GEOMATEC CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.63B
• Operating Income: ¥269M
• Net Income: ¥288M
• EPS: ¥36.44

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 solid Q2 with double-digit top-line growth and a sharp rebound in operating profitability, but capital efficiency remains weak and retained losses constrain shareholder returns. Revenue rose 10.8% YoY to 26.34, while operating income jumped 195.5% YoY to 2.69, indicating strong operating leverage. Gross profit of 6.87 implies a 26.1% gross margin, and operating margin improved to 10.2%, marking a meaningful recovery from last year’s depressed level. Ordinary income reached 3.01 (+189.7% YoY), supported by modest net non-operating income (0.40 vs 0.27 expenses). Net income was 2.88 (+157.2% YoY), yielding a 10.9% net margin, aided by an unusually low effective tax rate of 4.6% (likely loss carryforwards). Cash generation outpaced earnings with operating cash flow of 4.60, resulting in an OCF/NI ratio of 1.60x, a positive indicator of earnings quality. Balance sheet liquidity is healthy (current ratio 188.3%, quick ratio 187.9%) with ample cash (30.29) and manageable leverage (reported D/E 0.76x; calculated equity ratio about 56%). ROE is still modest at 3.0%, and ROIC is 3.3%—below the 5% warning threshold—underscoring capital efficiency as a key weakness. Accounts receivable (45.51) are high relative to half-year sales, warranting attention to cash conversion and customer credit risk. Retained earnings remain negative (-23.73), signaling historical losses that may limit near-term dividend capacity and capital allocation flexibility. Non-operating contributions were limited (net +0.13), so the profit recovery was primarily operational rather than one-off gains. The relationship between ordinary income (3.01), profit before tax (1.17), and net income (2.88) appears unusual, suggesting one-off items or tax effects; however, the provided income tax (0.05) and disclosures are insufficient to reconcile fully. Capex was 3.36; with OCF of 4.60, a proxy FCF of about 1.24 appears positive, supporting reinvestment and balance sheet stability. Forward-looking, sustaining double-digit margins will require continued cost discipline and better asset utilization to lift ROIC toward mid-to-high single digits. Key watch items are receivables collection, normalization of the effective tax rate, and whether the margin improvement can be maintained as demand conditions evolve.

Profitability Analysis

ROE (3.0%) decomposition: Net Profit Margin (10.9%) × Asset Turnover (0.155) × Financial Leverage (1.79x) = ~3.0%. The weakest link is asset turnover at 0.155, indicating low sales productivity against the asset base. The largest change YoY, given the sharp rebound in operating income (+195.5% vs revenue +10.8%), is likely the margin component, reflecting improved cost structure and operating leverage. Business drivers likely include better product mix/pricing and SG&A operating leverage (SG&A of 5.96 held in check relative to revenue), coupled with a stable gross margin profile at 26.1%. The margin gains appear partially sustainable if mix and cost control persist, but some elements may be cyclical given electronics demand sensitivity. Asset turnover remains structurally low, implying underutilized assets or long cash conversion cycles; raising utilization and tightening working capital are necessary to improve ROE. Watch for any re-acceleration in SG&A outlays; a trend of SG&A growth outpacing revenue would erode operating leverage. Net non-operating effects were modest (+0.13), so ordinary profit improvement was core-driven, which supports quality, but the unusual PBT/NI relationship suggests potential non-recurring or tax effects that may not repeat.

Growth Assessment

Revenue growth of 10.8% YoY indicates healthy demand, likely from improved orders or pricing in core coating/processing lines. Operating profit surged 195.5% YoY to 2.69, suggesting a combination of gross margin resilience and SG&A efficiency. Net income increased 157.2% YoY to 2.88; however, the very low 4.6% effective tax rate likely amplified NI and may normalize in future periods, tempering growth optics. Non-operating income was a small contributor (0.40), with dividends (0.08) and interest income (0.02) not central to the story, implying growth is operational rather than financial. EBITDA of 3.37 (12.8% margin) provides a buffer for reinvestment and working capital needs. Sustainability hinges on order stability in end-markets (electronics/industrial), pricing discipline, and maintaining a lean cost base. With ROIC at 3.3%, incremental growth should prioritize high-return projects to avoid diluting capital efficiency. The high receivables balance vs H1 sales introduces execution risk to cash conversion as growth scales. Outlook bias is cautiously positive on operations, but we expect growth rates to moderate as comps normalize and taxes revert toward a more standard rate.

Financial Health

Liquidity is strong: current ratio 188.3% and quick ratio 187.9%, with cash and deposits of 30.29 and minimal inventories (0.19). No warning on current ratio (<1.0) or D/E (>2.0); reported D/E is 0.76x and the calculated equity ratio is roughly 56% (95.12 equity / 170.02 assets). Maturity mismatch risk appears low; current assets (107.44) comfortably exceed current liabilities (57.07), and accounts payable (42.53) are broadly matched by receivables (45.51). Long-term loans are 12.44; short-term loans were unreported, but interest burden is light (interest expense 0.09; interest coverage 31x). Negative retained earnings (-23.73) point to historical losses and may constrain dividend policy or equity-funded growth until consistently reversed. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 1.60x (4.60 / 2.88), indicating earnings are backed by cash and not solely accruals—no quality flag. With capex of 3.36, proxy FCF is about +1.24, suggesting capacity to fund reinvestment while preserving liquidity; full FCF cannot be confirmed as total investing CF was unreported. Working capital quality warrants monitoring: receivables (45.51) are large relative to H1 sales (26.34), implying extended credit terms or billing timing; inventories are very low (0.19), which reduces holding risk but places greater emphasis on supply chain reliability. We see no overt signs of working capital manipulation, but the AR build is a key area to track via days sales outstanding and collection patterns. Financing CF was an inflow of 1.40, indicating some reliance on external funding despite positive proxy FCF—details not disclosed.

Dividend Sustainability

Dividend data were unreported, and retained earnings remain negative (-23.73), indicating limited distributable reserves under JGAAP until accumulated deficits are offset. Earnings and proxy FCF are positive this period, but without a disclosed DPS or payout policy, sustainability cannot be assessed quantitatively. Given ROIC (3.3%) and the need to rebuild equity, internal retention for balance sheet strengthening and selective high-return investment appears prudent. If dividends exist, coverage should be evaluated against OCF and maintenance capex once disclosed.

Risk Assessment

Business Risks:

• End-market cyclicality in electronics/industrial coatings impacting volume and pricing
• Customer concentration risk (not disclosed) potentially magnifying demand swings
• Execution risk in maintaining cost discipline to sustain double-digit operating margins
• Supply chain reliability given very low inventories

Financial Risks:

• Low ROIC (3.3%) and ROE (3.0%) indicating weak capital efficiency
• Large receivables vs H1 sales increasing credit and collection risk
• Negative retained earnings constraining shareholder returns and flexibility
• Potential normalization of an unusually low effective tax rate impacting net profit

Key Concerns:

• Unusual relationship between ordinary income (3.01), profit before tax (1.17), and net income (2.88) suggesting one-off items or tax effects not fully disclosed
• Dependence on operating margin recovery; a demand slowdown could quickly compress profits
• Visibility limited by unreported items (investing CF, dividend data, segment details)

Investment Implications

Key Takeaways:

• Operational turnaround evident: revenue +10.8% YoY, operating income +195.5% YoY, operating margin ~10.2%
• Healthy cash conversion this quarter (OCF/NI 1.60x) and positive proxy FCF post capex
• Balance sheet liquidity strong; leverage moderate with ample interest coverage
• Capital efficiency is the main weakness (ROIC 3.3%, ROE 3.0%)
• Retained losses persist, likely limiting dividends until equity is rebuilt

Metrics to Watch:

• ROIC trajectory toward >5% and ultimately 7–8%
• Operating margin sustainability and SG&A discipline
• Receivables days and cash conversion cycle
• Order trends and pricing/mix in core businesses
• Effective tax rate normalization and its impact on NI
• Capex-to-sales and returns on new investments

Relative Positioning: Within precision/coatings peers, the company shows improving profitability and strong liquidity but lags on capital efficiency and equity quality; sustaining margins and improving asset turnover are critical 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