NIHON DENKEI CO.,LTD FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥52.32B
• Operating Income: ¥1.25B
• Net Income: ¥770M
• EPS: ¥66.17

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

日本電計株式会社 (9908) FY2026 Q2 results show solid top-line growth but softer operating profitability. Revenue rose 8.1% YoY to ¥52.3bn, while operating income declined 9.4% YoY to ¥1.246bn, indicating margin compression despite sales growth. Gross profit was ¥7.052bn, implying a gross margin of 13.5%, consistent with a low-margin distribution model. Operating margin is approximately 2.4%, reflecting elevated SG&A or a less favorable sales mix. Net income was ¥748m (+0.4% YoY), supported by non-operating items and a likely normalized tax burden. DuPont analysis yields a net margin of 1.43%, asset turnover of 0.864x, and financial leverage of 2.00x, producing ROE of 2.47%, which is modest and below typical Japanese trading/distribution peers. Cash generation was strong relative to earnings, with operating cash flow (OCF) of ¥3.040bn and OCF/Net Income of 4.06x, suggesting good earnings quality and working capital inflows in the period. Liquidity appears robust with a current ratio of 162.9% and quick ratio of 149.2%, and working capital of ¥25.36bn, indicating ample short-term funding capacity. Interest coverage is healthy at 22.4x given low interest expense of ¥55.7m, highlighting limited near-term financial stress. Ordinary income of ¥1.220bn is slightly below operating income, implying minor net non-operating expenses. The reported effective tax rate metric shows 0.0%, but based on income tax expense of ¥508m and net income of ¥748m, an implied effective tax rate around 40% is more realistic for the period. Balance sheet line items show some inconsistencies (e.g., current assets exceed total assets), and certain disclosures (investing CF, cash and equivalents, equity ratio, DPS, shares outstanding) are unreported, which limits precision on capital structure and dividend analysis. Despite the data gaps, available non-zero data indicate sound liquidity, adequate solvency, and conservative financing. Profit growth lagged sales due to margin pressure, keeping ROE subdued. Inventory of ¥5.545bn appears manageable for the scale of operations, though inventory discipline remains key in a cyclical demand environment. Overall, fundamentals suggest resilient cash conversion and conservative balance sheet management, offset by structurally thin margins and modest ROE.

Profitability Analysis

ROE_decomposition: Net profit margin 1.43% x Asset turnover 0.864x x Financial leverage 2.00x = ROE 2.47% (matches reported). The ROE is constrained primarily by low net margins typical of distribution businesses. margin_quality: Gross margin 13.5% on revenue of ¥52.319bn and gross profit of ¥7.052bn. Operating margin ≈ 2.38% (¥1.246bn / ¥52.319bn), down YoY given operating income decline despite higher sales. Net margin at 1.43% reflects tight spread after SG&A and taxes. operating_leverage: Negative operating leverage in the period: revenue +8.1% YoY while operating income -9.4% YoY indicates that fixed/semifixed costs (or adverse mix) outweighed volume benefits. EBITDA of ¥1.551bn (margin ~3.0%) leaves a thin buffer for shocks, underscoring sensitivity to gross margin and SG&A ratio.

Growth Assessment

revenue_sustainability: Top-line growth of 8.1% YoY suggests solid demand in core end markets. Sustainability hinges on order momentum and customer capex cycles; no backlog data provided to corroborate durability. profit_quality: Net income +0.4% YoY despite lower operating income implies support from non-operating items and/or tax effects. Interest burden is small (¥55.7m), so profit quality is primarily driven by operating execution and working capital efficiency. outlook: With modest margins and negative operating leverage this half, near-term profit growth will depend on restoring gross margin and controlling SG&A. A normalized effective tax rate (~40% implied from data) is likely, so earnings leverage will come from operating improvements rather than financial items.

Financial Health

liquidity: Current ratio 162.9% and quick ratio 149.2% indicate strong short-term coverage; working capital of ¥25.36bn provides ample cushion. Operating CF of ¥3.04bn further supports liquidity. solvency: Interest coverage 22.4x suggests low refinancing risk. Debt-to-equity ratio is indicated at 1.43x, though balance sheet totals presented contain inconsistencies; nonetheless, leverage appears moderate and manageable. capital_structure: Financial leverage of 2.00x (assets/equity) is modest. Equity of ¥30.298bn supports resilience, but exact mix of interest-bearing debt vs. payables is not fully disclosed in the dataset.

Cash Flow Quality

earnings_quality: OCF/Net Income at 4.06x (¥3.040bn / ¥748m) indicates strong cash conversion, likely aided by favorable working capital movements. FCF_analysis: Investing cash flows are unreported, so free cash flow cannot be reliably calculated for the period. EBITDA of ¥1.551bn and strong OCF suggest capacity to fund routine capex, but confirmation requires capex disclosure. working_capital: Inventories at ¥5.545bn look proportionate to scale. The strong OCF implies net inflows from receivables and/or payables; detailed turnover metrics are not provided, so sustainability of WC-driven cash is uncertain.

Dividend Sustainability

payout_ratio_assessment: EPS is ¥66.17, but DPS and payout ratio are unreported (shown as 0.00). Without dividend data, payout cannot be assessed. FCF_coverage: FCF not determinable due to missing investing CF. Therefore, cash dividend coverage cannot be evaluated for this period. policy_outlook: Given modest ROE (2.47%) and strong liquidity, the company could prioritize balance sheet strength and inventory/infrastructure investment; however, explicit dividend policy signals are not available in the provided data.

Risk Assessment

Business Risks:

• Margin pressure inherent to low-margin distribution and potential adverse sales mix
• Demand cyclicality tied to electronics/industrial capital expenditure
• Inventory obsolescence risk in a fast product-cycle environment
• Supplier concentration and pricing power from key manufacturers
• Customer concentration and credit risk in downturns
• FX exposure on imported components if not fully hedged

Financial Risks:

• Thin operating margins (~2.4% operating margin) reduce buffer against shocks
• Reliance on working capital flows; potential reversal could compress OCF
• Leverage and capital structure details partially undisclosed; reported ratios suggest moderate leverage but totals are inconsistent
• Interest rate risk on any floating-rate borrowings, albeit current interest burden is low

Key Concerns:

• Negative operating leverage despite revenue growth
• Sustainability of cash conversion absent detailed working capital turnover data
• Limited visibility on investing CF and dividend policy due to unreported items

Investment Implications

Key Takeaways:

• Revenue grew 8.1% YoY to ¥52.3bn, but operating income fell 9.4% YoY, indicating margin compression.
• ROE is modest at 2.47%, constrained by a 1.43% net margin and low operating leverage.
• Cash generation is strong relative to earnings (OCF/NI 4.06x), suggesting solid earnings quality.
• Liquidity is robust (current ratio 162.9%, quick ratio 149.2%, interest coverage 22.4x).
• EBITDA margin at ~3.0% underscores a thin cushion; profitability sensitive to gross margin and SG&A control.
• Some core disclosures (equity ratio, investing CF, DPS, shares outstanding) are unreported, limiting precision on capital allocation and FCF.

Metrics to Watch:

• Gross margin trend and SG&A ratio to sales
• Operating margin recovery and EBITDA margin
• Inventory turnover days and receivables collection (WC dynamics)
• OCF/Net Income and conversion stability
• ROE progression via margin and asset turnover improvements
• Ordinary income vs. operating income (non-operating gains/losses)
• Tax rate normalization vs. implied ~40%

Relative Positioning: Within Japan’s electronics/industrial distribution space, the company exhibits typical low margins but comparatively strong liquidity and cash conversion; ROE at 2.5% appears below many peers, suggesting room for improvement via margin discipline and asset efficiency.

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