TAISEI CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥907.87B
• Operating Income: ¥81.28B
• Net Income: ¥46.80B
• EPS: ¥378.30

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

Taisei Corporation (TSE:1801) posted FY2026 Q2 consolidated results under JGAAP showing a notable profit recovery despite a modest topline contraction. Revenue declined 4.7% YoY to ¥907.9bn, but operating income doubled (+100.5% YoY) to ¥81.3bn, lifting the operating margin to roughly 9.0%. Gross profit reached ¥90.1bn, implying a gross margin of 9.9% and highlighting improved project mix and/or better cost pass-through. Ordinary income was ¥83.9bn, slightly above operating income, indicating modest net non-operating gains. Net income rose 41.9% YoY to ¥63.6bn, translating to a net margin of 7.0% and EPS of ¥378.30. DuPont metrics indicate ROE of 6.88% = 7.01% net margin × 0.361x asset turnover × 2.72x financial leverage. Asset turnover at 0.361x is low on a half-year basis, consistent with the project-based construction model and seasonal revenue recognition. Financial leverage (assets/equity) is 2.72x, while balance sheet strength remains solid with total assets of ¥2,516.5bn and total equity of ¥925.4bn. The implied equity ratio is about 36.8% (computed), as the disclosed 0.0% is an undisclosed placeholder. Liquidity is adequate with a current ratio of 124% and working capital of ¥306.8bn. Interest coverage is strong at 75.5x, reflecting very low interest burden (¥1.1bn) relative to earnings. Operating cash flow was negative at -¥108.3bn, driven likely by working capital absorption common in mid-year construction cycles; investing cash flow and cash balances were not disclosed in the XBRL. Dividend items (DPS, payout) are undisclosed at this stage and shown as zero; they should not be interpreted as actual zeros. Overall, the quarter reflects margin-led earnings strength with a watchpoint on cash conversion and order sustainability into 2H. Data limitations around inventories, cash, and share counts constrain some granular ratio analyses. Our assessment leans on available non-zero items and standard construction sector dynamics under JGAAP.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 7.01%
• asset_turnover: 0.361
• financial_leverage: 2.72
• calculated_ROE: 6.88%
• commentary: ROE improvement is driven primarily by margin expansion, while turnover remains structurally low due to long-duration projects. Leverage is moderate for a major general contractor. margin_quality: Operating margin improved to ~9.0% (¥81.3bn/¥907.9bn) despite a 4.7% YoY revenue decline, indicating stronger project mix, cost controls, and/or cost pass-through. Gross margin at 9.9% supports the margin expansion narrative. Ordinary income exceeding operating income points to supportive non-operating items rather than reliance on financial gains. The displayed effective tax rate of 0.0% is not representative; using income tax of ¥19.4bn vs ordinary income ¥83.9bn implies ~23%—consistent with a normal effective rate. operating_leverage: The sharp rise in operating income (+100.5% YoY) against a mid-single-digit revenue decline indicates substantial positive operating leverage, likely from completion of higher-margin projects, SG&A discipline, and normalization from prior-year one-offs. Sustainability will depend on backlog quality and input cost stability.

Growth Assessment

revenue_sustainability: Revenue fell 4.7% YoY to ¥907.9bn, consistent with timing effects in recognizing construction revenue and potential backlog phasing. Sustainability hinges on orders received, backlog duration, and public/private capex trends. profit_quality: Net margin improved to 7.0% with ordinary income above operating income and interest costs minimal (¥1.1bn). The tax burden appears normal when recalculated (~23%), supporting earnings quality. However, negative OCF suggests earnings have not yet converted to cash due to working capital swings typical mid-year. outlook: Near-term profit sustainability will depend on cost pass-through amid material/labor inflation, execution on large projects, and 2H order intake. Margins may normalize from the elevated 1H level as project mix changes, but current trajectory suggests full-year improvement versus prior year if backlog remains robust.

Financial Health

liquidity: Current assets ¥1,599.7bn vs current liabilities ¥1,292.9bn yield a current ratio of 123.7% and working capital of ¥306.8bn—adequate for sector norms. Quick ratio mirrors current ratio because inventories were not disclosed; construction-specific WIP often appears under different captions. solvency: Total liabilities of ¥1,528.1bn vs equity of ¥925.4bn imply an equity ratio ~36.8% (computed) and leverage (assets/equity) of 2.72x—healthy for a large general contractor. Interest coverage at 75.5x indicates low refinancing risk under current conditions. capital_structure: Debt-to-equity is reported at 1.65x (definition not disclosed), suggesting moderate use of interest-bearing debt and substantial non-interest liabilities typical in construction (advances received, payables, provisions). Balance sheet capacity appears sufficient for ongoing project commitments.

Cash Flow Quality

earnings_quality: OCF/Net income was -1.70x (¥-108.3bn / ¥63.6bn), indicating poor cash conversion in the half—likely from project receivables growth, lower advances, and retention money effects rather than pure earnings weakness. FCF_analysis: Investing cash flow was not disclosed; hence true FCF cannot be determined. The displayed FCF of 0 should not be taken as actual. Absent investing data, we focus on OCF trends and capex commentary when available. working_capital: Negative OCF suggests significant working capital outflows, common mid-year as milestones, change orders, and certification timing affect cash. Inventories were undisclosed; construction WIP typically substitutes for inventories in this sector. Monitoring days sales outstanding, billing/collection cycles, and advances received is key.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.0% due to non-disclosure at Q2; actual dividend policy should be assessed using company guidance and full-year results. With net income at ¥63.6bn in 1H and typical sector payout policies, sustainable capacity appears supported by earnings, subject to cash conversion. FCF_coverage: FCF coverage cannot be computed as investing cash flow is undisclosed. OCF was negative in 1H, which, if sustained, would constrain coverage; seasonality often improves cash in 2H. policy_outlook: Given the strong 1H profit recovery and solid balance sheet, the company likely maintains a stable-to-progressive dividend stance typical of major Japanese constructors, contingent on full-year cash generation and order visibility.

Risk Assessment

Business Risks:

• Project cost overruns and fixed-price contract risk amid material and labor cost inflation
• Execution risk on large-scale civil and building projects, including change orders and delays
• Backlog timing and order intake volatility affecting revenue recognition
• Labor shortages and subcontractor capacity constraints in Japan
• Regulatory and safety compliance risks on domestic and overseas sites
• Competition pressure in domestic public/private tenders impacting margins

Financial Risks:

• Negative operating cash flow from working capital swings and retention money
• Potential increase in interest costs if rates rise, though current coverage is strong
• Counterparty risk on receivables from private developers and overseas clients
• Exposure to JV guarantees and off-balance commitments typical in the sector

Key Concerns:

• Sustainability of elevated operating margin (~9%) into 2H and beyond
• Cash conversion and reversal of 1H working capital outflows
• Visibility on orders received and quality of backlog mix

Investment Implications

Key Takeaways:

• Strong profit recovery with operating income +100.5% YoY despite a 4.7% revenue decline
• Healthy margins: gross 9.9%, operating ~9.0%, net 7.0%
• ROE 6.88% driven by margin expansion; leverage moderate at 2.72x assets/equity
• Liquidity adequate (current ratio 124%, working capital ¥306.8bn)
• Interest burden low with 75.5x coverage
• OCF negative (-¥108.3bn), highlighting working capital intensity in 1H
• Dividend data undisclosed; payout assessment awaits full-year
• Reported zeros for inventories, cash, and equity ratio reflect non-disclosure, not actual zeros

Metrics to Watch:

• Orders received and backlog (by segment and margin profile)
• Operating cash flow trajectory and working capital movements in 2H
• Material and labor cost indices vs contract pricing/pass-through
• Effective tax rate normalization vs recalculated ~23%
• Ordinary income vs operating income gap (non-operating items)
• Debt and interest-bearing liabilities trend vs interest coverage

Relative Positioning: Among major Japanese general contractors, Taisei’s 1H margins appear stronger than typical sector averages, supported by disciplined execution and mix; balance sheet strength and coverage are solid, with cash conversion the principal near-term differentiator.

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