KANEMITSU CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.46B
• Operating Income: ¥455M
• Net Income: ¥261M
• EPS: ¥69.39

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

Kanemitsu (72080) posted resilient FY2026 Q2 consolidated results under JGAAP, with modest topline softness but a strong rebound in profitability. Revenue declined 1.0% YoY to ¥5.455bn, yet operating income surged 44.6% YoY to ¥455m, indicating meaningful operating leverage and cost discipline. Gross profit reached ¥1.199bn, translating to a 22.0% gross margin, while operating margin expanded to approximately 8.4%. Ordinary income of ¥494m and net income of ¥354m (net margin 6.49%) confirm improved earnings quality relative to revenue trends. DuPont analysis shows ROE of 3.0%, driven by a 6.49% net margin, 0.352x asset turnover (on an interim basis), and 1.31x financial leverage (assets/equity). Despite the reported equity ratio appearing as 0.0% (unreported metric), the balance sheet implies a solid equity buffer of roughly 76.2% (¥11.809bn equity / ¥15.490bn assets). Liquidity is robust, with a current ratio of 248.9% and quick ratio of 241.3%, reflecting strong working capital headroom (¥4.808bn). Interest-bearing burden appears light, with an interest coverage ratio of 54.5x and interest expense of only ¥8.3m. Cash generation is healthy: operating cash flow (OCF) was ¥588.7m, equating to 1.66x net income, aided by non-cash D&A of ¥390.4m. Free cash flow cannot be assessed due to unreported investing cash flows, but OCF suggests adequate internal funding capacity if capex is near maintenance levels. Dividend data indicate DPS of ¥0 and a payout ratio of 0%, implying retained earnings for strengthening the balance sheet or funding investments; coverage analysis is limited by missing investing cash flows. The revenue decline alongside profit expansion suggests effective cost actions, improved mix, and/or pricing pass-through amidst potentially mixed auto sector volumes. Asset turnover appears low on a half-year snapshot, but this is typical for interim periods; the full-year trajectory will be more instructive. With low leverage (D/E 0.38x) and strong liquidity, solvency risk is limited in the near term. Data limitations exist for certain items (equity ratio, cash & equivalents, investing CF, shares), so conclusions rely on available non-zero data and derived calculations.

Profitability Analysis

ROE stands at 3.0% per the DuPont framework: net margin 6.49% x asset turnover 0.352 x financial leverage 1.31. Operating margin is approximately 8.35% (¥455m / ¥5,455m), up significantly YoY as operating income rose 44.6% despite a 1.0% revenue decline. Ordinary margin is about 9.06% (¥494m / ¥5,455m), reflecting positive non-operating contributions or financial income relative to low interest burden. Gross margin is 22.0%, providing sufficient spread to absorb overhead while still enabling operating margin expansion; this suggests improved cost control, favorable product mix, and/or pricing actions. EBITDA is ¥845.4m with a 15.5% margin, indicating strong cash earnings relative to sales. Interest coverage is 54.5x (operating income to interest), showing profits are comfortably covering financing costs. The sizable D&A (¥390.4m) supports EBITDA but also implies ongoing capital intensity typical for auto-related manufacturing. The 1.0% revenue contraction accompanied by a 44.6% operating income increase evidences high short-term operating leverage and effective SG&A/COGS management. Net margin at 6.49% is solid for a component supplier and broadly consistent with ordinary income trends. Effective tax rate appears as 0.0% in the provided metrics but cannot be relied upon due to data limitations; reported income tax is ¥89.9m against net income of ¥354m, implying taxes are being recognized.

Growth Assessment

Revenue declined 1.0% YoY to ¥5.455bn, indicating a soft demand backdrop or deliberate pruning of lower-margin volumes. Nonetheless, operating income growth of 44.6% YoY suggests profit improvements are quality-driven (cost efficiency, price/mix, productivity gains) rather than volume-led. Gross profit of ¥1.199bn (22.0% margin) indicates margin resilience; the expansion at the operating level points to overhead efficiencies. Ordinary income of ¥494m outpaced operating income, implying modest non-operating tailwinds. Net income rose 33.3% YoY to ¥354m, signaling that profitability enhancements are flowing through to the bottom line. Sustainability hinges on maintaining cost and mix benefits as the auto cycle evolves; if volumes stabilize or improve in H2, operating leverage could support further gains. Asset turnover of 0.352x (interim) is low but typical for H1 seasonality; full-year turnover will be a better gauge of utilization. Pricing power and raw material pass-through will be key to sustaining gross margins in the face of steel and logistics fluctuations. With OCF of ¥588.7m exceeding net income, earnings quality appears solid, supporting the durability of improvements. Outlook: cautious near-term on revenue momentum, but constructive on profit trajectory if cost actions persist and demand normalizes.

Financial Health

Total assets are ¥15.49bn and total equity is ¥11.809bn, implying an equity ratio of approximately 76.2% (computed) despite the reported metric being unreported (0.0%). Total liabilities are ¥4.430bn, with current liabilities of ¥3.228bn. Liquidity is strong: current ratio 248.9% and quick ratio 241.3%, underpinned by working capital of ¥4.808bn. Inventories are ¥245.5m, modest relative to current assets, reducing obsolescence risk. Leverage is low with a debt-to-equity ratio of 0.38x, and the interest burden is minimal (¥8.3m), limiting refinancing or rate sensitivity risks. Interest coverage of 54.5x indicates ample buffer against earnings volatility. The capital structure is conservative, providing flexibility to fund capex or absorb shocks. Cash and equivalents are unreported (0 in the feed), preventing a precise cash ratio calculation. Overall solvency risk is low given high equity and low financial leverage.

Cash Flow Quality

OCF of ¥588.7m is 1.66x net income, indicating strong conversion and supportive working capital dynamics and non-cash add-backs (notably D&A of ¥390.4m). EBITDA of ¥845.4m provides ample internal cash generation capacity. Investing cash flow is unreported (0), so Free Cash Flow (FCF) cannot be determined from the dataset; the reported FCF of 0 should be interpreted as unavailable rather than zero. Using D&A as a rough proxy for maintenance capex suggests that if capex approximates D&A, underlying FCF could still be positive given OCF > D&A, but this remains an assumption pending disclosure. Working capital appears well-managed given the strong liquidity ratios and OCF/NI > 1, though lack of detailed AR/AP changes limits granularity. Earnings quality is supported by cash conversion, moderate non-operating income relative to operating income, and low interest drag.

Dividend Sustainability

Annual DPS is reported as ¥0.00 with a payout ratio of 0.0%, implying earnings were fully retained. FCF coverage cannot be assessed because investing cash flows are unreported; the displayed FCF coverage of 0.00x should be treated as unavailable. From a capacity perspective, OCF of ¥588.7m and low leverage suggest room for distributions if capital needs are moderate; however, actual sustainability depends on capex requirements, cyclical visibility, and stated policy. In the absence of explicit guidance, the prudent assumption is that the company is prioritizing reinvestment and balance sheet strength. If profitability gains persist and capex remains in line with maintenance needs, dividend capacity could improve, but confirmation requires full-year cash flow and policy disclosures.

Risk Assessment

Business Risks:

• Automotive demand cyclicality affecting order volumes and utilization
• Product mix and pricing pressure from OEMs and Tier-1 customers
• Raw material cost volatility (steel, energy, logistics) impacting gross margins
• Technological transition to xEV platforms potentially altering component demand
• Customer concentration typical of auto supply chains
• Supply chain disruptions and lead-time variability
• Geopolitical and FX fluctuations impacting export competitiveness and costs

Financial Risks:

• Potential capex needs given capital intensity (implied by D&A of ¥390m) could pressure FCF in downcycles
• Limited visibility on cash and investing cash flows due to unreported items
• Asset turnover softness (interim) could weigh on ROE if not improved
• Tax rate volatility given limited disclosure on pre-tax income and effective tax

Key Concerns:

• Sustainability of margin improvements amid flat-to-declining sales
• Lack of reported investing cash flow and cash balance limits FCF and liquidity visibility
• Exposure to OEM bargaining power and platform shifts in the auto sector

Investment Implications

Key Takeaways:

• Strong profitability rebound: operating income +44.6% YoY on revenue -1.0%
• Healthy margins: gross 22.0%, operating ~8.4%, net 6.49%
• Robust cash conversion: OCF/Net Income 1.66x; D&A supports cash earnings
• Conservative balance sheet: implied equity ratio ~76%, D/E 0.38x, interest coverage 54.5x
• Data gaps on investing CF and cash balance constrain FCF and liquidity precision

Metrics to Watch:

• H2 revenue trajectory and order backlog in core automotive components
• Gross and operating margin sustainability versus raw material and wage inflation
• Capex outlays and disclosed investing cash flows to refine FCF
• Asset turnover improvement and inventory turns
• Customer concentration and program exposure to xEV platform shifts

Relative Positioning: Within Japanese auto component peers, Kanemitsu currently screens as financially conservative with solid liquidity and low leverage, demonstrating margin resilience despite modest topline pressure; however, lower interim asset turnover and limited disclosure on investing cash flows temper visibility relative to 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