ENOMOTO Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.65B
• Operating Income: ¥729M
• Net Income: ¥589M
• EPS: ¥92.21

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

Verdict: A solid rebound quarter with strong profit growth and healthy cash conversion, offset by low capital efficiency and negative comprehensive income. Revenue rose 9.2% YoY to 146.52, with operating income up 103.9% YoY to 7.29 and ordinary income up 122.8% to 8.11. Net income increased 117.9% YoY to 5.88, translating to a 4.0% net margin. Operating margin improved to 5.0% (7.29/146.52), expanding by roughly 231 bps from about 2.7% a year ago. Gross margin is 13.7%, indicating better cost absorption, though full YoY gross margin comparison is not available. EBITDA reached 18.71, with a 12.8% EBITDA margin, supporting a strong 29.5x interest coverage. Operating cash flow was 12.19, more than double net income (OCF/NI = 2.07x), signaling high earnings quality this period. The balance sheet remains conservative with a current ratio of 215% and D/E of 0.54x; cash (44.3) comfortably exceeds short-term loans (22.28). Despite the profit rebound, ROE is modest at 2.8% and ROIC is 2.6%, below the 5% warning threshold, highlighting weak capital efficiency. Total comprehensive income was negative (-5.17), likely due to valuation losses in OCI (e.g., securities or FX translation), which partially offsets the positive P&L momentum. Non-operating income of 1.17 (notably 0.39 in interest income) contributed nearly 20% of operating income, aiding ordinary income. Free cash flow is not fully disclosed, but implied FCF (OCF minus capex) is approximately 6.12, comfortably covering the recorded 1.86 share repurchases and likely supporting dividends, pending disclosure. The effective tax rate of 27.2% appears normalized. Working capital remains ample with 97.24 of surplus and receivables of 65.64 versus payables of 40.54. Forward-looking, margin improvement and cash generation are encouraging, but sustainably lifting ROIC above the cost of capital will require continued operating discipline and efficient deployment of assets. Watch for any reversal in OCI and the durability of non-operating income contributions.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Margin × Asset Turnover × Financial Leverage = 4.0% × 0.450 × 1.54 ≈ 2.8%. The biggest positive change this quarter is in profitability: operating income more than doubled (+103.9% YoY) and operating margin expanded by about 231 bps to 5.0%, indicating improved cost control and/or better mix/volume. Asset turnover remains modest at 0.45, reflecting a sizable asset base relative to sales, and leverage at 1.54x is conservative. Business drivers likely include better fixed-cost absorption on higher volumes and some support from non-operating items (interest income), while gross margin at 13.7% suggests incremental improvement but still a relatively thin manufacturing margin structure. Sustainability: operating margin gains can persist if demand and utilization remain healthy; however, the contribution from non-operating income (19.9% of operating income) may be less repeatable if interest rates or cash balances change. Concerning trends: capital efficiency is weak (ROIC 2.6%), and we cannot confirm SG&A discipline vs. revenue due to missing SG&A breakdown and YoY SG&A data.

Growth Assessment

Top-line growth was 9.2% YoY to 146.52, outpacing normalized mid-cycle levels in a typical precision components/semiconductor-related cycle. Operating income growth of 103.9% outstripped sales growth, evidencing strong operating leverage. Operating margin improved to ~5.0% (from ~2.7% a year ago), supported by a 12.8% EBITDA margin. Ordinary income grew 122.8% aided by 1.17 of non-operating income, including 0.39 of interest income. Net income rose 117.9% with a normalized 27.2% effective tax rate, suggesting the improvement is largely operational rather than tax-driven. The negative total comprehensive income (-5.17) indicates market value or currency impacts outside profit or loss, partially clouding the headline earnings momentum. Demand sustainability and mix are not disclosed; absent order backlog or guidance, we assume near-term growth depends on end-market recovery (likely semiconductor/auto electronics) and capacity utilization. The company’s low ROIC (2.6%) despite the stronger quarter implies that further growth must be accompanied by tighter capital deployment to be value-accretive. With interest income currently supportive, growth in financial income may not be a persistent driver if interest rates or cash levels decline. Capex of 6.07 is moderate relative to OCF and appears aimed at maintaining capacity rather than aggressively expanding, which could temper near-term growth acceleration but supports margin stability. Overall, near-term outlook is cautiously constructive on margins, with top-line growth contingent on cycle and customer demand.

Financial Health

Liquidity is strong: current ratio 215.3% and quick ratio 198.1%, well above benchmarks. Solvency is conservative with D/E at 0.54x and interest coverage at 29.5x. Maturity profile appears sound: current assets (181.56) exceed current liabilities (84.32) by 97.24, and cash (44.30) exceeds short-term loans (22.28), reducing rollover risk. Total debt is approximately 38.72 (short-term 22.28, long-term 16.44), manageable against EBITDA (18.71) and equity (211.75). There are no explicit warnings (Current Ratio < 1.0 or D/E > 2.0) to flag. We note potential maturity mismatch risk is low given ample liquidity and working capital. Off-balance sheet obligations are not disclosed; no data to assess guarantees or leases beyond reported items. Equity base is solid at 211.75, yielding a low financial leverage of 1.54x (assets/equity).

Cash Flow Quality

Earnings quality is high this period: OCF/Net Income is 2.07x (>1.0), indicating strong cash conversion. While total investing cash flow is unreported, capex of 6.07 allows an implied FCF of approximately 6.12 (12.19 OCF − 6.07 capex), suggesting capacity to fund shareholder returns and debt service. Financing CF was -4.20, including -1.86 for share repurchases; dividends are unreported. Working capital dynamics are not fully visible (no period-over-period changes disclosed), but the balance sheet composition (receivables 65.64, inventories 14.55, payables 40.54) does not suggest aggressive build-ups relative to sales scale. No signs of earnings-management via working capital can be asserted or dismissed without comparative data; however, cash exceeding short-term debt supports quality. Non-operating income (notably interest income) contributed to ordinary income; this is cash-based but may be rate-level dependent and not a structural operating source.

Dividend Sustainability

The reported payout ratio (calculated) is 82.9%, which is above the <60% benchmark for comfort and implies limited buffer if earnings soften. Dividend amounts and DPS are unreported, constraining precision. On cash metrics, implied FCF of ~6.12 appears to cover the 1.86 of share repurchases and likely a moderate dividend, but we cannot confirm actual dividend cash out due to missing disclosures. Balance sheet strength (cash 44.30, low leverage) supports continuity of distributions in the near term. Medium term, sustaining an 80%+ payout would require stable earnings and continued strong OCF; given cyclical exposure and low ROIC (2.6%), a more balanced payout vs. reinvestment might be prudent, though policy is undisclosed. We therefore assess near-term coverage as adequate, with medium-term sustainability sensitive to cycle and capital efficiency improvements.

Risk Assessment

Business Risks:

• Cyclical demand in semiconductor/auto-electronics end markets could pressure volumes and margins.
• Raw material cost volatility (e.g., copper/steel) may compress the 13.7% gross margin if not passed through.
• Customer concentration risk is typical in precision component supply chains (not disclosed here).
• Operational leverage can amplify downside if utilization drops, reversing the 231 bps operating margin expansion.
• Supply chain and geopolitical exposure (e.g., China/ASEAN) could disrupt production or logistics.

Financial Risks:

• Low capital efficiency (ROIC 2.6%) risks value dilution if capex or working capital rises without commensurate returns.
• Negative total comprehensive income (-5.17) indicates valuation/FX sensitivity in OCI that can erode equity.
• Non-operating income dependence (19.9% of operating income) introduces variability if interest income declines.
• Dividend payout ratio at 82.9% reduces buffer in a downturn, potentially constraining reinvestment.
• Interest rate shifts could reduce interest income and increase borrowing costs, squeezing ordinary income.

Key Concerns:

• Sustainability of margin gains in a cyclical environment.
• Improving ROIC above the 5% warning threshold to justify capital deployment.
• Visibility on OCI drivers (securities valuation or FX translation) to assess equity volatility.
• Data gaps (SG&A breakdown, investing CF, detailed dividend data) limit precision in cost and cash analysis.

Investment Implications

Key Takeaways:

• Earnings rebound is real: operating income +104% YoY with ~231 bps operating margin expansion to ~5.0%.
• Cash conversion is strong (OCF/NI 2.07x), enabling implied positive FCF even after capex.
• Balance sheet is conservative (current ratio 215%, D/E 0.54x), reducing near-term financial risk.
• Capital efficiency remains the weak link: ROE 2.8% and ROIC 2.6% are below value-creation thresholds.
• Negative comprehensive income flags market/FX valuation headwinds despite solid P&L.

Metrics to Watch:

• Operating margin trajectory and gross margin resilience vs. input costs.
• ROIC progression toward >5% and ideally >7–8% over time.
• OCI components (securities/FX) and their impact on equity and book value per share.
• Working capital turns (receivables and inventory days) and asset turnover (>0.45).
• Dividend disclosures (DPS, cash out) and buyback cadence vs. implied FCF.

Relative Positioning: Versus domestic precision component peers, the company shows improving profitability and superior balance sheet conservatism but lags on capital efficiency (ROIC/ROE). Its cash generation this quarter is a positive differentiator, while negative OCI and reliance on some non-operating income temper the quality of ordinary profit compared with best-in-class 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