Aichi Tokei Denki Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥27.52B
• Operating Income: ¥1.64B
• Net Income: ¥1.06B
• EPS: ¥93.08

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 Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

For FY2026 Q2, Aichi Tokei Denki (7723) delivered solid topline and stronger profit growth, with revenue of ¥27.523bn (+7.6% YoY) and operating income of ¥1.636bn (+20.4% YoY). Gross profit was ¥5.527bn, implying a gross margin of 20.1%, and operating margin expanded to roughly 5.9%, reflecting improved operating leverage. Ordinary income of ¥1.957bn exceeded operating income, indicating positive non-operating contributions (e.g., financial income/FX), while net income rose 35.0% YoY to ¥1.432bn, a 5.2% net margin. EBITDA of ¥2.135bn and minimal interest expense (¥2m) support an exceptionally high interest coverage ratio of ~818x, underscoring limited financial risk from leverage. On the balance sheet, total assets were ¥63.31bn, liabilities ¥15.93bn, and equity ¥48.37bn, implying an equity ratio around 76% (the reported 0.0% is an unreported placeholder). Liquidity appears strong: current assets of ¥38.19bn against current liabilities of ¥11.26bn yield a current ratio of ~339%, with working capital of ¥26.94bn. Operating cash flow of ¥2.619bn equates to 1.83x net income, evidencing healthy cash conversion; however, investing cash flow is unreported (shown as 0), limiting visibility into capex and true free cash flow. DuPont metrics show a net margin of 5.20%, asset turnover of 0.435x, and financial leverage of 1.31x, producing a calculated ROE of 2.96%. The modest ROE likely reflects conservative leverage and the interim period calculation; full-year ROE could be higher if profitability holds. Dividend data are not disclosed (DPS and payout shown as zero placeholders), so we infer capacity but cannot confirm policy or coverage. Share count is not disclosed, but EPS of ¥93.08 and net income of ¥1.432bn imply roughly 15.4 million shares outstanding, suggesting an estimated BVPS near ¥3,100–3,200 based on reported equity. Overall, the company shows improving profitability, robust liquidity, and low financial risk, with cash generation supporting ongoing operations. Key limitations include unreported inventories, cash balance, investing cash flows, and dividend details, which constrain depth of cash flow and payout analysis. Operationally, the step-up in operating income relative to revenue indicates positive mix/pricing or cost control, while non-operating gains enhanced ordinary income. Sustainability will hinge on demand in core metering/industrial instrumentation markets, input cost stability, and execution on smart/IoT-enabled meters. We see low solvency risk, healthy cash conversion, and improving margins, tempered by incomplete disclosures and potential cyclical exposure.

From Earnings Presentation: In Q2 FY2026 (March 2026), both revenue and gross profit reached record highs for the interim period, with strong sales of domestic gas and water-related equipment and 'Aichi Cloud' related products for LP gas. The operating profit margin improved to 5.9% (vs. 5.3% in the same period last year), although profits were partially constrained by 585 million yen in defect remediation costs for certain products. With contributions from non-operating income, ordinary profit reached 1,957 million yen (+31.9%) and net profit reached 1,432 million yen (+35.0%), achieving significant profit growth. Medium-Term Management Plan 2026 achieved all targets (sales, ordinary profit, net profit, ROE) in its first year (FY2025 March), and FY2026 March is progressing as planned. The cumulative number of 'Aichi Cloud' connections surpassed 1.4 million units as of September 2025, steadily expanding toward the target of 2 million units by March 2027. Exports of water meters to North America and ASEAN remained solid through strengthened partnerships with local partners, and market share expansion progressed in Taiwan through collaboration with local agents, while both gas and water meters struggled in China due to economic conditions. An annual dividend of 90 yen (payout ratio 37.7%) is planned, steadily increasing toward the 40% payout ratio target during the medium-term plan period. While GPT analysis pointed out non-disclosure of investment CF, inventory, and cash balances—constraints of the financial summary format—the PDF materials confirm operating profit variance factors and partial capital expenditures (tangible fixed assets +454 million yen), revealing that revenue growth, cost reductions, and selling price increases were the main drivers of operating profit growth.

Financial Analysis

Profitability

ROE_decomposition:

• net_profit_margin: 5.20% (NI ¥1.432bn / Revenue ¥27.523bn)
• asset_turnover: 0.435x (Revenue ¥27.523bn / Assets ¥63.31bn)
• financial_leverage: 1.31x (Assets ¥63.31bn / Equity ¥48.37bn)
• calculated_ROE: 2.96% (matches provided DuPont figure; interim period and low leverage constrain ROE) margin_quality:
• gross_margin: 20.1% (¥5.527bn / ¥27.523bn), stable-to-improving YoY implied by operating leverage
• operating_margin: 5.9% (¥1.636bn / ¥27.523bn), up with +20.4% YoY OI vs +7.6% revenue
• ordinary_margin: 7.1% (¥1.957bn / ¥27.523bn), boosted by favorable non-operating items
• net_margin: 5.2%, aided by low interest burden; implied tax rate low-20s%
• EBITDA_margin: 7.8% (¥2.135bn / ¥27.523bn) operating_leverage: Revenue +7.6% YoY vs operating income +20.4% indicates positive operating leverage from cost control and/or mix/pricing. D&A is modest (¥499m; ~1.8% of revenue), so incremental margins are primarily operating-cost driven. Non-operating tailwinds lifted ordinary income above operating income.

Growth

revenue_sustainability: Topline growth of +7.6% YoY is consistent with steady demand in metering/instrumentation; sustainability will depend on municipal/utilities orders, housing starts, and smart meter rollouts. profit_quality: Profit growth outpaced revenue, with operating margin expansion and minimal interest expense. Ordinary income benefitted from non-operating gains, which may be less predictable. outlook: If cost discipline and product mix persist, H2 margins can remain resilient. Key swing factors are input costs (metals/electronics), FX on components/exports, and order timing. Interim ROE is modest due to low leverage; full-year ROE should improve if current trends continue.

Financial Health

liquidity:

• current_assets: ¥38.19bn
• current_liabilities: ¥11.26bn
• current_ratio: 339%
• quick_ratio_note: Quick ratio shows as 339% because inventories are unreported (0 placeholder); true quick ratio is likely lower but still strong given large current asset buffer. solvency:
• total_assets: ¥63.31bn
• total_liabilities: ¥15.93bn
• equity: ¥48.37bn
• equity_ratio_estimate: ≈76% (equity/assets), vs reported 0.0% placeholder
• debt_to_equity: 0.33x (liabilities/equity), indicating conservative balance sheet
• interest_coverage: ≈818x (EBIT ¥1.636bn / interest ¥2m), extremely comfortable capital_structure: Low leverage with substantial equity base supports resilience and flexibility for investment. Financing CF outflow (¥741m) suggests debt repayment and/or shareholder returns, though payout specifics are undisclosed.

Cash Flow

earnings_quality: OCF of ¥2.619bn vs NI of ¥1.432bn (OCF/NI 1.83x) points to strong cash conversion and low accrual risk in the period. FCF_analysis: Investing CF is unreported (shown as 0), so capex and free cash flow cannot be reliably determined. EBITDA of ¥2.135bn and OCF strength imply capacity to fund maintenance capex under normal conditions. working_capital: Working capital is ¥26.94bn. Detailed drivers (inventories, receivables, payables) are not fully visible due to inventory non-disclosure; nonetheless, liquidity headroom appears ample.

Dividend Sustainability

payout_ratio_assessment: Dividend and payout ratio are unreported (0 placeholders). Based on NI of ¥1.432bn and strong OCF, there is capacity for dividends, but actual policy and payout levels cannot be assessed from provided data. FCF_coverage: Not measurable due to unreported investing cash flows; reported FCF of 0 is a placeholder. policy_outlook: With low leverage and robust liquidity, the company has flexibility for shareholder returns. Confirmation requires disclosure of DPS, capex plans, and capital allocation priorities.

Business Outlook

Full-year guidance maintains revenue of 57 billion yen, ordinary profit of 4.5 billion yen, and net profit of 3.3 billion yen (unchanged), expecting to achieve FY2026 March targets of Medium-Term Management Plan 2026. Core gas-related equipment shows replacement demand for household propane gas meters turning upward, with 'Aichi Cloud' related products in the LP gas sector continuing to perform well. Water-related equipment is expected to continue increasing, centered on the domestic private market and exports to North America. Instrumentation business is performing well with 36.1% revenue increase due to solid orders and projects carried over from the previous fiscal year. Going forward, the company will accelerate expansion of 'Aichi Cloud' in the LP gas market, horizontal deployment of data distribution services to city gas and water sectors, and maximization of data value through combination with AI technology. In global expansion, the company will continue strengthening partnerships in North America and ASEAN, leveraging Chinese joint venture effects, and expanding Taiwan market share, aiming for overseas sales of 5.5 billion yen in FY2027 March (+34% vs. FY2024 March). The company plans to implement a dividend of 90 yen per year with a payout ratio of 37.7%, aiming to increase the payout ratio to 40% during the medium-term plan period.

Management Guidance

Management emphasized that Q2 FY2026 March achieved 'record-high interim period' revenue and gross profit, and evaluated profitability improvements from revenue effects and favorable changes in product mix. While 585 million yen in defect remediation costs for certain products was recorded, management explained that cost reductions, selling price improvements, and revenue effects absorbed this, securing results exceeding the prior year period from operating profit onward. Management expressed confidence that the first year of Medium-Term Management Plan 2026 (FY2025 March) achieved targets for all indicators (revenue 53 billion yen, ordinary profit 4.3 billion yen, net profit 3.1 billion yen, ROE 7.0%), and FY2026 March is 'progressing smoothly' with 'prospects for achieving all indicator targets.' Regarding dividends, management clarified its stance on strengthening shareholder returns by implementing stable dividends while considering financial and investment plans, and aiming to increase the payout ratio to 40% during the medium-term plan period. For global expansion, management explained it emphasizes strengthening partnerships with regional partners and realizing functions and specifications required by each region, while promoting optimization of production systems including suppliers. Management positioned the data distribution service (Aichi Cloud) as the core of 'creating new value in the measurement field,' emphasizing expansion in the LP gas market and acceleration of horizontal deployment to city gas and water sectors.

Strategic Initiatives

• Broad deployment of 'Aichi Cloud' data distribution service: expanding as planned centered on LP gas market, active deployment to city gas and water sectors, maximizing data value through combination with AI technology
• Acceleration of global expansion: strengthening partnerships in North America and ASEAN, expanding Taiwan market share, leveraging Chinese joint venture effects, realizing functions and specifications required by each region and optimizing production systems including suppliers
• Improving convenience through integration with related services: strengthening integration between Aichi Cloud and related services
• Enhancing product competitiveness: quality improvement including defect remediation, cost reduction, selling price improvement, favorable product mix (increasing high value-added product ratio)
• Financial and capital strategy: increasing payout ratio to 40%, strengthening stable dividends and shareholder returns, building growth foundation through capital investment (production capacity expansion and optimization)

Risk Assessment

Business Risks:

• End-market cyclicality in gas/water metering and industrial instrumentation
• Timing risk on large utility/municipal orders and smart meter rollouts
• Raw material and component cost inflation (metals, semiconductors, electronics)
• Supply chain and logistics disruptions impacting delivery schedules
• Competitive pricing pressure in metering and flow measurement markets
• Technology transition risks in IoT-enabled smart meters and communications standards
• Regulatory and approval processes for utility-grade devices

Financial Risks:

• Working capital swings given project/order timing
• FX exposure on imported components and potential export sales
• Limited visibility on capex due to unreported investing cash flows
• Concentration risk if a small number of customers/utilities account for large orders

Key Concerns:

• Incomplete disclosure on inventories, cash balance, and investing cash flows limits FCF visibility
• Ordinary income reliance on non-operating gains may not be durable
• Interim ROE of 2.96% remains modest, requiring sustained margin improvement to lift returns

Risk Factors from Presentation:

• Risk of profit pressure from recording defect remediation costs for certain products (585 million yen this period)
• Struggles with gas and water meters due to economic conditions in Chinese market
• Foreign exchange rate fluctuation impact (interim period exchange rate progressed to yen appreciation from 154.5 yen in prior H1 to 146.2 yen actual in H1)
• Risk of raw material and purchased parts price increases (impact of △233 million yen in operating profit variance factors this period)
• Fixed cost increase (△233 million yen in operating profit variance factors this period)
• Risk of timing shifts due to uneven ordering periods in public and municipal demand
• Uncertainty in adoption speed of data distribution services in city gas market

Investment Implications

Key Takeaways:

• Revenue growth of +7.6% YoY paired with +20.4% YoY operating income demonstrates improving operating leverage
• Net income of ¥1.432bn and OCF of ¥2.619bn (OCF/NI 1.83x) indicate strong cash conversion
• Balance sheet is conservative: equity ratio ~76% and interest coverage ~818x
• Ordinary income above operating income signals positive but potentially non-recurring non-operating contributions
• Interim ROE 2.96% is suppressed by low leverage and the semiannual basis; potential to improve if margins hold
• Dividend policy and FCF are not assessable due to unreported DPS and investing CF

Metrics to Watch:

• Order backlog and book-to-bill in metering segments
• Gross and operating margin trajectory (cost pass-through, mix)
• Capex and investing cash flows (to assess sustainable FCF)
• Working capital movements (receivables, payables, inventory once disclosed)
• Non-operating income components (FX, securities) and sustainability
• ROE progression into H2 and full-year
• DPS/payout announcements and overall capital allocation

Relative Positioning: Within Japanese industrial measurement/ instrumentation peers, the company exhibits stronger-than-average balance sheet strength and cash conversion with moderate operating margins (~6%) and currently modest ROE due to conservative leverage; earnings momentum is positive, aided by both operating leverage and non-operating tailwinds.

Supplementary Insights (Key Highlights)

• Achieved high operating leverage with operating profit +20.4% even after recording 585 million yen in defect remediation costs
• Cumulative 'Aichi Cloud' connections surpassed 1.4 million units (as of September 2025), progressing well toward the 2 million unit target by end of 2027
• Movement toward full-scale adoption of cloud services by some customers in the city gas market
• Operating profit variance factors: revenue effect +608 million yen, cost reduction +169 million yen, selling price +332 million yen, fixed cost increase △233 million yen, defect remediation costs △585 million yen, foreign exchange etc. +23 million yen
• Payout ratio increased from 30.9% last year to 37.7% forecast this year, steadily strengthening shareholder returns toward the medium-term plan target of 40%
• Overseas sales showed strong performance with North American water meters +27.0%; Asia △7.2% due to reaction to large orders for Middle East in previous period
• Capital investment of 454 million yen in tangible fixed assets to promote production capacity expansion and optimization

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