Chino Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.19B
• Operating Income: ¥917M
• Net Income: ¥750M
• EPS: ¥27.53

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

Chino Corp. (TSE: 6850) reported FY2026 Q2 consolidated results under JGAAP with solid top-line growth but softer profitability. Revenue rose 7.8% YoY to ¥14.187bn, while operating income declined 14.0% YoY to ¥917m, indicating negative operating leverage in the half. Gross profit was ¥4.204bn, implying a 29.6% gross margin, but the operating margin compressed to 6.5%, suggesting higher SG&A or pressure on gross margin mix. Ordinary income of ¥960m outpaced operating income, supported by non-operating balance, and net income fell 26.1% YoY to ¥468m, with a net margin of 3.30%. DuPont decomposition yields ROE of 1.86% (net margin 3.30% × asset turnover 0.391 × financial leverage 1.44), indicating that low margins and modest asset turnover are the principal drags on equity returns rather than leverage. Liquidity appears very strong: current ratio 290%, quick ratio 283%, and working capital of ¥17.878bn. The balance sheet is conservative with total liabilities of ¥12.731bn and debt-to-equity of 0.51x; financial leverage (assets/equity) of 1.44x is moderate. Cash generation was healthy: operating cash flow (OCF) came in at ¥1.045bn, 2.23x net income, indicating good earnings-to-cash conversion in this period. Interest expense is minimal at ¥6m, and interest coverage is robust at 152.8x, implying low financial risk. The reported effective tax rate metric shows 0.0%, but based on disclosed tax expense and income, an estimated ETR in the low-40% range is more realistic for the period; the zero is likely a reporting artifact. Dividend data show DPS and payout at 0.00, which likely reflects nondisclosure for the period rather than an actual zero dividend, and free cash flow is shown as 0 due to missing investing cash flows. Overall, the company shows resilient demand and strong cash conversion but faces margin pressure, resulting in a weaker ROE. The balance sheet strength mitigates near-term financial risk. Data limitations (notably cash, investing CF, capex, equity ratio by XBRL, and share count) constrain precision in certain assessments, and all zero entries should be treated as unreported rather than literal zero.

Profitability Analysis

roe_decomposition: ROE 1.86% = Net margin 3.30% × Asset turnover 0.391 × Financial leverage 1.44. The low net margin and modest asset turnover are the primary constraints on ROE; leverage is not a driver. margin_quality: - Gross margin: 29.6% (¥4.204bn/¥14.187bn) indicates healthy value-add but likely some mix/price or cost headwinds given operating margin compression to 6.5%.

• Operating margin: 6.5% (¥917m/¥14.187bn), down YoY given operating income −14% vs revenue +7.8%, implying higher SG&A ratio and/or gross margin pressure.
• Ordinary margin: 6.8% (¥960m/¥14.187bn) slightly above operating margin, suggesting modest non-operating income support.
• Net margin: 3.30% reflects tax and below-the-line impacts; the decline vs operating trend indicates limited below-the-line cushion. operating_leverage: Negative in the half: revenue +7.8% YoY contrasted with operating income −14.0% YoY, implying rising fixed cost absorption and/or higher discretionary expenses. EBITDA margin at 9.5% (¥1.344bn) vs operating margin at 6.5% suggests D&A burden of ~2.9% of sales; fixed cost structure likely amplifies margin volatility.

Growth Assessment

revenue_sustainability: Top-line growth of +7.8% YoY indicates solid demand in core temperature measurement/control solutions, likely supported by industrial and process automation end-markets. Sustainability will depend on order intake, backlog, and export/regional demand mix (not disclosed). profit_quality: Ordinary income modestly above operating income signals some non-operating tailwinds, but the primary earnings engine is core operations. The 26.1% YoY decline in net income despite revenue growth reflects margin compression rather than one-off items, pointing to underlying cost pressure. outlook: Near-term outlook hinges on cost normalization (materials, logistics), pricing power, and operating expense discipline. If the company can stabilize gross margins and scale SG&A with growth, operating leverage can turn positive. FX, capex cycles in key industries, and product mix (controllers vs systems/services) will influence margin trajectory.

Financial Health

liquidity: Current ratio 290.4% and quick ratio 282.5% indicate ample short-term liquidity. Working capital is ¥17.878bn (¥27.268bn current assets − ¥9.390bn current liabilities). Inventories are reported at ¥0.74bn, a small share of current assets, implying receivables and cash are major components (cash balance itself is unreported in XBRL). solvency: Debt-to-equity 0.51x (total liabilities/equity), financial leverage 1.44x (assets/equity) highlight a conservative capital structure. Interest expense is negligible (¥6m), and interest coverage is 152.8x, suggesting very low refinancing risk. capital_structure: Equity totals ¥25.104bn against total assets of ¥36.25bn. With modest leverage and strong liquidity, the company retains flexibility for capex and R&D. The reported equity ratio of 0.0% is an unreported metric, not a sign of weakness.

Cash Flow Quality

earnings_quality: OCF/Net income at 2.23x (¥1.045bn/¥468m) indicates strong cash realization from earnings in the period, likely aided by favorable working capital movements and non-cash D&A (¥427m). fcf_analysis: Free cash flow is shown as 0 due to missing investing cash flows; therefore, true FCF cannot be assessed. Without capex data, we cannot judge reinvestment intensity or FCF coverage of potential dividends. working_capital: Working capital is ample and appears to be a positive contributor to cash this half, but item-level drivers (receivables, payables turns) are not disclosed. Inventory at ¥0.74bn looks lean relative to sales, consistent with a controller/instrumentation mix; careful monitoring of DSO and advance payments is warranted.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is shown as 0.0% and annual DPS as 0.00, which should be treated as undisclosed rather than literal zero for this interim. With net income of ¥468m and strong OCF, the capacity to pay dividends exists, but policy details are not provided here. fcf_coverage: FCF coverage cannot be calculated because investing cash flows (and thus capex) are unreported. OCF of ¥1.045bn would typically provide a base for distributions after reinvestment, subject to capex needs. policy_outlook: Absent disclosed DPS or payout guidance, dividend trajectory is uncertain. Given the conservative balance sheet, the company has flexibility, but current margin pressure may bias management toward reinvestment and balance sheet reinforcement.

Risk Assessment

Business Risks:

• Cyclical demand in industrial and process automation end-markets affecting orders and backlog.
• Pricing pressure and product mix shifts impacting gross margin.
• Input cost and logistics inflation that may outpace pricing actions.
• Supply chain and component availability affecting delivery schedules.
• FX volatility influencing export competitiveness and margins.
• Execution risk in large system/projects with milestone revenue recognition.

Financial Risks:

• Margin compression leading to lower cash generation despite revenue growth.
• Working capital swings (receivables collection, advance payments) impacting OCF.
• Potential capex uptick reducing FCF if growth investments accelerate.
• Tax rate variability (estimated ~40%+ this period) affecting net income.

Key Concerns:

• Negative operating leverage in the half (OP −14% YoY vs sales +7.8%).
• Low ROE at 1.86% driven by margin and turnover rather than leverage.
• Limited disclosure on cash, capex, and dividends constraining visibility into FCF and shareholder returns.

Investment Implications

Key Takeaways:

• Solid top-line growth but margin compression led to weaker operating and net profits.
• ROE of 1.86% is subdued; improving margin and asset turnover are key to lift returns.
• Balance sheet and liquidity are strong, limiting financial risk and preserving flexibility.
• Cash conversion is healthy (OCF/NI 2.23x), but FCF cannot be assessed without investing cash flows.
• Interest burden is minimal; financial risk is low even in a softer margin environment.

Metrics to Watch:

• Order intake, backlog, and book-to-bill for demand visibility.
• Gross margin and SG&A ratio trajectory to assess operating leverage recovery.
• OCF trends and working capital turns (DSO/DPO/DIO).
• Capex and R&D intensity to gauge reinvestment and future growth.
• FX exposure and pricing actions to offset input cost pressures.
• Tax rate normalization and any one-off items below operating income.

Relative Positioning: Within Japan’s electric equipment/instrumentation small-to-mid caps, Chino exhibits a conservative balance sheet, strong liquidity, and mid-to-high 20s gross margins, but currently lags peers on operating margin expansion and ROE due to negative operating leverage in the half.

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