KYORITSU ELECTRIC CORPORATION FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥8.21B
• Operating Income: ¥521M
• Net Income: ¥292M
• EPS: ¥38.85

Income Statement

Balance Sheet

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

For FY2026 Q1, Kyoritsu Electric Co., Ltd. (TSE: 6874) posted revenue of ¥8,214 million, down 1.8% year over year, with operating income of ¥521 million (-6.5% YoY) and net income of ¥312 million (+12.8% YoY). Gross profit was ¥1,608.9 million, yielding a gross margin of 19.6%, indicating modest compression risk if price/mix or cost pressures persist. Operating margin stood at 6.34%, implying that the modest revenue decline translated into a proportionally larger reduction in operating profit, consistent with negative operating leverage this quarter. Ordinary income of ¥551 million exceeded operating income by ¥30 million, suggesting small net non-operating gains and minimal financial drag given interest expense of only ¥0.75 million. The implied effective tax burden based on disclosed figures is elevated (roughly mid-to-high 40% using ordinary income as a proxy for pre-tax income), yet net profit still rose, indicating YoY support from non-operating items and/or tax effects compared to the prior year. DuPont decomposition points to a calculated ROE of 1.49% for the quarter, driven by a 3.80% net margin, 0.257x asset turnover, and 1.53x financial leverage. The balance sheet is conservatively positioned with total assets of ¥31.96 billion, equity of ¥20.95 billion, and total liabilities of ¥11.58 billion, implying a low debt-to-equity ratio of 0.55x. Liquidity appears strong with a current ratio of 210.5% and quick ratio of 200.9%, supported by relatively modest inventories of ¥1,037.9 million. Working capital totals ¥11.94 billion, providing a cushion to navigate short-term demand fluctuations and procurement cycles. Cash flow statement items were not disclosed in this filing, so operating cash flow, investing cash flow, and free cash flow cannot be assessed from this dataset. Similarly, depreciation and EBITDA figures were not disclosed under the provided line items; margin commentary therefore relies on operating income and gross profit. Dividend-related line items (DPS, payout, FCF coverage) were not disclosed for the quarter, which is typical for Japanese companies that guide and declare dividends on a semiannual/annual basis. Overall profitability remains positive but shows sensitivity to even small changes in revenue, as evidenced by the larger contraction in operating profit versus sales. The company’s financial risk is low given minimal interest burden and ample liquidity. Near-term priorities include safeguarding gross margin through cost pass-through and mix management, while maintaining discipline on fixed costs to mitigate operating leverage risks. Given the limited disclosure on cash flows and dividends in this quarterly snapshot, conclusions on earnings quality and dividend sustainability should remain provisional until full-year or mid-year updates are available.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 3.80% (¥312m / ¥8,214m)
• asset_turnover: 0.257x (¥8,214m / ¥31,955m)
• financial_leverage: 1.53x (¥31,955m / ¥20,952m)
• calculated_ROE: 1.49% (matches reported DuPont ROE) margin_quality: - Gross margin: 19.6% (¥1,608.9m/¥8,214m), indicating moderate headroom but vulnerable to cost inflation and pricing pressure.
• Operating margin: 6.34% (¥521m/¥8,214m); gap vs. gross margin highlights a meaningful fixed-cost base and SG&A absorption sensitivity.
• Ordinary margin: 6.71% (¥551m/¥8,214m), aided by small net non-operating gains.
• Net margin: 3.80%; despite an implied high tax burden, net profit rose YoY, pointing to favorable non-operating or tax mix vs. the prior year. operating_leverage: Revenue fell 1.8% YoY while operating income declined 6.5% YoY, indicating negative operating leverage this quarter (operating profit sensitivity to sales >1). Fixed-cost absorption likely weighed on operating margin as volumes softened slightly.

Growth Assessment

revenue_sustainability: Top-line declined 1.8% YoY to ¥8.21bn. Given the modest contraction, demand appears broadly stable but not immune to short-cycle softness. Mix and pricing discipline will be key to maintaining gross margin if volumes soften further. profit_quality: Operating income fell faster than revenue, revealing cost absorption pressure. Ordinary income benefited from small net non-operating gains (≈¥30m). The implied tax burden is elevated, but net income still improved YoY, suggesting favorable below-OP items versus the prior year. outlook: With low financial leverage and ample liquidity, the company has flexibility to manage through near-term cyclicality. Sustained growth will hinge on order momentum, backlog conversion, and ability to defend margins through cost control and product mix. Watch for updates on pricing pass-through and cost normalization in subsequent quarters.

Financial Health

liquidity: - Current assets: ¥22,749.4m; current liabilities: ¥10,804.8m; current ratio 210.5% indicates strong short-term liquidity.

• Quick ratio 200.9% with inventories at ¥1,037.9m suggests liquidity strength is not dependent on inventory liquidation. solvency: - Total liabilities: ¥11,581.9m vs. equity: ¥20,952.0m; debt-to-equity 0.55x indicates conservative leverage.
• Interest expense is minimal at ¥0.75m; interest coverage ~693x (OP/interest), signaling very low financial risk. capital_structure: Assets of ¥31.96bn funded 66% by equity and 34% by liabilities (implied from totals). Financial leverage at 1.53x is modest, supporting balance sheet resilience.

Cash Flow Quality

earnings_quality: Operating cash flow data was not disclosed in this quarterly dataset. As such, cash conversion metrics (OCF/NI) and accrual intensity cannot be evaluated from the provided figures. FCF_analysis: Investing and financing cash flows were not disclosed; free cash flow cannot be derived. Assessment of capex discipline and reinvestment sufficiency is deferred until updated filings. working_capital: Inventories are ¥1,037.9m (≈4.6% of current assets), implying current assets are primarily cash/receivables; however, cash and equivalents were not disclosed in this snapshot. Working capital totals ¥11,944.6m, providing operational flexibility.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio were not disclosed in this quarter. With EPS of ¥38.85 for Q1 and positive profitability, earnings capacity exists; however, payout tendencies cannot be inferred from absent DPS data. FCF_coverage: Free cash flow and operating cash flow were not disclosed, so FCF-based dividend coverage cannot be assessed from this dataset. policy_outlook: Many Japanese companies confirm dividends on a semiannual/annual basis; an updated outlook should be revisited once mid-year or full-year guidance/dividend announcements are available.

Risk Assessment

Business Risks:

• Demand cyclicality in industrial electronics/automation end-markets leading to volume and mix volatility.
• Gross margin pressure from input cost inflation and pricing competition.
• Fixed-cost absorption risk causing outsized operating profit swings on small revenue changes.
• Supply chain lead-time variability impacting delivery schedules and working capital.
• Customer concentration or project timing risk affecting quarterly revenue visibility.

Financial Risks:

• Limited, given low leverage and minimal interest burden; primary risk is profit volatility rather than balance sheet stress.
• Potential tax rate volatility affecting net income due to changes in non-operating items or deferred tax movements.
• FX exposure on components or exports (if applicable) could affect gross margin, though sensitivity not disclosed.

Key Concerns:

• Negative operating leverage observed in Q1 as OP declined more than sales.
• Dependence on non-operating items to bridge OP to ordinary profit.
• Insufficient disclosure on cash flows limits assessment of earnings quality and dividend coverage.

Investment Implications

Key Takeaways:

• Top-line modestly lower (-1.8% YoY) with operating income down more sharply (-6.5% YoY), indicating negative operating leverage.
• Gross margin at 19.6% and operating margin at 6.34% reflect moderate profitability with sensitivity to cost absorption.
• Net income rose 12.8% YoY aided by non-operating items and/or tax effects.
• Balance sheet is conservative (D/E ~0.55x) with strong liquidity (current ratio 210.5%).
• Interest burden is negligible; interest coverage ~693x.
• Cash flow and dividend data not disclosed this quarter; further updates needed for FCF and payout analysis.

Metrics to Watch:

• Order intake/backlog and book-to-bill for forward revenue visibility.
• Gross margin progression and cost pass-through effectiveness.
• SG&A and fixed-cost control to mitigate operating leverage.
• Ordinary income composition (non-operating gains/losses) and interest income/expense trends.
• Cash conversion (OCF/NI) and working capital turns once cash flow data is available.
• Tax rate normalization versus the implied elevated rate this quarter.

Relative Positioning: Financially conservative with ample liquidity and low leverage compared to many small/mid-cap industrial electronics peers; profitability is steady but exhibits operating leverage to top-line fluctuations, making margin management and cost control key differentiators.

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
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