TANAKA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.86B
• Operating Income: ¥518M
• Net Income: ¥334M
• EPS: ¥41.32

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

FY2026 Q2 results were a modest beat on top-line with softer margin performance, resulting in only slight earnings growth. Revenue rose 7.4% YoY to 198.62, outpacing operating income growth of 4.4% to 5.18 and virtually flat net income at 3.34 (+0.1% YoY). Gross profit was 29.91, implying a gross margin of 15.1%. Operating margin stood at 2.61%, and net margin at 1.68%. Based on the disclosed growth rates, we estimate prior-year revenue of roughly 184.95 and operating income of 4.96, indicating operating margin compressed by about 7 bps YoY (from ~2.68% to ~2.61%). Net margin similarly compressed by roughly 13 bps YoY (from ~1.81% to ~1.68%). SG&A was 24.72 (12.45% of sales), and with operating income lagging sales growth, we infer mild cost pressure or mix deterioration. Ordinary income was 5.14 (+0.2% YoY), with non-operating items small and roughly neutral (income 0.14, expenses 0.18). Cash generation was healthy: operating cash flow reached 5.71, 1.71x net income, indicating solid earnings quality. Liquidity is adequate with a current ratio of 1.40x and quick ratio of 1.16x; leverage is moderate at D/E 0.85x and interest coverage very strong at 28.4x. However, capital efficiency remains weak: ROE is 2.2% and ROIC is 2.1%, well below a 5% warning threshold and typical corporate hurdle rates. The effective tax rate was elevated at 35.2%, a slight drag on net profitability. With short-term loans of 39.00 versus cash of 30.48 and large receivables of 75.92, working capital discipline is important but currently manageable given positive OCF. Dividend affordability appears comfortable with a calculated payout ratio of 26.4%, though DPS itself is unreported. Overall, the quarter shows stable growth with slight margin compression, solid cash conversion, and conservative financing, but persistently low returns on capital temper the quality of the result. Forward-looking, improving margin management and capital efficiency will be necessary to lift ROE/ROIC, while maintaining disciplined working capital and controlling SG&A will be key. We note several items are unreported in XBRL (e.g., DPS detail, investment CF), so conclusions rely on available non-zero data only.

Profitability Analysis

DuPont (ROE = Net Profit Margin × Asset Turnover × Financial Leverage): Reported ROE is 2.2%, decomposed as 1.7% net margin × 0.712x asset turnover × 1.85x leverage. The primary constraint on ROE is the low net margin, with only modest leverage and middling turnover. Versus last year, operating income growth lagged revenue (+4.4% vs +7.4%), implying margin pressure was the most significant driver of change; we estimate operating margin compressed ~7 bps and net margin ~13 bps YoY. Business drivers likely include tighter pricing in electrical equipment wholesaling, product mix shifts toward lower-margin items, and/or higher SG&A (e.g., personnel or logistics) outpacing gross profit gains. This margin softness appears cyclical and competitive rather than one-off, suggesting sustainability depends on pricing discipline and mix improvement; no large one-time gains are evident in non-operating items. Efficiency (asset turnover 0.712x) is typical for a distributor with large receivables/inventory, and leverage (1.85x) is moderate; neither is likely to be the immediate lever for ROE improvement. Watch for SG&A growth relative to revenue; operating leverage this quarter was negative (OP grew slower than sales), flagging cost containment as a priority.

Growth Assessment

Top-line growth of 7.4% to 198.62 is solid, likely volume-led in core distribution. Profit growth lagged (OP +4.4%, NI +0.1%), signalling margin headwinds and/or higher tax burden (35.2% ETR). Gross profit of 29.91 and EBITDA of 6.96 (3.5% margin) indicate limited operating leverage in the period. Sustainability hinges on demand from construction/electrical end-markets and ability to pass through costs. Non-operating contribution was small (net −0.04), so earnings were primarily operating-driven and recurring. Outlook: stabilization or recovery in operating margin is needed to translate revenue growth into EPS growth; discipline on SG&A and pricing/mix are the levers.

Financial Health

Liquidity is adequate: current ratio 1.40x (above 1.0x threshold, below 1.5x best-practice) and quick ratio 1.16x. No explicit warning triggers (Current Ratio is not <1.0; D/E is 0.85x, below 2.0x). Working capital of 42.65 supports operations; current assets (149.35) exceed current liabilities (106.70), mitigating near-term refinancing risk. Maturity structure shows reliance on short-term loans (39.00) versus cash (30.48), but large receivables (75.92) and inventories (25.88) provide coverage if collection cycles remain normal. Noncurrent liabilities are modest at 21.45, and long-term loans are minimal (0.29). Interest coverage is strong at 28.38x, indicating ample debt service capacity. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF of 5.71 exceeds net income of 3.34 (OCF/NI 1.71x), indicating good accrual quality and supportive working capital movement. Investing CF, capex, and FCF are unreported; thus, FCF sustainability versus dividends and capex cannot be precisely assessed. Financing CF was −2.56, suggesting net repayment or dividends, but dividend cash out is unreported. No obvious signs of working capital manipulation appear in the limited data; positive OCF alongside revenue growth is consistent with stable collections. Given distribution-heavy models, continued vigilance on receivables days is warranted to sustain OCF.

Dividend Sustainability

The calculated payout ratio is 26.4%, well within a conservative range (<60%), implying room to maintain distributions. However, DPS and total dividends paid are unreported, and FCF is not calculable due to missing investing CF/capex data. On balance, positive OCF and strong interest coverage provide capacity for dividends, but confirmation requires visibility on capex needs and any strategic investments. Policy outlook cannot be inferred from the data provided; monitor guidance and shareholder return targets.

Risk Assessment

Business Risks:

• Margin pressure in electrical equipment distribution (pricing competition, mix shifts).
• Demand cyclicality tied to construction and industrial activity.
• Execution risk on SG&A control as operating leverage turned negative.
• Supply chain/logistics cost variability affecting gross margin.

Financial Risks:

• Working capital intensity (75.92 receivables, 25.88 inventories) elevates cash conversion risk.
• Reliance on short-term loans (39.00) vs cash (30.48) introduces refinancing/rollover exposure.
• Elevated effective tax rate (35.2%) reduces net profitability.
• Low ROIC (2.1%) risks value dilution if sustained.

Key Concerns:

• Sustained sub-5% ROIC and low 2.2% ROE despite growth.
• YoY compression in operating and net margins (~7–13 bps).
• Limited disclosure on capex/FCF and dividend cash outflows.
• Potential slowdown risk in end-markets impacting receivables collection.

Investment Implications

Key Takeaways:

• Revenue growth healthy at +7.4% but profitability lagged (OP +4.4%, NI +0.1%).
• Operating and net margin compressed modestly YoY (~7–13 bps).
• Cash generation quality solid (OCF/NI 1.71x) and leverage moderate (D/E 0.85x).
• Capital efficiency weak: ROE 2.2%, ROIC 2.1% below acceptable thresholds.
• Liquidity adequate (current ratio 1.40x), but short-term debt dependence warrants monitoring.

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio trend.
• Receivables days and inventory turns (cash conversion cycle).
• Capex and investing CF to assess true FCF.
• Tax rate normalization potential.
• ROIC trajectory versus a 5–8% benchmark.

Relative Positioning: Within distribution peers, the company shows solid balance sheet resilience and cash conversion but underperforms on capital efficiency and margin scale; improving operating discipline and asset turns are needed to close 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