OKAYA ELECTRIC INDUSTRIES CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.98B
• Operating Income: ¥-1.00B
• Net Income: ¥-799M
• EPS: ¥-43.56

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

Okaya Electric Industries (6926) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥4.981bn, up 9.8% year over year, indicating top-line resilience despite a challenging margin environment. Gross profit was ¥0.461bn, implying a gross margin of 9.3%, which remains thin for electronic component makers and leaves little buffer for fixed costs. Operating income was a loss of ¥1.004bn, and ordinary income and net income were losses of ¥0.981bn and ¥0.974bn, respectively, underscoring persistent profitability pressure. EBITDA was negative at ¥0.837bn, confirming that the company did not cover cash operating costs in the half even before depreciation and amortization of ¥0.167bn. Despite the net loss, operating cash flow was positive at ¥0.324bn, suggesting supportive working capital movements and non-cash charges; however, the OCF/Net Income ratio of -0.33 cautions that cash conversion is not structurally robust. Liquidity appears solid with a current ratio of 2.47x and a quick ratio of 2.27x, backed by working capital of ¥5.257bn, reducing near-term refinancing pressure. The balance sheet shows total assets of ¥13.329bn and total liabilities of ¥6.976bn, implying an equity balance of about ¥6.268bn and an estimated equity ratio around 47% (equity/total assets), despite the disclosed equity ratio field being unreported. Financial leverage (assets/equity) stands at 2.13x and, combined with a net margin of -19.55% and asset turnover of 0.374x, yields a DuPont ROE of -15.54%. Interest expense was ¥0.047bn and interest coverage is negative, highlighting sensitivity to borrowing costs until profitability normalizes. Inventory was ¥0.739bn, relatively modest versus current assets, and the high quick ratio indicates limited dependence on inventory for liquidity. Financing cash flow was a net outflow of ¥0.298bn, likely reflecting debt service or other financing uses, while investing cash flow was not disclosed. Dividends and outstanding shares were not disclosed; EPS was reported at -¥43.56, reflecting the half-year loss. Revenue momentum is a relative bright spot, but margin recovery is essential given operating leverage. Overall, the profile is one of improving sales, weak but potentially recoverable margins, adequate liquidity, and elevated earnings risk until cost structure or pricing improves. Several items (e.g., equity ratio, cash and equivalents, investing CF, dividends, shares) were not disclosed and are shown as zero placeholders; conclusions are therefore calibrated to the available line items.

Profitability Analysis

ROE_decomposition: DuPont: Net margin -19.55% × Asset turnover 0.374 × Leverage 2.13 = ROE -15.54%. The negative ROE is driven predominantly by deep operating losses (low gross margin and negative operating margin), with moderate leverage amplifying the downside. margin_quality: Gross margin at 9.3% is thin for the product mix (surge protection devices, noise filters, capacitors), leaving limited room to absorb SG&A and R&D. Operating income of -¥1.004bn on ¥4.981bn revenue implies an operating margin around -20.2%. EBITDA of -¥0.837bn indicates cash operating losses before D&A. Ordinary loss of -¥0.981bn is close to operating loss, suggesting net non-operating items (including ¥0.047bn interest) are not the primary drag. operating_leverage: The swing from low single-digit gross margin to a ~-20% operating margin indicates a high fixed-cost base (personnel, manufacturing overhead) or elevated SG&A relative to sales. Depreciation of ¥0.167bn points to a non-trivial capital base, increasing fixed cost absorption risk when volumes are soft. A relatively small improvement in gross margin could materially narrow losses, but the reverse also holds if sales soften.

Growth Assessment

revenue_sustainability: Revenue grew 9.8% YoY to ¥4.981bn, suggesting demand recovery in end-markets (industrial/automotive electronics, factory automation) or improved pricing/mix. Sustainability will depend on order backlog, book-to-bill, and regional demand (Japan/overseas), none of which are disclosed here. profit_quality: Despite higher sales, gross margin remains 9.3% and EBITDA is negative, indicating growth is not yet translating into profitable scale. Positive OCF likely reflects working capital release and non-cash add-backs rather than structural profitability. outlook: With asset turnover at 0.374x and leverage at 2.13x, ROE will remain negative unless net margin turns positive. Key drivers for 2H will be utilization recovery, cost-down initiatives, and product mix shift to higher-margin surge protection and EMC solutions. FX and raw material cost normalization could aid gross margin if favorable.

Financial Health

liquidity: Current ratio 247.4% and quick ratio 226.6% indicate ample short-term liquidity. Working capital is ¥5.257bn. Inventory is ¥0.739bn, modest vs. current assets, reducing risk of liquidity tied up in stock. solvency: Estimated equity ratio ~47% (¥6.268bn/¥13.329bn). Debt-to-equity 1.11x suggests a meaningful interest-bearing debt load. Interest coverage is negative given operating losses; sustained losses would pressure covenant headroom if applicable. capital_structure: Assets ¥13.329bn, liabilities ¥6.976bn, equity ¥6.268bn. Leverage (assets/equity) at 2.13x is moderate for the sector but currently unhelpful given negative earnings.

Cash Flow Quality

earnings_quality: OCF of ¥0.324bn versus net loss of ¥0.974bn (OCF/NI -0.33) indicates that cash flow benefited from non-cash charges and working capital movements. This positive OCF is not yet corroborated by operating profitability (negative EBITDA), so quality is mixed. FCF_analysis: Investing cash flow is not disclosed; therefore, free cash flow cannot be reliably derived from the provided data. Given negative EBITDA, maintenance and growth capex (if any) would likely reduce FCF unless offset by further working capital inflows. working_capital: High quick ratio indicates substantial liquid current assets (cash/receivables). The positive OCF suggests either receivable collections or inventory drawdown; sustainability into 2H depends on sales cadence and procurement timing.

Dividend Sustainability

payout_ratio_assessment: No dividend per share was disclosed for the period, and the company posted a net loss (EPS -¥43.56), making a conventional payout ratio not meaningful. FCF_coverage: With investing cash flows unreported, FCF coverage of dividends cannot be assessed. Given negative EBITDA, recurring dividend capacity would typically require either strong OCF from working capital or cash reserves. policy_outlook: Absent disclosure on dividend policy and with losses in the half, we assume a conservative stance toward shareholder returns until profitability stabilizes. Any future distributions will likely hinge on margin recovery and confirmable positive FCF.

Risk Assessment

Business Risks:

• Weak gross margins and negative operating leverage amid fixed manufacturing and SG&A costs
• Demand cyclicality in electronics, automotive, and industrial end-markets
• Pricing pressure and product mix headwinds in surge protection/EMC components
• Supply chain and procurement volatility for electronic materials and components
• FX fluctuations affecting export competitiveness and imported input costs
• Competition from domestic and Asian component makers

Financial Risks:

• Negative EBITDA and interest coverage, heightening refinancing and covenant risks if losses persist
• Moderate leverage (D/E 1.11x) that amplifies earnings volatility
• Potential working capital reversal if sales accelerate and receivables/inventory rebuild
• Impairment risk if underutilized assets persist

Key Concerns:

• Sustained operating losses despite revenue growth
• Thin 9.3% gross margin leaves little buffer for fixed costs
• Reliance on working capital movements for positive OCF
• Unreported items (e.g., investing CF, cash, shares) limit precision of FCF and per-share analyses

Investment Implications

Key Takeaways:

• Top-line growth of 9.8% YoY contrasts with continued operating and net losses
• Gross margin at 9.3% implies urgent need for mix/pricing and cost actions
• OCF positive at ¥0.324bn, but EBITDA negative, questioning durability of cash generation
• Liquidity strong (current 2.47x; quick 2.27x), mitigating near-term cash stress
• Leverage moderate (2.13x assets/equity; D/E 1.11x) but interest coverage remains negative
• ROE -15.54% driven by margin weakness; improvement hinges on operational turnaround

Metrics to Watch:

• Gross margin and operating margin trajectory in 2H
• EBITDA recovery and interest coverage
• Order intake/book-to-bill and backlog (if disclosed)
• Working capital trends: receivables days, inventory turns, payables days
• Capex and investing cash flows to assess FCF
• FX sensitivity and pricing actions

Relative Positioning: Within TSE-listed electronic component peers, Okaya Electric’s revenue growth is respectable, but profitability is weaker with sub-10% gross margin and negative EBITDA. Liquidity is stronger than many small-cap peers, while leverage is moderate; however, overall returns (ROE) lag until margins normalize.

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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