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

Financial Highlights

• Net Sales: ¥77.51B
• Operating Income: ¥5.39B
• Net Income: ¥729M
• 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

T.Rad Co., Ltd. (7236) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥77.5bn (-1.9% YoY) and strong profit expansion, as operating income doubled to ¥5.39bn (+110.6% YoY) and net income rose to ¥4.09bn (+466.3% YoY). The operating margin improved to roughly 7.0%, reflecting effective cost control and/or product mix improvements despite modest top-line softness. Gross margin of 11.3% indicates limited pricing power in a cost-intensive business, but the significant uplift in operating profit suggests SG&A efficiency and operating leverage. Ordinary income of ¥5.67bn implies solid non-operating contributions (e.g., foreign exchange or financial income) relative to interest expense of ¥0.23bn. Net profit margin reached 5.28%, translating into a reported DuPont ROE of 8.66% with asset turnover of 0.836 and financial leverage of 1.96. EBITDA was ¥8.06bn (10.4% margin), providing a useful buffer above operating earnings given D&A of ¥2.67bn. Liquidity appears sound with a current ratio of 191.9% and quick ratio of 180.8%, underpinned by ¥29.4bn of working capital. Leverage is moderate with a debt-to-equity ratio of 1.03x and interest coverage of 23.6x, pointing to comfortable solvency. Operating cash flow was ¥1.60bn, which is below net income (OCF/NI of 0.39), indicating working capital or timing effects dampened cash conversion this half. Free cash flow was not fully observable given unreported investing cash flows; financing cash outflows of ¥3.48bn suggest repayments or other outlays. Dividend per share was unreported for the period (DPS shown as 0), translating into a reported payout ratio of 0%, so distribution policy signals are limited in this interim snapshot. The equity ratio figure was unreported; nevertheless, total equity of ¥47.3bn versus total assets of ¥92.7bn suggests a solid capital base. Inventories were reported at ¥3.56bn within current assets of ¥61.4bn; the relatively low inventory figure (as reported) may reflect classification differences. Overall, profitability momentum is robust versus last year, liquidity is ample, and leverage is manageable, but cash conversion was weak in the period and several disclosures (e.g., equity ratio, investing cash flows, dividend detail) were not provided, tempering interpretability. Given the company’s exposure to the auto and industrial thermal systems cycle, sustaining the improved margin profile against material cost and FX volatility will be important in the second half.

Profitability Analysis

ROE_decomposition: DuPont ROE = 8.66% = Net Margin (5.28%) × Asset Turnover (0.836) × Financial Leverage (1.96). The improvement in ROE is driven primarily by a step-up in net profit margin, with stable-to-moderate asset efficiency and moderate leverage. margin_quality: Gross margin is 11.3%, operating margin ~7.0% (¥5.39bn/¥77.51bn), and EBITDA margin 10.4%. The large YoY jump in operating income (+110.6%) despite a -1.9% revenue decline points to tighter cost control, favorable mix, and/or non-structural tailwinds (e.g., lower input costs). Ordinary margin (~7.3%) benefits from non-operating items exceeding interest expense. operating_leverage: The swing in operating income on a modest revenue decline indicates positive operating leverage from cost rationalization and overhead absorption improvements. Sustainability will depend on maintaining SG&A discipline and stabilizing gross margin amid input and FX variability.

Growth Assessment

revenue_sustainability: Revenue of ¥77.5bn declined 1.9% YoY, implying soft volumes or pricing in core markets. Auto/industrial end-market normalization and customer production schedules likely influenced demand. profit_quality: Profit expansion is strong, with net margin at 5.28% and interest coverage at 23.6x. However, OCF/NI at 0.39 suggests earnings outpaced cash generation in the half, hinting at working-capital-led profit–cash timing differences. outlook: If cost efficiencies are structural, margins could remain elevated even with flattish sales. Near-term growth hinges on auto production trends, thermal product content per vehicle (including hybrid/EV platforms), and FX/material cost tailwinds. Monitoring H2 revenue recovery and gross margin resilience is key.

Financial Health

liquidity: Current ratio 191.9% and quick ratio 180.8% indicate strong short-term coverage, supported by ¥29.4bn of working capital. Cash and equivalents were unreported for this period. solvency: Debt-to-equity of 1.03x and interest coverage of 23.6x reflect moderate leverage with ample interest service capacity. capital_structure: Total assets ¥92.7bn, total liabilities ¥48.7bn, and total equity ¥47.3bn indicate a well-capitalized balance sheet. The equity ratio was not disclosed; based on the reported balances, equity appears substantial relative to assets, supporting resilience.

Cash Flow Quality

earnings_quality: Operating CF of ¥1.60bn versus net income of ¥4.09bn (OCF/NI 0.39) indicates weak cash conversion in the half, likely due to working capital timing. EBITDA of ¥8.06bn provides capacity to fund operations, but conversion to cash should improve to validate earnings quality. FCF_analysis: Free cash flow cannot be assessed reliably because investing CF was unreported. The positive OCF suggests potential for FCF if capex is disciplined, but the financing CF outflow of ¥3.48bn indicates cash uses (e.g., debt repayment) during the period. working_capital: Working capital of ¥29.4bn provides a cushion; reported inventories of ¥3.56bn are modest relative to current assets of ¥61.4bn, which may reflect classification choices. Monitoring receivables and payables turnover will clarify the OCF drag.

Dividend Sustainability

payout_ratio_assessment: Annual DPS was unreported (shown as 0) with a reported payout ratio of 0%. With net income positive and leverage moderate, capacity exists, but interim distribution policy is unclear from the provided data. FCF_coverage: FCF coverage cannot be determined due to unreported investing CF. Sustainable dividends typically require OCF consistently exceeding maintenance capex; current OCF is positive but below net income. policy_outlook: Given cyclical exposure, management may prioritize balance sheet strength and strategic capex over distributions near term. A clearer view will emerge with full-year cash flow and capex disclosure.

Risk Assessment

Business Risks:

• Cyclicality in global auto production affecting thermal systems demand
• Input cost volatility (aluminum, copper) impacting gross margins
• FX fluctuations (JPY vs. USD/EUR/Asian currencies) influencing non-operating income and costs
• Customer concentration risk with major OEMs and Tier-1 suppliers
• Technology transition to EV/hybrid thermal management requiring R&D and capex
• Geopolitical and supply chain disruptions affecting procurement and delivery

Financial Risks:

• Weak cash conversion this period (OCF/NI 0.39) indicating working capital sensitivity
• Moderate leverage (D/E 1.03x) increases exposure if operating conditions deteriorate
• Potential refinancing and interest rate risk despite current high coverage
• Unreported cash and investing flows limit visibility on liquidity runway and capex commitments

Key Concerns:

• Sustainability of margin gains in the face of input cost and FX normalization
• Recovery of operating cash flow relative to earnings in H2
• Visibility on capex plans and free cash flow generation
• Customer program pipeline and order visibility for EV/hybrid platforms

Investment Implications

Key Takeaways:

• Strong margin-led profit rebound despite slight revenue decline
• Healthy liquidity and interest coverage support operational flexibility
• Cash conversion lagged earnings; watch for H2 normalization
• Leverage moderate; balance sheet appears robust
• Limited disclosure on investing cash flows and dividends tempers visibility

Metrics to Watch:

• Gross and operating margin trend versus input costs
• Operating cash flow and working capital turns (AR/AP/inventory days)
• Capex intensity and investing cash flows to gauge FCF
• FX impacts on ordinary income and hedging effectiveness
• Debt levels and interest coverage under varying rate conditions
• Order intake and revenue trajectory in auto thermal systems, including EV-related

Relative Positioning: Within Japan’s auto parts and thermal systems peers, T.Rad shows improved profitability and solid liquidity with moderate leverage; visibility on cash generation and capex will determine how sustainably it can maintain its enhanced margin profile versus competitors exposed to similar cyclical and input cost dynamics.

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
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