SEIKOH GIKEN Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.13B
• Operating Income: ¥2.76B
• Net Income: ¥779M
• EPS: ¥250.03

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

Seiko Giken (6834) delivered a strong FY2026 Q2 performance under JGAAP on a consolidated basis, with revenue of ¥12.133bn, up 33.9% year on year. Operating income surged 167.6% YoY to ¥2.756bn, evidencing substantial operating leverage and improved cost control. Net income rose 188.6% YoY to ¥2.229bn, and EPS came in at ¥250.03, implying roughly 8.9 million shares outstanding. Profitability metrics are robust: EBITDA was ¥3.198bn, implying an EBITDA margin of 26.4%, and operating margin was approximately 22.7%. Ordinary income of ¥2.854bn exceeded operating income, suggesting positive non-operating contributions (e.g., financial income or FX). The company’s DuPont profile shows a net margin of 18.37%, asset turnover of 0.338x, and financial leverage of 1.20x, yielding a calculated ROE of 7.48% that aligns with the reported figure. The balance sheet is conservative with total assets of ¥35.9bn and total equity of ¥29.813bn, indicating low leverage (assets/equity ≈ 1.20x) and a debt-to-equity ratio of 0.21x. Liquidity is very strong, with a current ratio of 502% and a quick ratio of 485%, supported by modest inventories of ¥0.831bn relative to current assets of ¥24.042bn. Operating cash flow was ¥979m, positive but only 44% of net income, pointing to weaker cash conversion in the period. Free cash flow is not determinable from the disclosure as investing cash flow was not reported (zeros indicate non-disclosure rather than true zeros). Reported tax expense was ¥270m; given the relationship between ordinary income and net income, special items and/or minority interests likely influenced the effective tax rate, so the 0.0% metric shown should be considered non-representative. Dividend data (DPS and payout) are shown as zero, which likely reflects non-disclosure rather than an actual zero distribution; thus dividend conclusions require caution. Overall, the company demonstrates strong margin expansion, improved operating leverage, and a fortress balance sheet, offset by weaker cash conversion and some disclosure gaps that limit full assessment of free cash flow and capital allocation.

Profitability Analysis

ROE_decomposition: DuPont shows Net Margin 18.37% × Asset Turnover 0.338 × Financial Leverage 1.20 = ROE 7.48%. The ROE is being driven primarily by margin expansion rather than leverage or asset intensity. margin_quality: Operating margin ≈ 22.7% (¥2.756bn / ¥12.133bn) and EBITDA margin 26.4% (¥3.198bn / ¥12.133bn) indicate strong conversion from revenue to earnings. Gross margin is reported at 26.0% (¥3.150bn gross profit on ¥12.133bn revenue). Note: the reported cost of sales figure does not reconcile with the gross profit; we rely on the provided gross profit and gross margin for analysis. operating_leverage: Operating income grew +167.6% on revenue growth of +33.9%, evidencing significant operating leverage from fixed cost absorption and/or improved product mix. Ordinary income exceeded operating income by ¥98m, indicating incremental non-operating gains.

Growth Assessment

revenue_sustainability: Revenue increased 33.9% YoY to ¥12.133bn, suggesting strong demand recovery or ramp in key end markets. Sustainability will depend on order backlog, book-to-bill, and customer/project timing in precision equipment end markets. profit_quality: Net margin at 18.37% and operating margin at ~22.7% reflect solid pricing/mix and cost execution. Ordinary income uplift over operating income suggests non-operating tailwinds; excluding these would still leave core profitability strong. outlook: With high margins and a lean balance sheet, the company has capacity to invest for growth. Near-term outlook hinges on continued demand in electronics/precision equipment, stabilization of FX, and supply chain continuity. Monitoring orders and utilization will be key to gauge momentum into the second half.

Financial Health

liquidity: Current assets ¥24.042bn vs. current liabilities ¥4.787bn yields a current ratio of 502% and a quick ratio of 485%, indicating ample short-term liquidity. Inventories are modest at ¥0.831bn, implying most current assets are cash and receivables, though cash was not disclosed. solvency: Total liabilities ¥6.239bn vs. equity ¥29.813bn result in a debt-to-equity ratio of 0.21x and financial leverage of 1.20x, underscoring low balance-sheet risk. Equity ratio shown as 0.0% appears non-disclosed; calculated equity-to-assets is approximately 83%. capital_structure: Conservative capital structure with limited leverage; interest expense was not disclosed (shown as zero). Ordinary income coverage relative to any potential interest expense would be very high given operating strength.

Cash Flow Quality

earnings_quality: Operating cash flow of ¥979m is 0.44x net income (¥2.229bn), indicating weak cash conversion this period, likely due to working capital investment and/or timing effects. D&A of ¥442m implies EBIT-to-cash conversion below potential. FCF_analysis: Investing cash flow was not disclosed, so free cash flow cannot be reliably computed (the zero placeholder is non-informative). Financing cash outflow of ¥504m suggests modest shareholder returns and/or debt movements, but details were not provided. working_capital: Working capital is sizable at ¥19.256bn, and given revenue growth, a build in receivables or other current assets likely weighed on OCF. Inventory levels appear lean relative to sales, which is positive for cash efficiency; receivables collection and advance payments will drive OCF normalization.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as 0.0% but are likely undisclosed rather than actual zero. Based on EPS of ¥250.03 and strong profitability, the capacity for dividends appears solid, subject to cash conversion and capital needs. FCF_coverage: FCF coverage cannot be assessed because investing cash flows were not disclosed. Operating cash inflow of ¥979m is supportive but below net income; sustained OCF improvement would enhance dividend cover. policy_outlook: With low leverage and strong earnings, the company has flexibility for shareholder returns. Actual policy signals (guidance, historical payout, buybacks) were not provided; monitoring disclosures on capital allocation is necessary.

Risk Assessment

Business Risks:

• Demand cyclicality in precision equipment/electronics end markets
• Customer concentration risk typical in B2B equipment suppliers
• Project timing and backlog conversion risk affecting quarterly volatility
• Foreign exchange fluctuations impacting margins and non-operating gains
• Supply chain constraints and lead-time variability for critical components
• Technological displacement risk requiring sustained R&D investment

Financial Risks:

• Weak cash conversion (OCF/NI 0.44) if working capital remains elevated
• Potential exposure to non-operating gains that may not recur
• Limited disclosure on cash, investing CF, and interest expense complicates coverage analysis
• Capex intensity uncertainty could pressure future FCF

Key Concerns:

• OCF lagging earnings despite strong profit growth
• Inconsistencies between cost of sales and reported gross profit imply classification differences
• Lack of visibility on cash and capex constrains FCF assessment

Investment Implications

Key Takeaways:

• Strong topline growth (+33.9% YoY) with outsized operating income growth (+167.6% YoY) demonstrates high operating leverage
• Robust profitability: EBITDA margin 26.4% and net margin 18.37%
• Balance sheet strength with low leverage (D/E 0.21x) and high liquidity (current ratio 502%)
• Cash conversion below earnings (OCF/NI 0.44) warrants monitoring
• Non-operating tailwinds elevated ordinary income above operating income
• Disclosure gaps on cash, capex, and dividends limit full capital allocation analysis

Metrics to Watch:

• Order intake and backlog/book-to-bill
• Operating cash flow and OCF/NI ratio
• Working capital days (receivables, payables, inventory turns)
• Capex and investing cash flows
• FX impacts on non-operating income and margins
• Gross margin stability and product mix

Relative Positioning: Relative to typical TSE precision equipment peers, Seiko Giken currently exhibits above-average margins and a stronger balance sheet with lower leverage, offset by weaker cash conversion and limited disclosure on capex/dividends that obscures free cash flow comparability.

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