NIHON DENGI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥18.67B
• Operating Income: ¥4.14B
• Net Income: ¥1.65B
• EPS: ¥186.35

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

Nihon Dengi Co., Ltd. (TSE: 17230) reported strong FY2026 Q2 consolidated results under JGAAP, with revenue of ¥18.7bn, up 24.6% YoY, and operating income of ¥4.14bn, up 78.6% YoY. Net income reached ¥2.97bn (+80.3% YoY), translating to EPS of ¥186.35 for the period. Profitability improved meaningfully: gross profit was ¥6.02bn (gross margin 32.3%), and operating margin expanded to approximately 22.2%, aided by lower SG&A intensity. Ordinary income exceeded operating income by ¥0.16bn, indicating positive non-operating contributions (e.g., interest/dividend income or other non-operating gains). The DuPont decomposition indicates a net margin of 15.9%, asset turnover of 0.361x, and financial leverage of 1.23x, yielding a reported ROE of 7.03%. Balance sheet strength is a standout: total assets were ¥51.8bn and equity ¥42.2bn, implying an equity ratio around 81.6% based on the provided balance sheet figures (the “reported” equity ratio field is uninformative at 0.0%). Liquidity appears ample with a current ratio of 265.5% and working capital of ¥20.37bn, consistent with a net cash or low-debt profile (interest expense is unreported and debt-to-equity is modest at 0.32x on a total-liabilities basis). Cash flow statement items are unreported (recorded as zeros), so operating cash flow and free cash flow cannot be assessed from this dataset; accordingly, the OCF/Net Income and FCF metrics shown as zero should be viewed as “not disclosed.” The combination of higher revenue and outsized operating income growth suggests operating leverage and/or mix improvements in the portfolio of projects. Using net income plus tax expense implies a pre-tax income of roughly ¥3.73bn and an indicative effective tax rate of about 20.4% for the period; this is consistent with a relatively normal tax burden. With DPS not disclosed, dividend capacity and policy trends cannot be inferred directly, but the strong earnings trajectory and robust equity base imply capacity to sustain shareholder returns, subject to cash conversion. Key data limitations include unreported cash flow items, inventory details, share count, and dividend data; nonetheless, the reported income statement and balance sheet data support a view of improving margin quality and disciplined cost control. Project-based businesses often experience working capital swings around milestones; monitoring receivables and contract assets will be important given the faster growth. Overall, FY2026 Q2 shows strong execution, a healthy margin structure, and a conservatively capitalized balance sheet. Continued attention to order intake/backlog, project mix, and delivery schedules will be essential to gauge the sustainability of performance into the second half. On balance, the company enters 2H with favorable momentum and a solid financial foundation, albeit with limited visibility on cash flow conversion due to disclosure gaps.

Profitability Analysis

ROE_decomposition: Reported DuPont ROE is 7.03%, driven by Net Profit Margin 15.90% × Asset Turnover 0.361 × Financial Leverage 1.23. This indicates that profitability (margin) is the main contributor, with modest asset intensity and low leverage. margin_quality: Gross profit ¥6.022bn on revenue ¥18.668bn implies a 32.3% gross margin. Operating income ¥4.140bn yields ~22.2% operating margin, indicating healthy project execution and cost control. SG&A is inferred at ~¥1.882bn (≈10.1% of revenue), pointing to good operating efficiency. Ordinary income exceeds operating income by ~¥0.157bn, suggesting net non-operating gains (likely interest/dividend income or other recurring non-operating items), consistent with a strong balance sheet. Net margin is 15.9%, reflecting both operational strength and manageable tax burden. operating_leverage: Revenue grew +24.6% YoY while operating income rose +78.6% YoY, implying significant operating leverage and/or favorable mix. Prior-period implied operating margin was ~15.5% (back-solved), expanding ~+6.7ppt to ~22.2% in the current period.

Growth Assessment

revenue_sustainability: Top-line growth of +24.6% YoY suggests strong order execution and likely healthy end-market demand. For a project/system integration business, sustainability depends on backlog quality, customer capex cycles (private construction and public infrastructure), and schedule adherence. profit_quality: Margin expansion across gross and operating levels indicates improved mix and/or better cost pass-through. Ordinary income above operating income implies supplemental non-operating income, which may not be fully controllable; core profitability, however, remains strong at the operating level. outlook: Momentum into 2H appears favorable given current margins and scale; however, sustainability will depend on order intake, backlog conversion, labor availability, and supply-chain stability. Without cash flow disclosure, we cannot verify cash conversion; working capital discipline will be key to sustaining growth.

Financial Health

liquidity: Current assets ¥32.68bn vs current liabilities ¥12.31bn imply a current ratio of 265.5% and working capital of ¥20.37bn, supporting ample short-term liquidity. Quick ratio equals the current ratio due to inventories being unreported. solvency: Total liabilities ¥13.39bn vs equity ¥42.23bn imply a liabilities-to-equity ratio of ~0.32x. Based on balance sheet figures, the implied equity ratio is ~81.6% (equity/total assets), indicating a conservative capital structure. capital_structure: Low financial leverage (DuPont leverage 1.23x) and unreported interest expense suggest limited reliance on interest-bearing debt, consistent with the positive ordinary-to-operating income spread.

Cash Flow Quality

earnings_quality: Core earnings quality appears strong given the operating margin expansion; however, without OCF disclosure, conversion to cash cannot be assessed. The net positive non-operating contribution warrants monitoring for durability. FCF_analysis: Operating and investing cash flows are unreported (shown as zero), so free cash flow cannot be calculated. Capital intensity appears modest from the P&L (no D&A disclosed), but this cannot be confirmed without capex/CF data. working_capital: Working capital is sizable at ¥20.37bn, consistent with a project-based model. As revenue scales, receivables and contract assets can absorb cash; collection efficiency and billing milestones should be monitored.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are unreported for the period. EPS is ¥186.35, suggesting capacity for distributions in principle, but without DPS history and policy disclosure, payout discipline cannot be evaluated. FCF_coverage: FCF is unreported; therefore, coverage of dividends by FCF cannot be assessed. Any dividend sustainability assessment requires OCF and capex visibility. policy_outlook: With strong earnings and a conservative balance sheet, financial capacity appears adequate; however, dividend policy direction remains indeterminate absent disclosure on DPS, target payout/DOE, or medium-term capital policy.

Risk Assessment

Business Risks:

• Project execution risk (schedule delays, milestone slippage, penalties).
• Fixed-price contract risk leading to cost overruns and margin erosion.
• Supply chain and component availability impacting delivery timelines.
• Labor availability and wage inflation in engineering and field services.
• End-market cyclicality in private construction and public infrastructure budgets.
• Customer concentration and timing of large orders/backlog conversion.
• Technology and vendor dependency in building automation/control systems.

Financial Risks:

• Working capital swings as revenue scales (receivables and unbilled contract assets).
• Potential mismatch between accounting profit and cash flow due to milestone billing.
• Non-operating income variability (interest/dividend/other).
• Limited visibility on capex and lease obligations due to unreported cash flow data.
• Tax rate variability given inferred rather than disclosed pre-tax figures.

Key Concerns:

• Cash flow conversion is unassessable from the current dataset (OCF and FCF not disclosed).
• Inventory and detailed contract asset/liability data are unavailable, limiting margin sustainability analysis.
• Dividend policy and quantum remain unclear due to missing DPS disclosure.
• Equity ratio reported as 0.0% in the dataset is uninformative; analysis relies on inferred ratio from balance sheet.

Investment Implications

Key Takeaways:

• Strong 1H topline growth (+24.6% YoY) with outsized operating income growth (+78.6% YoY) signals robust operating leverage.
• Operating margin improved to ~22.2% and net margin to 15.9%, indicating enhanced project economics and cost control.
• Balance sheet is conservative (implied equity ratio ~81.6%, liabilities/equity ~0.32x), supporting resilience.
• Ordinary income above operating income suggests net financial/non-operating tailwinds consistent with low leverage.
• Cash conversion and FCF are unknown; sustainability of performance would be stronger with demonstrated OCF.

Metrics to Watch:

• Order intake and backlog to validate revenue sustainability into 2H and next fiscal year.
• Gross margin and SG&A ratio to assess margin durability and operating leverage.
• Receivables days and contract asset/liability movements (billing vs. revenue recognition).
• Operating cash flow/Net income and free cash flow to confirm earnings quality.
• Capex and headcount trends affecting capacity and fixed-cost base.
• Tax rate normalization and any extraordinary items affecting net income.

Relative Positioning: Within Japanese building systems/automation and plant engineering peers, the company exhibits above-average operating margins and conservative leverage, implying competitive execution and pricing discipline; confirmation via order backlog quality and cash conversion will anchor the durability of this relative strength.

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