NANSIN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.72B
• Operating Income: ¥33M
• Net Income: ¥-37M
• EPS: ¥-5.48

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: FY2026 Q2 was mixed—core operations stabilized with higher ordinary income, but a sizable extraordinary loss pushed the quarter into a net loss despite solid cash generation. Revenue was 47.24 (−0.2% YoY), essentially flat, reflecting stable demand but no growth momentum. Gross profit was 11.38 with a 24.1% margin, indicating decent pricing and cost pass-through in aggregate. Operating income improved sharply to 0.33 (+227.1% YoY), lifting operating margin to 0.7% from roughly 0.2% a year ago (about +50 bps). Non-operating income of 0.65 provided additional lift, taking ordinary income to 0.88 (+62.1% YoY) and ordinary margin to about 1.9% (roughly +70 bps YoY). However, profit before tax was −0.08 despite positive ordinary income, implying approximately 0.96 in extraordinary losses this quarter. With income tax expense of 0.29 booked despite a pre-tax loss, the effective tax rate appears distorted (−356.8%), likely due to non-deductible items or timing differences. Net income printed at −0.37 (EPS −5.48 yen), but total comprehensive income was positive at 0.59, aided by OCI. The sales cost structure remains tight: SG&A of 11.05 nearly equals gross profit of 11.38, leaving limited operating leverage. Cash flow quality was better than earnings: operating cash flow was +2.08 versus net loss of −0.37, signaling cash resiliency and likely non-cash extraordinary charges. The balance sheet is very strong with current ratio at 580%, net cash of 33.19, and D/E at 0.22x, mitigating solvency risks. ROE was −0.3% and ROIC 0.4%, underscoring low capital efficiency that needs margin improvement or faster asset turns. Capex was −1.90, broadly covered by OCF, implying modest positive implied FCF. Forward-looking, the key swing factor is whether the extraordinary loss is one-off; absent repeats, ordinary income trajectory suggests gradual earnings recovery. Near-term priorities include SG&A efficiency and inventory discipline to defend margins in a flat revenue environment. With cash-rich balance sheet and low leverage, the company has room to invest or sustain shareholder returns, but capital productivity must improve to lift ROIC.

Profitability Analysis

ROE decomposition (DuPont): ROE (−0.3%) = Net Profit Margin (−0.8%) × Asset Turnover (0.329×) × Financial Leverage (1.22×). The largest change driver is the net profit margin turning negative due to extraordinary losses despite improved operating and ordinary income. Business reason: SG&A (11.05) nearly absorbs gross profit (11.38), capping operating margin at 0.7%, while a ~0.96 extraordinary loss flipped pre-tax profit negative. Sustainability: the SG&A-to-gross-profit squeeze is structural unless costs are reduced or pricing/mix improves; the extraordinary loss appears non-recurring by nature, but recurrence risk depends on impairment/one-off item cadence. Positive sign: ordinary income up 62.1% YoY, indicating core profit recovery, supported by non-operating gains (0.65). Concerning trend: SG&A growth versus revenue is not disclosed this quarter, but the absolute SG&A level relative to GP leaves minimal buffer—any demand softness could push operating income back toward breakeven. Operating leverage remains weak; further gross margin expansion or SG&A cuts are needed to lift ROIC and ROE.

Growth Assessment

Revenue declined slightly (−0.2% YoY) to 47.24, indicating stable but subdued demand. Operating income rose to 0.33 (+227.1% YoY), reflecting better cost control and/or mix, but the operating margin remains thin at 0.7%. Ordinary income improvement (+62.1% YoY) was aided by non-operating income (0.65), suggesting part of the profit lift is non-core. Extraordinary losses (~0.96 implied) erased pre-tax profits; if one-off, underlying growth in ordinary income is more indicative of run-rate performance. EBITDA was 1.70 (3.6% margin), modest but positive; depreciation at 1.37 indicates high non-cash cost intensity relative to EBIT. With inventory at 21.99 and AR at 25.66 against half-year sales of 47.24, working capital remains heavy, potentially capping asset turnover. Near-term outlook hinges on: absence of repeat extraordinary charges, maintaining the 24.1% gross margin, and tightening SG&A. Without topline growth, profit growth must come from mix and cost discipline; otherwise, ROIC will remain subpar.

Financial Health

Liquidity is exceptionally strong: current ratio 579.6% and quick ratio 446.5%, with cash and deposits of 33.19 covering all short-term loans (2.50) multiple times. No warning on current ratio (<1.0) or D/E (>2.0): D/E stands at a conservative 0.22x. Working capital is 79.23, and short-term obligations (16.52) are well covered by cash plus receivables alone (58.85), indicating minimal maturity mismatch risk. Long-term debt details are unreported, but total noncurrent liabilities are modest at 9.61. Interest coverage is strong at 25.25x, consistent with low financial risk. No off-balance-sheet obligations are disclosed in the data provided; absence of disclosure does not confirm absence of such commitments. Overall solvency and liquidity are robust, giving ample buffer against earnings volatility.

Cash Flow Quality

OCF was +2.08 versus net income of −0.37, yielding an OCF/NI ratio of −5.61 due to the negative denominator; qualitatively, cash generation exceeded accounting profit, typically a positive signal when losses are driven by non-cash or one-off items. Capex was −1.90; using OCF − Capex as a proxy, implied FCF is approximately +0.18, though full investing CF is unreported (caveat). The positive OCF alongside an ordinary profit suggests core operations are cash-generative; the net loss likely reflects non-cash extraordinary items and/or tax timing. Working capital details are limited, but sizable inventories (21.99) relative to sales could be a drag if demand softens; no explicit signs of aggressive working capital release are visible from the limited data. Financing CF was −2.05, implying outflows for debt repayment and/or shareholder returns; dividends/share repurchases are unreported, so attribution is unclear. Overall, cash flow quality this quarter is better than the income statement would imply, but sustainability depends on avoiding repeat extraordinary losses.

Dividend Sustainability

Dividend amounts are unreported; a calculated payout ratio of −416.6% indicates dividends may have been paid despite a net loss, but the source data lacks total dividends paid, so this metric should be treated cautiously. From a capacity standpoint, OCF of 2.08 roughly covered capex of 1.90, leaving a small implied FCF cushion (~0.18). With a large net cash position (cash 33.19) and low leverage (D/E 0.22x), liquidity supports modest dividends even in a loss-making quarter. However, structurally low ROIC (0.4%) and thin operating margins limit long-term headroom for growing distributions without improving earnings quality. Policy outlook cannot be inferred from the data; confirmation of full-year guidance and explicit dividend policy are needed to assess sustainability with confidence.

Risk Assessment

Business Risks:

• Margin squeeze risk: SG&A (11.05) nearly equals gross profit (11.38), leaving minimal operating cushion.
• Demand softness: revenue −0.2% YoY signals weak end-market momentum.
• Inventory risk: high inventories (21.99) relative to half-year sales may lead to write-downs if demand weakens.
• Execution risk on cost reductions needed to lift ROIC from 0.4%.
• Extraordinary loss recurrence risk impacting bottom line despite improving ordinary income.

Financial Risks:

• Tax volatility: tax expense (0.29) despite pre-tax loss (−0.08) creates earnings unpredictability.
• Non-operating income dependence: ordinary income uplift supported by 0.65 in non-operating gains.
• Working capital intensity constraining asset turnover (0.329×).

Key Concerns:

• Capital efficiency: ROE −0.3% and ROIC 0.4% are below hurdle rates.
• Earnings quality flag: OCF/NI ratio distorted (−5.61) due to net loss; reliance on one-off items suspected.
• Limited disclosure: lack of investing CF and dividend detail reduces visibility into FCF allocation.

Investment Implications

Key Takeaways:

• Core profitability improved (operating income +227% YoY), but absolute margin remains thin at 0.7%.
• Ordinary income strength (+62% YoY) was offset by ~0.96 in extraordinary losses driving a net loss.
• Balance sheet strength (current ratio ~580%, D/E 0.22x, cash 33.19) provides significant downside protection.
• Cash generation outpaced accounting profit (OCF 2.08 vs NI −0.37), implying non-cash loss elements.
• ROIC at 0.4% highlights need for better margin and asset turnover to create value.

Metrics to Watch:

• Extraordinary gains/losses: magnitude and recurrence.
• Gross margin vs SG&A ratio: ability to expand operating margin above 1–2%.
• Inventory turns and AR collection: progress on asset turnover from 0.329×.
• Ordinary income sustainability relative to non-operating income contribution (0.65).
• Capex discipline vs OCF to sustain positive FCF.

Relative Positioning: Within small-cap industrial components peers (casters/material handling), Nansin exhibits superior balance sheet resilience (net cash, low D/E) but lags on profitability and capital efficiency, leaving performance more sensitive to execution on cost control and mix improvements than to financial flexibility.

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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