TOPY INDUSTRIES,LIMITED FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥143.00B
• Operating Income: ¥3.26B
• Net Income: ¥813M
• EPS: ¥113.08

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

Topy Industries (7231) delivered a mixed but improving FY2026 Q2 (cumulative) performance: revenue declined 3.7% YoY to ¥142.998bn, yet operating income surged 440.6% YoY to ¥3.256bn and net income rose 231.6% YoY to ¥2.483bn, indicating material margin recovery and cost discipline despite softer topline. Gross profit is reported at ¥18.923bn (13.2% margin), supporting a rebound in operating margin to 2.3%. Ordinary income of ¥3.390bn exceeded operating income by ¥0.134bn, implying modest positive non-operating contributions offsetting interest expense of ¥0.358bn (operating interest coverage ~9.1x). The DuPont profile shows a net margin of 1.74%, asset turnover of 0.530x, and financial leverage of 1.98x, yielding a reported ROE of 1.83% for the period. Liquidity appears solid with a current ratio of 162% and a quick ratio of 133%, supported by working capital of ¥59.3bn; solvency is moderate with liabilities-to-equity at 1.07x and an implied equity ratio around 50% (computed from totals), despite the reported equity ratio field showing 0% (unreported). Balance sheet strength likely underpins resilience through cyclical end-markets (auto wheels, construction equipment undercarriage, steel). Cash flow statement items are unreported (zeros), limiting assessment of earnings-to-cash conversion and free cash flow sustainability this period. Reported cost of sales (¥129.609bn) is inconsistent with the reported gross profit; we rely on the gross profit figure and derived gross margin as the more reliable datapoint for margin analysis. Inventory of ¥27.8bn supports an indicative half-year inventory days of ~39–41, suggesting reasonable inventory discipline. EPS is ¥113.08, but share count is unreported, constraining per-share triangulations and capital allocation analysis. The combination of improving profitability, healthy liquidity, and moderate leverage is encouraging, yet sustainability will hinge on demand recovery in auto and construction machinery, price/mix, and raw material pass-through. With dividends unreported for the period, payout visibility is low; policy clarity will likely depend on full-year cash generation and capital needs. Overall, the quarter indicates operational progress and margin repair, but limited cash flow disclosure and minor line-item inconsistencies warrant cautious interpretation. Data gaps (CF, D&A, equity ratio field) constrain depth of analysis; conclusions are based on available non-zero items and computed indicators.

Profitability Analysis

ROE_decomposition: DuPont (3-step): ROE 1.83% = Net margin 1.74% × Asset turnover 0.530 × Financial leverage 1.98. This implies ROA of ~0.92% (1.74% × 0.530) and leverage uplift of ~2.15x to equity returns. margin_quality: Gross margin stands at 13.2% (¥18.923bn GP on ¥142.998bn revenue). Operating margin is 2.28% (¥3.256bn OI), ordinary margin 2.37% (¥3.390bn), and net margin 1.74% (¥2.483bn). The YoY operating profit surge (+440.6%) against revenue -3.7% indicates better cost control and mix. Note: reported cost of sales (¥129.609bn) does not reconcile with gross profit; we anchor on the reported gross profit and derived margin. operating_leverage: Positive operating leverage evident as small topline decline coexisted with sharp EBIT recovery, suggesting fixed cost absorption improved and/or cost reductions took hold. Interest expense (¥0.358bn) is manageable with 9.1x coverage on operating income, limiting financial drag on margins.

Growth Assessment

revenue_sustainability: Revenue declined 3.7% YoY to ¥142.998bn, reflecting softer demand or pricing in key end-markets (automotive wheels, construction equipment components, steel). Sustainability will depend on OEM production schedules, aftermarket demand, and export conditions. profit_quality: Profit growth is driven by margin repair more than revenue expansion. Ordinary income exceeded operating income by ¥0.134bn, suggesting net non-operating gains. Effective tax outflow (¥0.242bn) appears modest relative to ordinary income, supporting net earnings; however, tax rate metrics in the dataset show as 0.0% and should not be relied upon. outlook: If input costs (steel, energy) remain benign and price pass-through holds, margins could continue to improve. A recovery in auto production and construction machinery demand would support revenue normalization. FX and raw material dynamics remain key external swing factors.

Financial Health

liquidity: Current ratio 161.9% (¥155.185bn CA / ¥95.852bn CL) and quick ratio 132.9% imply comfortable short-term coverage. Working capital is ¥59.333bn, providing buffer in a cyclical environment. solvency: Total liabilities ¥145.038bn vs total equity ¥135.939bn (liabilities-to-equity 1.07x). Implied equity ratio is ~50.4% (¥135.939bn / ¥269.580bn), despite the reported field showing 0% (unreported). Interest expense of ¥0.358bn is well covered by operating income (9.1x), indicating manageable financial risk. capital_structure: Leverage is moderate with financial leverage factor 1.98x from DuPont. Ordinary income exceeding operating income suggests some positive non-operating items; continued attention to financing costs and non-operating volatility is warranted.

Cash Flow Quality

earnings_quality: Cash flow line items (OCF/ICF/FCF) are unreported this period; OCF/Net Income ratio shows as 0.00 due to missing OCF and should not be interpreted as cash weakness. Therefore, earnings-to-cash conversion cannot be assessed. FCF_analysis: Free cash flow is unreported (0 in dataset). With D&A also unreported, EBITDA and maintenance capex cannot be validated, limiting FCF visibility. working_capital: Inventories are ¥27.8bn. Using reported GP implies COGS ~¥124.1bn, yielding indicative half-year inventory turnover of ~4.5x and ~41 days; using reported COGS (¥129.6bn) implies ~4.7x and ~39 days. Either way, inventory levels appear reasonable for the scale of operations.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.00, indicating unreported rather than actual zero. With EPS at ¥113.08 for the period, a payout assessment is not possible without dividend disclosures. FCF_coverage: FCF is unreported; therefore, coverage of dividends by free cash flow cannot be evaluated. policy_outlook: Dividend policy visibility is low this quarter due to missing cash flow and dividend inputs. Future distributions will likely be a function of full-year profits, cash generation, and capex plans given the cyclical nature of core end-markets.

Risk Assessment

Business Risks:

• Demand cyclicality in automotive OEM and construction machinery end-markets
• Raw material price volatility (steel) and energy costs impacting margins
• Pricing and pass-through negotiations with OEM customers
• FX fluctuations affecting export competitiveness and translation
• Supply chain disruptions impacting production schedules and inventory
• Product mix shifts between OEM and aftermarket affecting margins

Financial Risks:

• Potential non-operating income/expense volatility affecting ordinary income
• Interest rate risk on floating-rate borrowings (coverage currently adequate at ~9.1x)
• Working capital swings impacting cash generation in downcycles
• Limited visibility due to unreported cash flow and D&A data this period

Key Concerns:

• Data inconsistency between reported cost of sales and gross profit; reliance on gross profit for margin analysis
• Unreported cash flow statements and D&A impede assessment of cash conversion and maintenance capex needs
• Revenue decline (-3.7% YoY) despite profit recovery; sustainability of margin repair needs validation with volume recovery

Investment Implications

Key Takeaways:

• Topline contracted 3.7% YoY to ¥142.998bn, but operating income rebounded sharply to ¥3.256bn (+440.6% YoY)
• Gross margin at 13.2% and operating margin at 2.3% indicate margin repair and cost discipline
• Ordinary income (¥3.390bn) exceeded operating income by ¥0.134bn, implying net non-operating gains
• Net margin 1.74% and ROE 1.83% reflect early-stage profitability recovery on moderate leverage (1.98x)
• Liquidity solid: current ratio 162%, quick ratio 133%, working capital ¥59.3bn
• Solvency moderate: liabilities-to-equity 1.07x; implied equity ratio ~50%
• Interest coverage ~9.1x provides cushion against rate and profit volatility
• Cash flow, D&A, and dividend data unreported, limiting cash and payout visibility
• Inventory discipline appears reasonable (~39–41 days on half-year basis)
• Data inconsistency between cost of sales and gross profit; analysis anchored on gross profit

Metrics to Watch:

• Gross and operating margins (price/mix and cost pass-through)
• Order trends and production schedules in auto and construction machinery
• Non-operating items and interest expense trajectory (ordinary vs operating income gap)
• Working capital movements (inventories, receivables/payables) and OCF once disclosed
• Capex and D&A (to gauge maintenance vs growth spending and EBITDA)
• FX rates and steel input costs
• Dividend announcements and payout guidance at full-year

Relative Positioning: Within Japan’s auto components and steel-related peers, Topy shows improving but still modest profitability (OI margin ~2.3%, net margin ~1.7%) offset by a comparatively solid balance sheet (implied equity ratio ~50% and strong liquidity), positioning it as a cyclical recovery candidate contingent on demand normalization and sustained cost control.

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