Helios Techno Holding Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.43B
• Operating Income: ¥249M
• Net Income: ¥247M
• EPS: ¥13.64

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

FY2026 Q2 was a mixed quarter: revenue declined modestly, operating profit contracted sharply, but cash generation was exceptionally strong with a fortress balance sheet. Revenue fell 6.0% YoY to 44.32, while operating income dropped 43.6% YoY to 2.49, indicating meaningful negative operating leverage. Ordinary income decreased 24.3% YoY to 3.41, cushioned by 0.98 of non-operating income (notably 0.22 in dividend income and 0.02 in interest income). Net income declined 29.4% YoY to 2.47, with an effective tax rate of 27.6%. Gross margin held at 35.9%, but the operating margin compressed to 5.6%. Based on implied prior-period figures, operating margin compressed by roughly 376 bps YoY (from ~9.4% to 5.6%), and net margin compressed about 185 bps (from ~7.4% to 5.6%). SG&A equaled 13.43, about 30.3% of sales, leaving limited operating leverage at current volumes. Non-operating income played a sizable role, contributing roughly 0.93 to bridge operating to ordinary income, equivalent to a 39.7% non-operating income ratio, highlighting profit stabilization from financial and ancillary sources. Cash flow was a standout: operating cash flow (OCF) reached 16.22, approximately 6.6x net income, indicating strong cash conversion and likely working capital release. Liquidity is very strong with cash and deposits at 126.58 and a current ratio of 263%, while solvency remains conservative with debt-to-equity at 0.51x and minimal long-term loans (0.38). ROE calculated via DuPont is low at 1.6%, driven by modest net margin, low asset turnover (0.185x), and moderate leverage (1.51x). ROIC is estimated at 5.6%, below the 7–8% target range, signaling return pressure at current profitability levels. Earnings quality is high this quarter given OCF well in excess of net income, but the earnings mix leans more on non-operating items than ideal. The reported calculated payout ratio of 378.6% appears elevated against earnings, warranting verification given missing dividend cash flow disclosures. Forward-looking, margin repair via volume recovery and SG&A discipline is key, while maintaining cash-rich flexibility provides resilience. Monitoring the durability of non-operating income and any demand normalization will be pivotal to re-accelerate ROE and ROIC toward target ranges.

Profitability Analysis

ROE decomposition: ROE (1.6%) = Net Profit Margin (5.6%) × Asset Turnover (0.185x) × Financial Leverage (1.51x). The weakest link is asset turnover at 0.185x, indicating a large asset base relative to current revenue, while net margin also compressed notably YoY. The largest apparent change YoY is the margin line: operating income declined 43.6% on a 6.0% revenue drop, implying operating margin contraction of ~376 bps (from ~9.4% to 5.6%) and negative operating leverage as fixed costs weighed on a smaller top line. Business drivers likely include softer demand and/or less favorable mix, with SG&A at 30.3% of sales limiting flexibility; non-operating tailwinds (dividends and other items) partially mitigated ordinary income decline. Sustainability: margin pressure can normalize if volumes recover or cost actions progress; non-operating income is less controllable and may fluctuate. Watch for any trend where SG&A growth exceeds revenue—this quarter, the steep OI decline vs a mild revenue decline suggests cost absorption challenges that are not sustainable without sales recovery or cost reductions.

Growth Assessment

Top-line contracted 6.0% YoY to 44.32, reflecting demand softness. Operating income fell 43.6% YoY to 2.49, showing high sensitivity of profits to revenue changes. Ordinary income (-24.3% YoY) outperformed operating income thanks to 0.98 in non-operating income, a partial cushion. Net income declined 29.4% YoY to 2.47; EPS was 13.64 JPY on an average share count of 18.15 million. Gross margin of 35.9% suggests product-level value-add remains intact, but fixed-cost absorption and SG&A intensity pulled down operating margin to 5.6%. EBITDA was 3.34 (7.5% margin), providing some buffer but still down versus implied prior-year profitability. Near-term outlook hinges on demand stabilization and improved utilization; absent revenue recovery, margin improvement must come from cost control. Non-operating contributions (dividends, others) support ordinary income but are not a structural growth driver. ROIC at 5.6% is below common hurdle rates, implying that profit growth and/or asset efficiency improvements are required to create value above cost of capital.

Financial Health

Liquidity is robust: current ratio 263.4% and quick ratio 262.1%, with cash and deposits at 126.58—ample coverage of current liabilities (77.14). No warning thresholds are breached (Current Ratio well > 1.0; D/E at 0.51x, comfortably < 2.0). Maturity mismatch risk appears low: current assets (203.20) exceed current liabilities by 126.07, and long-term loans are minimal at 0.38. Interest coverage is very strong at 333x, indicating negligible financing stress. Short-term loans and interest-bearing debt are unreported, but observed liabilities and interest expense (0.01) suggest low leverage. Off-balance sheet obligations are not disclosed in the data provided; none noted.

Cash Flow Quality

OCF was 16.22 versus net income of 2.47, yielding an OCF/NI of 6.57x—well above the 0.8 threshold, indicating high-quality earnings and likely favorable working capital movements. Capital expenditures were 1.62; using OCF minus capex as a proxy suggests an indicative FCF of roughly 14.60, though full investing CF is unreported. With financing CF at -7.53, net cash still likely increased given strong OCF (ending cash balance unreported, but cash on the balance sheet is a sizable 126.58). There are no explicit signs of working capital manipulation in the disclosed figures; however, the OCF strength versus profit implies a meaningful release from receivables/payables/inventory this period. Sustainability of such working capital benefits should be monitored, as they may be timing-related.

Dividend Sustainability

Dividend cash flow data are unreported; however, the calculated payout ratio is shown as 378.6%, which, if accurate, would be well above sustainable levels (<60% benchmark). Given OCF of 16.22 and capex of 1.62, the company appears capable of funding ordinary dividends from cash generation, but the indicated payout ratio suggests distributions may exceed earnings this period (potentially due to special dividends or timing), warranting confirmation. FCF coverage of dividends cannot be directly computed without dividend cash outflow data; qualitatively, cash and OCF provide capacity, but sustainability should be aligned with earnings normalization. Policy outlook is unclear from disclosures; if management targets stable or progressive dividends, a reversion toward payout aligned with earnings capacity would be prudent as margins recover.

Risk Assessment

Business Risks:

• Demand softness leading to a 6.0% YoY revenue decline and negative operating leverage
• Margin compression (~376 bps at the operating level) reflecting fixed-cost absorption and SG&A intensity
• High reliance on non-operating income (39.7% of ordinary income), which may be volatile
• Potential exposure to cyclical electronics/industrial end-markets, with capex and inventory cycles

Financial Risks:

• Low ROE (1.6%) and sub-target ROIC (5.6%) limiting value creation if profitability does not improve
• Dividend sustainability risk implied by the calculated payout ratio of 378.6% amid lower earnings
• Data gaps on short-term borrowing and investing cash flows obscure full leverage and liquidity dynamics

Key Concerns:

• Operating income decline outpacing sales decline suggests cost base rigidity
• Sustainability of working capital-driven OCF strength is uncertain (timing effects possible)
• Earnings mix leaning on non-operating items may not be repeatable

Investment Implications

Key Takeaways:

• Core profitability weakened materially, with operating margin compressing to 5.6%
• Cash generation was very strong (OCF 16.22; OCF/NI 6.57x), supporting liquidity
• Balance sheet remains conservative (D/E 0.51x) with large cash reserves (126.58)
• ROE at 1.6% and ROIC at 5.6% point to return pressures pending margin/volume recovery
• Non-operating income provided an important cushion to ordinary income

Metrics to Watch:

• Revenue trajectory and order trends to gauge utilization and operating leverage
• SG&A ratio and fixed-cost actions to restore operating margin
• Non-operating income components (dividends/others) for volatility
• Working capital movements (AR, AP, inventory) and sustainability of OCF
• Dividend policy disclosures vs. earnings and cash flow capacity
• ROIC and asset turnover improvements as indicators of capital efficiency

Relative Positioning: Compared to peers in electronics/industrial niches, the company exhibits superior liquidity and conservative leverage but lags on profitability metrics, with mid-single-digit operating margin and low ROE; the strong cash position offers resilience while management seeks margin recovery and better capital efficiency.

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