ASAHI KOGYOSHA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥41.44B
• Operating Income: ¥4.09B
• Net Income: ¥2.36B
• EPS: ¥124.66

Income Statement

Balance Sheet

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

Asahi Kogyosha (TSE:1975) delivered solid FY2026 Q2 consolidated results under JGAAP, with notable profitability improvement despite modest top-line growth. Revenue increased 2.3% year over year to ¥41.4bn, while operating income rose 46.3% to ¥4.09bn, indicating strong operating leverage and/or mix improvement. Gross profit was ¥6.22bn, yielding a gross margin of 15.0%, and operating margin expanded to roughly 9.9%, a strong level for a building equipment/engineering contractor. Ordinary income of ¥4.28bn slightly exceeded operating income, suggesting modest positive net non-operating contributions. Net income was ¥3.21bn, up 35.9% YoY, translating to a net margin of 7.75% and EPS of ¥124.66 for the period. DuPont analysis indicates ROE of 7.34% for the period, driven by a 7.75% net margin, asset turnover of 0.512x, and financial leverage of 1.85x. The interest burden is negligible, with interest expense at only ¥13m and coverage at 314.7x, underscoring low financial risk. The balance sheet appears conservative: total assets are ¥81.0bn, total equity ¥43.8bn, and liabilities ¥38.8bn, implying an effective equity ratio of about 54.1% (notwithstanding the reported 0.0% placeholder). Liquidity is sound with a current ratio of 163.9% and working capital of ¥23.5bn. Cash flow statements and several line items (cash, OCF, inventories, D&A, DPS, shares outstanding) are not disclosed in the provided XBRL, so cash conversion and per-share balance metrics cannot be assessed here. The reported effective tax rate in the metrics table is 0.0% due to missing pre-tax data; based on income tax expense of ¥1.13bn and net income of ¥3.21bn, an implied tax rate of roughly 26% is more realistic. The pronounced divergence between revenue growth (+2.3%) and operating income growth (+46.3%) suggests a combination of improved project margins, SG&A efficiency, and possibly favorable non-recurring items. Given the project-based nature of the business, order backlog quality and execution discipline remain critical to sustaining margins. Overall, profitability momentum and balance sheet strength are evident, but the absence of cash flow data limits assessment of earnings quality and dividend capacity. We therefore treat the OCF/NI ratio and EBITDA metrics in the table as non-informative placeholders. Near-term outlook hinges on maintaining higher conversion of gross profit to operating income and stable tax and non-operating items. We note data limitations and base conclusions only on the available non-zero disclosures.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 7.75%
• asset_turnover: 0.512x
• financial_leverage: 1.85x
• calculated_ROE: 7.34% (period basis)
• commentary: ROE is mainly driven by improved margins rather than leverage, with modest asset turnover typical for an engineering/installation contractor. margin_quality:
• gross_margin: 15.0% (¥6.22bn GP on ¥41.44bn revenue)
• operating_margin: 9.9% (¥4.09bn OI on ¥41.44bn revenue)
• ordinary_margin: 10.3% (¥4.28bn on ¥41.44bn)
• net_margin: 7.75% (¥3.21bn on ¥41.44bn)
• tax_burden: Approx. 26% implied effective tax rate (¥1.13bn tax on ¥4.34bn pre-tax), vs 0.0% placeholder in metrics due to missing pre-tax disclosure.
• non_operating_items: Ordinary income exceeds operating income by ¥185m, indicating small net non-operating gains or financial income. operating_leverage:
• revenue_growth_YoY: 2.3%
• operating_income_growth_YoY: 46.3%
• interpretation: Significant positive operating leverage, likely from improved project mix and SG&A efficiency; the scale of OI uplift vs revenue suggests cost discipline and possibly one-off tailwinds.

Growth Assessment

revenue_sustainability: Top-line growth of 2.3% is modest and consistent with a steady order environment; sustainability depends on backlog conversion and new wins in HVAC/mechanical contracting. profit_quality: Substantial margin expansion lifted profits; durability hinges on repeatability of improved project margins vs potential one-offs. Gross-to-operating conversion (OI/GP ≈ 65.8%) is strong for the sector. outlook: If current execution persists, mid-to-high single-digit net margins can be maintained; however, project timing and input cost volatility can cause quarter-to-quarter swings. Monitor orders received, backlog, and project margin guidance for confirmation.

Financial Health

liquidity:

• current_ratio: 163.9%
• quick_ratio: 163.9% (inventories unreported, so quick equals current here)
• working_capital: ¥23.50bn
• commentary: Comfortable short-term liquidity; large current assets vs current liabilities aligns with progress billing dynamics in the industry. solvency:
• total_liabilities: ¥38.83bn
• total_equity: ¥43.76bn
• equity_ratio: ≈54.1% (computed as equity/assets; the 0.0% reported is a placeholder)
• debt_to_equity: 0.89x (liabilities/equity)
• interest_coverage: 314.7x (OI/interest expense)
• commentary: Low leverage and minimal interest burden indicate strong solvency headroom. capital_structure: Balance tilts toward equity financing with ample cushion for working capital needs and project bonding requirements common in contracting.

Cash Flow Quality

earnings_quality: Unassessable from provided data: OCF, investing CF, financing CF, and cash balances are not disclosed (zeros are placeholders). FCF_analysis: Free cash flow cannot be computed due to missing OCF and capex/D&A disclosures; EBITDA is not meaningful here because D&A is unreported. working_capital: Current assets of ¥60.29bn vs current liabilities of ¥36.79bn suggest adequate liquidity; however, the mix (receivables, advances, retention money) is unknown, limiting insights on cash conversion. additional_notes: Project businesses can exhibit sizable OCF volatility due to milestone billings; monitor OCF/NI, receivables days, and advances received when disclosed.

Dividend Sustainability

payout_ratio_assessment: Reported DPS and payout ratio are zeros due to non-disclosure; cannot infer payout from EPS of ¥124.66 without DPS data. FCF_coverage: Not assessable; FCF is not disclosed. policy_outlook: Mid-term sustainability would depend on maintaining net margins near current levels and stable OCF. Historically, many Japanese contractors emphasize stability over high payout; confirm company policy and interim vs year-end dividend practice when available.

Risk Assessment

Business Risks:

• Project execution risk affecting margins and completion timing
• Order intake and backlog cyclicality tied to private/non-residential capex
• Input cost inflation (materials, subcontracting) and limited pass-through on fixed-price contracts
• Labor availability and wage pressures in construction/installation trades
• Schedule delays from clients or supply chain disruptions impacting revenue recognition
• Competition in HVAC/mechanical contracting compressing bid margins

Financial Risks:

• Working capital swings from progress billings and retention impacting short-term OCF
• Potential credit risk on receivables from private-sector clients
• Concentration of short-term liabilities necessitating disciplined liquidity management
• Tax rate variability around the implied ~26% depending on deductions and non-operating items

Key Concerns:

• Absence of cash flow disclosure prevents validation of earnings-to-cash conversion
• Large divergence between revenue and operating income growth may include non-recurring factors
• Limited visibility on D&A and capex constrains assessment of maintenance vs growth investment needs

Investment Implications

Key Takeaways:

• Strong profitability inflection: operating income +46.3% on revenue +2.3%, with operating margin ~9.9%
• Healthy balance sheet: computed equity ratio ~54% and interest coverage 315x
• Net margin 7.75% supports period ROE of 7.34% with modest leverage (1.85x)
• Liquidity robust: current ratio 164% and ¥23.5bn working capital
• Non-operating items slightly positive; tax burden likely normalized around 26%
• Cash flow and dividend data are undisclosed; caution in interpreting OCF/NI and EBITDA placeholders

Metrics to Watch:

• Orders received and backlog growth/mix
• Gross margin and SG&A-to-sales for sustainability of margin gains
• Operating cash flow and OCF/NI conversion once disclosed
• Receivables days and advances/retentions to gauge working capital intensity
• D&A and capex to understand maintenance needs and EBITDA trajectory
• Effective tax rate and non-operating gains/losses

Relative Positioning: Within Japan’s building equipment/HVAC contracting peers, Asahi Kogyosha appears to be operating with above-average current-period margins and a strong equity base, though verified cash conversion data is lacking in this disclosure.

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