TAIYO YUDEN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥177.62B
• Operating Income: ¥9.02B
• Net Income: ¥5.54B
• EPS: ¥44.37

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 Q2 with profitable growth and clear margin improvement, supported by robust operating cash flow but weighed by low capital efficiency (ROIC 2%). Revenue rose 5.8% YoY to 1,776.24, and operating income climbed 19.1% YoY to 90.24, evidencing positive operating leverage. Net income jumped 55.3% YoY to 55.40, aided by improved operations and a manageable tax rate of 25.3%. Gross profit reached 396.56, implying a gross margin of 22.3%, while operating margin improved to roughly 5.1%. Based on revenue and operating income growth rates, we estimate operating margin expanded by about 57 bps YoY (5.08% vs. ~4.51% last year). Net margin likely expanded by roughly 99 bps YoY to 3.1% (vs. ~2.1%), driven by operating leverage and stable non-operating expense levels. Ordinary income of 81.06 (+19.9% YoY) was lower than operating income due to net non-operating expenses, but interest coverage remains strong at 11.6x. Cash generation was a standout: operating cash flow of 256.58 was 4.63x net income, indicating high earnings quality and good working capital discipline. The balance sheet is conservative with a current ratio of 337.5% and D/E of 0.83x; short-term liquidity risk is minimal given cash and receivables comfortably exceed short-term borrowings. Total comprehensive income of 109.78 greatly exceeded net income, indicating sizable OCI gains (likely FX/valuation), which strengthens equity but are non-cash. Despite improved profitability, capital efficiency remains weak with ROE at 1.7% and ROIC at 2.0%, well below cost of capital benchmarks. EBITDA was 325.11 (18.3% margin), and debt/EBITDA of 3.13x is within comfort for the sector. Dividend data are limited; the calculated payout ratio of 211.5% suggests caution if extrapolated, though cash flow coverage cannot be confirmed due to missing capex/FCF. Forward-looking, sustaining margin gains will hinge on product mix/ASP and utilization, while low ROIC highlights a need for tighter capital discipline and focused growth investments. Overall, Q2 execution was strong operationally; the key debate shifts to durability of margin gains vs. the drag from low capital efficiency.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 3.1% × Asset Turnover 0.299 × Financial Leverage 1.83x = ROE 1.7%. Driver assessment: The margin component improved YoY (operating income +19.1% vs revenue +5.8%), indicating positive operating leverage; asset turnover is low (0.299), consistent with a capital-intensive footprint; leverage is moderate (1.83x) and not the main ROE driver. Business context: Margin gains likely reflect better utilization, disciplined SG&A, and product mix tailwinds; ordinary income lagged operating income due to net non-operating expense (non-op income 9.83 vs non-op expense 19.01), partially offset by interest income of 6.07. Sustainability: Margin improvement appears cyclical-operational rather than one-off; however, sustaining beyond the cycle requires continued mix upgrade and cost control, as non-operating drag persists. Flags: SG&A of 306.32 is high relative to gross profit (SG&A/gross profit ~77%), but absolute SG&A growth vs revenue growth cannot be assessed due to lack of prior SG&A data; watch for SG&A growth outpacing revenue in coming quarters.

Growth Assessment

Top-line grew 5.8% YoY to 1,776.24, consistent with gradual recovery in electronics demand. Operating profit rose 19.1% to 90.24, outpacing sales and implying operating margin expansion to about 5.1%. Net income surged 55.3% to 55.40 (net margin ~3.1%), benefiting from operational improvement and a steady effective tax rate of 25.3%. EBITDA of 325.11 (18.3% margin) indicates healthy contribution from depreciation-heavy assets; D&A of 234.87 underlines capital intensity. Ordinary income of 81.06 (+19.9% YoY) confirms underlying earnings growth despite non-operating expense drag. Growth quality is supported by OCF at 256.58 (4.63x NI), signaling strong cash conversion potentially from disciplined working capital. Outlook: Revenue sustainability hinges on MLCC demand normalization, mix/ASP stabilization, and utilization rates; incremental margin upside may come from cost optimization and product mix but is capped by capital intensity and low asset turnover.

Financial Health

Liquidity is robust: current ratio 337.5% and quick ratio 298.1%—well above benchmarks; no warning triggers (Current Ratio >> 1.0). Solvency is sound with D/E at 0.83x and interest coverage at 11.55x; no D/E > 2.0 concerns. Maturity profile: short-term loans of 104.16 are comfortably covered by cash and deposits of 906.32 and receivables of 844.04, minimizing maturity mismatch risk. Total liabilities are 2,686.95 against equity of 3,245.53, indicating a conservative capital structure. Debt/EBITDA at 3.13x is manageable in this industry context. No off-balance sheet obligations are reported in the data provided.

Cash Flow Quality

OCF/Net Income at 4.63x signals high earnings quality and strong cash conversion. With OCF of 256.58 and financing CF of -5.49, cash generation supports deleveraging or liquidity build; however, investing CF and capex are unreported, preventing full FCF assessment. Dividend and buyback outflows are unreported; thus FCF coverage of shareholder returns is not calculable. Working capital: balance sheet shows moderate inventories (348.93) and receivables (844.04) relative to payables (283.45), consistent with a manufacturer; no explicit signs of working capital manipulation can be inferred without period-to-period deltas.

Dividend Sustainability

Dividend data are largely unreported. The calculated payout ratio of 211.5% suggests potential unsustainability if reflective of actual distributions; however, without DPS, total dividends paid, or capex/FCF, we cannot validate cash coverage. OCF was strong (256.58), which helps, but sustainability depends on capex intensity and future profit stability. Policy outlook cannot be inferred from the data provided; monitor company guidance on payout ratios and capital allocation.

Risk Assessment

Business Risks:

• Demand cyclicality in electronics components (MLCCs) affecting volumes and ASPs.
• Product mix and pricing pressure that could erode gross and operating margins.
• Capacity utilization risk given high fixed costs and significant D&A (234.87).
• Supply chain and lead-time volatility impacting inventories and delivery.

Financial Risks:

• Low capital efficiency: ROIC at 2.0% and ROE at 1.7% lag cost of capital benchmarks.
• Non-operating expense drag (net non-op loss ~9.18) reducing ordinary income.
• Currency exposure potentially affecting OCI and earnings (large swing in total comprehensive income).
• Refinancing/interest rate risk, though mitigated by strong liquidity and 11.55x interest coverage.

Key Concerns:

• Sustainability of recent margin expansion amid competitive pricing.
• Visibility on capex and FCF is limited due to unreported investing cash flows.
• Potential for elevated payout (calculated 211.5%) to pressure balance sheet if continued.
• Asset turnover at 0.299 constrains returns absent significant margin gains.

Investment Implications

Key Takeaways:

• Operational beat: revenue +5.8% YoY and operating income +19.1% indicate healthy operating leverage.
• Margins improved: operating margin ~5.1% and net margin ~3.1%, both likely up YoY.
• Cash quality strong: OCF 4.63x NI, supporting liquidity and optionality.
• Balance sheet conservative: current ratio 3.38x, D/E 0.83x, interest cover 11.6x.
• Capital efficiency weak: ROIC 2.0% and ROE 1.7% are key medium-term issues.

Metrics to Watch:

• Operating margin trend (bps change) vs. ASP/mix and utilization.
• OCF vs. NI and full FCF once capex/investing CF are disclosed.
• ROIC trajectory and asset turnover improvements.
• Non-operating income/expense balance and interest cost.
• Inventory levels and turns relative to demand recovery.
• Dividend policy updates and payout guidance.

Relative Positioning: Versus domestic electronic component peers, Taiyo Yuden exhibits strong liquidity and acceptable leverage but lags in capital efficiency (low ROIC/ROE) and asset turnover; sustaining margin gains and improving mix/turns are pivotal to narrow the gap 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