Sangetsu Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥98.89B
• Operating Income: ¥8.19B
• Net Income: ¥5.00B
• EPS: ¥107.40

Income Statement

Balance Sheet

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

Sangetsu Co., Ltd. reported FY2026 Q2 (cumulative) consolidated results showing solid top-line growth and stronger profit leverage. Revenue rose 5.3% year on year to ¥98.9bn, while operating income increased 10.9% to ¥8.19bn, indicating positive operating leverage. Net income advanced 26.4% to ¥6.31bn, supported by improved operating profit and a normalized tax rate. Gross margin was 29.3%, pointing to healthy pricing and mix, and operating margin improved to approximately 8.3%. Ordinary income of ¥8.53bn exceeded operating income, suggesting modest non-operating income offsetting interest expense (¥120m) and providing a small uplift to profit quality. The DuPont breakdown yields a net margin of 6.38%, asset turnover of 0.542, and financial leverage of 1.57x, resulting in ROE of 5.44%. This ROE implies moderate profitability supported more by margin improvement than by balance sheet leverage. Liquidity is robust with a current ratio of 200.8% and quick ratio of 167.7%, backed by current assets of ¥117.0bn versus current liabilities of ¥58.3bn. The capital structure appears conservative with liabilities/equity of 0.60x; based on the balance sheet, the equity ratio is approximately 63.6% (¥116.1bn equity / ¥182.5bn assets), though the disclosed equity ratio item shows as unreported in the dataset. Interest coverage is strong at 68.2x on an operating basis, pointing to low financial risk. The effective tax rate implied by the figures is roughly 29–30% (income tax ¥2.58bn on pre-tax profit approximating ¥8.9bn), despite the “0.0%” placeholder shown in the summary metrics. Cash flow statement line items are not disclosed in this dataset; as a result, OCF/Net Income and FCF measures in the provided metrics default to zero and should not be interpreted as actual cash results. Inventory stands at ¥19.3bn, about 29.7% of cost of sales for the period, which is reasonable for the business but still a key working-capital lever. Dividend data are not provided here; payout-related metrics showing zero are placeholders, not evidence of no dividend. Overall, the half-year shows good revenue resilience, gross margin health, and SG&A discipline, translating to widening operating margin and higher earnings. Balance sheet strength provides flexibility to navigate demand variability and fund growth or shareholder returns. The primary analytical gap is the absence of cash flow and capex data, which constrains assessment of earnings-to-cash conversion and dividend coverage. Given these limitations, conclusions center on the quality of reported profits and the conservative financial position rather than on cash generation trends.

Profitability Analysis

roe_decomposition: ROE 5.44% = Net margin 6.38% × Asset turnover 0.542 × Financial leverage 1.57. This indicates moderate profitability driven by respectable margins and mid-level asset efficiency, with limited reliance on leverage. margin_quality: Gross margin is 29.3% (¥28.98bn GP on ¥98.89bn sales). Operating margin is about 8.28% (¥8.19bn OI), up faster than sales (+10.9% OI vs +5.3% revenue), suggesting pricing/mix and SG&A control. Ordinary income (¥8.53bn) exceeds OI, implying net non-operating income (~¥0.34bn) that more than offsets ¥0.12bn interest cost. Effective tax is roughly 29–30%, consistent with normalized levels. operating_leverage: Operating income growth (+10.9% YoY) outpaced revenue (+5.3% YoY), evidencing positive operating leverage. Implied SG&A for the period is ~¥20.79bn (GP minus OI), or ~21.0% of sales, indicating disciplined overhead amid growth.

Growth Assessment

revenue_sustainability: Revenue grew 5.3% YoY to ¥98.89bn, demonstrating steady demand. Without segment disclosure, we infer growth is broad-based, supported by pricing and possibly stable renovation/new-build demand. profit_quality: Gross margin at 29.3% and OI growth outpacing sales indicate improved mix and cost discipline. Ordinary income benefits modestly from non-operating gains, but core profitability is the main driver. outlook: Assuming stable macro conditions and continued cost control, margins should remain resilient. Key to sustaining growth will be maintaining price discipline against input cost variability and managing working capital to support volumes.

Financial Health

liquidity: Current assets ¥117.01bn vs current liabilities ¥58.28bn ⇒ current ratio 200.8% and quick ratio 167.7%, indicating strong near-term solvency. Working capital is ¥58.74bn. solvency: Total liabilities ¥70.11bn vs equity ¥116.12bn yields liabilities/equity of 0.60x. Based on balance sheet figures, the equity ratio is approximately 63.6% (equity/assets), pointing to a conservative balance sheet. capital_structure: Interest expense is modest at ¥0.12bn, and interest coverage is 68.2x on an operating basis. Leverage is low-to-moderate (financial leverage 1.57x), providing flexibility for investment and shareholder return.

Cash Flow Quality

earnings_quality: Net income of ¥6.31bn with strong operating margins suggests underlying earnings quality is solid; tax expense of ¥2.58bn implies a normalized tax rate (~29–30%). Non-operating items add modestly to profits. fcf_analysis: Operating CF and Investing CF are not disclosed in this dataset (zeros are placeholders). Consequently, FCF cannot be assessed. Capex and depreciation are also not provided, constraining cash conversion analysis. working_capital: Inventories are ¥19.3bn, about 29.7% of cost of sales for the period, indicating moderate inventory intensity. With substantial working capital (¥58.74bn), liquidity headroom is ample, though inventory and receivables discipline remain key to OCF stability.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed here (zeros are placeholders). Based on earnings (EPS ¥107.40) and conservative leverage, capacity for distributions appears supported, but exact payout cannot be evaluated. fcf_coverage: Insufficient data: OCF and FCF are not provided, so cash coverage of dividends cannot be assessed. policy_outlook: With strong balance sheet metrics and improving profitability, the company retains flexibility to continue or enhance shareholder returns, subject to cash generation, investment needs, and stated capital policy.

Risk Assessment

Business Risks:

• Demand cyclicality in construction, renovation, and interiors impacting volume and mix
• Input cost volatility (materials, logistics) potentially pressuring gross margin
• Competitive pricing in distribution channels affecting margin sustainability
• Project timing and order backlog variability influencing quarterly results

Financial Risks:

• Working capital swings (inventory and receivables) could weigh on operating cash flow
• Potential increase in interest rates, though current interest burden is low
• FX exposure on imported materials if not fully hedged, with pass-through timing risk

Key Concerns:

• Lack of disclosed cash flow and capex data limits assessment of cash conversion
• Equity ratio in the summary appears as 0.0% due to non-disclosure, requiring reliance on calculated values
• No dividend disclosure in this dataset prevents payout trend analysis

Investment Implications

Key Takeaways:

• Top-line growth of 5.3% YoY with operating income up 10.9% evidences positive operating leverage
• Gross margin at 29.3% and strong SG&A discipline support improved operating margin (~8.3%)
• ROE of 5.44% reflects moderate profitability driven by margin and asset efficiency rather than leverage
• Balance sheet is conservative: liabilities/equity 0.60x and an implied equity ratio of ~63.6%
• Interest coverage of 68.2x indicates low financial risk
• Cash flow disclosure is absent; earnings-to-cash conversion remains a key unknown
• Inventory equals ~29.7% of cost of sales, making working capital management a lever for OCF

Metrics to Watch:

• Gross margin and operating margin trajectory (price/mix vs. input cost trends)
• SG&A-to-sales ratio sustainability
• Operating cash flow, capex, and free cash flow when disclosed
• Inventory levels relative to cost of sales and receivables collection
• Ordinary vs operating income gap (non-operating income/expenses)
• Effective tax rate normalization against guidance

Relative Positioning: Within Japanese interiors/distribution peers, Sangetsu presents steady growth, improving margins, and a conservative balance sheet; profitability is solid though not leverage-driven, leaving room for resilience and capital allocation flexibility.

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