SHIBAURA ELECTRONICS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥17.04B
• Operating Income: ¥2.60B
• Net Income: ¥1.18B
• EPS: ¥78.48

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

Verdict: FY2026 Q2 was a mixed quarter with resilient top line and solid cash generation, but profit compressed due to extraordinary losses, driving a sharp YoY decline in net income. Revenue grew 1.6% YoY to 170.44, while operating income declined 5.3% YoY to 26.01, implying softer operating leverage. Gross profit was 48.19 with a gross margin of 28.3%, holding reasonably firm given input cost pressures. Operating margin was 15.3% (26.01/170.44), down roughly 110 bps from an estimated ~16.4% a year ago, reflecting slightly higher cost intensity and SG&A absorption. Ordinary income was 25.94 (-2.2% YoY), indicating core non-operating items were stable; however, profit before tax fell to 17.25, implying approximately 8.7 in extraordinary losses. Net income dropped 32.8% YoY to 11.83, with an effective tax rate of 31.4%, amplifying the impact of the extraordinary charge. EBITDA was 34.16 (20.0% margin), providing healthy coverage for capex and signaling underlying earning power remains intact. Cash generation was strong with operating cash flow of 27.99, 2.37x net income, indicating high earnings quality and favorable working capital dynamics. Balance sheet strength is a clear positive: total assets 442.47, total equity 362.14, and current ratio of 384.9% underscore ample liquidity; implied equity ratio is about 81.8%. Leverage is conservative with a D/E of 0.22x and short-term loans of only 2.97, limiting financial risk. Working capital is healthy at 217.35, and quick ratio of 350.2% indicates low reliance on inventories for liquidity. Despite the strong cash and balance sheet position, the calculated payout ratio of 197.3% (data caveat noted) suggests potential near-term dividend pressure if earnings softness persists. ROE is modest at 3.3%, constrained by low asset turnover (0.385) and limited leverage (1.22x), though ROIC of 7.1% sits near the long-term target range. Looking ahead, recovering from the one-off loss and stabilizing margins are key to improving EPS and dividend sustainability. Overall, the quarter shows operational resilience and robust cash quality, but the extraordinary loss and lower net income temper the near-term earnings picture.

Profitability Analysis

ROE decomposition (Net Profit Margin × Asset Turnover × Financial Leverage): 6.9% × 0.385 × 1.22x = ~3.3% ROE (matches reported). The biggest drag is the low asset turnover (0.385), followed by modest net margin (6.9% including extraordinary impact) and deliberately conservative leverage (1.22x). Operating margin was ~15.3% this quarter, down ~110 bps YoY from ~16.4% (back-solved from last year's operating income and revenue), indicating mild negative operating leverage. The compression likely reflects limited pricing power relative to input cost/inventory absorption and slightly higher SG&A ratio (SG&A 22.18 equals ~13.0% of sales). Ordinary income was relatively stable (-2.2% YoY), but the large gap to PBT implies non-recurring losses (e.g., impairment or special losses), which depressed net margin. This extraordinary factor is more one-time than structural, suggesting underlying margin power (as seen in EBITDA margin 20.0%) is intact. Sustainability: operating margin should normalize if one-off losses do not recur; however, asset turnover remains structurally low given high cash and strong equity base. Watch for SG&A growth versus revenue; with revenue +1.6% and operating income -5.3%, operating leverage was negative this quarter, a cautionary sign if repeated.

Growth Assessment

Revenue grew 1.6% YoY to 170.44, indicating steady demand in core end markets. Operating income declined 5.3% YoY to 26.01, highlighting margin pressure despite stable gross margin. Ordinary income slipped 2.2% YoY, showing core operations and non-operating items remained largely resilient. Net income fell 32.8% YoY to 11.83 due to approximately 8.7 in extraordinary losses implied by the gap between ordinary income and profit before tax. EBITDA margin of 20.0% indicates underlying capacity to generate cash remains solid. Growth quality is mixed: revenue growth is modest but positive; profit quality is impacted by one-off losses rather than underlying demand deterioration. Near-term outlook hinges on normalization of extraordinary items, incremental pricing/mix improvement, and cost discipline to recover operating margin. With ROIC at 7.1% (near target), reinvestment discipline appears sound, but sustaining >8% will likely require higher asset turns or improved margin. Currency and input costs remain swing factors for growth in the next half.

Financial Health

Liquidity is very strong with current ratio at 384.9% and quick ratio at 350.2%, far above benchmarks. No warning on leverage: D/E is 0.22x, and short-term loans are 2.97 against cash and deposits of 112.03, implying net cash. Maturity mismatch risk is low given current assets of 293.63 vs current liabilities of 76.28. Implied equity ratio is approximately 81.8% (362.14/442.47), reflecting a very solid capital structure. Interest-bearing debt details are incomplete (long-term loans unreported), but observed borrowings are small relative to equity. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 2.37x, indicating high earnings quality and favorable working capital conversion. Operating cash flow of 27.99 comfortably exceeds depreciation of 8.15, suggesting solid cash profitability. Capex was -15.92; while full investing cash flows are unreported, an OCF minus Capex proxy implies roughly 12.07 of pre-dividend FCF capacity in the period. Financing cash flow was -25.78, reflecting shareholder returns and/or debt reduction; dividends paid were unreported, and share repurchases were minimal (-0.01). There are no clear signs of working capital manipulation from the limited snapshot; receivables (62.69), inventories (26.46), and payables (45.45) appear manageable relative to sales scale. Overall cash generation supports ongoing operations and capex, with headroom for distributions depending on actual dividend outlay.

Dividend Sustainability

The calculated payout ratio of 197.3% suggests distributions exceeded earnings in the period, but dividend amounts were not disclosed, so this figure should be treated with caution. Cash generation is strong (OCF 27.99), and an OCF–Capex proxy of ~12.07 indicates capacity to fund moderate dividends; however, the implied one-off loss depressed net income, inflating the payout ratio. With a robust net cash position and low leverage, balance sheet can buffer dividends short term, but sustained payout above earnings is not advisable. Policy outlook likely emphasizes stable to progressive dividends contingent on profit normalization in H2; confirmation of annual DPS guidance would clarify coverage. Key swing factor is the recurrence (or not) of extraordinary losses.

Risk Assessment

Business Risks:

• Commodity/input cost volatility affecting thermistor materials and margins
• Demand cyclicality in core end markets (automotive, HVAC, industrial equipment)
• Pricing pressure and competition in sensors/thermistors impacting gross margin
• Potential customer concentration risk typical for component suppliers

Financial Risks:

• Earnings sensitivity to extraordinary losses (e.g., impairments) as seen this quarter
• Low asset turnover limiting ROE despite strong balance sheet
• Currency fluctuation risk impacting exports and translation effects

Key Concerns:

• Approx. 8.7 of extraordinary losses compressed PBT and NI
• Operating margin contracted ~110 bps YoY, indicating negative operating leverage
• Calculated payout ratio of 197.3% raises near-term dividend coverage concerns (data incomplete)

Investment Implications

Key Takeaways:

• Stable topline (+1.6% YoY) but operating profit down (-5.3%) with ~110 bps margin compression
• Extraordinary losses (~8.7) drove a 32.8% YoY decline in net income
• Cash generation strong: OCF 27.99, OCF/NI 2.37x; net cash balance sheet with D/E 0.22x
• ROE modest at 3.3% due to low asset turnover and conservative leverage; ROIC 7.1% near target
• Dividend sustainability uncertain given a calculated payout ratio of 197.3% amid incomplete disclosure

Metrics to Watch:

• Extraordinary gains/losses trajectory and disclosure in H2
• Operating margin recovery and SG&A growth vs revenue
• Working capital turns (receivables, inventory) and asset turnover improvement
• Capex intensity vs cash generation (OCF–Capex)
• FX rates and input cost trends affecting gross margin

Relative Positioning: Financially conservative with superior liquidity and low leverage versus typical small/mid-cap manufacturers; profitability quality is sound at the EBITDA level, but shareholder returns and ROE trail peers without improved asset turns or margin expansion.

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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