HARADA INDUSTRY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥20.33B
• Operating Income: ¥1.74B
• Net Income: ¥619M
• EPS: ¥61.49

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

Harada Industry Co., Ltd. (TSE:69040) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥20.33bn, down 12.3% YoY, yet delivered a notable operating profit increase of 15.5% YoY to ¥1.74bn. Gross profit of ¥5.09bn implies a 25.0% gross margin, signaling effective cost management and/or improved product mix despite top-line pressure. EBITDA was ¥2.44bn, for a 12.0% margin, indicating solid operating efficiency relative to the revenue contraction. Ordinary income of ¥1.77bn was slightly above operating income, suggesting modest net non-operating gains. Net income surged 110.3% YoY to ¥1.30bn, pushing net margin to 6.39%, supported by stronger operations and possibly cleaner below-the-line items. DuPont decomposition yields a 9.92% ROE, derived from a 6.39% net margin, 0.561x asset turnover, and 2.77x financial leverage, a balanced profile with profitability the key driver. Liquidity is adequate but not abundant: current ratio stands at 120.9% and quick ratio at 95.3%. The company shows positive working capital of ¥4.98bn, anchored by ¥6.11bn of inventories, which warrants monitoring for turns amid softer sales. Leverage appears meaningful with a debt-to-equity ratio of 1.95x and financial leverage of 2.77x; however, an equity ratio implied by totals is approximately 36% (total equity ¥13.1bn vs total assets ¥36.26bn). Interest burden is manageable with a 6.6x EBIT interest coverage and ¥261.9m interest expense against ¥1.74bn operating profit. Cash conversion was weak this half: operating cash flow (OCF) of ¥154.5m equates to an OCF/net income ratio of 0.12, implying working-capital investment or timing effects. Reported investing cash flow and cash balances are undisclosed (shown as zero), so free cash flow cannot be reliably determined; OCF provides only a pre-capex proxy. With EPS of ¥61.49 and no disclosed dividend, near-term capital allocation visibility is limited. Overall, the quarter demonstrates margin resilience and improved profitability against a challenging revenue backdrop, but cash flow softness and elevated leverage heighten the need to monitor working capital discipline and interest costs. Data gaps (e.g., cash balance, capex, DPS, share count) limit depth of certain conclusions. The outlook hinges on sustaining cost efficiencies, normalizing inventory and receivables, and stabilizing demand from core automotive customers.

Profitability Analysis

ROE_decomposition: ROE 9.92% = Net margin 6.39% × Asset turnover 0.561 × Financial leverage 2.77. Profitability (margin) and leverage are the largest contributors; moderate asset turnover reflects an asset-intensive profile typical of automotive component suppliers. margin_quality: Gross margin 25.0% on revenue decline suggests favorable mix, cost reductions, or pricing discipline. Operating margin improved YoY (OP +15.5% vs sales -12.3%), indicating structural cost actions and overhead control. Net margin at 6.39% reflects limited non-operating drag (ordinary income modestly above operating), with an implied tax rate around 36% (¥633m tax on ~¥1.77bn pre-tax), consistent with a normalized Japanese statutory range. operating_leverage: Positive operating leverage evident: OP grew despite sales contraction. Fixed cost absorption improved, likely via SG&A efficiencies and manufacturing productivity. Sustainability will depend on volume stabilization; if demand softens further, leverage could reverse.

Growth Assessment

revenue_sustainability: Top line fell 12.3% YoY to ¥20.33bn, suggesting softer OEM demand, model transitions, or FX headwinds. Without segment/geography detail, breadth of decline is unclear; auto end-market cyclicality remains the primary factor. profit_quality: Operating profit growth outpaced sales, supported by margin expansion. Ordinary income exceeds operating income, indicating non-operating net gains or FX/financial income offsetting interest; however, interest expense remains material at ¥262m. outlook: Maintaining higher margins will require continued cost discipline and mix benefits (e.g., higher-value antenna/electronics content). Near-term growth visibility is constrained by auto production planning, inventory normalization at customers, and macro conditions; cash conversion must improve to underpin further investment.

Financial Health

liquidity: Current ratio 120.9% and quick ratio 95.3% indicate adequate near-term coverage, but reliance on inventories (¥6.11bn) is high. Working capital is positive at ¥4.98bn. solvency: Debt-to-equity 1.95x and financial leverage 2.77x point to a leveraged balance sheet, though implied equity ratio is ~36% (¥13.1bn/¥36.26bn). Interest coverage of 6.6x (EBIT/interest) is acceptable but could tighten if earnings soften or rates rise. capital_structure: Total assets ¥36.26bn vs total liabilities ¥25.55bn and equity ¥13.10bn indicate moderate leverage typical for the sector. Absence of disclosed cash balance limits net debt assessment.

Cash Flow Quality

earnings_quality: OCF of ¥154.5m vs net income of ¥1.30bn yields an OCF/NI ratio of 0.12, indicating weak cash conversion this half—likely driven by working capital build (inventories/receivables) or timing. Depreciation & amortization of ¥700.5m supports EBITDA-to-cash conversion potential once working capital normalizes. FCF_analysis: Investing cash flow is undisclosed (reported as zero), and capex is not provided; thus, true free cash flow cannot be determined. Using OCF as a pre-capex proxy indicates limited internal cash generation in the period. working_capital: Inventory at ¥6.11bn is sizable relative to sales; without prior-period balances, turn trends are unknown. Current liabilities at ¥23.83bn are high vs current assets, keeping liquidity tight if receivables collections lag.

Dividend Sustainability

payout_ratio_assessment: No dividend per share is disclosed (DPS shown as zero indicates unreported). With EPS at ¥61.49, the mechanical payout ratio of 0% is not informative. FCF_coverage: Given OCF of ¥154.5m and undisclosed capex, FCF coverage of dividends cannot be assessed. Any future distributions should be evaluated against normalized OCF post working-capital adjustments. policy_outlook: Capital allocation visibility is limited due to missing DPS guidance. Given leverage and recent weak cash conversion, prioritization of balance sheet resilience and reinvestment over distributions would be prudent until cash flow normalizes (observation, not a recommendation).

Risk Assessment

Business Risks:

• Automotive demand cyclicality affecting OEM order volumes
• Model changeover and product-mix risk impacting margins
• FX volatility influencing export competitiveness and input costs
• Raw material and logistics cost fluctuations
• Technology shifts (connected car, EV) requiring ongoing R&D investment
• Customer concentration with major OEMs

Financial Risks:

• Elevated leverage (D/E 1.95x) and sensitivity of interest coverage to earnings
• Weak cash conversion (OCF/NI 0.12) and potential working-capital volatility
• Limited disclosed liquidity (cash balance undisclosed) obscures net debt
• Refinancing or interest rate risk if borrowing costs rise

Key Concerns:

• Sustainability of margin gains amid declining revenue
• Inventory and receivables management to restore OCF
• Visibility on capex and free cash flow
• Dependence on a concentrated customer base within autos

Investment Implications

Key Takeaways:

• Profit resilience: OP +15.5% YoY despite sales -12.3%, with 25.0% gross margin and 12.0% EBITDA margin
• ROE at 9.92% driven by solid margins and leverage
• Liquidity adequate but tight (current ratio 121%, quick 95%) amid high inventories
• Cash conversion weak (OCF/NI 0.12); FCF indeterminable due to undisclosed capex
• Leverage meaningful (D/E 1.95x) but interest coverage acceptable at 6.6x

Metrics to Watch:

• OCF/NI and working-capital changes (inventories, receivables, payables)
• Gross and operating margin sustainability
• Interest expense and coverage ratios
• Capex and investing cash flows (once disclosed)
• Order trends and revenue trajectory with key OEM customers

Relative Positioning: Within Japanese auto-parts suppliers, Harada appears to be executing effective cost control and mix optimization, yielding margin outperformance against a softer demand backdrop; however, weaker cash conversion and higher leverage position it more defensively relative to peers with stronger balance sheets and steadier FCF.

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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