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

Tanaka Shouji Co., Ltd. (76190) delivered moderate top-line and earnings growth in FY2026 Q2 on a consolidated JGAAP basis, with revenue up 7.4% year over year to ¥19.862bn and operating income up 4.4% to ¥518m. Net income was essentially flat at ¥334m (+0.1% YoY), indicating margin pressure and/or cost inflation offsetting part of the sales growth. Gross profit of ¥2.849bn implies a 14.3% gross margin, consistent with a low-to-mid teens margin structure typical for distribution-oriented models. Operating margin stood at 2.6% (¥518m/¥19.862bn), while EBITDA of ¥682.9m implies a 3.4% EBITDA margin, underscoring modest operating leverage. DuPont analysis shows ROE of 2.21%, driven by a thin 1.68% net margin, asset turnover of 0.712x, and moderate financial leverage of 1.85x. Liquidity is adequate with a 131.4% current ratio and 104.9% quick ratio, supported by ¥3.91bn of working capital. The balance sheet appears conservatively levered on a liabilities-to-equity basis (0.97x), and implied equity ratio calculated from the provided balance sheet is approximately 54%, despite the reported equity ratio field showing 0.0% (likely unreported). Cash flow from operations was negative at -¥286m, resulting in weak cash conversion this half (OCF/NI = -0.86), likely reflecting a working capital build amid growth. Interest expense remains low at ¥9.5m, yielding a very comfortable EBIT interest coverage ratio of roughly 54.5x. The effective tax burden inferred from the data is about 35% (¥180m income tax on ¥514m ordinary income), indicating the 0.0% effective tax rate in the calculated metrics is not representative. Inventory totals ¥3.30bn; given distribution exposure, inventory discipline and receivables management are key to restoring positive OCF. Dividend data fields indicate DPS and payout at 0.00; given the positive earnings, this likely reflects unreported interim dividend data rather than a confirmed policy shift. Overall, the quarter shows resilient sales momentum and stable operating performance, but cash flow quality was weak due to working capital, and ROE remains subdued. The outlook hinges on margin resilience, working capital normalization, and sustained demand. Data gaps (cash balance, capex/investing CF, share count) limit precision in per-share and FCF coverage analysis.

Profitability Analysis

ROE of 2.21% decomposes into a 1.68% net margin, 0.712x asset turnover, and 1.85x financial leverage, highlighting that profitability is constrained primarily by thin margins rather than excessive leverage. Gross margin of 14.3% supports a low operating margin of 2.6%, indicating limited pricing power and a distribution-like cost structure. EBITDA margin at 3.4% shows modest operating leverage; the small spread between EBITDA and EBIT (D&A of ¥165m) suggests limited capital intensity. Net margin stability (1.68%) alongside flat net income growth suggests that cost increases and/or sales mix offset revenue growth benefits. Interest burden is minimal (interest expense ¥9.5m), enabling strong EBIT interest coverage of ~54.5x. Effective tax rate implied is ~35% (¥180m tax on ¥514m ordinary income), consistent with typical domestic rates. Overall, profitability is steady but modest, with improvements likely contingent on better gross margin management and SG&A efficiency rather than financial leverage.

Growth Assessment

Revenue grew 7.4% YoY to ¥19.862bn, indicating healthy demand or share gains. Operating income growth of 4.4% lagged revenue growth, implying some margin compression or higher operating expenses. Net income growth was essentially flat (+0.1% YoY), pointing to pressures below the gross profit line and/or a normalized tax burden. The gross margin at 14.3% appears consistent with a distribution-centric model; sustained improvement would likely require mix upgrades, supplier terms, or price discipline. Asset turnover of 0.712x reflects efficient asset use for the sector but leaves limited room for ROE uplift without margin expansion. Profit quality is mixed: accrual earnings are steady, but cash conversion this half was weak (negative OCF), likely due to working capital investment accompanying growth. Near-term outlook depends on normalization of receivables and inventory, maintenance of gross margin, and continued sales momentum into H2; if working capital unwinds, earnings-to-cash conversion should improve.

Financial Health

Liquidity is adequate with a current ratio of 131.4% and a quick ratio of 104.9%, supported by ¥3.91bn in working capital. Total assets are ¥27.907bn against total liabilities of ¥14.582bn and equity of ¥15.092bn; this implies an equity ratio of roughly 54% (assets minus liabilities over assets), despite the 0.0% field reported. Leverage is moderate: liabilities-to-equity is 0.97x, and financial leverage (assets/equity) is 1.85x. Interest expense is low at ¥9.5m, with robust interest coverage (EBIT/interest ~54.5x), suggesting low refinancing or solvency risk in the near term. The absence of reported cash and investing cash flow limits assessment of liquidity buffers and capex flexibility; however, stable liabilities and strong coverage indicate manageable financial risk.

Cash Flow Quality

Operating cash flow was -¥285.9m versus net income of ¥334m (OCF/NI = -0.86), indicating poor cash conversion in the half, likely driven by working capital expansion (receivables and/or inventory build alongside higher sales). EBITDA of ¥682.9m versus OCF suggests a significant temporary cash drag from working capital rather than core earnings weakness. Investing CF is shown as 0, likely unreported; therefore, free cash flow cannot be reliably computed for the period. Depreciation of ¥164.9m aligns with modest capital intensity. Watch for reversal of working capital in H2 to validate earnings quality and restore positive OCF.

Dividend Sustainability

Dividend fields show DPS 0.00 and payout 0.0%, which likely indicates unreported dividend data for the interim period rather than a definitive zero-dividend policy. With positive net income and manageable leverage, capacity for distributions depends on full-year cash generation and working capital normalization. Given OCF was negative in the half and investing cash flows are unreported, FCF coverage cannot be assessed. Policy outlook remains unclear based on the provided data; monitoring full-year guidance, historical payout patterns, and year-end board resolutions is necessary.

Risk Assessment

Business Risks:

• Thin margins (gross 14.3%, operating ~2.6%) expose earnings to small changes in pricing or input costs
• Working capital intensity in a distribution model can pressure OCF during growth phases
• Potential supplier concentration and pricing power dynamics typical in trading/distribution businesses
• Demand cyclicality tied to industrial, construction, and capex cycles impacting sales volume
• Inventory obsolescence risk if product cycles or customer demand shift

Financial Risks:

• Negative OCF in the half (-¥286m) elevates reliance on balance sheet liquidity
• Subdued ROE (2.21%) may constrain internal capital generation
• Exposure to tax rate normalization (~35% effective) limiting net margin upside
• Limited visibility on cash and capex due to unreported investing CF and cash balance

Key Concerns:

• Cash conversion weakness (OCF/NI = -0.86) and need for working capital normalization
• Sustaining gross margin at 14.3% amid input cost and competitive pricing pressures
• Maintaining operating leverage given flat net income growth despite 7.4% revenue growth

Investment Implications

Key Takeaways:

• Top-line momentum solid (+7.4% YoY), but operating and net profit growth lag indicates margin pressure
• ROE of 2.21% constrained by thin net margin; leverage is moderate and not a driver
• Liquidity is adequate (current ratio 131%, quick ratio 105%); coverage strong (54.5x)
• Cash conversion weak this half; working capital likely the swing factor for H2 FCF
• Data gaps (cash, investing CF, dividends, share count) limit per-share and FCF conclusions

Metrics to Watch:

• Working capital turns (receivables days, inventory days) and OCF/NI ratio improvement toward >1.0
• Gross margin trajectory relative to input costs and pricing
• SG&A efficiency and operating margin versus prior-year H2
• Capex and investing cash flows once reported to assess true FCF
• Tax rate trends and any one-offs affecting net margin

Relative Positioning: Within distribution/trading peers, Tanaka Shouji exhibits typical low-to-mid teens gross margin, modest operating margin, and conservative leverage; its current quarter is characterized by stronger revenue growth but weaker cash conversion versus steady peers, leaving overall positioning as operationally stable but cash-flow challenged near term.

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
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