KYOSHA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.35B
• Operating Income: ¥338M
• Net Income: ¥108M
• EPS: ¥7.42

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

Verdict: A weak FY2026 Q2 with sharp profit compression despite stable liquidity and strong cash conversion. Revenue declined 3.6% YoY to 123.5, while operating income halved (-49.1% YoY) to 3.38, indicating deteriorating operating leverage. Ordinary income fell 51.0% YoY to 2.19, pressured by higher non-operating expenses, notably interest expense of 1.56. Net income decreased 60.1% YoY to 1.07, with an elevated effective tax rate of 45.2% further squeezing bottom-line results. Gross margin stood at 15.5%, and operating margin was a low 2.7%, highlighting tight pricing and/or cost pressures. Operating margin compressed by roughly 244 bps YoY (from about 5.2% to 2.7%), given a modest revenue decline but a near-halving of operating profit. ROE is weak at 1.1%, driven by a very low net margin (0.9%), modest asset turnover (0.533), and moderate leverage (2.48x). ROIC is 1.6%, well below a typical cost of capital, flagging inadequate returns on invested capital. Cash flow quality is a relative bright spot: operating cash flow of 8.67 is 8.1x net income, supported by non-cash D&A (5.52) and likely working capital tailwinds. However, total comprehensive income was a negative 6.18, implying sizable OCI losses (e.g., securities valuation or FX), which erode equity despite positive net profit. Liquidity appears adequate with a current ratio of 152.7% and cash of 49.34 against short-term loans of 36.10, but interest coverage of 2.17x is thin. Leverage is moderate with D/E at 1.48x, near the upper end of conservative thresholds. Capex was 6.08; using OCF minus capex implies an indicative FCF of roughly 2.6, but full investing CF and dividends paid are unreported. Dividend data are limited; a calculated payout ratio of 150.3% suggests potential unsustainability against earnings, though OCF coverage looks better. Forward-looking, recovery hinges on restoring gross/operating margins, controlling financing costs, and improving ROIC toward at least 5% near term; absent that, equity value creation will remain challenged.

Profitability Analysis

ROE (1.1%) = Net Profit Margin (0.9%) × Asset Turnover (0.533) × Financial Leverage (2.48x). The component exerting the largest negative pressure is the net margin, given the 60.1% YoY decline in net income versus only a 3.6% drop in revenue. Business drivers likely include pricing pressure in PCB-related products, unfavorable mix, and an elevated non-operating burden (interest expense at 1.56) plus a high effective tax rate (45.2%). Operating margin compressed sharply to 2.7% from roughly 5.2% a year ago (≈244 bps contraction), indicating negative operating leverage as costs did not flex with lower sales. The deterioration appears partly cyclical (demand softness and pricing) and partly structural (financing costs), with sustainability dependent on cost-downs, pricing discipline, and deleveraging. EBITDA margin is 7.2%, but conversion to operating margin is weak due to SG&A intensity and interest drag below the operating line. Flag: operating income (-49.1% YoY) fell far faster than revenue (-3.6%), signaling adverse operating leverage; we cannot verify SG&A growth vs revenue due to missing SG&A detail.

Growth Assessment

Top-line declined modestly (-3.6% YoY), but profits fell steeply, implying mix and/or price erosion and cost stickiness. Operating income contraction (-49.1% YoY) indicates revenue is not covering fixed costs adequately at current scale. Non-operating expenses, especially interest, amplified the profit drop, driving ordinary income down 51%. The high effective tax rate further constrained net profit (-60.1% YoY). With ROIC at 1.6%, current growth investments are not earning their cost of capital. Near-term growth recovery depends on market demand in electronics/PCB end-markets, restoration of gross margin, and cost control. Absent evidence of a strong order rebound, near-term revenue growth appears fragile, and profit quality is sensitive to small revenue changes. Outlook: prioritize profitability over growth—reducing interest burden and improving mix/gross margin would have outsized impact on earnings.

Financial Health

Liquidity is adequate: current ratio 152.7% and cash 49.34 versus short-term loans 36.10 and current liabilities 96.14. Quick ratio is reported at 152.7% (inventories unreported), suggesting comfortable short-term coverage. No warning on current ratio (<1.0) or extreme leverage (D/E > 2.0); D/E is 1.48x, near the conservative ceiling. Interest coverage is thin at 2.17x, close to warning territory, implying sensitivity to earnings volatility. Maturity mismatch risk appears manageable given cash plus receivables (33.55) relative to short-term debt, but sustained low margins could pressure refinancing. Total equity is 93.48, but comprehensive losses (-6.18) signal possible equity erosion from OCI volatility (e.g., investment securities at 7.62). Off-balance sheet obligations are not disclosed in the provided data.

Cash Flow Quality

OCF of 8.67 is strong relative to net income of 1.07 (OCF/NI = 8.10x), indicating high cash earnings and/or working capital release; no quality red flag here. D&A (5.52) materially supports OCF versus accrual earnings. Capex was 6.08; using OCF−Capex implies indicative FCF of about 2.6, suggesting room to service debt and potential dividends, though full investing CF is unreported. Financing CF was -4.02, consistent with debt repayment and/or dividends, but line-item detail is missing. No clear signs of working capital manipulation are evident from the limited data, but the identical current and quick ratios reflect missing inventory data rather than zero inventory.

Dividend Sustainability

Dividend amounts are unreported; however, a calculated payout ratio of 150.3% versus current period earnings indicates potential unsustainability against accrual profits. On a cash basis, indicative FCF (~2.6) could partially support distributions, but without total dividends paid and full investing CF, coverage cannot be confirmed. Given thin interest coverage (2.17x) and sub-WACC ROIC (1.6%), prudent policy would favor balance sheet protection over high payouts. Outlook: unless earnings recover and ROIC improves, sustaining a >100% payout against earnings appears challenging. Data limitations: DPS by quarter, total dividends paid, and explicit dividend policy are unreported.

Risk Assessment

Business Risks:

• End-market softness and pricing pressure in PCB/electronics lowering gross and operating margins
• Negative operating leverage: small revenue declines driving disproportionate profit drops
• High effective tax rate (45.2%) depressing net margins
• Supply chain cost volatility impacting cost of sales and margins

Financial Risks:

• Interest burden (interest expense 1.56) with low interest coverage (2.17x)
• Equity erosion risk from OCI volatility (total comprehensive income -6.18)
• Moderate leverage (D/E 1.48x) near conservative boundary
• Refinancing risk if earnings remain weak given short-term loans of 36.10

Key Concerns:

• ROIC at 1.6% indicates value destruction relative to cost of capital
• Operating margin compressed to 2.7% from ~5.2% YoY, signaling deteriorating profitability
• Payout ratio at 150.3% implies potential strain on capital if maintained
• Data gaps (inventories, SG&A detail, dividends) limit full assessment of sustainability

Investment Implications

Key Takeaways:

• Profitability deteriorated sharply with operating income -49.1% YoY and net income -60.1% YoY
• Operating margin compressed by roughly 244 bps to 2.7%, reflecting negative operating leverage
• Cash generation is comparatively solid (OCF/NI 8.1x), but comprehensive losses undermine equity
• Interest coverage is thin at 2.17x; deleveraging would improve resilience
• ROIC at 1.6% is well below target levels, requiring margin and asset efficiency improvements

Metrics to Watch:

• Gross and operating margin trajectory
• Interest coverage and absolute interest expense
• Working capital turns (AR days, inventory days once disclosed)
• OCI movements and investment securities valuation
• Capex discipline versus OCF to sustain positive FCF
• ROIC progress toward >5% near term

Relative Positioning: Versus domestic electronics/PCB peers, profitability and capital efficiency appear below average, with higher sensitivity to financing costs; liquidity is acceptable but margin restoration and ROIC improvement are needed to close the gap.

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