TOKYU CONSTRUCTION CO., LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥150.07B
• Operating Income: ¥5.15B
• Net Income: ¥-5M
• EPS: ¥38.75

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

Tokyu Construction (17200) delivered a solid FY2026 Q2 with clear top-line momentum and improving profitability on a consolidated JGAAP basis. Revenue rose 26.5% year over year to ¥150.1bn, driven by healthy project execution and likely favorable order backlog conversion. Operating income increased 31.2% to ¥5.15bn, outpacing sales and indicating modest positive operating leverage. Net income advanced 37.2% to ¥4.11bn, aided by improved operating performance and a net tax benefit in the period. Operating margin improved to approximately 3.43%, up around 12bp from an estimated ~3.31% in the prior-year period. Gross profit of ¥9.51bn implies a gross margin of 6.3%, consistent with the low-margin profile typical of general contractors in Japan. Ordinary income of ¥5.56bn was ¥0.41bn above operating income, suggesting supportive non-operating items (e.g., financial income or equity-method gains) more than offset interest expense of ¥0.14bn. Cash generation was notably strong: operating cash flow of ¥15.98bn equates to 3.9x net income, underscoring robust cash conversion of earnings and favorable working capital dynamics. Financing cash outflow of ¥14.74bn indicates net deleveraging and/or return of capital to creditors, consistent with balance sheet discipline; we note no dividend payment is reported in this dataset. The DuPont decomposition yields a reported ROE of 3.94%, based on a 2.74% net margin, 0.572x asset turnover, and 2.52x financial leverage; this is modest in absolute terms but reasonable for the sector at the interim stage. Liquidity appears sound with a current ratio of 147%, and working capital of ¥69.42bn provides an ample cushion for project execution. Capital structure is balanced with total liabilities of ¥171.65bn versus equity of ¥104.21bn, implying a debt-to-equity ratio of 1.65x. The effective tax rate reads as 0.0% because income tax is negative (−¥0.19bn), indicating tax credits/deferred tax effects; this should not be annualized. Reported equity ratio is shown as 0.0% due to disclosure limitations, but based on assets and equity, the implied equity ratio is roughly 39.7%, a comfortable level. Several items are undisclosed or reported as zero (e.g., cash and equivalents, inventories, investing cash flows, shares outstanding), which constrains precision on liquidity granularity, FCF, and per-share analytics. Overall, the interim results point to healthy execution, improved margins, strong operating cash flow, and prudent balance sheet management, though sustainability into the second half will hinge on order intake, pricing discipline, and cost control.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 2.74% × Asset turnover 0.572 × Financial leverage 2.52 = ROE 3.94%. Operating margin improved to ~3.43% (¥5,146m / ¥150,073m), up ~12bp YoY based on implied prior-year figures, signaling mild positive operating leverage as operating income grew faster than revenue (31.2% vs 26.5%). Gross margin is 6.3% (¥9,514m / ¥150,073m), consistent with industry norms for general contractors where cost pass-through and project mix drive low single-digit margins. EBITDA is ¥5,725m with an EBITDA margin of 3.8%, offering a manageable buffer over interest (EBIT/interest ~37.8x), indicating limited financial drag on profits. Ordinary income exceeds operating income by ~¥414m, suggesting supportive non-operating contributions. The negative tax expense (−¥194m) boosts net margin at the interim stage; normalize for a standard effective tax rate when assessing full-year profitability. Overall, profitability is improving but remains modest; sustaining the margin trajectory depends on disciplined bidding, cost containment, and project execution quality.

Growth Assessment

Revenue growth of 26.5% YoY to ¥150.1bn reflects robust backlog conversion and likely favorable project starts. Operating income growth of 31.2% indicates improved mix and/or better cost control, producing slight margin expansion. Net income growth of 37.2% is accentuated by a tax benefit and non-operating tailwinds; core earnings growth is closer to operating income growth. The sustainability of top-line growth will depend on new order intake in H2, end-market demand (private/non-residential and civil), and the timing of large-scale project milestones. Margin quality appears to be improving but from a low base; watch for cost inflation pass-through and subcontractor availability. With asset turnover at 0.572x, efficiency is adequate for the sector; further gains would likely come from working capital optimization and selective bidding. Outlook hinges on maintaining pricing discipline in a competitive environment and avoiding cost overruns on large projects.

Financial Health

Liquidity: Current ratio 147.1% and working capital of ¥69.4bn indicate comfortable short-term coverage. Quick ratio is reported as 147.1% due to inventories being undisclosed (shown as zero); true quick ratio may be slightly lower if inventories exist. Solvency: Total liabilities ¥171.6bn vs equity ¥104.2bn implies D/E of 1.65x and an implied equity ratio of ~39.7% (computed from disclosed assets/equity despite the reported 0.0%). Interest coverage is strong at ~37.8x (EBIT/interest), suggesting low near-term refinancing risk. Capital structure: The −¥14.7bn financing cash flow points to net debt reduction and/or other liability settlements; combined with strong OCF, this supports deleveraging capacity.

Cash Flow Quality

Operating CF of ¥15.98bn is 3.89x net income, indicating strong cash conversion and favorable working capital inflows in the period. EBITDA of ¥5.73bn vs OCF suggests working capital release and/or advance payments contributed materially. Investing CF is reported as zero (undisclosed), so Free Cash Flow cannot be reliably computed; the reported FCF of 0 should be treated as not available rather than true zero. Earnings quality appears solid given high OCF/NI, but sustainability depends on the repeatability of working capital timing benefits. Monitor receivables collection, unbilled revenue, and advance receipts on construction projects to gauge persistence.

Dividend Sustainability

Annual DPS is shown as ¥0.00 and payout ratio 0.0%; given the interim nature and disclosure limits, we treat this as not declared rather than indicative of policy change. With OCF of ¥15.98bn and unknown capex (investing CF undisclosed), we cannot compute meaningful FCF coverage. Balance sheet capacity (implied equity ratio ~40%) and strong OCF suggest room for distributions over a full year, but visibility requires confirmed full-year guidance, capex plans, and cash balances. Policy outlook remains uncertain in this dataset; watch for year-end dividend guidance and capital allocation commentary.

Risk Assessment

Business Risks:

• Project execution risk and potential cost overruns on large civil and building contracts
• Competitive bidding pressure limiting margin expansion
• Input cost inflation (materials, labor) and subcontractor availability
• Timing risk of order intake and project starts affecting revenue recognition
• Client concentration and cancellation/postponement risk in private-sector projects

Financial Risks:

• Working capital volatility inherent to construction leading to cash flow swings
• Leverage at 1.65x D/E, though mitigated by strong coverage
• Interest rate and credit market conditions affecting refinancing costs
• Recognition timing differences and potential margin erosion on long-duration contracts
• Tax normalization risk given current-period negative tax expense

Key Concerns:

• Sustainability of margin gains beyond H1 given low absolute margins
• Reliance on working capital releases to support OCF in the period
• Data gaps (cash, investing CF, inventories) limiting precision on FCF and liquidity buffers

Investment Implications

Key Takeaways:

• Strong top-line growth (+26.5% YoY) with operating income outperformance (+31.2% YoY) indicates positive operating leverage
• ROE at 3.94% is modest but improving alongside margin expansion
• OCF of ¥16.0bn (3.9x NI) signals high-quality interim cash generation
• Balance sheet appears healthy with implied ~40% equity ratio and strong interest coverage
• Non-operating gains and negative tax expense inflated net income; normalize for H2

Metrics to Watch:

• New orders and order backlog trajectory in H2
• Operating margin and gross margin progression versus cost inflation
• Working capital components (receivables, unbilled revenue, advances) and OCF sustainability
• Capex and investing cash flows to firm up FCF outlook
• Leverage trend and financing cash flows (debt repayments)

Relative Positioning: Within Japanese general contractors, Tokyu Construction exhibits typical low-margin characteristics but currently shows better-than-average interim cash conversion and solid liquidity; continued margin discipline and order quality will determine whether it can close the profitability gap with higher-margin peers.

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