DAIWA TSUSHIN Co.,Ltd FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.22B
• Operating Income: ¥108M
• Net Income: ¥34M
• EPS: ¥20.41

Income Statement

Balance Sheet

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

Daiwa Tsushin Co., Ltd. (Consolidated, JGAAP) delivered a solid FY2026 Q1, with revenue of ¥1,218 million (+5.7% YoY) and operating income of ¥108 million (+50.6% YoY), signaling strong operating leverage early in the fiscal year. Gross profit was ¥412.3 million, translating to a gross margin of approximately 33.8%, which underpins the step-up in operating profitability. Operating margin improved to roughly 8.9% (¥108m/¥1,218m), a notable expansion given the moderate revenue growth, implying SG&A discipline and scale benefits. Ordinary income of ¥105 million closely tracked operating income, indicating limited non-operating drag, with interest expense modest at ¥1.52 million and an implied interest coverage of about 71x based on operating income. Net income reached ¥55 million (+64.7% YoY), reflecting both stronger operating performance and a normalizing tax charge relative to profit growth. The DuPont breakdown shows a net profit margin of 4.52%, asset turnover of 0.248x, and financial leverage of 2.22x, yielding a reported ROE of 2.48% for the quarter; this profile suggests profitability is primarily margin-led rather than asset-intensity-driven. On the balance sheet, total assets were ¥4,912 million and equity ¥2,214 million, implying an equity ratio of roughly 45.1% by calculation, though the reported equity ratio appears as 0.0% (treated as undisclosed rather than zero). Liquidity is tight near term: the current ratio is 102.4% and quick ratio 61.3%, with working capital of only ¥59.6 million, leaving limited cushion against short-term shocks. Inventories are sizable at ¥1,038 million (about 40% of current assets), concentrating liquidity risk and elevating the importance of sell-through and turnover. Leverage is moderate with total liabilities of ¥3,051.7 million versus equity of ¥2,214 million (debt-to-equity 1.38x), consistent with the DuPont financial leverage factor. Cash flow statements were not disclosed (all zeros represent unreported figures), so operating cash flow (OCF), free cash flow (FCF), and OCF/Net Income cannot be assessed this quarter. Dividend information indicates no payout this quarter (DPS 0, payout ratio 0%), consistent with early fiscal positioning and the lack of reported cash flows, but it does not constitute a definitive policy stance. Earnings quality cannot be fully judged without cash flow data; however, the low interest burden and improved operating margin are supportive. Overall, the quarter shows healthy operational execution with margin-led profit growth, while the balance sheet indicates adequate solvency but tight liquidity and inventory-dependent working capital. Data gaps (cash flows, depreciation, share count) constrain depth of analysis, so tracking subsequent quarters for cash conversion and working capital normalization is important.

Profitability Analysis

ROE_decomposition: DuPont indicates Net Profit Margin 4.52% x Asset Turnover 0.248 x Financial Leverage 2.22 = ROE 2.48% for the quarter. Profitability is driven by margin expansion rather than high asset intensity, with moderate leverage amplifying returns. margin_quality: Gross margin of ~33.8% (¥412.3m/¥1,218m) and operating margin of ~8.9% (¥108m/¥1,218m) reflect improved cost controls and scale benefits. Ordinary income (~8.6% of sales) closely mirrors operating income, suggesting stable non-operating items. Net margin is 4.52%. The effective tax rate appears normalizing (~29–30% implied using ¥31.1m tax vs ~¥105m pretax proxy), despite a reported 0.0% placeholder. operating_leverage: Revenue growth of +5.7% YoY contrasted with operating income growth of +50.6% YoY indicates strong operating leverage, likely from SG&A efficiency and better gross mix. SG&A (implied) is ~¥304.3m (gross profit minus operating income), about 25.0% of sales, consistent with disciplined overhead.

Growth Assessment

revenue_sustainability: Top-line growth of +5.7% YoY is steady, likely driven by ongoing demand in core businesses; sustainability will hinge on order backlog and execution given inventory levels. profit_quality: Margin expansion (operating margin ~8.9%) and limited non-operating drag indicate higher-quality earnings, but confirmation requires positive OCF once cash flow data are disclosed. outlook: With improved margins and moderate leverage, the company is positioned for incremental earnings growth if revenue momentum holds and inventory converts efficiently. Key dependencies include project timing, component availability, and pricing discipline in subsequent quarters.

Financial Health

liquidity: Current ratio 102.4% and quick ratio 61.3% indicate tight near-term liquidity. Working capital is ¥59.6 million, leaving a small buffer. Inventories of ¥1,038 million (≈40% of current assets) concentrate liquidity risk. solvency: Total liabilities ¥3,051.7m vs equity ¥2,214.0m yields debt-to-equity of 1.38x, reflecting moderate leverage. Calculated equity ratio is ~45.1% (2,214/4,912), though the reported 0.0% should be treated as undisclosed. capital_structure: Financial leverage factor of 2.22 in DuPont aligns with balance sheet figures. Interest burden is low (¥1.52m), and interest coverage of ~71x (operating income basis) provides ample headroom.

Cash Flow Quality

earnings_quality: Cash flow data were not disclosed this quarter (zeros indicate unreported). Thus, OCF/Net Income of 0.00 is a placeholder and cannot be interpreted. Earnings quality assessment is incomplete without cash conversion metrics. FCF_analysis: FCF could not be calculated due to absent OCF and capex data. Depreciation and amortization are also undisclosed, limiting EBITDA analysis. working_capital: Inventory is the dominant working capital component (¥1,038m). With current liabilities at ¥2,531m and a slim working capital cushion, timely inventory turnover and receivables collection will be critical to generate OCF.

Dividend Sustainability

payout_ratio_assessment: DPS is 0 and payout ratio is shown as 0.0% for the quarter; this indicates no dividend declared, not necessarily a change in policy. With quarterly net income of ¥55m, capacity exists in principle, but policy assessment requires full-year guidance and cash flow visibility. FCF_coverage: FCF coverage is unassessable this quarter due to undisclosed OCF and capex (reported as 0 placeholders). policy_outlook: Given tight liquidity metrics and the early stage of the fiscal year, a conservative stance on distributions would be consistent until sustained OCF and working capital normalization are demonstrated. Any dividend decisions should be evaluated against inventory conversion and leverage maintenance.

Risk Assessment

Business Risks:

• Inventory risk: elevated inventories (¥1,038m) increase obsolescence and price risk.
• Project timing risk causing revenue and cash flow lumpiness.
• Input cost and supply chain fluctuations affecting gross margin.
• Customer concentration risk typical in systems/solutions businesses (not disclosed but relevant).
• Competitive pricing pressure potentially compressing margins.

Financial Risks:

• Tight short-term liquidity (current ratio 102.4%, quick ratio 61.3%).
• Working capital dependence on inventory turnover and receivables collection.
• Refinancing/rollover risk on short-term obligations given low liquidity buffer.
• Sensitivity to any rise in interest costs, albeit current interest burden is low.
• Data limitations on cash flows and depreciation hinder monitoring of true cash earnings.

Key Concerns:

• Absence of cash flow disclosure this quarter impedes assessment of earnings-to-cash conversion.
• High inventory relative to current assets concentrates liquidity risk.
• Slim working capital (¥59.6m) offers limited shock absorption.

Investment Implications

Key Takeaways:

• Strong operating leverage: +5.7% sales growth drove +50.6% operating income growth; operating margin ~8.9%.
• Margins healthy: gross margin ~33.8%; limited non-operating drag; interest coverage ~71x.
• Liquidity is tight: current ratio 102.4%, quick ratio 61.3%, working capital ¥59.6m.
• Leverage moderate: debt-to-equity 1.38x; computed equity ratio ~45%.
• Cash flow data unreported; earnings quality and FCF sustainability unverified.
• Inventory at ¥1,038m is a focal point for cash conversion and margin risk.

Metrics to Watch:

• Operating cash flow and free cash flow in subsequent quarters.
• Inventory turnover days and sell-through rates.
• Receivables collection and days sales outstanding.
• Gross margin trajectory and SG&A ratio.
• Order backlog/book-to-bill and revenue visibility.
• Net working capital trends and short-term borrowing mix.
• ROE progression via DuPont components.

Relative Positioning: Profitability appears solid for a small-cap systems/communications-related business with mid-30s gross margin and high single-digit operating margin; solvency is adequate but near-term liquidity is tighter than many peers, placing emphasis on working capital execution.

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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