OTEC CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.60B
• Operating Income: ¥1.74B
• Net Income: ¥524M
• EPS: ¥78.84

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

Autech Co., Ltd. (17360) delivered a strong FY2026 Q2 (cumulative) performance with clear operating leverage and margin expansion. Revenue rose 18.0% year over year to ¥14.60bn, while operating income surged 149.7% to ¥1.74bn, implying a sharp uptick in operating margin to approximately 11.9%. Net income increased 148.6% to ¥1.22bn, translating to a reported net profit margin of 8.36%. Ordinary income of ¥1.88bn exceeded operating income, indicating roughly ¥0.14bn of net non-operating gains, likely from financial or investment-related items. Gross profit reached ¥3.11bn, putting gross margin at 21.3%, which underpins the substantial improvement at the operating line. EBITDA was ¥1.88bn, and with depreciation/amortization of just ¥0.14bn, the business appears asset-light with modest non-cash charges. The DuPont framework shows ROE of 4.97% on a leverage factor of 1.47x and asset turnover of 0.403x, consistent with a capital-light, services/installation-oriented profile. Based on non-zero items, the effective tax burden calculates to about 18.6% (¥279m tax on roughly ¥1.50bn pre-tax income), though an “effective tax rate” metric was listed as 0.0% and should be treated as undisclosed. Operating cash flow was ¥988m, equal to 0.81x of net income, which is reasonable but below 1.0x, indicating some working-capital absorption during growth. Liquidity is strong, with a current ratio of 214.5% and a quick ratio of 206.1%, supported by sizable working capital of ¥11.51bn. Using reported totals, equity of ¥24.56bn against assets of ¥36.19bn implies an equity ratio of roughly 67.9%, pointing to a conservative balance sheet even though the equity ratio line item was undisclosed. Interest expense is low at ¥14m and interest coverage is very robust at 124x, signaling negligible financial strain. Inventory is modest at ¥853m relative to sales, suggesting low inventory intensity and limited obsolescence risk. Dividend and capital allocation signals are limited as DPS and share counts were undisclosed; financing cash outflows of ¥622m likely reflect debt repayments and/or shareholder returns but cannot be decomposed from available data. Overall, the company demonstrates improving profitability, solid liquidity, and low financial risk, with the key watchpoint being the sustainability of margins and cash conversion as growth continues. Data gaps (notably cash, investing cash flows, DPS, share counts, and the disclosed equity ratio) constrain granularity, so interpretations lean on the non-zero figures and derived metrics.

Profitability Analysis

ROE of 4.97% decomposes into: net profit margin 8.36%, asset turnover 0.403x, and financial leverage 1.47x. The significant YoY operating income growth (+149.7% vs. revenue +18.0%) indicates strong operating leverage from a relatively fixed cost base and/or mix improvements. Operating margin is approximately 11.9% (¥1,736m / ¥14,602m), materially above the gross-to-operating conversion implied last year, suggesting SG&A discipline and scale efficiencies. Gross margin of 21.3% is healthy for an engineering/installation-type business and likely benefited from favorable project mix and procurement. Ordinary income exceeding operating income by about ¥139m implies non-operating tailwinds (e.g., financial income), which supported bottom-line expansion; sustainability of this component should be monitored. EBITDA margin of 12.9% and low D&A (¥144m) indicate an asset-light model, helping returns and cash generation potential over a full cycle. Interest burden is negligible (interest expense ¥14m; 124x coverage), so financial leverage is not a driver of ROE; improvement must come from margins and turnover. The net margin of 8.36% is strong in context for the sector and underpins the DuPont result. Given the semiannual nature of the data, the reported ROE may not annualize linearly; nonetheless, profitability momentum is clearly positive.

Growth Assessment

Revenue increased 18.0% YoY to ¥14.60bn, a solid topline expansion likely driven by robust order execution and possibly stronger private-sector demand. Operating income rose 149.7% YoY to ¥1.74bn, signaling substantial margin expansion and operating leverage. Net income grew 148.6% to ¥1.22bn, aided by non-operating gains (ordinary income above operating income by ~¥139m) and a moderate tax burden. The quality of growth appears supported by gross margin resilience (21.3%) and disciplined SG&A, though part of the bottom-line outperformance reflects non-operating items that may not recur. OCF/NI at 0.81 suggests growth absorbed working capital; this is not unusual during expansion but warrants monitoring to ensure earnings translate into cash. D&A is modest (¥144m), which supports scalability but also implies future replacement capex could be episodic and lumpy. Outlook-wise, sustaining double-digit operating margins will depend on project pricing, execution, and input cost stability; any normalization of non-operating gains could trim ordinary/net income growth. With limited disclosure on order backlog and new orders, revenue sustainability cannot be fully assessed; order intake visibility remains a key information gap.

Financial Health

Total assets are ¥36.19bn and total equity is ¥24.56bn, implying an equity ratio of roughly 67.9% based on reported totals (the disclosed equity ratio was unspecified). Total liabilities are ¥11.77bn, with current liabilities at ¥10.05bn versus current assets of ¥21.56bn, yielding a current ratio of 214.5% and a quick ratio of 206.1%, both indicating strong short-term liquidity. Working capital stands at ¥11.51bn, providing a meaningful buffer for project execution and receivables cycles. Debt-to-equity is listed at 0.48x; given the low interest expense, interest-bearing debt appears modest and the balance sheet conservatism is intact. Interest coverage is 124.1x, reflecting minimal financial risk. Inventory is ¥853m, low relative to revenue and cost of sales, suggesting low inventory intensity and reduced holding risks. Overall solvency and liquidity profiles are strong, positioning the company well to weather project timing volatility.

Cash Flow Quality

Operating cash flow of ¥988m is 0.81x net income (¥1,221m), indicating decent but not full cash conversion, likely due to working capital investment accompanying growth. Free cash flow could not be determined because investing cash flow/capex data were undisclosed (investing CF shown as zero is treated as unreported). EBITDA of ¥1,880m versus OCF of ¥988m suggests cash taxes and working capital movements were the primary uses of cash in the period. D&A of ¥144m is low, consistent with an asset-light model; absent capex disclosure, we cannot assess maintenance vs. growth capex coverage. Financing cash outflows of ¥622m imply net debt reduction and/or shareholder distributions, but with DPS undisclosed, the mix is unclear. Overall, earnings quality is reasonable, but further periods are needed to confirm sustained OCF alignment with earnings as revenues scale.

Dividend Sustainability

Dividend information is undisclosed for the period (DPS and payout ratio listed as zero should be treated as not reported). With OCF of ¥988m and strong liquidity, the capacity for distributions appears solid, but without capex and FCF data, true free cash coverage cannot be assessed. The low leverage and high implied equity ratio (~67.9%) provide balance sheet flexibility for shareholder returns subject to internal investment needs. Policy outlook cannot be inferred from the provided data; future guidance, historical payout trends, and capex plans would be required to assess sustainability and trajectory.

Risk Assessment

Business Risks:

• Project execution risk and potential cost overruns affecting margins
• Input cost volatility (materials, subcontracting) impacting gross margin
• Order intake and backlog visibility risk given limited disclosures
• Customer concentration and timing risk in private-sector demand
• Labor availability and wage inflation in installation/construction trades
• Regulatory, safety, and compliance risks inherent to construction/engineering work
• Cyclical exposure to construction and capex cycles

Financial Risks:

• Working capital absorption during growth phases, pressuring OCF/NI
• Potential normalization of non-operating gains that boosted ordinary income
• Limited disclosure on capex and investing cash flows obscures FCF
• Counterparty credit risk embedded in receivables
• Interest rate and credit market shifts (albeit mitigated by low leverage)

Key Concerns:

• Sustainability of double-digit operating margin as mix and costs evolve
• Cash conversion below earnings (OCF/NI 0.81) during expansion
• Data gaps on DPS, capex, cash balances, and share count limit capital allocation analysis

Investment Implications

Key Takeaways:

• Strong topline growth (+18.0% YoY) with outsized operating income growth (+149.7%) demonstrates operating leverage.
• Operating margin improved to ~11.9%, supported by 21.3% gross margin and SG&A discipline.
• Ordinary income exceeded operating income by ~¥139m, indicating supportive non-operating gains.
• Balance sheet appears conservative with an implied equity ratio of ~67.9% and interest coverage of 124x.
• OCF of ¥988m (0.81x NI) is decent but indicates working capital investment alongside growth.
• Asset-light profile (D&A ¥144m; EBITDA margin 12.9%) supports return potential over time.
• Several disclosures are missing (DPS, capex, cash balances, share count), constraining FCF and per-share analysis.

Metrics to Watch:

• Order intake and backlog (leading indicator for revenue sustainability)
• Gross margin and operating margin trajectory (target: sustain >20% GP and ~12% OP margins)
• OCF/Net income and working capital days (DSO/DPO/DIO) to confirm cash conversion
• Capex and investing cash flows to establish true FCF and maintenance needs
• Non-operating income components and their recurrence
• Leverage metrics and interest expense trends (maintain high coverage)
• Tax rate normalization versus calculated ~18.6%

Relative Positioning: Compared with typical small-to-mid cap TSE construction/engineering peers, Autech exhibits above-average operating margins and strong liquidity with low financial risk, consistent with an asset-light, installation-oriented business; the main differentiator is margin quality, while the main handicap is limited disclosure on FCF and shareholder return policy.

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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