MATSUDA SANGYO Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥288.25B
• Operating Income: ¥8.06B
• Net Income: ¥4.62B
• EPS: ¥235.04

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

Matsuda Sangyo Co., Ltd. (7456) delivered a strong FY2026 Q2 performance under JGAAP on a consolidated basis, with revenue up 29.7% year on year to ¥288.25bn and operating income up 28.4% to ¥8.06bn. Net income grew 31.7% to ¥6.09bn, driving EPS of ¥235.04. Profitability remains thin but consistent with the company’s low-margin trading/recycling mix, evidenced by a 6.0% gross margin and a 2.8% operating margin. DuPont analysis indicates ROE of 5.92%, derived from a 2.11% net margin, 1.578x asset turnover, and 1.78x financial leverage, pointing to returns driven more by efficient asset use than high margins. Operating leverage appears modestly negative this period (operating income growth slightly below revenue growth), suggesting some margin dilution amid rapid top-line expansion. Ordinary income of ¥8.44bn and low interest expense (¥156m) yield robust interest coverage of 51.7x, underscoring strong debt service capacity. Liquidity is solid with a 238.9% current ratio and a 168.2% quick ratio, supported by significant working capital of ¥67.51bn. The balance sheet is conservative, with total liabilities at ¥68.77bn versus equity of ¥102.77bn (debt-to-equity of 0.67x), leaving ample financial flexibility. Cash conversion lagged earnings this half; operating cash flow was ¥2.45bn, implying an OCF/Net Income ratio of 0.40, likely reflecting working capital investment amid growth (inventories at ¥34.34bn) and price/cycle dynamics. Tax expense of ¥1.96bn indicates a normalizing effective tax rate in the low-20s to mid-20s range despite the provided calculated metric showing 0.0% (data limitation). Dividend data are not disclosed in this dataset (DPS and payout show as 0.00), so we cannot infer policy changes; capacity to sustain dividends looks adequate from earnings, but near-term cash coverage depends on working capital normalization. Free cash flow cannot be reliably assessed because investing cash flows (including capex) are not disclosed here. Overall, the company shows healthy growth momentum, resilient profitability for its industry structure, strong solvency and liquidity, and excellent interest coverage, tempered by weaker cash conversion in the period. Key sensitivities likely include commodity/precious metal prices, semiconductor and electronics activity, recycling volumes, and foreign exchange effects. Data gaps (equity ratio, cash and equivalents, investing CF, dividend details, share counts) limit precision in certain assessments, but available metrics provide a coherent picture of solid operational execution. Monitoring working capital trends and margin trajectory will be important for the back half.

Profitability Analysis

ROE decomposition: ROE 5.92% = Net Margin 2.11% × Asset Turnover 1.578 × Financial Leverage 1.78. Returns are primarily supported by strong asset turnover rather than high margins or leverage. margin_quality: Gross margin 6.0% (¥17.33bn/¥288.25bn) and operating margin 2.8% (¥8.06bn/¥288.25bn) are consistent with a low-margin trading/recycling model. EBITDA margin is 3.3%, reflecting modest operating buffer after depreciation (¥1.33bn). Net margin at 2.11% remains stable given low interest burden (¥156m) and a normalizing tax charge (¥1.96bn). operating_leverage: Revenue rose 29.7% YoY while operating income rose 28.4% YoY, indicating slight negative operating leverage this half. This suggests incremental costs (e.g., procurement, logistics, or SG&A tied to growth) outpaced scale benefits, although the effect is mild.

Growth Assessment

revenue_sustainability: Top-line growth of 29.7% appears robust, likely supported by volume recovery and/or higher price levels in key product streams (e.g., precious metals, electronics-related recycling, and distribution). Given the business mix, revenue can be sensitive to commodity price swings and industrial activity. profit_quality: Operating income growth (28.4%) broadly tracks revenue, indicating stable contribution despite slight margin dilution. Ordinary income (¥8.44bn) exceeded operating income, aided by low interest expense and possible non-operating gains/losses within normal bounds. outlook: Near-term growth should hinge on commodity price trends, semiconductor/electronics cycle, and recycling volumes. Sustaining margins will require disciplined procurement and cost pass-through. Monitoring the back-half seasonality and potential normalization of working capital intensity is key for translating earnings growth into cash.

Financial Health

liquidity: Current ratio 238.9% and quick ratio 168.2% point to strong short-term liquidity. Working capital stands at ¥67.51bn. Cash and equivalents are not disclosed in this dataset (reported as 0). solvency: Debt-to-equity 0.67x (using total liabilities as a proxy) and interest coverage of 51.7x indicate a conservative capital structure and low refinancing risk. Total assets ¥182.70bn vs. equity ¥102.77bn imply financial leverage of 1.78x. capital_structure: Total liabilities ¥68.77bn against equity ¥102.77bn supports flexibility for investment and working capital needs. The reported equity ratio is undisclosed in this dataset (shown as 0.0%).

Cash Flow Quality

earnings_quality: OCF/Net Income of 0.40 signals weak cash conversion in the period, likely due to working capital build consistent with strong sales growth and higher inventories (¥34.34bn). Earnings appear supported by operations, but cash realization lagged. FCF_analysis: Free cash flow cannot be assessed because investing cash flows/capex are not disclosed (Investing CF shown as 0 in the dataset). EBITDA of ¥9.39bn provides capacity, but actual FCF will depend on capex and working capital trends in H2. working_capital: Elevated inventories and probable receivables growth are the likely drivers of OCF shortfall. Key watch items: inventory turns, days sales outstanding, and supplier terms to ensure normalization as growth stabilizes.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are not disclosed here (displayed as 0.00). Based on EPS of ¥235.04 and net income of ¥6.09bn, earnings capacity to fund dividends exists; however, without actual DPS and share count we cannot compute payout. FCF_coverage: FCF is not computable from the provided data because investing cash flows/capex are undisclosed. OCF of ¥2.45bn is below net income this half, implying tighter near-term cash coverage until working capital normalizes. policy_outlook: No policy update can be inferred from this dataset. If historical policy targets stable or progressive dividends, sustainability would hinge on cash conversion improving in H2 and maintaining conservative leverage.

Risk Assessment

Business Risks:

• Commodity/precious metal price volatility affecting both revenue and margins
• Exposure to semiconductor/electronics cycles impacting recycling volumes and spreads
• Procurement and logistics cost fluctuations that can pressure low margins
• Customer concentration risk in materials recovery or trading channels
• Regulatory and environmental compliance costs in recycling/waste handling
• FX volatility (JPY) affecting import/export and valuation of commodity-linked transactions

Financial Risks:

• Working capital intensity during rapid growth, dampening operating cash flow
• Potential inventory valuation risk if commodity prices decline
• Counterparty credit risk in receivables during cycle slowdowns
• Refinancing or interest rate risk is currently low but could rise if leverage increases

Key Concerns:

• Weak OCF/Net Income (0.40) despite strong earnings growth
• Slight operating margin dilution as revenue expands
• Limited disclosure on investing cash flows/capex and cash balances in this dataset

Investment Implications

Key Takeaways:

• Strong top-line expansion (+29.7% YoY) with operating income up 28.4%
• ROE at 5.92% primarily driven by high asset turnover (1.578x) and moderate leverage
• Margins remain thin but stable for the business model (operating margin 2.8%)
• Excellent interest coverage (51.7x) and conservative balance sheet (D/E 0.67x)
• Cash conversion lagged (OCF/NI 0.40), likely due to working capital build
• Data gaps on investing CF, equity ratio, and cash balances necessitate cautious interpretation

Metrics to Watch:

• Operating margin and gross margin trajectory in H2
• Working capital metrics: inventory turns and DSO/Days Payable
• OCF to Net Income ratio recovery toward 0.8–1.0 over the next periods
• Commodity price indices for gold, silver, PGMs, and electronics scrap spreads
• Ordinary income vs. operating income gap (non-operating gains/losses)
• Capex and investing CF disclosures to assess FCF

Relative Positioning: Within low-margin materials trading/recycling peers, Matsuda Sangyo exhibits above-average asset turnover, strong liquidity, and low financial risk; near-term differentiation will hinge on cash conversion and margin discipline amid volatile commodity cycles.

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