RIKEN KEIKI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥27.00B
• Operating Income: ¥5.52B
• Net Income: ¥3.58B
• EPS: ¥90.28

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

Riken Keiki (7734) reported FY2026 Q2 (cumulative) consolidated results with solid top-line growth but limited operating leverage. Revenue rose 12.8% YoY to ¥26,997m, while operating income was essentially flat at ¥5,516m (+0.3% YoY), indicating increased operating costs or an unfavorable mix. Gross profit reached ¥12,263m, implying a robust gross margin of 45.4%, which remains a strength for the business model. EBITDA was ¥6,468m (24.0% margin), reflecting healthy underlying profitability before depreciation. Net income increased 15.8% YoY to ¥4,147m, outpacing operating profit growth, suggesting small non-operating tailwinds and a normalized tax rate. Ordinary income of ¥5,805m sits slightly above operating income, consistent with modest net financial or other non-operating gains. Based on income tax expense of ¥1,613m and ordinary income, the implied effective tax rate is approximately 27.8%, despite the reported 0.0% placeholder. The DuPont breakdown indicates a net margin of 15.36%, asset turnover of 0.281x, and financial leverage of 1.19x, yielding an ROE of 5.12%. This ROE is modest, reflecting conservative leverage and low asset turnover rather than weak margins. The balance sheet is strong: total liabilities are only ¥15,259m against equity of ¥80,948m, indicating very low leverage and abundant headroom. Liquidity metrics (current ratio 514%, quick ratio 475%) suggest ample short-term coverage, supported by sizeable working capital of ¥48,777m. However, cash conversion was soft: operating cash flow (OCF) of ¥2,163m equates to an OCF/Net income ratio of 0.52, implying a working capital build or timing effects in H1. Interest expense is minimal at ¥25m, and interest coverage is excellent at 220x. Dividend data and cash balances are not disclosed in this dataset (zeros represent unreported, not actual zero), limiting assessment of capital return policy and net cash position. Overall, Riken Keiki demonstrates strong margins and balance sheet resilience, but limited operating leverage this period and weaker cash conversion warrant monitoring. Data limitations (notably cash, investing cash flows, and dividend details) constrain the completeness of this assessment.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 15.36%
• asset_turnover: 0.281x
• financial_leverage: 1.19x
• calculated_ROE: 5.12%
• interpretation: ROE is driven primarily by high margins and constrained by low asset turnover and conservative leverage; scope for ROE improvement lies in enhancing capital efficiency rather than taking on leverage. margin_quality:
• gross_margin: 45.4% (¥12,263m/¥26,997m)
• operating_margin: 20.4% (¥5,516m/¥26,997m)
• EBITDA_margin: 24.0% (¥6,468m/¥26,997m)
• net_margin: 15.36% (¥4,147m/¥26,997m)
• commentary: Margins remain structurally strong, underpinned by differentiated products and pricing power in gas detection; the near-flat operating profit vs. double-digit revenue growth suggests higher SG&A/R&D, mix shift, or FX effects compressed operating leverage. operating_leverage:
• YoY_revenue_growth: 12.8%
• YoY_operating_income_growth: 0.3%
• assessment: Negative operating leverage in the period; incremental revenues did not translate into commensurate operating profit, implying cost inflation or increased investment in growth and service infrastructure.

Growth Assessment

revenue_sustainability: Double-digit revenue growth indicates healthy demand across end markets for gas detection and safety equipment; sustainability will hinge on industrial activity, capex cycles in chemicals/semiconductors/energy, and international orders. profit_quality: Net income outgrew operating income, aided by small non-operating contributions and a normalized tax rate (~28% implied). Core profitability remains solid at the gross level, but higher operating expenses muted EBIT growth. outlook: With a strong order environment implied by sales growth, the key to sustaining earnings will be stabilizing SG&A intensity and improving operating leverage in H2. FX moves and product mix (portable vs. fixed systems, aftersales) will be decisive for margins.

Financial Health

liquidity:

• current_ratio: 514.4%
• quick_ratio: 474.9%
• working_capital: ¥48,776,905,000
• assessment: Exceptional liquidity with significant buffer to meet obligations; indicates low short-term refinancing risk. solvency:
• debt_to_equity: 0.19x (using total liabilities as proxy due to lack of debt breakdown)
• interest_coverage: 220.2x
• assessment: Very low leverage and negligible interest burden signal strong solvency. Equity ratio was shown as 0.0% but is undisclosed; based on totals, the implied equity ratio is high (~84%). capital_structure: Conservative, equity-heavy balance sheet (Assets ¥96.2bn, Liabilities ¥15.3bn, Equity ¥80.9bn). Capacity exists for investment or capital returns, contingent on cash holdings (not disclosed here).

Cash Flow Quality

earnings_quality: OCF/Net income = 0.52 (¥2,163m/¥4,147m) indicates weaker cash realization in H1, likely from working capital build (receivables and/or inventories) or timing of tax and bonus payments. FCF_analysis: Free cash flow cannot be reliably assessed as investing cash flows and capex are undisclosed (reported as 0 = unreported). Depreciation was ¥952m, suggesting ongoing asset base maintenance. working_capital: Current assets ¥60.55bn and inventories ¥4.64bn underscore ample buffer; however, the period’s cash conversion suggests higher receivables or inventory accumulation relative to sales. Monitor DSO/DIO trends when available.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed in this dataset (zeros are placeholders). With EPS at ¥90.28 for H1, there is theoretical capacity, but actual policy cannot be inferred. FCF_coverage: Not assessable due to missing investing cash flow and capex data; OCF alone was ¥2.16bn in H1, which is supportive but volatile with working capital. policy_outlook: The company historically maintains a conservative balance sheet; absent disclosed DPS, we cannot comment on distribution stance this year. Watch for year-end guidance and capital allocation commentary.

Risk Assessment

Business Risks:

• Demand cyclicality in industrial, energy, and semiconductor end-markets affecting project-based orders
• FX volatility impacting export competitiveness and translation of overseas earnings
• Product mix shifts (portable vs. fixed systems, maintenance) affecting margins
• Supply chain constraints and component lead times impacting deliveries and costs
• Regulatory and certification requirements by region increasing time-to-market
• Competition from global safety equipment manufacturers pressuring pricing
• Geopolitical and China-related demand uncertainties

Financial Risks:

• Working capital swings reducing cash conversion (as seen in OCF/NI of 0.52)
• Potential inventory obsolescence given technical product cycles
• Concentration of cash or deposits (cash balance not disclosed here) and interest rate risk on financial assets
• Limited disclosure of interest-bearing debt composition; reliance on total liabilities proxy for leverage metrics

Key Concerns:

• Negative operating leverage despite strong revenue growth
• Weaker cash conversion in the half-year period
• Lack of disclosure on cash, investing cash flows, and dividends limits capital allocation visibility

Investment Implications

Key Takeaways:

• Top-line growth strong at +12.8% YoY with resilient gross and EBITDA margins
• Operating income essentially flat, indicating cost pressure or increased growth investment
• ROE of 5.1% constrained by low asset turnover and conservative leverage, not weak margins
• Liquidity and solvency are exceptionally strong; balance sheet flexibility is high
• Cash conversion weaker in H1 (OCF/NI 0.52), likely due to working capital build
• Dividend and FCF visibility limited due to unreported cash and investing flows

Metrics to Watch:

• OCF/Net income and working capital metrics (DSO, DIO, DPO)
• SG&A ratio and operating leverage in H2
• Gross margin trends and product mix
• Order backlog and book-to-bill (if disclosed)
• FX rates (USD/JPY, EUR/JPY) and regional sales mix
• Capex and R&D spending disclosures
• Cash and net cash position; any changes in capital return policy

Relative Positioning: Within Japan’s industrial safety and sensor peers, Riken Keiki exhibits above-average margins and a fortress balance sheet, but generates a modest ROE due to low leverage and asset turnover; improving capital efficiency and cash conversion could narrow the gap with higher-ROE peers.

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