TAKAMATSU CONSTRUCTION GROUP CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥170.91B
• Operating Income: ¥7.88B
• Net Income: ¥533M
• EPS: ¥129.06

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

Takamatsu Construction Group (17620) reported FY2026 Q2 consolidated results under JGAAP showing steady top-line growth and a sharp rebound in profitability. Revenue was ¥170.9bn (+5.4% YoY), while operating income surged to ¥7.88bn (+204.4% YoY), indicating significant operating leverage from modest gross margin improvement and tighter cost control. Net income rose to ¥4.49bn (+746.0% YoY), with net margin at 2.63%, reflecting both improved operations and a normalization from a weak prior-year base. Gross profit was ¥19.1bn, equating to an 11.2% gross margin; operating margin reached 4.6%, a notable uplift for a mid-tier general contractor. The DuPont decomposition yields a reported ROE of 3.20%, built from a 2.63% net margin, 0.60x asset turnover, and 2.03x financial leverage. The balance sheet remains sound: total assets ¥285.0bn, liabilities ¥132.0bn, and equity ¥140.3bn, implying assets/equity of 2.03x and liabilities/equity of 0.94x. Liquidity appears strong with a current ratio of 182% and working capital of ¥91.6bn, which is typical for construction businesses with sizable contract assets/liabilities. Interest burden is light (interest expense ¥0.09bn; interest coverage 87.5x), providing resilience against rate volatility. Ordinary income of ¥7.76bn was slightly below operating income due to modest net non-operating costs. Income tax was ¥1.63bn; the implied pre-tax profit (~¥6.12bn) suggests extraordinary and/or non-operating items below ordinary income, a common JGAAP pattern, though detailed drivers are not disclosed. Cash flow figures (OCF/FCF) and cash balances are unreported in the dataset; therefore, cash flow quality cannot be quantitatively assessed from this release. Dividend and share data are also not disclosed, limiting payout analysis. Despite these data gaps, the reported metrics indicate improving profitability, ample liquidity, manageable leverage, and solid interest coverage. Key sensitivities remain order intake, project mix, materials/labor inflation, and execution on fixed-price contracts. Overall, the half-year points to a recovery trajectory with cautious optimism tempered by sector cyclicality and data limitations.

Profitability Analysis

ROE_decomposition: ROE 3.20% = Net margin 2.63% × Asset turnover 0.60× × Financial leverage 2.03×. margin_quality: Gross margin 11.2% (¥19.1bn/¥170.9bn) and operating margin 4.6% (¥7.88bn/¥170.9bn) indicate improved project profitability and SG&A discipline vs. last year’s weak base. Ordinary margin 4.5% (¥7.76bn/¥170.9bn) is close to operating margin, implying limited net non-operating drag. Net margin at 2.63% reflects taxes and below-ordinary items. operating_leverage: Operating income +204% YoY on revenue +5.4% demonstrates strong operating leverage from small percentage improvements in gross margin and SG&A efficiency. Interest expense is minimal (¥0.09bn), so incremental profits largely flow through at the operating level.

Growth Assessment

revenue_sustainability: Revenue grew 5.4% YoY to ¥170.9bn, consistent with stable demand and execution across building/housing-related projects typical for the group. Sustainability depends on order intake/backlog and project scheduling, which are not disclosed here. profit_quality: The large YoY rebound in operating and net income likely reflects normalization from prior-year headwinds (e.g., input cost pressure and mix). Margins are still in a mid-single-digit operating range, suggesting improvements are grounded in core operations rather than non-recurring gains, though detailed extraordinary items are not disclosed. outlook: With asset turnover at 0.60x and leverage at 2.03x, further ROE improvement would come from sustaining higher margins and improving turnover via timely project delivery. Continued materials/labor inflation management and healthy order intake are key to maintaining the trajectory.

Financial Health

liquidity: Current assets ¥203.3bn vs current liabilities ¥111.7bn yields a current ratio of 182% and working capital of ¥91.6bn, indicating solid short-term coverage. Quick ratio matches due to undisclosed inventory; true quick ratio may be lower but still likely comfortable given sector norms. solvency: Total liabilities ¥132.0bn vs equity ¥140.3bn implies D/E of 0.94x and assets/equity 2.03x. This is moderate leverage for a contractor and provides balance sheet flexibility. capital_structure: Interest expense is low (¥0.09bn) with interest coverage at 87.5x (operating income basis), suggesting low refinancing risk. Equity ratio is listed as 0.0% in the dataset but is not reflective of reported totals; based on totals, equity/asset is approximately 49%—however, we treat the disclosed 0.0% as an unreported field rather than an inconsistency.

Cash Flow Quality

earnings_quality: Cash flow data (OCF/FCF) are unreported. With strong operating leverage and low interest burden, earnings quality appears supported by core operations, but lack of OCF prevents verification against cash conversion. FCF_analysis: Free cash flow cannot be assessed due to missing OCF and investing cash flows. Construction firms often see intra-year working capital swings (advances, retention), so half-year FCF can be volatile. working_capital: Net working capital is ¥91.6bn, consistent with the business model of recognizing costs ahead of billing in some phases and carrying sizable contract assets/liabilities. Detailed components (inventories, contract assets, receivables, advances) are not disclosed.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are unreported (showing as zero in the dataset). EPS is ¥129.06 for H1, but without DPS we cannot calculate payout. FCF_coverage: Not assessable due to unreported OCF/FCF. As such, we cannot confirm cash coverage of any dividend. policy_outlook: No guidance or policy details are provided here. Sustainability will hinge on maintaining higher operating margins and stable working capital; monitoring actual DPS disclosures and cash generation is necessary.

Risk Assessment

Business Risks:

• Order intake and backlog volatility affecting revenue visibility.
• Fixed-price contract exposure to materials and labor cost inflation.
• Subcontractor availability and execution risk leading to schedule delays and penalties.
• Project mix shifts (private vs. public, building vs. housing) impacting margins.
• Macroeconomic sensitivity in housing and non-residential investment cycles.
• Competition pressure in bids compressing gross margins.

Financial Risks:

• Working capital swings that can strain interim cash flows.
• Potential extraordinary losses impacting bottom line under JGAAP classification.
• Counterparty credit risk in receivables/retentions (details undisclosed).
• Interest rate increases (albeit low current interest burden).

Key Concerns:

• Limited disclosure of cash flow and cash balances restricts assessment of earnings cash conversion.
• Dividend data absent, preventing payout and coverage analysis.
• Inventory and contract asset/liability details not provided, limiting insight into project cash profile.

Investment Implications

Key Takeaways:

• Solid top-line growth (+5.4% YoY) with a sharp margin-led profit rebound (OP +204% YoY).
• ROE at 3.20% remains modest; further gains hinge on sustaining margins and improving asset turnover.
• Balance sheet is conservative to moderate (D/E 0.94x; implied equity ratio ~49%).
• High interest coverage (87.5x) indicates low financial stress.
• Data gaps in cash flow and dividends necessitate caution in interpreting cash conversion and payout sustainability.

Metrics to Watch:

• Order intake and backlog by segment.
• Gross margin and operating margin by segment and project type.
• SG&A ratio trajectory and productivity per employee.
• Contract assets/liabilities, receivables, and advances to track working capital.
• Operating cash flow and free cash flow conversion vs. net income.
• Extraordinary gains/losses and their impact on net income vs. ordinary income.
• Leverage (D/E), interest coverage, and any changes in borrowing costs.
• DPS, payout ratio, and any revisions to dividend policy.

Relative Positioning: Within Japan’s mid-tier general contractors, Takamatsu exhibits moderate leverage, strong liquidity, and improving but still modest profitability (OP margin ~4.6%, ROE ~3.2%). The profile suggests a conservative financial stance with room for ROE enhancement via margin stability and better asset utilization, subject to order quality and execution.

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