PULSTEC INDUSTRIAL CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.04B
• Operating Income: ¥89M
• Net Income: ¥25M
• EPS: ¥51.83

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

Palstech Kogyo Co., Ltd. (TSE: 68940) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥1,041m (+7.2% YoY) and operating income of ¥89m (+60.8% YoY), indicating meaningful operating leverage on modest top-line growth. Gross profit was ¥348m, yielding a healthy gross margin of 33.4%, which, together with disciplined SG&A, translated to an operating margin of 8.6%. Ordinary income reached ¥100m and net income was ¥70m (+179.4% YoY), with EPS of ¥51.83, underscoring substantial bottom-line recovery. DuPont metrics show a net margin of 6.72%, asset turnover of 0.219, and financial leverage of 1.25, producing a reported ROE of 1.85% for the period. The balance sheet appears conservative: total assets were ¥4,751m, liabilities ¥1,166m, and equity ¥3,788m, implying low leverage (L/E ~0.31x) and ample solvency headroom. Liquidity is strong on headline metrics: current assets of ¥3,609m versus current liabilities of ¥736m result in a current ratio of 490%, signaling substantial working capital buffers. However, operating cash flow was negative at ¥-157m despite positive earnings, yielding an OCF/NI ratio of -2.25, which flags near-term cash conversion weakness, likely due to working capital movements. EBITDA was ¥118m (11.4% margin), and depreciation was modest at ¥29m, suggesting limited capital intensity in the period. Interest expense was de minimis at ¥0.07m, and interest coverage was extremely high at 1,271x, reflecting minimal financial risk from debt service. The company reported no investing cash flow and a financing cash outflow of ¥-154m, suggesting potential debt repayment, share repurchases, or dividend payments at other entities; the specifics are not disclosed. Several line items show as zero (e.g., inventories, cash and equivalents, investing cash flow, equity ratio, shares outstanding), which indicates non-disclosure rather than actual zero balances; conclusions relying on these items should be treated with caution. The reported equity ratio of 0.0% is not representative; using provided totals implies an equity ratio around the high-70% range. Dividend per share and payout ratio are shown as zero, suggesting no interim distribution or non-disclosure; sustainability analysis therefore focuses on capacity rather than policy execution. Overall, profitability is improving, financial risk is low, but cash flow conversion is the key near-term watch point. Data limitations constrain depth of per-share and capital allocation analysis, but available metrics point to a solid financial base with cyclical or project-driven working capital swings affecting cash flow.

Profitability Analysis

ROE_decomposition: Reported ROE 1.85% = Net margin 6.72% x Asset turnover 0.219 x Financial leverage 1.25. The low asset turnover (0.219) is the primary drag on ROE, typical for mid-period (H1) results and asset-heavy or project-based revenue recognition. Financial leverage is modest (A/E ~1.25), so ROE is earnings-driven rather than leverage-enhanced. margin_quality: Gross margin 33.4% and operating margin ~8.6% (¥89m/¥1,041m) indicate solid pricing and cost control. The spread between gross and operating margins suggests manageable SG&A. Ordinary margin (~9.6%) exceeds operating margin due to non-operating gains or financial income, with minimal interest expense (¥0.07m). The net margin of 6.72% benefits from low interest and a moderate tax burden for the period. operating_leverage: Operating income grew 60.8% on 7.2% revenue growth, evidencing meaningful operating leverage. This implies fixed cost absorption and/or a favorable mix shift. Sustainability depends on continued volume growth and stable gross margins.

Growth Assessment

revenue_sustainability: Revenue increased 7.2% YoY to ¥1,041m. Without order/backlog disclosure, sustainability is inferred from margin resilience and limited price discounting. The moderate growth rate is consistent with steady demand rather than a one-off surge. profit_quality: Net income rose 179% YoY to ¥70m, outpacing sales growth due to operating leverage. However, OCF was negative (¥-157m), so earnings quality requires scrutiny; working capital usage likely explains the gap, but details (receivables, inventories) are undisclosed. outlook: Assuming normalization of working capital in H2 and stable demand, margins could remain near current levels. Asset turnover may improve with higher second-half sales conversion, supporting ROE. Data gaps on backlog and pipeline constrain visibility.

Financial Health

liquidity: Current assets ¥3,609m vs current liabilities ¥736m imply a current ratio of 490% and substantial working capital of ¥2,873m. Quick ratio equals current ratio due to non-disclosure of inventories; true quick ratio may be lower but still likely robust. solvency: Total liabilities ¥1,166m vs equity ¥3,788m yield a low debt-to-equity of ~0.31x and implied equity ratio around ~79.7% (vs reported 0.0% due to non-disclosure). Interest coverage is 1,271x, indicating negligible refinancing risk. capital_structure: Leverage is conservative with limited interest-bearing debt (implied by minimal interest expense). Financial flexibility appears strong, enabling absorption of working capital swings and potential strategic investments.

Cash Flow Quality

earnings_quality: OCF/Net income is -2.25, signaling poor cash conversion this half. This likely reflects increased receivables and/or work-in-progress associated with growth, timing of collections, or advance procurement; specific drivers are not disclosed. FCF_analysis: Investing cash flow is shown as 0 (non-disclosed), so FCF cannot be reliably derived. EBITDA of ¥118m and modest depreciation (¥29m) suggest underlying cash earnings capacity, but negative OCF tempers near-term free cash flow. working_capital: Headline working capital is ample (¥2,873m), but period cash outflow indicates a build. Inventories and trade receivables details are not disclosed; monitoring days sales outstanding, days inventory, and customer advance trends is essential.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is shown as 0.00 and payout ratio 0.0%, suggesting no distribution for the period or non-disclosure. With net income positive and leverage low, capacity exists, but near-term cash generation is weak. FCF_coverage: FCF coverage cannot be assessed due to non-disclosure of investing CF and the negative OCF. Sustainable dividends would require normalization of working capital and consistent positive OCF. policy_outlook: No explicit policy is provided. Given low leverage and improving profitability, a conservative payout could be feasible longer term, contingent on cash conversion and capital allocation priorities.

Risk Assessment

Business Risks:

• Demand cyclicality in end markets leading to revenue volatility
• Project timing and acceptance risk affecting revenue recognition and cash collections
• Input cost fluctuations impacting gross margin
• Customer concentration risk (not disclosed) potentially amplifying earnings volatility
• Supply chain lead times causing inventory or WIP build and OCF pressure
• Technology obsolescence risk in product lines without ongoing R&D investment visibility

Financial Risks:

• Negative operating cash flow despite profit indicating working capital strain
• Data gaps on cash balance and inventories reduce visibility on near-term liquidity buffers
• Potential FX exposure if procurement or sales are denominated in foreign currencies (not disclosed)
• Refinancing or covenant risks appear low but cannot be fully assessed without debt detail

Key Concerns:

• Sustained negative OCF if working capital does not normalize
• Low asset turnover depressing ROE absent further growth
• Limited disclosure (inventories, cash, share count) constraining analysis precision

Investment Implications

Key Takeaways:

• Revenue growth of 7.2% with a 60.8% surge in operating profit demonstrates strong operating leverage
• Healthy gross margin of 33.4% and operating margin of ~8.6% signal improved cost discipline
• Balance sheet is conservative with D/E ~0.31x and implied equity ratio near 80%
• Operating cash flow of ¥-157m versus net income of ¥70m highlights cash conversion risk
• Interest burden is negligible (coverage 1,271x), lowering financial risk
• ROE at 1.85% is constrained by low asset turnover; improved throughput is key for returns

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue visibility
• OCF/Net income ratio and working capital days (DSO/DIO/DPO) for cash conversion
• Asset turnover trend as sales scale in H2
• Gross margin stability amid input cost moves
• Non-operating items and ordinary income drivers
• Capital expenditure and investing cash flows once disclosed

Relative Positioning: Within small-cap Japanese industrial/tech manufacturers, the company exhibits above-average balance sheet strength and improving margins, but currently lags top peers on cash conversion and asset efficiency.

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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