INNOTECH CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥21.60B
• Operating Income: ¥1.14B
• Net Income: ¥555M
• EPS: ¥43.79

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 and operating profit growth with clear margin improvement, but ordinary income and bottom line remain constrained by sizable non-operating losses and a high tax rate. Revenue rose 3.8% YoY to 216.01, while operating income climbed 26.6% YoY to 11.37, indicating stronger operating leverage. Gross profit reached 65.21, implying a gross margin of 30.2%. SG&A was 53.83, yielding an SG&A ratio of 24.9% and allowing operating margin to expand to 5.3%. Based on YoY changes, prior-year operating margin was roughly 4.3%, indicating about 94 bps of operating margin expansion. Ordinary income was nearly flat at 7.52 (+0.2% YoY), pressured by net non-operating expenses of 3.86 (non-operating income 3.12 vs expenses 6.98). Profit before tax was 11.61 and net income was 5.74 (+25.1% YoY), but the effective tax rate was elevated at 52.2%, suppressing net profitability. EBITDA came in at 17.62 (8.2% margin), with depreciation and amortization of 6.25, supporting stable cash earnings. Operating cash flow of 12.00 exceeded net income (OCF/NI 2.09x), signaling high earnings quality this quarter. Liquidity is adequate (current ratio 152.7%, quick ratio 122.7%) and leverage is moderate (D/E 0.91x), though short-term loans of 78.14 warrant monitoring for refinancing risk. Capital efficiency is weak (ROIC 2.0%, ROE 2.2%), which remains a key structural headwind for valuation. The payout ratio is indicated at 167.1%, suggesting potential dividend strain; however, DPS details were unreported in XBRL and should be verified. Non-operating volatility and the high tax rate are the primary drags between operating performance and bottom-line delivery. Forward-looking, sustaining the improved operating margin while reducing non-operating losses and normalizing the tax rate would provide the clearest path to stronger ROE and ROIC. Management’s small buybacks (0.68 financing outflow) and positive OCF provide some capital allocation flexibility, but disciplined investment returns are needed to lift ROIC above the 5% warning threshold.

Profitability Analysis

ROE decomposition: ROE 2.2% = Net Profit Margin 2.7% × Asset Turnover 0.440 × Financial Leverage 1.91x. The margin component improved the most at the operating level: operating income grew 26.6% YoY on 3.8% revenue growth, expanding operating margin by about 94 bps (to roughly 5.3%). However, ordinary income was held back by net non-operating losses (−3.86), and the high effective tax rate (52.2%) compressed net margin to 2.7%, limiting the pass-through of operational gains to ROE. Asset turnover at 0.440 remains modest, reflecting a relatively asset-heavy balance sheet for the revenue base and potentially conservative working capital. Leverage at 1.91x is moderate and not the driver of ROE changes. Business drivers: better expense control (SG&A ratio ~24.9%) and scale benefits drove operating margin gains, but forex/valuation losses or financing costs within non-operating items likely offset improvements at the ordinary line. Sustainability: SG&A discipline and mix improvements appear repeatable; by contrast, non-operating losses and an unusually high tax rate may normalize, offering upside to net margin if managed. Watchpoints: ordinary income stagnation versus operating income growth is a concern, and any re-acceleration of SG&A ahead of revenue would erode operating leverage.

Growth Assessment

Revenue grew 3.8% YoY to 216.01, a moderate pace consistent with stable end-market demand. Operating income outpaced sales growth (+26.6% YoY), indicating positive operating leverage from controlled SG&A and potentially improved gross mix. Ordinary income growth stalled (+0.2% YoY) due to a swing in non-operating results (net −3.86), diluting the visibility of earnings momentum below the operating line. Net income rose 25.1% YoY to 5.74, but a 52.2% effective tax rate capped the uplift. EBITDA of 17.62 (8.2% margin) underscores steady cash earnings. On outlook, sustaining the SG&A ratio and protecting gross margin near 30% are key to maintaining a 5%+ operating margin. Normalization of non-operating items (e.g., forex, valuation, or financing costs) and a lower tax rate could unlock better ordinary income and net income growth. Given low ROIC (2.0%), future growth should emphasize higher-return projects and tighter capital intensity to be value accretive.

Financial Health

Liquidity: Current ratio 152.7% and quick ratio 122.7% indicate healthy near-term coverage; no warning triggers (CR < 1.0) are present. Solvency: D/E 0.91x is moderate; total liabilities 234.06 vs equity 256.69 show a balanced structure. Maturity profile: current liabilities 210.76 are large but are covered by current assets 321.78; cash + receivables total 195.90, slightly below current liabilities, but inventories (63.16) close the gap, reducing near-term liquidity stress. Short-term loans of 78.14 create some refinancing/maturity mismatch risk if credit conditions tighten; long-term loans are 14.50. Off-balance sheet obligations: none reported in the provided data. No explicit covenant pressure is observable given information limits.

Cash Flow Quality

OCF/Net Income of 2.09x indicates strong cash conversion and high earnings quality this quarter. Operating cash flow of 12.00 more than covered capex of 2.94, implying approximate FCF of about 9.06 (since investing CF details were unreported, this proxy uses capex only). Financing CF was −4.23, including share repurchases of −0.68; dividend cash outflow was unreported. Working capital appears contained given positive OCF alongside an increase in revenue, suggesting no obvious revenue pull-forward or inventory build concerns this quarter. No red flags of working capital manipulation are evident from the disclosed figures.

Dividend Sustainability

The calculated payout ratio of 167.1% suggests potential unsustainability on an earnings basis; however, DPS and total dividend cash were unreported, so this metric likely reflects external guidance or prior policy and should be confirmed. Cash coverage looks better: estimated FCF (OCF 12.00 minus capex 2.94) is about 9.06, which could cover a moderate dividend, but would be stretched if the implied payout truly exceeds net income. With ROIC at 2.0% and ROE at 2.2%, reinvestment returns are currently low, increasing the trade-off between payouts and investing for future growth. Policy outlook: absent disclosed DPS, assume a conservative stance is warranted until ordinary income volatility and the high tax rate normalize to support steady free cash generation.

Risk Assessment

Business Risks:

• Semiconductor/electronics cycle volatility impacting demand and margins
• Pricing and mix risk affecting gross margin near 30%
• Execution risk in controlling SG&A to sustain operating leverage
• Customer concentration risk typical in B2B electronics and EDA/tool distribution
• Project timing risk that can shift revenue and ordinary income between quarters

Financial Risks:

• Non-operating losses (net −3.86) compressing ordinary income and increasing earnings volatility
• High effective tax rate (52.2%) reducing net margin and cash available for dividends
• Short-term loan reliance (78.14) creating refinancing/maturity risk
• Low capital efficiency (ROIC 2.0%, ROE 2.2%) potentially depressing long-term value creation
• Potential FX exposure given import/export mix (details unreported)

Key Concerns:

• Ordinary income barely grew (+0.2% YoY) despite strong operating profit growth
• Payout ratio indicated at 167.1% suggests possible dividend strain if accurate
• Asset turnover at 0.440 underscores efficiency headwinds
• Intangibles and goodwill total 24.29 (about 5% of assets); while not large, impairment risk exists in downturns
• Limited disclosure on non-operating item breakdown and dividends reduces visibility

Investment Implications

Key Takeaways:

• Healthy operating improvement with ~94 bps operating margin expansion to ~5.3%
• Ordinary income and bottom line constrained by non-operating losses and a high tax rate
• Strong cash conversion (OCF/NI 2.09x) and positive FCF proxy support balance sheet resilience
• Leverage moderate (D/E 0.91x) with adequate liquidity (CR 152.7%, QR 122.7%), but watch short-term loans
• Capital efficiency remains weak (ROIC 2.0%, ROE 2.2%), a core structural issue

Metrics to Watch:

• Ordinary income trend and detailed non-operating item breakdown (FX, valuation, interest)
• Effective tax rate trajectory and drivers
• OCF vs NI and FCF after capex
• SG&A growth vs revenue growth to preserve operating leverage
• Working capital intensity (AR and inventory days) and short-term debt levels
• ROIC by project/business (if disclosed) to track improvement in capital allocation

Relative Positioning: Versus domestic electronics/semiconductor solution peers, Innotech shows solid operating discipline but lags on capital efficiency (ROIC/ROE). Balance sheet quality is reasonable, yet earnings visibility below the operating line is weaker due to non-operating and tax headwinds.

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
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