MT GENEX CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.10B
• Operating Income: ¥167M
• Net Income: ¥107M
• EPS: ¥99.84

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

Verdict: Solid topline growth but profit compression; FY2026 Q2 delivered double-digit revenue growth (+11.9% YoY) while operating and bottom-line margins contracted, resulting in lower profits YoY. Revenue was 21.02, with gross profit of 4.86 (GPM 23.1%) and operating income of 1.67 (OPM 8.0%). Ordinary income was 1.83 and net income 1.07 (NPM 5.1%), down 4.3% and 5.0% YoY respectively despite the higher revenue base. Operating margin fell by roughly 153 bps YoY (from ~9.5% to ~8.0%), indicating negative operating leverage. Net margin compressed by about 93 bps YoY (from ~6.0% to ~5.1%), partly cushioned by modest non-operating gains (0.16; 14.7% of operating income). The effective tax rate was elevated at 41.4%, further pressuring net income. Operating cash flow was strong at 2.50, comfortably exceeding net income (OCF/NI 2.34x), suggesting high earnings quality this quarter. Liquidity remains exceptionally robust with a current ratio of 838.5% and cash/deposits of 21.93 against current liabilities of 5.49. Leverage is conservative (D/E 0.22x; assets/equity 1.22x), supporting resilience despite margin pressure. ROE calculated at 2.5% reflects modest profitability and low leverage; ROIC at 4.8% is below the 5% warning threshold, signaling capital efficiency challenges. Non-operating income (interest and securities-related gains totaling 0.16) provided a small buffer but is not a substitute for operating improvement. SG&A of 3.18 implies limited operating leverage capture given the 11.9% revenue growth. Capex was light at 0.09, consistent with an asset-light profile, while financing CF was -0.52 (likely dividends and/or minor debt changes). With payout ratio estimated at 40.4%, distributions appear manageable against operating cash generation. Forward-looking, focus should center on restoring operating margin via pricing/mix and cost discipline, improving ROIC toward the 7–8% management benchmark range, and normalizing the tax rate.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.5% = Net Profit Margin 5.1% × Asset Turnover 0.411 × Financial Leverage 1.22x. The most material YoY change is net profit margin contraction (~93 bps), with operating margin down ~153 bps (from ~9.5% to ~8.0%), indicating cost pressure and/or unfavorable mix offsetting revenue growth. Business drivers likely include higher cost of sales relative to revenue and/or SG&A growth outpacing sales (OI declined despite +11.9% revenue). Asset turnover at 0.411 is modest and broadly consistent with a cash-rich balance sheet; leverage is low (1.22x), limiting ROE amplification. The margin compression appears cyclical/operational rather than structural—non-operating income (0.16) helped ordinary income but is not a core driver. Sustainability: Without pricing power or cost control, margins may remain under pressure; however, the asset-light model and cash position provide runway to execute efficiency measures. Watch for concerning trends where SG&A growth exceeds revenue growth—this quarter’s pattern (revenue up, OI down) suggests negative operating leverage. Overall, ROE softness is primarily margin-driven, secondarily limited by low leverage (prudently conservative).

Growth Assessment

Revenue grew 11.9% YoY to 21.02, indicating healthy demand or successful expansion. Despite this, operating income fell 6.4% to 1.67 and net income fell 5.0% to 1.07, evidencing margin compression. Ordinary income declined 4.3% to 1.83, partially cushioned by 0.16 in non-operating income (interest and securities gains). The revenue growth quality appears sound (no extraordinary one-time gains cited at the top line), but profit quality is mixed due to higher costs and a high tax rate. EBITDA of 1.78 (8.4% margin) indicates moderate operating cash earnings. Outlook hinges on restoring operating leverage: pricing actions, procurement efficiency, and SG&A discipline will be key. Non-operating tailwinds (interest income of 0.11) may persist as long as cash balances and interest rates remain favorable but should be treated as ancillary. With ROIC at 4.8%, incremental growth must be carefully screened for returns above cost of capital. Near-term, expect stable-to-improving cash generation if working capital remains well-managed; profit growth depends on margin recovery more than volume.

Financial Health

Liquidity is very strong: current ratio 838.5% and quick ratio 838.5% (no inventory reliance disclosed). Working capital is 40.55, with cash/deposits at 21.93 comfortably covering current liabilities of 5.49. Solvency is conservative: total liabilities 9.25 vs equity 41.92 (D/E 0.22x), long-term loans are minimal at 0.41, and interest coverage is 1063.7x. No warning triggers: Current Ratio >> 1.0 and D/E well below 2.0. Maturity mismatch risk appears low given substantial current assets vs current liabilities; short-term borrowings are unreported, but the cash buffer mitigates refinancing risk. Off-balance sheet obligations are not disclosed in the data provided. Financial flexibility is high owing to low leverage and ample liquidity.

Cash Flow Quality

OCF/Net Income is 2.34x (>1.0), indicating high-quality earnings with strong cash conversion. OCF of 2.50 exceeds net income of 1.07, suggesting favorable working capital or non-cash charges (DA 0.11) supporting cash generation. Capex is light at 0.09, consistent with an asset-light model; while investing CF is unreported, a proxy FCF (OCF − Capex) would be approximately 2.41, implying ample coverage for shareholder returns and organic investment, subject to unreported investing items. No clear signs of working capital manipulation from available data; AR at 2.97 vs AP at 1.25 and strong cash balance suggest conservative management. Sustained OCF above net income will be important to fund dividends and any growth initiatives. Absent large acquisitions or investments (unreported), FCF sustainability appears favorable.

Dividend Sustainability

The calculated payout ratio is 40.4%, within the <60% benchmark for sustainability. Dividends paid and DPS are unreported, but with OCF (2.50) well above net income (1.07) and capex modest (0.09), cash coverage for dividends appears comfortable. Balance sheet strength (cash 21.93; low debt) further supports payout capacity. Policy visibility is limited due to lack of disclosed DPS schedule; nonetheless, current earnings and cash flow profile imply room to maintain or modestly increase dividends if margins stabilize. Monitor for potential shifts in tax rate and margin recovery, which directly affect payout headroom. If larger growth investments emerge (unreported in this period), management may balance payouts with ROIC-driven deployment.

Risk Assessment

Business Risks:

• Margin pressure from cost inflation or unfavorable sales mix leading to negative operating leverage (OPM down ~153 bps YoY).
• Execution risk in SG&A control as revenue growth did not translate into operating profit growth.
• High effective tax rate (41.4%) depresses net income and may be sensitive to discrete items.
• Dependence on modest non-operating income (0.16; 14.7% of operating income) to support ordinary income.
• Potential customer concentration or project timing risk typical for smaller-cap operators (not disclosed).
• Industry cost dynamics (labor, materials) could compress gross margin absent pricing power.

Financial Risks:

• ROIC at 4.8% (<5% warning) indicates capital efficiency risk versus cost of capital.
• Interest rate risk on cash: beneficial currently (interest income 0.11) but could reverse if rates decline.
• Limited disclosure on investing cash flows and off-balance sheet commitments may mask future cash needs.

Key Concerns:

• Sustained margin compression despite double-digit revenue growth.
• Low ROE (2.5%) driven by margin and low leverage, constraining equity returns.
• Visibility: several line items unreported (inventories, detailed SG&A, investing CF, DPS), limiting full assessment.

Investment Implications

Key Takeaways:

• Topline strength (+11.9% YoY) but profit contraction highlights cost pressure and negative operating leverage.
• Operating margin fell to 8.0% (~153 bps YoY compression); net margin 5.1% (~93 bps compression).
• Cash conversion is strong (OCF/NI 2.34x), supporting balance sheet resilience and dividends.
• Leverage is low (D/E 0.22x) with substantial liquidity (cash 21.93), providing optionality.
• ROIC at 4.8% is below target ranges, making capital allocation discipline critical.

Metrics to Watch:

• Operating margin and gross margin trajectory quarter-on-quarter and YoY.
• SG&A growth vs revenue growth to gauge operating leverage.
• ROIC progression toward >7–8% and ROE improvement.
• Effective tax rate normalization and its impact on NPM.
• Non-operating income ratio (reliance on interest/securities gains).
• OCF/NI and working capital movements (AR and AP trends).

Relative Positioning: Financially conservative with superior liquidity and minimal leverage, but trailing peers on capital efficiency (ROIC <5%) and near-term margin momentum.

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