SANSHIN ELECTRONICS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥87.78B
• Operating Income: ¥3.27B
• Net Income: ¥1.35B
• EPS: ¥206.55

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

Sansin Denki Co., Ltd. (TSE: 8150) reported solid topline and profit growth for FY2026 Q2 under JGAAP on a consolidated basis, with revenue up 16.8% year over year to ¥87.8bn. Gross profit of ¥7.43bn implies an 8.5% gross margin, consistent with a low-margin distribution model, yet operating income grew 46.8% YoY to ¥3.27bn as operating leverage improved. Ordinary income of ¥2.92bn trailed operating income, indicating non-operating costs (including interest expense of ¥0.31bn) weighed on profitability. Net income rose 86.2% YoY to ¥2.53bn, lifting EPS to ¥206.55, suggesting stronger execution and some expense discipline. DuPont decomposition shows a 2.88% net margin, 1.006x asset turnover, and 2.06x financial leverage, combining for an ROE of 5.96%. The improvement in operating income versus revenue indicates favorable mix, pricing, or SG&A control, though gross margin remains thin. EBITDA of ¥3.42bn (3.9% margin) points to modest operating cash generation capacity relative to sales scale. Liquidity appears comfortable with a current ratio of 175% and working capital of ¥32.1bn, supporting near-term obligations. While the reported equity ratio field shows 0.0%, that reflects non-disclosure; based on the provided totals, implied equity ratio is approximately 48.5% (¥42.4bn equity/¥87.3bn assets), denoting a balanced capital structure. Cash flow quality is a watch point: operating cash flow was negative at -¥4.19bn despite positive earnings, likely due to working capital investment as revenue scaled. Financing cash inflow of ¥2.18bn suggests the company tapped external funding to bridge operating cash needs, consistent with growth-related inventory/receivable builds in distribution businesses. Interest coverage of 10.4x (EBITDA basis) indicates adequate debt-servicing capacity presently. The effective tax rate shown as 0.0% in the metrics appears understated; using income tax of ¥0.58bn and ordinary income as a proxy for pre-tax income implies roughly a ~20% effective rate, acknowledging some line-item limitations. Dividend data are not disclosed this period (DPS showing 0.00), and free cash flow is not determinable from the provided investing cash flows (shown as 0, implying non-disclosure rather than zero). Overall, results demonstrate strong growth and margin improvement, but negative OCF and reliance on financing underline working capital intensity and the need to monitor cash conversion. Data limitations (notably inventories, cash balance, equity ratio, DPS, and share count) constrain depth of analysis; conclusions are based on available non-zero data.

Profitability Analysis

ROE of 5.96% is driven by a modest net profit margin (2.88%), near-1.0x asset turnover, and moderate financial leverage (2.06x). The step-up in operating income (+46.8% YoY) against revenue growth (+16.8% YoY) signals operating leverage and SG&A efficiency improvements. Gross margin at 8.5% remains thin, typical of an electronics/IT distribution profile, so profit expansion likely came from mix/pricing and opex control rather than structural margin shifts. Operating margin is approximately 3.7% (¥3.269bn/¥87.781bn), up YoY given the scale effect. Ordinary income below operating income (¥2.919bn vs. ¥3.269bn) indicates non-operating drag, including interest expense of ¥0.314bn and other non-operating items. EBITDA margin of 3.9% corroborates lean underlying margins, leaving limited buffer if pricing tightens. Interest coverage of 10.4x suggests current earnings comfortably service interest costs. Depreciation and amortization are low at ¥0.155bn, implying an asset-light model with limited non-cash expense support to EBITDA. Overall profitability quality improved this half, but remains sensitive to gross margin fluctuations and non-operating costs.

Growth Assessment

Revenue growth of 16.8% YoY to ¥87.8bn is robust and likely supported by demand in core verticals and/or expanded project wins. Operating income growth of 46.8% YoY materially outpaced sales, reflecting operating leverage and favorable cost control. Net income rose 86.2% YoY, aided by improved operating performance and possibly lower non-operating burdens versus the prior-year period. Sustainability depends on ability to maintain mix and pricing amid competitive procurement environments and potential component price normalization. The low gross margin indicates reliance on volume; continued double-digit growth may require ongoing working capital investment, which can pressure cash conversion. Non-operating expenses (notably interest) could rise if financing remains elevated to support growth. Pipeline visibility is not disclosed, but the magnitude of growth suggests healthy end-market demand; sustainability into 2H will hinge on order backlog and execution on large accounts. Outlook: cautiously constructive on profit trajectory given operating leverage, but mindful of cash conversion and non-operating cost headwinds.

Financial Health

Liquidity is solid with a current ratio of 175.1% and working capital of ¥32.11bn. Quick ratio equals current ratio due to inventories not being disclosed; true quick ratio may be lower if inventories are material. Total liabilities of ¥43.50bn against equity of ¥42.36bn implies a liabilities-to-equity ratio of ~1.03x, consistent with the provided debt-to-equity metric. While the reported equity ratio field shows 0.0%, implied equity ratio is ~48.5%, indicating a balanced capital structure. Interest coverage is healthy at 10.4x, supporting solvency. Financing cash inflow of ¥2.18bn suggests utilization of external funding to support operations, consistent with working capital needs in a growth phase. Absence of disclosed cash and inventories limits precision in assessing liquidity buffers and inventory risk.

Cash Flow Quality

Operating cash flow of -¥4.19bn versus net income of ¥2.53bn yields an OCF/NI ratio of -1.66, signaling poor cash conversion this period, likely from receivables growth and/or inventory build tied to revenue expansion. Investing cash flow is shown as 0 (not disclosed), and capex is therefore unavailable; Free Cash Flow is shown as 0 in the dataset and should be treated as not determinable, not actual zero. EBITDA of ¥3.42bn provides operating cash generation capacity, but the working capital outflow more than offset this. The positive financing cash flow of ¥2.18bn indicates reliance on external funding to bridge OCF shortfalls, a common pattern in distribution models during periods of rapid growth. Key to earnings quality will be normalization of working capital in 2H and timely collections. Without cash and inventory disclosures, assessing structural cash conversion is constrained.

Dividend Sustainability

Dividend data for the period are not disclosed (DPS shown as 0.00 and payout ratio 0.0% should be treated as unreported). With net income of ¥2.53bn and negative OCF this half, near-term dividend capacity would hinge on second-half cash generation and balance sheet flexibility. FCF coverage is reported as 0.00x in the dataset but is not meaningful given missing capex/FCF details. The implied equity ratio (~48.5%) and interest coverage (10.4x) suggest capacity to sustain a modest payout if the company has an established dividend policy, but sustainability depends on improving cash conversion and maintaining profitability. Policy outlook cannot be inferred from the provided data; monitor year-end guidance and board resolutions.

Risk Assessment

Business Risks:

• Low gross margin model increases sensitivity to pricing and supplier terms
• Working capital intensity and cash conversion risk during growth phases
• Customer concentration risk typical in B2B distribution (not disclosed but common)
• Supply chain and lead-time volatility affecting deliveries and billing
• Potential slowdown in end-markets impacting volume-driven profitability

Financial Risks:

• Negative operating cash flow requiring external financing in the period
• Non-operating cost drag (interest expense ¥0.314bn) reducing ordinary income
• Leverage sensitivity if financing grows to support WC
• Limited visibility on cash/inventory balances due to non-disclosure
• Potential increase in funding costs if interest rates rise

Key Concerns:

• OCF/NI of -1.66 indicates weak cash conversion this half
• Reliance on financing CF (+¥2.18bn) to support operations
• Thin gross and EBITDA margins leave limited cushion if pricing tightens
• Non-operating items reduced ordinary income below operating income
• Data limitations (cash, inventories, equity ratio, DPS) constrain full assessment

Investment Implications

Key Takeaways:

• Strong revenue growth (+16.8% YoY) with outsized operating income growth (+46.8% YoY)
• ROE at 5.96% driven by modest margins, near-1x asset turnover, and moderate leverage
• Operating leverage evident; gross margin remains structurally thin at 8.5%
• Negative OCF (-¥4.19bn) versus positive earnings highlights WC drag
• Financing inflow (+¥2.18bn) used to bridge operating cash needs
• Implied equity ratio ~48.5% suggests a balanced balance sheet despite reported field non-disclosure

Metrics to Watch:

• Working capital days (DSO/DPO/DIO) and OCF recovery in 2H
• Gross margin trends and project mix
• Ordinary income versus operating income (non-operating cost trajectory)
• Interest coverage and total liabilities-to-equity
• Capex and true FCF once investing cash flows are disclosed
• Dividend policy guidance and year-end payout decisions

Relative Positioning: Within Japan’s electronics/IT distribution peer set, Sansin Denki shows competitive topline growth and improving operating leverage, but cash conversion lags this half; capital structure appears balanced, placing the company mid-pack on profitability and solvency with a need to improve working capital efficiency to reach top-tier returns.

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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