Hosiden Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥245.43B
• Operating Income: ¥8.10B
• Net Income: ¥4.43B
• EPS: ¥120.03

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

Hosiden Co., Ltd. (TSE: 6804) reported FY2026 Q2 consolidated results under JGAAP showing very strong top-line expansion but thin margins and weak cash conversion. Revenue surged to ¥245.4bn (+111.3% YoY), yet operating income rose only 1.6% to ¥8.1bn, implying significant negative operating leverage and pricing/mix pressure. Reported gross profit of ¥12.6bn translates to a gross margin of 5.1%, consistent with the provided calculated margin; this indicates limited value-add or aggressive pricing in the period. Ordinary income of ¥9.6bn exceeded operating income by about ¥1.5bn, suggesting material non-operating gains (e.g., FX or financial income) that supported bottom-line results. Net income increased 38.0% YoY to ¥6.1bn, with EPS of ¥120.03, highlighting earnings aided by non-operating items despite muted operating improvement. The DuPont bridge indicates an ROE of 4.28%, driven by a low net margin (2.49%), healthy asset turnover (1.152x), and moderate leverage (1.49x). Balance sheet strength remains a key positive: total equity of ¥142.8bn against ¥213.0bn in assets implies an equity ratio around 67% by our calculation (the reported equity ratio metric is undisclosed), and the current ratio of 379% underscores ample liquidity. However, operating cash flow was negative at -¥1.7bn, producing an OCF/Net income ratio of -0.28, pointing to working capital drag amid the rapid sales expansion. Capex/Investing cash flows were not disclosed, preventing a clean free cash flow assessment for the period, and the provided FCF metric is undisclosed. Dividend data were not reported for the period (DPS and payout ratio metrics show as undisclosed), limiting visibility on shareholder returns. There is an apparent inconsistency between the reported cost of sales figure and the gross profit/margin; we rely on the internally consistent gross profit and margin for analysis. Overall, the quarter demonstrates scale growth and solid financial resilience but highlights margin pressure, reliance on non-operating gains, and weak cash conversion—key areas to monitor for sustainability. Given several unreported items (equity ratio, cash & equivalents, investing CF, DPS, share count), conclusions focus on available non-zero data and calculated relationships.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 2.49% (Net income ¥6.1bn on revenue ¥245.4bn)
• asset_turnover: 1.152x (Revenue ¥245.4bn / Assets ¥213.0bn)
• financial_leverage: 1.49x (Assets ¥213.0bn / Equity ¥142.8bn)
• calculated_ROE: 4.28%
• ROA_proxy: 2.87% (NPM 2.49% × ATO 1.152) margin_quality:
• gross_margin: 5.1% (Gross profit ¥12.6bn on revenue ¥245.4bn)
• operating_margin: 3.30% (Operating income ¥8.10bn)
• ordinary_margin: 3.91% (Ordinary income ¥9.59bn)
• EBITDA_margin: 3.9% (EBITDA ¥9.53bn)
• comments: Margins are thin for the scale of revenue; the gap between ordinary and operating income indicates non-operating support (likely FX/financial gains). YoY operating income growth (+1.6%) lagged far behind revenue growth (+111%), implying price/mix headwinds and/or elevated operating costs. operating_leverage: Negative in the period: revenue more than doubled while operating income was essentially flat, compressing incremental margins.

Growth Assessment

revenue_sustainability: Revenue +111.3% YoY indicates major volume/program ramps or customer demand rebound. Sustainability depends on order visibility and customer/program stickiness; absent backlog disclosure, durability is uncertain. profit_quality: Earnings quality is mixed: operating profit growth was modest, while non-operating gains lifted ordinary and net income. Low gross and EBITDA margins suggest limited pricing power or cost pass-through dynamics. outlook: Key to near-term trends will be stabilization/improvement of gross margin and normalization of non-operating gains. If working capital normalizes, cash conversion can improve; otherwise, scale without margin expansion will cap ROE.

Financial Health

liquidity:

• current_ratio: 379.2% (¥171.5bn / ¥45.2bn)
• quick_ratio: 361.0% (ex-inventories)
• working_capital: ¥126.3bn
• comment: Very strong short-term liquidity with low inventory intensity (inventories ¥8.2bn). solvency:
• equity_ratio: Undisclosed in provided metrics; computed ≈ 67.1% (Equity ¥142.8bn / Assets ¥213.0bn)
• debt_to_equity: 0.42x (Liabilities ¥60.0bn / Equity ¥142.8bn)
• interest_coverage: 476.4x (Operating income ¥8.10bn / Interest expense ¥0.017bn)
• comment: Low leverage and exceptional coverage indicate low financial risk. capital_structure: Assets ¥213.0bn funded primarily by equity (≈67%) with modest liabilities (≈33%), providing flexibility to absorb cyclicality.

Cash Flow Quality

earnings_quality: OCF/Net income = -0.28 indicates weak conversion this period, likely due to working capital outflows tied to rapid growth (receivables and/or payables timing). FCF_analysis: Free cash flow cannot be reliably computed as investing cash flows/capex were undisclosed (provided FCF metric is undisclosed). Depreciation was ¥1.43bn, implying modest capital intensity, but actual capex could differ. working_capital: Inventories were ¥8.22bn (low relative to sales), implying the OCF drag likely stems from receivables build or reduced advances/payables. Monitoring DSO/DPO is important as growth normalizes.

Dividend Sustainability

payout_ratio_assessment: Payout ratio and DPS are not disclosed for the period (metrics show as undisclosed). With EPS at ¥120.03 and strong balance sheet, capacity exists, but without policy guidance or historical context, sustainability cannot be assessed. FCF_coverage: Not assessable due to undisclosed FCF/capex and negative OCF in the period. policy_outlook: No update provided. Future dividends will depend on cash conversion normalizing and management’s capital allocation priorities.

Risk Assessment

Business Risks:

• Margin compression from pricing pressure and adverse product/customer mix (thin 5.1% gross margin).
• Execution risk in scaling large programs after rapid revenue growth.
• Demand cyclicality in end-markets and potential order volatility.
• Supply chain and component cost fluctuations affecting pass-through.
• Foreign exchange volatility impacting non-operating income and competitiveness.
• Inventory/technology obsolescence risk inherent in electronics components.

Financial Risks:

• Weak cash conversion (OCF negative vs. positive earnings) amid rapid growth.
• Dependence on non-operating gains to bridge earnings (ordinary > operating).
• Working capital intensity if receivables remain elevated.
• Potential tax rate normalization affecting net income if effective rate rises.

Key Concerns:

• Sustaining revenue scale while improving gross and operating margins.
• Normalizing OCF to align with earnings and supporting self-funded growth.
• Visibility on capex/FCF and dividend policy given undisclosed data.

Investment Implications

Key Takeaways:

• Top-line growth was exceptional (+111% YoY) but delivered limited operating profit growth (+1.6%).
• ROE at 4.28% reflects low net margin, healthy turnover, and moderate leverage.
• Liquidity and solvency are strong (current ratio 379%, computed equity ratio ≈67%).
• Cash conversion is weak (OCF/NI -0.28), likely due to working capital build.
• Non-operating gains supported earnings (ordinary income > operating income).
• Several disclosures are missing (equity ratio, investing CF, DPS, share count), constraining full analysis.

Metrics to Watch:

• Gross and operating margin trajectory (cost pass-through and mix).
• OCF/NI and working capital days (DSO/DPO/DIO) as growth normalizes.
• Ordinary vs. operating income gap (FX and other non-operating contributions).
• Capex and investing cash flows to assess FCF and capital efficiency.
• Leverage and interest coverage (remain strong but monitor if investment ramps).
• Effective tax rate based on pre-tax income vs. cash taxes.

Relative Positioning: Financially resilient balance sheet with strong liquidity and low leverage, but currently exhibiting lower profitability quality (thin margins, OCF drag) relative to the magnitude of revenue growth.

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