MUSASHI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.93B
• Operating Income: ¥2.36B
• Net Income: ¥1.51B
• EPS: ¥186.95

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

For FY2026 Q2, Musashi Co., Ltd. (75210) delivered strong top-line and operating momentum with Revenue of ¥19.932bn (+20.2% YoY) and Operating Income of ¥2.359bn (+288.2% YoY), indicating significant operating leverage and improved cost execution. Gross profit was ¥4.078bn, yielding a gross margin of 20.5%, while the operating margin expanded to 11.8%, a notable uplift versus the prior year given the outsized YoY growth in operating income. Ordinary Income reached ¥2.389bn, broadly consistent with operating profit, suggesting minimal non-operating drag and manageable financing costs. Net Income was ¥1.273bn (-15.4% YoY), which contrasts with the robust operating recovery; this gap likely reflects prior-year non-recurring gains or different below-OP items, as reported income tax was ¥456m and interest expense was a modest ¥21m. The DuPont bridge shows Net Margin of 6.39%, Asset Turnover of 0.396x, and Financial Leverage of 1.43x, resulting in a calculated ROE of 3.61%, consistent with the reported ROE. Asset intensity appears relatively high (AT 0.396x), tempering ROE despite improved margins. Liquidity remains very strong with a Current Ratio of 271.8% and Quick Ratio of 256.2%, supported by Working Capital of ¥22.024bn, indicating ample short-term coverage. The capital structure is conservative, with leverage at 1.43x assets-to-equity and a reported Debt-to-Equity of 0.45x, while interest coverage is exceptionally high at 112.3x, implying low refinancing or interest-rate risk. EBITDA was ¥2.552bn and the EBITDA margin 12.8%, pointing to relatively light depreciation (¥193m) and limited asset obsolescence risk near term. Despite earnings strength, Operating Cash Flow was negative at -¥581m and OCF/Net Income was -0.46x, implying weak cash conversion in the half, likely driven by working capital investment aligned with revenue growth. Inventories stood at ¥2.002bn, relatively modest versus current assets of ¥34.843bn, suggesting the OCF drag is more likely receivables or other current assets rather than inventory swell. The equity base remains large at ¥35.258bn against total assets of ¥50.303bn, indicating a solid solvency position even though the equity ratio line item shows 0.0% (not disclosed). Dividend information, cash and equivalents, investing cash flows, and share count were not disclosed in the XBRL (zeros indicate unreported), limiting precision on capital allocation and per-share metrics beyond EPS of ¥186.95. Overall, profitability is improving with healthy operating leverage and low financial risk, but near-term cash conversion is a watch point. The sustainability of revenue growth and normalization of working capital will be key for converting earnings into free cash flow over the remainder of the fiscal year. Given data limitations, the analysis emphasizes disclosed non-zero items and derived relationships while acknowledging unreported fields.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 6.39% × Asset Turnover 0.396 × Financial Leverage 1.43 = ROE 3.61%, matching the provided figure. Margin quality improved materially at the operating level: gross margin 20.5% and operating margin 11.8% reflect stronger cost discipline and/or improved mix versus the prior year (operating income +288.2% YoY on revenue +20.2% YoY). Ordinary income closely tracks operating income, indicating minimal non-operating headwinds; interest expense is small at ¥21m, consistent with the high interest coverage (112.3x). EBITDA margin of 12.8% implies low D&A intensity (D&A ¥193m), suggesting limited fixed cost drag and supporting near-term margin resilience. The gap between strong operating profit growth and the decline in net income (-15.4% YoY) implies prior-period non-recurring gains or differences below the operating line; using ordinary income as a proxy base, the implied tax burden is roughly in the high-teens to ~20% range (income tax ¥456m), though the precise effective rate is not disclosed. Operating leverage appears favorable given the step-up in OP on a 20% revenue increase; sustaining volumes and mix will be crucial to maintain the elevated operating margin into H2.

Growth Assessment

Revenue grew 20.2% YoY to ¥19.932bn, signaling robust demand or share gains. The magnitude of operating income growth (+288.2% YoY) suggests a cyclical or mix-driven recovery with improved cost absorption. Net income declined 15.4% YoY despite operational strength, pointing to below-operating line factors in the comparison base (e.g., prior-year non-operating gains) or current-period normalizing tax. With asset turnover at 0.396x, scaling growth further may require continued efficiency gains or higher utilization to lift returns. The modest inventory level (¥2.002bn) relative to current assets indicates revenue expansion is not primarily inventory-driven; receivables expansion may be the underlying working capital driver. Outlook hinges on demand durability in core businesses and the company’s ability to hold the improved operating margin as inflation, input costs, and pricing dynamics evolve. Absent disclosed segment data, the breadth and sustainability of growth across end markets cannot be fully assessed. Near-term, management’s ability to convert earnings to cash (normalize OCF) will determine the quality of growth. A stable interest burden and high coverage limit financial frictions to growth, while the strong equity base supports investment capacity.

Financial Health

Liquidity is strong: Current Ratio 271.8%, Quick Ratio 256.2%, and Working Capital of ¥22.024bn demonstrate ample near-term coverage. Total assets are ¥50.303bn, equity is ¥35.258bn, implying assets-to-equity of ~1.43x and an equity share of roughly 70% of assets (equity ratio not disclosed in the source line but inferable from totals). Total liabilities are ¥15.845bn, and reported Debt-to-Equity is 0.45x, indicating a conservative capital structure with limited leverage risk. Interest coverage is 112.3x, suggesting minimal sensitivity to rate increases. Solvency appears strong given the sizable equity buffer versus liabilities. The absence of reported cash and equivalents constrains assessment of immediate liquidity headroom, but the large quick assets relative to current liabilities are supportive. No material solvency red flags are evident from the disclosed non-zero items.

Cash Flow Quality

Earnings quality is mixed near term: despite solid profitability (OP ¥2.359bn), Operating Cash Flow was -¥581m, yielding OCF/Net Income of -0.46x. The negative OCF likely reflects a working capital build in line with the 20% revenue growth, most plausibly in receivables or other current assets (inventories are modest at ¥2.002bn). EBITDA of ¥2.552bn indicates healthy cash earnings capacity before working capital. Free Cash Flow was not disclosed (FCF shown as 0 indicates non-disclosure); investing cash flow was also unreported, limiting full FCF analysis. Key watch items are collection cycles (DSO) and procurement terms (DPO), which are not disclosed here. Normalization of working capital in H2 will be important to validate cash conversion and support any capital return or reinvestment plans.

Dividend Sustainability

Dividend data were not disclosed (Annual DPS and payout ratio display as 0.00, indicating non-disclosure). EPS is ¥186.95, but without confirmed DPS or a stated policy, payout assessment is not possible from the provided fields. With negative OCF in the half and unreported investing cash flows, FCF coverage cannot be determined; the reported FCF coverage metric of 0.00x reflects non-disclosure rather than an actual zero. The robust equity base and low leverage imply capacity for dividends in principle, but sustainability depends on converting earnings to cash and management’s policy stance, both of which are not disclosed here.

Risk Assessment

Business Risks:

• Revenue sustainability risk after a strong +20% YoY surge if demand normalizes.
• Margin compression risk if input costs rise or pricing power fades, given recent margin step-up.
• Working capital intensity risk impacting cash conversion during growth phases (negative OCF in the half).
• Customer concentration or end-market cyclicality (not disclosed), which could amplify volatility.
• Supply chain or lead-time risks potentially affecting deliveries and receivables collection.
• Competitive pressure that could erode gross margin (20.5%) and operating margin (11.8%).

Financial Risks:

• Cash flow timing risk as OCF/NI is -0.46x, requiring H2 normalization.
• Potential increases in receivables or other current assets that tie up cash.
• Limited visibility on cash and equivalents and investing cash flows due to non-disclosure.
• Tax rate variability; effective rate not disclosed precisely and could affect net margins.
• Exposure to interest rate changes appears low but not fully quantifiable without debt detail.

Key Concerns:

• Negative operating cash flow despite strong operating profit.
• Net income decline (-15.4% YoY) versus significant operating recovery, suggesting non-operating or one-off comparison effects.
• Lack of disclosure on dividends, investing cash flows, and cash balances, limiting capital allocation assessment.

Investment Implications

Key Takeaways:

• Operational turnaround evident: operating income +288.2% YoY with operating margin at 11.8%.
• Cash conversion is the key near-term watch item given OCF of -¥581m and OCF/NI of -0.46x.
• Balance sheet strength (assets-to-equity 1.43x, high liquidity ratios) reduces financial risk.
• ROE of 3.61% is constrained by modest net margin (6.39%) and low asset turnover (0.396x).
• Interest burden is minimal (112.3x coverage), supporting earnings durability.

Metrics to Watch:

• Working capital components: receivables days, payables days, and inventory turns.
• Cash from operations trend in H2 and full-year free cash flow.
• Sustainability of operating margin at ~12% amid input cost and pricing dynamics.
• Asset turnover improvement as a driver of ROE uplift.
• Any disclosure updates on dividends and capital allocation.

Relative Positioning: The company appears operationally improved with strong liquidity and low financial risk, but trails best-in-class peers on ROE due to relatively low asset turnover and moderate net margins; near-term differentiation will hinge on sustaining margin gains and converting earnings into cash.

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