.0% as a data artifact. Free cash flow cannot be reliably derived because investing cash flow and cash balance are undisclosed in the XBRL (zeros reflect non-disclosure, not actual zero). Dividend information (DPS, payout) also appears undisclosed; EPS of ¥260.03 and net income imply roughly 11.8 million shares outstanding as a cross‑check. Inventory is modest at ¥0.77bn relative to revenue and current assets, suggesting restrained working capital intensity. Overall, profitability, cash conversion, and balance sheet strength are favorable, though several disclosures (equity ratio, cash and equivalents, investing CF, share data, dividend) are incomplete and limit certain ratio analyses. Outlook hinges on sustaining high margins and improving asset turnover while maintaining prudent capital allocation given the strong financial position.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 23.93%
• asset_turnover: 0.400x
• financial_leverage: 1.39x (Assets/Equity)
• calculated_ROE: 13.29%
• commentary: ROE is margin-led. With asset turnover at 0.40x and modest leverage of 1.39x, the primary driver is the high net margin. Incremental ROE upside will rely on sustaining mix/pricing and improving asset efficiency. margin_quality:
• gross_margin: 53.5% (¥6.83bn/¥12.78bn)
• operating_margin: 32.2% (¥4.12bn/¥12.78bn)
• EBITDA_margin: 34.4% (¥4.40bn/¥12.78bn)
• net_margin: 23.9% (¥3.06bn/¥12.78bn)
• analysis: Margins are strong across the P&L, pointing to differentiated products and scale benefits. D&A is light (~2.2% of sales), so EBITDA-to-EBIT drop-through is minimal. Low interest burden preserves net margin. operating_leverage:
• evidence: Operating income growth (+6.6% YoY) slightly exceeded revenue growth (+6.5% YoY), implying neutral-to-slight positive operating leverage in the period.
• implications: Further volume growth should support EBIT expansion if fixed cost base remains stable; however, mix changes could influence gross margin and leverage effects.

Growth Assessment

revenue_sustainability: Top-line growth of 6.5% YoY suggests steady demand. Inventory levels (¥0.77bn) are low relative to current assets, reducing risk of overstocking and hinting at demand-led fulfillment. profit_quality: Net income growth (+14.6% YoY) outpaced sales, reflecting margin resilience. OCF/NI at 1.14x validates earnings cash conversion in the period. outlook: Sustained growth will depend on maintaining premium pricing/mix and execution in core markets. With limited leverage and strong liquidity, the company can invest in capacity/innovation if demand accelerates. Data gaps (order backlog, geographic mix) limit visibility.

Financial Health

liquidity:

• current_ratio: 3.88x (¥20.27bn/¥5.22bn)
• quick_ratio: 3.73x ((CA−Inventories)/CL)
• working_capital: ¥15.04bn
• commentary: Very strong near-term liquidity with minimal inventory dependence. solvency:
• debt_to_equity: 0.35x (Liabilities/Equity)
• interest_coverage: ≈1,282x (EBIT/Interest)
• equity_ratio: Unreported in XBRL (0% shown is not actual).
• commentary: Low leverage and exceptional interest coverage indicate limited solvency risk. capital_structure: Equity of ¥23.01bn funds ~72% of assets (implied by leverage 1.39x), with liabilities at ¥8.10bn. Financing CF was negative (−¥0.745bn), likely reflecting dividends, buybacks, or debt repayment, but details are undisclosed.

Cash Flow Quality

earnings_quality: OCF/Net Income = 1.14x (¥3.50bn/¥3.06bn), indicating solid cash realization of earnings. FCF_analysis: Free cash flow cannot be assessed due to undisclosed investing cash flows (CapEx, acquisitions). EBITDA of ¥4.40bn and low interest burden suggest capacity for self-funded investment. working_capital: Inventories are modest at ¥0.77bn; strong quick ratio implies limited reliance on inventories. Specific receivables/payables movements are not disclosed, constraining deeper WC analysis.

Dividend Sustainability

payout_ratio_assessment: Payout ratio and DPS appear undisclosed in this dataset (zeros reflect non-disclosure). Based on EPS of ¥260.03, any dividend policy assessment requires actual DPS. FCF_coverage: Not assessable due to missing investing cash flow data; OCF is strong, suggesting potential capacity, but FCF must incorporate CapEx. policy_outlook: With low leverage and strong liquidity, the company has flexibility to balance reinvestment and shareholder returns; actual policy signals (guidance, historical DPS) are needed.

Risk Assessment

Business Risks:

• End-market cyclicality in optical communications, data center, and telecom capex.
• Product mix risk affecting gross margin sustainability.
• Customer concentration typical in optical components/testing markets.
• Technology obsolescence and rapid innovation cycles requiring sustained R&D.
• Export controls and cross-border regulatory risk for photonics/laser products.
• Supply chain constraints for specialized optical and semiconductor components.
• FX exposure (JPY vs. USD/EUR/CNY) impacting revenue and margins.

Financial Risks:

• Potential increase in CapEx or M&A could compress FCF if OCF moderates.
• Working capital swings (receivables timing) could affect cash conversion.
• Tax rate variability; reported tax line implies ~high-20s ETR vs. 0% shown in metrics due to data artifact.

Key Concerns:

• Incomplete disclosures (investing cash flows, cash balance, equity ratio, DPS) limit full assessment.
• Sustainability of elevated margins amid competitive pricing and cost inflation.
• Visibility on order intake/backlog not provided, constraining forward growth assessment.

Investment Implications

Key Takeaways:

• Margin-led ROE of 13.3% with conservative leverage and strong liquidity.
• Healthy cash conversion (OCF/NI 1.14x) supports earnings quality.
• Interest burden is negligible; solvency risk appears low.
• Revenue growth is steady (+6.5% YoY) with slight positive operating leverage.
• Data gaps on investing CF and dividends preclude definitive FCF and payout analysis.

Metrics to Watch:

• Gross margin trajectory and product mix shifts.
• Asset turnover improvement (targeting >0.40x) to enhance ROE.
• Order intake/backlog and book-to-bill for demand visibility.
• CapEx and investing cash flows to assess FCF and capital intensity.
• OCF/NI ratio sustainability and working capital movements (DSO/DPO/DIO).
• FX rates and hedging impact on revenue/margin.
• Tax rate normalization relative to implied ~high-20s level.

Relative Positioning: Financially conservative with superior margins versus many electronics/optical peers; growth is steady rather than hyper-cyclical in this period, and balance sheet strength provides optionality for investment or returns.

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