RIX CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.18B
• Operating Income: ¥1.68B
• Net Income: ¥1.23B
• EPS: ¥157.77

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

RIX Co., Ltd. (TSE: 7525) reported FY2026 Q2 (cumulative) consolidated results under JGAAP with stable topline and resilient bottom-line performance. Revenue grew 0.7% YoY to ¥26.18bn, while operating income declined 1.2% YoY to ¥1.68bn, indicating mild margin pressure and negative operating leverage in the period. Gross profit reached ¥6.40bn, implying a gross margin of 24.4%, a reasonable level for an industrial trading/solutions business, though cost pass-through and mix likely limited incremental margin expansion. Ordinary income was ¥1.83bn, exceeding operating income by roughly ¥0.15bn, suggesting positive non-operating contributions (e.g., financial income or equity-method gains) that cushioned operating softness. Net income rose 5.3% YoY to ¥1.28bn, with EPS of ¥157.77, aided by non-operating gains and a normalized tax burden. The DuPont decomposition shows a net margin of 4.88%, asset turnover of 0.596x, and financial leverage of 1.62x, yielding a calculated ROE of 4.71%—adequate but below typical market cost of equity and likely below peer trading/distributor averages. Liquidity is strong, with a current ratio of 199% and quick ratio of 183%, underpinned by ¥32.41bn in current assets versus ¥16.28bn in current liabilities. The balance sheet is conservative: equity of ¥27.14bn against total assets of ¥43.91bn implies an equity ratio of about 61.8% (disclosed equity ratio appears unreported as 0.0%). Interest expense was minimal at ¥4.3m, supporting a very high interest coverage of ~389x. Operating cash flow was solid at ¥1.76bn (OCF/NI 1.38x), signaling healthy earnings quality and good cash conversion from profits. Free cash flow is not determinable due to unreported investing cash flows; hence FCF-based dividend coverage cannot be assessed this quarter. Working capital remained ample at ¥16.12bn, with inventories modest at ¥2.57bn, suggesting limited balance-sheet risk from stock build. Overall, results indicate steady demand, small adverse operating leverage, strong financial flexibility, and robust cash conversion, albeit with moderate ROE that may constrain valuation multiples. Data limitations exist (equity ratio, investing CF, cash balance, dividends, and share data show zeros), so the analysis focuses on disclosed non-zero metrics and internally consistent derivations (e.g., effective tax rate).

Profitability Analysis

ROE stood at 4.71% via DuPont (Net Margin 4.88% x Asset Turnover 0.596x x Leverage 1.62x), reflecting moderate profitability on a well-capitalized base. Operating margin was ~6.39% (¥1.675bn / ¥26.179bn), down slightly YoY given operating income -1.2% vs revenue +0.7%, indicating mild negative operating leverage. Gross margin was 24.4%, pointing to decent value-add but with limited upside from pricing/mix in the period. EBITDA was ¥1.904bn (EBITDA margin 7.3%), implying D&A intensity is modest (D&A ¥229m, 0.9% of sales), consistent with an asset-light trading/solutions model. The spread between operating and ordinary income (¥150m) suggests supportive non-operating items that improved pre-tax returns. Interest burden is negligible (interest expense ¥4.3m; coverage ~389x), so financial structure is not constraining margins. Overall, profitability is steady with resilient net margin aided by non-operating gains, but operating margin compression indicates costs (or mix) offset the slight revenue growth. Sustained improvement in ROE will likely require higher asset turnover (working capital efficiency) and/or structurally higher operating margins.

Growth Assessment

Topline grew 0.7% YoY to ¥26.18bn, indicating stable but subdued demand. Operating income fell 1.2% YoY, suggesting limited pricing power or mix headwinds and some SG&A or cost inflation pressure. Net income rose 5.3% YoY to ¥1.28bn due to non-operating contributions and a normalized tax profile, offsetting core margin softness. With inventories at ¥2.57bn (modest relative to sales), growth appears not driven by stock build; instead, order flow and project timing likely dominate near-term revenue dynamics. Asset turnover of 0.596x suggests room to enhance efficiency (receivables and payables management) to support growth without heavy capital. EBITDA growth trails revenue given margin pressure, indicating limited operating leverage under current mix. Outlook hinges on end-market capex cycles (e.g., industrial clients), FX and commodity pass-through, and the cadence of higher-margin solution sales. Near-term growth sustainability looks steady but not accelerating; focus should be on gross margin mix, SG&A discipline, and deepening value-add to lift operating profit growth above revenue growth.

Financial Health

Total assets were ¥43.91bn and equity ¥27.14bn, implying an equity ratio of ~61.8% (the disclosed 0.0% is an unreported placeholder). Total liabilities were ¥17.76bn (liabilities-to-equity ~0.65x), underscoring a conservative capital structure. Current assets of ¥32.41bn vs current liabilities of ¥16.28bn produce a current ratio of 199% and quick ratio of 183%, indicating strong liquidity. Working capital was ¥16.12bn, providing ample buffer for order and project execution. Interest expense was only ¥4.3m, and interest coverage was ~389x, reflecting minimal financial risk from borrowing. With strong equity and low effective leverage, solvency risk is low. The absence of reported cash and cash equivalents in the dataset (0) is an unreported item; nevertheless, liquidity ratios derived from other line items appear robust.

Cash Flow Quality

Operating cash flow was ¥1.76bn, 1.38x net income, indicating solid cash conversion and limited accrual build in the period. The OCF margin was ~6.7% (¥1.76bn / ¥26.18bn), consistent with reported operating profitability. Working capital management appears effective, with inventories modest at ¥2.57bn and no sign of cash drain from inventory accumulation; receivables/payables detail is not disclosed, but OCF/NI >1.0x suggests healthy collections and/or payables discipline. D&A of ¥229m supports that earnings are not heavily dependent on non-cash items. Free cash flow cannot be computed as investing cash flows are unreported (shown as 0). Similarly, the cash balance is unreported (shown as 0). Given these constraints, cash earnings quality is judged good based on OCF relative to NI, but full FCF evaluation and reinvestment intensity assessment (capex, M&A) are not possible this quarter.

Dividend Sustainability

Dividend disclosures show DPS and payout ratio as 0.0%, which we treat as unreported rather than actual zero. EPS for the half-year was ¥157.77, and OCF was ¥1.76bn, but without investing cash flows and actual dividend outlay, we cannot compute FCF coverage. Historically for similar profiles, strong liquidity and low interest burden can support stable dividends, but confirmation requires actual DPS policy and capex needs. For now, payout ratio assessment and FCF coverage are not determinable due to missing dividend and investing CF data. Policy outlook remains unknown in this dataset; we would look for management guidance on full-year DPS, payout ratio targets, and capital allocation priorities.

Risk Assessment

Business Risks:

• End-market cyclicality in industrial capex and manufacturing demand impacting order intake
• Gross margin sensitivity to product/service mix and pricing power against supplier cost movements
• Project timing risk affecting quarterly revenue recognition and operating leverage
• Supply chain availability and lead-time volatility for key components and equipment
• FX exposure on imported equipment and overseas transactions (pass-through effectiveness)
• Customer concentration risk typical of B2B industrial solution providers

Financial Risks:

• Working capital collection risk given trading model (receivables concentration and credit risk)
• Potential inventory obsolescence in specialized equipment (though current inventory is modest)
• Reinvestment visibility risk due to unreported investing cash flows (capex/M&A commitments unknown)
• Tax rate variability; effective tax estimated around low-30% but not explicitly disclosed
• Data limitations on cash balances and equity ratio disclosures complicate granular liquidity analysis

Key Concerns:

• Moderate ROE at 4.71% may trail peer benchmarks and cost of equity
• Negative operating leverage this quarter (OP -1.2% YoY vs sales +0.7%) indicates margin pressure
• Incomplete disclosure in this snapshot (investing CF, cash, DPS) constrains FCF and payout analysis

Investment Implications

Key Takeaways:

• Stable topline with slight margin compression; operating leverage negative in the period
• Non-operating gains supported ordinary and net income, improving bottom-line resilience
• ROE at 4.71% reflects moderate profitability on a strong equity base; efficiency uplift needed
• Liquidity and solvency are strong, with ~62% equity ratio and near-2.0x current ratio
• Cash conversion is healthy (OCF/NI 1.38x), but FCF unknown due to missing investing CF
• Interest burden is negligible; capital structure headroom remains ample

Metrics to Watch:

• Gross margin trend and mix of higher-value solutions/services
• SG&A ratio and operating margin progression
• Order intake/backlog and book-to-bill for forward visibility
• Working capital efficiency (DSO, DPO, inventory days) and OCF/NI consistency
• ROE trajectory (asset turnover and margin components) versus peer set
• Actual DPS, payout ratio, and full-year FCF once investing CF is disclosed
• Effective tax rate (estimated ~31%) stability

Relative Positioning: Compared with small/mid-cap industrial trading and solutions peers on the TSE, RIX exhibits stronger-than-average balance sheet strength and liquidity, solid cash conversion, but a middling ROE and modest operating margins; improving mix and efficiency would be key to closing the profitability gap.

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