SENSHU ELECTRIC CO.,LTD. FY2026 Q2 Earnings Report

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Executive Summary

Cumulative results for 2026 FY Q2 recorded higher revenue and earnings, driven by demand for electric wires and cables, accompanied by an improvement in profitability as Operating Income growth outpaced Revenue growth. Revenue was ¥76.78B (+11.3% YoY), Operating Income was ¥5.59B (+16.6%), Ordinary Income was ¥5.85B (+16.3%), and Net Income was ¥4.22B (+23.3%). The reason Net Income growth exceeded Operating Income growth was that, at the pre-tax stage, a gain on the sale of investment securities of ¥0.55B exceeded impairment losses of ¥0.09B and other items, thereby contributing to earnings; this component includes a one-time factor.

Factors Affecting Performance

【Revenue】Revenue was ¥76.78B, an increase of +11.3% YoY. The Company operates as a single segment, the Electric Wire and Cable Business, and expansion in demand drove the increase in consolidated Revenue. As there is no diversification in the business composition, demand trends are directly reflected in Revenue.

【Profit and Loss】Operating Income was ¥5.59B (+16.6% YoY), exceeding the Revenue growth rate, indicating positive operating leverage. Although the gross margin remained at 14.9%, the Company was able to convert the effect of higher Revenue into profit while maintaining the SG&A ratio at 7.6%. Ordinary Income was ¥5.85B (+16.3%), supplemented by non-operating income and expenses such as dividend income and foreign exchange gains. Net Income was ¥4.22B (+23.3%); however, the ¥0.47B difference between the gain on the sale of investment securities of ¥0.55B and the impairment loss of ¥0.09B in extraordinary gains and losses contributed to the increase, meaning that the result includes a temporary factor compared with growth at the Ordinary Income stage. In conclusion, the Company achieved higher revenue and earnings.

Segment Analysis

The Group operates as a single segment, the Electric Wire and Cable Business, and does not disclose results by segment.

Key Financial Indicators

【Profitability】The Operating Income margin of 7.3% improved by approximately 0.3pt from approximately 7.0% in the same period of the previous year, while the Net Income margin of 5.5% also improved by approximately 0.5pt from approximately 4.9% in the same period of the previous year. The gross margin of 14.9% is relatively low for a distribution and wholesale-type business, indicating a structure in which changes in procurement and selling prices and product mix are likely to affect margins.【Investment Efficiency】ROE of 6.8% consists of the combination of total asset turnover and financial leverage of 2.0x, with the improvement in the Net Income margin being the primary driver. EPS was ¥245.37 (¥195.64 in the previous year, +25.4%), reflecting higher earnings.【Financial Soundness】The Equity Ratio was 50.1%; against cash and deposits of ¥40.22B, interest-bearing debt was negligible, and the net cash position continued. Current assets of ¥89.43B exceeded current liabilities of ¥59.43B, indicating positive working capital.

Cash Flow Analysis

As figures from the cash flow statement are not included in the disclosed data, funding trends are analyzed based on changes in the balance sheet. Cash and deposits increased to ¥40.22B from ¥32.97B in the previous year, indicating continued accumulation of funds through business operations. Meanwhile, accounts receivable and notes receivable amounted to ¥23.51B, and inventories amounted to ¥9.96B, both increasing year on year, indicating an increase in working capital associated with higher Revenue. Accounts payable and notes payable also increased to ¥54.30B, potentially offsetting a certain degree of the working capital burden through the expansion of trade payables. Interest-bearing debt was very small, limiting financial cash outflow pressure.

Quality of Earnings

Recurring earning power is reflected in Operating Income of ¥5.59B and Ordinary Income of ¥5.85B, with non-operating income and expenses consisting of modest positive items such as dividend income and foreign exchange gains. Meanwhile, Profit Before Tax of ¥6.31B exceeded Ordinary Income by ¥0.47B because the gain on the sale of investment securities of ¥0.55B exceeded impairment losses of ¥0.09B and losses on disposal of fixed assets of ¥0.03B; therefore, the result includes non-recurring factors. Net Income growth of 23.3% exceeded Operating Income growth of 16.6%, and part of the earnings increase depends on extraordinary gains with low recurrence. Accordingly, when evaluating the sustainability of earning power, greater emphasis should be placed on growth in Operating Income and Ordinary Income rather than Net Income. Comprehensive Income was ¥4.94B, exceeding Net Income of ¥4.22B, with positive foreign currency translation adjustments and valuation differences on securities accounting for the difference.

Earnings Forecast and Guidance

Progress against the full-year Company forecasts was 49.9% for Revenue, 49.9% for Operating Income, 50.0% for Ordinary Income, and 49.4% for Net Income, broadly in line with the standard Q2 progress rate of 50%. The full-year forecasts are Revenue of ¥154.00B (+13.6% YoY), Operating Income of ¥11.20B (+25.1%), and Ordinary Income of ¥11.70B (+26.2%), with all of these assumptions exceeding the growth rates achieved in the first half. In particular, as the full-year growth forecasts for Operating Income and Ordinary Income exceed the Revenue forecast, the plan requires greater profitability improvement in the second half than in the first half. The Company revised its earnings and dividend forecasts during the quarter, reflecting a review of the initial plans.

Shareholder Returns

The Q2 dividend was ¥80.00 per share, representing 50% of the full-year dividend forecast of ¥160.00 per share. The Payout Ratio, calculated as total dividends divided by profit attributable to owners of the parent, was approximately 34.3%, below the general benchmark of 60%. The Payout Ratio represented by the forecast dividend of ¥160.00 against full-year forecast EPS of ¥499.82 is approximately 32.0%. Given cash and deposits of ¥40.22B and the low level of interest-bearing debt, constraints on securing funds for dividends appear limited. As no data on the amount of share repurchases during the period were provided, the Total Return Ratio is not evaluated.

Risk Factors

1. Structural low gross margin: The gross margin of 14.9% is low, and raw material prices such as copper, the timing of passing through procurement and selling prices, and changes in product mix are likely to affect margins. Although the Operating Income margin improved in the first half, the sustainability of pricing power remains an item to monitor from the second half onward.

2. Concentration in a single business: The Company operates as a single segment, the Electric Wire and Cable Business, and fluctuations in demand related to construction, electric power, and telecommunications directly affect consolidated Revenue and earnings. The risk-mitigation effect of business diversification is limited.

3. Profitability improvement in the second half toward achieving the full-year plan: The full-year Operating Income forecast assumes growth of +25.1% YoY, exceeding the first-half growth of +16.6%, and failure to improve profitability in the second half represents a risk to achieving the plan. Increases in accounts receivable of ¥23.51B and electronically recorded monetary claims of ¥12.94B could also lead to a working capital burden depending on the credit conditions of counterparties.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

The Net Income margin is below the industry median, and the low gross margin represents a constraint on profitability relative to peers in the industry.

Growth and Capital Efficiency

The Revenue growth rate is significantly above the industry median, indicating that top-line expansion is relatively strong within the industry.

※Source: Company analysis

Key Takeaways from the Financial Results

1. Operating Income increased by +16.6% against Revenue growth of +11.3%, allowing the Company to achieve both higher revenue and margin improvement in the first half. The Operating Income margin was 7.3% and the Net Income margin was 5.5%, both improving from the same period of the previous year.

2. Progress toward the full-year plan was 49.9% for Revenue and 49.9% for Operating Income, consistent with the plan at the interim point; however, the full-year forecasts assume growth rates exceeding those achieved in the first half, making profitability improvement in the second half the key to achieving the plan.

3. Net Income includes a gain on the sale of investment securities of ¥0.55B, and part of the 23.3% earnings growth is attributable to a factor with low recurrence. When evaluating earnings sustainability, greater emphasis should be placed on trends in Operating Income and Ordinary Income.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,004–¥4,241 at ±1% in the cost of equity, and ¥4,108–¥4,137 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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