T.RAD Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥77.51B
• Operating Income: ¥5.39B
• Net Income: ¥4.09B
• EPS: ¥669.95

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

Verdict: A strong profitability rebound in FY2026 Q2 despite slightly lower sales, with margins expanding materially and cash generation outpacing accounting earnings. Revenue declined 1.9% YoY to 775.1, but operating income more than doubled (+110.6% YoY) to 53.9, and net income surged 466.3% YoY to 40.9. Gross profit reached 111.8, implying a gross margin of 14.4%. Operating margin improved to 7.0% (53.9/775.1), and net margin rose to 5.3% (40.9/775.1). Using the YoY growth rates, we estimate prior-year Q2 operating income at ~25.6 and revenue at ~790.3, implying prior operating margin of ~3.24%, so operating margin expanded by approximately 372 bps YoY. Net margin likely expanded by roughly 413 bps (from ~0.9% to 5.3%) given the reported +466% jump in net income and modest revenue decline. Ordinary income of 56.7 (+97% YoY) indicates non-operating items contributed positively but did not drive the story; the core turnaround is operational. OCF of 56.9 exceeded net income (40.9), with OCF/NI at a healthy 1.39x, signaling solid earnings quality. Leverage and liquidity are conservative: current ratio 214%, quick ratio 202%, and interest coverage 43.9x, reducing near-term financial risk. ROE stands at 8.7% via DuPont (NPM 5.3% × AT 0.836 × leverage 1.96x), a marked improvement consistent with margin gains. ROIC is 7.6%, around the management target range and approaching an “excellent” threshold (>8%). Capex was 29.9 and buybacks were 25.0, with OCF sufficient to fund capex and most shareholder returns this period. The tax rate of 28.3% looks normalized; no unusual tax effects are evident. Balance sheet shows modest net debt (~35) and debt/EBITDA of 2.11x, comfortably within typical auto-parts peer norms. While several disclosures are unreported (investing CF detail, dividend amount), the available data suggest improved operational discipline and cost control. Forward-looking, sustainability hinges on maintaining cost efficiencies amid a flat-to-soft topline and managing input costs (aluminum/copper) and FX exposure. Overall, Tirado delivered a quality earnings beat on margins and cash conversion, setting a higher profitability base if execution holds.

Profitability Analysis

Step 1 (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 5.3% × 0.836 × 1.96 ≈ 8.7%. Step 2: The largest driver of change vs last year is Net Profit Margin, which improved sharply (net income +466% YoY on slightly lower sales), while asset turnover slipped marginally with revenue down and leverage appears stable. Step 3: Margin expansion was driven by operating income more than doubling (+110.6% YoY) despite -1.9% revenue, pointing to effective cost control (COGS efficiencies and/or SG&A discipline) and favorable non-operating net (+2.81 = 5.54–2.73) that added but did not dominate. Step 4: Sustainability: Structural cost improvements (procurement, yield, fixed cost absorption via productivity) are more durable than one-off gains; non-operating support can be volatile. With gross margin at 14.4% and operating margin at 7.0%, a portion of improvement looks structural, but maintaining 7% OPM amid raw material and FX volatility may be challenging if volumes remain soft. Step 5: No red flags of cost bloat: SG&A ratio is 7.46% (57.84/775.11), and given revenue declined, operating leverage is positive; there is no evidence that SG&A is growing faster than revenue this period.

Growth Assessment

Topline contracted 1.9% YoY to 775.1, indicating a soft demand environment or price/mix headwinds. Profit growth was driven by margin expansion: operating income +110.6% YoY to 53.9 and ordinary income +97% YoY to 56.7. Net income rose +466.3% YoY to 40.9, aided by improved operations and modest non-operating net income. Operating margin expanded ~372 bps YoY to 7.0%, and net margin rose to 5.3%, evidencing robust operating leverage. EBITDA was 78.8 (10.2% margin), supporting healthy cash EBTIDA conversion and a strong 43.9x interest coverage. Revenue sustainability depends on auto production schedules and end-market demand in Japan and overseas; current readings suggest stable-to-soft volumes. Profit quality is good given OCF/NI of 1.39x and normalized tax rate (28.3%). Outlook: If cost discipline persists and input headwinds remain manageable, mid-single digit OPM looks defensible; upside requires volume recovery or pricing. ROIC at 7.6% is at the management target range; incremental improvement toward >8% would likely require continued margin discipline and prudent asset turns.

Financial Health

Liquidity is strong: current ratio 214.3% and quick ratio 201.8%, with cash and deposits of 130.95 versus current liabilities of 261.86. No warning triggers (Current Ratio <1.0 or D/E >2.0) are present. Solvency is solid: total liabilities/equity at ~0.96x, and interest-bearing debt approximates 166.3 (short 11.8, long 154.5), implying net debt of ~35.3 after cash. Debt/EBITDA at 2.11x is conservative for the sector. Maturity mismatch risk appears low: short-term loans (11.8) are small versus current assets (561.0) and cash (131.0). Accounts receivable (240.8) comfortably exceed short-term borrowings, and inventory at 32.7 is modest. No off-balance sheet obligations are disclosed in the provided data. Equity base is robust at 472.9, with retained earnings of 286.4 supporting future investment and shareholder returns.

Cash Flow Quality

OCF/Net Income is 1.39x (56.93/40.94), above the 1.0 threshold, indicating high-quality earnings with solid cash conversion. While total investing cash flow is unreported, disclosed capex was 29.9; a proxy FCF before other investing flows equals ~27.0 (OCF 56.9 – capex 29.9). Financing CF was -54.8, including share repurchases of -25.0; OCF covered capex and most buybacks, suggesting disciplined capital allocation. Working capital appears well-managed: with revenue down modestly, strong OCF implies either stable DSO/DPO or favorable working capital movements; no signs of aggressive payables extension or receivables build are evident from the snapshot. No OCF red flags (no OCF/NI <0.8) and interest coverage is ample, supporting ongoing commitments.

Dividend Sustainability

Reported payout ratio is 38.6%, within the <60% sustainable benchmark. The actual dividend cash amount is unreported, but at a 38.6% payout on NI of 40.94, implied dividends would be ~15.8 if applied uniformly; this would be covered by the proxy FCF (~27.0). With net debt modest (~35) and interest coverage very strong, the balance sheet can support steady dividends. Share repurchases of 25.0 this period were largely funded by residual OCF after capex, indicating capacity for mixed shareholder returns. Policy outlook: absent a downturn in volumes or raw material spikes, maintaining a mid-30s payout appears feasible; flexibility remains via buybacks given liquidity and leverage levels.

Risk Assessment

Business Risks:

• Auto production cycle sensitivity leading to volume volatility and pricing pressure
• Raw material cost volatility (aluminum, copper) impacting gross margins
• FX fluctuations (JPY vs USD/EUR/Asian currencies) affecting export competitiveness and input costs
• Customer concentration risk typical for auto parts suppliers (OEM bargaining power)
• Execution risk on sustaining cost reductions and productivity gains

Financial Risks:

• Potential working capital swings (receivables and payables timing) affecting OCF
• Exposure to interest rate normalization on refinancing of long-term loans (154.5)
• Limited disclosure on investing CF could mask one-off asset sales or investments
• Net debt position (~35) introduces some, albeit modest, leverage risk in a downturn

Key Concerns:

• Topline contracted (-1.9% YoY); margin-led gains may be harder to repeat if volumes weaken further
• Non-operating items contributed positively; sustainability of this tailwind is uncertain
• ROIC at 7.6% is at target but not yet in the >8% ‘excellent’ zone; incremental gains required

Investment Implications

Key Takeaways:

• Quality beat driven by margin expansion: OPM rose ~372 bps YoY to 7.0% despite -1.9% revenue
• Cash conversion is strong (OCF/NI 1.39x), supporting capex and buybacks
• Balance sheet healthy: current ratio 214%, interest coverage 43.9x, debt/EBITDA 2.11x
• ROE at 8.7% and ROIC at 7.6% indicate improving returns near management targets
• Risks: input costs and FX volatility could pressure margins if demand remains soft

Metrics to Watch:

• Operating margin trajectory and gross margin stability versus raw material trends
• OCF versus NI and working capital turns (DSO/DIO/DPO) for cash flow durability
• ROIC progression toward >8% and capital efficiency by project
• Revenue trend by region/customer (if disclosed) to gauge demand recovery
• FX sensitivity and hedging effectiveness

Relative Positioning: Within Japanese auto-parts peers, Tirado currently exhibits above-average margin momentum and cash conversion with conservative leverage. Returns (ROE 8.7%, ROIC 7.6%) are at or slightly above sector midpoints, with room to improve to top quartile if cost discipline holds and volumes stabilize.

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