NAKABAYASHI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥28.22B
• Operating Income: ¥1.02B
• Net Income: ¥350M
• EPS: ¥8.34

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Nakabayashi Co., Ltd. (TSE: 7987) reported FY2026 Q2 (cumulative) consolidated results under JGAAP showing mixed dynamics: top-line contraction but strong operating profit recovery, alongside a sharp decline in bottom-line profit. Revenue declined 3.2% year on year to ¥28,216 million, reflecting softness in demand and/or product mix shifts in its core stationery, filing, and related solutions businesses. Despite the revenue dip, gross profit reached ¥7,355 million with a solid gross margin of 26.1%, suggesting improved cost discipline and/or input cost normalization compared with the prior year. Operating income surged 127.6% YoY to ¥1,019 million, lifting the operating margin to 3.6%, indicating better operating leverage and expense control. Ordinary income of ¥1,206 million exceeded operating income, implying a net positive non-operating contribution (e.g., interest/dividend income or other non-operating gains outweighing interest expense of ¥43 million). However, net income fell 35.6% YoY to ¥229 million (net margin 0.81%), pointing to substantial below-the-line headwinds such as extraordinary losses and/or non-controlling interests that are not detailed here. The DuPont bridge shows ROE of 0.79% driven by a thin net margin (0.81%), moderate asset turnover (0.521x), and financial leverage of 1.87x. Liquidity metrics are healthy, with a current ratio of 188.2% and quick ratio of 146.3%, supported by working capital of ¥13,960 million. The balance sheet appears conservatively positioned; with total assets of ¥54,135 million and total equity of ¥28,918 million, the implied equity ratio is approximately 53% (the reported equity ratio of 0.0% is not disclosed in this dataset). Interest coverage is strong at 23.7x, indicating comfortable capacity to service debt from operating earnings. Cash flow data (OCF/FCF) and dividend details are not disclosed in the XBRL here, limiting visibility into cash conversion and shareholder return policy within the period. The EBITDA metrics shown as zero reflect non-disclosure of depreciation and amortization rather than actual absence; operating income should be used as the profitability anchor. Overall, the company demonstrates operational improvement at the EBIT/ordinary levels against a softer sales backdrop, but bottom-line volatility due to non-operating or extraordinary items muted ROE and EPS (¥8.34). The near-term focus should be on sustainability of margin gains, normalization of below-the-line items, inventory discipline, and any updates to dividend policy. While data gaps limit a full assessment of cash generation, the balance sheet strength and interest coverage offer a degree of financial resilience. Management commentary (not provided here) on demand trends, input cost trajectory, and extraordinary items would be key to interpreting the divergence between operating and net income. We analyze only available non-zero data points and acknowledge that zeros in the dataset indicate non-disclosure rather than actual zeros.

Profitability Analysis

ROE of 0.79% decomposes into Net Profit Margin (0.81%) × Asset Turnover (0.521x) × Financial Leverage (1.87x). The very low net margin is the binding constraint on ROE despite decent leverage and moderate turnover; operating margin improved to 3.6% (¥1,019m / ¥28,216m) from the prior year’s level, underscoring better cost control and operating leverage. Gross margin at 26.1% aligns with improved input cost dynamics and/or product mix; the spread between gross and operating margins (22.5ppt) reflects SG&A intensity typical for stationery and solutions businesses but appears to have narrowed YoY given the large operating profit increase. Ordinary income (¥1,206m) above operating income suggests net positive non-operating items (e.g., investment income) more than offset interest expense, which is modest at ¥43m, delivering an interest coverage of 23.7x. The collapse from ordinary income to net income (¥229m) implies sizable extraordinary charges and/or higher non-controlling interest impacts not disclosed here; this is the key quality issue in profitability. EBITDA is not assessable due to non-disclosed D&A (shown as zero), so operating income is the most reliable metric to gauge core profitability. Overall, core profitability is improving at the operating level despite revenue contraction, but bottom-line quality is clouded by below-the-line volatility.

Growth Assessment

Revenue declined 3.2% YoY to ¥28,216m, indicating demand softness or adverse mix/pricing in key categories. Despite lower sales, operating income rose 127.6% YoY to ¥1,019m, pointing to structural cost actions, normalization of input costs, and/or improved pricing discipline. Ordinary income at ¥1,206m confirms further uplift from non-operating contributions, but net income fell 35.6% YoY to ¥229m due to undisclosed extraordinary or allocation effects. The divergence between operating growth and net income contraction suggests that the operating improvement is real but not yet fully translating to shareholder profits. Sustainability hinges on maintaining the 26.1% gross margin and 3.6% operating margin in the face of potential demand variability and commodity/FX movements. Inventory of ¥6,625m against six-month sales implies roughly 2.8 months of inventory coverage, reasonable but worth monitoring for demand alignment. Outlook-wise, if the company can limit extraordinary losses and steady non-operating items, ordinary-to-net conversion should normalize, improving EPS and ROE. Near-term growth will likely be driven more by margin execution than top-line acceleration unless demand conditions improve.

Financial Health

Total assets are ¥54,135m, total liabilities ¥27,206m, and total equity ¥28,918m, implying an equity ratio of roughly 53% (reported equity ratio field is undisclosed). The debt-to-equity ratio of 0.94x (liabilities/equity) indicates moderate leverage balanced by substantial equity. Liquidity is strong: current assets ¥29,789m vs current liabilities ¥15,829m yield a current ratio of 188.2% and quick ratio of 146.3%, providing ample short-term coverage. Working capital stands at ¥13,960m, offering operating flexibility. Interest expense is low at ¥43m, and interest coverage is robust at 23.7x, indicating low refinancing risk under current earnings power. Cash and equivalents are undisclosed in this dataset, so net debt cannot be determined, but the balance sheet composition suggests conservative solvency.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed here (zeros reflect non-reporting), so OCF/NI and FCF cannot be meaningfully assessed. As such, we cannot validate earnings-to-cash conversion, capex intensity, or working capital cash dynamics for the period. From the P&L and balance sheet alone, improved operating income alongside steady inventories suggests some operational discipline, but the lack of OCF data prevents confirmation. Key watch items include collection cycles (AR days), payables discipline, and capex trends once disclosed. Until OCF/FCF are available, use operating income and ordinary income as proxies for near-term cash earnings directionally, with the caveat of potential timing effects in working capital.

Dividend Sustainability

Dividend per share and payout metrics are not disclosed in this dataset (zeros reflect non-reporting). Therefore, we cannot compute payout ratios or FCF coverage. From an earnings capacity viewpoint, net income of ¥229m is modest for the half-year and was pressured by below-the-line items; however, operating and ordinary earnings are stronger, and liquidity is ample, which would generally support a conservative dividend if the company maintains a stable policy. Without OCF/FCF and share count disclosures, we refrain from quantitative coverage analysis. Monitor management guidance, historic payout norms, and forthcoming full-year cash flow statements for visibility on sustainability.

Risk Assessment

Business Risks:

• Demand cyclicality in stationery, filing, and office/home organization products amid macro softness
• Ongoing digitalization reducing structural demand for paper-based products
• Input cost and FX volatility (pulp, paper, plastics, energy; yen fluctuations) impacting gross margin
• Customer concentration and pricing pressure in B2B/public sector channels
• Inventory obsolescence risk if demand weakens or product mix shifts
• Execution risk in cost restructuring and product mix upgrades needed to sustain operating margin gains

Financial Risks:

• Bottom-line volatility from extraordinary items impacting net income and ROE
• Limited visibility on cash flows (OCF/FCF undisclosed) constraining assessment of cash conversion
• Potential working capital swings given seasonal sales patterns
• Refinancing/interest rate risk is currently low but could rise if leverage increases

Key Concerns:

• Net income decline (-35.6% YoY) despite strong operating recovery suggests below-the-line charges
• Lack of cash flow disclosure prevents validation of earnings quality and dividend capacity
• Sustainability of 26.1% gross margin and 3.6% operating margin amid input and demand pressures

Investment Implications

Key Takeaways:

• Top line -3.2% YoY, but operating income +127.6% YoY, evidencing improved operating leverage
• Gross margin at 26.1% and operating margin at 3.6% mark operational progress
• Ordinary income (¥1,206m) exceeds operating income, indicating positive net non-operating contribution
• Net income of ¥229m (margin 0.81%) is depressed by extraordinary/non-controlling effects
• Strong liquidity (current ratio 188.2%, quick ratio 146.3%) and moderate leverage (D/E 0.94x)
• ROE at 0.79% constrained primarily by thin net margin
• Cash flows and dividend data are undisclosed; assessment of cash conversion/dividend coverage is deferred

Metrics to Watch:

• Gross and operating margins (sustainability of cost improvements)
• Ordinary-to-net income bridge (extraordinary items, minority interests, tax effects)
• OCF and FCF once disclosed (cash conversion, capex needs)
• Inventory levels and turnover (alignment with demand)
• Interest coverage and leverage trends
• Revenue trajectory and pricing/mix in core categories

Relative Positioning: Within domestic stationery and office-solution peers, Nakabayashi shows improving operating profitability on a contracting top line, supported by strong liquidity and moderate leverage; however, its bottom-line volatility and limited cash flow disclosure currently place it at a cautious midpoint relative to peers with steadier net margins and clearer cash conversion.

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