WAKACHIKU CONSTRUCTION CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥45.40B
• Operating Income: ¥1.56B
• Net Income: ¥268M
• EPS: ¥73.76

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Wakachiku Construction (TSE:18880) delivered a strong FY2026 Q2 performance, with revenue rising 29.1% year over year to ¥45.4bn and operating income up 238.2% to ¥1.56bn. Net income reached ¥0.94bn, up 300.9% YoY, translating to EPS of ¥73.76 for the half. Profitability improved across the P&L, with operating margin at approximately 3.4% and net margin at 2.06%, indicating better project mix, execution, and SG&A discipline. Ordinary income (¥1.46bn) tracked slightly below operating income, suggesting modest non-operating costs, including interest expense of ¥63m, with a healthy interest coverage of 24.8x. Gross profit of ¥4.12bn implies a gross margin of about 9.1%, consistent with construction industry seasonality and project timing. DuPont analysis indicates a calculated ROE of 1.89% for the half, derived from a 2.06% net margin, 0.472x asset turnover, and 1.94x financial leverage; this is modest but directionally supported by the sharp YoY earnings rebound. Asset turnover of 0.472x reflects the asset-heavy nature of the construction business and the early stage of the fiscal year. Financial leverage is moderate with liabilities-to-equity around 0.85x, and total equity of ¥49.6bn provides a solid capital buffer. Liquidity appears strong, with current assets of ¥70.3bn against current liabilities of ¥37.8bn, implying a current ratio of ~186% and working capital of ¥32.4bn. The reported effective tax line in the pre-calculated metrics is 0.0%, but disclosed tax expense of ¥230m against ordinary income implies an effective tax rate closer to the mid-teens; we rely on the disclosed non-zero figures. Cash flow statements are not disclosed in this dataset, so OCF/NI and FCF-based assessments cannot be performed and should not be inferred from zeros. Similarly, DPS, cash and equivalents, and share counts are not disclosed here and cannot be assumed to be zero. Overall, H1 results point to improving profitability and operating leverage, supported by robust liquidity and manageable leverage. However, the absence of cash flow disclosure, order backlog, and dividend details limits the depth of quality-of-earnings and capital return analysis. Outlook will hinge on order intake, backlog conversion, and cost control amid potential input price and labor tightness in domestic construction. We base this analysis solely on the available non-zero data points and standard relationships; where items are undisclosed, we refrain from drawing conclusions.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 2.06% (¥0.94bn net income on ¥45.4bn revenue)
• asset_turnover: 0.472x (Revenue ¥45.4bn / Assets ¥96.3bn)
• financial_leverage: 1.94x (Assets ¥96.3bn / Equity ¥49.6bn)
• calculated_ROE: 1.89% for the half, consistent with reported DuPont figure margin_quality: Gross margin ~9.1% (¥4.12bn gross profit), operating margin ~3.4% (¥1.56bn OI), ordinary margin ~3.2%, and net margin 2.06%. The sizable YoY expansion in operating income versus revenue (+238% vs +29%) points to improved mix and/or cost control. Note: We rely on reported gross profit for margin; the disclosed cost of sales line is not used for margin derivation. operating_leverage: High in the period: operating income grew ~8.2x faster than revenue. This suggests favorable project execution and lower SG&A intensity relative to sales, typical when high-margin projects progress or when prior-period losses roll off.

Growth Assessment

revenue_sustainability: Revenue +29.1% YoY to ¥45.4bn indicates strong activity; sustainability will depend on order intake and backlog conversion in public works (ports/coastal) and private civil segments. profit_quality: Operating margin uplift and healthy interest coverage support better profit quality. The effective tax appears in the mid-teens based on disclosed amounts. Lack of cash flow disclosure limits confirmation via OCF conversion. outlook: Near-term outlook is constructive if backlog remains firm and project cost inflation stays manageable. Watch for seasonality in H2, labor availability, and materials costs. Any acceleration in public infrastructure spending would be supportive; delays or cost overruns would pressure margins.

Financial Health

liquidity: Current assets ¥70.3bn vs current liabilities ¥37.8bn yields a current ratio ~185.7% and working capital ¥32.4bn, indicating solid short-term liquidity. Quick ratio equals current ratio due to undisclosed inventories. solvency: Total liabilities ¥42.0bn vs equity ¥49.6bn; liabilities-to-equity ~0.85x, indicating conservative leverage. Interest coverage is strong at ~24.8x (OI/interest). capital_structure: Assets ¥96.3bn funded by ~51.5% equity (computed from totals) and ~48.5% liabilities. Financial leverage 1.94x is moderate for a construction contractor.

Cash Flow Quality

earnings_quality: Unavailable to fully assess due to undisclosed cash flow statements. The sharp YoY profit improvement is encouraging, but OCF conversion cannot be verified. FCF_analysis: Not disclosed; cannot compute FCF or FCF margin without OCF and capex. working_capital: Working capital is ¥32.4bn. Construction typically sees timing effects in receivables and unbilled work; with inventories undisclosed, we cannot assess WIP movements. Monitor receivable days and advances from customers when disclosed.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are not disclosed in the provided dataset; EPS for H1 is ¥73.76. Without dividend data, payout assessment is not possible. FCF_coverage: Not assessable due to undisclosed OCF and capex. policy_outlook: No disclosure here on dividend policy. Sustainability would hinge on stable profitability, OCF generation, and capital needs for equipment and guarantees; revisit upon full-year results.

Risk Assessment

Business Risks:

• Project execution risk and cost overruns in civil/marine works
• Fluctuations in materials and subcontractor costs
• Labor availability and wage inflation in construction trades
• Order intake volatility tied to public infrastructure budgets
• Seasonality in revenue recognition and weather-related delays
• Competitive bidding pressure compressing margins

Financial Risks:

• Working capital swings affecting cash conversion
• Credit risk from receivables and unbilled construction revenue
• Potential increases in interest rates impacting financing costs
• Contingent liabilities from performance guarantees and warranties

Key Concerns:

• Lack of disclosed cash flow statements limits earnings quality validation
• Visibility on backlog and order pipeline not provided here
• Gross profit vs cost of sales presentation differences constrain margin diagnostics

Investment Implications

Key Takeaways:

• Strong H1 revenue growth (+29.1% YoY) with outsized operating income growth (+238% YoY)
• Improved profitability: operating margin ~3.4%, net margin 2.06%
• Healthy balance sheet: current ratio ~186%, liabilities-to-equity ~0.85x
• Interest coverage robust at ~24.8x, indicating low near-term financial stress
• DuPont ROE 1.89% reflects modest profitability with moderate leverage and asset intensity
• Cash flow, DPS, and share count not disclosed; defer cash-based and per-share valuation diagnostics

Metrics to Watch:

• Order intake and backlog size/mix
• Gross margin and operating margin trends by project mix
• Working capital days (receivables, unbilled WIP, advances) and OCF conversion
• Cost inflation indicators (materials, subcontracting, labor)
• Interest coverage and leverage ratios as rates evolve
• Tax rate normalization relative to ordinary income

Relative Positioning: Within Japanese general and marine contractors, Wakachiku’s H1 shows improving margins and robust liquidity with moderate leverage; confirmation via cash flow and backlog disclosure is needed to benchmark sustainability versus 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