NIPPON RIETEC CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥28.63B
• Operating Income: ¥1.48B
• Net Income: ¥775M
• EPS: ¥42.42

Income Statement

Balance Sheet

Cash Flow Statement

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

日本リーテック株式会社 (19380) reported solid topline growth and sharp profit expansion in FY2026 Q2 under JGAAP on a consolidated basis. Revenue rose 6.1% YoY to ¥28.63bn, while operating income surged 87.5% YoY to ¥1.48bn, evidencing strong operating leverage and improved cost discipline. Gross profit of ¥3.43bn implies a gross margin of 12.0%, and operating margin improved to roughly 5.2%, a notable step-up for an engineering/construction-type business. Ordinary income of ¥1.75bn exceeded operating income, indicating positive non-operating contributions. Net income increased 35.4% YoY to ¥1.05bn, with EPS of ¥42.42 for the period. Despite the positive P&L trajectory, operating cash flow was a sizable outflow (¥-5.62bn), likely reflecting working capital absorption typical of project-driven businesses around interim cut-offs. Financing cash flow was an inflow of ¥5.35bn, consistent with bridging funding for working capital. The balance sheet appears robust: total assets were ¥99.16bn and total equity ¥63.65bn, implying an equity ratio around 64% (computed) and a modest liabilities-to-equity level. Liquidity is strong with a current ratio of 228% and substantial working capital of ¥31.29bn, aided by very low inventories relative to the business model. Interest expense was low (¥30.2m) and interest coverage high (48.8x on EBIT), pointing to limited financial burden. DuPont decomposition yields a reported/derived ROE of 1.65%, driven by a 3.67% net margin, 0.289x asset turnover, and 1.56x financial leverage; this ROE reflects a half-year period and conservative balance sheet. Depreciation and amortization were ¥726m and EBITDA margin about 7.7%, consistent with asset intensity in installation/maintenance businesses. The effective tax rate shown as 0.0% in provided metrics is inconsistent with the disclosed income tax amount; using ordinary income as a proxy for pre-tax income suggests an implied tax rate in the high-teens. Dividend and share data were not disclosed in this extract (zeros indicate unreported), so payout assessment must rely on earnings and cash flow signals. Overall, fundamentals show healthier profitability and strong solvency, offset by weak interim operating cash flow and data gaps around cash, capex, and dividends.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 3.67% (¥1,050m / ¥28,629m)
• asset_turnover: 0.289x (¥28,629m / ¥99,156m)
• financial_leverage: 1.56x (Assets/Equity = ¥99,156m / ¥63,654m)
• calculated_ROE: 1.65% (matches reported 1.65%) margin_quality: Gross margin of 12.0% and operating margin of ~5.15% indicate improved cost efficiency and mix versus the prior year (operating income +87.5% on +6.1% revenue). Ordinary income (¥1,746m) above operating income suggests non-operating gains or financial income contributed positively. Net margin at 3.67% is reasonable for a construction/engineering contractor, improved by better operating leverage. operating_leverage: Significant: operating income +87.5% YoY on revenue +6.1% implies strong incremental margins from better project execution, utilization, and SG&A control. EBITDA margin at 7.7% vs operating margin ~5.2% shows a moderate depreciation burden consistent with equipment-heavy operations.

Growth Assessment

revenue_sustainability: Revenue grew 6.1% YoY to ¥28.63bn, consistent with steady demand in core electrical/railway-related construction and maintenance. Sustainability hinges on backlog, project start timing, and public/private capex cycles; these were not disclosed here. profit_quality: Profit growth outpaced sales (OP +87.5%, NI +35.4%), driven by mix and cost control. The contribution from non-operating items (ordinary income > operating income) enhances current period results but may not be recurring. outlook: With higher margins and a robust balance sheet, the company appears positioned to maintain improved profitability if project execution remains strong. However, the large negative OCF suggests near-term cash conversion risk tied to receivables/unbilled amounts, which could moderate growth investment pace unless collections normalize.

Financial Health

liquidity: Current ratio 228.2% (¥55.70bn / ¥24.40bn) and quick ratio ~228.0% reflect ample near-term liquidity; inventories are minimal (¥69m), consistent with a project services model. Working capital stands at ¥31.29bn. solvency: Computed equity ratio roughly 64.2% (¥63.65bn / ¥99.16bn). Debt-to-equity (using total liabilities) is 0.49x, indicating conservative leverage. Interest coverage is very strong at 48.8x (EBIT/interest), and interest expense is modest at ¥30.2m. capital_structure: Balance sheet is equity-heavy, offering capacity to absorb project volatility. Financing inflow of ¥5.35bn likely supports working capital; interest-bearing debt composition and maturities were not disclosed here.

Cash Flow Quality

earnings_quality: OCF/Net income is -5.35x (¥-5.62bn / ¥1.05bn), signaling weak interim cash conversion. This likely reflects increased trade receivables, unbilled construction receivables, and/or advances to subcontractors—common in H1 for project businesses. FCF_analysis: Investing CF and cash balance were not disclosed in this extract (shown as 0). Consequently, FCF cannot be reliably computed. EBITDA of ¥2.20bn and D&A of ¥0.73bn suggest capacity to fund maintenance capex, but actual capex is unknown. working_capital: Large negative OCF implies a material working capital build. Given minimal inventories, the driver is likely receivables/unbilled or reduced advances received. Monitoring collection cycles and billing milestones into H2 is critical.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio were not disclosed (zeros indicate unreported). EPS is ¥42.42 for the period; without actual DPS, payout cannot be assessed from this data. FCF_coverage: FCF is not calculable due to undisclosed investing CF. Given negative OCF in the half, interim FCF coverage of any dividend would be weak unless offset by H2 cash inflows; however, full-year seasonality may normalize. policy_outlook: No policy information provided. Given strong balance sheet and improved profitability, dividends could be supportable if cash conversion improves in H2, but confirmation requires disclosed DPS/board guidance.

Risk Assessment

Business Risks:

• Project execution risk affecting margins and milestone billings
• Dependence on public infrastructure and railway-related spending cycles
• Timing risk between revenue recognition and cash collection (unbilled receivables)
• Input cost inflation and subcontractor availability impacting gross margin
• Seasonality and concentration of completions in H2

Financial Risks:

• Negative interim operating cash flow requiring short-term financing
• Potential increase in receivables days and working capital intensity
• Exposure to interest rate changes on short-term borrowings (if utilized)
• Non-operating income volatility (ordinary income > operating income)

Key Concerns:

• Large OCF outflow (¥-5.62bn) versus positive earnings (OCF/NI -5.35x)
• Reliance on financing inflow (¥+5.35bn) to bridge working capital
• Limited disclosure on cash, capex, dividend policy, and share data in this extract

Investment Implications

Key Takeaways:

• Strong margin expansion: OP +87.5% YoY on +6.1% sales
• Healthy solvency with computed equity ratio ~64% and low interest burden
• Weak interim cash conversion with OCF/NI at -5.35x
• Ordinary income above operating income, implying non-operating support
• Liquidity is ample (current ratio 228%) despite working capital build

Metrics to Watch:

• Backlog and order intake to gauge revenue sustainability
• Receivables and unbilled construction balances; collection cycle into H2
• Capex and investing cash flows to assess true FCF
• Composition of financing CF (short-term borrowings vs. others) and net debt
• Operating margin trajectory and project mix
• Effective tax rate on a full-year basis

Relative Positioning: Within Japan’s electrical/railway infrastructure contractors, the company exhibits above-average balance sheet strength and improving operating profitability, counterbalanced by below-par interim cash conversion typical of project-heavy models; sustained H2 cash recovery would solidify its relative standing.

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