Imasen Electric Industrial Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥42.56B
• Operating Income: ¥486M
• Net Income: ¥1.00B
• EPS: ¥45.95

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: Mixed quarter—solid operating recovery amid revenue contraction, but bottom-line declined YoY and ROIC remains weak. Revenue decreased 8.5% YoY to 425.62, reflecting softer demand and/or price/mix headwinds. Gross profit was 37.09 with an 8.7% gross margin, underscoring tight cost absorption on lower volumes. Operating income rose 204.9% YoY to 4.86, lifting operating margin to 1.14% despite the revenue drop. Ordinary income increased 134.5% YoY to 3.96 as non-operating expenses (2.98) exceeded non-operating income (2.07), creating a net non-operating drag of about -0.91. Profit before tax was 13.76, implying approximately 9.8 of net extraordinary gains versus ordinary income—indicative of one-time items under JGAAP. Net income fell 45.7% YoY to 9.89, suggesting last year’s bottom line benefited from larger one-off factors than this year despite improved operations. Operating margin expanded by roughly 80 basis points YoY (from ~0.34% to 1.14%) as operating profit grew against a smaller revenue base. Net margin stood at 2.3%, likely down YoY given net income’s sharp decline versus revenue’s mid-single-digit fall. Earnings quality was strong with OCF of 21.98 exceeding net income by 2.22x, aided by working capital and non-cash D&A of 16.18. Liquidity is robust (current ratio 274.8%, quick ratio 203.3%), and leverage is low (D/E 0.43x, interest coverage 9.35x). However, capital efficiency remains a key weakness: ROE is only 1.9% and ROIC is 0.9%, well below a 5% warning threshold. Balance sheet strength supported shareholder returns (share repurchases of 2.83) and negative financing CF of -16.51. While the operating turnaround and cash conversion are positives, the reliance on extraordinary items for pre-tax profit and weak ROIC temper the quality of the earnings profile. Forward-looking, sustaining operating margin improvement and lifting ROIC above 5% will be critical, alongside tighter control of non-operating/extraordinary volatility.

Profitability Analysis

ROE decomposition (DuPont): ROE 1.9% = Net Profit Margin (2.3%) × Asset Turnover (0.567) × Financial Leverage (1.43x). The most notable movement YoY appears in the profitability leg: operating income rose 204.9% YoY (to 4.86) despite an 8.5% revenue decline, implying operating margin expansion of roughly 80 bps; however, net income fell 45.7% YoY, indicating that bottom-line margin likely compressed due to non-operating and extraordinary dynamics. Business driver: cost actions and/or better mix supported operating profit, but non-operating expenses (net -0.91) and a changed extraordinary profile dominated the YoY net result. Sustainability: the operating improvement is more sustainable if tied to structural cost control or price pass-through; the extraordinary gains (~9.8) boosting PBT are, by definition, non-recurring. Concerning trends: top-line contraction outpaced any SG&A detail (breakdown unreported), but given operating leverage, SG&A discipline was likely tighter than revenue. Still, ROIC at 0.9% signals insufficient return on the asset base and indicates that asset turnover (0.567) is a drag—improving utilization and pruning underperforming assets should be priorities.

Growth Assessment

Revenue declined 8.5% YoY to 425.62, pointing to demand softness or price/mix headwinds in key automotive programs. Despite this, operating income surged 204.9% YoY, indicating meaningful cost optimization and/or improved product profitability. Ordinary income increased 134.5% YoY, though net non-operating impact was negative (-0.91), so core earnings relied mainly on operating improvements. Profit before tax includes an estimated 9.8 of extraordinary gains, highlighting material one-time contributions. Net income fell 45.7% YoY, suggesting the prior period had outsized one-off gains that masked underlying trends. EBITDA of 21.04 implies an EBITDA margin of 4.9%, a modest level for an auto parts supplier under volume pressure. Outlook hinges on stabilizing end-demand, price pass-through to offset input inflation, and continued fixed-cost absorption improvements; the quarter’s operating margin improvement is encouraging but needs repeatability. With asset turnover at 0.567, uplifting volumes and inventory turns is essential to support growth quality. Given low leverage and strong liquidity, the company can sustain selective capex to reposition for EV-related content and higher-margin products. Near term, focus should remain on executing cost programs, maintaining pricing discipline with OEMs, and filtering capex to high-ROIC projects.

Financial Health

Liquidity is strong: current ratio 274.8% and quick ratio 203.3% comfortably exceed benchmarks. No warning on leverage: D/E 0.43x and interest coverage 9.35x both indicate conservative solvency. Maturity mismatch risk appears low: current assets (497.96) exceed current liabilities (181.23) by 316.73 of working capital, and cash (155.48) alone covers short-term loans (4.81) over 32x. Total debt is modest (short-term 4.81, long-term 3.13), implying a large net cash position (~147.5) when set against cash and deposits. There are no explicit off-balance sheet obligations disclosed in the provided data. Equity base is sizable at 525.89, with owners' equity 522.49 providing ample buffer against shocks.

Cash Flow Quality

OCF of 21.98 is 2.22x net income (9.89), indicating high earnings quality and solid cash conversion. D&A of 16.18 supports the cash bridge and suggests non-cash charges are appropriately reflected. Capex was 19.14, which is largely covered by OCF; implied FCF is modestly positive (~2.8) despite revenue pressure (note: investing CF total not disclosed). Financing CF of -16.51 includes share repurchases of -2.83, indicating discretionary outflows while maintaining liquidity. Working capital signs are broadly constructive given high cash and receivables relative to payables; however, without YoY delta, we cannot assert optimization or manipulation. No red flags on OCF/NI (<0.8) thresholds.

Dividend Sustainability

The calculated payout ratio is 47.5%, within the <60% benchmark for sustainability. Although total dividends paid are unreported, OCF covers capex, and the balance sheet is in a net cash position, providing a buffer for distributions. With implied positive FCF and conservative leverage, dividend sustainability appears adequate, assuming no deterioration in operating fundamentals. Policy visibility is limited due to unreported DPS figures; monitoring guidance and payout policy disclosures is necessary.

Risk Assessment

Business Risks:

• Automotive demand volatility and production adjustments impacting volumes and fixed-cost absorption
• Pricing pressure from OEM customers reducing gross margin resilience
• Product mix shift and EV transition potentially disrupting legacy product economics
• Supply chain and logistics disruptions affecting delivery schedules and costs

Financial Risks:

• ROIC at 0.9% indicates returns below likely WACC, risking value dilution
• Revenue contraction coupled with low asset turnover (0.567) pressures overall capital efficiency
• Non-operating expense burden (net -0.91) and extraordinary item volatility impacting earnings predictability
• FX exposure (not disclosed) may affect margins given global sourcing/customer base

Key Concerns:

• Net income down 45.7% YoY despite operating improvement, implying reliance on non-recurring items in comparatives
• Very low operating margin (1.14%) leaves little cushion for shocks
• Sustained low ROE (1.9%) and ROIC (0.9%) highlight structural profitability challenges
• Top-line decline (-8.5% YoY) raises questions about share of wallet with key OEMs or model-cycle exposure

Investment Implications

Key Takeaways:

• Operating margin improved by ~80 bps YoY despite an 8.5% revenue decline
• Bottom-line fell 45.7% YoY; extraordinary items (~9.8) inflated PBT but did not offset YoY net decline
• Liquidity and leverage are strong; net cash position provides resilience
• OCF quality is high (2.22x NI) and broadly covers capex
• Capital efficiency is the core issue: ROIC 0.9%, ROE 1.9%

Metrics to Watch:

• Gross and operating margin trajectory by quarter
• Order trends with major OEMs and revenue recovery pace
• Inventory and receivable turns to lift asset turnover above 0.6x
• ROIC progression toward >5% via mix, cost, and asset optimization
• Non-operating/extraordinary items volatility and its impact on ordinary income

Relative Positioning: Versus domestic auto parts peers, the company exhibits stronger liquidity and lower leverage but weaker profitability and capital efficiency; sustained cost improvements and asset turn enhancement are needed to close 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