KEL CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.09B
• Operating Income: ¥156M
• Net Income: ¥208M
• EPS: ¥18.54

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

ケル株式会社 (TSE: 69190) reported FY2026 Q2 (cumulative first half) revenue of ¥6,089 million, up 0.4% YoY, but operating income fell sharply to ¥156 million (-62.2% YoY), indicating significant margin compression despite flat sales. Gross profit was ¥1,589.9 million, implying a gross margin of 26.1%, while SG&A costs are inferred at roughly ¥1,433.9 million (about 23.6% of sales), highlighting cost inflation and/or deleverage. Ordinary income of ¥204 million exceeded operating income, suggesting non-operating gains (e.g., financial income/FX) partially offset weak operations. Net income was ¥134 million (-35.1% YoY), with an EPS of ¥18.54 for the half; the implied effective tax outflow (¥120.7 million) appears sizeable relative to earnings. DuPont metrics show a thin net margin of 2.20%, asset turnover of 0.328, and low leverage (1.22x), yielding a modest reported ROE of 0.88% on a half-year basis. Liquidity remains robust with a current ratio of 401.3% and working capital of ¥8,665.4 million, underscoring a conservative financial profile. The balance sheet is strong: total assets ¥18,545 million, total liabilities ¥3,380.8 million, and total equity ¥15,230 million, implying an equity ratio of roughly 82% (the reported 0.0% equity ratio clearly reflects an unreported placeholder rather than economics). Operating cash flow was solid at ¥659.99 million, resulting in an OCF/Net income ratio of 4.93x, which signals high cash conversion for the period. EBITDA totaled ¥621.6 million (10.2% margin), and interest expense was minimal at ¥1.58 million, with interest coverage of 98.7x, indicating negligible financing risk. Revenue resilience alongside a steep drop in operating profit points to unfavorable mix, pricing, or fixed-cost absorption, typical of cyclical softness in electronics/connectors. Inventory stood at ¥810.4 million, which is modest relative to current assets (¥11,541.7 million), though more detail on inventory quality and order trends would help gauge near-term recovery potential. Dividend figures are unreported (DPS and payout show as 0.00), so capital return policy cannot be evaluated this quarter from the provided data. Several key data points are missing or shown as zero (e.g., cash and equivalents, investing cash flows, capex, equity ratio, shares outstanding), which constrains precision on free cash flow and per-share balance metrics. Overall, fundamentals show a cash-rich, low-leverage balance sheet and healthy liquidity, but profitability is under pressure in the near term, requiring close monitoring of gross margin recovery, SG&A discipline, and order momentum into 2H.

Profitability Analysis

ROE_decomposition: Net margin 2.20% × Asset turnover 0.328 × Financial leverage 1.22 = ROE 0.88% (half-year). The ROE is suppressed primarily by the very low net margin, not leverage or asset efficiency. margin_quality: Gross margin at 26.1% is reasonable for connectors but the operating margin collapsed to ~2.56% (¥156m/¥6,089m) as SG&A intensity rose to ~23.6% of sales. Ordinary margin improved to ~3.35% due to non-operating gains. The gap between gross and operating margins indicates cost pressure and/or weak absorption. operating_leverage: Revenue +0.4% YoY versus operating income -62.2% YoY signals negative operating leverage. Fixed costs and/or higher overhead (e.g., R&D, logistics, energy, labor) likely outpaced revenue growth. EBITDA margin at 10.2% still shows underlying capacity to recover if volumes/mix improve.

Growth Assessment

revenue_sustainability: Flat topline (+0.4% YoY) suggests subdued demand or cautious order intake in the first half, consistent with electronics end-market digestion. Inventory appears contained (¥810m) relative to current assets, which may support steady shipments, but visibility on backlog/book-to-bill is not provided. profit_quality: Net income is supported by ordinary gains over operating earnings, reducing quality of profit relative to core operations. The sizable tax expense versus earnings suggests mix/timing effects; underlying operating profitability remains the key swing factor. outlook: Recovery hinges on gross margin normalization and SG&A control into 2H. If end-market demand (industrial, communications, auto electronics) stabilizes, incremental volumes could restore operating leverage. However, absent clear order momentum, near-term profit growth remains uncertain.

Financial Health

liquidity: Current ratio 401.3% and quick ratio 373.1% indicate very strong short-term solvency. Working capital stands at ¥8,665.4 million. solvency: Debt-to-equity 0.22x and interest coverage of 98.7x reflect minimal financial risk. With total equity of ¥15.23 billion versus liabilities of ¥3.38 billion, balance sheet capacity is ample. capital_structure: Implied equity ratio is roughly 82% (15.23/18.545), despite a reported 0.0% placeholder. Leverage is conservative, providing flexibility for investment through cycles.

Cash Flow Quality

earnings_quality: OCF of ¥660.0 million versus net income of ¥134.0 million (OCF/NI = 4.93x) indicates strong cash conversion, benefiting from working capital dynamics and non-cash D&A of ¥465.6 million. FCF_analysis: Free cash flow is not computable from provided data because investing cash flow/capex is shown as 0 (unreported). On a proxy basis, if capex were modest relative to D&A, FCF would likely be positive given strong OCF. working_capital: Working capital is ample; inventory is ¥810.4 million. The OCF strength suggests favorable receivables/payables movements in H1, but sustainability depends on 2H order and collection patterns.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is shown as 0.0% due to unreported DPS; EPS is ¥18.54. Without actual DPS, payout cannot be assessed. FCF_coverage: FCF coverage is listed as 0.00x due to missing capex/investing CF. Given positive OCF, coverage could be adequate if capex needs are moderate, but data is insufficient to conclude. policy_outlook: No dividend policy detail is provided in the dataset. With a strong balance sheet and low leverage, the company has capacity, but near-term profit pressure may temper distributions until margins recover.

Risk Assessment

Business Risks:

• End-market cyclicality in electronics/connectors (industrial automation, communications, automotive electronics).
• Pricing pressure and product mix shifts affecting gross margin.
• Customer concentration and order volatility (common in niche connector markets).
• Supply chain and lead-time risks for metals/resins; logistics cost variability.
• FX fluctuations (JPY volatility) impacting export competitiveness and translation.
• Technology obsolescence risk requiring ongoing R&D to meet miniaturization/high-speed needs.

Financial Risks:

• Margin compression and negative operating leverage if volumes remain subdued.
• Working capital swings affecting cash conversion in 2H.
• Potential capex requirements not visible due to unreported investing CF.
• Tax rate/mix volatility relative to modest earnings base.

Key Concerns:

• Operating income down 62.2% YoY on flat sales, indicating cost pressure.
• Dependence on non-operating gains to lift ordinary income above operating income.
• Lack of visibility on capex, cash balance, DPS, and certain per-share metrics due to unreported data.

Investment Implications

Key Takeaways:

• Revenue held flat, but operating margin compressed to ~2.6%, driving a sharp decline in operating profit.
• Balance sheet is robust with low leverage (D/E 0.22x) and strong liquidity (current ratio >400%).
• Cash generation is solid in H1 (OCF/NI ~4.9x), supporting financial flexibility.
• Ordinary income benefited from non-operating factors; core margin recovery is essential for sustainable earnings.
• Data gaps (capex, cash, DPS) limit precision on FCF and shareholder return capacity.

Metrics to Watch:

• Gross margin trajectory and pricing/mix changes.
• SG&A as a percentage of sales and cost control initiatives.
• Order intake and book-to-bill; backlog visibility.
• Inventory turns and receivables collection (OCF sustainability).
• Capex plans and investing cash flows (for FCF and capacity outlook).
• FX (USD/JPY) sensitivity and export mix.

Relative Positioning: Within Japanese connector peers, the company appears small/mid-cap with a conservative balance sheet and strong liquidity but currently weaker operating margin momentum; recovery depends on volume/mix normalization and disciplined SG&A.

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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