TACHIKAWA CORPORATION FY2026 Q2 Earnings Report

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Executive Summary

FY2026 Q2 (first half) resulted in increases in both revenue and earnings, with growth in Operating Income and Ordinary Income notably exceeding growth in Net Income. Revenue was ¥220.9B (¥207.7B in the previous year, YoY +6.4%), Operating Income was ¥25.4B (¥20.9B in the previous year, YoY +21.5%), Ordinary Income was ¥26.8B (¥21.9B in the previous year, YoY +22.6%), and Net Income attributable to owners of the parent was ¥17.8B (¥17.3B in the previous year, YoY +2.3%). In addition to higher revenue, improvements in selling, general and administrative expense efficiency and growth in high-margin segments improved the Operating Income margin, while Net Income grew less than Operating Income and Ordinary Income due to an increase in the effective tax rate.

Factors Driving Performance Changes

[Revenue] Revenue was ¥220.9B (YoY +6.4%), with all three segments contributing to the increase. The core Interior and Exterior Products-Related Business achieved stable growth at ¥181.1B (composition ratio 81.9%, YoY +1.3%), while the Parking Equipment-Related Business and Reducer-Related Business expanded significantly to ¥21.5B (composition ratio 9.7%, YoY +68.3%) and ¥18.9B (composition ratio 8.5%, YoY +15.8%), respectively, driving the Company-wide revenue increase.

[Profit and Loss] Operating Income was ¥25.4B (YoY +21.5%), and the Operating Income margin improved to 11.5% from 10.1% in the previous year. Although the gross margin declined slightly to 41.2%, selling, general and administrative expenses (¥65.5B) remained nearly flat against revenue growth (+6.4%), with improved SG&A efficiency supporting the margin improvement. By segment, Operating Income from the Parking Equipment-Related Business surged to ¥4.0B (YoY +141.8%, margin 18.4%), while the Reducer-Related Business increased to ¥1.5B (YoY +203.5%, margin 7.9%). Both achieved higher growth rates than the core Interior and Exterior Products-Related Business (¥20.0B, YoY +6.3%, margin 11.0%), contributing to an improved business mix. Ordinary Income increased to ¥26.8B (YoY +22.6%), supported by non-operating income including ¥0.8B in dividend income. However, Net Income grew only 2.3% YoY to ¥17.8B as the effective tax rate increased from 26.9% in the previous year to 33.8%. The fact that extraordinary gains in the previous year (including gains on sales of investment securities) largely disappeared in the current period also restrained the apparent growth in Net Income. In conclusion, this quarter resulted in increases in both revenue and earnings, with earnings growth driven by expansion in high-margin segments and improved SG&A efficiency.

Segment Analysis

The Interior and Exterior Products-Related Business is the core business, accounting for approximately 79% of Company-wide profit, with revenue of ¥181.1B (composition ratio 81.9%, YoY +1.3%) and Operating Income of ¥20.0B (YoY +6.3%, margin 11.0%), maintaining stable growth. The Parking Equipment-Related Business generated revenue of ¥21.5B (composition ratio 9.7%, YoY +68.3%) and Operating Income of ¥4.0B (YoY +141.8%, margin 18.4%), making it the most profitable of the three businesses and producing the highest profit growth rate. The Reducer-Related Business recorded revenue of ¥18.9B (composition ratio 8.5%, YoY +15.8%) and Operating Income of ¥1.5B (YoY +203.5%, margin 7.9%). Although its margin was the lowest among the three businesses, its growth rate improved substantially, leaving room for further improvement. Overall, the expansion of the high-margin, high-growth Parking Equipment-Related Business contributed to raising the Company-wide Operating Income margin.

Key Financial Indicators

[Profitability] The Operating Income margin improved to 11.5% from 10.1% in the previous year, while the Net Income margin declined slightly to 8.0% from 8.4% in the previous year. ROE remained low at 3.1%, due to the combination of slower Net Income growth and a substantial equity base (Equity Ratio 84.7%). [Cash Flow Quality] Operating Cash Flow (OCF) was ¥21.5B, exceeding Net Income of ¥17.8B, indicating sound conversion of underlying earnings into cash. [Investment Efficiency] Under a conservative capital structure with an Equity Ratio of 84.7% (83.2% in the previous year), the Company accelerated growth investments, including ¥10.5B in capital expenditures, ¥9.9B in purchases of investment securities, and ¥2.9B in acquisitions of intangible assets. Improving asset efficiency will therefore be a future challenge. [Financial Soundness] The Company maintains a financially sound structure with low dependence on interest-bearing debt, as cash and deposits amounted to ¥166.6B, compared with current liabilities of ¥74.3B and non-current liabilities of ¥30.0B.

Cash Flow Analysis

Operating Cash Flow was ¥21.5B (¥20.2B in the previous year, YoY +6.8%), exceeding Net Income of ¥17.8B, indicating that cash-generation capacity from the core business has been maintained. Investing Cash Flow was -¥35.5B, as capital expenditures of ¥10.5B, purchases of investment securities of ¥9.9B, acquisitions of intangible assets of ¥2.9B, and increases in time deposits, among other factors, caused the balance to shift substantially into net investment outflows from +¥2.2B in the previous year. Financing Cash Flow was -¥10.4B, primarily due to dividend payments (approximately ¥10.0B). As a result, Free Cash Flow (Operating Cash Flow + Investing Cash Flow) was -¥14.0B, indicating that growth investments generated funding needs exceeding OCF. However, cash and deposits remained substantial at ¥166.6B, and the impact of the investment outflows on liquidity is expected to be limited.

Earnings Quality

In the current period, both extraordinary income and extraordinary losses were negligible (approximately ¥0.0B each). The near disappearance of one-time factors arising in the previous year, such as gains on sales of investment securities and impairment losses (including ¥329 million in extraordinary losses in the previous year), has increased the Company’s dependence on recurring business earnings, which can be viewed positively in terms of earnings quality. Non-operating income of ¥1.4B was small at approximately 0.7% of revenue and consisted primarily of ¥0.8B in dividend income, insufficient to materially distort total profit. The gap between Ordinary Income of ¥26.8B and Net Income of ¥17.8B was primarily attributable to income taxes of ¥9.1B (effective tax rate 33.8%). The increase from the previous year’s effective tax rate (approximately 26.9%) was the main factor limiting Net Income growth relative to Operating Income and Ordinary Income. The fact that OCF exceeded Net Income indicates a small gap between accounting earnings and cash generation.

Earnings Forecast and Guidance

Progress against the full-year earnings forecast was 50.8% for revenue (¥220.9B/¥435.0B), 56.5% for Operating Income (¥25.4B/¥45.0B), 57.1% for Ordinary Income (¥26.8B/¥47.0B), and 54.1% for Net Income (¥17.8B/¥32.8B). All metrics are progressing at a pace exceeding the simple 50% first-half revenue progress rate. In particular, profit indicators are approximately 6–7 points ahead of schedule, reflecting the contribution from growth in high-margin segments during the first half. No revisions were made to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

The interim dividend was ¥50 per share, representing a significant increase from ¥20 in the same period of the previous year. The full-year dividend forecast is ¥120, resulting in a Payout Ratio of 73.5% based on forecast full-year EPS of ¥163.18. OCF of ¥21.5B almost covered the combined amount of dividend payments (approximately ¥10.0B) and capital expenditures (¥10.5B), ensuring core cash-generation capacity to support dividends. However, Free Cash Flow was negative due to the expansion of total investments, including purchases of investment securities, and this requires monitoring when assessing future dividend sustainability. As no disclosure regarding share repurchases was identified, the shareholder return assessment in this report is based on the Payout Ratio.

Risk Factors

1. Concentration risk in the core business: The Interior and Exterior Products-Related Business accounts for 81.9% of revenue (¥181.1B) and approximately 79% of Operating Income (¥20.0B), meaning that demand trends in this business have a significant impact on Company-wide performance.

2. Working capital volatility risk: An increase in inventories reduced Operating Cash Flow by ¥4.1B, and management of inventories and accounts receivable accompanying revenue expansion could affect future cash conversion efficiency.

3. Market fluctuation risk related to investment securities: The Company holds ¥67.4B in investment securities (up from ¥54.5B in the previous year). Valuation differences on securities, which are a source of volatility in comprehensive income, contributed +¥5.5B in the current period, but may fluctuate in the future due to market movements.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Return

Both the Operating Income margin and Net Income margin exceed the industry median, indicating that profitability is relatively favorable within the industry.

Growth and Capital Efficiency

The revenue growth rate is below the industry median, positioning the Company somewhat unfavorably within the industry in terms of revenue growth.

Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Income margin improved to 11.5% (10.1% in the previous year). Growth in high-growth segments such as the Parking Equipment-Related Business (margin 18.4%) and Reducer-Related Business (margin 7.9%), together with improved SG&A efficiency, represents a notable structural improvement factor.

2. Net Income YoY growth of +2.3% slowed relative to growth in Operating Income (+21.5%) and Ordinary Income (+22.6%), primarily due to the increase in the effective tax rate from 26.9% in the previous year to 33.8%. The improvement in business earnings was offset by the higher tax burden, highlighting the impact of tax-rate trends on the presentation of Net Income.

3. Under a sound financial foundation characterized by an Equity Ratio of 84.7% and cash and deposits of ¥166.6B, the Company has accelerated investments in capital expenditures, investment securities, and intangible assets, resulting in Free Cash Flow of -¥14.0B. Although the impact on liquidity is expected to be limited given the substantial cash position, the balance between investment and shareholder returns will influence future cash flow trends.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥2,548–¥2,689 at ±1% for the cost of equity, and ¥2,609–¥2,622 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing gap relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

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