LINTEC Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥154.75B
• Operating Income: ¥12.77B
• Net Income: ¥8.93B
• EPS: ¥135.48

Income Statement

Balance Sheet

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: Soft quarter with modest top-line decline and margin compression, compounded by weaker below-the-line items and negative OCI, though balance sheet strength remains a clear support. Revenue fell 2.4% YoY to 1,547.52, while operating income declined 6.7% YoY to 127.67. Ordinary income dropped a steeper 12.5% YoY to 124.87 as net non-operating loss (income 6.84 vs expenses 9.64) weighed. Net income decreased 17.4% YoY to 89.28, with an effective tax rate of 29.6%. Gross margin printed at 26.3%, and operating margin was 8.25%. Given last year’s implied operating margin of ~8.63%, margins compressed by roughly 38 bps YoY. SG&A stood at 278.86, or 18.0% of sales, indicating limited fixed-cost flexibility amid lower sales. Interest expense was only 1.71, and interest coverage remained very strong at 74.7x, underscoring minimal financial risk. Total comprehensive income was just 22.65 versus net income of 89.28, signaling sizable negative OCI (likely from valuation and FX effects), which diluted equity accretion despite positive earnings. Financial position is robust: current ratio 285%, quick ratio 191%, and D/E 0.36x, with cash and deposits of 498.93 comfortably exceeding total interest-bearing debt (short + long ≈ 31.06). ROE calculated at 3.7% remains subdued, consistent with weak capital efficiency; ROIC is 4.7% (<5% alert), below a typical cost of capital proxy and well under best-in-class targets. Ordinary income fell faster than operating income, suggesting non-operating headwinds offset negligible extraordinary support (PBT exceeded ordinary by ~1.99, implying one-time gains). With OCF unreported, earnings quality cannot be validated; the gap between net income and comprehensive income is a cautionary signal for capital strength. Forward-looking, stabilization hinges on demand recovery in key end-markets (electronics, auto, labels/packaging), passing through raw material cost changes, and managing FX volatility. Strong liquidity provides downside protection and supports dividends, but the high payout ratio (81.2%) looks demanding without clear FCF visibility. Overall, the quarter reflects cyclical softness and lower below-the-line contributions, but a fortress balance sheet provides time to execute margin and ROIC improvements.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 5.8% × Asset Turnover 0.473 × Financial Leverage 1.36x = ROE 3.7% (matches reported). Component changes: Net margin contracted vs last year (net income -17.4% vs revenue -2.4%), indicating the margin leg weakened the most; leverage is low and stable, and asset turnover appears subdued. Business drivers: Soft demand and limited operating leverage pressured operating margin (8.25% vs implied 8.63% last year), while non-operating losses (net -2.80) further reduced ordinary income; negative OCI harmed comprehensive returns. Sustainability: Low leverage is structurally stable; margin pressure likely cyclical with scope to recover if pricing and mix improve and costs normalize; asset turnover improvement requires sales recovery and tighter inventory/receivables management. Margin quality: Gross margin at 26.3% and SG&A ratio at 18.0% point to limited fixed-cost absorption amid revenue decline; ordinary income falling more than operating income suggests below-the-line headwinds. Operating leverage: Revenue -2.4% vs operating income -6.7% evidences negative operating leverage. Cost discipline: Without SG&A breakdown, underlying efficiency actions are unclear; however, the SG&A-to-sales ratio implies limited flexibility in the short term. Watchouts: If SG&A growth continues to outpace revenue (not directly observable this quarter), further ROE erosion is likely.

Growth Assessment

Top line contracted 2.4% YoY, reflecting softer demand or price/mix pressure across core adhesive-related segments. Operating income declined 6.7% YoY, with ordinary income down 12.5% and net income down 17.4%, indicating progressively weaker profitability through the P&L. Non-operating balance deteriorated (net -2.80), and PBT benefitted from a small extraordinary gain (~1.99), likely non-recurring. Revenue sustainability remains dependent on electronics and auto-related demand cycles, as well as broader label/packaging trends; there is no evidence of structural share loss, but the company appears exposed to cyclical normalization. Profit quality: Operating margin contraction of ~38 bps YoY underscores negative operating leverage; pricing power and input cost pass-through will be critical for stabilization. Outlook: With ROIC at 4.7%, management focus should be on mix improvement, pricing, and asset efficiency (inventory and receivables). Absent volume recovery or further cost actions, earnings may remain under pressure in H2. Key upside catalysts include demand recovery in semiconductor-related films, easing raw material costs, and FX tailwinds; downside risks include continued weak end-markets and further OCI volatility. Data gaps on OCF and capex limit visibility into organic growth investments and FCF-funded initiatives.

Financial Health

Liquidity is very strong: current ratio 285.2% and quick ratio 190.8% comfortably exceed benchmarks; no warning flags (Current Ratio >> 1.0). Solvency is conservative: D/E at 0.36x, interest coverage 74.66x, and equity representing roughly 73–74% of assets (Assets 3,270.73 vs Equity 2,399.16), indicating low leverage. Maturity profile appears safe: current assets 1,853.80 exceed current liabilities 650.04 by 1,203.76, with cash and deposits 498.93 covering total interest-bearing debt (~31.06) many times. Working capital intensity is high (AR 670.90, inventory 613.48 vs AP 407.00), which could pressure asset turnover but provides operational buffer. No off-balance sheet obligations were reported in the dataset; absence of disclosure does not rule them out. Overall, the balance sheet provides substantial shock-absorption capacity.

Cash Flow Quality

OCF and FCF are unreported, preventing direct validation of earnings quality and dividend/CapEx coverage. We cannot compute OCF/Net Income; therefore, no quality flag is applied. The large gap between net income (89.28) and total comprehensive income (22.65) signals negative OCI that reduced equity accretion despite positive earnings, a cautionary note for capital formation. Working capital balances are sizable; without OCF detail, we cannot assess whether changes in receivables or inventories supported or consumed cash—this is a key data limitation. Interest burden is minimal (1.71), so OCF quality risk, if any, would more likely stem from working capital or one-time items rather than financing costs. Conclusion: FCF sustainability cannot be assessed this quarter; monitor OCF conversion once cash flow statements are available.

Dividend Sustainability

The calculated payout ratio is 81.2%, above the <60% benchmark, implying a demanding distribution relative to current earnings. With OCF and capex unreported, we cannot confirm FCF coverage of dividends. Balance sheet strength (cash 498.93 and low net debt) provides near-term flexibility to maintain dividends even if earnings are soft. However, given ROIC at 4.7% and lower comprehensive income, sustained high payouts could constrain reinvestment unless cash generation improves. Policy outlook: Assuming a stable to slightly defensive stance, management may prioritize maintaining DPS, but future growth in payouts likely hinges on recovery in operating cash flow and improved capital efficiency.

Risk Assessment

Business Risks:

• Demand cyclicality in electronics/semiconductor and automotive end-markets affecting volumes and mix
• Pricing pressure and pass-through timing versus raw material cost movements
• Competitive intensity in labels, tapes, optical/functional films impacting margins
• FX volatility influencing export competitiveness and translation effects

Financial Risks:

• Earnings-comprehensive income gap due to negative OCI, potentially from securities valuation and FX
• High payout ratio (81.2%) relative to earnings without confirmed FCF coverage
• Asset efficiency risk from high working capital (inventory and receivables) weighing on asset turnover and ROIC

Key Concerns:

• ROIC at 4.7% below a typical cost of capital proxy, signaling weak capital efficiency
• Margin compression (~38 bps YoY) amid declining sales indicates negative operating leverage
• Non-operating loss (net -2.80) reducing ordinary income; reliance on small extraordinary gain (~1.99) this quarter

Investment Implications

Key Takeaways:

• Operational softness with revenue -2.4% and operating income -6.7% YoY; operating margin at 8.25%
• Ordinary and net income declines outpaced sales, reflecting negative operating and non-operating leverage
• Large negative OCI compressed comprehensive income to 22.65 despite net income of 89.28
• Balance sheet remains a strong anchor: current ratio 285%, D/E 0.36x, interest coverage 74.7x
• Capital efficiency is weak (ROIC 4.7%, ROE 3.7%), highlighting need for margin and turnover improvements
• Dividend payout ratio elevated at 81.2% with FCF coverage unknown

Metrics to Watch:

• Order trends and book-to-bill in electronics/auto-linked products
• Gross and operating margin trajectory vs input costs and pricing actions
• Working capital turns: inventory days and receivables collection
• OCF conversion (OCF/Net Income) and FCF after capex once disclosed
• OCI drivers (securities valuation, FX) and their impact on equity
• ROIC progress toward >7–8% over the medium term

Relative Positioning: Within Japanese specialty materials/adhesives peers, Lintec demonstrates superior balance sheet resilience but currently lags on capital efficiency and margin momentum; recovery in end-market demand and improved OCF conversion are needed to close the performance gap.

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