TEIN,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.81B
• Operating Income: ¥197M
• Net Income: ¥193M
• EPS: ¥19.41

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

Verdict: Mixed quarter with resilient top-line and strong cash generation, but significant operating margin compression and structurally low capital efficiency. Revenue rose 4.3% YoY to 28.12, while operating income fell 32.1% YoY to 1.97, and ordinary income declined 13.6% YoY to 2.44. Net income, however, increased 32.4% YoY to 1.93, aided by modest non-operating gains and a lower effective tax rate (20.9%). Gross margin printed at 37.6%, but operating margin compressed sharply to 7.0%. Based on YoY changes, we estimate operating margin compressed by about 375 bps (from ~10.8% to 7.0%). Ordinary margin compressed by roughly 178 bps (from ~10.5% to 8.7%). In contrast, net margin expanded by about 144 bps (from ~5.4% to 6.9%) due to non-operating tailwinds and tax effects. Earnings quality is strong: OCF of 4.62 is 2.39x net income, implying cash-backed earnings. Financial position is robust with a current ratio of 404.5%, quick ratio of 237.7%, D/E of 0.28x, and interest coverage of 49.1x. Nonetheless, ROE is a modest 3.1% and ROIC is only 3.0%, flagging capital efficiency concerns. Inventory remains sizeable at 16.14 against half-year sales of 28.12, which could weigh on asset turnover and cash conversion if demand softens. Non-operating income contribution is high (non-operating income ratio 27.7%), suggesting part of profit is outside core operations. Shareholder returns included 0.29 in buybacks; dividends are unreported, but a calculated payout ratio of 176.2% implies potential mismatch with earnings unless driven by prior retained earnings or annualized basis—data caveat applies. Forward-looking, sustaining margin recovery will require SG&A discipline and better fixed-cost absorption, while improving ROIC above 5% is a key management challenge. Strong liquidity and cash generation provide flexibility to execute on cost improvement and targeted capex. Absent visibility on dividend policy and investing cash flows, we remain cautious on the sustainability of elevated payout metrics. Monitoring inventory normalization, FX impacts, and raw material trends will be critical into 2H.

Profitability Analysis

DuPont decomposition (current period): ROE 3.1% = Net Profit Margin 6.9% × Asset Turnover 0.350 × Financial Leverage 1.28x. The largest drag is low asset turnover (0.35), reflecting a relatively heavy asset base versus revenue, with inventories (16.14) prominent. Net margin improved YoY despite operating pressure, implying non-operating support and tax effects offsetting weaker operating leverage. Operating margin compressed to 7.0% (approx. -375 bps YoY), likely due to higher cost of sales (input costs, mix) and elevated SG&A (8.59) growing faster than revenue (+4.3% YoY vs unknown SG&A YoY; risk of deleverage). Ordinary margin fell to ~8.7% (approx. -178 bps YoY), confirming operating softness despite 0.54 in non-operating income. Sustainability: the improvement in net margin versus operating margin suggests one-off or less controllable drivers (non-operating and tax), which are less repeatable; core margin sustainability hinges on cost control and pricing. Concerning trends: operating income down 32.1% against revenue up 4.3% implies negative operating leverage; SG&A intensity (SG&A/Revenue ~30.5%) is high and may be pressuring profitability if growth moderates.

Growth Assessment

Revenue growth of 4.3% YoY to 28.12 indicates steady demand, likely supported by aftermarket and export channels, though segment detail is unavailable. Operating income declined 32.1% YoY, signaling cost pressure and/or weaker mix outweighing top-line growth. Ordinary income fell 13.6% YoY, partially cushioned by non-operating gains. Net income rose 32.4% YoY to 1.93 due to non-operating tailwinds and a favorable effective tax rate. EBITDA of 3.96 (14.1% margin) provides buffer, but conversion to operating profit weakened. With ROIC at 3.0% (below 5% warning), incremental growth without efficiency gains may dilute returns. Outlook hinges on margin restoration (pricing, cost pass-through, and SG&A discipline) and inventory normalization to lift asset turnover. FX and raw material costs (steel/aluminum) remain swing factors; absent visibility on investing activity, growth investments are unclear but capex of 1.13 suggests measured reinvestment.

Financial Health

Liquidity is strong: current ratio 404.5% and quick ratio 237.7%—well above benchmarks; no warning for Current Ratio < 1.0. Solvency is conservative with D/E 0.28x and interest coverage 49.1x; no warning for D/E > 2.0. Maturity profile appears comfortable: current assets 39.14 versus current liabilities 9.68 mitigates short-term refinancing risk; long-term loans total 2.10. Cash and deposits of 13.54 further support liquidity. No off-balance sheet obligations were disclosed in the data. Inventory (16.14) is sizeable relative to AR (3.01) and AP (2.52), implying working capital tied up; however, strong cash generation offsets near-term risk.

Cash Flow Quality

OCF of 4.62 is 2.39x net income, indicating high-quality earnings (OCF/NI > 1.0). Using capex of 1.13, analyst-calculated FCF is approximately 3.49, suggesting good internal funding capacity for shareholder returns and selective capex. Financing CF was -2.77, including 0.29 of share repurchases; dividends were unreported, so total cash returns are uncertain. No obvious signs of working capital manipulation are apparent from point-in-time data; however, inventories remain high, which could pressure future OCF if sales slow. Overall, cash generation appears sufficient to fund operations and modest shareholder returns near term.

Dividend Sustainability

Dividend data are unreported, but a calculated payout ratio of 176.2% implies potential overdistribution versus current earnings; this figure likely reflects a different basis (e.g., annualized EPS vs interim dividend, or inclusion of special items)—data caveat. Given analyst-calculated FCF of ~3.49 for the period and limited leverage, the company could fund dividends from cash flow if absolute dividend outlay is modest; however, sustainability above a 60% payout benchmark would depend on improving operating margins. Share repurchases totaled 0.29, which appears comfortably covered by FCF. Without disclosed DPS and total dividends paid, we cannot conclusively assess coverage; clarity on full-year dividend policy and timing is needed.

Risk Assessment

Business Risks:

• Operating margin compression amid rising input costs or unfavorable mix (operating income -32.1% YoY).
• Inventory build (16.14) relative to sales, increasing risk of obsolescence and cash conversion pressure.
• FX exposure on exports/imports affecting revenue and COGS (industry-typical, not disclosed).
• Raw material price volatility (steel/aluminum) impacting gross margin.
• Dependence on non-operating income (non-operating income ratio 27.7%) to support bottom line.

Financial Risks:

• Low ROIC at 3.0% (below 5% warning), indicating capital inefficiency.
• Low asset turnover (0.35) dampening ROE despite low leverage.
• Potential overdistribution risk if the calculated payout ratio (~176%) reflects actual policy.

Key Concerns:

• Sustained SG&A intensity (8.59; ~30.5% of revenue) constraining operating leverage.
• Ordinary margin compression (~-178 bps YoY) despite non-operating gains.
• Visibility on investing CF and dividend outflows is limited due to unreported items.

Investment Implications

Key Takeaways:

• Top-line growth resilient (+4.3% YoY) but core profitability weakened (operating margin ~7.0%).
• Net income growth (+32.4% YoY) benefited from non-operating/tax factors; quality supported by strong OCF.
• Balance sheet strength (current ratio ~4.0x, D/E 0.28x) provides flexibility.
• Capital efficiency is the key issue: ROE 3.1% and ROIC 3.0% are below desirable levels.
• Inventory management and SG&A control are critical levers for 2H recovery.

Metrics to Watch:

• Operating margin trajectory and SG&A/revenue ratio.
• Inventory-to-sales ratio and days inventory outstanding.
• ROIC progression toward >5% (medium-term target >7–8% desirable).
• Non-operating income contribution to ordinary profit.
• OCF sustainability and FCF after capex versus shareholder returns (dividends + buybacks).

Relative Positioning: Within auto-parts peers, the company exhibits above-average liquidity and low leverage but lags on capital efficiency (ROIC/ROE) and operating leverage; improvement in cost structure and inventory turnover is needed to close the gap.

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