NIPRO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥317.38B
• Operating Income: ¥15.34B
• Net Income: ¥813M
• EPS: ¥36.21

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

Nipro (8086) delivered mixed FY2026 Q2 consolidated results under JGAAP: solid operating momentum but sharply weaker bottom-line, likely due to non-operating and/or extraordinary factors. Revenue grew 1.7% YoY to ¥317.4bn, while operating income rose 14.0% YoY to ¥15.3bn, indicating margin improvement and some operating leverage. Gross profit was ¥94.3bn with a gross margin of 29.7%, and EBITDA was ¥45.6bn, implying an EBITDA margin of 14.4%. Despite the operating improvement, ordinary income was only ¥8.2bn, significantly below operating income, signaling notable non-operating losses (e.g., interest burden and other non-operating items). Interest expense was ¥3.7bn and interest coverage was a moderate 4.1x on an EBIT basis. Net income fell to ¥5.9bn, a dramatic -98.7% YoY, implying large below-operating-line impacts and/or prior-year one-offs; this divergence merits close scrutiny. DuPont shows ROE at 1.98%, with a slim net margin of 1.86%, low asset turnover of 0.275x, and high financial leverage of 3.87x. Liquidity appears sound with a current ratio of 163.9% and a quick ratio of 115.1%; working capital stands at ¥223.9bn. The balance sheet is levered: total liabilities are ¥858.9bn versus equity of ¥297.7bn, implying a debt-to-equity ratio of 2.88x and an implied equity ratio of ~25.8% (equity/total assets), even though a reported equity ratio was not disclosed in XBRL. Operating cash flow was ¥15.0bn and OCF/Net Income was 2.54x, suggesting earnings quality is stronger than the slim reported net margin would indicate. Inventory of ¥170.9bn (about 29.8% of current assets) is material and a focal point for working capital management and cash conversion. Dividend data were not disclosed (DPS and payout shown as zero), so no conclusions about distribution policy can be drawn from this dataset. The key analytical takeaway is that core operations improved, but non-operating items and/or extraordinary factors compressed ordinary and net income, dragging ROE. With leverage elevated and interest costs meaningful, sustaining operating improvements and stabilizing non-operating items will be essential for earnings normalization and ROE recovery. Data limitations (notably cash and investing CF, equity ratio, and share data) constrain full-depth analysis, but available metrics point to resilient operations, moderate financial risk, and near-term focus on cash conversion and non-operating volatility.

Profitability Analysis

ROE of 1.98% reflects: Net profit margin 1.86% × Asset turnover 0.275 × Financial leverage 3.87. The main drag is the thin net margin despite decent operating metrics. Operating margin is 4.83% (¥15.3bn/¥317.4bn), up YoY given operating income growth outpacing revenue (+14.0% vs +1.7%), demonstrating operating leverage and some margin expansion. Gross margin of 29.7% indicates healthy value-add, while EBITDA margin of 14.4% highlights capacity to absorb D&A (¥30.2bn). The gap between operating income (¥15.3bn) and ordinary income (¥8.2bn) implies sizable non-operating losses; after interest expense of ¥3.7bn, residual non-operating losses of roughly ¥3.4bn are inferred (e.g., FX, valuation, equity-method, or other financial items). This is the key bridge to the sharp net income decline. Interest coverage of 4.1x (EBIT/interest) is adequate but not generous for a company with leverage of ~2.9x liabilities-to-equity. The effective tax burden, using income tax of ¥3.24bn on a rough pre-tax proxy near ordinary income, implies a c.39% rate; the reported 0.0% effective tax rate appears non-disclosed rather than economic. Overall, core profitability is improving, but bottom-line compression from below-operating items is weighing on ROE.

Growth Assessment

Top-line grew 1.7% YoY, indicating steady but modest growth. Operating income growth of 14.0% YoY suggests successful cost controls, pricing/mix improvement, and/or efficiency gains, delivering operating leverage. Ordinary income of ¥8.2bn and net income of ¥5.9bn lag operating results materially, indicating that non-operating headwinds (including interest and other losses) are currently offsetting operating gains. EBITDA of ¥45.6bn supports the view that core cash earnings capacity is intact. Given the -98.7% YoY net income, prior-year comparatives likely benefited from one-offs, or current period faced exceptional charges; clarity on extraordinary items would refine the trend assessment. Revenue sustainability appears reasonable given stable gross margin, but further growth will be needed to dilute fixed costs and strengthen margins. Profit quality at the operating level is acceptable; the quality of reported net profit is impaired by volatile non-operating items. Near-term outlook hinges on normalization of non-operating impacts (FX, financial securities valuations, interest cost trajectory) and continued discipline in COGS and SG&A. Monitoring inventory normalization and cash conversion will be key to supporting growth without balance-sheet stretch.

Financial Health

Liquidity is solid: current ratio 163.9%, quick ratio 115.1%, and working capital of ¥223.9bn. Inventories are sizeable at ¥170.9bn (29.8% of current assets), implying some cash conversion risk if demand slows or if mix becomes unfavorable. Solvency: total liabilities of ¥858.9bn vs equity of ¥297.7bn yields a debt-to-equity of 2.88x; implied equity ratio is approximately 25.8% (equity/total assets), despite a reported equity ratio not being disclosed. Leverage is elevated but manageable given EBIT interest coverage at 4.1x; nevertheless, higher rates or earnings volatility could pressure coverage. Asset turnover at 0.275x is low, reflecting a capital-intensive profile and/or the mid-year timing of balance-sheet averages; it constrains ROA and ROE absent margin expansion. Overall, the balance sheet supports operations, but headroom is not abundant; preserving liquidity and moderating leverage remain priorities.

Cash Flow Quality

Operating CF of ¥15.0bn versus net income of ¥5.9bn yields an OCF/NI of 2.54x, indicating solid cash conversion of earnings and/or working capital release in the period. D&A of ¥30.2bn is substantial relative to EBIT, underscoring the importance of capex to sustain assets; however, investing CF was not disclosed (shown as zero), so Free Cash Flow cannot be reliably assessed despite an indicated FCF of zero in the summary metrics. Cash and equivalents were not disclosed (shown as zero), limiting liquidity depth analysis beyond current ratios. Working capital is large (¥223.9bn), with inventories at ¥170.9bn; inventory management and receivables/payables dynamics will be major determinants of cash conversion going forward. Overall earnings quality looks better than reported net income would suggest, but incomplete CF disclosures (especially investing CF and cash balance) constrain assessment of sustainable FCF and balance-sheet liquidity.

Dividend Sustainability

Dividend per share and payout ratio were not disclosed (both shown as zero in the dataset), so we cannot assess dividend coverage or policy from this period’s data. With net income of ¥5.9bn and positive OCF of ¥15.0bn, internal capacity to fund distributions exists at face value, but lack of investing CF data (capex) precludes a proper FCF coverage view. Given elevated leverage (D/E 2.88x) and meaningful interest expense, a conservative distribution posture would be consistent with balance-sheet preservation until earnings volatility below the operating line stabilizes; however, no policy details are available in the provided data.

Risk Assessment

Business Risks:

• Margin sensitivity to input costs and product mix, given gross margin at 29.7%
• Inventory risk (¥170.9bn) affecting cash conversion and potential obsolescence
• Low asset turnover (0.275x) reflecting capital intensity and potential utilization risk
• Execution risk in sustaining operating leverage after a modest +1.7% revenue growth

Financial Risks:

• Elevated leverage (D/E 2.88x; implied equity ratio ~25.8%)
• Interest burden (¥3.7bn) with only 4.1x EBIT coverage
• Volatile non-operating/financial items depressing ordinary income vs operating income
• Limited visibility on investing cash flows and cash balances due to non-disclosure

Key Concerns:

• Sharp divergence between operating income (+14% YoY) and net income (-98.7% YoY)
• Non-operating losses (beyond interest) of roughly ¥3.4bn implied in the period
• Data gaps in investing CF and cash position hinder FCF and liquidity assessment
• Sustained high inventories could weigh on future OCF if normalization stalls

Investment Implications

Key Takeaways:

• Core operations improved with operating margin expansion despite modest top-line growth
• Bottom-line weakness stems from non-operating/extraordinary factors rather than core operations
• Liquidity is adequate, but leverage and interest costs require vigilant management
• Cash conversion appears solid this period, but sustainability depends on working capital discipline and capex profile
• Data limitations (cash, investing CF, dividend details) cap analytical certainty

Metrics to Watch:

• Ordinary income bridge (FX, equity-method, valuation, and other non-operating items)
• Interest coverage and all-in financing cost trends
• Inventory days, receivables/payables turnover, and OCF sustainability
• Capex and investing cash flows to derive true FCF
• ROE trajectory via margin stabilization and asset turnover improvements
• Equity ratio (economic) and net debt metrics once disclosed

Relative Positioning: Within capital-intensive healthcare/manufacturing peers, Nipro shows respectable operating margins and EBITDA generation but below-average net margins and ROE due to non-operating drags and higher leverage; liquidity is adequate, while balance-sheet flexibility appears moderate.

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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