TBK Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥25.86B
• Operating Income: ¥472M
• Net Income: ¥320M
• EPS: ¥9.58

Income Statement

Balance Sheet

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: TBK’s FY2026 Q2 showed resilient profit recovery on a lower revenue base, with sharply improved operating profitability but still thin net margins and subdued capital efficiency. Revenue declined 3.5% YoY to 258.6, while operating income surged 659.8% YoY to 4.72, lifting operating margin to 1.83%. Ordinary income rose 223.5% YoY to 4.61, supported by 1.66 of non-operating income and despite 1.78 of non-operating expenses. Net income came in at 2.72, implying a 1.05% net margin and EPS of 9.58 yen. Gross profit was 30.66 (11.9% margin) and SG&A totaled 25.94, placing the SG&A ratio at roughly 10.0% of sales. Using the YoY growth rates and current levels, we estimate operating margin expanded by about 160 bps YoY (from ~0.23% to 1.83%). Ordinary margin likely expanded by roughly 125 bps YoY (from ~0.53% to 1.78%). Interest coverage is solid at 7.61x (OP 4.72 vs interest expense 0.62), indicating improved earnings resilience. Liquidity remains healthy with a current ratio of 157.8% and quick ratio of 115.7%; debt-to-equity stands at a moderate 0.78x. That said, the effective tax rate is elevated at 47.6%, weighing on net profit conversion. ROE is low at 0.9% on a DuPont basis (NPM 1.1% × AT 0.493 × leverage 1.78x), reflecting thin margins and modest asset turnover. ROIC is flagged at 0.8%, well below typical cost of capital and sector benchmarks, signaling continued capital efficiency challenges. Non-operating items are meaningful (non-operating income ratio 61.0%), with dividend income of 0.75 contributing to ordinary profit. Operating cash flow and capex were not disclosed this quarter, limiting assessment of earnings quality and free cash flow coverage. A calculated payout ratio of 86.5% appears high relative to earnings, though dividend details were not reported. Looking ahead, sustaining margin gains will require continued cost discipline and mix/pricing improvements, while normalizing the tax rate and raising ROIC are key to improving shareholder returns.

Profitability Analysis

ROE decomposition (DuPont): ROE 0.9% = Net Profit Margin 1.1% × Asset Turnover 0.493 × Financial Leverage 1.78x. The primary constraint is the very thin net margin, followed by sub-1.0x asset turnover; leverage is modest and not the bottleneck. Operating margin improved materially YoY to 1.83% from an estimated ~0.23%, driven by better cost control and lower SG&A ratio vs sales; gross margin at 11.9% also indicates some improvement in cost-of-sales execution. The largest change component vs last year is margin (profitability), not leverage or asset intensity. Business drivers likely include price adjustments, product mix, and procurement/production efficiencies offsetting softer topline. Sustainability: some portion should be sustainable if cost actions are structural; however, reliance on non-operating items (non-operating income ratio 61.0%) and a high tax rate reduce durability at the net level. Watch for any sign that SG&A growth outpaces revenue; current SG&A-to-sales is 10.0%, but lack of YoY detail prevents confirmation of operating leverage trends.

Growth Assessment

Revenue contracted 3.5% YoY to 258.6, implying demand softness or pricing/mix headwinds in core auto components. Despite the decline, operating income rose sharply to 4.72, indicating successful cost measures or mix improvement. Gross margin printed 11.9%, and operating margin reached 1.83%, suggesting positive operating leverage even on a lower sales base. Ordinary income grew to 4.61 aided by 1.66 of non-operating income (including 0.75 of dividend income), partly offset by 1.78 of non-operating expenses. Net margin remains slim at ~1.05% due to an elevated 47.6% effective tax rate. With no OCF or capex data, sustainability of profit growth cannot be tied to cash conversion this quarter. Near-term outlook hinges on maintaining cost discipline, controlling input costs, and stabilizing volumes; normalization of the tax rate would support net growth. Medium term, raising ROIC from 0.8% will require either higher margins (pricing, mix, efficiency) or better asset utilization (inventory turns, receivables management).

Financial Health

Liquidity is sound: current ratio 157.8% and quick ratio 115.7% exceed benchmarks; no warning (both >1.0). Solvency is conservative to moderate with D/E 0.78x and ample interest coverage at 7.61x. Working capital stands at 98.21, with current assets 267.98 covering current liabilities 169.77 comfortably. Maturity profile shows short-term loans of 54.22 within a strong current asset base; near-term refinancing risk appears manageable. Total liabilities are 230.12 against equity of 294.62, suggesting balance-sheet capacity if needed. No off-balance sheet obligations were disclosed in the provided data. Equity ratio not reported, but assets/equity implies financial leverage of ~1.78x, consistent with moderate gearing.

Cash Flow Quality

Operating cash flow, capex, and free cash flow were not reported, so OCF/NI and FCF coverage cannot be assessed this quarter. As such, we cannot validate earnings quality via cash conversion (OCF/NI > 1.0 benchmark). Working capital signals: receivables of 133.20 and inventories of 71.57 are sizable relative to the half-year revenue base, but without turnover metrics or cash flow detail we cannot infer build/draw effects or potential timing benefits. No specific signs of working capital manipulation can be identified from the limited data. Until OCF and capex are disclosed, the durability of profit improvements and capacity to fund dividends and investment remain uncertain.

Dividend Sustainability

Dividend details (DPS, total dividends, FCF coverage) were not disclosed; however, the calculated payout ratio is 86.5%, which is high versus the <60% benchmark. Without OCF/FCF, we cannot confirm cash coverage of dividends. If the payout ratio is indeed near the high-80s against a ~1% net margin and ROIC of 0.8%, sustainability could be stretched unless cash flows are robust and stable. Policy outlook: management may prioritize balance-sheet stability and ROIC improvement; maintaining high payout would likely depend on ongoing operating margin gains and tax rate normalization.

Risk Assessment

Business Risks:

• Auto sector cyclicality and OEM production volatility impacting volumes and pricing
• Input cost inflation (materials, energy, logistics) compressing margins
• Product mix and pricing power limitations given competitive dynamics in auto parts
• FX exposure (JPY volatility vs USD/CNY/EUR) affecting both costs and export pricing
• Technology transition risks (ICE to xEV thermal management requirements) requiring investment

Financial Risks:

• High effective tax rate (47.6%) suppressing net margins and cash available for reinvestment/dividends
• Reliance on non-operating items (non-operating income ratio 61.0%) to support ordinary profit
• Short-term borrowings of 54.22 creating refinancing sensitivity to rate conditions (though currently covered by liquidity)
• Low ROIC (0.8%) below cost of capital indicating value dilution risk if not improved

Key Concerns:

• Sustaining margin improvements amid declining sales (-3.5% YoY)
• Thin net margin (~1.05%) and low ROE (0.9%) limiting shareholder returns
• Lack of disclosed OCF/FCF obscures earnings quality and dividend coverage
• Capital efficiency well below benchmarks, requiring structural improvements

Investment Implications

Key Takeaways:

• Strong YoY profit rebound on lower revenue demonstrates improved cost control
• Operating margin expanded to 1.83% (~+160 bps YoY by our estimate)
• Ordinary income up +223.5% YoY with meaningful non-operating contribution
• Net profitability remains thin (1.05% margin) due to a high tax rate
• Balance sheet/liquidity are healthy; leverage moderate at 0.78x D/E
• ROIC at 0.8% is a clear weak point versus 7–8% targets typical in the sector

Metrics to Watch:

• Operating cash flow and free cash flow (when disclosed)
• Gross and operating margin trajectory versus input costs
• Effective tax rate normalization path
• Working capital turns (AR days, inventory days) and asset turnover
• Capex level and returns (ROIC uplift)
• Dividend policy updates and payout/FCF alignment

Relative Positioning: Versus domestic auto parts peers, TBK shows improving operating execution but remains below-average on capital efficiency (ROIC 0.8%) and net margin, while maintaining a comparatively solid liquidity profile and manageable leverage.

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