TOKYO RADIATOR MFG.CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥17.36B
• Operating Income: ¥1.25B
• Net Income: ¥617M
• EPS: ¥111.42

Income Statement

Balance Sheet

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

Tokyo Radiator Mfg. (TSE: 72350) delivered solid FY2026 Q2 results with both top-line growth and significant operating leverage. Revenue rose 3.8% year on year to ¥17.364 billion, while operating income surged 68.8% to ¥1.253 billion, indicating strong cost discipline and/or favorable mix. Net income increased 82.7% to ¥1.053 billion, with EPS reported at ¥111.42, reflecting both operating improvements and limited financial burdens. Gross profit was ¥2.184 billion, translating to a gross margin of 12.6%, which, while modest, supported a robust operating margin of 7.2% for the period. Ordinary income was ¥1.367 billion, slightly ahead of operating income, implying net non-operating gains (e.g., financial income or other items). The DuPont framework points to a calculated ROE of 4.39%, driven by a 6.06% net margin, 0.537x asset turnover, and conservative financial leverage of 1.35x. Balance sheet strength is a highlight: total assets were ¥32.313 billion against total equity of ¥24.001 billion, implying an equity ratio of approximately 74.3% (despite the reported 0.0% likely being an undisclosed figure). Liquidity appears ample with a current ratio of 274.8% and a quick ratio of 260.8%, supported by working capital of ¥13.435 billion. Interest expense was minimal at ¥8.8 million, leading to a very high interest coverage ratio of 142.7x, underscoring the low financial risk profile. Tax expense was ¥220.6 million, suggesting an effective tax rate in the high teens on a pre-tax basis, despite a reported 0.0% in the calculated metrics, which likely reflects data limitations. Operating cash flow and investing/financing cash flows were not disclosed (shown as 0), constraining cash conversion analysis this quarter. Depreciation and amortization were also undisclosed, meaning EBITDA and FCF figures in the calculated metrics are not reflective of underlying performance. The combination of improved profitability and a strong balance sheet suggests earnings quality is improving, but verification through cash flow data is still needed. Dividend information shows DPS and payout ratio as 0, which likely reflects timing or non-disclosure rather than policy; EPS capacity would allow distributions if policy supports it. Overall, the company appears to be executing well operationally with a conservative capital structure, though absent cash flow disclosures limit the assessment of sustainability and capital allocation.

Profitability Analysis

ROE decomposition (DuPont) shows a 4.39% ROE = 6.06% net margin × 0.537x asset turnover × 1.35x leverage. Operating margin expanded to 7.2% (¥1,253m / ¥17,364m), a strong improvement versus last year given +68.8% YoY operating income on +3.8% revenue, evidencing operating leverage and cost control. Gross margin at 12.6% (¥2,184m / ¥17,364m) remains modest for auto parts, but the conversion from gross to operating profit has improved materially. Ordinary income of ¥1,367m exceeds operating income, indicating a positive non-operating contribution (e.g., financial income, FX, or other). Interest burden is de minimis (interest expense ¥8.8m), producing an interest coverage of 142.7x; financial leverage remains low (assets/equity ≈ 1.35x). Effective tax expense of ¥220.6m on an estimated pre-tax income of roughly ¥1.274bn implies an effective tax rate around 17–18% (not 0% as shown in the automated metrics). Overall, profitability momentum is strong, with operating leverage a key driver; sustaining gross margin improvements and cost discipline will be essential to maintain the elevated operating margin.

Growth Assessment

Revenue grew 3.8% YoY to ¥17.364bn, a moderate pace likely supported by stable automotive demand and/or product mix improvements. Profit growth was outsized (operating income +68.8%, net income +82.7%), implying a favorable cost structure shift, pricing/mix gains, or non-operating tailwinds. Asset turnover of 0.537x suggests moderate efficiency; further improvement could support ROE absent higher leverage. The net margin of 6.06% is healthy for the segment and indicates improved operating efficiency; ordinary income exceeding operating income adds a supplemental tailwind this quarter. Sustainability will hinge on demand stability in core end-markets (auto thermal systems), raw material cost trends, and FX; none are disclosed here, so we flag data limits. The outlook is cautiously constructive given the low financial risk and improved margins, but confirmation via subsequent quarters and cash flow realization is needed to validate the higher earnings run-rate.

Financial Health

The balance sheet is strong: total equity ¥24.001bn vs total assets ¥32.313bn implies an equity ratio of ~74.3% (reported 0.0% appears undisclosed). Total liabilities are ¥8.967bn, with current liabilities of ¥7.687bn. Liquidity is ample: current ratio 274.8% and quick ratio 260.8%, supported by working capital of ¥13.435bn. Inventories are ¥1.070bn, modest relative to sales; however, receivables and payables are not disclosed in detail, limiting deeper working capital diagnostics. Leverage is conservative with debt-to-equity of 0.37x (using total liabilities/equity as a proxy under data limitations). Interest expense of only ¥8.8m suggests minimal debt and low refinancing risk. Overall solvency risk is low, providing capacity to absorb cyclical volatility and invest in capex if needed.

Cash Flow Quality

Operating, investing, and financing cash flows are shown as 0, indicating non-disclosure for this period rather than actual zero flows. As a result, we cannot assess cash conversion (OCF/NI) nor free cash flow generation this quarter. Depreciation and amortization are also undisclosed, preventing EBITDA estimation and accruals analysis. Working capital appears ample (¥13.435bn), and inventories are modest at ¥1.070bn, but without receivables/payables movements, we cannot judge whether earnings were supported or hindered by working capital in the period. Given low interest expense and strong margins, underlying cash generation is likely positive, but this remains unverified until OCF and capex are disclosed.

Dividend Sustainability

DPS and payout ratio are shown as 0, indicating no disclosure or timing-related absence rather than a definitive policy stance. With EPS at ¥111.42 and a strong balance sheet (equity ratio ~74%), capacity for distributions exists in principle. However, without OCF and capex data, we cannot assess FCF coverage or sustainability. Historically, small-cap Japanese auto parts suppliers often target stable dividends with moderate payout ratios, but company-specific policy is not provided here. Until cash flow data and management policy guidance are available, dividend sustainability cannot be robustly evaluated.

Risk Assessment

Business Risks:

• End-market cyclicality in automotive production and aftermarket demand
• Customer concentration risk common in tier-1/2 auto suppliers
• Raw material price volatility (e.g., aluminum, copper, steel) impacting margins
• FX fluctuations affecting export competitiveness and input costs
• Technological transition to EVs potentially reducing demand for traditional radiators/thermal components
• Supply chain disruptions (logistics, parts shortages) impacting deliveries and costs

Financial Risks:

• Limited visibility on cash flow generation due to undisclosed OCF and capex
• Potential working capital volatility not observable from current disclosures
• Pension or off-balance obligations unknown from provided data
• Non-operating income contribution may be non-recurring

Key Concerns:

• Absence of cash flow statement items (OCF/FCF) constrains earnings quality assessment
• Depreciation and amortization undisclosed, obscuring EBITDA and capex needs
• Reported equity ratio 0.0% conflicts with balance sheet; must rely on calculated ~74.3%
• DPS and payout data not disclosed; dividend policy unclear

Investment Implications

Key Takeaways:

• Strong operating leverage: operating income +68.8% on +3.8% revenue
• Healthy profitability with 7.2% operating margin and 6.06% net margin
• Low financial risk profile: interest coverage 142.7x and implied equity ratio ~74%
• ROE at 4.39% is constrained by moderate asset turnover and conservative leverage
• Cash flow disclosure missing; confirmation of cash conversion is the key near-term validator

Metrics to Watch:

• Operating cash flow and free cash flow (conversion of earnings)
• Capex requirements and D&A (maintenance vs. growth)
• Gross and operating margin trajectory vs. raw material trends
• Inventory, receivables, and payables days (working capital discipline)
• Non-operating income items and FX impacts
• Order trends from key automotive customers and EV thermal management pipeline

Relative Positioning: Within Japanese small/mid-cap auto components, Tokyo Radiator currently exhibits stronger balance sheet conservatism and improved operating margins, though absolute gross margins remain modest and ROE trails peers that operate with higher asset turnover or leverage. Verification of cash generation will be pivotal to narrow 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