EIWA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥21.22B
• Operating Income: ¥1.14B
• Net Income: ¥830M
• EPS: ¥122.41

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

Eiwa Co., Ltd. (TSE: 9857) reported FY2026 Q2 (cumulative) consolidated results under JGAAP showing steady top-line growth and resilient operating performance, alongside softer bottom-line growth due to a higher tax burden. Revenue rose 5.1% YoY to ¥21.2bn, with gross profit of ¥3.56bn and operating income of ¥1.14bn (+4.9% YoY), indicating stable operating leverage and disciplined cost control. Ordinary income was ¥1.173bn, modestly above operating income, reflecting minimal non-operating drag. Net income declined 6.7% YoY to ¥774m as taxes increased; based on disclosed income tax of ¥413m, the implied effective tax rate is roughly 34–35%, which compressed net margin to 3.65%. DuPont analysis shows ROE of 4.42% based on the half-year period, decomposed into a 3.65% net margin, 0.69x asset turnover, and 1.76x financial leverage. On a simple run-rate basis, annualized ROE would be closer to the high single digits if H2 trends hold, but this is sensitive to seasonality and mix. Gross margin of 16.8% and operating margin of 5.4% are consistent with an electronics/industrial trading model emphasizing value-added distribution and solutions. Cash flow quality appears strong: operating cash flow (OCF) of ¥1.73bn equates to 2.23x net income, evidencing solid earnings-to-cash conversion in the half. Liquidity remains ample with a current ratio of 179% and quick ratio of 167%, underpinned by significant current assets and manageable current liabilities. The balance sheet is conservative: while the equity ratio was shown as 0.0% in the data extract (unreported), a direct computation yields about 57% (equity ¥17.5bn / assets ¥30.7bn), consistent with the DuPont leverage factor of 1.76x. Interest expense is de minimis (¥0.9m), and interest coverage is extremely high at ~1,255x, underscoring low financial risk. Working capital is sizable at ¥12.7bn, typical for a trading company, and a key driver of cash flow variability quarter to quarter. Financing cash outflow of ¥482m likely reflects dividends and/or debt repayment, but the split is not disclosed, and reported DPS was 0 (unreported). With EPS at ¥122.41 for the half, profitability per share is healthy, but dividend policy cannot be assessed from the provided fields. Overall, Eiwa exhibits stable revenue growth, resilient operating margins, strong liquidity, and high cash conversion, offset by modest reported ROE for the half and a decline in net income due to taxes. Outlook hinges on the electronics/industrial demand cycle, gross margin stability, and working-capital discipline. Data limitations (notably zeros indicating undisclosed items) constrain depth of dividend and capex analysis, but the core operating and financial health signals are solid.

Profitability Analysis

ROE (DuPont): 4.42% = Net margin 3.65% x Asset turnover 0.69x x Financial leverage 1.76x (half-year basis, not annualized). Operating margin is 5.37% (¥1,140m / ¥21,217m) and ordinary margin is 5.53% (¥1,173m / ¥21,217m), pointing to minimal non-operating drag and good cost discipline. Gross margin is 16.8%, consistent with a value-added trading profile; stability here will be a key indicator of pricing power and product mix. EBITDA is ¥1,183m and EBITDA margin is 5.6%, closely tracking operating margin due to low D&A (¥43m), indicating a relatively asset-light model. Net margin at 3.65% reflects a higher implied effective tax rate (~34.8%) versus the prior year, which reduced the flow-through from operating to net income despite revenue growth. Operating leverage appears balanced: operating income growth (+4.9% YoY) essentially matched revenue growth (+5.1% YoY), suggesting limited incremental margin expansion in the period. The exceptionally high interest coverage (~1,255x) confirms that financing costs are not a profitability headwind. Overall profitability is steady with moderate margins and scope for ROE improvement if asset turnover and net margin can be nudged higher in H2.

Growth Assessment

Revenue grew 5.1% YoY to ¥21.2bn, a solid mid-single-digit pace for a specialized trading company, implying healthy demand in core electronics/industrial customer segments. Operating income rose 4.9% YoY to ¥1.14bn, roughly in line with sales growth, indicating that cost structure scaled proportionately and pricing/mix dynamics were stable. Net income declined 6.7% YoY to ¥774m due to higher taxes (implied ~35% rate), not due to deterioration in operating fundamentals; ordinary income was stable. Sustainability of revenue growth will depend on order intake, backlog, and customer capex cycles in semiconductors, factory automation, and industrial equipment; absent contrary evidence, the current trajectory appears steady. Profit quality is supported by strong OCF relative to net income (2.23x), suggesting earnings are cash-backed rather than accrual-dependent in the half. Outlook considerations include macro demand normalization, supply chain lead times, and FX (imported components), which can affect gross margin and competitiveness. If H2 seasonality is favorable and tax effects normalize, annualized earnings could outpace H1 reported growth, but visibility is limited without backlog and segment disclosures.

Financial Health

Liquidity is strong: current ratio 179.5%, quick ratio 167.0%, and working capital of ¥12.67bn provide ample cushion for receivables and inventory cycles. Solvency is robust: computed equity ratio is approximately 57% (¥17.5bn equity / ¥30.7bn assets), consistent with financial leverage of 1.76x; the 0.0% equity ratio shown in the extract appears to be an unreported placeholder. Debt-to-equity is 0.92x from the provided metrics, indicating moderate leverage for a trading company, but interest expense is minimal (¥0.9m) and coverage is extremely high, implying low servicing risk. The liability structure is short-term heavy (current liabilities ¥15.94bn vs total liabilities ¥16.17bn), typical for working-capital financing; liquidity resources appear adequate to manage this. Overall, the balance sheet is conservative with significant equity support and low effective financial risk.

Cash Flow Quality

Earnings quality is strong with OCF of ¥1,729m equating to 2.23x net income, indicating robust cash conversion in the period. The positive OCF suggests favorable working capital movements and/or disciplined collections; however, detailed drivers (AR, AP, inventory changes) are not disclosed here. Free cash flow cannot be reliably computed because investing cash flow was shown as 0 (undisclosed), and capex details are absent; the reported FCF of 0 should be treated as a placeholder. Financing cash outflow of ¥482m likely reflects dividend payments and/or debt reductions, but the mix is not specified. Given the asset-light profile (D&A only ¥43m), structural capex needs are likely modest, supporting medium-term FCF potential, subject to working capital swings.

Dividend Sustainability

Dividend fields show DPS at 0 and payout ratio at 0%, which should be treated as undisclosed rather than zero. Without disclosed DPS or total dividend amount, we cannot compute a precise payout ratio or FCF coverage. That said, EPS is ¥122.41 (half-year), OCF is strong at ¥1.73bn, and financing CF outflows of ¥482m suggest capacity for shareholder returns. Sustainability would hinge on maintaining cash-generative operations and stable working capital; with low interest costs and moderate leverage, the balance sheet can support consistent dividends once disclosed. Policy outlook remains unclear due to missing dividend data; monitor upcoming disclosures for DPS and payout guidance.

Risk Assessment

Business Risks:

• Exposure to electronics/industrial demand cycles, including semiconductors and factory automation capex
• Gross margin sensitivity to product mix, pricing pressure, and vendor terms
• Supply chain disruptions and lead-time volatility impacting deliveries and inventory levels
• FX risk on imported components and settlement mismatches affecting margins
• Customer concentration risk typical of specialized trading businesses
• Inventory obsolescence risk in fast-moving electronics components

Financial Risks:

• Working capital intensity leading to cash flow volatility across quarters
• Credit risk on receivables during macro slowdowns
• Refinancing/rollover risk on short-term borrowings despite current strong liquidity
• Potential tax rate variability affecting net income and ROE
• Limited disclosure of capex and dividend cash flows in this period

Key Concerns:

• Net income decline (-6.7% YoY) despite stable operating performance due to higher taxes
• Moderate ROE (4.42% on half-year basis) relative to balance sheet strength
• Dependence on sustained gross margin to support operating margin in a competitive environment

Investment Implications

Key Takeaways:

• Top-line up 5.1% YoY with operating income up 4.9% indicates steady core momentum
• Strong cash conversion (OCF/NI 2.23x) supports earnings quality
• Balance sheet conservative with ~57% equity ratio and very high interest coverage
• ROE is modest on reported half-year basis; potential to trend higher if H2 holds
• Net profit pressured by higher tax rate; watch for normalization or drivers

Metrics to Watch:

• Order intake/backlog and book-to-bill to gauge H2 revenue visibility
• Gross margin trajectory and mix of high-value solutions vs commodity components
• Working capital turns (AR days, inventory days, AP days) and OCF sustainability
• Tax rate evolution and any one-off items
• Dividend policy disclosures (DPS, payout ratio) and capital allocation
• Leverage and short-term borrowing levels vs liquidity buffers

Relative Positioning: Within Japan’s electronics/industrial trading peers, Eiwa shows solid mid-single-digit revenue growth, stable mid-single-digit operating margins, strong liquidity, and low funding costs; ROE is currently modest on a half-year basis but could approach high single digits on an annualized run-rate if margins and turnover are maintained.

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