NIHON DEMPA KOGYO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.69B
• Operating Income: ¥1.43B
• Net Income: ¥802M
• EPS: ¥34.80

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

Nihon Dempa Kogyo (IFRS, consolidated) delivered modest top-line growth but significant profit compression in FY2026 Q2 (cumulative), with revenue of 266.86 (100M JPY) up 1.4% YoY while operating income fell 39.4% to 14.31 (100M JPY). Gross profit of 80.30 implies a gross margin of 30.1%, indicating decent product-level economics, but SG&A of 46.53 compressed operating margin to 5.4%. Non-operating items were a headwind: profit before tax of 10.40 trails operating income by 3.91, implying net non-operating losses, including equity-method losses of -0.63. The effective tax rate was elevated at 43.2%, further pressuring bottom-line results. Net income declined 43.0% YoY to 8.02, yielding a net margin of 3.0% and EPS (basic) of 34.80 JPY. DuPont analysis shows ROE of 2.7% driven by a 3.0% net margin, 0.368x asset turnover, and 2.42x financial leverage—profitability is the main drag. Cash generation was strong relative to earnings: operating cash flow reached 39.85, 4.97x net income, benefiting from non-cash D&A of 17.03 and likely working capital tailwinds. Investing CF was -31.88 (capex -27.79), resulting in positive free cash flow of 7.97 (defined here as OCF + investing CF). The balance sheet shows total assets of 725.26 and equity of 299.94, implying an equity ratio of 41.4% and total liabilities/equity of 1.41x—moderate leverage by IFRS standards but with sizable interest-bearing loans (short-term 8.03, long-term 258.08). EBITDA of 31.34 provides a cushion, though leverage versus half-year EBITDA looks elevated. Dividend capacity appears tight: a calculated payout ratio of 86.5% and FCF coverage of 1.15x suggest limited headroom if earnings softness persists or capex remains above depreciation. Liquidity metrics (current/quick ratio, cash balance) are not disclosed, but cash & equivalents at period-end were 158.81, and financing CF was -30.40, indicating debt repayment and/or dividends. Revenue growth resilience contrasts with profit headwinds from non-operating losses and a high tax rate; margin normalization and tax rate improvement will be key to ROE recovery. Inventory stood at 104.80 and accounts payable at 94.69, suggesting a relatively balanced near-term working capital posture, though turnover metrics are not computable from available data. Outlook hinges on product mix (e.g., automotive/industrial) and operating leverage; with a 30% gross margin base, improved utilization and SG&A discipline could lift operating margin if demand improves. Data gaps (e.g., non-operating detail, interest expense, current liabilities) limit precision on liquidity and coverage analysis, so conclusions are based on the disclosed non-zero items.

Profitability Analysis

ROE_decomposition: ROE 2.7% = Net margin 3.0% x Asset turnover 0.368 x Financial leverage 2.42x. The low net margin is the primary constraint; asset efficiency and leverage are within typical ranges for the sector. margin_quality: Gross margin is 30.1% (80.30/266.86), but operating margin fell to 5.4% (14.31/266.86) amid higher SG&A burden and weaker operating leverage. Net non-operating losses (~-3.91) and a high effective tax rate (43.2%) further compressed net margin to 3.0%. operating_leverage: Revenue grew 1.4% YoY but operating income dropped 39.4% YoY, indicating negative operating leverage in the period (fixed costs not absorbed). With D&A at 17.03 and EBITDA margin at 11.7%, there is room for recovery if volume/mix improves, but current fixed-cost absorption is weak.

Growth Assessment

revenue_sustainability: Top-line growth of 1.4% YoY suggests demand stability rather than acceleration. Given the industry’s exposure to automotive/industrial demand cycles and FX, sustainability will depend on mix and order trends; current data does not provide backlog or regional breakdown. profit_quality: Profitability is hampered by non-operating losses and a high tax rate; equity-method losses (-0.63) and likely interest burden reduced PBT below operating income. Cash conversion is strong (OCF/NI 4.97x), indicating earnings are not overstated and supported by non-cash charges and working capital inflows. outlook: If product mix shifts toward higher-value automotive/industrial applications and utilization improves, margins could normalize from a 30% gross margin base. However, elevated tax rate and non-operating losses must abate to restore EPS and ROE. Capex above depreciation suggests continued investment, potentially supporting medium-term growth.

Financial Health

liquidity: Cash & equivalents were 158.81. Current ratio and quick ratio are not calculable due to unreported current liabilities and cash/account receivable details. Working capital shown equals current assets (434.82), but true working capital cannot be determined without current liabilities. solvency: Equity ratio is 41.4% (299.94/725.26). Total liabilities/equity is 1.41x (423.51/299.94), indicating moderate balance sheet leverage. capital_structure: Interest-bearing loans total at least 266.11 (short-term 8.03 + long-term 258.08). Gross debt to half-year EBITDA is ~8.5x; annualizing EBITDA would reduce this to ~4.2x, still elevated. Interest coverage is not calculable due to unreported interest expense.

Cash Flow Quality

earnings_quality: OCF of 39.85 versus net income of 8.02 (OCF/NI 4.97x) signals strong cash realization, supported by D&A (17.03) and likely working capital releases. Total comprehensive income (12.05) also exceeded net income, modestly improving equity. FCF_analysis: FCF defined as OCF + investing CF equals 7.97 (39.85 - 31.88). Capex was 27.79, exceeding depreciation (capex/depreciation ~1.63x), implying ongoing reinvestment. working_capital: Inventories were 104.80 and payables 94.69; receivables and other current liabilities are unreported, limiting turnover analysis. The sizable OCF suggests favorable working capital movements in the period.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 86.5% of net income, high for a business with cyclical exposure and elevated leverage. Reported dividends paid in cash flows (-3.45) reflect partial period timing; the payout ratio appears based on estimated total dividends for the fiscal year-to-date. FCF_coverage: FCF coverage is 1.15x, indicating dividends are presently covered by free cash flow but with thin headroom if earnings or OCF weaken. policy_outlook: With operating margin compression, high effective tax rate, and meaningful debt load, sustaining a high payout could constrain deleveraging and investment. Dividend policy may prioritize stability, but flexibility could be required if profitability does not recover.

Risk Assessment

Business Risks:

• End-market cyclicality in automotive, industrial, and consumer electronics affecting crystal device demand
• Product mix and utilization risk impacting gross and operating margins
• Inventory obsolescence risk due to rapid technology and customer qualification cycles
• Supply chain and geopolitical risks affecting materials and logistics
• Foreign exchange volatility affecting revenues, costs, and translation

Financial Risks:

• Elevated leverage relative to EBITDA with sizable long-term loans
• High effective tax rate (43.2%) depressing net income and ROE
• Non-operating losses, including equity-method loss (-0.63), weighing on PBT
• Potential interest rate and refinancing risk; interest expense not disclosed
• Thin dividend FCF coverage (1.15x) amid capex above depreciation

Key Concerns:

• Sustained operating margin pressure despite stable revenue
• Dependence on non-cash items and working capital for OCF strength
• Limited transparency on current liabilities and interest expense restricting coverage analysis

Investment Implications

Key Takeaways:

• Top-line up 1.4% YoY but operating income down 39.4% indicates negative operating leverage
• Gross margin resilient at 30.1%, but SG&A and non-operating items compress net margin to 3.0%
• ROE at 2.7% is subdued; profitability is the main lever for improvement
• OCF robust at 39.85 (4.97x NI), supporting positive FCF of 7.97 despite elevated capex
• Balance sheet shows moderate equity ratio (41.4%) but meaningful long-term debt (258.08)
• Dividend coverage by FCF is modest (1.15x) with a high payout ratio (86.5%)

Metrics to Watch:

• Operating margin trajectory and SG&A efficiency
• Non-operating line items: interest expense and equity-method results
• Effective tax rate normalization
• Order trends, utilization rates, and inventory turnover
• Debt/EBITDA and refinancing profile
• Capex intensity versus depreciation and its impact on FCF

Relative Positioning: Within the frequency components space, the company shows stable revenue but weaker profitability and higher leverage than top-tier peers, suggesting sensitivity to operating leverage and non-operating headwinds; margin recovery and deleveraging are key to improving its relative standing.

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
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