MUTO SEIKO CO. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.84B
• Operating Income: ¥1.30B
• Net Income: ¥927M
• EPS: ¥155.17

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

For FY2026 Q2 (consolidated, JGAAP), ムトー精工株式会社 reported steady top-line growth with clear operating leverage and robust balance sheet metrics, while cash flow quality appears sound but constrained by disclosure gaps in investing and cash balances. Revenue rose 4.4% year over year to ¥14,841 million, and operating income expanded 14.3% to ¥1,299 million, indicating margin expansion and positive operating leverage. Gross profit of ¥2,920 million implies a gross margin of 19.7%, and the operating margin reached approximately 8.8%, up solidly versus revenue growth. Ordinary income exceeded operating income at ¥1,525 million, reflecting healthy non-operating contributions and minimal interest burden (interest expense only ¥15.6 million). Net income grew 25.3% to ¥1,082 million, with EPS of ¥155.17, underscoring improved profitability. DuPont analysis shows a net margin of 7.29%, asset turnover of 0.453x, and financial leverage of 1.65x, resulting in a calculated ROE of 5.45% (matching the reported figure). Based on the provided tax expense (¥324 million) and net income, the implied effective tax rate is approximately 23% (the 0.0% figure shown in the input appears to be a placeholder due to incomplete taxonomy mapping). Liquidity is strong: current ratio is 247% and quick ratio is 236%, supported by ample working capital of ¥11,837 million. Solvency also looks conservative, with total liabilities-to-equity at 0.59x; computed equity ratio is about 60.6% (equity/total assets), despite equity ratio being shown as 0.0% in disclosures. Operating cash flow of ¥996 million is 0.92x net income, a healthy conversion for an interim period. EBITDA was ¥1,955 million (13.2% margin), and interest coverage is very high at about 83x, suggesting negligible refinancing risk in the near term. Investing cash flow and cash balance were unreported (displayed as zero), and dividends were not disclosed (DPS and payout ratio shown as zero should not be interpreted as actual values). Financing cash outflow of ¥841 million likely reflects debt repayment and/or shareholder returns, but the split is undisclosed. Overall, the company exhibits improving profitability, disciplined cost structure, and a fortified balance sheet; however, incomplete disclosures around investing cash flows, cash position, and dividend policy limit a full assessment of free cash flow deployment and capital allocation.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 7.29%
• asset_turnover: 0.453x
• financial_leverage: 1.65x
• calculated_ROE: 5.45%
• interpretation: ROE is driven primarily by margin improvement and moderate leverage; asset intensity remains relatively high as indicated by sub-0.5x turnover. margin_quality:
• gross_margin: 19.7%
• operating_margin: 8.8%
• ordinary_margin: 10.3%
• net_margin: 7.29%
• drivers: Operating income grew 14.3% on 4.4% revenue growth, indicating favorable mix, productivity gains, and/or cost discipline. Ordinary income exceeded operating income, supported by net non-operating gains and very low interest expense. operating_leverage: Positive operating leverage is evident: operating income growth (+14.3% YoY) outpaced revenue growth (+4.4%), implying improved fixed-cost absorption and/or scale benefits.

Growth Assessment

revenue_sustainability: Top-line growth of 4.4% suggests steady demand; magnitude of growth implies stable rather than cyclical surge. Without segment/geographic disclosure, sustainability appears moderate but not overextended. profit_quality: Net income grew 25.3% with an implied effective tax rate near 23% and minimal interest burden, indicating quality earnings rather than financial engineering. Ordinary income outperformance versus operating income points to supportive non-operating items but not reliance on leverage. outlook: With improved margins and strong balance sheet capacity, the company is positioned to sustain mid-single-digit revenue growth and incremental margin gains if demand holds. However, absent visibility on order backlog, pricing actions, or input cost trends, the forward trajectory should be viewed as cautiously constructive.

Financial Health

liquidity:

• current_ratio: 246.6%
• quick_ratio: 236.4%
• working_capital: ¥11,836,954,000
• assessment: Liquidity is ample for operating needs and short-term obligations, with a low inventory burden relative to current assets. solvency:
• debt_to_equity: 0.59x (total liabilities/equity)
• interest_coverage: 83.4x (operating income/interest expense)
• equity_ratio_computed: 60.6% (equity/total assets)
• assessment: Leverage is conservative and interest burden negligible, reducing refinancing and covenant risks. capital_structure: Balance sheet shows a solid equity base (¥19.842bn) against ¥11.717bn in liabilities. Financing CF outflow suggests deleveraging and/or shareholder returns, but details are undisclosed.

Cash Flow Quality

earnings_quality: OCF of ¥995.8m is 0.92x net income, indicating good conversion in a half-year context, consistent with accruals discipline. FCF_analysis: Free cash flow cannot be determined because investing cash flow (and therefore capex) is unreported. D&A of ¥655.9m implies ongoing reinvestment needs; absent capex data, FCF coverage assessments are limited. working_capital: Inventories of ¥824.7m appear modest vs. current assets, likely supporting the strong quick ratio. Specific movements in receivables/payables are not disclosed, constraining deeper analysis of OCF drivers.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are shown as zero but should be treated as undisclosed. Therefore, a payout ratio cannot be assessed reliably. FCF_coverage: Not assessable due to unreported investing cash flows and undisclosed DPS. policy_outlook: With robust liquidity and conservative leverage, capacity for shareholder returns exists; however, no disclosed policy or interim DPS prevents conclusions about current or future distributions.

Risk Assessment

Business Risks:

• End-market demand variability given modest revenue growth and potential exposure to industrial/precision components cycles
• Input cost and procurement volatility impacting gross margin sustainability
• Pricing pressure from customers and competitive intensity affecting operating margins
• Supply chain disruptions impacting delivery schedules and working capital
• Potential FX exposure if there is overseas sourcing or sales (not disclosed)

Financial Risks:

• Limited disclosure on cash balances and investing cash flows complicates liquidity runway and capex planning assessment
• Potential increase in capex requirements relative to D&A could compress future free cash flow
• Non-operating income dependence for ordinary income outperformance may not be recurring
• Possible changes in tax items or extraordinary gains/losses affecting net income volatility

Key Concerns:

• Incomplete visibility on capex and free cash flow constrains capital allocation analysis
• Dividend policy and actual shareholder return stance are not disclosed
• Equity ratio officially shown as 0.0% in the dataset (likely undisclosed), requiring reliance on computed ratios

Investment Implications

Key Takeaways:

• Margin expansion with positive operating leverage: operating income +14.3% on revenue +4.4%
• Healthy profitability: operating margin ~8.8%, EBITDA margin 13.2%, net margin 7.29%
• Strong balance sheet: computed equity ratio ~60.6%, liabilities/equity 0.59x, interest coverage ~83x
• Sound cash conversion: OCF ≈ 0.92x net income for the interim period
• Disclosure gaps in investing CF, cash, and dividends limit assessment of FCF deployment and shareholder returns

Metrics to Watch:

• Order trends and backlog to gauge revenue sustainability
• Gross and operating margin trajectory vs. input costs and pricing
• Capex disclosures and investing cash flows to establish true FCF
• Working capital movements (AR, AP, inventory) to validate OCF durability
• Non-operating income/expense composition to assess repeatability of ordinary income uplift
• Confirmed effective tax rate versus implied ~23% going forward

Relative Positioning: Relative to typical TSE-listed precision/industrial peers, the company exhibits above-average liquidity, conservative leverage, and solid interest coverage, with margins in a healthy mid-single to high-single-digit operating range; however, limited disclosure on FCF and dividends makes its capital return profile less transparent than best-in-class 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
• 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