NICHIDEN Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥67.28B
• Operating Income: ¥2.80B
• Net Income: ¥2.02B
• EPS: ¥74.18

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

Nihon Den Den (TSE:9902) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth but softer operating profitability, with supportive non-operating gains and strong balance sheet metrics. Revenue rose 3.6% YoY to ¥67.28bn, while operating income declined 3.7% to ¥2.80bn, indicating negative operating leverage in the half. Ordinary income outpaced operating income at ¥3.25bn, implying approximately ¥0.52bn in net non-operating gains after ¥0.08bn of interest expense. Net income increased 8.4% YoY to ¥2.19bn, helped by the stronger non-operating line and a normalized tax burden. The gross margin was 14.4% (¥9.70bn gross profit), operating margin 4.17%, ordinary margin 4.83%, and net margin 3.26%, consistent with a low-margin distributor profile. EBITDA was ¥3.43bn (5.1% margin), supporting a high EBIT interest coverage of 37.4x, underscoring low financial risk. DuPont analysis yields ROE of 2.48% with net margin 3.26%, asset turnover 0.544x, and financial leverage 1.40x, indicating that ROE is currently constrained by both modest margins and low asset velocity. Liquidity remains robust: current ratio 298%, quick ratio 240%, and working capital of ¥53.36bn, reflecting the business’s inventory- and receivables-heavy model. The capital structure is conservative with total liabilities of ¥35.10bn and debt-to-equity of 0.40x. Operating cash flow was ¥1.70bn, 0.78x of net income, suggesting a working capital drag in the half. Investing CF and cash balance were unreported (shown as zero), limiting free cash flow analysis and dividend coverage assessment; reported FCF of zero is not reliable due to missing investing CF disclosure. The reported effective tax rate of 0.0% is clearly an unreported metric; using provided income tax expense (¥1.00bn) and net income implies an effective tax rate around low-30s, consistent with norms. Financing CF was an outflow of ¥5.23bn, likely reflecting dividends and/or share repurchases and/or debt repayments, though dividend data for the period is not disclosed. Overall, the company maintains strong financial health and prudent leverage, but near-term operating leverage appears negative with reliance on non-operating gains to support bottom line. Key uncertainties stem from unreported investing cash flows, cash position, detailed dividend policy cadence, and equity ratio. Second-half seasonality could lift full-year ROE versus the interim level, but execution on gross margin, SG&A control, and working capital will be critical.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 3.26% (¥2.19bn / ¥67.28bn)
• asset_turnover: 0.544x (¥67.28bn / ¥123.71bn)
• financial_leverage: 1.40x (Assets/Equity = ¥123.71bn / ¥88.38bn)
• calculated_ROE: 2.48% (matches reported DuPont result; interim-level figure)
• commentary: ROE is subdued due to modest net margins and moderate asset turnover; leverage is conservative and not a driver of returns. margin_quality:
• gross_margin: 14.4% (¥9.70bn / ¥67.28bn)
• operating_margin: 4.17% (¥2.80bn / ¥67.28bn)
• ordinary_margin: 4.83% (¥3.25bn / ¥67.28bn)
• net_margin: 3.26% (¥2.19bn / ¥67.28bn)
• drivers: Operating margin contraction despite revenue growth suggests SG&A inflation and/or mild gross margin pressure. Ordinary income exceeding operating income indicates supportive non-operating items (e.g., financial income or equity method gains) offsetting weaker core margins. operating_leverage: Negative in the half: revenue +3.6% YoY while operating income -3.7% YoY. Cost absorption and SG&A growth outpaced revenue growth, compressing operating margin. interest_coverage: 37.4x (EBIT ¥2.80bn / interest expense ¥0.075bn), highlighting low financial risk.

Growth Assessment

revenue_sustainability: Top-line grew 3.6% YoY to ¥67.28bn. As an industrial distributor, growth likely tracks underlying factory automation and capital goods demand; sustainability hinges on customer capex cycles and macro conditions. profit_quality: Net income +8.4% YoY despite lower operating profit, due to non-operating gains and a normalized tax burden. Core quality is mixed: EBITDA margin 5.1% and operating margin 4.17% remain thin; reliance on non-operating contributions raises quality concerns if such gains are non-recurring. outlook: Second-half seasonality could improve full-year margins and ROE if gross margin stabilizes and SG&A discipline improves. Watch pricing power, product mix (higher-value automation components), and inventory normalization to support gross margins.

Financial Health

liquidity:

• current_ratio: 298.0% (¥80.31bn / ¥26.95bn)
• quick_ratio: 239.5% ((¥80.31bn - ¥15.75bn) / ¥26.95bn)
• working_capital: ¥53.36bn
• commentary: Very strong short-term liquidity typical for distributors; ample buffer to absorb inventory and receivable cycles. solvency_capital_structure:
• total_assets: ¥123.71bn
• total_liabilities: ¥35.10bn
• total_equity: ¥88.38bn
• debt_to_equity: 0.40x (using total liabilities/equity as a proxy)
• equity_ratio_note: Reported equity ratio 0.0% is unreported; based on balances, the true equity ratio would be strong (~71% if computed naively).
• commentary: Conservative leverage and abundant equity underpin high solvency. Interest burden is minimal. taxation:
• income_tax_expense: ¥1.00bn
• effective_tax_rate_estimate: Approximately 31–32% (¥1.003bn / (¥2.190bn + ¥1.003bn)), as the reported 0.0% is unreported.

Cash Flow Quality

earnings_quality: OCF/Net income = 0.78 (¥1.70bn / ¥2.19bn), indicating cash conversion below 1x, likely from working capital build (inventory/receivables). Needs monitoring to ensure temporary in nature. free_cash_flow: Not reliably measurable this period. Investing CF is unreported (shown as zero), so the reported FCF of zero is not meaningful. working_capital_dynamics: Large working capital base (¥53.36bn). With inventories at ¥15.75bn, cash conversion depends on inventory turns and receivable collection; interim cash shortfall vs earnings suggests normalization potential in H2 if demand stabilizes. financing_flows: Financing CF outflow of ¥5.23bn may reflect dividends, buybacks, and/or debt repayment; specifics not disclosed.

Dividend Sustainability

payout_ratio_assessment: Reported DPS and payout ratio show as 0.00, which is unreported. Without actual dividend amounts, payout cannot be assessed from this dataset. FCF_coverage: Not assessable due to unreported investing cash flows; reported FCF coverage of 0.00x is not meaningful. policy_outlook: Given strong balance sheet and low leverage, the company likely has capacity to sustain ordinary shareholder returns, but visibility depends on actual dividend policy disclosures and cash generation in H2.

Risk Assessment

Business Risks:

• Cyclical exposure to factory automation and capital goods demand in Japan and export-linked sectors.
• Thin operating margins (4.17%) leave limited cushion against cost inflation or pricing pressure.
• Inventory and receivables intensity increases sensitivity to demand slowdowns and working capital swings.
• Reliance on non-operating gains to support net income in the period may not be recurring.
• Supplier concentration and availability risks in components and MRO/FA product supply chains.
• Competition from other industrial distributors driving pricing pressure.

Financial Risks:

• Working capital consumption (OCF/NI = 0.78) if inventory builds persist.
• Potential mismatch between earnings and cash if receivable collections slow.
• Limited visibility on investing cash flows and cash balance due to unreported items.
• Tax rate variability if special items or non-operating gains fluctuate.

Key Concerns:

• Negative operating leverage despite revenue growth.
• Non-operating income as a key contributor to ordinary income.
• Incomplete disclosure of investing CF, cash, and dividend details in this dataset.

Investment Implications

Key Takeaways:

• Revenue growth (+3.6% YoY) but operating income decline (-3.7% YoY) indicates negative operating leverage.
• Margins remain thin: gross 14.4%, operating 4.17%, EBITDA 5.1%, net 3.26%.
• ROE of 2.48% (interim) constrained by low margin and moderate asset turnover; leverage is conservative (1.40x).
• OCF at ¥1.70bn is 0.78x of net income, reflecting working capital drag that should be monitored.
• Balance sheet is strong: current ratio 298%, D/E ~0.40x; interest coverage 37.4x.
• Ordinary income benefited from non-operating gains (~¥0.52bn net), boosting bottom line.
• Data gaps: investing CF, cash balances, equity ratio, and dividends are not disclosed in this dataset.

Metrics to Watch:

• Gross margin trajectory and SG&A ratio in H2 FY2026.
• Inventory turns and receivable days; OCF/NI ratio normalization toward or above 1.0x.
• Composition of non-operating income and its recurrence.
• Capex and investing CF disclosure to assess true FCF.
• Effective tax rate stabilization around low-30s.
• Ordinary payout policy (DPS) and any share repurchases in financing CF.

Relative Positioning: Within Japanese industrial distribution peers, Nihon Den Den exhibits typical thin margins and conservative leverage with above-average liquidity; however, interim ROE (2.5%) is below peer mid-to-high single digits, reflecting softer operating leverage and greater reliance on non-operating gains this half.

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