SHOEI CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥9.32B
• Operating Income: ¥610M
• Net Income: ¥-455M
• EPS: ¥51.25

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

Shoei Corporation (TSE:9385) delivered resilient profitability in FY2026 Q2 despite a modest top-line contraction. Revenue declined 3.0% year over year to ¥9,322 million, but operating income rose 35.5% to ¥610 million, indicating strong cost control and/or favorable mix. Gross profit reached ¥2,169.6 million, translating to a gross margin of 23.3%, and operating margin improved to approximately 6.5%. Ordinary income matched operating income, suggesting minimal non-operating income and expenses, with interest expense modest at ¥12.8 million. Net income surged 92.7% to ¥396 million, implying sizable below-the-line items in the prior year or improvements in extraordinary/affiliate results this year. DuPont analysis indicates a calculated ROE of 8.77%, driven by a 4.25% net margin, asset turnover of 0.864x, and financial leverage of 2.39x. Cash flow quality appears solid: operating cash flow of ¥501.1 million exceeds net income (OCF/NI of 1.27x), pointing to healthy cash conversion. Liquidity is comfortable with a current ratio of 148% and quick ratio of 110%, supported by working capital of ¥2,144 million. The balance sheet shows total assets of ¥10,787 million and equity of ¥4,513 million, implying an equity ratio around 41.8% (the reported 0.0% equity ratio should be treated as undisclosed, not zero). Debt-to-equity of 1.36x and an interest coverage of 47.5x indicate manageable financial risk. EBITDA of ¥699.5 million (7.5% margin) and low D&A of ¥89.5 million suggest modest capital intensity in the period. The effective tax rate shown as 0.0% is clearly not representative given reported income tax of ¥55.7 million and should be treated as a data limitation. Dividend fields show 0 (DPS, payout ratio, FCF coverage), which likely reflects non-disclosure at the interim stage rather than an explicit zero payout policy. Investing cash flow was reported as 0, which should be interpreted as not disclosed; thus, free cash flow cannot be fully assessed. Overall, the company exhibits improved operating leverage, good cash conversion, and a moderate leverage profile, while the decline in sales and limited disclosure on investing CF and dividends temper visibility. Key sensitivities likely include raw material prices, energy costs, and demand trends in end markets relevant to plastic packaging and logistics-related products.

Profitability Analysis

ROE of 8.77% decomposes into Net Profit Margin 4.25% x Asset Turnover 0.864x x Financial Leverage 2.39x. Net margin expansion versus the prior year is implied by the 35.5% rise in operating income despite a 3.0% revenue decline, underscoring operating leverage and/or improved gross-to-operating conversion. Gross margin stands at 23.3%, while operating margin is approximately 6.5% (¥610m / ¥9,322m), evidencing tighter SG&A control or favorable pricing/mix. EBITDA margin is 7.5%, with D&A of ¥89.5m indicating limited depreciation drag. Ordinary income equals operating income, so non-operating items (interest, FX, securities) had limited impact in the half; interest expense of ¥12.8m is small with EBIT/interest coverage of 47.5x. The substantial YoY increase in net income (92.7%) versus operating income suggests prior-year extraordinary drag or improved below-the-line effects this year; however, details are not disclosed. Operating leverage is evident: a modest revenue decline coupled with strong operating income growth implies fixed-cost absorption gains and/or cost deflation (e.g., raw materials/energy) flowing through. Margin quality appears supported by cash conversion (OCF/NI 1.27x), which corroborates earnings realization in cash.

Growth Assessment

Top-line contracted 3.0% YoY to ¥9,322m, indicating softness in demand or pricing pressure in core markets. Despite this, profit growth was strong: operating income +35.5% YoY to ¥610m and net income +92.7% to ¥396m, reflecting improved cost efficiency and potentially better product mix. The sustainability of profit growth hinges on whether cost tailwinds (e.g., raw material or energy costs) persist and whether pricing discipline can be maintained amid weaker volumes. Asset turnover of 0.864x is steady for a packaging/industrial products context, suggesting stable utilization of the asset base. With EBITDA margin at 7.5% and OCF outpacing net income, profit quality appears solid in this period. However, the lack of disclosed investing cash flows limits visibility into growth capex or maintenance needs, which could influence medium-term capacity and efficiency. Outlook will depend on end-market demand (retail, industrial, logistics) and raw material price trajectories; absent revenue recovery, sustaining current margins may be challenging. In summary, revenue sustainability is uncertain near-term, but the company demonstrated the ability to expand earnings through cost control and operating leverage.

Financial Health

Liquidity is sound: current ratio 147.8% (¥6,632.8m CA / ¥4,488.8m CL) and quick ratio 110.1% indicate adequate coverage of near-term obligations. Working capital of ¥2,143.9m supports operations and buffers volatility. Solvency appears moderate: total liabilities of ¥6,156.8m vs equity of ¥4,513.0m imply debt-to-equity of 1.36x. The implied equity ratio is approximately 41.8% (¥4,513m / ¥10,787m); the reported 0.0% equity ratio should be treated as undisclosed. Interest burden is light with interest expense of ¥12.8m and coverage of 47.5x, suggesting limited near-term refinancing risk. Asset base totals ¥10,787m, with inventories at ¥1,692.3m (about 25.5% of current assets), consistent with a working-capital-intensive model but not excessive on the available data. Overall capital structure is balanced, with manageable leverage and strong interest coverage.

Cash Flow Quality

Operating cash flow of ¥501.1m exceeds net income of ¥396.0m (OCF/NI 1.27x), indicating good earnings quality and favorable working capital movements and/or non-cash charges (D&A ¥89.5m). EBITDA of ¥699.5m provides an additional lens on cash earnings before working capital effects. Free cash flow cannot be reliably calculated because investing cash flow is reported as 0 (treated as undisclosed) and capex is not itemized. Working capital quality appears reasonable given the quick ratio above 1.0x and inventories at ~¥1.69bn; however, without receivables/payables detail or YoY deltas, we cannot assess inventory turns or collection risk. The strong interest coverage and modest interest expense further support cash flow resilience. Overall, cash conversion in the period was solid, but full-cycle FCF assessment is constrained by missing investing CF and capex details.

Dividend Sustainability

Dividend data (DPS 0.00, payout ratio 0.0%, FCF coverage 0.00x) should be interpreted as not disclosed for the interim period rather than actual zeros. With EPS of ¥51.25 for H1 and positive operating cash flow, the company appears to have capacity for distributions, but policy and annual DPS are not provided here. Payout ratio cannot be assessed without declared dividends; similarly, FCF coverage of dividends cannot be computed due to undisclosed investing cash flows and capex. Balance sheet metrics (implied equity ratio ~41.8%, D/E 1.36x, robust interest coverage) suggest financial flexibility, but dividend sustainability and trajectory depend on board policy, full-year earnings, and capex needs. We therefore refrain from drawing conclusions on dividend outlook based on the provided interim dataset.

Risk Assessment

Business Risks:

• Raw material price volatility (e.g., resin, film, and packaging inputs) impacting gross margin
• Energy and logistics cost fluctuations affecting cost of sales and distribution expenses
• Demand cyclicality in end markets (retail, e-commerce, industrial packaging) influencing volumes
• Pricing pressure from customers and competition in commoditized packaging products
• Environmental regulation and recycling mandates potentially increasing compliance costs
• Supply chain disruptions (imports of materials, overseas sourcing) affecting lead times and inventory
• Customer concentration risk if large accounts represent a significant share of sales

Financial Risks:

• Working-capital intensity (inventory and receivables) exposing cash flows to demand swings
• Moderate leverage (D/E 1.36x) amplifying downside if margins compress
• Interest rate risk on floating-rate borrowings, albeit mitigated by strong coverage
• Potential extraordinary items affecting net income and tax rate visibility
• Limited disclosure of investing cash flows impeding assessment of capex and FCF durability

Key Concerns:

• Revenue decline of 3.0% YoY despite strong profit growth—uncertainty on volume sustainability
• Heavy reliance on cost tailwinds and operating leverage to support margins
• Insufficient disclosure on investing cash flows and dividend policy at the interim stage
• Apparent discrepancy around effective tax rate; tax and below-the-line items need clarification

Investment Implications

Key Takeaways:

• Strong margin and earnings improvement despite lower revenue, highlighting effective cost control
• ROE at 8.77% underpinned by moderate leverage and improved net margin
• Healthy cash conversion (OCF/NI 1.27x) supports earnings quality
• Liquidity is comfortable with current ratio 148% and quick ratio 110%
• Interest coverage is robust at 47.5x, indicating low near-term financial stress
• Visibility on capex/FCF and dividend policy remains limited due to undisclosed items

Metrics to Watch:

• Gross and operating margins versus resin and energy cost indices
• SG&A ratio and operating leverage as volumes fluctuate
• Inventory levels and turns; receivables collection and OCF/NI ratio
• Capex and investing cash flows to gauge FCF and growth investments
• ROE trajectory and asset turnover
• Debt-to-equity and interest coverage in a changing rate environment
• Any updates to dividend policy and full-year DPS guidance

Relative Positioning: Within Japan small/mid-cap packaging and industrial products peers, Shoei shows mid-single-digit operating margins, solid cash conversion, and moderate leverage, yielding an ROE around sector averages; revenue softness tempers growth visibility but operational execution appears above average in the period.

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