TOA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥24.05B
• Operating Income: ¥1.25B
• Net Income: ¥312M
• EPS: ¥27.68

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

TOA Co., Ltd. (TSE:68090) delivered a solid FY2026 Q2 performance with clear signs of operating leverage and improved profitability. Revenue grew 5.6% year over year to ¥24.051 billion, while operating income surged 78.2% to ¥1.255 billion, indicating significant expense discipline and/or favorable mix. Gross profit of ¥9.772 billion implies a robust gross margin of 40.6%, supporting the margin-led earnings recovery. Operating margin expanded to approximately 5.2% for the period, with ordinary income at ¥1.520 billion (ordinary margin about 6.3%). Net income rose to ¥832 million, up 498.6% YoY, albeit off a weak prior-year base, bringing net margin to 3.46%. DuPont decomposition points to ROE of 1.62% driven by net margin of 3.46%, asset turnover of 0.366x, and modest financial leverage of 1.28x. The balance sheet remains conservative: total assets were ¥65.688 billion, equity ¥51.222 billion (equity-to-asset ratio approximately 78.0% by calculation), and total liabilities ¥16.043 billion. Liquidity is strong with a current ratio of 4.54x and a quick ratio of 3.67x, underpinned by ¥45.249 billion in current assets and ¥9.964 billion in current liabilities. Interest coverage is very comfortable at 29.2x, reflecting low interest burden relative to operating earnings. Operating cash flow of ¥1.13 billion exceeded net income (OCF/NI 1.36x), indicating decent earnings quality and favorable non-cash/working capital dynamics in the half. EBITDA was ¥2.069 billion, consistent with operating income plus depreciation and amortization of ¥814 million. Working capital is substantial at ¥35.285 billion, with inventories at ¥8.696 billion (about 19% of current assets), suggesting ample capacity to meet project and product demand. Several disclosures are missing or interim-suppressed (e.g., cash and equivalents, investing cash flow, dividend per share, equity ratio, shares outstanding), so some derived metrics rely on available figures and standard interpretations. Based on the available non-zero data, the company exhibits strong financial health, improving profitability, and sufficient capacity to fund operations and potential shareholder returns. Outlook depends on sustaining margin improvements, managing inventory turns, and navigating FX and project timing risks common to TOA’s professional audio and public address solutions markets.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 3.46%
• asset_turnover: 0.366
• financial_leverage: 1.28
• calculated_ROE: 1.62%
• interpretation: ROE improvement is primarily margin-led; leverage is modest and asset turnover is relatively low, consistent with a capital-light but inventory-reliant model. margin_quality:
• gross_margin: 40.6%
• operating_margin: 5.2%
• ordinary_margin: 6.3%
• net_margin: 3.46%
• drivers: Strong gross margin and tight SG&A control enabled operating leverage; depreciation at ¥814m suggests limited fixed-cost drag. Effective tax rate inferred around ~30% using income tax vs. ordinary income (despite the reported 0.0% placeholder). operating_leverage: Revenue grew 5.6% while operating income rose 78.2%, indicating high incremental margins in the half. This likely reflects better pricing/mix (e.g., higher-margin systems/projects), cost control, and normalization from prior-year headwinds.

Growth Assessment

revenue_sustainability: Top-line growth of 5.6% YoY indicates steady demand in core markets (installed sound systems, security/PA solutions), but visibility on backlog and order intake is not disclosed. profit_quality: Profit expansion is quality-backed by gross margin strength and OCF/NI of 1.36x. Interest burden is minimal, isolating operational performance as the main driver. outlook: Continuation hinges on maintaining pricing/mix advantages, disciplined SG&A, and stable component availability. FX could aid reported revenue and margins if the yen remains weak given overseas exposure, but project timing can introduce quarterly volatility.

Financial Health

liquidity:

• current_ratio: 454.1%
• quick_ratio: 366.9%
• working_capital: ¥35,285 million
• commentary: Very strong liquidity with sizable current asset buffer; inventory represents ~19% of current assets, implying manageable inventory risk if turns are maintained. solvency:
• debt_to_equity: 0.31x (using total liabilities/equity as a proxy)
• interest_coverage: 29.2x
• equity_ratio: Approx. 78.0% (computed as equity/assets; reported 0.0% is undisclosed)
• commentary: Low leverage and high equity cushion support resilience against cyclical or project-timing shocks. capital_structure: Balance sheet is equity-heavy with limited reliance on interest-bearing debt (exact debt split not disclosed). This supports flexibility for capex, R&D, and potential shareholder returns.

Cash Flow Quality

earnings_quality: OCF of ¥1.13b vs NI of ¥0.832b (1.36x) indicates healthy cash conversion for the half, aided by non-cash charges and working capital management. FCF_analysis: Investing cash flow and capex are not disclosed; hence FCF cannot be precisely determined. Using OCF as a proxy suggests internal funding capacity, but true FCF depends on capex, which may track depreciation (¥814m) over time. working_capital: Inventories at ¥8.696b and strong receivables/cash components (not fully disclosed) underpin operations. Monitoring inventory days and receivable collections will be key to sustaining cash conversion.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.0% due to non-disclosure; interim data typically understates dividends under JGAAP interim reporting. FCF_coverage: FCF coverage cannot be assessed given missing capex and investing cash flows. On available data, low leverage and positive OCF suggest capacity to fund dividends if policy prioritizes stability. policy_outlook: Absent explicit guidance, expect a conservative approach aligned with earnings stability and balance sheet strength; potential for steady or gradually rising dividends contingent on maintaining cash generation.

Risk Assessment

Business Risks:

• Project timing and acceptance risk in installed systems affecting quarterly revenue recognition
• Input cost and component availability (semiconductors, electronics) impacting gross margin
• FX volatility affecting overseas revenue translation and component costs
• Competitive pricing pressure in professional audio, security, and PA markets
• Demand cyclicality tied to construction, infrastructure, and public sector budgets
• Supply chain disruptions and logistics costs

Financial Risks:

• Inventory obsolescence risk if demand softens or product cycles shift
• Working capital swings impacting OCF despite earnings growth
• Customer credit risk concentrated in project-based sales
• Interest rate normalization marginally raising financing costs (though leverage is low)

Key Concerns:

• Sustainability of current margin gains amid potential normalizing input costs
• Visibility on order backlog and capex needs not disclosed
• Limited disclosure on investing cash flows and cash balance constrains FCF assessment

Investment Implications

Key Takeaways:

• Revenue up 5.6% YoY with outsized operating income growth (+78.2%) evidences operating leverage
• Gross margin at 40.6% and operating margin ~5.2% indicate improved mix and cost control
• Strong balance sheet: equity ratio ~78%, current ratio 4.54x, interest coverage 29.2x
• Earnings quality solid with OCF/NI at 1.36x; further confirmation needed via capex/FCF data
• Valuation context requires per-share and market data, which are not provided in this dataset

Metrics to Watch:

• Order backlog and book-to-bill
• Gross margin trajectory and SG&A ratio
• OCF/NI and free cash flow (capex disclosure)
• Inventory turns and receivable days
• FX rates (USD/JPY, EUR/JPY) and overseas sales mix
• Capital allocation updates (dividends, buybacks, strategic investments)

Relative Positioning: Within Japanese professional audio and public address peers, TOA exhibits a conservative balance sheet, mid-single-digit operating margins, and improving cash conversion, positioning it as financially resilient with scope for incremental margin gains if mix and cost discipline persist.

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