NEW COSMOS ELECTRIC CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥24.63B
• Operating Income: ¥4.02B
• Net Income: ¥2.32B
• EPS: ¥220.24

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

Shin-Cosmos Electric Co., Ltd. (TSE: 6824) delivered strong topline and profit growth in FY2026 Q2 (cumulative), with revenue up 21.9% year over year to ¥24.63bn and operating income up 19.2% to ¥4.02bn. Net income rose 33.6% to ¥2.72bn, outpacing operating income growth, suggesting favorable non-operating items and/or a more normalized tax burden versus the prior year. Profitability remained robust: gross margin was 41.7%, operating margin 16.3%, and EBITDA margin 18.5%, indicating healthy pricing and cost control in core operations. Ordinary income of ¥4.00bn and minimal interest expense (¥19m) reflect limited leverage and negligible financial drag. The DuPont decomposition indicates a calculated ROE of 5.12%, built on an 11.03% net margin, asset turnover of 0.354x, and financial leverage of 1.31x—solid margins offset by low asset turnover and conservative leverage. Balance sheet strength is notable: total assets of ¥69.55bn against total equity of ¥53.03bn imply an equity ratio around the mid-70% range (despite the reported 0% likely being a disclosure gap), and the current ratio stands at a very strong 472%. Working capital of ¥33.81bn and a quick ratio above 4x underscore ample liquidity. Cash conversion is softer this period: operating cash flow of ¥1.62bn is 60% of net income, probably reflecting working capital build amid growth. Financing cash outflows of ¥1.19bn indicate capital returns and/or debt repayment, but dividend and share data are not disclosed in the XBRL for this period. Investing cash flow and cash balances were not reported, so free cash flow and net cash position cannot be reliably assessed from the provided dataset. Interest coverage is extremely high at 209x, consistent with a low-risk capital structure. The effective tax rate implied by provided taxes (¥1.08bn) and earnings suggests a normalized level near the high-20% range, despite the reported 0.0% metric which appears to be a data artifact. Overall, the company demonstrates solid operational execution, conservative leverage, and strong liquidity, with the main analytical constraint being incomplete cash flow and equity/distribution disclosures. The outlook hinges on sustaining order momentum while normalizing working capital and improving asset turnover to lift ROE. We note zeros in certain line items are due to non-disclosure, not actual zeros, and our analysis focuses on available, non-zero data.

Profitability Analysis

ROE is 5.12% per the provided DuPont, driven by an 11.03% net margin, asset turnover of 0.354x, and financial leverage of 1.31x. This indicates profitability is margin-led rather than efficiency- or leverage-led. Gross margin of 41.7% and operating margin of 16.3% are strong for an industrial electronics/safety-device profile, reflecting pricing power, product mix, and cost control. Operating income growth (+19.2% YoY) slightly lagged revenue growth (+21.9% YoY), implying modest negative operating leverage in the period—likely higher SG&A (e.g., sales expansion, R&D, logistics) or mix effects. EBITDA margin at 18.5% confirms healthy underlying economics relative to peers with similar hardware/software mixes. Ordinary income aligns closely with operating income due to low interest expense (¥19m), reinforcing that non-operating drag is minimal. The 33.6% net income growth outpacing operating income suggests year-on-year tailwinds in non-operating items and/or a normalized tax rate. To lift ROE from 5.1%, management would need to improve asset turnover (e.g., inventory/receivables turns) or adjust capital structure; given already strong margins, efficiency gains are the most realistic driver.

Growth Assessment

Revenue grew 21.9% YoY to ¥24.63bn, indicating strong demand across core segments. Operating income increased 19.2% to ¥4.02bn, slightly below revenue growth, signaling some cost absorption as the business scales. Net income rose 33.6% to ¥2.72bn, benefitting from low financial costs and a normalized tax burden. The margin structure (41.7% gross, 16.3% operating) suggests that growth is not bought at the expense of pricing; rather, growth appears to be supported by mix and scale. Sustainability hinges on order backlog and repeat maintenance/consumables (not disclosed), but the large YoY step-up and strong margins point to durable demand drivers. Asset turnover at 0.354x is low, hinting at balance sheet conservatism and/or elevated cash/working assets relative to sales; improving turnover would reinforce growth quality. Near-term outlook: continued revenue expansion is plausible given recent momentum, but operating leverage may be muted if the company continues to invest in growth (SG&A, R&D). Monitoring book-to-bill, backlog, and regional mix will be critical to gauge the durability of the current run-rate.

Financial Health

Liquidity is very strong: current ratio 471.6% and quick ratio 444.1% indicate substantial short-term assets versus liabilities. Working capital is ¥33.81bn, providing a significant cushion for operations and procurement. Solvency is conservative: debt-to-equity is 0.30x and interest expense is de minimis at ¥19m, yielding an interest coverage ratio of 208.8x. While the reported equity ratio is 0.0% (undisclosed), implied equity ratio is approximately 76% (¥53.03bn equity / ¥69.55bn assets), pointing to a robust capital base. The firm is positioned to weather volatility without balance-sheet strain. The low financial leverage (DuPont leverage 1.31x) limits ROE but enhances resilience. Given the strong equity base and low borrowing, refinancing and covenant risks appear minimal from the available data.

Cash Flow Quality

Operating cash flow was ¥1.63bn versus net income of ¥2.72bn, an OCF/NI ratio of 0.60, indicating weaker cash conversion this period, likely due to working capital build consistent with 21.9% revenue growth. Depreciation and amortization totaled ¥550m, supporting cash earnings quality relative to EBITDA of ¥4.57bn (non-cash share is modest). Investing cash flow was not disclosed (reported as 0), preventing an assessment of capital intensity and free cash flow; consequently, the provided FCF of 0 should be treated as not computed rather than actual. Financing cash flow was an outflow of ¥1.19bn, likely reflecting dividends and/or debt repayment, but dividend and share data are not available in this dataset. The divergence between profit and OCF warrants monitoring of receivables and inventories; inventories stand at ¥2.50bn, which appears light versus sales, suggesting receivables likely drove the OCF shortfall (not disclosed). Overall, earnings quality is good at the operating level, but cash conversion needs normalization as growth-related working capital unwinds.

Dividend Sustainability

Dividend data are not disclosed in this period (annual DPS reported as 0.00 and payout ratio 0.0% should be treated as unreported). Financing cash outflow of ¥1.19bn suggests some capital return and/or debt service, but we cannot attribute without disclosure. With net income at ¥2.72bn and a strong balance sheet (implied ~76% equity ratio), the capacity for distributions appears ample in principle. However, in the absence of actual DPS and share count data, payout and FCF coverage cannot be calculated. Future sustainability will depend on aligning dividends with normalized free cash flow, which requires visibility into capex (investing CF not disclosed) and working capital needs.

Risk Assessment

Business Risks:

• Demand cyclicality in industrial/safety equipment end-markets affecting order flow and backlog.
• Pricing pressure from competitors and procurement cost inflation impacting gross margins.
• Supply chain constraints for electronic components leading to delivery delays and cost overrun.
• Project timing and revenue recognition variability causing quarter-to-quarter volatility.
• Regulatory and standards changes in safety/compliance markets requiring ongoing product investment.
• Foreign exchange fluctuations affecting export competitiveness and translated results.

Financial Risks:

• Working capital expansion during growth periods reducing operating cash conversion (OCF/NI at 0.60).
• Low asset turnover (0.354x) depressing ROE and increasing capital tied in operations.
• Limited disclosure on investing cash flows and cash balances impairs visibility on FCF and liquidity deployment.
• Potential concentration risk in customers or regions (not disclosed) that could amplify volatility.
• Reinvestment needs (capex/R&D) could rise, pressuring free cash flow if margins compress.

Key Concerns:

• Cash conversion lag versus earnings; need for normalization in receivables and broader working capital.
• Incompleteness of cash and investment disclosures inhibits assessment of FCF and dividend capacity.
• Operating leverage slightly negative despite strong growth; watch cost base scalability.
• ROE constrained by low asset turnover and conservative leverage.

Investment Implications

Key Takeaways:

• Strong H1 revenue growth (+21.9% YoY) with resilient margins (GM 41.7%, OPM 16.3%).
• Net income growth (+33.6% YoY) outpaced operating income on low financial burden and normalized taxes.
• ROE at 5.12% is margin-led; efficiency/leverage are the main headwinds to higher returns.
• Exceptional liquidity and low leverage underpin financial resilience.
• OCF/NI of 0.60 indicates growth-driven working capital absorption that should normalize.
• Data gaps (cash, investing CF, dividend/share data) limit FCF and payout analysis.

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue sustainability.
• OCF/Net income and working capital turns (DSO, DIO) to monitor cash conversion.
• Asset turnover and inventory/receivable turnover to track efficiency gains.
• Gross and operating margins for pricing/mix and cost control.
• Capex and investing cash flows to assess FCF and capital intensity.
• ROE trajectory and any changes in capital structure or shareholder return policy.

Relative Positioning: Operationally strong with above-average margins and very conservative balance sheet; returns on equity trail margin peers due to low asset turnover and leverage, leaving upside if efficiency improves.

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