EIDAI KAKO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.59B
• Operating Income: ¥242M
• Net Income: ¥35M
• EPS: ¥111.89

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 Kako (TSE:78770) delivered a solid H1 FY2026 (Q2 cumulative) recovery with revenue of ¥4.59bn (+3.3% YoY) and a sharp improvement in profitability, evidenced by operating income of ¥242m (+180% YoY) and net income of ¥144m (+315% YoY). Gross profit reached ¥875.8m, translating to a 19.1% gross margin, indicating better price-cost dynamics versus the prior year. Operating margin improved to 5.3%, supported by disciplined operating expenses and likely easing of input costs and/or successful selling price pass-through. Ordinary income of ¥234m remained close to operating income, suggesting minimal non-operating drag and very low financing burden (interest expense ¥2.9m; interest coverage 83.4x). The DuPont profile shows a modest net margin (3.14%), low asset turnover (0.491x), and conservative leverage (assets/equity 1.32x), yielding an ROE of 2.04% for the period. Balance sheet strength is a clear positive: equity of ¥7.07bn against total assets of ¥9.35bn implies an estimated equity ratio of ~75.6% (the reported 0.0% equity ratio is an undisclosed placeholder), and liquidity is ample with a current ratio of 392% and quick ratio of 339%. Operating cash flow was ¥141m, close to net income (OCF/NI ≈ 0.98), indicating decent earnings-to-cash conversion in the half. With investing cash flows undisclosed (reported as 0) and financing outflows of ¥122m (likely debt service or other financing uses), the company remains self-funded on operations. Free cash flow cannot be assessed reliably because capex is not disclosed; the reported FCF of 0 reflects missing data, not zero spending. Dividend information is also undisclosed (DPS and payout shown as 0.00), so policy and shareholder return stance cannot be inferred from this dataset. Working capital appears well managed given the strong liquidity and limited OCF dilution; inventories stood at ¥789m, but receivables/payables details are not provided. Profit quality looks improved, but ROE remains modest due to still-low margins and asset turnover, typical for small-cap specialty chemicals. Outlook hinges on sustaining gross margin gains, stabilizing input costs (e.g., resins/solvents), and maintaining pricing power in end-markets. Overall, the company shows a conservative financial posture, improving profitability, and sound cash conversion, albeit with incomplete disclosures on capex, cash, and dividends. Data limitations (zeros for certain items) constrain deeper conclusions on capital allocation and FCF durability.

Profitability Analysis

ROE_decomposition: ROE 2.04% = Net margin 3.14% × Asset turnover 0.491 × Financial leverage 1.32. The main drag on ROE remains low asset turnover and modest net margin; leverage is conservative and not a driver. margin_quality: Gross margin 19.1% and operating margin 5.3% signal meaningful YoY recovery (OI +180% vs revenue +3.3%), implying improved price-cost spread and/or cost discipline. Ordinary margin of 5.1% is close to operating margin, indicating minimal non-operating headwinds. Net margin at 3.14% remains relatively thin but is moving in the right direction. operating_leverage: Revenue grew modestly (+3.3% YoY) while operating income rose sharply, evidencing positive operating leverage from fixed-cost absorption and expense control. EBITDA margin of 8.9% versus operating margin of 5.3% suggests D&A burden of ~3.6% of sales; further volume growth could incrementally lift margins if cost base remains contained.

Growth Assessment

revenue_sustainability: Top-line growth of 3.3% YoY is modest, likely reflecting steady demand in core end-markets. Sustainability will depend on maintaining pricing and volumes amid macro and input cost trends. profit_quality: Operating profit expansion outpaced sales, driven by margin recovery. Ordinary income close to operating income and minimal interest expense support underlying profit quality. OCF/NI at ~0.98 suggests earnings are largely cash-backed this half. outlook: Near-term outlook is cautiously positive if input costs remain stable and pricing holds. Key swing factors are raw material prices (resins/chemicals), FX on imported inputs, and end-market demand (industrial/consumer applications). Continuation of cost discipline could support further margin normalization.

Financial Health

liquidity: Current ratio 392.2% and quick ratio 339.0% indicate very strong short-term liquidity. Working capital of ¥4.33bn provides a substantial buffer. solvency: Debt-to-equity 0.37x (total liabilities/equity) reflects a conservative balance sheet. Interest coverage of 83.4x underscores minimal solvency risk. capital_structure: Estimated equity ratio ~75.6% (equity ¥7.07bn / assets ¥9.35bn). Low leverage limits financial risk but also constrains ROE uplift from leverage.

Cash Flow Quality

earnings_quality: OCF ¥141.4m vs net income ¥144.0m yields OCF/NI ≈ 0.98, indicating solid cash realization and limited working capital drag in the period. FCF_analysis: Free cash flow cannot be determined as capex is not disclosed (investing CF shown as 0 indicates unreported). EBITDA of ¥406.3m and positive OCF suggest internal capacity to fund maintenance capex, but growth capex needs are unknown. working_capital: Inventories at ¥789.3m; receivables and payables are not disclosed, limiting turnover analysis. Nonetheless, strong liquidity and OCF proximity to earnings imply manageable working capital movements.

Dividend Sustainability

payout_ratio_assessment: Payout ratio and DPS are shown as 0.0%, which indicates undisclosed items rather than actual zero payments. EPS is ¥111.89 for the half; without dividend data, payout cannot be assessed. FCF_coverage: FCF coverage is reported as 0.00x due to missing capex data, not true zero. With positive OCF, coverage of any prospective dividends would depend on actual capex and working capital needs. policy_outlook: Dividend policy is not discernible from the dataset. Given the conservative balance sheet, the company has capacity for shareholder returns, but lack of disclosure precludes conclusions on intent or stability.

Risk Assessment

Business Risks:

• Raw material price volatility (resins, chemicals) affecting gross margin
• Pricing power and competitive intensity in specialty/industrial materials markets
• Demand cyclicality in end-markets (e.g., automotive, construction, consumer goods)
• Customer concentration risk (not disclosed) typical for niche manufacturers
• Supply chain and logistics disruptions impacting lead times and costs

Financial Risks:

• Foreign exchange exposure on imported inputs (if applicable) with limited natural hedges
• Potential margin squeeze if input costs rise faster than selling price adjustments
• Limited ROE due to low asset turnover and conservative leverage
• Disclosure gaps on cash, capex, and dividends complicate assessment of FCF and capital allocation

Key Concerns:

• Sustainability of recent margin recovery given input cost uncertainty
• Low reported ROE (2.04%) despite improved earnings
• Incomplete visibility on capex and cash balances, constraining FCF analysis

Investment Implications

Key Takeaways:

• Profit recovery is real: operating income +180% YoY on +3.3% sales shows improved price-cost balance and cost control
• Balance sheet is robust with an estimated ~75.6% equity ratio and minimal interest burden
• Cash conversion is solid (OCF/NI ~0.98), but FCF cannot be verified without capex disclosure
• ROE remains modest at 2.04%, held back by thin net margins and low asset turnover
• Data limitations (capex, cash, dividends) temper confidence in long-term capital allocation assessment

Metrics to Watch:

• Gross and operating margins (target >19% and >5% respectively) to confirm sustained recovery
• OCF/NI ratio (≥1.0 over time) and disclosure of capex to gauge FCF
• Asset turnover improvement toward ~0.6x to lift ROE
• Inventory levels and turns to monitor working capital efficiency
• Input cost indices (resins) and FX rates (JPY) for margin sensitivity

Relative Positioning: Within Japan small-cap chemicals/industrial materials, Eidai Kako exhibits a stronger-than-average equity cushion and low financial risk, with improving but still modest profitability and ROE versus peers that have higher asset turnover or scale advantages.

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