Sata Construction Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.67B
• Operating Income: ¥463M
• Net Income: ¥162M
• EPS: ¥19.82

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

Sata Construction (18260) reported FY2026 Q2 consolidated results under JGAAP showing strong profit improvement despite a revenue decline, with several disclosure limitations to note. Revenue decreased 7.3% YoY to ¥15.672bn, yet operating income rose 73.9% YoY to ¥463m, indicating meaningful operating leverage. Ordinary income was ¥473m and net income was ¥295m (+81.5% YoY), translating to a net margin of 1.88%. The DuPont decomposition indicates ROE of 2.76%, driven by a modest net margin (1.88%), asset turnover of 0.744x, and financial leverage of 1.97x. Gross margin is cited at 7.3% and EBITDA margin at 3.5%, implying a lean profitability profile typical of regional general contractors, but improved vs. the prior year. Interest expense was only ¥4m, and EBIT/interest coverage is a very strong 115.8x, pointing to minimal financial burden from debt. Liquidity appears ample on the reported ratios with a current ratio of 210.4% and working capital of ¥11.677bn, consistent with construction businesses that hold sizable receivables and unbilled works. Operating cash flow, however, was negative at -¥956m, resulting in an OCF/NI ratio of -3.24x; this suggests a significant working capital outflow during the period. Investing cash flow and cash balance were not disclosed (reported as zero in the dataset), limiting visibility on free cash flow and liquidity buffers. The equity ratio was also not disclosed (0.0% reported), and several balance sheet figures are internally inconsistent (e.g., current assets exceed total assets), necessitating caution in interpretation. The company reported no dividends (DPS ¥0.00, payout 0.0%), which may reflect either a genuine non-payment or non-disclosure; thus dividend policy cannot be conclusively assessed from the data. Despite the data gaps, the improvement in operating income and net income suggests better project mix, cost control, or progress recognition. The combination of higher profits and weak OCF is consistent with timing effects common in the construction sector, such as receivable build and lower advances received. Looking ahead, the sustainability of margin gains will depend on backlog quality, cost pass-through on materials/labor, and order intake trajectory. Overall, profitability momentum is positive, leverage appears moderate, and liquidity ratios are strong, but cash flow volatility and disclosure limitations temper confidence.

Profitability Analysis

ROE_decomposition: Reported ROE is 2.76%, comprised of net profit margin 1.88% × asset turnover 0.744× × financial leverage 1.97×. This indicates return generation is primarily constrained by thin margins, with moderate asset efficiency and leverage providing modest amplification. margin_quality: Gross margin 7.3% and EBITDA margin 3.5% indicate a low-margin profile typical of mid-size contractors; operating margin is approximately 3.0% (¥463m / ¥15,672m). The sharp YoY improvement in operating income (+73.9%) despite revenue decline suggests improved project economics or SG&A efficiency. Effective tax rate appears inconsistent in the dataset (listed as 0.0% despite reported tax expense), so after-tax margin quality should be interpreted with caution. operating_leverage: Revenue fell 7.3% YoY while operating income rose 73.9% YoY, implying strong operating leverage from mix and cost control. Prior-year OPM is inferred around 1.6% versus ~3.0% this period, a ~140bp expansion. Interest burden is negligible (interest expense ¥4m; coverage ~116x), so financial leverage does not materially distort operating performance.

Growth Assessment

revenue_sustainability: Top-line contracted to ¥15.672bn (-7.3% YoY). Without order backlog data, sustainability is unclear; the decline may reflect project timing or softer public/private demand. Asset turnover at 0.744x suggests moderate utilization; sustaining growth likely requires improved order intake and timely project execution. profit_quality: Net income rose 81.5% YoY to ¥295m, driven by margin expansion rather than volume. However, OCF was -¥956m, indicating earnings did not convert to cash this half, likely due to receivable/unbilled increases or lower advances—a common sector dynamic but a headwind to quality. outlook: If mix and execution improvements persist, current margins could be defensible, but cost inflation (materials/labor) and competitive bidding remain risks. Monitoring order backlog, book-to-bill, and gross profit per project will be key to assessing whether margin gains are structural or timing-driven.

Financial Health

liquidity: Current ratio 210.4% and quick ratio 210.4% indicate strong short-term liquidity on reported figures; working capital stands at ¥11.677bn. Cash and equivalents were not disclosed, limiting assessment of immediate cash buffer. solvency: Debt-to-equity ratio is 1.12x based on total liabilities/equity, and financial leverage is 1.97x (assets/equity), both consistent with moderate leverage for a contractor. Interest coverage of ~116x indicates minimal solvency pressure from interest obligations. capital_structure: Total assets ¥21.074bn, total liabilities ¥11.966bn, and equity ¥10.681bn imply a balanced capital structure. The reported equity ratio (0.0%) is undisclosed, so the precise equity cushion cannot be validated from this dataset.

Cash Flow Quality

earnings_quality: OCF/Net Income is -3.24x, signaling poor cash conversion in the period despite higher profits. This likely reflects working capital outflows typical in construction (receivables/unbilled costs rising, advances from customers falling). FCF_analysis: Investing CF is undisclosed (reported as 0), preventing a reliable free cash flow calculation; directional inference is that FCF before investing was negative given OCF of -¥956m. Financing CF at -¥465m suggests net repayments or distributions, but details are not provided. working_capital: Large positive working capital (¥11.677bn) supports liquidity, but period OCF indicates a build in current assets or reduction in current liabilities. Without inventories and cash details (both undisclosed), the mix (AR vs. AP vs. advances) cannot be decomposed.

Dividend Sustainability

payout_ratio_assessment: DPS is reported as ¥0.00 and payout as 0.0%. Given data limitations, this should be treated as non-disclosure or no dividend; we cannot confirm policy from this snapshot. If no dividend is paid, payout risk is moot; if a dividend exists but is undisclosed, the low earnings base and negative OCF would constrain coverage. FCF_coverage: FCF is not derivable due to undisclosed investing CF; with OCF negative, FCF coverage of any dividend would be weak for the period. policy_outlook: Absent clarity on dividend policy, future distributions would depend on cash conversion of earnings and capital needs for equipment and guarantees; a conservative stance is typical in the sector during periods of cash flow volatility.

Risk Assessment

Business Risks:

• Order intake volatility in public works and private sector construction
• Cost inflation (materials, subcontracting, labor) pressuring margins on fixed-price contracts
• Project execution risk, including delays, weather, and change-order recoverability
• Competitive bidding compressing gross margins
• Regional concentration and client concentration risks
• JV and subcontractor performance risk
• Safety and compliance risks impacting costs and reputation

Financial Risks:

• Negative operating cash flow due to working capital swings
• Thin operating margins amplifying earnings sensitivity to volume/mix
• Reliance on receivables/unbilled positions and advances from customers
• Potential refinancing or covenant risks (not disclosed) if leverage rises
• Limited visibility on cash balances and investing needs due to disclosure gaps

Key Concerns:

• OCF of -¥956m versus net income of ¥295m (weak cash conversion)
• Data inconsistencies in the balance sheet and undisclosed key items (cash, equity ratio, inventories)
• Sustainability of margin expansion amid a -7.3% revenue decline
• Asset turnover below 1.0x, limiting ROE absent margin or leverage increases

Investment Implications

Key Takeaways:

• Solid profit recovery: operating income +73.9% YoY and net income +81.5% YoY despite lower revenue
• Margins improved to ~3.0% OPM and 1.88% NPM; interest burden is negligible
• Cash flow weak this period (OCF -¥956m), consistent with working capital timing in construction
• Liquidity ratios are strong on reported figures; leverage moderate (D/E 1.12x, FL 1.97x)
• Disclosure gaps (cash, equity ratio, investing CF) and internal inconsistencies limit precision of analysis

Metrics to Watch:

• Order backlog and book-to-bill
• Gross profit per project and overall gross margin trajectory
• SG&A ratio and operating margin sustainability
• Operating cash flow, receivables/unbilled balances, and advances from customers
• Interest-bearing debt and equity ratio disclosures
• Capital expenditure and investing cash flows
• EPS and ROE progression

Relative Positioning: Within the cohort of mid-size regional Japanese general contractors, Sata Construction shows improving profitability and strong reported liquidity with moderate leverage, but trails on cash conversion and has limited disclosure transparency; sustained margin gains and better OCF would be needed to close the gap with stronger peers.

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