KYB Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥230.81B
• Operating Income: ¥20.71B
• Net Income: ¥17.84B
• EPS: ¥366.14

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

KYB Corporation (カヤバ株式会社) delivered strong FY2026 Q2 consolidated results under IFRS, with revenue of 2,308.07 (100M JPY), up 8.1% YoY, indicating solid demand and/or successful price pass-through in its automotive and hydraulic businesses. Operating income surged to 207.13 (100M JPY), up 148.5% YoY, signaling substantial margin expansion and operating leverage. Net income rose 230.6% YoY to 171.34 (100M JPY), aided by a low effective tax rate of 9.0% and modest non-operating items. Gross margin was 17.2%, while operating margin (calculated) reached about 9.0%, underscoring improved cost efficiency and pricing. Notably, operating income exceeds gross profit minus SG&A by a large amount (207.13 vs 87.41 based on 397.90 – 310.49), implying sizable other operating income under IFRS (e.g., other income, gains, or remeasurement effects). DuPont analysis points to a calculated ROE of 7.1% driven by a 7.4% net margin, 0.484x asset turnover, and 1.98x financial leverage. Cash generation was healthy: operating cash flow (OCF) of 171.95 (100M JPY) was roughly in line with net income (OCF/NI 1.00x), and free cash flow (FCF) was positive at 77.93 (100M JPY) despite 81.13 (100M JPY) of capex. The balance sheet appears solid with total assets of 4,765.54 (100M JPY), equity of 2,406.74 (100M JPY), and a reported equity ratio of 48.6%, while a reported debt-to-equity ratio of 0.95x suggests moderate leverage. Liquidity disclosure is limited (current liabilities, cash detail, and short/long-term loans unreported), but cash and equivalents stood at 474.28 (100M JPY). Financing cash outflow of -123.21 (100M JPY) reflects dividend payments of -29.73 (100M JPY) and likely net debt reduction or other financing outflows. EPS (basic) was 366.14 JPY on 45.51 million average shares, consistent with the reported net income scale. Equity-method income of 12.36 (100M JPY) contributed to pre-tax results. Comprehensive income of 232.84 (100M JPY) exceeded net income, implying favorable OCI movements (e.g., FX translation or securities valuation). While reported payout ratio is 47.1%, DPS data are unreported; dividend affordability appears reasonable given positive FCF, though one provided FCF coverage metric (0.97x) conflicts with a simple FCF/dividends calculation. Overall, profitability momentum and cash generation improved meaningfully, but reliance on other operating income and limited disclosure on interest expenses and debt structure temper visibility. Future performance will hinge on sustaining mix/pricing gains, managing input costs, and normalizing the tax rate from the unusually low 9.0%. Data limitations (several unreported items) necessitate caution in interpreting certain ratios and coverage metrics.

Profitability Analysis

ROE_decomposition: Calculated ROE 7.1% = Net margin 7.4% × Asset turnover 0.484 × Financial leverage 1.98x. The improvement YoY in operating income (+148.5%) against revenue growth (+8.1%) indicates that net margin expansion is the primary ROE driver, with asset turnover stable and leverage unchanged near 2.0x. margin_quality: Gross margin 17.2% (397.90/2,308.07). Operating margin (calculated) ~9.0% (207.13/2,308.07). The large gap between operating income and (gross profit – SG&A) implies significant other operating income under IFRS; recurring quality should be validated. Net margin 7.4% benefited from a low effective tax rate of 9.0% and modest non-operating net impact. operating_leverage: Revenue grew 8.1% YoY, but operating income rose 148.5% YoY, evidencing high operating leverage from cost controls, pricing, and scale. SG&A discipline relative to gross profit contributed, and other operating income amplified operating profit.

Growth Assessment

revenue_sustainability: Top-line growth of 8.1% YoY suggests steady demand and/or pricing power in auto OEM and hydraulic segments. Receivables of 1,098.76 (100M JPY) and inventories of 676.04 (100M JPY) are consistent with revenue scale, but without prior-period balance data, working capital intensity trends are unclear. profit_quality: Profit before tax of 209.81 (100M JPY) is close to operating income, implying limited non-operating drag and positive contribution from equity-method income (12.36). However, reliance on other operating income components and a 9.0% tax rate raises questions about repeatability. EBITDA of 300.80 (100M JPY) yields a 13.0% margin, supporting improved core profitability. outlook: If pricing/mix and cost pass-through persist and input costs remain benign, operating margin near 9% appears defendable. Normalization of the tax rate could temper net income growth. FX, auto production schedules, and raw material costs remain key external variables.

Financial Health

liquidity: Cash & equivalents of 474.28 (100M JPY) provide a buffer. Current assets are 2,583.37 (100M JPY), but current liabilities are unreported, so current and quick ratios are not calculable. Reported working capital equals current assets, indicating missing current liabilities disclosure. solvency: Total equity is 2,406.74 (100M JPY) vs total assets 4,765.54 (100M JPY), for reported equity ratio of 48.6% (approx. 50.5% by simple calculation). Debt-to-equity of 0.95x suggests moderate leverage, though the split between short- and long-term debt and interest costs is unreported. capital_structure: Accounts payable are 651.61 (100M JPY), indicating typical supplier financing scale. Treasury shares total 6,579,217, supporting flexible capital allocation. Financing cash outflows (-123.21) imply dividends and potential net debt repayment or other financing uses.

Cash Flow Quality

earnings_quality: OCF/Net income is 1.00x, indicating clean conversion of earnings to cash in the period. EBITDA of 300.80 (100M JPY) and D&A of 93.67 (100M JPY) are consistent with capital intensity but still support cash generation. FCF_analysis: OCF 171.95 less capex 81.13 implies FCF of roughly 90.8 (100M JPY), while the provided FCF metric is 77.93 (100M JPY), likely reflecting broader investing cash flows. Regardless of definition, FCF is positive, supporting balance sheet and shareholder returns. working_capital: Receivables 1,098.76 and inventories 676.04 are material; without prior-period benchmarks or current liabilities, it is difficult to assess turns or cash tied in operations. OCF performance suggests no acute deterioration in working capital this period.

Dividend Sustainability

payout_ratio_assessment: Payout ratio (calculated) is 47.1%, which appears manageable given profitability. DPS is unreported, limiting precision. FCF_coverage: Dividends paid were -29.73 (100M JPY). Using provided FCF of 77.93 (100M JPY), coverage would be approximately 2.6x on a simple basis, whereas the provided metric lists FCF coverage at 0.97x; this discrepancy likely stems from differing definitions or period alignment. policy_outlook: Given positive OCF and FCF and a near-50% payout, the company appears positioned to maintain dividends, contingent on sustaining operating cash flow and absent unforeseen capex spikes. Lack of DPS guidance/data tempers visibility.

Risk Assessment

Business Risks:

• Automotive production volatility impacting hydraulic and suspension demand
• Raw material and energy cost inflation pressuring margins if price pass-through weakens
• FX fluctuations affecting export competitiveness and translation
• Customer concentration risk with major OEMs
• Potential normalization of unusually low tax rate (9.0%) lowering net margins

Financial Risks:

• Moderate leverage (D/E 0.95x) with limited visibility on interest costs and maturities
• Liquidity assessment constrained by unreported current liabilities and debt schedule
• Earnings reliance on other operating income components that may be nonrecurring
• Working capital swings in receivables and inventories affecting OCF

Key Concerns:

• Sustainability of operating margin uplift given significant other operating income
• Potential earnings sensitivity if tax rate reverts to historical norms
• Data gaps (interest expense, current liabilities, debt composition) limiting ratio analysis

Investment Implications

Key Takeaways:

• Strong revenue growth (+8.1% YoY) coupled with outsized operating profit growth (+148.5% YoY)
• Operating margin (calculated) near 9% and net margin 7.4%, aided by low tax rate
• Healthy cash conversion (OCF/NI ~1.0x) and positive FCF despite capex
• Solid balance sheet with ~48.6% equity ratio and moderate leverage (D/E 0.95x)
• Large other operating income under IFRS inflated operating profit; recurrence uncertain
• Dividend payout (~47%) appears manageable; FCF supports distributions
• Visibility constraints from unreported items (current liabilities, interest expense, DPS)

Metrics to Watch:

• Operating margin excluding other operating income and one-offs
• Tax rate trajectory and effective tax normalization
• Working capital turns (DSO, DIO, DPO) and OCF sustainability
• Capex intensity versus growth needs
• Leverage metrics and interest coverage once interest data are available
• FX impacts and pricing pass-through to offset input cost changes

Relative Positioning: Within Japanese auto parts and hydraulics suppliers, KYB appears to be in an improving profitability phase with solid cash generation and a balanced capital structure, though the sustainability of elevated operating income depends on recurring margin drivers rather than other operating income.

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