SEIKO GROUP CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥160.52B
• Operating Income: ¥16.85B
• Net Income: ¥8.85B
• EPS: ¥305.88

Income Statement

Balance Sheet

Cash Flow Statement

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

Seiko Group (8050) delivered solid mid-term FY2026 Q2 results under JGAAP on a consolidated basis, with revenue of ¥160.5bn (+6.3% YoY) and operating income of ¥16.8bn (+26.2% YoY), indicating meaningful operating leverage. Gross profit reached ¥68.3bn, implying a robust gross margin of 42.5%, while operating margin expanded to approximately 10.5%. Ordinary income was ¥17.4bn, modestly above operating income, reflecting limited non-operating drag, and net income rose to ¥12.5bn (+44.2% YoY), with a net margin of 7.79%. DuPont analysis shows ROE of 7.57% driven by a 7.79% net margin, asset turnover of 0.429, and financial leverage of 2.26, suggesting a balance of profitability and moderate leverage. EBITDA was ¥23.9bn, yielding an EBITDA margin of 14.9%, underscoring healthy underlying earnings power. Interest expense was ¥0.72bn with interest coverage of 23.5x (EBIT basis), indicating ample headroom against finance costs. On cash generation, operating cash flow was ¥11.5bn, equating to an OCF/Net Income ratio of 0.92, which is respectable for a first-half period though shy of 1.0, pointing to some working capital absorption. Liquidity appears adequate with a current ratio of 116% and a quick ratio of 62%, but the inventory position of ¥81.7bn is sizable, warranting monitoring for turnover efficiency. Total assets were ¥373.8bn against total liabilities of ¥211.2bn and equity of ¥165.2bn, yielding a liabilities-to-equity multiple of 1.28x and financial leverage of 2.26x. The effective tax rate based on reported figures is approximately 23–24% (income tax ¥4.0bn vs ordinary income ¥17.4bn), though a zero rate shown in the “calculated metrics” should be treated as a data artifact. Dividend and share data were not disclosed in the provided extract (zeros should be read as unreported), so payout and per-share capital metrics cannot be assessed here. Free cash flow cannot be derived because investing cash flows were not disclosed. Overall, profitability momentum is favorable given the strong YoY operating income growth versus mid-single-digit revenue growth. Cash conversion is decent but not stellar, and inventory levels are high for the scale of current assets, implying working capital discipline remains a key focus. The balance sheet suggests a moderate leverage posture with adequate liquidity, but the absence of disclosed cash balances and investing flows tempers visibility. Data limitations around equity ratio, cash, capex, and dividends constrain the completeness of capital allocation and shareholder return analysis.

Profitability Analysis

ROE_decomposition: Reported ROE is 7.57%, decomposed as Net Margin 7.79% × Asset Turnover 0.429 × Financial Leverage 2.26. This indicates ROE is predominantly supported by margins with modest asset intensity and moderate leverage. margin_quality: Gross margin at 42.5% and operating margin at ~10.5% reflect strong pricing/mix and operating efficiency. Ordinary margin (~10.8%) slightly exceeds operating margin, suggesting minimal net non-operating drag. Net margin of 7.79% benefits from contained interest expense and a normalized tax rate (~23–24%). operating_leverage: Revenue grew 6.3% YoY while operating income rose 26.2% YoY, evidencing positive operating leverage and cost discipline. Depreciation of ¥7.04bn implies capital intensity, but EBITDA margin at 14.9% indicates healthy overhead absorption.

Growth Assessment

revenue_sustainability: Top-line expansion of 6.3% YoY is steady, likely driven by mix and pricing rather than pure volume acceleration (detail not disclosed). Sustainability will hinge on demand resilience and inventory sell-through. profit_quality: EBITDA margin (14.9%) and operating margin (~10.5%) improvements alongside limited non-operating items support quality of earnings. Interest burden is light (23.5x coverage), and taxes appear normalized. outlook: With operating income outpacing sales growth, the trajectory suggests further margin upside if topline trends hold and inventories normalize. However, visibility is constrained by a lack of segment breakdown, FX impacts, and capex plans in the provided data.

Financial Health

liquidity: Current ratio 116.4% and quick ratio 61.8% indicate adequate near-term liquidity, but liquidity quality is influenced by sizeable inventories (¥81.7bn). Working capital stands at ¥24.6bn. solvency: Liabilities/Equity is 1.28x and financial leverage (Assets/Equity) is 2.26x, suggesting a moderate leverage profile with ample interest coverage (23.5x). capital_structure: Total assets ¥373.8bn, liabilities ¥211.2bn, equity ¥165.2bn. The reported equity ratio was shown as 0% in the extract but should be considered undisclosed rather than zero. Cash balances were not disclosed here, limiting net leverage assessment.

Cash Flow Quality

earnings_quality: OCF/Net Income is 0.92, which is reasonable for a first-half period, but indicates some working capital consumption. Depreciation of ¥7.04bn supports non-cash earnings quality. FCF_analysis: Free cash flow cannot be determined as investing cash flows (capex and investments) were not disclosed; the provided FCF value of 0 should not be interpreted as actual zero. working_capital: Inventories at ¥81.7bn are high relative to current assets (47% of CA), which may be strategic but elevates the risk of slower cash conversion if demand softens. Receivables and payables detail not disclosed; current ratio and quick ratio point to reliance on inventory for liquidity.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio were not disclosed in the provided data (zeros are placeholders). With ROE at 7.57% and positive OCF, the capacity exists for distributions, but actual policy cannot be assessed here. FCF_coverage: Not assessable due to missing investing cash flows; any FCF coverage multiple shown as 0.00x should be treated as not available. policy_outlook: Without DPS history or guidance, we cannot infer the payout trajectory. Future distributions will depend on capex needs (undisclosed), working capital normalization, and profit sustainability.

Risk Assessment

Business Risks:

• Demand cyclicality affecting premium and mid-range consumer products
• Potential inventory buildup leading to discounting or margin pressure
• FX volatility impacting export margins and translation effects
• Supply chain and component availability risks
• Competitive pricing pressure in key categories

Financial Risks:

• Working capital intensity (high inventories) slowing cash conversion
• Limited visibility on cash and capex due to undisclosed items
• Refinancing or interest rate risk if debt levels are higher than implied by liabilities
• Potential tax rate variability versus assumptions

Key Concerns:

• OCF below net income (0.92x) suggests scope to tighten working capital
• Inventory at ¥81.7bn requires careful sell-through management
• Absence of investing CF and cash balance data constrains FCF and net leverage analysis
• Dividend capacity and policy unassessable from provided disclosure

Investment Implications

Key Takeaways:

• Strong operating leverage: +6.3% sales vs +26.2% operating income YoY
• Margins solid with 42.5% gross and ~10.5% operating margin; EBITDA margin 14.9%
• ROE at 7.57% supported by margin strength and moderate leverage
• Interest coverage robust at 23.5x, indicating low financing risk near term
• OCF/Net Income at 0.92 highlights working capital drag; inventories elevated
• Liquidity adequate (CR 116%, QR 62%) but quality relies on inventory
• Limited visibility on FCF, equity ratio, cash, and dividends due to undisclosed data

Metrics to Watch:

• Inventory levels and turnover days
• OCF/Net Income and operating cash conversion cycle
• Operating margin sustainability and SG&A ratio
• Capex and investing cash flows (once disclosed) to gauge FCF
• Net debt/EBITDA once cash and gross debt are disclosed
• Tax rate normalization and any one-off items
• FX sensitivity and pricing/mix trends

Relative Positioning: Within Japanese precision and consumer durable peers, Seiko Group displays above-average margin resilience and operating leverage this half, paired with moderate balance-sheet leverage; however, comparative clarity on capital intensity and shareholder returns is limited pending disclosure of cash, capex, and dividend details.

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