SANYU CONSTRUCTION CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.23B
• Operating Income: ¥381M
• Net Income: ¥247M
• EPS: ¥81.83

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

For FY2026 Q2 (cumulative), Sanyu Kensetsu Co., Ltd. delivered resilient profitability despite a modest top-line decline. Revenue fell 1.7% year over year to ¥5,232 million, yet operating income rose 13.1% to ¥381 million, and net income increased 7.7% to ¥266 million. Profitability improvements are evident: gross margin stood at 11.6%, operating margin at 7.3%, ordinary margin at 7.6%, and net margin at 5.1%. Operating leverage was positive as cost discipline and/or project mix offset the slight revenue contraction. DuPont analysis indicates ROE of 2.24% based on net margin of 5.08%, asset turnover of 0.348x, and modest financial leverage of 1.26x. The balance sheet is very conservative, with total equity of ¥11,887 million against total assets of ¥15,026 million, implying an equity ratio of roughly 79% (the disclosed 0.0% should be treated as an undisclosed placeholder). Liquidity is robust with a current ratio of 338% and working capital of ¥4,444 million. Financial risk is low: debt-to-equity is 0.24x and interest expense is only ¥0.5 million, yielding an interest coverage of roughly 753x. Cash flow from operations was slightly negative at ¥46 million, likely reflecting working capital timing typical for construction businesses. Investing cash flow was undisclosed (shown as zero), preventing a reliable free cash flow calculation. The reported effective tax rate of 0.0% is not reflective of the period economics; using income tax expense of ¥106 million and ordinary income of ¥398 million, the implied effective tax rate is about 26–27%. EPS was ¥81.83 for the half year, implying an approximate average share count near 3.25 million shares (outstanding and treasury share figures were not disclosed). Dividend figures appear undisclosed (shown as zero), so payout policy cannot be inferred from this dataset. Overall, profitability momentum, a strong balance sheet, and negligible interest burden offset softer sales and a temporary OCF shortfall. Data limitations around cash, equity ratio, dividends, and capital expenditures constrain precision, but the available non-zero metrics indicate solid underlying fundamentals for this period.

Profitability Analysis

ROE decomposition: Net margin 5.08% × asset turnover 0.348 × financial leverage 1.26 = ROE ≈ 2.24%. Operating margin improved to 7.3% (¥381m/¥5,232m), with ordinary margin at 7.6% (¥398m/¥5,232m), indicating small non-operating gains and negligible interest drag. Gross margin of 11.6% supports better project mix or improved execution; the lift in operating income despite lower sales points to favorable cost control and/or higher-margin jobs. EBITDA was ¥463 million, with an 8.8% margin, and D&A of ¥82 million suggests a relatively light asset base consistent with the low financial leverage. Interest expense was only ¥0.5 million, so financing costs are not a burden. ROA is approximately 1.8% (¥266m/¥15,026m), consistent with net margin × asset turnover, reinforcing that the constraining factor on ROE is low leverage rather than margin weakness. Overall margin quality appears sound, with profit growth underpinned by operations rather than non-recurring items.

Growth Assessment

Revenue declined 1.7% YoY to ¥5.23 billion in the first half, but profits grew (OP +13.1%, NI +7.7%), indicating margin-led earnings growth. Given construction cyclicality and project timing, the topline softness may reflect order phasing rather than demand deterioration. The improvement in operating and ordinary margins suggests better pricing discipline, mix shift toward higher-margin projects, or reduced SG&A intensity. With asset turnover at 0.35x (H1 annualization implied), operational efficiency is moderate for a contractor and could improve if billing accelerates in H2. Profit quality is reasonable: ordinary income exceeds operating income slightly, and interest burden is negligible, implying minimal reliance on financial income to support earnings. Outlook hinges on order backlog and execution cadence; sustaining the current margin profile should keep earnings resilient even if revenue growth remains subdued. Data constraints (no backlog, order intake, or segment details) limit forward visibility, but the H1 trajectory supports a cautious expectation of stable to slightly improving full-year profitability if the project mix holds.

Financial Health

Liquidity is strong with a current ratio of 337.7% and quick ratio of 335.8%, supported by working capital of ¥4,444 million. Solvency is robust: total equity of ¥11,887 million vs. assets of ¥15,026 million implies an equity ratio around 79% (reported 0% is an undisclosed placeholder). Leverage is low, with debt-to-equity at 0.24x, and interest coverage at ~753x shows ample headroom. The capital structure is conservative, providing resilience against project delays or cost overruns. Inventories are minimal at ¥36 million, consistent with a services-oriented construction model; key balance sheet drivers are likely receivables and advances (not fully disclosed here). Overall financial health is a key strength.

Cash Flow Quality

Operating cash flow was -¥46 million versus net income of ¥266 million (OCF/NI ≈ -0.17), indicating working capital build or billing timing typical in construction. OCF/EBITDA is about -10%, again consistent with temporary WC movements rather than structural cash weakness. Investing cash flow and capex were undisclosed (shown as zero), so free cash flow cannot be reliably derived; the listed FCF of 0 should be treated as unavailable rather than actual zero. Earnings quality appears decent given the alignment of ordinary and operating income and a normal implied tax rate (~26–27%), but confirmation via cash conversion will require H2 data. Watch for reversals in receivables and contract assets to validate cash realization.

Dividend Sustainability

Dividend per share and payout ratio are shown as zero, which likely reflects non-disclosure for the period rather than an actual suspension. Without disclosed dividends and capex, FCF coverage cannot be assessed. Balance sheet strength (equity ratio ~79%, low debt) suggests capacity to maintain a reasonable payout if such a policy exists, but this is speculative without formal guidance. EPS for H1 is ¥81.83 (annualized ~¥160–165 assuming seasonality), offering potential coverage, but cash realization in H2 is key. Until actual DPS and policy are disclosed, dividend sustainability cannot be conclusively evaluated.

Risk Assessment

Business Risks:

• Order backlog visibility and project timing risk affecting revenue recognition
• Cost inflation in materials and subcontracting potentially compressing margins
• Execution risk on fixed-price contracts and potential for cost overruns
• Regional and sector exposure concentration typical of smaller contractors
• Public-sector budget cycles and private investment sentiment impacting pipeline

Financial Risks:

• Working capital volatility leading to negative OCF despite reported profits
• Counterparty credit risk from receivables and retention money
• Limited disclosure on cash and capex constraining FCF assessment
• Potential lumpiness in financing cash flows (e.g., debt repayments) without detail

Key Concerns:

• Negative OCF in H1; need evidence of cash conversion in H2
• Revenue decline despite profit growth; sustainability of margin mix must be monitored
• Lack of disclosure on dividends, cash balances, and capex impedes payout and FCF analysis

Investment Implications

Key Takeaways:

• Earnings quality appears solid with margin-led profit growth despite slightly lower sales
• Balance sheet is very strong with low leverage and high equity ratio, minimizing solvency risk
• OCF was negative due to likely working capital build; watch cash conversion in H2
• Interest burden is negligible; financing risk is low
• Data gaps (cash, capex, DPS, backlog) limit precision of valuation and payout analysis

Metrics to Watch:

• Order intake and backlog/book-to-bill
• Gross and operating margins by project type
• OCF/NI and changes in receivables, contract assets, and advances
• Capex and maintenance vs. growth spending
• Effective tax rate stability and any non-operating gains/losses

Relative Positioning: Within Japanese small/mid-cap construction peers, Sanyu Kensetsu exhibits above-average balance sheet strength, negligible financing costs, and mid-single-digit net margins, positioning it as a conservative, profitability-focused operator; however, limited disclosure on cash flows and dividends, plus modest asset turnover, temper comparative appeal until cash conversion and backlog trends are validated.

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