TOTECH CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥78.49B
• Operating Income: ¥7.28B
• Net Income: ¥4.53B
• EPS: ¥126.75

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

Totech Co., Ltd. (Ticker: 9960) reported solid FY2026 Q2 consolidated results under JGAAP, with headline growth and profitability metrics trending positively. Revenue reached 78.5bn yen, up 14.8% YoY, indicating robust demand and effective execution in the current period. Operating income rose 24.4% YoY to 7.28bn yen, showing operating leverage as costs grew slower than sales. Net income was 5.22bn yen (+15.2% YoY), with EPS of 126.75, aligning profit growth with per-share outcomes. Gross profit of 18.76bn yen implies a 23.9% gross margin, while operating margin stands at 9.3%, both supportive of improved profitability. Ordinary income (7.74bn yen) exceeded operating income, reflecting net non-operating income, with minimal interest burden (32m yen) and strong interest coverage (227.6x). The DuPont framework yields a calculated ROE of 7.96%, driven by a 6.65% net margin, 0.724x asset turnover, and 1.65x financial leverage; this is in line with the reported ROE. Cash flow from operations was 4.31bn yen, or 0.83x net income, indicating positive but moderated cash conversion due to working capital needs. The balance sheet appears sound with total assets of 108.4bn yen and equity of 65.5bn yen, implying an equity ratio of about 60% (the reported equity ratio field is undisclosed). Liquidity is adequate with a current ratio of 154% and quick ratio of 142%, and working capital of 21.05bn yen. Debt-to-equity is modest at 0.67x (using total liabilities), reflecting conservative leverage. Investing cash flow and cash balance were undisclosed (shown as zero placeholders), which limits full free cash flow and liquidity assessment. Dividend data (DPS, payout) were also undisclosed; hence, dividend sustainability cannot be quantified this quarter. Overall, the company exhibits healthy top-line momentum, improved operating efficiency, strong coverage metrics, and a conservative capital structure, albeit with some cash flow drag from working capital and incomplete cash/distribution disclosures. Near-term outlook depends on sustaining order momentum, maintaining margin discipline, and stabilizing working capital. We base the analysis on the provided non-zero figures, acknowledging certain line items are unreported rather than actually zero.

Profitability Analysis

ROE_decomposition: Calculated ROE is 7.96%, derived from net profit margin of 6.65% × asset turnover of 0.724 × financial leverage of 1.65. This indicates ROE is primarily supported by margin improvement and steady asset efficiency, with moderate leverage. margin_quality: Gross margin is 23.9% (gross profit 18.76bn yen on 78.49bn yen sales). Operating margin is approximately 9.3% (operating income 7.28bn yen), up YoY given operating income growth outpaced revenue (+24.4% vs +14.8%). Ordinary margin is 9.9% and net margin 6.65%, indicating limited non-operating drag and a standard tax burden. The effective tax rate, inferred as income tax (2.12bn yen) over ordinary income (7.74bn yen), is roughly 27–28%, consistent with a normal domestic rate. operating_leverage: Operating income growth (+24.4% YoY) exceeded revenue growth (+14.8% YoY), evidencing positive operating leverage in the period. EBITDA was 8.05bn yen (10.3% margin), supported by low D&A (765m yen), suggesting a relatively asset-light cost base. Interest expense is negligible (32m yen), so incremental earnings largely flow through to pre-tax profits.

Growth Assessment

revenue_sustainability: Revenue grew 14.8% YoY to 78.49bn yen, indicating healthy demand. Sustainability will hinge on order backlog conversion, project execution cadence, and pricing power; no backlog data were provided this quarter. profit_quality: Net income increased 15.2% YoY to 5.22bn yen, broadly in line with sales growth, while operating income growth outpaced sales, pointing to improved operating efficiency. Ordinary income exceeded operating income by 455m yen, implying supportive non-operating items rather than reliance on financial leverage. outlook: With a 9.3% operating margin and strong coverage metrics, the company enters the second half with momentum. Key to sustaining growth will be maintaining gross margin discipline amid input cost dynamics and managing working capital to avoid cash conversion headwinds. Absent company guidance here, we assume mid-teens growth normalizes as comps toughen.

Financial Health

liquidity: Current ratio 153.7% and quick ratio 141.8% indicate comfortable short-term liquidity. Working capital stands at 21.05bn yen (60.29bn current assets vs 39.24bn current liabilities). Cash balance was not disclosed; thus, immediate liquidity buffers cannot be precisely quantified. solvency: Total liabilities are 44.0bn yen against total equity of 65.54bn yen, for a debt-to-equity of 0.67x (using total liabilities as a proxy). Interest coverage is very strong at 227.6x, reflecting minimal interest burden. capital_structure: Implied equity ratio (equity/total assets) is approximately 60.4% (65.54/108.43), despite the reported equity ratio field being undisclosed. Financial leverage of 1.65x is moderate and supports the ROE without undue risk.

Cash Flow Quality

earnings_quality: OCF of 4.31bn yen is 0.83x net income (5.22bn yen), positive but below one-for-one conversion, indicating some working capital absorption or other non-cash timing effects. FCF_analysis: Free cash flow cannot be determined because investing cash flow (and thus capex) is undisclosed; the reported FCF as zero is a placeholder. EBITDA of 8.05bn yen and modest D&A (765m yen) suggest capacity to fund typical maintenance capex, but visibility is limited. working_capital: Based on OCF vs NI reconciliation, implied working capital and other accruals reduced cash by roughly 1.7bn yen (NI + D&A − OCF ≈ 5.22 + 0.77 − 4.31). Inventories are 4.63bn yen; receivables and payables were not disclosed, constraining a full cash conversion cycle analysis.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are undisclosed (zeros are placeholders). With EPS at 126.75 and positive OCF, earnings capacity appears supportive of distributions in principle, but no current payout data can be assessed. FCF_coverage: Investing cash flows are undisclosed; therefore, free cash flow coverage of dividends cannot be evaluated. The reported FCF coverage of 0.00x is a placeholder, not an economic measure. policy_outlook: No dividend policy details were provided in this dataset. Sustainability would depend on maintaining operating margins, managing working capital to lift OCF/NI toward or above 1.0x, and clarity on capex needs.

Risk Assessment

Business Risks:

• Potential normalization of demand after a strong first half, impacting revenue growth
• Gross margin pressure from input cost inflation or pricing competition
• Project timing and backlog conversion risk affecting quarterly volatility
• Supply chain lead times that could drive working capital build and delay revenue recognition
• Execution risk in multi-site or large projects

Financial Risks:

• OCF/NI below 1.0x this period, indicating working capital drag
• Limited visibility on cash and capex due to undisclosed investing cash flows and cash balance
• Concentration of earnings to operating performance with limited non-operating buffers if conditions weaken
• Potential tax rate variability around the inferred ~27–28% effective rate

Key Concerns:

• Incomplete disclosure of cash, investing cash flows, and dividend metrics limits valuation and payout analysis
• Working capital absorption (~1.7bn yen) reduced cash conversion despite higher earnings
• Sustainability of operating leverage if revenue growth moderates

Investment Implications

Key Takeaways:

• Strong top-line growth (+14.8% YoY) with outsized operating income growth (+24.4% YoY) indicates positive operating leverage
• Healthy profitability: operating margin ~9.3%, net margin 6.65%, EBITDA margin 10.3%
• ROE at 7.96% supported by margin gains and moderate leverage (1.65x)
• Robust balance sheet with implied equity ratio ~60% and interest coverage >200x
• OCF positive (4.31bn yen) but below net income (0.83x), reflecting working capital drag
• Key cash, investing, and dividend data are undisclosed, constraining FCF and payout assessment

Metrics to Watch:

• Order intake and backlog (to gauge revenue visibility)
• Gross and operating margins (pricing and cost control)
• OCF/NI ratio and working capital days (receivables, inventories, payables)
• Capex and investing cash flows (to assess FCF capacity)
• Tax rate stability vs inferred ~27–28%
• Leverage trend (liabilities/equity) and interest coverage

Relative Positioning: Profitability and balance sheet quality appear solid relative to typical TSE mid-cap industrial/distributor peers, with operating margin around the upper single digits and ROE near the market average; cash conversion lags this quarter, and incomplete cash/dividend disclosure tempers comparability.

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