TACHIBANA ELETECH CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥103.12B
• Operating Income: ¥3.06B
• Net Income: ¥2.82B
• EPS: ¥118.03

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

Tachibana Eletech’s FY2026 Q2 results show modest top-line contraction with pronounced operating margin pressure but healthy cash generation. Revenue was ¥103.1bn, down 3.4% YoY, reflecting softer demand in key electronics/FA segments and/or normalization post-cycle peaks. Gross profit of ¥14.38bn yields a 13.9% gross margin, broadly acceptable for a technical trading/distribution model but thinner than in stronger cycles. Operating income declined 23.1% YoY to ¥3.06bn, taking operating margin to 3.0%, signaling negative operating leverage as fixed costs did not fully flex with lower volume. Ordinary income of ¥3.47bn exceeded operating income, indicating positive non-operating contributions (e.g., interest/dividend income, equity-method gains, or FX), partially cushioning operating weakness. Net income was ¥2.69bn (-4.6% YoY), much more resilient than operating profit, again underscoring the relevance of non-operating items this period. DuPont shows net margin of 2.61%, asset turnover of 0.620x, and financial leverage of 1.69x, resulting in ROE of 2.73%, a subdued level for a Japanese trading company. The OCF/NI ratio is strong at 3.14x, implying robust cash conversion, likely driven by working-capital release. Liquidity is solid with a current ratio of 225.6% and quick ratio of 165.2%, and working capital of ¥72.5bn, supporting operational flexibility. Total liabilities of ¥70.4bn against equity of ¥98.3bn imply conservative capitalization (approx. 59% equity-to-assets computed from provided balances), despite the reported equity ratio field being unreported. Interest coverage is high at 45x, and interest expense is a modest ¥68m, indicating limited financial risk from leverage. Inventory stands at ¥34.9bn, a notable balance to monitor in a softening environment for potential obsolescence or discounting risk. Cash flow from operations of ¥8.45bn comfortably exceeds net income, but investing cash flow is undisclosed, preventing a reliable free cash flow assessment. Financing cash outflow of ¥4.83bn suggests distributions or debt paydown, but dividends per share and share metrics are unreported. Overall, the company remains financially sound with strong liquidity and cash conversion, though profitability and ROE are currently muted due to margin compression. Outlook hinges on demand normalization in FA/semiconductor-linked verticals, maintaining pricing discipline, and managing inventories.

Profitability Analysis

ROE_decomposition: ROE 2.73% = Net margin 2.61% × Asset turnover 0.620 × Financial leverage 1.69. ROA approximates 1.62% (2.61% × 0.620), highlighting margin constraints more than balance sheet drag. margin_quality: Gross margin at 13.9% is typical for a value-added distributor/solution integrator but compressed versus peak cycles. Operating margin at 3.0% (¥3.06bn/¥103.12bn) fell sharply with only a modest top-line decline, indicating weaker mix or pricing, higher SG&A stickiness, or project execution timing. Ordinary margin at 3.37% (¥3.47bn/¥103.12bn) benefited from non-operating gains, while net margin at 2.61% shows improved resilience versus operating margin. operating_leverage: Revenue declined 3.4% YoY while operating income dropped 23.1% YoY, evidencing negative operating leverage. Fixed cost absorption and mix likely drove outsized profit sensitivity. D&A is modest (¥263m), so deleverage was primarily from gross margin and SG&A rather than non-cash charges.

Growth Assessment

revenue_sustainability: Top-line contraction of 3.4% suggests cyclical softness or slower project conversion in FA/electronics. Sustainability depends on order intake, backlog, and customer capex trends (not disclosed). profit_quality: Despite operating weakness, ordinary and net profits held up better, implying reliance on non-operating elements this period. Core earnings quality is thus mixed: operating profit softness versus supportive non-operating items. outlook: Short-term growth hinges on normalization in semiconductor, machine tool, and automation demand, alongside inventory normalization. Margin recovery requires improved mix, pricing discipline, and SG&A control. With strong liquidity, the company can support customer projects and capture upcycle demand when it returns.

Financial Health

liquidity: Current ratio 225.6%, quick ratio 165.2%, and working capital ¥72.5bn indicate ample liquidity and buffer for project and inventory cycles. solvency: Interest coverage 45x and modest interest expense (¥68m) signal low financial risk. Using provided totals, equity-to-assets is approximately 59% (¥98.3bn/¥166.4bn), despite the equity ratio field being unreported. capital_structure: Debt-to-equity (proxied by total liabilities/equity) is 0.72x, conservative for the model. The structure affords flexibility for inventory carry and customer credit without straining solvency.

Cash Flow Quality

earnings_quality: OCF/Net income at 3.14x indicates strong cash conversion, likely from a release in working capital (receivables/inventories) or favorable payables timing. FCF_analysis: Operating CF is ¥8.45bn, but investing CF is undisclosed; Free Cash Flow cannot be reliably determined (reported as 0 by data convention). The economic FCF is likely positive given strong OCF, but capex and investment outlays are unknown. working_capital: Inventories at ¥34.87bn are sizable; continued drawdown would support cash, while restocking or slower turnover could reverse the OCF strength. Monitoring receivables days, payables discipline, and inventory turns is critical.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio fields are unreported (displayed as 0). With EPS at ¥118.03 and solid OCF, capacity for distributions appears present, but actual policy and payout are not provided. FCF_coverage: FCF is not ascertainable due to undisclosed investing CF; hence, coverage metrics cannot be computed reliably. policy_outlook: Given conservative leverage and liquidity, the balance sheet could support stable dividends; however, sustainability depends on true FCF after investments and management’s capital allocation policy, both not disclosed here.

Risk Assessment

Business Risks:

• Cyclical exposure to factory automation, electronics, and semiconductor supply chains
• Gross margin pressure from competition and customer pricing demands
• Inventory obsolescence or discounting risk if demand weakens further
• Project timing risk affecting quarterly revenue recognition and margins
• Supplier concentration risk typical for authorized distributors/integrators
• FX volatility impacting non-operating income and purchasing costs

Financial Risks:

• Potential reversal of working-capital tailwinds that boosted OCF
• Credit risk from customer receivables in a softer macro environment
• Interest rate normalization marginally increasing financing costs
• Uncertainty around true FCF due to undisclosed investing cash flows

Key Concerns:

• Negative operating leverage as small revenue declines drive outsized profit compression
• Dependence on non-operating gains to support ordinary/net income
• Elevated inventory balance requiring careful turnover management

Investment Implications

Key Takeaways:

• Revenue down 3.4% YoY with operating income down 23.1% evidences margin and leverage pressure
• Ordinary income above operating income highlights supportive non-operating items
• ROE at 2.73% is subdued; margin recovery is essential to lift returns
• OCF robust at ¥8.45bn (3.14x net income), indicating strong cash conversion this period
• Balance sheet conservative with implied ~59% equity-to-assets and 0.72x liabilities-to-equity

Metrics to Watch:

• Order intake/book-to-bill and backlog (not disclosed)
• Gross margin trajectory and operating margin recovery
• Inventory turnover days and receivables days
• Composition of non-operating income and FX impacts
• OCF/NI ratio sustainability and any reversal in working capital
• Capex/investing cash flows to assess true FCF
• ROE versus cost of equity and management’s capital allocation policy

Relative Positioning: Within Japan’s FA/electronics distribution and solution integrator space, the company appears financially conservative with strong liquidity and low interest burden, but current profitability and ROE are below desirable levels; recovery depends on cycle normalization and margin discipline.

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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