SANKO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.59B
• Operating Income: ¥251M
• Net Income: ¥230M
• EPS: ¥21.11

Income Statement

Balance Sheet

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

Sankoh Co., Ltd. (Ticker: 69640) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥8.591bn, up 5.7% YoY, indicating modest top-line expansion despite a soft operating profit line. Gross profit was ¥1.000bn, translating to an 11.6% gross margin, which is thin for a manufacturing-focused business and suggests limited pricing power or elevated input costs. Operating income was ¥251m, down 5.9% YoY, implying negative operating leverage in the period as cost growth outpaced revenue. Ordinary income of ¥288m exceeded operating income, driven by net non-operating gains, while interest expense remained minimal at ¥0.484m. Net income declined 18.7% YoY to ¥187m, with EPS of ¥21.11, pointing to margin compression and/or an adverse mix. DuPont decomposition yields a net margin of 2.18%, asset turnover of 0.389x, and financial leverage of 1.40x, resulting in a calculated ROE of 1.19% (aligned with the reported figure). The balance sheet is conservative: total assets are ¥22.064bn, total equity ¥15.755bn, and total liabilities ¥6.426bn, implying an equity ratio around 71.4% (calculated), despite a reported 0.0% which appears to be an undisclosed metric. Liquidity is strong with a current ratio of 280% and working capital of ¥9.743bn, providing ample short-term buffer. Interest coverage is very high at ~519x based on operating income, reflecting minimal financial risk from borrowings. Cash flow and several components (depreciation, inventories, cash and equivalents) are not disclosed in the provided XBRL line items, limiting assessment of cash conversion, capex intensity, and inventory risk. Dividend data show DPS and payout as 0, but again cash flow non-disclosure constrains our ability to analyze policy and coverage. Overall, the company exhibits a strong balance sheet and low financial risk, but profitability quality appears pressured as operating income fell despite revenue growth. The key questions are around margin sustainability, cost control, and the trajectory of non-operating gains that supported ordinary income. Given data gaps, conclusions on earnings quality and cash flow resilience are provisional and hinge on forthcoming disclosures (OCF, capex, depreciation, inventory levels).

Profitability Analysis

ROE_decomposition: ROE 1.19% = Net margin 2.18% × Asset turnover 0.389x × Financial leverage 1.40x. The primary constraint is thin net margin; leverage is modest and asset turns are sub-0.4x. margin_quality: - Gross margin: 11.6% (¥1,000m/¥8,591m), indicating limited pricing power and/or elevated input costs.

• Operating margin: 2.92% (¥251m/¥8,591m), down YoY as operating income declined despite higher sales.
• Ordinary margin: 3.35% (¥288m/¥8,591m), supported by non-operating items.
• Net margin: 2.18% (¥187m/¥8,591m). Implied effective tax rate ~31.8% (¥87.1m tax on ~¥274.1m pre-tax), not 0%.
• SG&A: ~¥749.3m (Gross profit minus operating income), ~8.7% of sales. operating_leverage: Revenue grew 5.7% YoY while operating income fell 5.9% YoY, evidencing negative operating leverage. This suggests gross margin compression and/or SG&A growth outpacing sales. Monitoring incremental margins in H2 will be critical.

Growth Assessment

revenue_sustainability: Top-line grew 5.7% YoY to ¥8.591bn. Without order/backlog data, the durability of this growth is unclear; however, low asset turnover (0.389x) implies capacity underutilization or longer cash conversion cycles typical in components manufacturing. profit_quality: Ordinary income exceeded operating income (¥288m vs ¥251m), indicating reliance on non-operating gains (e.g., FX/interest/other). Net income declined 18.7% YoY despite sales growth, highlighting core margin pressure. outlook: Key swing factors are input cost trends, pricing pass-through, product mix, and FX. Sustaining growth will require stabilization of gross margins and better operating leverage in H2. Lack of CF and inventory disclosures limits visibility on demand momentum and execution.

Financial Health

liquidity: Current assets ¥15.143bn vs current liabilities ¥5.400bn yields a current ratio of 280%. Working capital stands at ¥9.743bn. Quick ratio equals current ratio in the dataset due to inventories being undisclosed; true quick ratio is likely lower but still appears comfortable. solvency: Total equity ¥15.755bn and total liabilities ¥6.426bn imply a calculated equity ratio of ~71.4% and leverage of 0.41x debt-to-equity (provided; interest-bearing debt not detailed). Interest coverage ~519x underscores low financial risk. capital_structure: Assets ¥22.064bn funded primarily by equity (assets/equity = 1.40x). Minimal interest expense suggests low reliance on debt financing. Absent disclosure on interest-bearing debt composition and cash, net debt cannot be inferred.

Cash Flow Quality

earnings_quality: OCF, investing CF, and financing CF are undisclosed (presented as 0). Therefore, we cannot assess cash conversion, working capital drag, or the proportion of earnings supported by non-cash items. Depreciation is also undisclosed, limiting EBITDA analysis. FCF_analysis: Free cash flow cannot be computed without OCF and capex. Given thin operating margins, FCF sensitivity to working capital swings may be high. working_capital: Inventories are undisclosed, so we cannot judge inventory buildup or obsolescence risk. Working capital is sizable at ¥9.743bn; its efficiency and turns will be important for cash generation.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0, which likely indicates no disclosure rather than a confirmed zero distribution. With EPS at ¥21.11, theoretical capacity exists, but policy remains unclear based on the provided data. FCF_coverage: FCF coverage cannot be assessed as OCF and capex are undisclosed. Without cash flow data, we cannot gauge the sustainability of any potential dividends. policy_outlook: Given a strong balance sheet but compressed profitability, a conservative dividend stance would be consistent; clarity depends on management guidance and FCF visibility once CF statements are available.

Risk Assessment

Business Risks:

• Gross margin pressure from raw material cost inflation and limited pricing power
• Demand cyclicality in end-markets (automotive/electronics/industrial components)
• FX volatility impacting non-operating income and competitiveness
• Supply chain disruptions affecting lead times and costs
• Product mix shifts toward lower-margin items

Financial Risks:

• Potential working capital build (inventories/receivables) weighing on OCF (data undisclosed)
• Thin operating margin (2.9%) leaves limited cushion against shocks
• Dependence on non-operating gains to support ordinary income
• Uncertain capex intensity and depreciation profile (undisclosed), which could pressure FCF

Key Concerns:

• Negative operating leverage despite revenue growth
• Lack of cash flow and inventory disclosure limits earnings quality assessment
• ROE of 1.19% is low relative to cost of equity, driven by slim margins

Investment Implications

Key Takeaways:

• Top-line grew 5.7% YoY, but operating income fell 5.9% YoY, indicating margin stress
• Balance sheet is robust with an estimated 71% equity ratio and very high interest coverage
• ROE is low at 1.19%, constrained by a 2.18% net margin and low asset turnover (0.389x)
• Ordinary income benefited from non-operating items; core profitability is the bottleneck
• Data gaps (OCF, capex, inventories, depreciation) restrict cash flow and capital intensity insights

Metrics to Watch:

• Gross margin and SG&A ratio trend in H2
• Operating margin and incremental margins vs sales
• OCF/Net income conversion and working capital turns (once disclosed)
• Capex and depreciation to assess maintenance vs growth investment
• FX gains/losses and other non-operating items’ contribution to ordinary income
• Equity ratio and net cash/debt once cash and debt details are disclosed

Relative Positioning: Financially conservative with strong liquidity and low leverage, but operationally challenged with thin margins and low ROE versus typical Japanese industrial/component peers that target mid-single-digit operating margins and higher asset turns.

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