TAKANO Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.71B
• Operating Income: ¥92M
• Net Income: ¥-107M
• 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

Takano Co., Ltd. (7885) delivered solid top-line growth in FY2026 Q2, with revenue up 10.9% year over year to ¥10.713 billion. Despite a modest gross margin of 18.2%, operating income expanded 66.2% to ¥92 million, indicating meaningful operating leverage as fixed costs were better absorbed on higher volumes. Ordinary income of ¥173 million exceeded operating income by ¥81 million, implying supportive non-operating gains (e.g., interest/forex/other), while interest expense remained de minimis at ¥0.629 million. Net income rose 15.3% to ¥124 million, translating to a 1.16% net margin—still thin, but improved alongside revenue momentum. The DuPont profile shows low asset turnover (0.288) and modest leverage (1.16x), producing a low ROE of 0.39%; structurally, the company is equity-heavy with conservative financing. Liquidity is very strong, with a current ratio of 422% and quick ratio of 406%, supported by low inventories (¥915 million) relative to current assets. The balance sheet is robust, with total liabilities of ¥6.563 billion versus equity of ¥32.031 billion (implied equity ratio approximately 86% despite the reported 0.0% placeholder). Operating cash flow was excellent at ¥1.632 billion (OCF/Net income 13.16x), suggesting strong cash conversion this half, likely aided by favorable working capital movements. Interest coverage is comfortable at 146x on an EBIT basis, underscoring low financial risk. EBITDA margin was 4.9%, indicating some cost pressure above COGS and limited pricing power or elevated SG&A, but improving operating income suggests incremental efficiency gains. The negative income tax line implies a small tax benefit, keeping the effective tax rate near zero this period; investors should not extrapolate this level. Dividend information appears undisclosed for the period (DPS and payout reported as zero placeholders), and cash/equivalents are unreported, which constrains full cash and dividend assessment. Free cash flow cannot be assessed because investing cash flow was not disclosed in the XBRL (reported as zero by placeholder). Overall, the company exhibits defensive balance sheet strength and improving profitability on higher sales, but absolute margins and ROE remain low. Key watchpoints are the durability of revenue growth, sustainability of working-capital-driven OCF, the degree of reliance on non-operating gains, and forthcoming disclosure on capex and dividend policy.

Profitability Analysis

ROE decomposition (DuPont): Net margin 1.16% × Asset turnover 0.288 × Financial leverage 1.16 = ROE 0.39% (matches reported). The low ROE is driven primarily by low asset turnover and slim net margins rather than leverage. Gross margin of 18.2% is modest for industrial components/consumer furnishings, indicating continued cost-of-goods pressure or limited pricing power. Operating margin is 0.86% (¥92m/¥10.713b), improving YoY with 66% growth in operating income on 11% revenue growth, evidencing positive operating leverage as fixed costs are spread over a larger base. Ordinary margin (1.61%) exceeds operating margin, with non-operating items contributing ~75–90 bps to margin; this mix benefit may not be repeatable. EBITDA margin is 4.9%, suggesting SG&A and overhead intensity; further scale or cost actions are needed to lift margins structurally. Interest burden is negligible (interest expense ¥0.629m), so financial costs are not a constraint on profitability. Effective tax rate appears ~0% due to a small tax benefit this period; normalized tax will reduce net margin. Overall margin quality is improving but remains thin; further gross margin enhancement and cost discipline are required to translate sales growth into sustainable ROE uplift.

Growth Assessment

Revenue grew 10.9% YoY, indicating healthy demand and/or share gains across end markets. Profit growth outpaced sales at the operating line (+66.2%), pointing to favorable operating leverage and early benefits from efficiency initiatives or mix. Ordinary income also improved versus operating income, but reliance on non-operating gains introduces volatility risk to bottom-line growth. The net margin at 1.16% remains low, so incremental growth must continue to be margin-accretive to materially improve ROE. The strong OCF relative to net income suggests that current growth is cash-generative, likely helped by working capital; however, sustainability depends on receivables collections and inventory discipline in subsequent quarters. Without capex disclosure, we cannot evaluate whether growth is capital intensive; this limits our ability to assess long-term FCF scalability. Looking ahead, if revenue momentum persists and gross/operating margins continue to expand, earnings quality should improve; conversely, any normalization of non-operating gains and taxes could cap net income growth. The outlook hinges on the company’s ability to maintain volume growth, manage input costs, and execute mix/price improvements while keeping SG&A growth below sales.

Financial Health

Liquidity is strong: current ratio 422.2% and quick ratio 406.4%, reflecting substantial liquid assets relative to short-term obligations. Working capital stands at ¥18.625 billion, offering ample buffer for operations and procurement cycles. Solvency is solid: total liabilities of ¥6.563 billion against equity of ¥32.031 billion yields a debt-to-equity ratio of 0.20x; implied equity ratio is ~86% (Equity/Assets), although the reported 0.0% equity ratio is an undisclosed placeholder. Interest coverage is 146.3x (EBIT/interest), evidencing minimal financial risk. The capital structure is conservative with low leverage, providing flexibility for investment, and insulating against rate shocks. Overall, the balance sheet quality is high, supporting resilience across cycles.

Cash Flow Quality

Operating cash flow was ¥1.632 billion, 13.16x net income, indicating strong cash conversion this period. The magnitude suggests favorable working capital inflows (e.g., receivables collection and/or payables timing) in addition to non-cash charges (D&A ¥437 million). EBITDA of ¥529 million compared to OCF implies significant working capital tailwinds this half; investors should expect normalization in subsequent periods. Investing cash flow was not disclosed (reported as zero placeholder), so free cash flow cannot be reliably computed; reported FCF of zero is not meaningful. Financing cash flow was an outflow of ¥366 million, possibly reflecting dividends, lease liabilities, or share transactions, but details are not provided. With cash and equivalents undisclosed (placeholder zero), we cannot assess liquidity runway from cash-on-hand; however, strong current assets and low leverage mitigate concern. Overall earnings quality appears good in the half, but sustainability depends on future working capital trends and capex levels once disclosed.

Dividend Sustainability

Dividend data for the period appear undisclosed (DPS and payout ratio shown as zero placeholders). Without investing cash flow and cash balance disclosure, we cannot calculate FCF coverage of dividends. Structurally, the company has capacity to sustain dividends given robust liquidity, low leverage, and positive OCF, but the thin net margin and low ROE argue for cautious payout growth until margins improve. Policy outlook will depend on visibility into capex needs and earnings normalization (including tax and non-operating items). We will reassess once full-year DPS guidance and capex are disclosed.

Risk Assessment

Business Risks:

• Thin operating and net margins leave limited cushion against input cost inflation or demand shocks
• Dependence on non-operating gains to bridge from operating to ordinary income introduces earnings volatility
• Potential normalization of a favorable tax position could reduce net profit
• Working capital reversals could pressure operating cash flow in subsequent periods
• Exposure to cyclical end markets (industrial/consumer) may amplify earnings cyclicality
• Pricing power constraints suggested by modest gross margin

Financial Risks:

• Limited disclosure of cash and investing cash flows obscures true FCF and liquidity headroom
• Low asset turnover depresses ROE despite conservative leverage
• FX or financial income sensitivity within non-operating items

Key Concerns:

• Sustainability of operating leverage and margin expansion
• Visibility on capex and growth investment requirements
• Quality and repeatability of non-operating income and tax benefits

Investment Implications

Key Takeaways:

• Top-line growth of 10.9% translated into 66.2% operating income growth, evidencing operating leverage
• ROE remains low at 0.39% due to thin margins and low asset turnover despite conservative leverage
• Balance sheet strength is a clear positive, with implied equity ratio ~86% and interest coverage 146x
• OCF significantly exceeded net income (13.16x), likely aided by working capital; watch for normalization
• Non-operating gains and tax benefit boosted bottom line; normalization could temper net income
• Incomplete disclosures (cash, capex, DPS) limit full assessment of FCF and dividend capacity

Metrics to Watch:

• Gross and operating margin trajectory
• Asset turnover and working capital efficiency (DSO/DIO/DPO) once disclosed
• Capex and investing cash flows to gauge sustainable FCF
• Ordinary vs operating income gap (non-operating contribution)
• Effective tax rate normalization
• Order trends/backlog and pricing actions

Relative Positioning: Versus small/mid-cap peers on the TSE in industrial/consumer equipment, Takano exhibits superior balance sheet strength and liquidity, but lags on profitability and ROE due to low margins and asset turnover; improving operating leverage is a near-term positive, while disclosure gaps constrain full comparative FCF analysis.

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