TAKARA STANDARD CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥123.14B
• Operating Income: ¥8.71B
• Net Income: ¥6.95B
• EPS: ¥104.88

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: FY2026 Q2 was a solid earnings beat characterized by strong operating leverage and clean cash generation, though capital efficiency remains below target. Revenue grew 6.2% YoY to 1,231.4, with operating income up 46.3% YoY to 87.1, lifting operating margin to roughly 7.1%. Gross profit reached 432.1 with a gross margin of 35.1%, reflecting improved pricing/mix and/or easing input costs. Net income climbed 79.0% YoY to 69.5, taking net margin to about 5.6%. Non-operating income netted a modest positive contribution (approximately +3.0), mainly from dividend and interest income, with negligible interest burden (interest expense 0.41). Operating margin expanded by about 195 bps YoY (from ~5.1% to ~7.1%), indicating both better gross spread and SG&A discipline. EBITDA came in at 125.0, for a 10.2% EBITDA margin, supporting improved operating efficiency. Cash quality was strong: operating cash flow of 106.1 exceeded net income (OCF/NI 1.53x), mitigating concerns about earnings sustainability. Liquidity is robust with a current ratio of 242.7% and cash and deposits of 617.5 against short-term loans of 51.0. Balance sheet leverage is conservative (D/E 0.44x) with exceptionally high interest coverage (212.5x), limiting financial risk. Despite the cyclical margin uptick, structural capital efficiency remains a weak spot: ROE is 3.6% and ROIC is 4.4%, below a typical 7–8% hurdle. Capex was sizable at 81.1, but pre-dividend free cash flow (OCF–Capex) still appears positive at ~25, aided by solid cash generation. Shareholder returns were active via share repurchases (55.3), and the calculated payout ratio is a relatively high 75.5%, warranting monitoring if macro softens. Forward-looking, sustaining the higher margin will depend on maintaining price discipline, stable input costs (steel/resins), and steady renovation housing demand. The company enters H2 with strong liquidity and momentum, but must lift asset turnover and ROIC to close the gap to cost of capital.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 5.6% × Asset Turnover 0.444 × Financial Leverage 1.44x = ROE 3.6%. The biggest positive change this quarter was the margin component: operating income grew 46.3% on 6.2% revenue growth, driving operating margin expansion of roughly 195 bps YoY to ~7.1% and lifting net margin to ~5.6%. Business drivers likely included price/mix optimization in core product lines, easing raw material costs, and SG&A discipline, with only minor non-operating tailwinds. Financial leverage remained conservative (1.44x), so ROE expansion is overwhelmingly operational, not leverage-driven. Asset turnover at 0.444 remains modest for a manufacturing/distribution model, indicating capital intensity and potential inventory/asset base heaviness. Sustainability: some margin gains could be cyclical (input cost tailwinds), but pricing actions and cost control may support a higher run-rate than last year; asset turnover improvement will require structural measures (supply chain efficiency, product rationalization, or asset-light initiatives). Watch for any SG&A growth outpacing revenue in H2; although not disclosed YoY, current results imply SG&A operating leverage was favorable this quarter.

Growth Assessment

Top-line growth of 6.2% YoY shows steady demand, likely supported by renovation and selective price increases. Profit growth significantly outpaced sales (OP +46.3%, NI +79.0%), indicating strong operating leverage and better cost absorption. Gross margin at 35.1% suggests improved spread; sustainability depends on input cost trends and ability to hold pricing. Ordinary income rose 46.8% with only modest help from non-operating items, underscoring that the growth was primarily operational. With EBITDA margin at 10.2%, there is evidence of efficiency gains, but capital efficiency (ROIC 4.4%) remains a structural drag on value creation. Outlook hinges on stabilizing commodity inputs (steel/resins), execution of capex for productivity, and demand resilience in domestic housing-related markets. Near-term compares should remain favorable if pricing holds and cost relief persists; mix shift toward higher-margin product lines would further support margins. Medium term, improving asset turnover is key to lifting ROE/ROIC.

Financial Health

Liquidity is very strong: current ratio 242.7% and quick ratio 225.8%, with cash and deposits of 617.5 far exceeding short-term loans of 51.0. No warning on current ratio (<1.0) or leverage (D/E 0.44x well below 2.0). Working capital is ample at 926.5, and receivables (358.1) plus cash provide comfortable coverage of current liabilities (649.2). Interest coverage is exceptionally strong at 212.5x, reflecting minimal interest burden. Maturity mismatch risk is low given the large cash cushion vs short-term debt. Off-balance sheet obligations are not disclosed; none can be assessed from the provided data.

Cash Flow Quality

OCF/Net Income is 1.53x, indicating high earnings quality with cash conversion comfortably above 1.0. Operating CF of 106.1, alongside capex of 81.1, implies positive pre-dividend FCF of roughly 25.0, although full investing CF was unreported and may include other items. Financing CF was an outflow of 105.4, driven by share repurchases (-55.3) and likely dividends (unreported), funded by internal cash and existing liquidity. No clear signs of working capital manipulation can be inferred without period-to-period WC detail; current balances (AR 358.1, inventory 110.0) appear proportionate to sales scale. Overall, cash generation supports ongoing investment and shareholder returns, with headroom from a sizeable cash balance.

Dividend Sustainability

The calculated payout ratio is 75.5%, above a conservative <60% benchmark, implying moderate-to-high payout risk if earnings normalize down. Actual dividend amounts are unreported; share repurchases of 55.3 indicate a balanced shareholder return stance. Pre-dividend FCF (OCF–Capex) appears positive (~25.0), but full FCF coverage of total shareholder returns cannot be confirmed due to missing investing CF and dividend cash outflow data. With strong liquidity and low leverage, near-term dividends appear serviceable; medium-term sustainability hinges on maintaining current margins and cash conversion while funding capex. Policy outlook: if ROIC remains at ~4–5%, management may prioritize investments that lift returns; buybacks may remain tactical given cash levels.

Risk Assessment

Business Risks:

• Input cost volatility (steel/resin/energy) could compress gross margins if pricing power weakens
• Demand sensitivity to domestic housing and renovation cycles
• Competitive pricing pressure in system kitchens/bathrooms and related product categories
• Execution risk on capex to deliver expected productivity/efficiency gains
• Product mix shifts potentially affecting margin structure

Financial Risks:

• ROIC at 4.4% (<5%) indicates subpar capital efficiency versus typical 7–8% targets
• High payout ratio (75.5%) may pressure cash if profits soften
• Potential WC volatility impacting cash conversion (limited visibility without detailed flows)
• Concentration risk if domestic market exposure is high (FX and global diversification benefits limited)

Key Concerns:

• Sustainability of ~195 bps operating margin expansion amid uncertain input costs
• Low ROE (3.6%) and asset turnover (0.444) limiting value creation
• Incomplete disclosure on investing CF and dividends limits FCF assessment accuracy

Investment Implications

Key Takeaways:

• Strong quarter: revenue +6.2% YoY; OP +46.3% YoY; NI +79.0% YoY
• Operating margin expanded ~195 bps YoY to ~7.1%; EBITDA margin 10.2%
• Clean cash: OCF/NI 1.53x; pre-dividend FCF likely positive despite higher capex
• Balance sheet robust: current ratio 243%, D/E 0.44x, interest coverage 212x
• Capital efficiency weak: ROE 3.6%, ROIC 4.4%—below typical hurdles
• Shareholder returns active via buybacks (55.3); payout ratio elevated at 75.5%

Metrics to Watch:

• Gross and operating margin progression vs input cost trends
• OCF/NI ratio and working capital turns
• ROIC and asset turnover improvements post-capex
• Capex-to-sales and payback on capacity/productivity investments
• Payout ratio trajectory and balance between dividends and buybacks
• Order trends and pricing power in core product lines

Relative Positioning: Within Japan housing-related manufacturers, the company exhibits above-peer near-term margin momentum and superior liquidity with very low financial risk, but lags on structural capital efficiency (ROE/ROIC) and asset turnover; sustained pricing discipline and efficiency gains are needed to close the return 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
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