TAKANO Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.71B
• Operating Income: ¥92M
• Net Income: ¥124M
• EPS: ¥8.17

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

Verdict: A mixed but improving quarter, with solid top-line growth and operating profit recovery, offset by very thin core margins and heavy reliance on non-operating income. Revenue rose 10.9% YoY to 107.13, demonstrating healthy demand momentum. Operating income increased 66.2% YoY to 0.92, and ordinary income climbed 60.7% to 1.73, indicating improved operating leverage despite a still-narrow margin base. Net income advanced 15.3% to 1.24, while total comprehensive income surged to 4.28, suggesting sizeable unrealized gains (likely on investment securities). Gross profit reached 25.11, implying a gross margin of 23.4%. SG&A of 24.18 essentially consumed the gross margin, leaving an operating margin of about 0.9%, highlighting limited pricing power or elevated overheads. Non-operating income of 0.83 (notably dividends 0.38 and interest 0.16) contributed materially to pretax profits, underlining earnings dependence on financial income. Basis-point precision for YoY margin changes cannot be calculated due to lack of prior-period margin data, but operating profit growth far outpaced revenue growth, implying margin expansion from a low base. Cash flow quality was strong: operating cash flow was 23.23, roughly 18.7x net income, pointing to robust collections and/or working capital release. Liquidity and solvency are very strong, with a current ratio of 506.5% and debt-to-equity of 0.16x, and interest coverage at 177.6x. Asset efficiency remains weak: asset turnover is 0.288 and ROIC is 0.3%, signaling underutilized assets (large cash/securities) relative to revenue scale. ROE stands at 0.4%, constrained by thin margins and low leverage. Capital expenditures were 6.20; with OCF of 23.23, proxy FCF appears ample even though full investing cash flows are unreported. The reported payout ratio (calculated) of 253.6% looks unsustainably high versus earnings, but dividend amounts are unreported and cash generation is strong, so further disclosure is needed. Forward-looking, sustaining revenue growth while lifting operating margin above 1% and reducing reliance on non-operating income will be key to improving ROIC and ROE. Overall, the quarter shows operational recovery and excellent cash/financial strength, but core profitability and capital efficiency remain key challenges.

Profitability Analysis

DuPont ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 1.2% × 0.288 × 1.16 ≈ 0.4%. The weakest link is asset turnover (0.288), followed by net margin (1.2%), while leverage is low at 1.16x. The component that appears to have changed most vs. revenue growth is margin (operating income +66% vs. revenue +11%), indicating operating margin expansion from a low base; precise bps cannot be computed due to missing prior-period margins. Business drivers: gross margin is 23.4% and SG&A of 24.18 nearly equals gross profit, producing a ~0.9% operating margin, so small improvements in price/mix or SG&A discipline can magnify operating income. Non-operating income (dividends/interest) of 0.83 materially augments pretax profit, cushioning thin core margins. Sustainability: reliance on financial income is repeatable but not fully controllable (market yields, investee dividends); core margin gains need to come from cost control, utilization, and pricing to be sustainable. Watch for SG&A growth relative to revenue; currently SG&A appears high versus gross profit, leaving limited operating leverage headroom unless revenue continues to scale or costs are rationalized.

Growth Assessment

Revenue growth of 10.9% YoY to 107.13 indicates solid demand recovery. Operating income grew 66.2% YoY to 0.92, implying positive operating leverage, albeit from a very low base. Ordinary income increased 60.7% to 1.73, aided by 0.83 in non-operating income (dividends and interest), indicating profit mix tilting toward financial income. Net income rose 15.3% to 1.24, with an effective tax rate of 28.2%. The growth quality is mixed: core operating profitability is thin (operating margin ~0.9%), but cash conversion is excellent (OCF/NI 18.7x). Sustainability hinges on maintaining double-digit revenue growth while lifting gross margin or curbing SG&A. Total comprehensive income at 4.28 suggests meaningful valuation gains in securities, which are non-operating and volatile; not a foundation for recurring growth. Near-term outlook depends on order intake and pricing power; with investment securities at 43.25 and cash at 97.84, the company has resources to invest in efficiency and growth initiatives. However, capital efficiency (ROIC 0.3%) must improve to sustain value creation.

Financial Health

Liquidity is very strong: current assets 223.30 vs current liabilities 44.09 yields a current ratio of 506.5% and a quick ratio of 487.0%. No warning on current ratio (<1.0) and no signs of liquidity stress. Solvency is conservative: total liabilities 51.58 vs equity 320.31 implies D/E of 0.16x, with long-term loans only 0.55; interest coverage is 177.6x. Maturity mismatch risk appears low given ample cash (97.84), receivables (66.70), and limited short-term obligations (current liabilities 44.09). Off-balance sheet obligations are not disclosed in the provided data; none can be assessed. Equity is robust with retained earnings of 262.88 supporting balance sheet resilience.

Cash Flow Quality

OCF/Net Income is 18.73x, well above the 1.0 benchmark, indicating high earnings quality this period, likely driven by working capital inflows and non-cash charges (D&A 4.27). With OCF of 23.23 and capex of 6.20, proxy FCF is approximately 17.03 (estimate; full investing CF unreported), suggesting capacity to fund dividends and investment. Sustainability: such a high OCF/NI ratio may normalize if working capital reverses; monitor receivables and payables timing. No clear signs of working capital manipulation can be confirmed from the limited snapshot, but the magnitude of OCF vs NI warrants tracking collection cycles and inventory turns in subsequent quarters.

Dividend Sustainability

Dividend details are unreported, but the calculated payout ratio of 253.6% versus net income implies potential unsustainability if accurate. However, strong proxy FCF (~17.03) indicates room to pay dividends from cash flow despite low earnings. Given ROIC at 0.3% and thin operating margins, prioritizing reinvestment to lift core profitability could be prudent, subject to stated policy. Without disclosed DPS or total dividends paid, we cannot confirm FCF coverage; additional disclosure is required. Policy outlook likely hinges on earnings normalization and the stability of non-operating income (dividends/interest).

Risk Assessment

Business Risks:

• Thin operating margins (~0.9%) with SG&A nearly equal to gross profit, leaving little buffer against demand or cost shocks
• Dependence on non-operating income (0.83) to support pretax profits, which may fluctuate with market yields and investee performance
• Low asset turnover (0.288) and ROIC (0.3%) signaling inefficient capital deployment
• Potential cyclical exposure in end markets (capital goods/office-related demand) affecting order visibility and pricing

Financial Risks:

• Valuation risk on investment securities (43.25) affecting comprehensive income and potentially equity
• Working capital reversal risk following a strong cash inflow quarter (OCF/NI 18.7x)
• Dividend sustainability risk if payout truly exceeds earnings (calculated payout 253.6%)

Key Concerns:

• Sustaining revenue growth without expanding SG&A and preserving gross margin
• Reducing reliance on dividends/interest to meet profit targets
• Improving capital efficiency to lift ROE above current 0.4%

Investment Implications

Key Takeaways:

• Top-line growth is solid (+10.9% YoY) and operating profit recovered (+66.2%) from a low base
• Core margins remain very thin; operating margin ~0.9% despite improvement
• Non-operating income materially supports earnings, raising quality/mix questions
• Cash generation is strong (OCF 23.23), balance sheet highly liquid with low leverage
• Capital efficiency is a clear weak point (ROIC 0.3%, ROE 0.4%)

Metrics to Watch:

• Operating margin progression (bps) and SG&A-to-sales ratio
• Share of non-operating income in pretax profit
• OCF/Net income normalization and working capital movements
• ROIC trajectory vs management targets
• Capex efficiency and revenue per asset (asset turnover)

Relative Positioning: Financially conservative with ample liquidity versus peers, but underperforming on core profitability and capital efficiency; improvement depends on operational margin gains and better asset utilization rather than leverage.

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