TOYO CONSTRUCTION CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥94.59B
• Operating Income: ¥3.57B
• Net Income: ¥1.93B
• EPS: ¥26.50

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

Toyo Construction (1890) reported strong top-line momentum in FY2026 Q2 under JGAAP on a consolidated basis, with revenue up 28.5% year over year to ¥94.6bn. Profitability improved alongside growth: operating income rose 28.7% to ¥3.57bn and net income increased 34.8% to ¥2.49bn, indicating stable operating leverage and some bottom-line accretion. Gross margin stood at 9.5%, and operating margin at approximately 3.8%, consistent with the profile of a general contractor facing input cost variability and project mix effects. The DuPont decomposition shows a net margin of 2.63%, asset turnover of 0.545x, and financial leverage of 2.27x, yielding an ROE of 3.25%, which matches the reported calculation. ROA is approximately 1.43%, reflecting moderate capital efficiency constrained by the asset intensity of the construction business and mid-year seasonality. Ordinary income was below operating income, implying net non-operating expenses of roughly ¥0.6bn despite modest interest expense (¥79m), likely from non-operating losses or equity-method impacts; details are not provided. Cash generation was solid: operating cash flow reached ¥5.00bn, resulting in an OCF/Net Income ratio of 2.01x, a positive indicator of earnings quality and billing collection. Liquidity appears sound with a current ratio of 151.6% and working capital of ¥42.2bn; quick ratio equals current ratio due to inventories being unreported in XBRL rather than actually zero. The balance sheet is balanced with total liabilities of ¥100.4bn and equity of ¥76.6bn; while the equity ratio field shows 0.0% (unreported), the implied equity ratio is about 44% (equity/total assets), suggesting a conservative capital structure for the sector. Debt-to-equity of 1.31x (using total liabilities as a proxy for debt) remains manageable given a high interest coverage of 45.2x. Free cash flow is shown as zero due to unreported investing cash flows; true FCF cannot be assessed from the available data but is likely positive given strong OCF if capex is not outsized. EPS was ¥26.50 with net income growth outpacing operating income growth, indicating stable tax and non-operating items overall; the “effective tax rate” metric is displayed as 0.0% despite income tax expense being ¥1.02bn, reflecting a data field limitation rather than economic reality. No dividend is reported (DPS ¥0, payout 0%), so capital returns policy updates remain a watch point. Several data items, including equity ratio, cash and equivalents, investing cash flows, and share counts, appear unreported; analysis focuses on disclosed non-zero items and derived ratios. Overall, Toyo Construction demonstrates robust revenue growth, stable operating leverage, healthy liquidity, and good cash conversion, though ROE remains modest and visibility on capex and shareholder returns is limited.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 2.63%
• asset_turnover: 0.545
• financial_leverage: 2.27
• calculated_ROE: 3.25%
• context: ROE is driven primarily by modest margins and moderate leverage; asset turnover reflects mid-year seasonality for a construction contractor. margin_quality:
• gross_margin: 9.5%
• operating_margin: 3.8%
• ordinary_margin: 3.1%
• net_margin: 2.63%
• commentary: Margins are consistent with industry norms given project mix and input cost pressures; net margin expansion YoY appears supported by scale and cost discipline. operating_leverage:
• revenue_growth_YoY: 28.5%
• operating_income_growth_YoY: 28.7%
• assessment: Operating income growth in line with revenue growth suggests stable operating leverage; no evident diseconomies at current scale.

Growth Assessment

revenue_sustainability: The 28.5% YoY revenue increase indicates a strong order execution phase; sustainability will hinge on backlog replenishment, timing of large civil projects, and domestic public works demand. profit_quality: Operating income growth (28.7%) and net income growth (34.8%) with a steady operating margin imply quality growth rather than one-off gains; ordinary income below operating income suggests some non-operating headwinds but manageable. outlook: With healthy liquidity and execution, near-term growth should be supported by ongoing projects; medium-term visibility depends on order intake, cost pass-through on materials and labor, and macro/public investment cycles.

Financial Health

liquidity:

• current_assets: 123842000000
• current_liabilities: 81676000000
• current_ratio: 151.6%
• quick_ratio: 151.6%
• working_capital: 42166000000
• notes: Inventories are unreported in XBRL; construction typically classifies costs on uncompleted contracts as current assets, which may explain the quick ratio equaling the current ratio. solvency:
• total_assets: 173650000000
• total_liabilities: 100384000000
• total_equity: 76618000000
• implied_equity_ratio: ≈44.1%
• debt_to_equity: 1.31x (liabilities/equity as a proxy)
• interest_coverage: 45.2x
• commentary: Balance sheet leverage is moderate with ample interest coverage, supporting solvency through cycles. capital_structure: Liabilities represent approximately 58% of assets; equity funds the remaining ~44%. The structure is conservative for a general contractor, providing flexibility for bonding, guarantees, and working capital needs.

Cash Flow Quality

earnings_quality:

• OCF: 4998000000
• net_income: 2489000000
• OCF_to_NI: 2.01
• assessment: Strong cash conversion suggests disciplined billing/collection and limited earnings accrual risk in the period. FCF_analysis:
• reported_FCF: 0
• investing_CF: 0
• commentary: Investing cash flows are unreported; hence FCF cannot be determined from provided data. Given positive OCF, underlying FCF is likely positive if capex is moderate. working_capital: Positive working capital of ¥42.2bn underpins project execution capacity; monitoring receivables and contract assets/liabilities is key given sector cash flow cyclicality.

Dividend Sustainability

payout_ratio_assessment: Reported payout ratio is 0.0% with DPS of ¥0, indicating no dividend disclosure for the period; EPS is ¥26.50. FCF_coverage: Not assessable due to unreported investing cash flows and FCF; OCF is healthy, suggesting capacity subject to capex and order cycle needs. policy_outlook: With modest ROE (3.25%) and sector working capital demands, management may prioritize balance sheet strength and project funding; any dividend policy updates should be watched in full-year guidance.

Risk Assessment

Business Risks:

• Project execution risk leading to cost overruns and margin compression.
• Input cost inflation (materials, subcontracting, labor) and pass-through limitations.
• Order intake cyclicality tied to public works budgets and private sector capex.
• Competition and bid pricing pressure in domestic civil engineering markets.
• Schedule delays from weather, regulatory approvals, or supply chain constraints.

Financial Risks:

• Working capital swings inherent to long-term construction contracts affecting cash flows.
• Non-operating losses impacting ordinary income despite low interest burden.
• Potential increase in leverage if large projects require bonding or advance financing.
• Limited visibility on capex due to unreported investing cash flows.

Key Concerns:

• ROE at 3.25% remains modest despite revenue growth.
• Unreported data fields (equity ratio, investing CF, cash balance, share counts) limit precision of valuation and payout analysis.
• Margin sensitivity to project mix and inflation could affect profitability if growth slows.

Investment Implications

Key Takeaways:

• Strong revenue growth (+28.5% YoY) with proportional operating profit growth (+28.7%) shows stable operating leverage.
• Healthy liquidity (current ratio 152%, working capital ¥42.2bn) and high interest coverage (45x) support resilience.
• Cash conversion is solid (OCF/NI 2.01x), indicating good earnings quality.
• ROE is modest at 3.25% due to thin margins and mid-year asset intensity.
• Ordinary income trails operating income, highlighting non-operating headwinds to monitor.

Metrics to Watch:

• Order backlog and new orders to gauge revenue sustainability.
• Gross and operating margins for cost pass-through and mix effects.
• Contract assets/liabilities and receivables for cash flow timing.
• Capex and investing cash flows to assess true FCF.
• Full-year dividend policy and capital allocation guidance.

Relative Positioning: Within Japanese general contractors, Toyo Construction demonstrates solid growth and liquidity with conservative leverage, but profitability (ROE, margins) remains on the lower side, aligning with mid-tier peers focused on civil projects.

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