TEIN,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.81B
• Operating Income: ¥197M
• Net Income: ¥146M
• 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

For FY2026 Q2, Tein Co., Ltd. delivered modest top-line growth but experienced pronounced operating margin compression, offset by non-operating gains that lifted bottom-line results. Revenue increased 4.3% year over year to ¥2,812 million, indicating steady demand despite a challenging cost backdrop. Gross profit was ¥1,156 million with a solid gross margin of 41.1%, but operating income fell 32.1% YoY to ¥197 million, implying higher SG&A or other operating cost pressure. Ordinary income of ¥244 million exceeded operating income, suggesting positive non-operating contributions (e.g., foreign exchange gains, subsidies, or other income). Net income rose 32.4% YoY to ¥193 million, a notable divergence from operating performance that underscores the importance of non-operating or extraordinary items in the quarter. EBITDA totaled ¥412 million, an EBITDA margin of 14.6%, providing comfortable interest coverage of 28.8x against interest expense of ¥6.8 million. DuPont analysis shows ROE of 3.08%, driven by a 6.86% net margin, 0.35x asset turnover, and 1.28x financial leverage, reflecting a low-leverage balance sheet and modest profitability. Liquidity is strong: current ratio is 383.5% and quick ratio is 230.0%, supported by ¥3,920 million of current assets and working capital of ¥2,898 million. Total assets stand at ¥8,042 million with total equity of ¥6,261 million, implying an equity-to-asset mix of roughly 78% despite the reported equity ratio displaying as 0.0% (unreported). Operating cash flow was healthy at ¥418 million, equating to 2.17x net income, indicating good earnings-to-cash conversion. Financing cash outflow of ¥479 million suggests debt reduction and/or shareholder returns, though cash and equivalents and dividend details were not disclosed in this dataset. Inventory of ¥1,569 million is sizeable within current assets, making inventory turnover a key execution focus amid slowing operating profit. The effective tax rate metric was shown as 0.0% but is not usable; tax expense of ¥138 million indicates taxes materially impacted results. Overall, the quarter reflects resilient revenue and cash generation but weaker operating leverage, with non-operating items supporting net profit. Data gaps (e.g., cash balance, investing cash flow, equity ratio disclosure) limit full cash and capital allocation assessment.

Profitability Analysis

ROE is 3.08% per DuPont: net margin 6.86% × asset turnover 0.350 × financial leverage 1.28. Operating margin is approximately 7.0% (¥197m / ¥2,812m), down sharply YoY given operating income declined 32.1% against a 4.3% revenue increase, pointing to negative operating leverage. Gross margin of 41.1% remains robust, implying the margin squeeze likely stemmed from SG&A or other operating costs rather than direct input costs alone. Ordinary margin is about 8.7% (¥244m / ¥2,812m), indicating non-operating gains partially offset operating weakness. EBITDA margin of 14.6% provides a cushion, with low interest burden (interest expense ¥6.8m) resulting in 28.8x EBIT coverage and ample debt service capacity. The decline in operating income despite higher sales suggests either elevated fixed cost base, increased selling expenses, or unfavorable product/customer mix. Net income growth (+32.4% YoY) despite weaker operating profit implies one-off or market-related non-operating tailwinds; sustainability should be scrutinized. Overall profitability is adequate but below potential given the cost base; restoring operating leverage is the key swing factor.

Growth Assessment

Revenue grew 4.3% YoY to ¥2,812m, indicating steady demand in core markets. The sustainability of revenue growth appears reasonable near term, but operating income contraction signals that growth is not yet translating into earnings leverage. Profit quality is mixed: gross margin is solid, but the gap between operating income (down 32.1% YoY) and net income (up 32.4% YoY) indicates reliance on non-operating items this quarter. Ordinary income above operating income suggests FX or other income contributions; if these normalize, underlying profit could be lower. With EBITDA margin at 14.6% and strong OCF, the core business remains cash-generative, yet operating efficiency needs improvement to convert sales growth into profit growth. Outlook hinges on cost management (SG&A discipline), product mix, and external factors such as exchange rates and input costs. Given inventory levels and working capital intensity, growth may require continued careful inventory planning to avoid margin drag.

Financial Health

The balance sheet appears conservative: total equity of ¥6,261m versus total assets of ¥8,042m implies low leverage (financial leverage 1.28x), even though the equity ratio is not disclosed in this dataset. Total liabilities are ¥1,848m, and current liabilities are ¥1,022m, supporting a strong current ratio of 383.5% and quick ratio of 230.0%. Debt-to-equity is 0.30x per provided metric, consistent with modest leverage and ample solvency headroom. Working capital of ¥2,898m indicates strong short-term liquidity. Interest expense is low at ¥6.8m, and interest coverage is robust at 28.8x, limiting refinancing risk. The capital structure favors equity, providing resilience against cyclical downturns. While cash and equivalents are not disclosed here, the strength in OCF and low leverage mitigate near-term liquidity concerns. Absence of the equity ratio and cash detail limits a fuller assessment of liquidity buffers and net cash/debt.

Cash Flow Quality

Operating cash flow of ¥418m equals 2.17x net income, indicating strong earnings quality and favorable working capital contribution in the period. Depreciation and amortization of ¥215m supports cash earnings, with EBITDA of ¥412m aligning with positive operating cash generation. Free cash flow is not derivable here because investing cash flow is unreported (shown as 0 indicates not disclosed). Financing cash outflow of ¥479m suggests debt repayment and/or shareholder returns, but without cash balance details we cannot evaluate post-outflow liquidity. Inventory stands at ¥1,569m and represents a material share of current assets; future OCF will be sensitive to inventory turns and receivables collections. Overall, cash conversion appears healthy this quarter, but confirmation requires visibility into maintenance capex and investing outflows.

Dividend Sustainability

Annual DPS and payout ratio are displayed as 0.00 and 0.0% respectively in this dataset, which should be treated as not disclosed rather than actual zero. With net income of ¥193m and OCF of ¥418m, coverage for a modest dividend would be plausible; however, the absence of investing cash flow and cash balance data prevents a robust FCF coverage assessment. Financing CF outflow of ¥479m could include dividends and/or debt repayments; the mix is not specified. Policy outlook cannot be inferred from the provided data; any assessment would require management guidance or historical payout practice. Until FCF (after capex) is known, dividend sustainability cannot be conclusively evaluated, though the conservative balance sheet is supportive in principle.

Risk Assessment

Business Risks:

• Negative operating leverage as costs outpace sales growth, pressuring operating margins
• Dependence on non-operating gains to sustain net income in the quarter
• Inventory intensity (¥1,569m) heightening risk of obsolescence or margin dilution if demand softens
• Exposure to currency fluctuations affecting ordinary income and export competitiveness
• Raw material and logistics cost variability impacting gross-to-operating margin bridge
• Competitive pressures in aftermarket and OEM channels affecting price/mix

Financial Risks:

• Data gaps on cash and investing cash flows limit visibility on true free cash flow
• Potential working capital swings affecting OCF sustainability
• Concentration of equity funding; limited leverage can constrain ROE if margins remain subdued
• Unclear dividend/capital return commitments could create mismatch with investor expectations

Key Concerns:

• 32.1% YoY decline in operating income despite 4.3% revenue growth
• Reliance on non-operating items to drive a 32.4% YoY increase in net income
• Large inventory balance requiring improved turnover to support cash flow
• Insufficient disclosure on cash, equity ratio, and investing cash flows

Investment Implications

Key Takeaways:

• Top-line growth of 4.3% was offset by significant operating margin compression to roughly 7.0%
• Ordinary and net income outperformed operating income, implying material non-operating contributions
• ROE of 3.08% reflects conservative leverage and modest profitability; operating improvement is needed to lift returns
• Liquidity and solvency are strong with a current ratio of 383.5% and low debt burden
• OCF strength (2.17x NI) supports earnings quality, but lack of investing CF disclosure obscures FCF
• Inventory management is a pivotal lever for margin and cash conversion

Metrics to Watch:

• Operating margin and SG&A ratio trajectory
• Inventory turnover and days on hand
• Ordinary income components (FX gains/losses and other non-operating items)
• OCF/NI conversion and capex intensity to derive true FCF
• Revenue mix by region/channel and pricing/mix trends
• Exchange rate movements and input cost indicators

Relative Positioning: Within Japanese auto parts peers, Tein appears conservatively financed with solid gross margins but currently exhibits weaker operating leverage and mid-teens EBITDA margin; improving cost discipline and working capital efficiency are key to closing the profitability gap while maintaining balance sheet strength.

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