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

Geomatec Co., Ltd. (single-entity, JGAAP) delivered a solid FY2026 Q2 (cumulative) with clear margin expansion and improved cash generation. Revenue was ¥2,634m, up 10.8% YoY, indicating healthier demand or improved pricing/mix in its thin-film coating businesses. Gross profit of ¥687m implies a 26.1% gross margin, signaling better cost absorption and/or materials efficiency versus the prior year. Operating income rose to ¥269m (+195.5% YoY), taking the operating margin to 10.2%, demonstrating strong operating leverage on mid‑teens top-line growth. Ordinary income reached ¥301m and net income ¥288m (+157.2% YoY), translating to a 10.93% net margin. The DuPont bridge shows Net Margin 10.93% × Asset Turnover 0.155 × Financial Leverage 1.79 = ROE 3.03% (reported and calculated aligned), highlighting that profitability improvement is the main driver while asset efficiency remains modest. EBITDA was ¥337m (12.8% margin), and interest coverage was a comfortable 31.0x, reflecting low financial strain. On the balance sheet, total assets were ¥17,002m and equity ¥9,512m, implying an equity ratio around 55.9% by calculation, despite the reported equity ratio showing 0.0% (unreported). Liquidity appears robust with a current ratio of 188.3% and quick ratio of 187.9%, supported by sizable current assets versus current liabilities. Operating cash flow was ¥460m, outpacing net income (OCF/NI 1.60), indicating high earnings quality in the period. Investing cash flow was reported as 0 (undisclosed), which limits visibility into capex and hence true free cash flow; reported FCF is shown as 0 due to missing investing data. Financing cash flow was an inflow of ¥140m, likely reflecting debt changes or other financing activities. With DPS at ¥0 and payout 0%, the company is currently retaining cash, which aligns with its investment or balance sheet objectives; FCF coverage cannot be assessed because investing cash flows were not disclosed. Inventories were reported at ¥19m—unusually low relative to scale—so working capital interpretation should be cautious given reported zeros/unusual amounts may reflect disclosure classifications. Overall, results show improving profitability and solid cash conversion, a healthy balance sheet, but limited disclosure on investment outflows and cash balances constrains full assessment.

Profitability Analysis

ROE is 3.03% for the period, decomposed as Net Profit Margin 10.93% × Asset Turnover 0.155 × Financial Leverage 1.79. The key driver is margin expansion: gross margin at 26.1% and operating margin at 10.2% indicate improved cost control and operating leverage on 10.8% revenue growth. Ordinary margin at 11.4% and net margin at 10.9% suggest limited non-operating drag and a low tax burden in the half. EBITDA margin of 12.8% versus operating margin of 10.2% implies D&A intensity is modest (D&A ¥68m), consistent with a relatively light depreciation profile in the period. Interest expense of ¥8.7m is small relative to operating profit, supporting a high interest coverage ratio (31.0x). Operating leverage appears favorable: a near-tripling of operating income on low double-digit revenue growth points to meaningful fixed-cost absorption and/or mix shift toward higher-margin work. Asset turnover at 0.155 is subdued (first-half cumulative), indicating that efficiency, not leverage, is the primary headwind to higher ROE; further improvements in utilization or working capital turns could raise ROE.

Growth Assessment

Top-line growth of 10.8% YoY to ¥2,634m indicates demand recovery across key end-markets (likely display, electronics, and industrial thin-film applications). Profit growth significantly outpaced sales, with operating income up 195.5% and net income up 157.2% YoY, driven by margin gains and cost discipline. The margin expansion breadth (gross, operating, and net) implies improved mix/pricing or better capacity utilization. Sustainability depends on order visibility and end-market cyclicality; absent backlog disclosures, we treat current growth as solid but potentially cyclical. The low effective tax recorded (income tax ¥5.4m vs ordinary income ¥301m) boosted net profit; a normalization of the tax rate would temper net margin. With investing cash flows undisclosed, it is unclear whether growth is being supported by incremental capex; if capex is rising off-screen, future depreciation and cash outflows may increase. Near-term outlook is constructive based on operating leverage and healthy OCF, but medium-term sustainability hinges on demand from consumer electronics/industrial customers, energy/material cost trends, and currency impacts on exports and materials.

Financial Health

Total assets stood at ¥17,002m against total liabilities of ¥7,254m and equity of ¥9,512m. This implies an equity ratio around 55.9% (calculated) despite the reported equity ratio being 0.0% (undisclosed), indicating a conservative capital structure. Current assets were ¥10,744m versus current liabilities of ¥5,707m, yielding a current ratio of 188.3% and a quick ratio of 187.9%, pointing to strong short-term liquidity. Working capital was ¥5,037m, providing a solid buffer for operations. Debt-to-equity was 0.76x (total liabilities/equity), a moderate leverage level, while interest coverage of 31.0x evidences ample servicing capacity. The balance between liabilities and equity suggests low solvency risk, though the absence of disclosed cash and marketable securities (reported as 0) limits precise cash liquidity assessment. Inventories are reported at ¥19m, which is unusually low; thus, quick and current ratios may be driven by receivables/other current assets. Overall, the company appears financially sound with conservative leverage and strong liquidity.

Cash Flow Quality

Operating cash flow of ¥460m exceeded net income of ¥288m (OCF/NI 1.60), signaling high earnings quality and positive working capital dynamics in the period. EBITDA of ¥337m provides a solid cash earnings base relative to OCF, suggesting limited non-cash distortion. Free cash flow is reported as 0 due to undisclosed investing cash flows (Investing CF reported as 0); therefore, true FCF cannot be determined. The gap between OCF and investing needs is a key blind spot: capex intensity for thin-film processing can be lumpy; if capex was material but undisclosed, normalized FCF may be lower than implied by OCF. Financing CF was an inflow of ¥140m, possibly reflecting debt drawdowns or other financing; without detail, we cannot assess reliance on external funding. Working capital appears supportive: current assets materially exceed current liabilities, and the small reported inventory suggests limited cash tied up in stock, though classification limits visibility. Overall, cash conversion looks strong in H1, but lack of investing disclosure constrains FCF assessment.

Dividend Sustainability

DPS is ¥0 with a payout ratio of 0.0%, indicating distributions are currently suspended or not declared for the period. Given OCF of ¥460m and moderate leverage, the capacity to fund dividends appears present, but the absence of investing cash flow disclosure prevents assessment of FCF cover. If capex requirements are rising, management may be prioritizing reinvestment and balance sheet flexibility. The implied equity ratio (~56%) and strong liquidity support future optionality. Policy outlook depends on earnings durability, capex plans, and potential strategic investments; a resumption would likely require visibility on sustained operating margins and clearer disclosure on capex/FCF. For now, dividend sustainability cannot be concluded; the company retains cash to support operations and potential growth projects.

Risk Assessment

Business Risks:

• End-market cyclicality in electronics/display and industrial applications impacting order volatility
• Customer concentration risk typical for specialized thin-film processing
• Pricing pressure from OEMs and competitors, including overseas peers
• Raw material and target (e.g., ITO, metals) cost volatility
• Energy cost inflation affecting sputtering and vacuum process economics
• Technology obsolescence and need for continuous process innovation
• Capacity utilization sensitivity driving operating leverage (both up and down)
• Supply chain disruptions for specialty materials and equipment
• FX exposure on exports/materials despite single-entity reporting

Financial Risks:

• Limited disclosure on cash balance and investing cash flows reduces visibility into liquidity runway and capex commitments
• Moderate leverage (D/E 0.76x) could amplify downside in a demand downturn, though interest coverage is currently strong
• Potential normalization of tax rate could reduce net margins and cash generation
• Working capital composition uncertainty (very low reported inventories) complicates cash forecasting

Key Concerns:

• Investing cash flow and capex not disclosed, so true FCF is indeterminate
• Equity ratio reported as 0.0% despite calculable ~56%, indicating disclosure gaps
• Cash and equivalents reported as 0 (undisclosed), limiting liquidity precision

Investment Implications

Key Takeaways:

• Revenue growth of 10.8% YoY with broad-based margin expansion; operating margin at 10.2%
• Operating income up 195.5% YoY evidencing strong operating leverage
• High earnings quality with OCF/NI at 1.60 and interest coverage at 31.0x
• Balance sheet solidity implied by ~56% equity ratio (calculated) and current ratio at 188%
• Disclosure limitations on cash, equity ratio, and investing CF constrain FCF visibility
• Dividend currently suspended (DPS ¥0); capital allocation focused on retention

Metrics to Watch:

• Order backlog and book-to-bill for visibility on revenue sustainability
• Operating margin and gross margin trends as indicators of mix and cost control
• OCF/NI ratio and working capital turns (AR and inventory days) for cash conversion
• Capex and Investing CF disclosure to assess true FCF and depreciation trajectory
• Leverage metrics (D/E, net debt/EBITDA) once cash balance is disclosed
• Tax rate normalization effects on net margin
• Energy/material cost trends and FX impact on margins

Relative Positioning: Within Japanese small/mid-cap electronic materials/components peers, Geomatec shows improving profitability and cash conversion with a conservative balance sheet, but remains constrained by smaller scale, single-entity exposure, and limited disclosure on investment outlays compared to more transparent, larger peers.

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