PENTA-OCEAN CONSTRUCTION CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥378.97B
• Operating Income: ¥25.84B
• Net Income: ¥10.05B
• EPS: ¥61.53

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

Penta-Ocean Construction (Goyo Kensetsu, TSE:1893) delivered a strong FY2026 Q2 performance under JGAAP on a consolidated basis, with clear operating leverage and margin expansion versus the prior year. Revenue grew 15.5% year on year to ¥378.97bn, while operating income surged 71.1% to ¥25.84bn, and net income rose 73.3% to ¥17.13bn. Operating margin improved to 6.8% and net margin to 4.5%, reflecting better project profitability and disciplined SG&A. EBITDA reached ¥29.93bn, implying a 7.9% EBITDA margin, supported by depreciation and amortization of ¥4.09bn. DuPont metrics point to a calculated ROE of 9.37%, driven by a 4.52% net margin, 0.458x asset turnover, and 4.53x financial leverage. The YoY spread between revenue growth and operating income growth signals significant operating leverage in the period. Interest coverage is robust at 24.3x (operating income of ¥25.84bn vs. interest expense of ¥1.06bn), indicating ample buffer against higher funding costs. Liquidity appears adequate with a current ratio of 127.8% and working capital of ¥105.19bn. Using the provided totals, equity is ¥182.92bn against assets of ¥828.22bn and liabilities of ¥488.01bn; this implies an equity-to-asset proxy of about 22.1% based on the disclosed equity and assets, and a debt-to-equity ratio of 2.67x. Operating cash flow was negative at ¥-52.63bn, substantially below net income (OCF/NI of -3.07x), likely reflecting working capital absorption typical of construction seasonality and project mix. Financing inflows of ¥51.26bn helped bridge near-term cash needs. Dividend-related data were not disclosed (DPS and payout shown as zero indicate non-disclosure, not actual zero), so distribution policy and coverage cannot be assessed from this dataset. The overall earnings quality at the P&L level looks solid, but the negative OCF highlights cash conversion risk in the half. Balance sheet line-item detail is incomplete in parts (several items are unreported in XBRL), so capitalization and liquidity assessments rely on the provided aggregates and ratios. Despite these data limitations, the results indicate improving profitability and resilient interest coverage, tempered by first-half cash outflows and reliance on financing during the period.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 4.52%
• asset_turnover: 0.458
• financial_leverage: 4.53
• calculated_ROE: 9.37%
• comments: ROE of 9.37% reflects modest net margins for a contractor, moderate asset turns, and relatively high leverage. The combination suggests returns are sensitive to margin swings and working capital discipline. margin_quality:
• gross_margin: 7.4% (¥27.90bn GP on ¥378.97bn revenue)
• operating_margin: 6.8% (¥25.84bn OI)
• ordinary_margin: 6.6% (¥25.14bn ordinary income)
• net_margin: 4.5% (¥17.13bn NI)
• EBITDA_margin: 7.9% (¥29.93bn EBITDA)
• drivers: Stronger project execution and cost control expanded operating margin vs. last year (OI +71.1% vs. revenue +15.5%). The small gap between gross and operating margins implies tight SG&A and possible mix benefits from higher-margin marine/civil projects. operating_leverage: Operating income growth (+71.1% YoY) far outpaced revenue growth (+15.5% YoY), evidencing strong operating leverage. This is typical when higher margin projects progress and fixed overheads are spread over a larger revenue base; it also increases sensitivity to volume and mix.

Growth Assessment

revenue_sustainability: Revenue reached ¥378.97bn (+15.5% YoY). While order intake/backlog are not disclosed here, the top-line expansion suggests healthy execution and potentially solid order books in core marine and civil segments. profit_quality: Operating profit growth (+71.1%) outstripping revenue growth indicates improved project margins and cost management. Interest coverage of 24.3x corroborates underlying operating strength. outlook: Sustained growth will depend on order backlog conversion, cost pass-through on materials and labor, and overseas project performance. Given the half-year nature and construction seasonality, second-half revenue recognition and cash conversion are key swing factors.

Financial Health

liquidity:

• current_ratio: 127.8%
• quick_ratio: 127.8% (inventories not disclosed)
• working_capital: ¥105.19bn
• commentary: Short-term liquidity looks adequate on reported metrics; however, construction working capital can be lumpy due to unbilled receivables and advances. solvency_capital_structure:
• total_assets: ¥828.22bn
• total_liabilities: ¥488.01bn
• total_equity: ¥182.92bn
• debt_to_equity: 2.67x
• equity_ratio_proxy: ≈22.1% (total equity / total assets, using disclosed figures)
• interest_coverage: 24.3x
• commentary: Leverage is meaningful but supported by strong interest coverage. Some balance sheet details are undisclosed, so these indicators should be interpreted using the provided aggregates.

Cash Flow Quality

earnings_quality: Despite solid profitability, OCF was ¥-52.63bn vs. NI of ¥17.13bn (OCF/NI = -3.07x), pointing to weak cash conversion in the half—likely due to increases in receivables/unbilled work and timing of advances. free_cash_flow: Not determinable here as investing cash flows are undisclosed (reported as zero). Absent capex detail, FCF cannot be reliably assessed. working_capital_dynamics: Construction projects often drive swings in trade receivables, unbilled revenues, and advances received. The negative OCF suggests a working capital build; monitoring collection cycles and billing milestones is important for the second half.

Dividend Sustainability

payout_ratio_assessment: Payout ratio and DPS are not disclosed in this dataset (zeros indicate non-disclosure). EPS is ¥61.53, but without DPS we cannot compute payout. FCF_coverage: Not assessable given undisclosed investing cash flows and negative OCF in the half. Any assessment would be speculative without capex and full-year cash data. policy_outlook: Dividend policy cannot be inferred from the provided data. Typically, Japanese contractors target stable dividends aligned with earnings visibility and balance sheet capacity, but confirmation requires management guidance.

Risk Assessment

Business Risks:

• Project execution risk on large marine and civil works (cost overruns, delays).
• Input cost inflation (materials, subcontracting, labor) and pass-through limitations.
• Order intake variability and backlog conversion timing.
• Overseas project risks including FX, regulatory, and geopolitical exposure.
• Competition in domestic civil engineering impacting pricing.
• Labor availability and skilled workforce constraints in construction.
• Claims/disputes risk common in long-duration EPC-type contracts.

Financial Risks:

• Negative operating cash flow in the half, indicating cash conversion risk.
• Leverage at 2.67x liabilities-to-equity elevates sensitivity to funding conditions.
• Potential reliance on short-term financing to bridge working capital swings.
• Interest rate risk despite currently strong coverage (24.3x).
• Counterparty credit risk on receivables and unbilled balances.

Key Concerns:

• Sustainability of margin gains as project mix evolves.
• Normalization of cash flows in H2 to support liquidity without increasing borrowings.
• Visibility on capex and investing cash needs to gauge true FCF.

Investment Implications

Key Takeaways:

• Strong H1 earnings with operating income up 71.1% YoY on 15.5% revenue growth.
• Operating margin improved to 6.8%; EBITDA margin at 7.9%.
• ROE calculated at 9.37% via higher leverage (4.53x) and improved margins.
• Interest coverage robust at 24.3x, mitigating near-term rate risk.
• OCF materially negative (¥-52.63bn), highlighting cash conversion risk.
• Liquidity adequate on reported metrics (current ratio 127.8%, WC ¥105.19bn).
• Dividend data not disclosed; payout and coverage cannot be assessed.

Metrics to Watch:

• Order backlog and book-to-bill ratio.
• Unbilled receivables and advances received; overall working capital days.
• H2 operating cash flow and full-year FCF.
• Gross margin on new awards and project cost-to-complete forecasts.
• Interest-bearing debt levels and net debt/EBITDA once cash is disclosed.
• Overseas project performance and FX exposure.

Relative Positioning: Within Japanese civil and marine contractors, Penta-Ocean typically operates with mid-pack operating margins but stronger marine specialization; current results show above-trend margin expansion and solid coverage, though cash conversion lags in the half.

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