KUBOTEK CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.14B
• Operating Income: ¥72M
• Net Income: ¥156M
• EPS: ¥4.96

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, Kubotek Co., Ltd. (consolidated, JGAAP) reported revenue of ¥1.14bn, down 6.0% YoY, indicating a softer demand environment or lower order intake. Gross profit was ¥543.4m, implying a solid gross margin of 47.7%, but operating income fell sharply to ¥72m (-54.5% YoY), highlighting significant operating deleverage. Ordinary income was ¥71m and net income ¥68m (-56.2% YoY), with net margin at 5.96%. The EBITDA margin of 16.7% versus operating margin of 6.3% points to a heavy depreciation and amortization burden (¥118.2m), compressing operating profitability. DuPont analysis shows ROE at 22.97%, driven more by high financial leverage (assets/equity 4.24x) and decent asset turnover (0.91x) than by margin strength, which raises sustainability questions. Interest coverage remains strong at 42x, suggesting manageable near‑term interest burden despite leverage. Liquidity appears adequate but tight, with a current ratio of 106.6% and quick ratio of 105.5%, alongside working capital of ¥91.8m. Cash flow quality is weak: operating cash flow was negative at -¥263.8m, yielding an OCF/net income ratio of -3.88, implying earnings are not converting into cash in the period, likely due to working capital outflows. The company reports no investing cash flow and negative financing cash flow (-¥244.3m), while cash and equivalents are undisclosed; free cash flow is unreported, limiting coverage analysis. Balance sheet disclosures present internal inconsistencies (e.g., reported current assets exceed total assets; total liabilities exceed total assets while equity is positive), suggesting partial disclosure or classification differences; therefore, solvency ratios derived from the provided “calculated metrics” are used as primary references. The equity ratio is shown as 0.0%, which is an undisclosed item rather than a true zero. Dividend per share is shown as ¥0.00 and payout 0.0%; this may reflect either a suspension or lack of disclosure—data is insufficient to confirm policy changes. Overall, profitability has deteriorated materially on a lower top line, cash conversion is poor, and leverage is elevated, although interest burden is currently well covered. The near‑term outlook will hinge on stabilizing revenue, reining in operating costs, and normalizing working capital. Given data limitations and inconsistencies, conclusions are based on the non‑zero metrics provided and should be interpreted with caution.

Profitability Analysis

ROE_decomposition: Reported DuPont ROE is 22.97%, composed of net profit margin 5.96% × asset turnover 0.908 × financial leverage 4.24. The primary driver is leverage (4.24x) and acceptable asset turnover, while margin is modest and under pressure YoY. margin_quality: Gross margin is healthy at 47.7%, but operating margin is only 6.3% (¥72m OI on ¥1.14bn sales), indicating high operating costs and/or increased SG&A. Net margin at 5.96% is down with earnings falling faster than revenue (-56.2% vs -6.0%). Effective tax rate is shown as 0.0% (likely a data artifact given reported income tax of ¥3.1m), so margin comparisons should focus on pre‑tax levels. operating_leverage: A 6.0% revenue decline led to a 54.5% drop in operating income, evidencing pronounced negative operating leverage (high fixed cost base). The gap between EBITDA margin (16.7%) and operating margin (6.3%) underscores a heavy D&A load that amplifies sensitivity of operating profit to revenue fluctuations.

Growth Assessment

revenue_sustainability: Revenue contracted 6.0% YoY to ¥1.14bn, suggesting weaker order inflow, pricing pressure, or timing effects. Sustained gross margin implies pricing/mix remained relatively resilient, but volume softness likely dominated. profit_quality: Profitability deterioration (OP -54.5% YoY; NI -56.2% YoY) indicates unfavorable operating leverage and possibly higher fixed costs or elevated discretionary spend. With OCF deeply negative versus positive earnings, profit quality is weak this period due to working capital outflows. outlook: Near‑term growth depends on order stabilization and cost discipline. If revenue stabilizes, operating leverage can recover margins; conversely, further top‑line pressure could disproportionately impact profits. Monitoring backlog, bookings, and SG&A control will be key; data gaps preclude detailed segment/geo outlook.

Financial Health

liquidity: Current ratio 106.6% and quick ratio 105.5% indicate marginal but positive short‑term coverage; working capital totals ¥91.8m. Cash balance is undisclosed (reported as 0), increasing uncertainty around immediate liquidity buffers. solvency: Debt‑to‑equity is high at 5.18x (from provided metrics), implying elevated balance sheet leverage. Interest coverage is strong at 42.0x, suggesting current earnings cover interest comfortably. Note: reported total liabilities vs assets and equity figures are internally inconsistent; rely on provided leverage metrics rather than raw BS totals. capital_structure: Financial leverage (assets/equity) is 4.24x, a major contributor to ROE. Given earnings volatility, high leverage heightens downside risk if operating conditions weaken further.

Cash Flow Quality

earnings_quality: OCF of -¥263.8m versus net income of ¥68.0m yields OCF/NI of -3.88, indicating poor conversion and potential reliance on working capital or timing of collections/payables. FCF_analysis: Investing CF and free cash flow are unreported (shown as 0). Given negative OCF and typical maintenance capex needs, underlying FCF is likely negative this period, but exact magnitude cannot be determined. working_capital: With inventories relatively small (¥14.6m), the OCF shortfall likely stems from receivables build or payables reduction; detailed breakdown is not disclosed. Working capital remains positive at ¥91.8m, but the cash drain raises near‑term funding considerations.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is shown as 0.0% with DPS ¥0.00; this may indicate no interim dividend or undisclosed dividends. Given negative OCF, a conservative payout would be prudent, but disclosure is insufficient to conclude policy changes. FCF_coverage: FCF coverage is shown as 0.00x due to unreported FCF; with OCF negative, true FCF coverage of any dividend would be weak this period. policy_outlook: Absent clear guidance, we assume a cautious stance on distributions until cash conversion normalizes. Monitoring board communications and full‑year guidance is essential.

Risk Assessment

Business Risks:

• Revenue volatility leading to outsized operating income swings due to high fixed cost base
• Potential pricing pressure or mix shifts despite stable gross margin
• Order timing and collection risk affecting working capital and cash conversion
• Supply chain and procurement cost variability impacting margins
• Customer concentration risk (not disclosed, but common in niche industrial/technology suppliers)

Financial Risks:

• Elevated leverage (D/E 5.18x; leverage 4.24x) increasing sensitivity to earnings downturns
• Negative operating cash flow raising short‑term funding needs
• Liquidity tightness with current ratio near 1.0x and undisclosed cash balance
• Potential covenant headroom risks if leverage or interest coverage metrics deteriorate
• Data inconsistencies in balance sheet totals complicating true solvency assessment

Key Concerns:

• Sharp decline in operating income (-54.5% YoY) on modest revenue drop
• Poor cash conversion (OCF/NI -3.88) suggesting working capital strain
• High reliance on leverage to support ROE (22.97%) rather than margin expansion

Investment Implications

Key Takeaways:

• Top line down 6.0% YoY with significant negative operating leverage
• Gross margin resilient at 47.7%, but operating margin compressed to 6.3%
• ROE 22.97% primarily leverage‑driven (4.24x) with modest net margin (5.96%)
• Cash flow quality weak: OCF -¥263.8m vs NI ¥68.0m
• Liquidity adequate but tight (current ratio 106.6%, quick ratio 105.5%)
• Interest burden currently manageable (42x coverage) despite high D/E (5.18x)
• Disclosure limitations and internal inconsistencies require caution in interpretation

Metrics to Watch:

• Bookings/backlog and YoY revenue trend
• Operating margin trajectory and SG&A ratio
• OCF and working capital movements (receivables/payables days)
• Net debt and leverage ratios; interest coverage
• Cash balance and undrawn facilities/liquidity headroom
• Dividend announcements and capital allocation guidance

Relative Positioning: Relative to typical small/mid-cap industrial/technology peers, current margins appear mid-range at the gross level but weak at the operating level, leverage is higher than average, cash conversion is below average this quarter, and interest coverage remains comparatively strong.

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