Mori-Gumi Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.38B
• Operating Income: ¥259M
• Net Income: ¥166M
• EPS: ¥5.10

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

Morigumi Co., Ltd. (18530, standalone JGAAP) reported FY2026 Q2 results with revenue of ¥13.38bn, down 12.8% YoY, reflecting a softer order environment and/or project timing effects typical of the construction sector. Gross profit was ¥1.09bn, implying an 8.1% gross margin, which is thin and underscores limited pricing power and cost pass-through challenges. Operating income declined 25.2% YoY to ¥0.26bn, as operating margin compressed to roughly 1.9%, suggesting negative operating leverage as revenue fell faster than fixed/semi-fixed costs could be flexed. Ordinary income was ¥0.26bn and net income ¥0.17bn, down 18.3% YoY, with a reported net margin of 1.24%. DuPont decomposition indicates ROE of 1.13% (net margin 1.24% × asset turnover 0.511 × financial leverage 1.79), highlighting low profitability as the primary drag on returns despite moderate balance sheet leverage. EBITDA was ¥0.31bn (2.3% margin), and interest coverage remained strong at 19.9x given low interest expense, indicating manageable financial costs. Liquidity appears robust with a current ratio of 211% and quick ratio of 211%, supported by large current assets relative to liabilities; inventories are minimal at ¥44m, consistent with a contractor’s balance sheet dominated by receivables and WIP. Total assets were ¥26.18bn against total equity of ¥14.66bn, implying leverage of ~1.79x assets/equity and a debt-to-equity ratio of 0.71x, which is moderate for the sector. Operating cash flow was negative at ¥0.45bn, yielding an OCF/NI ratio of -2.72, signaling weak cash conversion likely tied to working capital swings (e.g., unbilled receivables or lower advances from customers). Reported investing cash flow and cash balances are shown as zero (unreported), limiting precision on free cash flow, but OCF negativity suggests FCF pressure this half. Although the metrics table shows a 0.0% effective tax rate, the income statement shows income tax of ¥0.11bn on pre-tax income of roughly ¥0.28bn, implying a recalculated effective tax rate of about 40%, which is more consistent with Japanese statutory levels. Working capital is sizable at ¥11.53bn, a typical feature of the construction business model but a potential source of cash flow volatility. The decline in revenue and steeper drop in operating profit point to margin pressure from cost inflation, project mix, or execution slippage. Despite moderate leverage and strong liquidity, earnings quality is mixed due to negative operating cash flow. No dividends were reported for the period (DPS 0), and payout ratio is shown as 0%, consistent with preserving liquidity amid weaker profitability and cash generation. Data limitations exist for some items (e.g., equity ratio, cash, investing CF, shares outstanding) as zero values likely indicate non-disclosure rather than true zeros, so conclusions emphasize disclosed non-zero items.

Profitability Analysis

roe_decomposition: ROE 1.13% = Net margin 1.24% × Asset turnover 0.511 × Financial leverage 1.79. Profitability (margin) is the biggest constraint on ROE, not leverage or asset efficiency. margin_quality: Gross margin 8.1% and operating margin ~1.9% indicate limited cushion against cost variability; EBITDA margin 2.3% signals low operating headroom. Net margin 1.24% benefits from modest interest burden but is still thin, consistent with competitive bidding and cost pressure in construction. operating_leverage: Operating income declined 25.2% on a 12.8% revenue decline, implying negative operating leverage as semi-fixed costs did not flex sufficiently. This suggests sensitivity of profits to volume/mix and underscores the importance of project selection and execution discipline.

Growth Assessment

revenue_sustainability: Revenue contracted 12.8% YoY to ¥13.38bn, suggesting weaker order intake or delayed starts/completions. Sustainability hinges on order backlog and book-to-bill, which are not disclosed here. profit_quality: Net income fell 18.3% YoY to ¥0.17bn, with margin compression. The OCF/NI ratio of -2.72 indicates poor cash conversion this half, likely due to working capital build (e.g., increases in receivables or WIP). outlook: With thin margins and negative operating cash flow, near-term growth depends on backlog conversion, cost pass-through on materials/labor, and stabilization of input costs. Recovery is plausible if order intake improves and project mix shifts towards higher-margin work, but visibility is limited given disclosure gaps.

Financial Health

liquidity: Current ratio 211% and quick ratio 210.8% reflect ample short-term liquidity; inventories are negligible (¥44m). Working capital is ¥11.53bn, a buffer but also a source of cash flow volatility. solvency: Debt-to-equity 0.71x and financial leverage ~1.79x assets/equity indicate moderate solvency risk. Interest coverage at 19.9x suggests sufficient capacity to service interest under current earnings. capital_structure: Total assets ¥26.18bn vs. equity ¥14.66bn and liabilities ¥10.40bn point to a relatively conservative structure for a mid-sized contractor. The reported equity ratio is shown as 0.0% (unreported), but the balance sheet implies equity of ~56% of assets.

Cash Flow Quality

earnings_quality: OCF/NI of -2.72 indicates earnings were not supported by cash generation in the period. The gap likely reflects working capital movements rather than non-cash profit inflation given modest D&A (¥53m). fcf_analysis: Investing cash flow is shown as 0 (unreported). With OCF at -¥451m, free cash flow was likely negative absent asset sales or reduced capex, but precise FCF cannot be determined from the unreported investing cash flows. working_capital: Large current asset base (¥21.91bn) and minimal inventories imply receivables/WIP dominate. Negative OCF suggests increases in unbilled receivables or reductions in advances from customers. Monitoring collection cycles and contract liabilities is critical.

Dividend Sustainability

payout_ratio_assessment: DPS is reported as 0 and payout ratio 0%. With thin profitability and negative OCF, a conservative stance on distributions is sensible this half. fcf_coverage: Free cash flow is not disclosed (investing CF unreported), but negative OCF implies weak near-term coverage of any potential dividends. policy_outlook: Absent clear visibility on cash generation and margin recovery, sustaining or initiating dividends would likely hinge on improved backlog quality and stabilization of working capital. No explicit policy information provided.

Risk Assessment

Business Risks:

• Order intake volatility and project timing affecting revenue recognition
• Cost inflation in materials and subcontracting with limited pass-through
• Labor shortages and subcontractor availability impacting execution
• Project-specific execution risk leading to cost overruns or penalties
• Competitive bidding pressure compressing margins
• Customer concentration risk (typical in construction) impacting collections

Financial Risks:

• Negative operating cash flow driven by working capital swings
• Thin margins increase sensitivity to small revenue or cost shocks
• Potential increase in net debt if OCF remains negative
• Interest rate risk on floating-rate borrowings (if any)
• Counterparty credit risk in receivables/unbilled WIP

Key Concerns:

• Sustained margin compression (gross 8.1%, operating ~1.9%)
• OCF/NI of -2.72 indicating weak cash conversion
• Revenue decline of 12.8% YoY and potential backlog softness
• Visibility constraints due to undisclosed items (e.g., investing CF, cash, equity ratio detail)

Investment Implications

Key Takeaways:

• ROE is low at 1.13%, constrained mainly by thin net margins.
• Liquidity is strong (current ratio ~211%), providing short-term resilience.
• Operating leverage is unfavorable in the current downturn; profits fell more than sales.
• Cash conversion is weak this half (negative OCF), likely due to working capital build.
• Leverage is moderate with solid interest coverage (19.9x).

Metrics to Watch:

• Order backlog and book-to-bill
• Gross margin on new orders and project mix
• Receivables, unbilled WIP, and advances from customers (working capital turns)
• Operating cash flow and FCF trajectory
• Leverage (net debt/EBITDA) and interest coverage
• Effective tax rate normalization (recalculated ~40% based on disclosed tax)

Relative Positioning: Relative to mid-sized Japanese general contractors, Morigumi exhibits strong liquidity and moderate leverage but operates with thinner margins and lower ROE, leaving it more sensitive to order flow and execution risk until pricing and mix improve.

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