NITCHITSU CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.79B
• Operating Income: ¥149M
• Net Income: ¥211M
• EPS: ¥48.16

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

For FY2026 Q2 (cumulative), ニッチツ reported revenue of ¥4,792 million (+1.7% YoY), indicating modest top-line growth despite a mixed profit picture. Gross profit was ¥611 million, implying a gross margin of 12.8%, which signals a relatively thin spread and a cost-sensitive business model. Operating income was ¥149 million (-0.9% YoY), with an operating margin of roughly 3.1%, reflecting slight negative operating leverage as small revenue growth did not translate into higher operating profit. Ordinary income reached ¥158 million, a 3.3% ordinary margin, showing limited non-operating contributions and low financial costs. Net income declined sharply to ¥94 million (-55.2% YoY), pointing to bottom-line pressure likely from below-the-line items and/or tax effects not fully captured in the operating level. ROE is calculated at 0.80% based on the provided DuPont inputs (NPM 1.96%, asset turnover 0.282x, leverage 1.45x), indicating subdued shareholder returns for the period. Liquidity is strong with a current ratio of 240.4% and a quick ratio of 234.3%, supported by sizable working capital of approximately ¥4,417 million. The capital structure appears conservative: total liabilities are ¥4,905 million versus equity of ¥11,754 million, implying an equity ratio around 69% (derived from assets and equity), despite the reported equity ratio field being unreported. Interest expense is minimal at ¥5.6 million and interest coverage is robust at 26.5x, reflecting low financial risk. Operating cash flow is solid at ¥655 million, representing 6.96x net income, which suggests high earnings quality and favorable working capital movements. EBITDA of ¥384 million (8.0% margin) provides an additional cushion relative to interest obligations, though the absolute margin remains modest for industrial-type activities. Inventories are lean at ¥193 million, indicating limited capital tie-up in stock relative to sales and potentially efficient supply chain practices. The disconnect between stable operating income and sharply lower net income suggests transitory non-operating or extraordinary impacts; however, detailed drivers are not disclosed. Dividend data are not provided (DPS reported as zero indicates non-disclosure), so payout policy cannot be inferred from this release. Overall, the company demonstrates strong liquidity and conservative leverage but faces structurally thin margins and modest asset turns, which constrain ROE absent a step-up in margins or turnover. Data limitations exist (several items are unreported), so conclusions focus on the disclosed non-zero metrics.

Profitability Analysis

ROE is 0.80%, decomposed via DuPont as follows: net profit margin 1.96%, asset turnover 0.282x, and financial leverage 1.45x. The primary drag on ROE is low profitability (NPM 1.96%) and modest asset efficiency, not leverage. Gross margin stands at 12.8%, consistent with a cost-intensive business; operating margin is about 3.1% (¥149m/¥4,792m), and ordinary margin is 3.3%. EBITDA margin is 8.0%, indicating that D&A (¥235m) is a meaningful cost component relative to EBIT. YoY, revenue grew 1.7% but operating income fell 0.9%, signaling mild negative operating leverage and possible input cost pressure or mix deterioration. Interest expense of ¥5.6m is negligible, and interest coverage at 26.5x confirms financing costs are not a constraint. The sharp drop in net income (-55.2% YoY) despite flattish operating profits suggests non-operating/extraordinary items or tax effects impacted the bottom line. Overall margin quality is adequate at the operating level but thin, leaving limited buffer against cost volatility.

Growth Assessment

Revenue growth of +1.7% YoY indicates stable but subdued demand momentum in H1. Operating income declined slightly (-0.9% YoY), implying that growth did not scale profit proportionally, possibly due to cost inflation, adverse mix, or project timing. Ordinary income (¥158m) modestly exceeded operating income, reflecting limited net non-operating gains. Net income fell 55.2% YoY, materially below operating trends, pointing to items below operating line and/or tax effects; detailed components are not disclosed. Asset turnover at 0.282x is modest, suggesting limited capital intensity improvements or slower asset productivity. Given the low margins and asset turnover, structural ROE uplift likely requires gross margin expansion, tighter SG&A discipline, or improved turnover. Outlook-wise, the solid OCF indicates underlying cash generation remains sound, which can support stabilization efforts. However, absent clearer visibility on the drivers of the bottom-line decline, near-term profit quality appears mixed. Sustainability of revenue growth will hinge on order intake, pricing power to offset input costs, and execution on cost controls.

Financial Health

Total assets are ¥17,000m with equity of ¥11,754m and liabilities of ¥4,905m, implying a derived equity ratio around 69% (despite the reported equity ratio field being unreported). Debt-to-equity is 0.42x, indicating moderate leverage overall and a conservative balance sheet. Liquidity is strong: current ratio 240.4% and quick ratio 234.3%, supported by working capital of ¥4,416.9m. Inventories are low at ¥192.9m relative to sales, which reduces obsolescence risk and supports cash conversion. Interest expense is only ¥5.6m, and interest coverage is 26.5x, signaling low solvency risk. No cash balance is disclosed (cash and equivalents reported as zero indicates non-disclosure), but liquidity ratios suggest sufficient liquid current assets. Overall, the company appears well-capitalized with ample liquidity headroom and modest financial risk.

Cash Flow Quality

Operating cash flow is ¥654.7m, equating to 6.96x net income, indicating strong cash conversion and likely favorable working capital movements relative to earnings. EBITDA of ¥383.5m provides a cushion for maintenance capex and interest, although investing cash flow is not disclosed (reported as zero). Free cash flow is not computable from the provided data (FCF reported as zero is a placeholder); absent capex disclosure, we cannot assess FCF precisely. Working capital appears ample, and low inventory levels suggest limited cash tied in stock; however, receivables and payables details are not provided. Earnings quality appears solid given OCF materially exceeding net income in the period, but sustainability depends on whether the working capital tailwind is recurring.

Dividend Sustainability

Dividend information is not disclosed for the period (DPS reported as zero indicates non-disclosure), and the payout ratio field shows 0.0%, so policy assessment is constrained. With OCF of ¥655m and low interest burden, the balance sheet could support dividends in principle, but without capex and actual DPS, FCF coverage cannot be evaluated. Historically typical metrics to assess would include payout as a percentage of net income and FCF, but those are unavailable here. Given strong liquidity and conservative leverage, capacity appears adequate, yet commitment to distributions is unclear based on the provided data.

Risk Assessment

Business Risks:

• Thin margins (gross 12.8%, operating ~3.1%) leave limited buffer against input cost inflation.
• Negative operating leverage in the period (revenue +1.7% vs operating income -0.9%).
• Potential volatility from project timing or mix, given small spread between operating and ordinary income.
• Demand cyclicality typical of industrial/manufacturing value chains.
• Pricing power constraints evidenced by modest margin structure.
• Execution risk in controlling SG&A and converting orders to profit.

Financial Risks:

• Bottom-line volatility (net income -55.2% YoY) from below-the-line items and/or taxes.
• Limited visibility on capex and investing cash flows (unreported), constraining FCF assessment.
• Asset turnover of 0.282x indicates modest asset efficiency, potentially weighing on ROE.
• Dependence on working capital for cash generation; reversal could compress OCF.

Key Concerns:

• Sharp decline in net income inconsistent with relatively stable operating profit.
• Sustained low margins may cap ROE absent structural improvements.
• Lack of disclosure on investing cash flows and dividends limits assessment of capital allocation.

Investment Implications

Key Takeaways:

• Top-line growth was modest (+1.7% YoY) while operating profit slightly declined (-0.9% YoY).
• ROE at 0.80% is constrained by low margins and modest asset turnover rather than leverage.
• Liquidity and solvency are strong (current ratio 240%, derived equity ratio ~69%, interest coverage 26.5x).
• OCF is robust (¥655m, 6.96x net income), indicating solid cash conversion in H1.
• Net income fell 55.2% YoY, suggesting below-the-line or tax-driven headwinds.
• Dividend capacity appears adequate but policy and FCF are not assessable due to limited disclosure.

Metrics to Watch:

• Gross and operating margins (cost pass-through, mix, SG&A control).
• Order intake/backlog and revenue growth trajectory.
• Working capital trends (receivables, payables, inventory days) and OCF sustainability.
• Capex and investing cash flows to evaluate true FCF.
• Asset turnover improvements and ROE trajectory.
• Non-operating items and effective tax rate normalization.

Relative Positioning: Within Japanese industrial/manufacturing peers, ニッチツ appears financially conservative with strong liquidity and low interest burden but exhibits structurally thin margins and modest asset efficiency, leading to lower ROE; improving margin capture and turnover would be key to converge toward higher-performing 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