VALQUA,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥27.08B
• Operating Income: ¥3.18B
• Net Income: ¥2.02B
• EPS: ¥144.93

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

Vulcan (7995) reported consolidated FY2026 Q2 (cumulative) results under JGAAP showing resilient profitability despite a top-line contraction. Revenue was ¥27.081bn, down 10.0% YoY, but operating income rose 8.8% YoY to ¥3.183bn, indicating meaningful margin expansion and effective cost/mix management. Gross profit margin was 44.5%, and operating margin improved to 11.8%, supported by disciplined SG&A control and likely favorable product/geographic mix. Ordinary income of ¥3.081bn trailed operating income, reflecting modest net non-operating costs (including ¥110m interest expense). Net income increased 27.7% YoY to ¥2.551bn, with EPS at ¥144.93, implying improved bottom-line leverage and potentially lower non-operating drag or tax effects versus the prior year. DuPont decomposition (interim, non-annualized) shows a 9.42% net margin, 0.339x asset turnover, and 1.56x financial leverage, yielding a reported ROE of 4.97%; on an annualized basis, underlying ROE would likely be higher, but interim comparisons should be made with caution. Liquidity is strong with a current ratio of 250% and a quick ratio of 215%, while leverage remains conservative with debt-to-equity around 0.53x and equity comprising the majority of the capital base. Cash generation quality appears healthy: operating cash flow (OCF) was ¥3.357bn, exceeding net income (OCF/NI = 1.32x), suggesting earnings backed by cash and manageable working capital dynamics. EBITDA was ¥4.56bn, and EBIT-based interest coverage is a robust 28.9x, indicating ample buffer against interest costs. Free cash flow cannot be assessed as investing cash flow was not disclosed (reported as zero due to non-disclosure), and cash & equivalents were also not disclosed. Dividend data were not provided (DPS and payout shown as 0.00 are placeholders for non-disclosure), so payout policy inference must rely on balance sheet strength and cash generation potential rather than reported distributions. The balance sheet shows total assets of ¥79.792bn and equity of ¥51.3bn, with working capital of ¥27.861bn supporting operations despite the sales decline. Overall, the company demonstrated positive operating leverage: profits rose despite lower sales, implying effective cost control and/or richer mix, though sustainability will depend on end-market demand normalization. Key limitations include several unreported items (equity ratio, C&CE, investing cash flows, DPS, share counts), making some ratios and coverage analyses incomplete. Near-term outlook hinges on revenue stabilization, maintaining gross margin discipline, and capex cadence (unreported) relative to depreciation. The risk profile appears balanced: strong liquidity and coverage offset cyclical exposure to industrial demand and potential raw material cost volatility.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 9.42%
• asset_turnover: 0.339x (interim, using period-end assets)
• financial_leverage: 1.56x (Assets/Equity = 79.792/51.300)
• calculated_ROE: 4.97% (interim, not annualized)
• commentary: ROE is primarily driven by healthy net margins and moderate leverage; asset turnover appears low due to interim denominator effects. Annualizing earnings would lift the implied ROE, but precise annualization requires average equity and full-year revenue. margin_quality:
• gross_margin: 44.5%
• operating_margin: 11.8%
• EBITDA_margin: 16.8%
• ordinary_margin: 11.4%
• net_margin: 9.42%
• commentary: Margin expansion despite a 10% revenue decline signals favorable mix, price discipline, and SG&A control. Ordinary income slightly below operating income reflects modest net non-operating costs. operating_leverage: Positive operating leverage is evident: operating income +8.8% YoY on revenue -10.0% YoY. This suggests effective cost flexing and/or improved product/customer mix. Sustainability depends on volume recovery and continued cost discipline.

Growth Assessment

revenue_sustainability: Top line contracted 10.0% YoY to ¥27.081bn. Without segment disclosure, the decline likely reflects slower industrial demand and/or inventory adjustments among customers. Monitoring order intake and backlog (not disclosed) will be important for trajectory into H2. profit_quality: Net income rose 27.7% YoY to ¥2.551bn with improved margins, indicating quality-driven growth rather than one-off gains. Ordinary income slightly below operating income implies limited non-operating support; the improvement appears operationally driven. outlook: Assuming stabilization of end-markets, margins should remain defensible given cost actions and product mix. However, if volumes weaken further, maintaining double-digit operating margins could be challenging without additional cost measures. Lack of capex data limits visibility on capacity and efficiency initiatives for growth.

Financial Health

liquidity:

• current_ratio: 250.0% (46.430/18.569)
• quick_ratio: 214.8% (ex-inventories: (46.430-6.542)/18.569)
• working_capital: ¥27.861bn
• commentary: Ample liquidity headroom supports operations and short-term obligations even amid softer sales. solvency:
• debt_to_equity: 0.53x (Total liabilities/equity = 27.302/51.300)
• interest_coverage: 28.9x (EBIT/interest; EBIT ≈ ¥3.183bn, interest ¥110m)
• equity_ratio: Not disclosed (reported 0 indicates non-reporting)
• commentary: Leverage is moderate and well-covered by earnings, providing resilience against rate or credit shocks. capital_structure: Equity-financed base is substantial (equity ¥51.3bn vs assets ¥79.8bn). Non-operating expenses are modest; no data on long-term debt mix or cash balances were disclosed, limiting net debt assessment.

Cash Flow Quality

earnings_quality: OCF/Net income = 1.32x (¥3.357bn/¥2.551bn), indicating cash-backed earnings and supportive working capital behavior. FCF_analysis: Free cash flow cannot be determined because investing cash flow/capex were not disclosed (reported as 0 implies non-reporting). D&A is ¥1.377bn; if capex approximates D&A, underlying FCF would likely be positive given OCF of ¥3.357bn, but this is an assumption. working_capital: Inventories stand at ¥6.542bn; overall current assets are strong. The positive OCF suggests either stable or improving working capital turns, though detailed movements (AR/AP/inventory) were not disclosed.

Dividend Sustainability

payout_ratio_assessment: Payout ratio reported as 0.0% and DPS at ¥0.00 reflect non-disclosure for the interim period rather than actual zero. With EPS at ¥144.93 for H1 and strong liquidity, capacity for distributions appears adequate in principle. FCF_coverage: Not assessable due to missing investing cash flow data; therefore, FCF-based coverage of dividends cannot be computed. policy_outlook: Absent disclosed DPS or policy guidance, sustainability judgment hinges on balance sheet strength and recurring cash generation. Stable margins and moderate leverage provide room for continued or resumed dividends, subject to board policy and H2 performance.

Risk Assessment

Business Risks:

• Demand cyclicality in industrial and semiconductor-related end-markets potentially impacting volume and pricing.
• Raw material and energy cost volatility affecting gross margins.
• Customer inventory adjustments leading to near-term revenue fluctuations.
• Product mix shifts; loss of high-margin product share could erode operating margin.
• Supply chain disruptions impacting lead times and working capital.

Financial Risks:

• Potential interest rate increases raising finance costs (though current coverage is strong).
• FX volatility affecting import costs and overseas earnings translation (if applicable; not disclosed).
• Concentration of capital in working capital; a reversal could temporarily reduce OCF.
• Limited visibility on capex could lead to higher-than-expected investment cash outflows.

Key Concerns:

• Top-line decline of 10% YoY despite strong profitability; sustainability of margin resilience if sales remain weak.
• Lack of disclosure on cash, investing cash flows, and equity ratio limits net debt and FCF analysis.
• Interim DuPont/ROE metrics are not annualized and sensitive to timing; caution in interpretation.

Investment Implications

Key Takeaways:

• Margins strengthened materially: operating margin 11.8% with revenue -10% YoY.
• Cash conversion is solid: OCF/NI 1.32x, indicating high earnings quality.
• Balance sheet conservative: current ratio 250%, D/E 0.53x, interest coverage 28.9x.
• ROE of 4.97% (interim) driven by healthy net margin and moderate leverage; annualized performance likely higher.
• Data gaps (cash, capex/ICF, DPS) constrain full FCF and payout analysis.

Metrics to Watch:

• Order trends and backlog for H2 revenue visibility.
• Gross margin trajectory vs raw material and energy costs.
• SG&A as a % of sales to gauge operating leverage persistence.
• Capex and investing cash flows relative to D&A to assess FCF.
• Working capital turns (DSO/DIO/DPO) and OCF sustainability.
• Non-operating gains/losses and effective tax rate normalization.

Relative Positioning: Compared to typical Japanese industrial components peers, Vulcan exhibits above-average liquidity and strong interest coverage with mid-teens EBITDA margins; however, revenue contraction outpaces some peers, making sustained margin defense and cash generation the differentiators in H2.

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