NAC CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥27.38B
• Operating Income: ¥419M
• Net Income: ¥107M
• EPS: ¥6.73

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

Nac (9788) reported FY2026 Q2 (cumulative) revenue of ¥27.38bn, down 1.6% YoY, indicating modest top-line pressure. Gross profit of ¥13.35bn implies a robust gross margin of 48.8%, suggesting pricing power and/or favorable product mix despite revenue softness. Operating income fell sharply by 45.1% YoY to ¥0.42bn, compressing the operating margin to approximately 1.5% and signaling elevated operating costs and/or weaker operating leverage in the period. Ordinary income was ¥0.43bn, only slightly above operating income, as finance costs are small (interest expense ¥26m) and non-operating items appear limited this term. Net income rose 160.5% YoY to ¥0.28bn despite the decline in operating income, implying YoY comparisons benefited from prior-year non-recurring costs or tax/extraordinary normalization; however, detailed extraordinary items are not disclosed. EPS was ¥6.73, but share count data is not disclosed here, limiting per-share diagnostics beyond EPS. DuPont decomposition yields a net margin of 1.03%, asset turnover of 0.703x, and financial leverage of 1.76x, resulting in an ROE of 1.27%, a low level that reflects subdued profitability more than balance sheet constraints. Liquidity is strong with a current ratio of 204% and a quick ratio of 178%, supported by working capital of ¥12.11bn. The balance sheet shows moderate leverage (liabilities/equity 0.71x), indicating conservative solvency. Interest coverage is healthy at 16.1x (EBIT/interest), so near-term interest rate risk is limited. Operating cash flow was solid at ¥1.73bn, equating to 6.2x net income, pointing to good cash conversion and limited accrual risk in this period. Depreciation and amortization were ¥0.52bn, and EBITDA totaled ¥0.94bn (margin ~3.4%), highlighting subdued operating profitability relative to gross margin strength. The implied tax burden from disclosed values appears elevated when comparing income tax expense (¥0.41bn) to net income, though reported “effective tax rate: 0.0%” is likely not indicative due to data limitations. Dividend and cash balance disclosures are not provided in this dataset, so we cannot assess per-share capital return or net cash accurately. Overall, Nac exhibits resilient gross margins, sound liquidity, and strong cash conversion, but faces weak operating margins and low ROE that will need improvement for a more compelling medium-term profile.

Profitability Analysis

ROE at 1.27% decomposes into a 1.03% net margin, 0.703x asset turnover, and 1.76x financial leverage. The key drag is profitability: operating margin is about 1.5% (¥419m/¥27,383m), and EBITDA margin is 3.4% despite a strong 48.8% gross margin, indicating elevated SG&A and/or under-absorption effects. Ordinary margin is ~1.6%, only marginally above operating margin given small net financial items. The 45.1% YoY decline in operating income versus a 1.6% revenue decline points to negative operating leverage this term, likely from fixed costs and selling expenses outpacing revenue. Depreciation of ¥518m against EBITDA of ¥937m suggests a meaningful capital base relative to current earnings. Interest burden is low (¥26m) and not the driver of earnings compression. Net income growth (+160.5% YoY) contrasts with operating income pressure, implying non-operating or tax-related YoY normalization; however, details are not available. Overall margin quality is mixed: gross margin is healthy, but operating and net margins are thin, depressing ROE despite moderate leverage.

Growth Assessment

Revenue declined 1.6% YoY to ¥27.38bn, signaling flat-to-slightly negative demand or mix headwinds. The comparatively larger decline in operating income suggests weaker conversion of sales into profits, potentially due to higher SG&A, promotional intensity, or cost inflation not fully offset by pricing. Net income growth (+160.5% YoY) likely reflects normalization of below-the-line items versus true operating improvement. With ordinary income (¥429m) roughly tracking operating income, sustained growth will require restoring operating margin rather than relying on non-operating factors. The strong gross margin indicates that pricing and mix remain supportive, offering a base for profit recovery if cost discipline improves. Outlook hinges on cost control, operating leverage, and segment mix; absent disclosure of order backlog or segment trends, we assume modest revenue stabilization with focus on margin repair. Given the low ROE and weak operating margin, medium-term growth in earnings will likely depend more on efficiency gains than top-line expansion. Data limitations (no segment detail provided) constrain visibility into sustainability by business line.

Financial Health

Total assets are ¥38.93bn and total equity is ¥22.10bn, yielding a liabilities/equity ratio of 0.71x, indicative of moderate leverage. Liquidity is strong with current assets of ¥23.74bn and current liabilities of ¥11.62bn, translating to a current ratio of 204% and quick ratio of 178%. Working capital stands at ¥12.11bn, providing a buffer for operations. Interest coverage is robust at 16.1x, and absolute interest expense is low at ¥26m, limiting refinancing risk. The reported equity ratio figure in the dataset is not usable (0.0% placeholder), but assets/equity imply an equity ratio around 56-57%. Balance sheet quality appears conservative, with capacity to absorb volatility. Absence of disclosed cash and detailed debt composition limits precise net debt assessment.

Cash Flow Quality

Operating cash flow of ¥1.73bn is 6.16x net income, indicating strong cash conversion and limited accrual pressure in the period. EBITDA of ¥0.94bn and D&A of ¥0.52bn suggest that non-cash charges are significant relative to operating profit, supporting OCF. Working capital appears well-managed given the large OCF relative to earnings; however, detailed components (AR/AP/inventory movements) are not disclosed. Investing cash flow is not provided in this dataset, so free cash flow cannot be reliably computed; the reported FCF of 0 reflects nondisclosure rather than true zero. Absent capex detail, we cannot assess reinvestment intensity or maintenance vs. growth capex split. Overall, earnings quality looks solid based on OCF/NI, but sustained assessment requires consistent capex and working capital disclosures.

Dividend Sustainability

Dividend data (DPS, payout, and FCF coverage) are not disclosed in this dataset; reported zeros are placeholders. With net income of ¥281m and strong OCF of ¥1.73bn, cash coverage of potential dividends appears adequate in principle, but actual distributions depend on capex needs and policy. The low ROE (1.27%) and weak operating margin argue for prioritizing reinvestment or margin improvement if attractive returns exist. Without confirmed DPS and capex, payout ratio analysis and FCF coverage cannot be completed. Historically, sustainability hinges on stable OCF and manageable leverage, both of which look supportive in this period, subject to investment requirements.

Risk Assessment

Business Risks:

• Operating margin pressure from cost inflation and higher SG&A
• Negative operating leverage if revenue remains flat or declines
• Potential demand softness in core end-markets given YoY revenue decline
• Pricing and mix risk despite currently strong gross margins
• Execution risk in cost control and efficiency initiatives
• Seasonality and quarterly volatility impacting earnings visibility

Financial Risks:

• Low ROE and thin operating margins limit buffer against shocks
• Tax and extraordinary item volatility affecting bottom line
• Limited disclosure on cash, debt structure, and capex impedes net leverage assessment
• Potential working capital swings impacting OCF in subsequent quarters

Key Concerns:

• Sustained recovery of operating margin from ~1.5% level
• Visibility on capex and investing cash flows to gauge true FCF
• Clarity on tax rate drivers given high tax expense vs net income
• Segment mix and order momentum to support revenue stabilization

Investment Implications

Key Takeaways:

• Top line declined modestly (-1.6% YoY), but gross margin remained strong at 48.8%.
• Operating income fell 45.1% YoY; operating margin compressed to ~1.5%, highlighting cost pressure.
• ROE is low at 1.27%, driven by thin margins rather than leverage; balance sheet is conservative.
• OCF was solid at ¥1.73bn (6.2x net income), indicating strong cash conversion this period.
• Interest coverage is comfortable at 16.1x; financial risk from debt service is low.
• Dividend capacity cannot be assessed due to nondisclosure of DPS and capex; policy clarity needed.

Metrics to Watch:

• Operating margin and SG&A ratio trajectory
• OCF sustainability and capex once disclosed (true FCF)
• Revenue growth by segment and order/backlog indicators
• Inventory and receivables turnover for working capital efficiency
• Tax rate normalization and extraordinary items
• EBITDA margin recovery and ROE improvement

Relative Positioning: Within Japanese small/mid-cap multi-business service peers, Nac exhibits stronger liquidity and conservative leverage but weaker operating margins and ROE; near-term investment case depends on margin recovery and cash flow consistency.

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