COMSYS Holdings Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥270.37B
• Operating Income: ¥18.04B
• Net Income: ¥12.94B
• EPS: ¥108.10

Income Statement

Balance Sheet

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

Verdict: A solid Q2 with margin expansion and double-digit profit growth, but capital efficiency (ROIC) remains weak and cash flow/distribution visibility is limited due to unreported CF and dividend details. Revenue rose 2.3% YoY to 2,703.66, while operating income grew 9.7% to 180.41 and net income increased 16.7% to 126.55, outpacing top-line growth. Gross profit reached 372.73, implying a gross margin of 13.8%. Operating margin improved to 6.67% (vs. ~6.22% a year ago), indicating roughly 45 bps expansion driven by cost discipline and operating leverage. Net margin expanded to 4.68% (from ~4.11% a year ago), about a 57 bps improvement. Ordinary income rose 9.5% to 188.32, supported by non-operating income of 9.70, including dividend income of 5.72 and interest income of 0.42; non-operating items remain a small but positive tailwind. The effective tax rate stands at 33.0%, broadly in line with domestic norms. Balance sheet strength is notable: current ratio is 278%, quick ratio 278%, and interest coverage an extremely high 1,503x, reflecting minimal debt (short-term loans 25.65, long-term loans 0.03) and substantial equity (owners' equity 3,780.72). DuPont analysis yields ROE of 3.3% on a 4.7% net margin, 0.526x asset turnover, and 1.33x leverage—indicating low capital intensity leverage and modest margin profile as the main constraints on returns. ROIC is 3.5%, below the 5% warning line, signaling underwhelming capital efficiency despite strong solvency. Earnings quality cannot be validated because operating cash flow and working capital details are unreported; this is notable in a project-based business where receivables timing can distort accrual profits. Dividend sustainability appears questionable on the surface, with a calculated payout ratio of 120.9%, but the lack of detailed dividend/FCF data and potential timing effects on interim payouts limit confidence. Forward-looking, margin normalization risks, labor cost inflation, and client capex cycles (telecom infrastructure) are key, but the improved profitability and robust balance sheet provide cushion. The quarter demonstrates solid execution and margin gains, yet sustained value creation will require better capital efficiency (higher ROIC/ROE) and consistent cash conversion. Monitoring order intake, backlog, and OCF/NI will be critical to confirm durability. Overall, a good earnings print with healthy margins and balance sheet, tempered by low ROIC and incomplete cash flow visibility.

Profitability Analysis

ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 4.7% × 0.526 × 1.33 ≈ 3.3%. The component changing most this quarter appears to be net profit margin, given net income growth (+16.7%) materially outpaced revenue growth (+2.3%), implying margin expansion. Business drivers likely include improved project mix, execution efficiency, and disciplined SG&A growth (OP +9.7% vs sales +2.3%), with a minor assist from non-operating income (dividends/interest totaling 6.14 within non-op income of 9.70). Asset turnover remains modest at 0.526, typical for a contractors/infrastructure services model with significant current assets tied to projects; leverage is low at 1.33x, limiting ROE uplift from gearing. Sustainability: The operating margin expansion (~+45 bps YoY to 6.67%) appears grounded in operating leverage and cost control; however, it may be sensitive to wage inflation, subcontractor cost pressure, and mix changes in telecom/public works pipelines. Non-operating contributions are supportive but not a structural driver. Watch for signs of negative operating leverage if revenue growth slows while personnel costs rise. Concerning trend flags: None evident in reported figures, but visibility on SG&A composition is limited (many SG&A line items unreported); ensure SG&A growth does not outpace revenue in subsequent quarters.

Growth Assessment

Top-line growth was modest at +2.3% YoY, consistent with steady demand in telecom/network construction. Profit growth was stronger: operating income +9.7%, ordinary income +9.5%, net income +16.7%, indicating favorable mix and cost discipline. Operating margin at 6.67% and net margin at 4.68% both improved YoY (approx. +45–57 bps), evidencing positive operating leverage. Non-operating income (9.70) provided a small tailwind, mainly from dividend (5.72) and interest (0.42) income; dependence on non-operating items remains low. Given the project-based nature, revenue sustainability hinges on order intake and backlog from telecom carriers and government/municipal work; these are not disclosed here, limiting visibility. Near-term outlook is cautiously positive given margin momentum and robust balance sheet, but sustained growth will require stable carrier capex (e.g., fiber/5G upgrades), execution capacity amid labor constraints, and price pass-through to offset cost inflation.

Financial Health

Liquidity is very strong: current ratio 278.3% and quick ratio 278.3%, with working capital of 1,902.49. No warning for Current Ratio (<1.0) or D/E (>2.0); reported D/E is 0.33x and interest-bearing debt is minimal (short-term 25.65, long-term 0.03). Interest coverage is exceptionally high at 1,503x, reflecting negligible interest burden. Maturity mismatch risk is low: current assets of 2,969.21 far exceed current liabilities of 1,066.72, and short-term loans are de minimis relative to cash and deposits (426.73). Off-balance sheet obligations are not disclosed; no assessment possible from provided data.

Cash Flow Quality

OCF is unreported; therefore, OCF/Net Income and FCF cannot be assessed. As such, we cannot confirm earnings quality via cash conversion (benchmark OCF/NI > 1.0). Given the industry’s working capital intensity (receivables and unbilled work), timing effects could cause gaps between NI and OCF; without AR/AP details, potential working capital pulls/pushes cannot be identified. Capex and dividends paid are unreported, preventing FCF coverage analysis for shareholder returns. No explicit signs of working capital manipulation are detectable from the limited data, but lack of disclosure is a constraint.

Dividend Sustainability

The calculated payout ratio is 120.9%, which exceeds the <60% benchmark and would be unsustainably high if based on full-year cash earnings; however, with dividends and FCF unreported and potential timing effects (e.g., interim dividends vs half-year earnings), this metric may not reflect full-year reality. Balance sheet strength (owners’ equity 3,780.72; minimal debt) provides short-term flexibility, but long-term sustainability requires positive and stable FCF after capex. Without OCF/FCF and capital allocation details, we cannot confirm coverage of dividends by internally generated cash.

Risk Assessment

Business Risks:

• Customer capex cycle dependence (telecom carriers’ fiber/5G and public sector budgets) affecting order intake and mix.
• Labor cost inflation and skilled labor shortages impacting project margins and capacity utilization.
• Project execution risk on fixed-price/long-duration contracts (cost overruns, delays).
• Competitive pricing pressure in telecom and public works bidding.
• Supply chain and subcontractor availability risks affecting costs and schedules.

Financial Risks:

• Low ROIC (3.5%) indicating weak capital efficiency relative to benchmarks.
• Potential cash conversion risk due to receivables/unbilled work seasonality (OCF unreported).
• Dividend coverage uncertainty (payout ratio calculated at 120.9% with no FCF data).
• Concentration risk if revenue is heavily tied to a few large carriers (not disclosed here).

Key Concerns:

• Inability to validate earnings quality due to unreported OCF and working capital details.
• Sustainability of margin gains amid wage/subcontractor cost pressures.
• Visibility on backlog/book-to-bill not provided, limiting forward demand assessment.

Investment Implications

Key Takeaways:

• Solid Q2 with margin expansion: OP margin 6.67% (+~45 bps YoY), net margin 4.68% (+~57 bps).
• Profit growth outpaced revenue: OP +9.7% vs sales +2.3%; NI +16.7%.
• Balance sheet is robust: current ratio 278%, interest coverage 1,503x, minimal debt.
• Capital efficiency is weak: ROIC 3.5% and ROE 3.3% constrain value creation.
• Non-operating income supportive but not a major driver (dividends/interest modest).
• Cash flow and dividend coverage cannot be assessed due to missing OCF/FCF data.

Metrics to Watch:

• Order intake and backlog/book-to-bill to gauge revenue sustainability.
• OCF/Net Income and working capital (DSO, unbilled receivables) to validate earnings quality.
• Segment/contract mix and gross margin progression to assess sustainability of margin gains.
• Personnel and subcontractor cost trends; pass-through in pricing.
• ROIC trajectory vs. 7–8% target benchmark; capital allocation discipline (capex/M&A).
• Dividend policy updates and full-year payout relative to FCF.

Relative Positioning: Within Japan’s telecom/infrastructure construction peers, the company shows above-average balance sheet strength and improved margins this quarter but trails on capital efficiency (ROIC/ROE). Sustained advantage will depend on consistent cash conversion and order/backlog resilience against carrier capex cycles.

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