AVAL DATA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.29B
• Operating Income: ¥316M
• Net Income: ¥281M
• EPS: ¥45.60

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

Abal Data (6918) reported FY2026 Q2 single-entity results under JGAAP marked by a sharp revenue contraction and margin compression, while maintaining an exceptionally strong balance sheet. Revenue declined 23.2% YoY to ¥4,294m, reflecting demand softness or shipment timing in its core industrial/embedded electronics niches. Gross profit was ¥1,747.6m with a robust gross margin of 40.7%, indicating underlying product/value-add remains sound despite lower volume. Operating income fell 59.2% YoY to ¥316m, bringing operating margin to 7.4% as fixed-cost absorption weakened on reduced sales. Ordinary income was ¥381m and net income ¥281m, with a net margin of 6.54%; profit contraction signals both volume and mix headwinds. The DuPont view shows modest ROE of 1.36%, driven by low asset turnover (0.189x) and minimal financial leverage (1.10x), despite positive net margin. Cash flow from operations was negative at -¥458m, weaker than net income (OCF/NI = -1.63), pointing to working-capital outflows during the period. Balance sheet resilience is notable: total assets ¥22.8bn, equity ¥20.7bn, and liabilities only ¥2.18bn, resulting in an implied low debt load and very high liquidity. Current ratio (977%) and quick ratio (930%) underscore a substantial liquid asset buffer against modest current liabilities of ¥1.66bn. Financial leverage is low (D/E 0.11x), and interest expense is nil, limiting financial risk. Operating leverage appears elevated given the sizable swing in operating profit versus revenue, highlighting sensitivity to volume. EBITDA of ¥405.5m (9.4% margin) provides an additional cushion, but the downdraft from the revenue decline is clear. Financing cash outflows of -¥1,633m suggest shareholder returns or liability reductions; dividend was not reported (DPS 0.00 in data), which limits direct conclusions on distribution policy from this dataset. Many cash metrics (e.g., cash balance, investing CF) appear unreported, so cash flow interpretation must be cautious. Overall, the company enters the second half with strong liquidity and conservative leverage, but near-term earnings visibility is tempered by demand softness and working-capital consumption.

Profitability Analysis

ROE decomposition indicates: Net profit margin 6.54% x Asset turnover 0.189 x Financial leverage 1.10 = ROE 1.36%. Margin quality remains reasonable at the gross level (40.7%), but operating margin compressed to 7.4% on deleverage of fixed costs and potential adverse mix. Ordinary margin is 8.9%, slightly above operating margin, implying net financial/non-operating effects were modestly positive. EBITDA margin at 9.4% suggests non-cash D&A is relatively low (D&A ¥89.5m), typical for a fabless/assembly-light electronics model. Tax metrics in the dataset are limited; reported effective tax rate appears as 0.0% in the metrics table, but income tax of ¥239.8m versus profit figures implies caution in interpreting period tax burden under JGAAP timing. Operating leverage is high: a 23.2% revenue decline translated into a 59.2% drop in operating income, indicating cost base rigidity and/or increased R&D/SG&A to support future growth. Interest coverage is not meaningful given zero interest expense, reflecting very low financial leverage. Overall profitability remains positive but cyclical sensitivity is evident.

Growth Assessment

Top-line contracted 23.2% YoY to ¥4.29bn, pointing to cyclical or customer-specific weakness in industrial/embedded electronics demand. The decline outpaced typical seasonal effects, implying either backlog depletion or order deferrals. Profit quality deteriorated as operating income fell 59.2% YoY to ¥316m and net income decreased 54.4% to ¥281m, underlining negative operating leverage. Gross margin resilience (40.7%) suggests the company preserved pricing and value-add; the main pressure stems from volume and fixed-cost absorption. Asset turnover at 0.189x is low, consistent with a half-year period measured against period-end assets and with a cash-heavy balance sheet, but it still flags subdued utilization. Sustainability of revenue will hinge on the pace of industrial capex normalization and lead-time dynamics in components; order intake and backlog (not disclosed) are key. With EBITDA margin at 9.4%, the company retains capacity to invest in product development, but near-term growth will likely be constrained by end-market softness. Outlook hinges on the second-half recovery in shipments and normalization of working capital; absent a rebound, full-year growth will remain pressured.

Financial Health

Liquidity is very strong: current assets ¥16.17bn vs current liabilities ¥1.66bn yields a current ratio of 977% and quick ratio of 930%, indicating substantial liquid buffers. Working capital is ¥14.52bn, providing ample headroom to manage volatility in receivables and inventories. Solvency risk is low: total liabilities are ¥2.18bn against equity of ¥20.66bn, with a debt-to-equity ratio of 0.11x and financial leverage at 1.10x, implying a near-net-cash profile. Interest expense is zero, reducing refinancing risk and cash interest burden. The reported equity ratio in the dataset is 0.0%, which appears unreported; based on the balance sheet totals, equity constitutes the majority of the capital structure. Overall, the company exhibits a fortress balance sheet with conservative leverage and high resilience.

Cash Flow Quality

Operating cash flow of -¥458m contrasts with net income of ¥281m (OCF/NI = -1.63), indicating earnings did not convert to cash in the half. The shortfall is likely driven by working-capital investments (higher receivables due to shipment timing or reduced payables), as inventory at ¥776m is modest relative to current assets. Free cash flow is shown as 0 in the dataset (unreported), so we cannot quantify FCF precisely; investing CF is also unreported. EBITDA of ¥405.5m suggests underlying cash earnings capacity remains positive, but cash conversion timing is unfavorable this period. The lack of interest burden supports cash preservation once working capital normalizes. Monitoring AR days, inventory turns, and payable days will be critical to assess cash conversion improvements in H2.

Dividend Sustainability

The dataset shows DPS at 0.00 and payout ratio at 0.0%, which indicates dividends were not disclosed for the period; single-entity interim distributions may differ from full-year policy. With negative OCF in the half and unreported FCF, coverage cannot be assessed from this dataset. However, balance sheet strength (low leverage, large working capital) implies capacity for distributions over a cycle if cash generation normalizes. Any resumption or increase in dividends should be contingent on improved cash conversion and clearer revenue visibility. Policy outlook is therefore uncertain in the short term based on available information.

Risk Assessment

Business Risks:

• Cyclical demand in industrial/embedded electronics leading to revenue volatility
• Customer concentration and order timing risk affecting quarterly shipments
• Component supply and lead-time variability impacting delivery and working capital
• Product mix shifts affecting gross margin sustainability
• Technology obsolescence risk in FPGA/board-level products requiring ongoing R&D

Financial Risks:

• Weak cash conversion in the half (negative OCF) increasing reliance on working capital
• Potential buildup in receivables if customers stretch payment terms
• Operating leverage amplifying profit swings on revenue changes
• Limited visibility on capex and investing CF due to unreported items

Key Concerns:

• 23.2% YoY revenue decline and 59.2% operating profit contraction
• Negative OCF relative to positive net income (OCF/NI -1.63)
• Low asset turnover (0.189x) pointing to underutilized asset base
• Dependence on H2 recovery to meet full-year profitability expectations

Investment Implications

Key Takeaways:

• Solid gross margin (40.7%) but significant operating deleverage in a weak demand environment
• ROE is subdued at 1.36% due to low turnover and limited leverage
• Balance sheet strength (D/E 0.11x, very high liquidity) mitigates downside risk
• Earnings quality is pressured near term with negative operating cash flow
• H2 cash conversion and order recovery are pivotal for trajectory stabilization

Metrics to Watch:

• Order intake and backlog/book-to-bill
• Operating cash flow and OCF/NI ratio
• Accounts receivable days and inventory turnover
• Gross and operating margin progression
• Asset turnover and working-capital intensity
• Any disclosure on dividends or treasury stock transactions in financing CF

Relative Positioning: Within Japan small-cap industrial electronics peers, Abal Data appears more conservatively capitalized with superior liquidity and low leverage, but currently exhibits weaker growth momentum and lower asset utilization, leaving near-term returns below peers that are further along in demand recovery.

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