DAI-ICHI CUTTER KOGYO K.K. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥5.47B
• Operating Income: ¥755M
• Net Income: ¥411M
• EPS: ¥64.48

Income Statement

Balance Sheet

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

Daiichi Cutter Kogyo (17160) delivered a solid FY2026 Q1, with operating leverage driving profit growth despite flat revenues. Revenue was ¥5,475 million (+0.2% YoY), essentially unchanged, yet operating income rose to ¥755 million (+16.3% YoY), indicating meaningful cost control and/or favorable mix. Net income accelerated to ¥725 million (+76.3% YoY), aided by stronger operating performance and stable non-operating items. The implied operating margin improved to 13.8% (¥755m/¥5,475m) from roughly 11.9% in the prior-year quarter (back-solving from growth rates), a c.+1.9pp expansion. Ordinary income reached ¥815 million, implying an ordinary margin of 14.9%. The reported DuPont breakdown shows a net margin of 13.24%, asset turnover of 0.237x (quarterly), and financial leverage of 1.19x, resulting in an ROE of 3.73% for the quarter; if maintained, this would roughly annualize to the mid-teens, though quarterly seasonality must be considered. The balance sheet remains very strong: total assets are ¥23,098 million and total liabilities are ¥2,889 million, implying an equity ratio around 84.2% (equity/assets), even though the reported equity ratio field is unpopulated. Liquidity appears ample with current assets of ¥14,403 million vs. current liabilities of ¥2,204 million, yielding a current ratio of about 653%. Interest expense is de minimis at ¥0.38 million, and interest coverage is an exceptionally high 1,986.8x, reflecting limited leverage and robust operating earnings. EPS was ¥64.48; this implies an average share count of roughly 11.24 million (¥725m/¥64.48), as share data fields are unpopulated. Cash flow disclosures are not available in this snapshot (all CF line items unreported), so free cash flow and operating cash conversion cannot be assessed. Dividend details are likewise unreported, preventing payout and FCF coverage analysis. Overall, the quarter highlights margin-driven profitability improvement on stable sales, a conservative capital structure, and very strong liquidity, with caveats that several key disclosures (gross profit, cash flows, dividend) are not presented here. Given the company’s asset-light financing and minimal interest burden, incremental operating improvements have an outsized impact on earnings. The effective tax rate appears normal at approximately 31–32% based on taxes vs. ordinary income, despite the zero value shown in the summary metric. Near-term focus should be on the sustainability of the improved operating margin amid modest topline growth. Data limitations, especially absent cash flow figures, constrain cash conversion analysis and dividend assessment. Nonetheless, the non-zero datapoints portray a high-quality balance sheet and improving profitability profile.

Profitability Analysis

ROE decomposition (DuPont): Net margin 13.24% × asset turnover 0.237 × financial leverage 1.19 = ROE 3.73% for the quarter (roughly low-to-mid teens if annualized, subject to seasonality). Operating margin is 13.8% (¥755m/¥5,475m), up an estimated ~1.9pp YoY as operating income rose 16.3% on +0.2% revenue, evidencing positive operating leverage. Ordinary margin is 14.9% (¥815m/¥5,475m). The interest burden is negligible with interest expense at ¥0.38m and coverage at 1,986.8x, so non-operating drag is limited. Effective tax rate implied at ~31.5% (¥256.9m/¥815m), indicating typical taxation despite the unpopulated metric field. Gross profit and EBITDA are not disclosed in this dataset, but the margin expansion at operating level suggests improved cost discipline and/or mix. Overall margin quality appears solid with improved conversion of revenue to operating profit, while leverage contribution to ROE is modest given the strong equity base.

Growth Assessment

Revenue growth was +0.2% YoY to ¥5,475m, indicating stability but no meaningful acceleration. Operating income growth of +16.3% YoY highlights margin-led profit growth, likely from cost efficiencies, mix shift, or pricing, given flat sales. Net income growth of +76.3% YoY reflects operating improvements plus limited financial costs and a normalizing tax rate. With asset turnover at 0.237 (quarterly), full-year throughput could be healthy if Q1 revenue patterns persist, but seasonality should be considered. Sustainability of profit growth hinges on maintaining the higher operating margin while growing the top line beyond low single digits. Without cash flow data, it is not possible to validate earnings quality via cash conversion; however, minimal interest expense reduces risks from financing costs. Outlook depends on execution in core service lines, pricing discipline, and operational utilization; near-term indicators favor continued profitability if demand holds. Mix and project timing could cause quarterly variability, but the low leverage structure cushions downside.

Financial Health

Total assets ¥23,098m vs. total liabilities ¥2,889m and equity ¥19,457m, implying an equity ratio around 84.2% (computed; reported field is unpopulated). Current assets ¥14,403m vs. current liabilities ¥2,204m produce a current ratio of ~6.53x (653%), and working capital of ¥12,199m, indicating very strong liquidity. Quick ratio equals the current ratio in the dataset due to unreported inventories; actual quick ratio may be slightly lower if inventories exist. Debt-to-equity of ~0.15x (using total liabilities as proxy) indicates low leverage and ample solvency buffers. Interest expense is minimal at ¥0.38m, reinforcing low financial risk. Overall, the balance sheet is conservative with significant capacity to absorb shocks and invest.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported in this dataset, so OCF/Net Income and FCF cannot be evaluated from the provided numbers. The reported OCF/Net Income of 0.00 and FCF of 0 should be treated as undisclosed rather than zero. Earnings quality therefore cannot be triangulated via cash conversion or working capital movements here. That said, strong operating profitability, minimal interest expense, and a large working capital cushion suggest underlying resilience, but confirmation requires actual OCF and capex data. Key items to review when available: OCF vs. EBIT, capex intensity, and changes in receivables/payables around seasonal peaks.

Dividend Sustainability

Dividend per share and payout ratio are unreported in this dataset, preventing a direct assessment of payout sustainability or FCF coverage. With Q1 EPS at ¥64.48 and a strong balance sheet (equity ratio ~84%), capacity for shareholder returns appears supported by profitability and low leverage; however, sustainability should be tied to recurring OCF and capex needs, which are undisclosed here. Policy outlook cannot be inferred without management guidance or historical payout trends in this dataset. Once cash flow and DPS data are available, focus on payout ratio vs. normalized earnings and FCF coverage after maintenance capex.

Risk Assessment

Business Risks:

• Revenue concentration in project-based services leading to quarterly volatility and utilization risk
• Pricing pressure in competitive bidding environments for infrastructure-related services
• Execution risk on large projects impacting margins and working capital
• Demand cyclicality tied to construction and public works spending
• Labor availability and wage inflation affecting cost base

Financial Risks:

• Potential working capital swings not visible due to absent cash flow disclosure
• Capex intensity risk if equipment renewal needs rise, affecting FCF
• Customer credit risk in receivables during downturns despite strong liquidity
• Tax rate variability vs. assumptions (~31–32% implied)

Key Concerns:

• Sustainability of the improved operating margin with flat revenue
• Lack of disclosed cash flow data, limiting assessment of earnings quality and FCF
• Unreported dividend data obscures capital return policy evaluation

Investment Implications

Key Takeaways:

• Profit growth was margin-driven: OI +16.3% on revenue +0.2%
• Operating margin improved to ~13.8%, an estimated +1.9pp YoY
• Net margin at 13.24% and negligible interest expense underpin strong bottom-line conversion
• Balance sheet is conservative with implied equity ratio ~84% and current ratio ~6.5x
• ROE of 3.73% for the quarter implies mid-teens on a simple annualized basis if sustained
• Cash flow and dividend data are not disclosed, limiting FCF and payout analysis

Metrics to Watch:

• Revenue growth beyond ~0% to validate demand momentum
• Operating margin sustainability and mix/pricing drivers
• Actual OCF and capex for cash conversion and FCF
• Working capital turns (receivables and payables) and asset turnover (annualized)
• Order backlog or booking indicators for visibility
• Tax rate vs. implied ~31–32%

Relative Positioning: Within Japan-listed construction and specialized engineering services peers, the company exhibits above-average balance sheet strength (low leverage, high liquidity) and improving profitability, albeit with currently modest topline growth; clearer cash flow disclosure would strengthen the quality narrative.

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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