Oriental Shiraishi Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥36.12B
• Operating Income: ¥3.74B
• Net Income: ¥2.74B
• EPS: ¥20.31

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

Oriental Shiraishi (1786) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥36.121bn (+9.3% YoY), operating income of ¥3.743bn (-6.9% YoY), and net income of ¥2.632bn (-3.9% YoY). The top line expanded solidly but operating profit declined, indicating margin compression despite growth. Operating margin for the period was approximately 10.4% (¥3.743bn/¥36.121bn), and net margin was 7.29%, consistent with the provided DuPont inputs. Ordinary income of ¥3.765bn was slightly above operating income, reflecting minimal non-operating drag; interest expense was only ¥8m, underscoring negligible financing costs. The effective tax expense was ¥1.283bn; versus ordinary income this implies a roughly 34% tax rate, despite the “0.0%” metric shown in the provided table. Balance sheet strength is notable: total assets were ¥79.295bn, total liabilities ¥26.305bn, and total equity ¥52.391bn, implying an equity ratio around 66% (notwithstanding the displayed 0.0%) and a conservative debt-to-equity of 0.50x. Liquidity is strong with current assets of ¥55.812bn and current liabilities of ¥18.739bn, yielding a current ratio of 297.8% and working capital of ¥37.073bn. The DuPont decomposition yields ROE of 5.02%, with net margin 7.29%, asset turnover 0.456x, and financial leverage 1.51x; the principal constraint on ROE is modest asset turnover for a H1 cumulative period and conservative leverage. Interest coverage is very robust at roughly 468x, reflecting low interest burden and healthy operating profit. Cash flow statement items were not disclosed (zeros likely indicate non-reporting rather than true zeros), limiting assessment of earnings-to-cash conversion and free cash flow. Dividend data for the period were also not disclosed, showing DPS and payout as zero; thus dividend policy and sustainability cannot be judged from this dataset alone. The YoY decline in operating profit despite revenue growth suggests cost pressure, project mix/timing effects, or lower gross margins on new/executed work, which is consistent with common sector dynamics in construction/engineering. With a strong balance sheet and liquidity, the company appears resilient to working capital swings typical of the industry. Overall, fundamentals point to solid profitability and low financial risk, but ROE remains moderate and margin resilience warrants monitoring in coming quarters. Data limitations (especially cash flows, gross profit, and share count) temper the depth of conclusions.

Profitability Analysis

ROE_decomposition: ROE 5.02% = Net margin 7.29% × Asset turnover 0.456 × Financial leverage 1.51. The ROE is primarily constrained by modest asset turnover and conservative leverage; profitability (net margin) is the strongest contributor. margin_quality: Operating margin ~10.4% (¥3.743bn/¥36.121bn). Net margin 7.29% (¥2.632bn/¥36.121bn). Ordinary income margin ~10.4% (¥3.765bn/¥36.121bn). The decline in operating income (-6.9% YoY) against revenue growth (+9.3% YoY) indicates margin compression, likely stemming from project mix/timing and/or cost inflation, though gross profit was not disclosed. operating_leverage: Negative operating leverage this period: revenue +9.3% YoY vs operating income -6.9% YoY. This implies higher costs relative to revenue or lower project margins in the quarter-to-date. With minimal interest expense (¥8m), financial leverage effects are negligible.

Growth Assessment

revenue_sustainability: Top-line growth of +9.3% YoY to ¥36.121bn indicates healthy order execution momentum for H1. Sustainability will depend on backlog quality and public/private demand, but backlog data were not provided. profit_quality: Net income declined 3.9% YoY to ¥2.632bn despite revenue growth, suggesting margin pressure. Ordinary income is closely aligned with operating income, indicating limited reliance on non-operating gains. Effective tax rate, inferred near ~34%, appears normal. outlook: Absent order and cash flow disclosures, near-term visibility is limited. Key swing factors are gross margin on new orders, progress on large projects, and cost pass-through. If cost pressures ease or mix normalizes, margins could stabilize; however, current negative operating leverage is a caution for H2.

Financial Health

liquidity: Current assets ¥55.812bn vs current liabilities ¥18.739bn imply a current ratio of 297.8% and strong short-term coverage. Quick ratio equals current ratio due to undisclosed inventories (reported as zero). Working capital stands at ¥37.073bn. solvency: Total liabilities ¥26.305bn vs equity ¥52.391bn yield D/E of ~0.50x. Equity ratio is inferred at ~66% (¥52.391bn/¥79.295bn), indicating a conservative capital structure. capital_structure: Low interest burden (¥8m) and high interest coverage (~468x) underscore limited financial risk. Leverage is modest (assets/equity 1.51x), providing flexibility to absorb operating volatility common in construction.

Cash Flow Quality

earnings_quality: Cash flow statements were not disclosed (zeros indicate unreported), so OCF-to-net income, FCF, and cash conversion cannot be validated. The displayed OCF/NI ratio of 0.00 is not meaningful in this context. FCF_analysis: Free cash flow cannot be assessed without OCF and capex data. Given strong working capital and low interest, potential to generate FCF is plausible, but unverified. working_capital: Current assets of ¥55.812bn provide a sizable buffer; however, composition (cash, receivables, unbilled WIP) is not disclosed. Construction businesses can experience timing-related OCF swings; monitoring receivables, unbilled revenue, and advances is important.

Dividend Sustainability

payout_ratio_assessment: Dividends per share and payout ratio are shown as 0.00, indicating non-disclosure rather than confirmed zero. Without DPS or declared interim dividends, payout cannot be assessed. FCF_coverage: Not assessable due to undisclosed OCF and capex (FCF shown as 0 by non-disclosure). policy_outlook: No information on dividend policy or guidance in the dataset. With strong balance sheet and low leverage, capacity exists, but actual policy depends on management stance and cash generation.

Risk Assessment

Business Risks:

• Project margin volatility due to fixed-price contracts and cost inflation (materials, labor).
• Execution risk on large, complex civil engineering projects and schedule delays.
• Order intake and backlog visibility not disclosed; potential demand cyclicality in public works/private investment.
• Change-order recoverability and claim risk impacting realized margins.
• Weather and natural disaster disruptions affecting site productivity and costs.
• Supply chain constraints for key materials impacting costs and timelines.

Financial Risks:

• Limited cash flow disclosure impedes assessment of earnings-to-cash conversion.
• Working capital swings typical of the sector can pressure OCF in certain quarters.
• Concentration risk in receivables/unbilled WIP if customer base is concentrated (not disclosed).
• Potential pension or off-balance commitments not visible in provided data.
• Tax rate variability; effective tax inferred around mid-30% but could fluctuate.

Key Concerns:

• Negative operating leverage: revenue up 9.3% YoY while operating income down 6.9% YoY.
• Lack of gross profit and cash flow disclosure limits margin and cash conversion analysis.
• Moderate ROE (5.02%) below typical equity cost benchmarks, driven by low asset turnover and conservative leverage.

Investment Implications

Key Takeaways:

• Solid revenue growth (+9.3% YoY) but margin compression led to lower operating and net profits.
• Operating margin ~10.4% and net margin 7.29% demonstrate underlying profitability notwithstanding YoY decline.
• Balance sheet strength is high with an inferred equity ratio ~66% and D/E ~0.50x.
• Interest burden is negligible (¥8m), yielding interest coverage ~468x.
• ROE at 5.02% is constrained by modest asset turnover (0.456x) and low leverage.
• Cash flow and dividend information are not disclosed, limiting assessment of cash generation and shareholder returns.

Metrics to Watch:

• Order backlog and new order intake (book-to-bill) and their implied gross margins.
• Gross profit and segment/project margin trends as costs evolve.
• Operating cash flow, changes in receivables/unbilled WIP, and advance receipts.
• Capex and maintenance spending to infer FCF trajectory.
• Effective tax rate and non-operating items influencing ordinary income.
• ROE path: improvements via margin resilience or asset turnover.

Relative Positioning: Within Japan’s listed construction/engineering cohort, the company exhibits strong balance sheet conservatism and liquidity, robust interest coverage, and mid-to-high single-digit net margins, but delivers a moderate ROE (5%) that trails peers targeting high-single-digit to low-double-digit ROE; visibility is further constrained by absent cash flow disclosure.

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