THE KINKI SHARYO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.27B
• Operating Income: ¥341M
• Net Income: ¥7M
• EPS: ¥39.96

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

Kinki Sharyo Co., Ltd. (TSE:71220) reported FY2026 Q2 consolidated results under JGAAP with solid top-line growth but muted profit conversion. Revenue rose 19.7% year over year to ¥16.27 billion, indicating healthy order execution and/or progress on existing projects. Despite the sales increase, operating income was essentially flat at ¥0.34 billion (-0.5% YoY), compressing operating margin to about 2.1%. Gross profit of ¥2.25 billion implies a gross margin of 13.8%, suggesting input cost pressure, project mix, or lower pricing power relative to the revenue expansion. Ordinary income came in at ¥0.39 billion, and net income was ¥0.27 billion, with a net margin of 1.68%. The YoY decline in net income (-99.6%) contrasts sharply with the stable operating result, implying large non-recurring items in the prior-year base or non-operating/extraordinary swings; however, detailed drivers are not disclosed. DuPont metrics indicate an ROE of 0.81%, driven by a low net margin (1.68%), modest asset turnover (0.261x), and financial leverage of 1.85x. ROA is approximately 0.44%, underscoring thin profitability for the period. Liquidity remains strong with a current ratio of 193.5% and working capital of ¥19.17 billion. The balance sheet shows total assets of ¥62.38 billion, liabilities of ¥25.22 billion, and equity of ¥33.65 billion, implying moderate leverage. Interest coverage is 10.7x, suggesting manageable financial risk at current earnings levels. Cash flow statements are not disclosed in this dataset (zeros indicate unreported), limiting assessment of cash conversion and free cash flow. Similarly, key items like depreciation and inventories are not reported here, which may overstate certain ratios (e.g., quick ratio) and obscure operating leverage analysis. Dividend per share is reported as zero for the period, with a payout ratio of 0%; policy details are not provided, and coverage cannot be evaluated without cash flow data. Overall, the quarter shows robust revenue momentum but margin compression and very low reported ROE, with healthy liquidity and moderate leverage. The primary analytical gap is the absence of cash flow and certain cost structure details, which tempers confidence in the earnings quality assessment.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.68%
• asset_turnover: 0.261
• financial_leverage: 1.85
• calculated_ROE: 0.81%
• interpretation: Low ROE reflects thin margins and modest asset turnover, partially offset by moderate leverage. margin_quality:
• gross_margin: 13.8%
• operating_margin: 2.1%
• ordinary_margin: 2.4%
• net_margin: 1.68%
• commentary: Revenue grew 19.7% YoY but operating income declined slightly, indicating cost inflation, mix shift, or pricing pressure. The gap between gross and operating margins suggests meaningful SG&A/overhead burden relative to gross profit. operating_leverage:
• revenue_trend_YoY: +19.7%
• operating_income_trend_YoY: -0.5%
• assessment: Negative operating leverage in the period; costs scaled at least as fast as revenue. Without depreciation disclosure, EBITDA-based leverage cannot be assessed.

Growth Assessment

revenue_sustainability: Top-line growth of +19.7% YoY indicates robust execution, likely supported by railcar delivery schedules and/or aftermarket/services. Sustainability depends on backlog, order intake, and delivery timing, which are not disclosed here. profit_quality: Profit conversion lagged revenue, with operating margin at ~2.1%. The net income collapse versus last year suggests prior-year non-recurring support or current non-operating drag; ordinary income remained close to operating income, implying limited non-operating lift this quarter. outlook: If input costs normalize and project mix improves, margins could recover; however, absent visibility on backlog, cost pass-through mechanisms, and FX/material hedging, near-term margin trajectory remains uncertain.

Financial Health

liquidity:

• current_ratio: 193.5%
• quick_ratio: 193.5% (likely overstated due to unreported inventories)
• working_capital: ¥19,173,000,000
• commentary: Strong near-term liquidity with sizable current asset cushion over current liabilities. solvency:
• debt_to_equity: 0.75x
• interest_coverage: 10.7x
• equity_ratio_note: Equity ratio not disclosed in this dataset (0% shown reflects unreported).
• assessment: Moderate leverage and comfortable interest coverage indicate manageable solvency risk at current earnings. capital_structure: Assets ¥62.38bn, liabilities ¥25.22bn, equity ¥33.65bn imply financial leverage of ~1.85x (Assets/Equity), consistent with DuPont inputs.

Cash Flow Quality

earnings_quality: Unable to assess cash conversion because operating, investing, and financing cash flows are not disclosed in this dataset. FCF_analysis: Free cash flow cannot be calculated without operating cash flow and capex (depreciation is also unreported). working_capital_dynamics: Current assets substantially exceed current liabilities, but absent inventory and receivables detail, the timing of cash realization is unclear. Project-based milestones could cause intra-period volatility.

Dividend Sustainability

payout_ratio_assessment: Reported payout ratio is 0% due to DPS=¥0 for the period; this does not necessarily reflect full-year policy. FCF_coverage: Not assessable due to unreported cash flows; FCF coverage ratio shown as 0.00x is not meaningful. policy_outlook: Dividend capacity will hinge on full-year profitability and cash generation; without OCF and capex visibility, sustainability cannot be evaluated for this interim period.

Risk Assessment

Business Risks:

• Project execution risk and milestone timing inherent in rolling stock contracts.
• Raw material and component cost inflation impacting gross margins.
• Pricing pressure in competitive tenders with limited pass-through.
• Demand cyclicality tied to public investment and railway capex cycles.
• Supply chain disruptions affecting delivery schedules and costs.

Financial Risks:

• Thin operating margin (~2.1%) leaves limited buffer against cost overruns.
• Exposure to interest rate changes, though current coverage (10.7x) is adequate.
• Working capital swings from long-duration projects could strain cash if collections are delayed.
• Potential FX exposure on imported components or export contracts (not disclosed).

Key Concerns:

• Divergence between strong revenue growth and flat operating income suggests margin pressure.
• Net income down 99.6% YoY likely reflects non-recurring effects; lack of detail limits clarity.
• Absence of cash flow, depreciation, and inventory data constrains assessment of earnings quality and capital intensity.

Investment Implications

Key Takeaways:

• Revenue momentum strong (+19.7% YoY), but operating leverage negative in the period.
• Margins are thin (gross 13.8%, operating ~2.1%, net 1.68%), yielding low ROE (0.81%).
• Balance sheet liquidity is solid (current ratio 193.5%) with moderate leverage (D/E 0.75x).
• Interest burden is manageable (10.7x coverage).
• Material data gaps (cash flows, depreciation, inventories) limit earnings quality analysis.

Metrics to Watch:

• Backlog and order intake to gauge revenue sustainability.
• Gross margin trajectory and cost pass-through on new orders.
• Operating cash flow and working capital movements (receivables, contract assets, inventories).
• Capex and depreciation to understand capital intensity and EBITDA.
• Ordinary vs. extraordinary items to reconcile the large YoY swing in net income.

Relative Positioning: A railcar/rolling stock manufacturer with strong liquidity and moderate leverage but currently low profitability and ROE; near-term positioning hinges on cost control, project mix, and backlog visibility compared with domestic 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