TOBA,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.42B
• Operating Income: ¥749M
• Net Income: ¥558M
• Earnings per Unit (EPU): ¥141.39

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: Solid Q2 with modest topline growth, clear margin expansion, and clean cash conversion, but capital efficiency remains subpar and the implied payout looks stretched. Revenue rose 1.7% YoY to 144.21, while operating income increased 13.2% YoY to 7.49, evidencing operating leverage. Gross profit reached 21.52 with a gross margin of 14.9%, supporting improved profitability. Operating margin expanded to approximately 5.19% this quarter from about 4.67% a year ago, a roughly 52 bps improvement by our estimates. Net income climbed 13.1% YoY to 5.58, lifting the net margin to about 3.87% from roughly 3.48% a year ago (c. +39 bps). Ordinary income rose 10.1% YoY to 8.02, aided modestly by non-operating income of 0.58 (notably dividend income 0.30 and interest income 0.10), with non-operating expenses limited at 0.06. OCF was 5.95, exceeding net income (OCF/NI 1.07x), indicating good earnings quality for the half. Liquidity is very strong with a current ratio of 297.8% and cash of 102.69 against current liabilities of 69.87, and interest burden is negligible (interest expense 0.01; coverage ~1,259x). Balance sheet solidity is underscored by equity of 208.89 (equity ratio ~73.4% by our calculation), and low financial leverage (DuPont leverage ~1.36x). That said, capital efficiency is a weak spot: ROE is only 2.7% and ROIC is 4.8% (below the 5% warning threshold), implying value creation versus capital cost may be limited. Operating leverage was positive this quarter (operating profit growth > revenue growth), but sustainability will hinge on gross margin discipline and SG&A control. Non-operating income contributed but is not the key driver; core operations delivered the bulk of the uplift. Financing CF was -6.95, including share repurchases of -1.81; the residual suggests dividends and/or other financing outflows were significant though undisclosed. The calculated payout ratio of 109.5% implies dividends exceed earnings on the measurement basis used, which raises sustainability questions without stronger FCF. Forward-looking, management likely needs to push ROIC toward >7% through mix, pricing, or cost initiatives while maintaining cash conversion and prudent capital returns. Data gaps (investing CF, dividend breakdown, inventory) limit deeper diagnostics, but the overall Q2 picture is one of improved profitability and solid cash discipline offset by low capital efficiency and potentially aggressive shareholder returns.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.7% = Net Profit Margin (3.9%) × Asset Turnover (0.507x) × Financial Leverage (1.36x). The most notable change appears in margins: operating income grew 13.2% vs revenue 1.7%, implying margin expansion (operating margin up c. 52 bps YoY to ~5.19%). Asset turnover at ~0.51x is modest for a distributor and likely stable YoY given low topline growth and a sizeable cash position. Financial leverage remains low at ~1.36x, consistent with the strong equity base and light debt usage. Business driver: better gross profitability and/or SG&A efficiency drove operating leverage; non-operating tailwinds (dividends/interest) added modestly to ordinary income but were not the main factor. Sustainability: margin gains can persist if mix (higher value-added FA/automation) and pricing discipline hold; however, with limited revenue growth, sustained ROE improvement requires continued cost control or better asset utilization. Concerning trend flags: ROIC at 4.8% (below 5%) indicates returns barely cover a typical mid-single-digit cost of capital. We do not have SG&A YoY detail to test if SG&A growth exceeded revenue; lack of disclosure precludes a definitive operating cost trend analysis.

Growth Assessment

Revenue grew 1.7% YoY to 144.21, indicating steady but subdued demand. Operating income growth of 13.2% outpaced sales, reflecting positive operating leverage and improved efficiency. Net income rose 13.1%, with a net margin of about 3.87% (up ~39 bps YoY), suggesting better cost control and limited non-operating dilution. Non-operating income was 0.58 (10.4% non-operating income ratio), helpful but not dominant. With effective tax rate at 31.3%, earnings growth was primarily operational rather than tax-driven. Outlook dependencies: order momentum in core industrial/FA segments, gross margin resilience, and SG&A discipline. Given the modest topline trajectory, sustaining double-digit profit growth may require mix upgrades or incremental cost rationalization. Limited capex (0.11) suggests low capital intensity, but also caps organic capacity expansion; M&A or partnerships could be levers if pursued. Data gaps (no segment disclosure, no backlog, no inventory) constrain visibility on revenue sustainability.

Financial Health

Liquidity is strong: current assets 208.08 vs current liabilities 69.87 (current ratio 297.8%, quick ratio 297.8%), with cash and deposits of 102.69 comfortably covering short-term obligations. Solvency is robust: total equity 208.89 vs total assets 284.33 implies an equity ratio around 73.4%; debt metrics are conservative, and interest coverage is ~1,259x due to minimal interest expense. The reported D/E ratio of 0.36x appears conservative; interest-bearing debt specifics are unreported, but total liabilities are modest relative to equity. No warning triggers: Current Ratio >> 1.0 and D/E well below 2.0. Maturity mismatch risk is low given ample cash and receivables versus payables; short-term funding reliance seems minimal. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net Income at 1.07x indicates good earnings cash conversion for the period. Operating CF of 5.95 likely benefited from disciplined working capital, though inventory data is unavailable to confirm mix of AR/AP/inventory movements. Free cash flow cannot be fully computed due to missing investing CF, but capex was small at 0.11, implying FCF was likely positive if other investing outflows were limited. Financing CF was -6.95, including share repurchases of -1.81; the remaining outflows likely include dividends and/or lease/other repayments. No signs of aggressive working capital manipulation are apparent from the limited disclosures; however, absence of inventory detail tempers that conclusion.

Dividend Sustainability

The calculated payout ratio of 109.5% suggests dividends exceed earnings on the measurement basis used, above the <60% benchmark and a potential red flag if persistent. OCF of 5.95 appears sufficient to cover small capex (0.11), leaving room for shareholder returns, but the financing cash outflow (-6.95) indicates total cash returns and other financing uses may exceed internally generated cash this half. FCF coverage of dividends cannot be precisely assessed due to unreported investing CF and undisclosed dividend amount; however, combining buybacks (1.81) with likely dividends implies aggregate distributions may be running ahead of NI. Policy outlook: to maintain balance sheet strength and target higher ROIC, a recalibration toward earnings-aligned payouts and disciplined buybacks would be prudent if growth opportunities arise.

Risk Assessment

Business Risks:

• Low revenue growth (1.7% YoY) increases reliance on margin improvements for profit growth
• Potential gross margin pressure from supplier pricing and competitive bidding in industrial/FA distribution
• Exposure to cyclical end-markets (factory automation, capital goods) that can swing order intake
• Execution risk in sustaining SG&A efficiency without impairing growth

Financial Risks:

• Capital efficiency risk: ROIC at 4.8% below 5% may not cover cost of capital
• Potential overdistribution: implied payout ratio 109.5% and financing CF outflows may exceed sustainable FCF
• Data gaps on debt composition and investing CF obscure leverage and cash needs assessment

Key Concerns:

• Persistently low ROE (2.7%) and ROIC (4.8%) despite strong balance sheet
• Limited visibility on investing activities and dividend cash outlays
• Reliance on modest non-operating income (dividends/interest) to supplement ordinary income

Investment Implications

Key Takeaways:

• Margin-led profit improvement with operating margin expanding ~52 bps YoY to ~5.19%
• Clean cash conversion: OCF/NI 1.07x and strong liquidity (current ratio ~298%)
• Capital efficiency remains weak: ROE 2.7%, ROIC 4.8% (warning)
• Balance sheet conservative with equity ratio ~73% and negligible interest burden
• Shareholder returns appear active (buybacks -1.81) but payout sustainability unclear

Metrics to Watch:

• Gross margin and SG&A ratio trajectory
• ROIC progression toward >7%
• Order intake/backlog and revenue growth acceleration
• OCF/NI and working capital turns (AR days, inventory levels when disclosed)
• Dividend declarations vs FCF and pace of share repurchases

Relative Positioning: Relative to peers in industrial distribution/FA trading, the company exhibits stronger liquidity and lower leverage but lags on capital efficiency (ROIC/ROE). Profitability momentum is improving via margin gains, yet sustained outperformance likely requires better asset utilization and topline acceleration.

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