GSI Creos Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥84.42B
• Operating Income: ¥1.76B
• Net Income: ¥1.24B
• EPS: ¥109.77

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

GSI Creos (8101) reported consolidated FY2026 Q2 results under JGAAP with revenue of ¥84.4bn, up 6.0% YoY, indicating steady top-line momentum. Gross profit was ¥8.57bn, implying a gross margin of 10.1%, roughly stable but still indicative of a thin-margin trading/distribution model. Operating income declined 2.3% YoY to ¥1.76bn, evidencing margin compression and negative operating leverage despite higher sales. Ordinary income reached ¥2.02bn, exceeding operating income and suggesting a net contribution from non-operating factors. Net income increased 8.9% YoY to ¥1.35bn, supported by the ordinary line and a normalizing tax burden, resulting in EPS of ¥109.77. The DuPont decomposition yields ROE of 4.41%, based on a 1.60% net margin, 1.007x asset turnover, and 2.75x financial leverage—indicating modest equity efficiency for a trading-oriented business. Liquidity remains solid with a current ratio of 146.7% and a quick ratio of 113.6%, supported by ¥68.6bn in current assets and ¥46.8bn in current liabilities. The balance sheet shows total assets of ¥83.8bn and total equity of ¥30.5bn; this implies an equity ratio of roughly 36.4% (equity/assets), even though the disclosed equity ratio field shows 0% (unreported). Inventory stands at ¥15.45bn; without turnover data, working capital intensity should be monitored given the sector’s sensitivity to inventory cycles. Interest expense of ¥153m is well covered (11.5x by operating income), indicating manageable financial risk at current earnings levels. Cash flow quality appears robust: operating cash flow (OCF) of ¥4.24bn is 3.15x net income, suggesting healthy cash conversion and likely working capital release or disciplined receivables/ payables management. Investing cash flow is shown as 0 and cash & equivalents as 0, which should be treated as undisclosed rather than true zeros per data limitations; therefore, free cash flow cannot be reliably derived. Dividend fields (DPS, payout ratio) are also unreported, preventing direct commentary on capital return in the period. Overall, the quarter shows resilient revenue growth, some pressure on operating margin, solid cash conversion, and a balanced capital structure. Key watchpoints are sustainability of gross margin, SG&A discipline, and the durability of the working-capital-driven cash inflows. Given incomplete disclosures on investing cash flows, cash balances, and dividends, conclusions on FCF and payout sustainability remain constrained.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.60%
• asset_turnover: 1.007x
• financial_leverage: 2.75x
• calculated_ROE: 4.41%
• commentary: ROE is driven more by leverage and asset turnover than margin. The margin profile is thin, typical for trading-heavy models, while asset turnover at ~1.0x suggests moderate efficiency for a mid-volume distributor. margin_quality:
• gross_margin: 10.1% (¥8.57bn on ¥84.42bn sales)
• operating_margin: 2.09% (¥1.76bn)
• ordinary_margin: 2.39% (¥2.02bn)
• net_margin: 1.60% (¥1.35bn)
• observations: YoY revenue +6.0% with operating income -2.3% implies SG&A or mix-driven pressure. Ordinary margin exceeding operating margin highlights positive non-operating contributions offsetting core margin softness. operating_leverage: Negative in the period: sales rose but operating income fell, indicating fixed cost absorption and/or gross margin compression. EBITDA margin of 2.3% and limited D&A (¥167m) underscore a low-capex, low-margin profile with tight cost headroom.

Growth Assessment

revenue_sustainability: Top-line growth of 6.0% YoY appears steady; sustainability will depend on demand trends in core end-markets and the ability to maintain volumes without eroding pricing. profit_quality: Net income +8.9% YoY despite operating income -2.3% suggests reliance on non-operating items (e.g., financial income, FX, or equity-method gains) and a normalized tax burden rather than purely operational improvement. outlook: Near-term growth hinges on restoring operating margin through mix and SG&A control. With trading models sensitive to commodity/FX and supply chain conditions, maintaining the ~10% gross margin and preventing working capital drag will be key to sustaining earnings.

Financial Health

liquidity:

• current_ratio: 146.7%
• quick_ratio: 113.6%
• working_capital: ¥21.82bn
• commentary: Liquidity is comfortable, implying adequate ability to meet short-term obligations even with inventory at ¥15.45bn. solvency:
• total_liabilities_to_equity: 1.64x (¥49.88bn / ¥30.51bn)
• interest_coverage: 11.5x (operating income / interest expense)
• equity_ratio_calculated: ≈36.4% (¥30.51bn / ¥83.82bn)
• commentary: Leverage is moderate for a trading business, with solid interest coverage. The implied equity ratio suggests a balanced capital base despite the unreported equity ratio field. capital_structure: Leverage (assets/equity) at 2.75x aligns with a working-capital-intensive model. The debt-to-equity metric provided (1.63x) closely tracks total liabilities to equity; exact interest-bearing debt composition is not disclosed.

Cash Flow Quality

earnings_quality: OCF of ¥4.24bn is 3.15x net income, indicating strong cash conversion and likely favorable working capital movements or disciplined collection. FCF_analysis: Investing CF is shown as 0 (unreported). Capex and acquisition activity are not available, so true free cash flow cannot be determined. On a proxy basis, positive OCF suggests capacity to fund typical maintenance capex, but this cannot be confirmed. working_capital: Current assets of ¥68.59bn versus current liabilities of ¥46.77bn point to a sizeable working capital base; inventory of ¥15.45bn warrants monitoring for turnover and potential revaluation risks. The strong OCF hints at a release or improved turnover in the period.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are unreported in this dataset; EPS is ¥109.77, but without DPS we cannot compute payout. FCF_coverage: Not assessable due to unreported investing cash flows and capex; OCF was robust, which is supportive in principle, but FCF is indeterminate. policy_outlook: No explicit guidance or historical policy is provided here. Any assessment of dividend stability would require confirmed DPS, cash balance, and medium-term cash needs.

Risk Assessment

Business Risks:

• Thin gross margin (~10%) amplifies sensitivity to input cost and pricing volatility.
• Negative operating leverage in the period; SG&A or mix pressure could persist if volumes slow.
• Working capital intensity (inventory ¥15.45bn) exposes the company to demand swings and potential inventory write-downs.
• Dependence on non-operating items to bridge from operating to net income increases earnings variability.
• Exposure to FX/commodity price movements typical of trading businesses (not quantified here).

Financial Risks:

• Moderate leverage (liabilities/equity ~1.64x) leaves less room if earnings weaken.
• Refinancing and interest rate risk despite current 11.5x coverage; actual interest-bearing debt mix undisclosed.
• Potential reversal of working-capital-driven OCF could compress cash generation in subsequent periods.
• Incomplete visibility on cash & equivalents and investing cash flows limits assessment of liquidity buffers.

Key Concerns:

• Sustained margin compression at the operating level despite revenue growth.
• Reliance on non-operating income to support net earnings.
• Uncertain free cash flow due to undisclosed investing activities and cash balances.

Investment Implications

Key Takeaways:

• Revenue growth is intact (+6.0% YoY), but operating margin contracted, driving ROE to a modest 4.41%.
• Cash conversion is strong (OCF/NI 3.15x), likely aided by working capital, but durability is unproven.
• Balance sheet is balanced with an implied equity ratio of ~36%, and interest coverage is healthy at 11.5x.
• Data gaps on investing CF, cash balances, and dividends constrain FCF and payout analysis.

Metrics to Watch:

• Gross and operating margin trajectory (targeting stabilization above 2% operating margin).
• SG&A ratio and operating leverage as volumes evolve.
• Inventory levels and turnover days; receivables collection metrics.
• Ordinary income composition (FX, investment income) versus core operating profit.
• OCF sustainability and any capex/strategic investments affecting FCF.
• Leverage metrics (interest-bearing debt, net debt/EBITDA) once cash data are available.

Relative Positioning: Within trading/distribution peers, GSI Creos exhibits typical thin margins and moderate leverage, with better-than-average cash conversion this quarter but lower operating margin resilience; sustained improvement hinges on mix and cost control while maintaining disciplined working capital.

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