The Lead Co.,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.78B
• Operating Income: ¥-218M
• Net Income: ¥-203M
• EPS: ¥-78.85

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

Lead Co., Ltd. (TSE: 69820, standalone, JGAAP) reported FY2026 Q2 cumulative revenue of ¥1,783 million, down 12.2% YoY, reflecting a weak demand environment and/or delayed order conversion. Gross profit is shown at ¥219 million with a gross margin of 12.3%, indicating thin product-level economics and limited pricing power. Operating income was a loss of ¥218 million (essentially flat YoY per disclosure), suggesting limited progress in restoring operating profitability despite revenue contraction. Ordinary loss of ¥189 million was slightly better than operating loss, implying some non-operating gains or financial income offsetting interest costs. Net loss was ¥203 million, with EPS of -¥78.85, underscoring continued bottom-line pressure. EBITDA was negative at ¥54 million, and the EBITDA margin was -3.0%, highlighting fixed-cost absorption challenges and low operating leverage resilience at current scale. DuPont decomposition yields a negative ROE of -8.21%, driven by a -11.39% net margin, low asset turnover of 0.207, and high financial leverage of 3.48x. Balance sheet shows total assets of ¥8,603 million and equity of ¥2,472 million; this implies an equity ratio of roughly 28.7% (the disclosed 0.0% equity ratio appears not to be reported), providing a moderate capital buffer but limited relative to ongoing losses. Total liabilities of ¥5,283 million translate to a debt-to-equity ratio of 2.14x, indicating meaningful leverage at this stage of the cycle. Liquidity is tight with a current ratio of 102.1% and working capital of only ¥52.7 million, leaving little cushion for shocks. Operating cash flow was positive at ¥96.7 million despite the net loss, likely supported by non-cash charges (¥163.6 million D&A) and a working-capital inflow; however, the OCF/Net Income ratio of -0.48 reflects that cash generation is not yet backed by sustainable profitability. Investing cash flow was not disclosed (0), preventing a proper free cash flow assessment; the provided FCF value of 0 should be treated as not available. Interest expense was ¥19.4 million and interest coverage based on operating earnings remains negative, underscoring ongoing earnings risk under a leveraged structure. The company paid no dividend (DPS ¥0), appropriately conserving cash given losses and leverage. Several line items (e.g., cash balance, inventories, investing cash flows, shares outstanding) are not disclosed in the dataset; conclusions rely on the available non-zero figures and derived metrics. Overall, the quarter shows pressured demand, negative operating profitability, thin margins, tight but still positive liquidity, and reliance on working capital release to support cash flow. Near-term priorities likely center on cost discipline, margin repair, and order conversion to stabilize revenue and improve operating leverage.

Profitability Analysis

ROE_decomposition: ROE -8.21% = Net Margin (-11.39%) × Asset Turnover (0.207x) × Financial Leverage (3.48x). The negative net margin is the dominant driver, with low turnover further depressing returns despite relatively high leverage. margin_quality: Gross margin of 12.3% is thin for capital equipment/electronics manufacturing, suggesting limited pricing power or unfavorable mix. EBITDA margin of -3.0% and operating loss of ¥218 million indicate that fixed costs are not adequately absorbed at current volume. Ordinary loss (-¥189 million) is slightly better than operating loss, implying modest non-operating offsets but not enough to alter the loss-making profile. operating_leverage: Revenue declined 12.2% YoY while operating loss was flat YoY, indicating some cost actions helped offset top-line pressure. However, persistent negative EBITDA implies high fixed cost intensity; incremental volume recovery could materially improve earnings, but conversely further revenue softness risks deeper losses.

Growth Assessment

revenue_sustainability: Top-line fell to ¥1,783 million (-12.2% YoY), signaling soft demand or slower order intake/shipment timing. Asset turnover at 0.207x indicates underutilized asset base. profit_quality: Net loss of ¥203 million alongside negative EBITDA points to weak core earnings quality. The improvement from operating to ordinary income suggests non-operating items partially cushioned results, but core profitability remains negative. outlook: Near-term growth hinges on order conversion, backlog health, and pricing/mix improvements to lift gross margin. Without visible capex or R&D disclosures in the period, product cycle catalysts are unclear. Cost restructuring and improved utilization are required to restore positive operating margins; macro and end-market recovery would be supportive but are uncertain.

Financial Health

liquidity: Current assets ¥2,569 million vs. current liabilities ¥2,517 million yields a current ratio of 102.1% and working capital of ¥52.7 million—adequate but tight. Quick ratio is shown as 102.1%, but inventory was not disclosed; true quick ratio may be lower if inventories are material. Cash balance is not disclosed, limiting visibility on immediate liquidity. solvency: Total liabilities ¥5,283 million vs. equity ¥2,472 million gives debt-to-equity of 2.14x. Implied equity ratio ~28.7%, a moderate cushion but susceptible to erosion if losses continue. Interest expense of ¥19.4 million with negative EBIT implies weak interest coverage on an earnings basis. capital_structure: Leverage is meaningful for a loss-making entity. Ordinary income is less negative than operating income, hinting at some financial/other income offsets, but reliance on such items is not a durable capital structure strategy.

Cash Flow Quality

earnings_quality: Operating CF of ¥96.7 million contrasts with net loss of ¥203 million (OCF/NI = -0.48), indicating cash generation was supported by non-cash D&A (¥163.6 million) and a working capital release rather than underlying profitability. FCF_analysis: Investing CF is not disclosed (0), so Free Cash Flow cannot be reliably calculated; the reported FCF of 0 should be treated as not available. Assuming minimal capex would overstate sustainable FCF given asset-intensive operations. working_capital: Given D&A of ¥163.6 million and net loss of ¥203 million, pre-working-capital OCF was likely negative; the positive OCF implies a working capital inflow on the order of ~¥130–140 million. This is not necessarily repeatable and could reverse if inventories/accounts receivable rebuild.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio is 0%, appropriate given negative earnings (EPS -¥78.85) and negative operating profitability. FCF_coverage: FCF coverage cannot be assessed due to unreported investing cash flows. With OCF positive but dependent on working capital inflows and EBITDA negative, sustainable cash coverage for dividends is currently lacking. policy_outlook: Given losses, leverage (D/E 2.14x), and tight liquidity, capital preservation is likely to remain the priority. Any resumption of dividends would likely require a return to positive EBITDA/operating income and clearer, recurring FCF.

Risk Assessment

Business Risks:

• Demand volatility and order timing affecting revenue (-12.2% YoY).
• Low gross margin (12.3%) indicating limited pricing power and unfavorable mix.
• High fixed-cost base leading to negative operating leverage at current volumes.
• Potential competitive pricing pressures in core markets.
• Execution risk in cost restructuring and margin improvement.

Financial Risks:

• Tight liquidity (current ratio ~102%) and small working capital buffer (¥52.7 million).
• Leverage at 2.14x liabilities-to-equity with negative EBIT, implying weak interest coverage.
• Cash flow reliance on working capital releases, which may not be repeatable.
• Limited visibility on cash balance, capex, and inventories due to unreported items.
• Potential refinancing/loan covenant pressure if losses persist.

Key Concerns:

• Sustained negative EBITDA and operating losses.
• Thin gross margin constraining earnings recovery.
• Data gaps (cash, inventories, investing CF) limiting assessment of true liquidity and FCF.

Investment Implications

Key Takeaways:

• Revenue contracted 12.2% YoY; utilization appears low (asset turnover 0.207x).
• EBITDA margin -3.0% and operating loss of ¥218 million highlight weak operating leverage.
• ROE -8.21% driven by negative margins despite high leverage (3.48x).
• Liquidity is just above breakeven (current ratio 102.1%); working capital buffer is thin.
• Positive OCF (¥96.7 million) reflects non-cash add-backs and WC inflow rather than core profitability.
• Equity ratio implied ~28.7%, but continued losses could erode capital.
• Dividend suspension (DPS ¥0) aligns with cash preservation under current conditions.

Metrics to Watch:

• Order intake/backlog and book-to-bill ratio.
• Gross margin trajectory and product mix pricing.
• EBITDA and operating income break-even timing.
• Working capital movements (AR, AP, inventory turns) and OCF sustainability.
• Interest coverage and net debt trends once cash is disclosed.
• Capex intensity and investing cash flows (to assess true FCF).

Relative Positioning: Within Japan small/mid-cap industrial/electronics peers, Lead exhibits below-average margins and negative EBITDA, with moderate equity capitalization but higher balance-sheet leverage; recovery depends on margin repair and volume normalization.

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