Hakudo Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥32.70B
• Operating Income: ¥1.00B
• Net Income: ¥1.22B
• EPS: ¥60.25

Income Statement

Balance Sheet

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

Hakudo Co., Ltd. (76370) reported FY2026 Q2 consolidated results under JGAAP showing resilient topline but pronounced margin compression. Revenue grew 0.7% YoY to ¥32.70bn, indicating stable demand and/or price pass-through in a subdued industrial backdrop. Gross profit was ¥5.19bn, delivering a gross margin of 15.9%, which remains reasonable for a metal/materials distributor but suggests tighter spreads versus the prior year. Operating income fell 36.0% YoY to ¥1.01bn, with an operating margin of 3.1%, implying negative operating leverage from either lower gross spread per unit or higher SG&A burden. Ordinary income reached ¥1.09bn, slightly above operating profit, indicating non-operating gains (e.g., FX or financial income) partially offsetting weaker core profitability. Net income declined 44.1% YoY to ¥0.68bn, with a net margin of 2.09%, reflecting tougher pricing and cost dynamics. DuPont analysis yields ROE of 2.88% (net margin 2.09% × asset turnover 0.781 × financial leverage 1.77), signaling lower equity productivity due to compressed profitability rather than asset efficiency or leverage. The balance sheet remains solid: total assets ¥41.89bn, equity ¥23.73bn, and liabilities ¥20.99bn, implying a conservative capital structure; management appears to prioritize balance sheet strength. Liquidity is healthy with a current ratio of 167.4% and a quick ratio of 107.7%, supported by sizable current assets of ¥35.03bn and working capital of ¥14.11bn. Inventories stand at ¥12.49bn (about 35.7% of current assets), highlighting exposure to commodity price swings and working capital absorption typical for the business model. Cash flow statements and several line items (e.g., depreciation, interest expense, cash and equivalents) were not disclosed in the provided dataset; zeros represent unreported values, not actual zero. As a result, cash flow quality and coverage ratios cannot be quantitatively assessed this quarter from the given data. Dividend information is also unreported; therefore payout analysis relies on earnings capacity and balance sheet rather than actual distributions. Overall, the quarter demonstrates solid revenue resilience but material margin headwinds and lower ROE, with non-operating gains helping at the ordinary income level. The company remains liquid and moderately levered, positioning it to navigate inventory and cycle risks. Going forward, the key focus will be on gross spread recovery, SG&A discipline, and normalization of working capital to support free cash flow.

Profitability Analysis

ROE of 2.88% is driven by: net profit margin 2.09%, asset turnover 0.781x, and financial leverage 1.77x. The primary drag is margin compression rather than asset efficiency or leverage. Gross margin is 15.9%, and operating margin is approximately 3.1% (¥1.005bn / ¥32.699bn), indicating a large gap between gross and operating levels; this suggests elevated SG&A ratio or reduced gross spreads YoY. Ordinary margin of about 3.3% (¥1.087bn / ¥32.699bn) indicates modest non-operating tailwinds. Net margin at 2.09% is thin but typical for distributors; YoY decline in net profit (-44.1%) versus modest revenue growth implies negative operating leverage. The implied effective tax burden appears elevated if we compare reported income tax (¥554m) to an inferred pre-tax figure, though exact pre-tax income is not disclosed; caution is warranted interpreting tax rates due to data limitations and possible extraordinary items. EBITDA, D&A, and interest expense were not disclosed in the dataset; hence EBITDA margin and interest coverage shown as 0.0%/0.0x should not be interpreted as actual figures. Overall, profitability deterioration is most likely due to narrower gross spreads (commodity price normalization and mix) and/or higher overheads, with limited price-cost pass-through leverage.

Growth Assessment

Revenue increased 0.7% YoY to ¥32.70bn, implying stable shipment volumes and/or pricing in a mixed demand environment. Profit contraction (operating income -36.0% YoY; net income -44.1% YoY) indicates that growth is not translating into earnings, pointing to weaker gross spread and/or higher operating costs. Ordinary income exceeding operating income signals some support from non-operating items, but core earnings momentum is soft. Given the distribution-centric model, revenue sustainability hinges on underlying industrial activity (machinery, automotive, electronics) and commodity price levels for non-ferrous metals. Margin sustainability will depend on inventory valuation effects, procurement terms, and the ability to adjust selling prices amid input volatility. Without disclosed cash flow data, we cannot confirm whether working capital absorbed cash to support revenue; however, inventory remains sizable at ¥12.49bn, which can suppress near-term free cash flow if turnover slows. Short-term outlook is cautious: stable sales with pressure on operating margins until spreads recover or SG&A is recalibrated. Medium-term normalization is possible if commodity prices stabilize and demand improves, allowing better price-cost alignment.

Financial Health

Total assets ¥41.89bn, liabilities ¥20.99bn, and equity ¥23.73bn reflect a conservative balance sheet; the reported equity ratio of 0.0% is unreported, but a simple equity/asset calculation suggests approximately 56.7%. Liquidity is strong: current ratio 167.4% and quick ratio 107.7%, underpinned by current assets of ¥35.03bn and current liabilities of ¥20.92bn. Working capital stands at ¥14.11bn, providing an ample buffer for operations but tying up capital in inventory and receivables. Leverage appears moderate with a liabilities-to-equity measure of about 0.88x; specific interest-bearing debt was not disclosed in the dataset. Solvency risk looks contained given the equity cushion and liquid asset base. The primary balance sheet sensitivity is inventory valuation and turnover, which can impact both liquidity and earnings through gross margin and potential write-downs.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed in the provided data (zeros indicate unreported), so quantitative assessment of OCF/NI and free cash flow cannot be performed this quarter. Given the business model, working capital swings (especially inventory and receivables) are typically the largest driver of OCF volatility. The sizable inventory balance (¥12.49bn) suggests potential cash absorption if turnover slowed in the period; conversely, de-stocking could release cash in subsequent quarters. Earnings quality is mixed: net income fell sharply despite stable revenue, implying weaker underlying unit economics; absent OCF data, we cannot confirm accrual intensity. Capex intensity is usually modest for distribution; however, lack of D&A disclosure limits triangulation of maintenance capex needs. Key to cash flow quality in coming quarters will be inventory management, receivables collection, and discipline on purchasing during price declines.

Dividend Sustainability

Dividend per share, payout ratio, and free cash flow coverage were not disclosed in the dataset; thus, we cannot assess actual distributions or coverage quantitatively for this period. From an earnings capacity perspective, H1 net income of ¥683m offers potential capacity to fund dividends, but the sharp YoY decline and missing cash flow data argue for caution in inferring sustainability. Balance sheet strength (equity ~¥23.73bn, healthy liquidity) supports optionality for dividends even in softer earnings conditions. Sustainability will depend on: (1) stabilization of operating margins, (2) maintaining positive operating cash flow after working capital, and (3) limited capex requirements. Any formal dividend policy (e.g., payout target or DOE) was not provided; future commentary from management will be important for visibility.

Risk Assessment

Business Risks:

• Commodity price volatility affecting gross spreads and inventory valuation (non-ferrous metals).
• Demand sensitivity to industrial end-markets (machinery, automotive, electronics).
• Negative operating leverage when volumes or spreads contract due to a largely fixed SG&A base.
• Supplier and customer concentration risks common in distribution models.
• FX fluctuations impacting procurement costs and non-operating income.
• Inventory obsolescence or write-down risk in prolonged price declines.

Financial Risks:

• Working capital absorption reducing operating cash flow during slower turnover periods.
• Potential mismatch between earnings and cash generation due to inventory and receivables cycles.
• Exposure to interest rate changes if interest-bearing debt exists (not disclosed in the dataset).
• Tax burden variability given discrepancies between ordinary income and inferred pre-tax income.

Key Concerns:

• Material YoY decline in operating and net income despite stable revenue.
• Thin net margin (2.09%) and reduced ROE (2.88%) highlighting profitability pressure.
• Lack of disclosed cash flow data this quarter limits visibility on earnings quality and FCF.

Investment Implications

Key Takeaways:

• Topline is stable (+0.7% YoY) but profitability deteriorated materially (OP -36% YoY).
• ROE compressed to 2.88%, primarily due to margin pressure rather than asset efficiency.
• Balance sheet and liquidity remain solid, providing resilience amid cyclical headwinds.
• Ordinary income exceeded operating income, suggesting some non-operating support.
• Working capital—especially inventory—remains the key swing factor for cash flow.

Metrics to Watch:

• Gross margin and operating margin trajectory versus prior year/quarter.
• Inventory turnover days and inventory-to-sales ratio.
• SG&A ratio to sales and evidence of cost control.
• OCF/Net income and free cash flow once cash flow data are disclosed.
• Ordinary income composition (FX gains/losses, financial income/expenses).
• Commodity price trends (aluminum, copper) and pass-through timing.

Relative Positioning: Within TSE-listed industrial distributors and non-ferrous metal suppliers, Hakudo exhibits typical low-margin characteristics with moderate leverage and strong liquidity. Current profitability is below recent levels, but balance sheet strength is comparatively supportive versus peers during down-cycles.

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