Eidai Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥35.26B
• Operating Income: ¥-118M
• Net Income: ¥-834M
• EPS: ¥-1.84

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

Eidai Sangyo Co., Ltd. reported FY2026 Q2 consolidated results under JGAAP with topline growth but continuing operating and bottom-line losses. Revenue rose 3.7% year over year to ¥35.26 billion, supported by modest volume and/or pricing resilience. Gross profit was ¥6.76 billion, implying a gross margin of 19.2%, which is positive but insufficient to cover fixed costs given the current expense base. Operating income remained in the red at ¥-118 million (flat YoY per disclosure), indicating limited operating leverage benefit from the revenue increase. Ordinary income fell to ¥-214 million, reflecting financial costs and other non-operating items weighing on results. Net income was ¥-81 million (EPS ¥-1.84), a small loss at the half-year mark, suggesting break-even remains challenging despite revenue growth. EBITDA totaled ¥1.554 billion, equating to a 4.4% EBITDA margin, which affords some cushion versus interest expense but is not translating into positive EBIT. The DuPont view shows a net margin of -0.23%, asset turnover of 0.401x, and financial leverage of 2.10x, producing an ROE of -0.19%, highlighting that thin margins are the primary drag rather than balance sheet inefficiency. Cash generation was weak: operating cash flow was ¥-6.074 billion, implying significant working capital outflows and/or timing effects; free cash flow is not disclosed and cannot be derived due to missing investing cash flow data. Liquidity on an accounting basis appears sound with current assets of ¥46.44 billion and current liabilities of ¥21.73 billion (working capital ¥24.71 billion; current ratio 213.7%), but the absence of disclosed cash and inventory balances limits interpretation of near-term cash liquidity. The capital structure shows total liabilities of ¥46.92 billion and equity of ¥41.85 billion (assets ¥87.96 billion), implying financial leverage of 2.10x and a debt-to-equity of 1.12x as presented, which is moderate for the sector but bears watching given negative OCF. Interest expense was ¥179 million; interest coverage on an EBIT basis is negative (-0.7x), consistent with operating losses, while EBITDA coverage is positive in absolute terms, indicating some capacity to service interest if working capital normalizes. The reported effective tax rate metric is 0.0%, which is not meaningful given the net loss and the presence of ¥175 million income tax expense likely driven by non-cash or non-consolidated tax items. Dividend distributions are suspended (DPS ¥0, payout 0%), appropriate given negative earnings and weak cash flow. Overall, the company shows incremental revenue progress but faces profitability and cash conversion headwinds, with margin enhancement and working capital discipline as the key levers for improvement. Data limitations (notably undisclosed cash, inventories, investing cash flows, and share count) constrain depth of ratio analysis, so conclusions focus on the available non-zero disclosures.

Profitability Analysis

ROE decomposition (DuPont): Net margin -0.23% × asset turnover 0.401 × financial leverage 2.10 = ROE -0.19% (matching reported). The negative ROE is almost entirely margin-driven, as asset turnover is moderate and leverage is not excessive. Gross margin of 19.2% indicates adequate value-add but insufficient to absorb SG&A and other fixed costs at the current revenue run-rate, resulting in EBIT margin of -0.33% (operating loss of ¥118 million on ¥35.26 billion revenue). EBITDA margin of 4.4% suggests underlying contribution before depreciation is positive; however, depreciation and amortization of ¥1.672 billion (circa 4.7% of sales) is a meaningful headwind to EBIT. Operating leverage: revenue grew 3.7% YoY but operating income was flat at a small loss, implying cost inflation or limited fixed cost absorption offsetting the topline gain. Ordinary income of ¥-214 million vs operating income of ¥-118 million reflects net financial and other non-operating burdens; interest expense of ¥179 million is material relative to EBIT, depressing ordinary results. Interest coverage: EBIT/interest is approximately -0.66x (reported -0.7x), while EBITDA/interest is approximately 8.7x, highlighting that the earnings gap is primarily at the depreciation/operating level, not cash operating contribution. Margin quality: the combination of positive gross and EBITDA margins with negative EBIT indicates either elevated fixed overhead, pricing/mix pressure, or insufficient scale; sustained price pass-through and cost control are necessary for break-even at the operating level.

Growth Assessment

Revenue increased 3.7% YoY to ¥35.26 billion, indicating modest demand resilience in the company’s building materials/interiors end-markets. The growth did not translate into operating profit improvement, suggesting either cost inflation (materials, logistics, energy) or unfavorable mix diluted contribution. Gross profit of ¥6.76 billion grew in line with sales, keeping gross margin around 19.2%; this stability implies price-cost spread has not deteriorated significantly, but overhead absorption remains a challenge. EBITDA of ¥1.554 billion (4.4% margin) provides a base for potential recovery if SG&A efficiency improves. The negative ordinary income and net loss indicate that non-operating expenses (notably interest) still outweigh operating performance. Profit quality is weak given negative OCF of ¥-6.074 billion in the half, pointing to substantial working capital consumption; until this normalizes, reported earnings (even if near break-even) will not translate into cash. Outlook hinges on demand for new housing and renovation activity, the company’s ability to pass through input costs, and inventory/receivables management; with leverage moderate but cash conversion poor, the growth path requires both margin uplift and tighter working capital discipline. Given limited disclosure on order intake and backlog, revenue sustainability cannot be confirmed from the data provided.

Financial Health

Liquidity: Current assets ¥46.443 billion vs current liabilities ¥21.729 billion yields a current ratio of 213.7% and working capital of ¥24.714 billion. The quick ratio is also presented as 213.7% due to undisclosed inventory balances; therefore, true near-term liquidity cannot be precisely assessed without cash and inventory details. Solvency: Total assets ¥87.961 billion, total liabilities ¥46.922 billion, and equity ¥41.853 billion imply financial leverage (assets/equity) of 2.10x; reported debt-to-equity is 1.12x (likely using total liabilities), indicating moderate leverage for the industry. Coverage: Interest expense ¥179 million versus EBIT of ¥-118 million gives negative EBIT coverage; however, EBITDA coverage is positive, suggesting solvency risk is manageable if cash flow stabilizes. Equity base remains sizeable, implying balance sheet capacity, but persistent negative OCF would erode flexibility over time. The reported equity ratio value is not disclosed (0.0% placeholder), but based on available balances, equity represents approximately 47.6% of assets, indicative of a reasonably capitalized balance sheet.

Cash Flow Quality

Operating cash flow was ¥-6.074 billion, a substantial outflow inconsistent with the relatively small accounting loss, indicating significant working capital consumption and/or timing effects (e.g., receivables build, inventory accumulation, or payables reduction). The OCF/Net Income ratio of 74.99 is not meaningful here because both OCF and net income are negative; it likely reflects scale rather than quality. Free cash flow cannot be assessed due to undisclosed investing cash flows (reported as zero indicates not disclosed), but given negative OCF, underlying FCF was likely negative. Depreciation and amortization of ¥1.672 billion exceeded the operating loss, showing that non-cash charges are sizable; nevertheless, cash conversion is poor due to working capital. Financing cash flow was ¥-874 million, suggesting net repayment of borrowings and/or lease/interest outflows, which, combined with negative OCF, implies cash consumption during the period. Without disclosed cash and equivalents, liquidity headroom from cash is unknown; the company likely relied on credit lines and working capital facilities. Key focus should be on normalizing receivables and inventories and aligning production with demand to restore cash generation.

Dividend Sustainability

The company paid no dividend (DPS ¥0; payout 0%), appropriate given negative net income and negative operating cash flow. With FCF not disclosed and OCF negative, FCF coverage of dividends is effectively nil; reinstatement would require a return to positive OCF and sustainable profitability. Balance sheet equity is solid, but distributing capital amid losses and cash outflows would be imprudent. Future dividend policy will likely prioritize balance sheet stability and investment in margin restoration before shareholder returns. Monitoring the path to positive EBIT and OCF is essential for any outlook on dividend resumption.

Risk Assessment

Business Risks:

• Exposure to domestic housing starts and renovation cycles impacting demand for building/interior materials
• Input cost volatility (wood, resins, adhesives, energy, logistics) challenging price pass-through
• Product mix and pricing pressure from competition in commodity-like categories
• Operational leverage risk given thin margins and high fixed costs
• Supply chain and procurement risks, including FX impacts on imported materials
• Potential project timing and seasonal demand swings affecting working capital

Financial Risks:

• Negative operating cash flow (¥-6.074 billion) stressing liquidity if sustained
• Interest burden (¥179 million) with negative EBIT leading to weak coverage
• Working capital swings (large receivables/inventory build likely) increasing funding needs
• Refinancing or covenant risk if losses persist and leverage increases
• Limited visibility on cash balances and investing cash flows due to undisclosed items

Key Concerns:

• Sustained negative OCF despite modest revenue growth
• Operating loss persistence with insufficient overhead absorption
• Ordinary loss driven by interest and non-operating items
• Data limitations on cash, inventory, and capex obscuring true liquidity and FCF

Investment Implications

Key Takeaways:

• Topline grew 3.7% YoY to ¥35.26 billion, but EBIT remained negative at ¥-118 million
• Gross margin stable at 19.2%, yet overhead and depreciation keep EBIT in the red
• Ordinary and net losses (¥-214 million and ¥-81 million) underline pressure from non-operating costs
• Operating cash flow of ¥-6.074 billion signals significant working capital consumption
• Leverage moderate (assets/equity 2.10x; D/E 1.12x), but coverage is weak on an EBIT basis
• Dividend suspended (DPS ¥0), appropriately conserving cash amid losses

Metrics to Watch:

• Gross and EBITDA margins versus input cost trends
• Operating income trajectory and EBIT break-even point
• Operating cash flow, receivables and inventory turns (days sales/inventory) as disclosed
• Interest coverage (EBITDA and EBIT) and net debt movement
• Capex intensity once investing cash flows are disclosed
• Domestic housing starts and renovation demand indicators

Relative Positioning: Within Japan’s building materials/interiors peer set, Eidai Sangyo exhibits weaker profitability and cash conversion at present despite moderate leverage, implying a need for margin restoration and tighter working capital management to close the gap with better-performing 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
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