Citizen Watch Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥159.25B
• Operating Income: ¥12.99B
• Net Income: ¥12.36B
• EPS: ¥48.70

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

Citizen Watch Co., Ltd. reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth with steady operating execution. Revenue reached ¥159.25 billion, up 1.7% YoY, indicating resilient demand across watches and devices despite a mixed macro backdrop. Gross profit of ¥67.75 billion translates to a robust gross margin of 42.5%, suggesting stable pricing and/or favorable mix effects. Operating income was ¥12.99 billion, up 5.3% YoY, with an operating margin of approximately 8.1%, reflecting cost discipline and operating leverage. Ordinary income (¥16.20 billion) exceeded operating income, implying net positive non-operating contributions (e.g., financial income or FX gains) more than offsetting minimal interest expense. Net income came in at ¥11.88 billion, down 3.3% YoY, likely due to higher taxes and/or non-controlling interests despite stronger operating results. EBITDA was ¥19.63 billion, producing a 12.3% margin, consistent with a capital-light profile relative to heavy industrial peers. Cash generation was solid with operating cash flow of ¥13.40 billion, exceeding net income (OCF/NI = 1.13), supporting earnings quality. The balance sheet appears strong: total assets were ¥431.25 billion, equity ¥271.61 billion, and liabilities ¥151.41 billion, implying a healthy implied equity ratio near 63% and financial leverage of 1.59x. Liquidity is ample with a current ratio of 351% and quick ratio of 272%, underpinned by ¥271.95 billion of current assets and working capital of ¥194.40 billion. Interest coverage is exceptionally high at about 84x, signaling negligible financial strain from debt servicing. Inventory stands at ¥61.0 billion; without prior-period context, inventory turns cannot be assessed, but the strong quick ratio tempers near-term working capital risk. Dividend information is not disclosed for the period (DPS and payout shown as zero are placeholders), so distribution policy cannot be inferred from the data provided. Free cash flow cannot be reliably calculated due to missing investing cash flow data and undisclosed capex. Reported DuPont metrics indicate a calculated ROE of 4.37% driven by a 7.46% net margin, 0.369x asset turnover, and 1.59x financial leverage. Overall, the company demonstrates healthy profitability, solid cash conversion, and a conservative balance sheet, though net income softness and limited disclosure on investments, cash, and dividends constrain full visibility.

Profitability Analysis

ROE_decomposition: Calculated ROE is 4.37%, consisting of a 7.46% net profit margin, 0.369x asset turnover, and 1.59x financial leverage (assets/equity ≈ 431.25/271.61). The ROE profile indicates returns are primarily margin-driven rather than asset intensity or leverage. margin_quality: Gross margin of 42.5% reflects solid pricing and product mix in watches and devices. Operating margin is approximately 8.1% (¥12.986b / ¥159.25b), up YoY given operating income growth outpacing sales. Ordinary margin is 10.2%, supported by positive non-operating items. Net margin is 7.46%; the delta from ordinary to net likely reflects taxes and minority interests. operating_leverage: Operating income grew 5.3% YoY on 1.7% revenue growth, indicating positive operating leverage from cost control and scale benefits. EBITDA margin at 12.3% versus operating margin at 8.1% is consistent with moderate D&A intensity (D&A ¥6.64b). Interest burden is minimal (interest expense ¥0.154b; coverage ~84x), so leverage is not a driver of earnings.

Growth Assessment

revenue_sustainability: Revenue grew 1.7% YoY to ¥159.25b, suggesting stable core demand. Sustainability will depend on watch ASP/mix, geographic recovery, and OEM/device demand resilience. profit_quality: Operating income rose 5.3% YoY and ordinary income exceeded operating income, implying supportive non-operating contributions and disciplined costs. Net income declined 3.3% YoY, likely due to a higher effective tax burden and/or minority interests. outlook: With high gross margins and strong liquidity, the company is positioned to navigate macro variability. Key drivers ahead include consumer demand for mid-to-high-end watches, currency impacts on exports and procurement, and component/device orders from industrial customers. Absent visibility on capex and investment CF, scaling initiatives and growth capex pace remain unclear.

Financial Health

liquidity: Current ratio 350.7% (CA ¥271.95b vs. CL ¥77.55b) and quick ratio 272.0% indicate ample short-term coverage. Working capital is ¥194.40b, providing a significant buffer. solvency: Debt burden appears low with debt-to-equity of ~0.56x when approximated as total liabilities/equity (¥151.41b/¥271.61b). Interest coverage is ~84x, highlighting very low financial risk from interest. capital_structure: Implied equity ratio is approximately 63.0% (equity/assets), despite the reported 0.0% placeholder. Financial leverage of 1.59x is conservative, indicating a strong capitalization.

Cash Flow Quality

earnings_quality: OCF/Net income is 1.13, indicating earnings are largely cash-backed. Depreciation and amortization (¥6.64b) support non-cash add-backs consistent with EBITDA. FCF_analysis: Free cash flow cannot be reliably computed because investing cash flow is unreported (shown as zero placeholder). Without capex disclosure, FCF coverage of dividends cannot be assessed. working_capital: Inventories totaled ¥61.0b; with no prior period data, changes in inventory and receivables are unknown. However, the strong quick ratio suggests limited immediate liquidity risk from working capital.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is shown as 0.0% and DPS at ¥0.00, which likely reflects non-disclosure for the interim period rather than an actual zero dividend. Based on EPS of ¥48.70, a sustainable payout would depend on normalized FCF and policy, neither of which is disclosed here. FCF_coverage: Unable to assess due to missing investing cash flows/capex. OCF coverage of potential dividends appears comfortable qualitatively, given OCF of ¥13.40b and modest interest burden, but this lacks capex context. policy_outlook: No policy guidance provided in the data. Historically, Japanese manufacturers often target stable dividends with opportunistic buybacks; however, we cannot infer Citizen’s specific stance from the provided figures.

Risk Assessment

Business Risks:

• Demand cyclicality in consumer timepieces and discretionary spending.
• Currency fluctuations affecting export competitiveness and procurement costs.
• Channel and geographic exposure, including China and Europe consumer trends.
• Product mix risk between premium watches and lower-margin categories.
• Dependence on OEM/device orders in the Devices and Components segment.
• Brand competitiveness versus global and domestic peers.
• Supply chain constraints and component availability.

Financial Risks:

• Potential working capital swings, particularly in inventories.
• Exposure to FX-related non-operating gains/losses affecting ordinary income.
• Limited visibility on capex and investment requirements due to unreported investing CF.
• Pension and other long-term liabilities not detailed in the snapshot.
• Interest rate risk is low given minimal interest expense but not fully disclosed debt composition.

Key Concerns:

• Net income decline despite stronger operating income suggests tax/minority pressure.
• Lack of investing cash flow and capex disclosure constrains FCF assessment.
• Dividend signals are unclear with DPS and payout shown as placeholders.
• Equity ratio reported as 0.0% conflicts with available balance data, indicating disclosure gaps in XBRL mapping.

Investment Implications

Key Takeaways:

• Steady top-line growth (+1.7% YoY) with stronger operating leverage (+5.3% YoY OI).
• Healthy margins: 42.5% gross, ~8.1% operating, 12.3% EBITDA.
• Strong liquidity and conservative leverage (implied equity ratio ~63%, coverage ~84x).
• Quality of earnings supported by OCF/NI > 1.0.
• Non-operating gains support ordinary income above operating income.
• Net income softness (-3.3% YoY) likely tax/minority driven.
• Limited visibility on capex, FCF, and dividends due to unreported items.

Metrics to Watch:

• Watch ASP/mix and regional sales growth trends.
• Operating margin progression and cost control initiatives.
• Capex and investing CF disclosures for FCF visibility.
• Inventory levels and cash conversion cycle dynamics.
• FX impacts on ordinary income and hedging effectiveness.
• Tax rate normalization and minority interest effects.
• Segment profitability in Devices/Components vs. Watches.

Relative Positioning: Citizen appears financially conservative with mid-to-high gross margins and moderate operating margins, positioning it competitively among Japanese watch and device peers that balance brand-driven pricing with manufacturing efficiency; however, visibility on investment intensity and capital returns lags where disclosure is incomplete.

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