YAMATO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.40B
• Operating Income: ¥2.42B
• Net Income: ¥1.36B
• EPS: ¥90.94

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

Yamato (19670) delivered a solid FY2026 Q2, with revenue up 7.8% YoY to ¥26.4bn and operating income up 40.9% YoY to ¥2.42bn, evidencing strong operating leverage. Gross profit of ¥3.17bn and a gross margin of 12.0% indicate some improvement in project profitability and/or mix versus last year. Operating margin expanded to 9.2% (operating income/revenue), a notable uplift given high fixed-cost absorption in engineering/construction-type businesses. Ordinary income (¥2.76bn) exceeded operating income, suggesting modest non-operating tailwinds, while interest expense remained minimal at ¥13m. Net income rose 62.0% YoY to ¥2.19bn, with EPS at ¥90.94, underscoring margin expansion and disciplined cost control. DuPont analysis shows net margin of 8.29%, asset turnover of 0.455x, and financial leverage of 1.49x, resulting in an ROE of 5.60%—healthy but with room to improve via either higher margins or better asset utilization. Cash generation was strong: operating cash flow (OCF) reached ¥5.27bn, 2.41x net income, indicating high earnings quality and favorable working capital movements. The balance sheet is conservative, with total assets of ¥58.0bn and total equity of ¥39.1bn; this implies an equity ratio around 67.3% (though the disclosed equity ratio is shown as 0.0%, which we interpret as undisclosed rather than zero). Liquidity is ample, with a current ratio of 232% and sizable working capital of ¥19.8bn. Interest coverage is extremely strong at ~186x, reflecting negligible debt service burden. Dividend payout is currently reported as zero, but capacity to pay appears supported by profitability and OCF, subject to capex and order-cycle needs. FCF cannot be assessed due to undisclosed investing cash flows; as a result, capital allocation conclusions are tentative. The EBITDA margin of 10.1% and low D&A intensity (¥241m) highlight a relatively asset-light profile for the earnings base. Tax expense of ¥655m implies an effective tax rate near the low-20s, broadly consistent with Japan’s statutory range, although the calculated metric table showing 0.0% likely reflects a data gap. Overall, the company demonstrates improving profitability, robust cash conversion, and strong financial resilience, albeit with incomplete disclosures that limit precision on FCF and capital deployment. Near-term, sustaining the improved gross margin and operating leverage while managing input cost volatility and project execution risk will be key to maintaining momentum.

Profitability Analysis

ROE of 5.60% decomposes into net profit margin of 8.29%, asset turnover of 0.455x, and financial leverage of 1.49x (Assets/Equity ≈ ¥58.0bn/¥39.1bn). Margin quality strengthened: operating margin is 9.2% (¥2.419bn/¥26.401bn), outpacing revenue growth and implying solid cost control and project mix gains. Gross margin at 12.0% provides room for further improvement, but the step-up versus revenue growth signals better execution and/or pricing discipline. EBITDA of ¥2.66bn (10.1% margin) versus operating income of ¥2.42bn indicates modest D&A intensity, consistent with a relatively asset-light operating model. Ordinary income exceeding operating income (¥2.76bn vs ¥2.42bn) suggests positive non-operating contributions (e.g., financial income or other), enhancing bottom-line leverage. Interest expense is very low (¥13m), with interest coverage ~186x, so financial leverage is not a material driver of ROE. The primary ROE levers are margin expansion and asset turnover; at 0.455x turnover (likely based on period-average assets for a semiannual period), improving utilization and project throughput could lift returns. Operating leverage is evident: operating income grew ~5x faster than revenue (+40.9% vs +7.8%), implying SG&A efficiency and better fixed-cost absorption.

Growth Assessment

Revenue grew 7.8% YoY to ¥26.4bn, a healthy pace for a contractor/engineering-oriented business, likely supported by steady order intake and execution progress. Profit growth outpaced sales, with operating income +40.9% YoY and net income +62.0% YoY, reflecting meaningful margin gains. The sustainability of growth hinges on order backlog quality, execution timelines, and input cost trends (materials/labor); while not disclosed here, cash flow strength suggests favorable milestone collections and working capital discipline. Non-operating contributions modestly lifted ordinary income above operating income, but core profit improvement is the main driver. With asset turnover at 0.455x and ample balance sheet capacity, incremental growth could be supported without heavy balance sheet strain. Near-term outlook is constructive if the company maintains gross margin discipline and delivery schedules; however, cyclical demand and public/private capex budgets remain external swing factors. Absent backlog and segment detail, we assume mid-single-digit sales growth continuity with focus on sustaining high-single-digit operating margin.

Financial Health

Total assets ¥58.0bn, total equity ¥39.1bn, total liabilities ¥17.6bn denote a conservative capital structure; implied equity ratio ≈ 67.3% (equity/assets), though the reported equity ratio field is undisclosed. Current assets ¥34.74bn vs current liabilities ¥14.95bn yield a current ratio of 232%, and with inventories undisclosed, the quick ratio is the same, indicating ample short-term liquidity. Working capital stands at ¥19.79bn, supporting project execution and buffer against collection timing. Debt metrics are benign; interest expense of ¥13m and interest coverage around 186x point to very low financial risk. Debt-to-equity is shown as 0.45x (likely total interest-bearing debt vs equity; underlying debt detail not disclosed), consistent with modest leverage. Overall solvency risk is low, and the company has capacity to absorb shocks or invest selectively.

Cash Flow Quality

OCF of ¥5.27bn is 2.41x net income (¥2.19bn), indicating strong cash conversion and likely favorable working capital inflows (e.g., advances, milestone billings, or receivables collection). EBITDA of ¥2.66bn vs OCF suggests additional cash inflow beyond operating earnings, again consistent with working capital tailwinds. Investing cash flows are undisclosed (shown as 0), so Free Cash Flow cannot be reliably calculated; the listed FCF of 0 should be interpreted as not available rather than zero. Financing CF was an outflow of ¥1.14bn, implying debt repayment, dividends, or share-related cash outlays; given DPS is reported as 0, the outflow may be debt or lease repayment, but details are not provided. With capex unknown, earnings quality still appears high based on OCF/NI, but sustainability of working capital inflows warrants monitoring. Working capital management appears a positive contributor this period; potential reversals in subsequent periods could normalize OCF.

Dividend Sustainability

Annual DPS is reported as ¥0.00 with a payout ratio of 0.0%, suggesting no dividend in the period. From a capacity standpoint, profitability (net income ¥2.19bn) and strong OCF (¥5.27bn) indicate room for distributions, subject to capex and order-cycle cash needs. FCF coverage cannot be assessed due to undisclosed investing CF; thus, we cannot verify whether OCF exceeds maintenance capex. Balance sheet strength (implied equity ratio ~67%) and minimal interest burden support potential for distributions under a stable outlook. Near-term policy outlook depends on management’s capital allocation priorities (growth investments, balance sheet conservatism, or shareholder returns). Without a stated policy or historical payout trend here, we treat dividend visibility as limited.

Risk Assessment

Business Risks:

• Order intake cyclicality tied to public/private capex cycles
• Project execution risk on fixed-price contracts (cost overruns, delays)
• Input cost inflation for materials and labor affecting gross margins
• Customer concentration and timing of milestone acceptances
• Competitive bidding pressure compressing margins
• Regulatory and safety compliance in construction/engineering works

Financial Risks:

• Working capital volatility impacting OCF (potential reversals after strong inflows)
• Limited disclosure on investing cash flows and capex requirements
• Potential increase in leverage if large projects require upfront funding
• Interest rate changes affecting financing costs (albeit currently minimal)

Key Concerns:

• Sustainability of elevated operating margin amid input cost variability
• Lack of visibility on capex and FCF given undisclosed investing CF
• Dependence on backlog quality and conversion given asset turnover at 0.455x

Investment Implications

Key Takeaways:

• Strong operating leverage: operating income +40.9% YoY on +7.8% revenue
• Healthy profitability with operating margin ~9.2% and EBITDA margin ~10.1%
• High earnings quality: OCF/Net income at 2.41x
• Conservative balance sheet with implied equity ratio ~67% and interest coverage ~186x
• ROE at 5.60% supported by margin gains; further improvement hinges on asset turnover
• Dividend currently undisclosed/non-paying; capacity exists but FCF unknown due to missing capex

Metrics to Watch:

• Order backlog and book-to-bill
• Gross margin and SG&A ratio to sustain operating margin
• OCF/Net income and working capital movements (receivables, advances)
• Capex and investing CF to gauge true FCF
• Asset turnover and project cycle times
• Leverage (interest-bearing debt) and interest coverage

Relative Positioning: Versus domestic engineering/construction peers, Yamato shows stronger-than-average cash conversion this period, solid liquidity, and low financial risk, with mid-single-digit ROE and improving margins; asset turnover is moderate, leaving room for efficiency gains.

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