SAKURAI LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.55B
• Operating Income: ¥84M
• Net Income: ¥-33M
• EPS: ¥42.56

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

For FY2026 Q2 (consolidated, JGAAP), Sakurai Seisakusho recorded revenue of ¥2,553 million, up 10.0% YoY, indicating healthy top-line momentum despite an otherwise mixed earnings profile. Gross profit was ¥266.8 million, translating to a modest gross margin of 10.5%, which suggests continued cost pressure or an adverse sales mix. Operating income was ¥84 million, flat YoY, implying limited operating leverage despite the solid revenue growth. Ordinary income rose to ¥132 million, reflecting a meaningful lift from non-operating items (ordinary income exceeded operating income by ¥48 million). Net income was ¥142 million, down 87.7% YoY, indicating a tough comparison likely driven by prior-year one-off gains or a different non-operating/tax profile; current-period taxes are unusually low at ¥3.1 million. The company’s DuPont metrics point to a moderate ROE of 2.89% for the period, driven by a 5.56% net margin, 0.352x asset turnover, and 1.48x financial leverage. EBITDA was ¥430.8 million with a 16.9% margin, supported by sizeable depreciation and amortization of ¥346.8 million, which exceeds operating income and underscores the capital intensity of the business. Cash flow quality appears solid with operating cash flow (OCF) of ¥324.6 million exceeding net income (OCF/NI = 2.29x), suggesting earnings are well backed by cash in this period. Liquidity is comfortable with a current ratio of 184.1% and working capital of ¥1,357.6 million. Leverage is moderate with total liabilities-to-equity of 0.51x and interest coverage of 16.9x, pointing to manageable financial risk. Based on total assets of ¥7,253 million and total equity of ¥4,912 million, the implied equity ratio is roughly 67.7%, although the reported equity ratio field shows 0.0% (unreported). Dividend payments were absent (DPS ¥0.00; payout 0.0%), likely reflecting a conservative stance or a lack of disclosure of dividend decisions at this interim stage. Several items are marked as zero due to non-disclosure, notably inventories, investing cash flows, cash and equivalents, and share data; these limit granularity on working capital dynamics, free cash flow (FCF), and per-share capital metrics. The disparity between net and operating profitability, coupled with very low taxes, highlights reliance on non-operating factors and transitory items this quarter. Overall, the company exhibits resilient cash generation and a solid balance sheet, but margin compression and flat operating profit against rising sales temper the earnings quality. Outlook hinges on cost normalization, the sustainability of non-operating contributions, and forthcoming disclosure on capex and inventory/cash levels.

Profitability Analysis

ROE_decomposition: Reported DuPont ROE is 2.89%, driven by Net Profit Margin 5.56% × Asset Turnover 0.352 × Financial Leverage 1.48. The leverage factor is consistent with Assets/Equity ≈ 7,253/4,912 ≈ 1.48. ROE is modest for a manufacturing business given revenue growth, reflecting constrained operating profitability. margin_quality: Gross margin is 10.5% (¥266.8m/¥2,553m), indicating tight cost control headroom or an unfavorable mix. Operating margin is 3.3% (¥84m/¥2,553m), flat YoY, signaling limited conversion of revenue growth into operating profit. Ordinary margin is 5.2% (¥132m/¥2,553m), buoyed by non-operating gains or income. Net margin is 5.56%, above operating margin due to non-operating contributions and a very low effective tax outlay (~¥3.1m). The low tax burden appears non-recurring or timing-related. operating_leverage: Despite +10.0% YoY revenue growth, operating income was flat, indicating negative operating leverage in the period (cost inflation, mix, or SG&A absorption offset). EBITDA margin of 16.9% vs operating margin of 3.3% highlights heavy D&A (¥346.8m), characteristic of capital-intensive operations and limiting operating margin expansion.

Growth Assessment

revenue_sustainability: Top-line growth of 10.0% YoY suggests healthy demand or pricing benefits. However, without inventory and order backlog disclosures, sustainability indicators (book-to-bill, order intake) cannot be assessed. profit_quality: Net income benefited from non-operating items and an unusually low tax charge; operating income did not grow with sales, reducing the quality of earnings growth. OCF/NI of 2.29x supports cash conversion this quarter, but the absence of investing CF data limits full-cycle assessment. outlook: Near-term earnings trajectory will depend on cost normalization (materials, logistics, labor), ability to pass on costs, and the persistence of non-operating income. Given high D&A, capex intensity likely remains a swing factor for future free cash flow once investing CF is disclosed.

Financial Health

liquidity: Current assets ¥2,971.4m vs current liabilities ¥1,613.8m yields a current ratio of 184.1% and working capital of ¥1,357.6m. Quick ratio is shown as 184.1%, but inventories are undisclosed (0 indicates unreported), so true quick ratio could be lower. solvency: Total liabilities ¥2,510.8m vs equity ¥4,912.0m implies liabilities-to-equity of 0.51x and financial leverage of 1.48x. Interest coverage is healthy at 16.9x (operating income ¥84m / interest expense ¥5.0m). The reported equity ratio is 0.0% (unreported), but implied equity ratio is ~67.7% (¥4,912m/¥7,253m). capital_structure: Balance sheet appears conservatively financed with moderate liabilities and strong equity base; detailed breakdown of interest-bearing debt vs non-interest liabilities is not disclosed, but the low interest burden suggests limited debt.

Cash Flow Quality

earnings_quality: OCF of ¥324.6m exceeds net income of ¥142.0m (OCF/NI = 2.29x), indicating strong cash realization. D&A (¥346.8m) materially exceeds operating income, implying significant non-cash charges underpinning EBITDA. FCF_analysis: Free cash flow cannot be determined because investing CF is undisclosed (reported as 0). As such, FCF coverage metrics and capex intensity cannot be assessed this period. working_capital: Inventories and cash balances are undisclosed, limiting insight into inventory turns and liquidity buffers. Given positive OCF alongside flat operating profit, working capital likely released cash (or non-cash items aided OCF), but the drivers are not visible.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is reported as ¥0.00 and payout ratio 0.0%, consistent with either no dividend declared at this stage or lack of disclosure. EPS for the period is ¥42.56. FCF_coverage: FCF coverage cannot be evaluated due to missing investing cash flow; OCF alone covers potential distributions, but capex needs (implied by high D&A) could materially reduce distributable cash. policy_outlook: Given interim nature and data gaps, no inference on dividend policy changes is warranted. Future payouts will hinge on operating margin recovery and clarity on capex program and cash balances.

Risk Assessment

Business Risks:

• Input cost inflation and supply chain volatility pressuring gross margins (10.5%).
• Limited operating leverage despite revenue growth (operating income flat YoY).
• Reliance on non-operating income to lift ordinary and net results.
• Potential cyclicality in end markets typical of capital goods/auto-related manufacturing.
• Execution risk around pricing power and cost pass-through.

Financial Risks:

• High D&A (¥346.8m) suggests capex requirements that could weigh on future FCF once disclosed.
• Unusually low tax expense (¥3.1m) may not be sustainable, creating earnings volatility.
• Incomplete disclosures (inventories, cash, investing CF, share data) hinder assessment of liquidity buffers and capital intensity.
• Potential sensitivity to interest rates, albeit current interest burden is low (¥5.0m).

Key Concerns:

• Margin compression with gross margin at 10.5% and operating margin at 3.3%.
• Net income decline of 87.7% YoY despite higher sales indicates low earnings quality versus prior-year comps.
• Visibility on FCF and capex is limited due to missing investing cash flow data.

Investment Implications

Key Takeaways:

• Revenue up 10.0% YoY to ¥2,553m, but operating income flat at ¥84m indicates cost headwinds.
• Net income ¥142m benefited from non-operating items and low taxes; sustainability uncertain.
• OCF strong at ¥324.6m (2.29x NI), but FCF unassessable without investing CF.
• Balance sheet appears strong (implied equity ratio ~67.7%, liabilities/equity 0.51x) and interest coverage 16.9x.
• High D&A (¥346.8m) suggests capital intensity and potential capex drag on future FCF.

Metrics to Watch:

• Gross and operating margin trajectory (targets: gross >12%, operating >4% to demonstrate leverage).
• Non-operating income components and sustainability of low effective tax rate.
• Investing cash flow and capex once disclosed to establish true FCF.
• Inventory levels/turns and cash balance disclosures to refine liquidity assessment.
• Order intake/backlog and pricing actions to gauge revenue durability.

Relative Positioning: Relative to TSE manufacturing peers, the company shows stronger balance sheet conservatism and cash conversion this quarter, but operates with lower margins and limited operating leverage; visibility on FCF and capex is weaker due to disclosure gaps.

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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