TBK Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥25.86B
• Operating Income: ¥472M
• Net Income: ¥-1.21B
• 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

TBK Co., Ltd. (72770) reported FY2026 Q2 consolidated results under JGAAP showing resilience in profitability despite a soft top line. Revenue declined 3.5% year over year to ¥25.855 billion, reflecting demand softness and/or mix headwinds. Gross profit was ¥2.516 billion, implying a gross margin of 9.7%, which remains thin for an auto-parts supplier and suggests limited pricing power and ongoing cost pressure. Operating income improved sharply to ¥472 million (+659.8% YoY from a very low base), translating to an operating margin of 1.8%, indicative of cost discipline and operating leverage from fixed-cost absorption. Ordinary income was ¥461 million, while interest expense of ¥147 million implies an interest coverage ratio of about 3.2x, adequate but not robust for a cyclical sector. Net income was ¥272 million (EPS ¥9.58), flat YoY, implying that tax and non-operating items offset the improvement in operating profit. Based on net profit margin of 1.05%, asset turnover of 0.493x, and financial leverage of 1.78x, reported ROE is 0.92%, underscoring structurally low profitability relative to capital employed. Liquidity is sound with a current ratio of 148.5%, quick ratio of 106.3%, and working capital of ¥8.628 billion, providing a buffer against demand volatility and inventory cycles. The balance sheet shows total assets of ¥52.474 billion, liabilities of ¥24.013 billion, and equity of ¥29.462 billion; the reported equity ratio of 0.0% appears unreported rather than zero given the disclosed equity base. Debt-to-equity of 0.82x indicates moderate leverage for the sector. Inventory stood at ¥7.514 billion within current assets of ¥26.402 billion, warranting monitoring in a down revenue quarter to ensure no build of slow-moving stock. Cash flow statements and depreciation were not disclosed (reported as zeros), limiting assessment of earnings quality, free cash flow, and capital intensity in the period. Annual DPS is shown as ¥0 with a payout ratio of 0.0%, indicating no dividend information in this dataset; policy continuity cannot be inferred. Overall, TBK delivered margin recovery from a depressed base, but profitability remains modest and leverage-sensitive, while visibility on cash conversion is limited by unreported cash flow data. The near-term outlook hinges on stabilizing demand in commercial vehicle and engine-related segments, cost pass-through to offset raw material and energy costs, and disciplined working capital management. FX, raw material costs, and customer production schedules remain key swing factors for 2H performance.

Profitability Analysis

ROE decomposition (DuPont): Net margin 1.05% × asset turnover 0.493 × financial leverage 1.78 = ROE 0.92%, consistent with the reported figure. Operating margin of 1.8% (¥472m / ¥25,855m) improved markedly YoY, indicating cost containment and operating leverage from a low base. Gross margin at 9.7% remains compressed, pointing to constrained pricing power and cost headwinds; further improvement likely requires mix enhancement and/or sustained cost-downs. The spread between gross margin (9.7%) and operating margin (1.8%) suggests SG&A intensity of roughly 7.9% of sales; any incremental revenue could drive disproportionately higher operating income if fixed costs are contained. Ordinary income (¥461m) sits slightly below operating income, with interest expense (¥147m) a meaningful drag; at 3.2x coverage, rising rates or earnings shortfalls would pressure bottom line. Net margin (1.05%) is modest and below many domestic auto parts peers, capping ROE even with moderate leverage (1.78x). The effective tax burden, inferred at ~47% (¥242m tax on ≈¥514m pre-tax), weighed on net results despite operating rebound. Overall profitability remains leverage-sensitive, with thin margins leaving limited cushion for shocks.

Growth Assessment

Revenue declined 3.5% YoY to ¥25.855bn, indicating a softer demand environment or mix effects in core products. The sharp rebound in operating income (+659.8% YoY) reflects recovery from a depressed base, improved cost control, and possibly better utilization; however, sustainability depends on stable volumes and cost pass-through. Net income was flat YoY at ¥272m, suggesting that non-operating costs and taxation absorbed operating improvement. Given the low gross margin (9.7%), incremental growth will need either mix upgrades (higher value-added components) or continued procurement and manufacturing efficiencies. With asset turnover at 0.493x, capital intensity and inventory cycles temper growth conversion into returns. Outlook hinges on production schedules of key commercial vehicle OEM customers, FX (yen level affecting export competitiveness and input costs), and raw material/energy cost trends. Absent disclosed capex and depreciation, visibility into capacity expansion and maintenance intensity is limited. Near-term growth trajectory appears cautious but improving on margin, assuming no renewed demand shock.

Financial Health

Liquidity is solid: current ratio 148.5%, quick ratio 106.3%, and working capital of ¥8.628bn provide operating flexibility. Inventories at ¥7.514bn are material within current assets (¥26.402bn); monitoring turnover is important given the revenue decline. Leverage is moderate with debt-to-equity at 0.82x, implying some financial risk but manageable given interest coverage of ~3.2x. Total assets are ¥52.474bn against equity of ¥29.462bn (implying an equity ratio near 56% by calculation, despite the disclosed 0.0% which appears unreported). Ordinary income (¥461m) relative to interest expense (¥147m) indicates adequate solvency, but thin margins leave limited headroom if earnings soften. No cash balance was disclosed in this dataset; therefore, short-term liquidity beyond ratios cannot be validated from cash data.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed in the period (reported as zeros), so OCF/NI and free cash flow assessment cannot be performed from this dataset. Depreciation and amortization are also not disclosed, obscuring EBITDA and non-cash earnings components. As such, we cannot validate accrual intensity, working capital drag, or capex reinvestment needs. Working capital appears positive (¥8.628bn) and quick ratio exceeds 100%, but inventory at ¥7.514bn should be monitored to ensure no build in a down-revenue quarter. Until OCF and capex are available, conclusions on earnings-to-cash conversion and FCF durability remain limited.

Dividend Sustainability

Annual DPS is shown as ¥0 with a payout ratio of 0.0% and FCF coverage unreported, indicating no dividend information in this dataset. Without OCF and capex disclosure, FCF coverage of any prospective dividends cannot be assessed. With ROE at 0.92% and net margin at 1.05%, earnings capacity is modest; a conservative payout would be prudent until cash flow visibility improves. Dividend policy outlook cannot be inferred from the provided data and should be cross-checked against company guidance and historical practice.

Risk Assessment

Business Risks:

• Cyclical demand from commercial vehicle and engine-related end-markets
• Customer concentration risk with major OEMs
• Raw material and energy cost volatility pressuring thin margins
• FX fluctuations impacting export competitiveness and input costs
• Electrification and powertrain shifts potentially disrupting product demand
• Supply chain disruptions affecting production schedules and inventory
• Pricing power constraints in a competitive auto parts landscape

Financial Risks:

• Thin operating margin (1.8%) leaves limited buffer for shocks
• Interest coverage of ~3.2x exposes earnings to rate or profit volatility
• Moderate leverage (D/E 0.82x) could amplify downturn impacts
• Limited visibility on cash generation due to unreported OCF and capex
• Potential working capital swings given sizable inventories

Key Concerns:

• Sustainability of margin improvement amid declining sales
• High inferred effective tax rate (~47%) dampening net income
• Lack of cash flow disclosure impeding assessment of earnings quality and FCF
• Need for cost pass-through to maintain or expand gross margin

Investment Implications

Key Takeaways:

• Top line declined 3.5% YoY to ¥25.855bn, but operating income rebounded sharply to ¥472m
• Margins remain thin: gross margin 9.7%, operating margin 1.8%, net margin 1.05%
• ROE at 0.92% reflects low profitability despite moderate leverage (1.78x)
• Liquidity is adequate (current ratio 148.5%, quick ratio 106.3%); leverage moderate (D/E 0.82x)
• Interest coverage of ~3.2x is acceptable but vulnerable to earnings volatility
• Cash flow and depreciation data are not disclosed, limiting FCF and EBITDA insight
• Dividend information not available in this dataset; policy cannot be assessed

Metrics to Watch:

• Gross and operating margin trajectory versus raw material/energy cost trends
• Operating income to interest expense (coverage) and sensitivity to rates
• Inventory levels and turnover days relative to sales trend
• Asset turnover and ROE progression, indicating capital efficiency
• Cash flow from operations and capex once disclosed (FCF conversion)
• Customer production schedules and order trends in commercial vehicles
• FX rates and pricing pass-through effectiveness

Relative Positioning: Within domestic auto parts peers, TBK exhibits weaker profitability (low single-digit margins, ROE <1%) but maintains a reasonable liquidity profile and moderate leverage; near-term upside depends on sustaining operating improvements and demonstrating cash conversion once disclosures are available.

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