NADEX CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.85B
• Operating Income: ¥355M
• Net Income: ¥-394M
• EPS: ¥13.26

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

For FY2026 Q2 (consolidated, JGAAP), Nadex posted modest topline growth with a meaningful rebound in operating profitability, but bottom-line results were dampened by sizable below-ordinary items. Revenue grew 1.9% YoY to 168.49, while gross profit was 29.96, yielding a gross margin of 17.8%, broadly stable. SG&A of 30.93 slightly exceeded gross profit, but cost control and mix lifted operating income to 3.55 (+83.5% YoY), driving an operating margin of 2.1%. Non-operating income of 1.31 (interest income 0.46, dividends 0.10) and non-operating expenses of 0.62 produced an ordinary income of 4.66 (+78.8% YoY), indicating stronger core-plus-financial earnings. Profit before tax, however, was -2.49, implying approximately 7.1 of extraordinary loss or other below-ordinary negative items under JGAAP. Despite the pre-tax loss, income tax expense was 1.46, yielding a negative effective tax rate and reinforcing the presence of non-deductible items or timing differences. Net income came in at 1.08 (+158.2% YoY), and total comprehensive income was a much higher 6.28, signaling a sizable positive contribution from other comprehensive income (e.g., valuation gains). Balance sheet quality appears solid: total assets are 299.35 with equity of 192.06, indicating low leverage and good solvency. Liquidity is strong with a current ratio of 198.7% and a quick ratio of 174.6%, supported by cash and deposits of 36.29 and modest interest-bearing debt (short-term 1.00, long-term 0.38). The DuPont-derived ROE is 0.6% on an interim basis, reflecting a combination of thin net margin (0.6%), moderate asset turnover (0.563), and conservative leverage (1.56x). Working capital is ample at 108.14, which should underpin near-term operating stability. Interest coverage is robust at roughly 69x, given low interest burden relative to operating income. The payout ratio is calculated at 276.9% for the period, suggesting dividends exceeded earnings, likely reflecting a policy to maintain shareholder returns through a weak profit phase. Cash flow data were not disclosed, limiting visibility into earnings quality and dividend coverage; however, the strong balance sheet provides a cushion. Overall, the trajectory shows improving operating performance but one-off headwinds below ordinary income, with solid liquidity and low leverage mitigating financial risk.

Profitability Analysis

ROE_decomposition_DuPont:

• net_profit_margin: 0.6% (Net income 1.08 / Revenue 168.49)
• asset_turnover: 0.563 (provided; revenue relative to assets indicates moderate efficiency)
• financial_leverage: 1.56x (Assets 299.35 / Equity 192.06)
• calculated_ROE: 0.6% (matches provided DuPont ROE) margin_quality:
• gross_margin: 17.8% (29.96 / 168.49), broadly stable
• operating_margin: 2.1% (3.55 / 168.49), up sharply YoY with +83.5% operating income growth
• ordinary_income_margin: 2.8% (4.66 / 168.49), aided by net non-operating gains
• net_margin: 0.6% (1.08 / 168.49), depressed by significant below-ordinary losses and atypical tax operating_leverage: Revenue grew +1.9% YoY while operating income rose +83.5% YoY, indicating positive operating leverage from SG&A efficiency and/or better gross mix. However, SG&A (30.93) still exceeds gross profit (29.96), so sustained leverage depends on further gross margin expansion or tighter SG&A control. non_operating_and_extraordinary_effects: Non-operating income (1.31) and expenses (0.62) provided a net boost, but the swing from ordinary income (4.66) to pretax loss (-2.49) indicates roughly 7.1 of extraordinary loss or similar below-ordinary charges under JGAAP, which diluted net margin.

Growth Assessment

revenue: 168.49 (+1.9% YoY). Growth was modest, likely reflecting steady demand in core segments but limited volume/pricing tailwinds. profitability_trends: Operating income +83.5% YoY and ordinary income +78.8% YoY point to improved cost discipline and favorable non-operating contributions. Net income +158.2% YoY benefited from a low base but was held back by extraordinary losses. sustainability: Sustaining operating margin gains will require continued gross margin support and SG&A containment. The negative swing at pretax level appears non-recurring, but confirmation is needed. outlook_drivers: - Order momentum and backlog conversion in core industrial/FA-related businesses; - Input cost stabilization supporting gross margin; - Normalization of extraordinary items; - Interest income tailwind while rates remain supportive; - Potential FX and capex-cycle sensitivity.

Financial Health

liquidity:

• current_ratio: 198.7% (Current assets 217.68 / Current liabilities 109.55)
• quick_ratio: 174.6% (Quick assets ~191.22 / Current liabilities 109.55)
• cash_and_deposits: 36.29 provides a comfortable liquidity buffer
• working_capital: 108.14, ample to support operations solvency:
• equity: 192.06
• total_assets: 299.35
• equity_ratio_calculated: 64.1% (Equity/Assets), indicating strong capitalization
• debt_to_equity: 0.62x (Total liabilities 118.46 / Equity 192.06) capital_structure:
• interest_bearing_debt: Approximately 1.38 (ST 1.00 + LT 0.38), very low relative to equity
• interest_coverage: 68.9x (indicative; Operating income 3.55 / Interest expense 0.05), low financial risk
• goodwill_and_intangibles: Goodwill 8.21 and intangible assets 15.46 suggest M&A/IT investments; monitor for impairment risk

Cash Flow Quality

earnings_quality: Net income (1.08) is materially below ordinary income (4.66) due to extraordinary losses and an unusual tax charge, complicating the assessment of recurring earnings. operating_cash_flow: Not disclosed (N/A). Inability to reconcile earnings with cash generation limits quality analysis. free_cash_flow: Not disclosed (N/A). Capex and working capital movements are unavailable. working_capital_dynamics: Inventories are 26.46; receivables and payables detail is limited (AR unreported, AP 30.69). Without AR/OCF, collection efficiency and inventory turns cannot be assessed. non_operating_items: Interest income (0.46) and dividends (0.10) contribute to earnings but are non-core; sustainability depends on cash and securities balances and market yields.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio of 276.9% indicates dividends exceeded interim earnings, implying reliance on retained earnings or balance sheet strength. FCF_coverage: Not calculable due to OCF/Capex unreported. Cash on hand (36.29) and low debt provide near-term flexibility, but recurring coverage is unverified. policy_outlook: The company likely targets stable or progressive dividends; however, continuation at current run-rate requires normalization of below-ordinary losses and consistent OCF. Watch for guidance updates at year-end and any change in capital allocation priorities.

Risk Assessment

Business Risks:

• Exposure to customers’ capex cycles in industrial/FA-related markets
• Order volatility and project timing affecting quarterly margins
• Pricing pressure from major customers and competitors
• Supply chain and component availability impacting delivery and costs
• Execution risk on systems integration and large projects
• Potential impairment risk related to goodwill (8.21) and intangibles (15.46)

Financial Risks:

• Extraordinary losses causing earnings volatility under JGAAP
• Negative effective tax rate suggests non-deductible items/timing differences
• Dividend outflows exceeding earnings in the period (high payout ratio)
• Limited visibility due to unreported OCF/Capex/FCF
• Market risk on financial income (interest/dividends) if rates or portfolio balances change

Key Concerns:

• Magnitude and nature of the ~7.1 extraordinary loss dragging PBT to -2.49
• Sustainability of operating margin improvement given SG&A > gross profit
• Dividend sustainability without OCF disclosure and with high interim payout

Investment Implications

Key Takeaways:

• Topline modest (+1.9% YoY) with strong operating income rebound (+83.5% YoY).
• Ordinary income solid (4.66), but extraordinary losses turned PBT negative (-2.49).
• Net income positive (1.08) and total comprehensive income strong (6.28) due to OCI gains.
• Balance sheet conservative: equity ratio ~64%, low interest-bearing debt (~1.38).
• Liquidity robust: current ratio 199%, quick ratio 175%, cash 36.29.
• Dividend payout ratio high at 276.9%, implying potential reliance on balance sheet this period.
• Cash flow metrics unreported; limits conviction on earnings quality and dividend coverage.

Metrics to Watch:

• Details and recurrence of extraordinary losses and tax normalization
• Order intake/backlog and book-to-bill for revenue visibility
• Gross margin trend and SG&A ratio trajectory
• Operating cash flow and free cash flow once disclosed
• Inventory levels and turns; receivables collection once AR disclosed
• Interest income sustainability as cash balance and rates evolve
• Any updates to dividend policy and full-year guidance

Relative Positioning: Within small to mid-cap industrial/FA peers on the TSE, Nadex shows stronger-than-average balance sheet resilience (low leverage, high equity ratio) but currently lower profitability at the net level due to extraordinary losses; operating recovery is encouraging, yet sustained improvement and clearer cash flow disclosure are required to close the gap with higher-margin peers.

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