Noritsu Koki Co.,Ltd. FY2026 Q2 Earnings Report

Quick View

Executive Summary

Both revenue and profit increased significantly, with operating income growth notably outpacing revenue growth, representing the most important point of the current period. Revenue was ¥825.0B (¥558.1B in the previous year, +47.8%), operating income was ¥182.9B (¥111.0B in the previous year, +64.7%), profit before tax was ¥184.8B (¥106.5B in the previous year, +73.4%), and net income attributable to owners of the parent was ¥124.0B (¥72.6B in the previous year, +70.9%). The primary drivers of revenue growth were solid growth in Audio Equipment Peripherals and rapid expansion in Parts Materials, including contributions from M&A. Profit growth was attributable to the scaling effect on SG&A expenses accompanying revenue expansion and the increased mix of high-margin segments.

Factors Behind Earnings Changes

【Revenue】Revenue was ¥825.0B, representing a significant year-on-year increase of +47.8%. By segment, Audio Equipment Peripherals remained the mainstay business at ¥611.1B (74.1% of total revenue, +21.9%), while Parts Materials expanded rapidly to ¥213.8B (25.9% of total revenue, +275.3%). The growth in Parts Materials appears to have been driven largely by the contribution from newly consolidated subsidiaries, with inorganic growth lifting the overall revenue growth rate.

【Profit and Loss】Operating income was ¥182.9B (+64.7%), and the operating margin improved to 22.2%, up +230bp from approximately 19.9% in the previous year. Segment margins were both high, at 29.1% for Audio Equipment Peripherals and 24.3% for Parts Materials, with the dilution of fixed costs accompanying revenue growth contributing to margin improvement. The gross margin was 49.7%, slightly below approximately 50.5% in the previous year, but this was offset by efficiencies at the operating income level. Against profit before tax of ¥184.8B, net income was ¥124.0B, implying an effective tax rate of approximately 32.9%, broadly in line with the previous year. No structural distortion was observed in the gap between ordinary income and net income. In conclusion, the company achieved higher revenue and profit, and profit growth exceeding the revenue growth rate demonstrates the high quality of top-line growth.

Segment Analysis

Audio Equipment Peripherals is the core business, generating the majority of company-wide profit, with revenue of ¥611.1B (+21.9%), operating income of ¥178.0B (+38.7%), and a margin of 29.1%. Parts Materials grew rapidly, with revenue of ¥213.8B (+275.3%), operating income of ¥51.9B (+295.7%), and a margin of 24.3%, apparently benefiting from the expansion of the consolidation scope through M&A. Both segments secured high margins in the 20% range, and earnings sources are diversified while dependence on a single business is being reduced.

Key Financial Indicators

【Profitability】The operating margin improved to 22.2% (approximately 19.9% in the previous year), while the net margin improved to 15.0% (approximately 13.0% in the previous year), with fixed-cost leverage accompanying revenue growth taking effect. 【Cash Flow Quality】Operating CF of ¥115.4B was approximately 0.93 times net income of ¥124.0B, an overall favorable level. However, the operating CF-to-EBITDA ratio was only 0.54 times EBITDA (approximately ¥214B), as corporate income tax payments of ¥55.5B and an increase in inventories constrained cash conversion. 【Investment Efficiency】ROE was 5.3% (not annualized, as of Q2), while total asset turnover was approximately 0.23 times, with the increase in assets from M&A weighing on asset turnover. 【Financial Soundness】The equity ratio was 63.4% (down from 75.7% in the previous year), remaining relatively robust. However, short-term borrowings surged to ¥782.6B while long-term borrowings were compressed to ¥2.4B, resulting in a significant short-term bias in the debt structure.

Cash Flow Analysis

Operating CF was ¥115.4B (up +53.4% year on year), broadly corresponding to net income of ¥124.0B. However, corporate income tax payments of ¥55.5B and a ¥6.0B increase in inventories partially constrained cash generation. Investing CF recorded a substantial outflow of -¥838.4B, primarily due to expenditures for the acquisition of subsidiaries, resulting in free CF (operating CF + investing CF) of -¥723.0B. Financing CF was positive at ¥388.2B, with funding through short-term borrowings providing financing for investment activities. Shareholder returns consisting of dividend payments of ¥39.7B and share repurchases of ¥30.1B could not be fully funded by internally generated cash, indicating increased dependence on external financing.

Quality of Earnings

Current-period profit was primarily generated by recurring business activities, with limited impact from temporary factors such as extraordinary gains and losses. Among non-operating items, the contribution from equity-method investment income of ¥0.5B was small, and no structural distortion was observed in the flow from profit before tax of ¥184.8B to net income of ¥124.0B after deducting corporate income taxes of ¥60.7B. On the other hand, the operating CF-to-EBITDA ratio (approximately 0.54 times) was weaker than net income growth (+70.9%). The absorption of working capital, including the increase in inventories and corporate income tax payments, delayed the conversion of earnings into cash, which should be noted when assessing earnings quality.

Earnings Forecast and Guidance

Progress against the full-year plan was 49.2% for revenue, at ¥825.0B/¥1,676.0B, broadly consistent with the standard first-half progress rate of 50%. In contrast, operating income reached 70.4%, at ¥182.9B/¥260.0B, and net income reached 73.8%, at ¥124.0B/¥168.0B. Both had exceeded 70% of the plan by the end of the first half, representing significantly front-loaded progress on the profit side. This divergence indicates the realization of high margins in the first half and the early emergence of M&A effects, while also suggesting that the full-year plan may have been set conservatively, incorporating investments, expense recognition, and seasonality in the second half. The company has not revised its earnings forecast and continues to maintain its current full-year plan.

Shareholder Returns

The interim dividend was ¥37, or ¥36.67 after taking the stock split into account, and the full-year dividend is planned at ¥75 (¥73.67 after taking the stock split into account). Based on interim dividend payments totaling approximately ¥39.7B against first-half net income of ¥124.0B, the payout ratio was approximately 32.5%. Assuming the company’s full-year net income plan of ¥168.0B, the full-year payout ratio is expected to be around 50%. In the first half, the company conducted share repurchases of ¥30.1B in addition to dividends of ¥39.7B, resulting in a total return ratio of approximately 56% of first-half net income. Since free CF was substantially negative as of the first half, shareholder returns for the time being are structured to depend on cash on hand and borrowings.

Risk Factors

1. Refinancing and Maturity Concentration Risk: While short-term borrowings surged to ¥782.6B, long-term borrowings were compressed to ¥2.4B, resulting in an extremely high proportion of short-term debt within interest-bearing liabilities. Cash and cash equivalents of ¥649.5B are insufficient to cover the full amount, making the smooth execution of refinancing a key funding issue.

2. Goodwill and Intangible Asset Impairment Sensitivity: Goodwill increased to ¥1,153.8B (31.4% of total assets and 49.6% of equity), while intangible assets increased to ¥854.0B (23.3% of total assets). The expansion of the consolidation scope through M&A has had a significant impact on the balance sheet structure. If the realization of synergies does not proceed as planned, impairment risk could materialize.

3. Declining Cash Conversion Efficiency: Operating CF of ¥115.4B was 0.93 times net income of ¥124.0B, while it was only 0.54 times EBITDA. Increases in inventories and corporate income tax payments have placed pressure on working capital, and the expansion of working capital requirements during a period of revenue growth may continue.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The company’s operating margin and net margin both substantially exceed the industry median, placing its profitability at a high level within the industry.

Growth and Capital Efficiency

The revenue growth rate exceeded four times the industry median, representing an outstanding growth pace within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Operating income growth of +64.7% and net income growth of +70.9% exceeded revenue growth of +47.8%, while the operating margin improved by +230bp to 22.2%. Fixed-cost leverage accompanying revenue growth and the increased mix of high-margin segments were behind the improvement in profitability.

2. Progress against the full-year plan was significantly front-loaded, with revenue at 49.2% compared with operating income at 70.4% and net income at 73.8%. The company has maintained its earnings forecast. The degree of expense and investment smoothing and the presence or absence of seasonality in the second half will be key points to monitor in future earnings releases.

3. Short-term borrowings surged to ¥782.6B, while long-term borrowings were compressed to ¥2.4B, substantially skewing the maturity structure of interest-bearing liabilities toward the short term. Together with the increase in the goodwill ratio, at 31.4% of total assets, this change in the financial structure is a notable balance sheet characteristic.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,021–¥2,137 at ±1% for the cost of equity, and ¥2,074–¥2,080 at ±0.1 for ω.

Notes:

• Since net income progress against the full-year forecast is 74%, exceeding the standard level of 50%, forecast EPS has been adjusted upward within a maximum range of +10% (because companies progressing ahead of plan tend to outperform forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Since forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Goodwill represents a high proportion of net assets, and the assumptions would change significantly if impairment were recognized.
• Net assets as of the quarter-end have been used; there is a timing difference from the full-year forecast.

（Calculation Model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest Rate Reference Month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee the future share price）

---

This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

---End of Report---