DAI-DAN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥118.36B
• Operating Income: ¥17.58B
• Net Income: ¥5.46B
• EPS: ¥291.44

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

Daidan Co., Ltd. delivered a strong FY2026 Q2 performance under JGAAP on a consolidated basis, with revenue up 12.1% YoY to ¥118.36bn and operating income surging 159.2% YoY to ¥17.58bn. Net income rose 129.5% YoY to ¥12.52bn, indicating robust margin expansion and favorable non-operating contributions, as ordinary income reached ¥18.14bn. The DuPont view indicates ROE of 10.58%, driven by a solid net margin of 10.58%, moderate asset turnover of 0.594x, and conservative leverage of 1.68x. EBITDA was ¥18.04bn, implying a 15.2% EBITDA margin, which is strong for a building facilities engineering contractor where mid-teens margins are typically viewed as healthy. Interest coverage is very high at 172.4x (operating income/interest expense), underscoring low financial risk despite a reported debt-to-equity ratio of 0.90x that likely reflects total liabilities rather than interest-bearing debt. Liquidity appears sound with a current ratio of 164.5% and working capital of ¥64.80bn, offering a buffer for project execution. Operating cash flow was negative at -¥6.00bn against positive earnings, a pattern often seen in the first half for project-based contractors due to work-in-progress and receivables build; the OCF/Net Income ratio of -0.48 points to working capital outflows rather than earnings weakness. Financing cash inflow of ¥18.08bn suggests increased borrowings or other financing activities to support WIP and seasonal cash needs, while investing cash flow and cash balance were not disclosed in XBRL (shown as zero). Balance sheet strength is notable with total equity of ¥118.39bn against total liabilities of ¥106.10bn, although the equity ratio was not disclosed (reported as 0%). The reported effective tax rate metric shows 0.0%, but based on disclosed income tax of ¥2.62bn and net income of ¥12.52bn, the implied tax burden appears closer to the mid-to-high teens, suggesting the 0.0% figure is an unreported placeholder. EPS of ¥291.44 reflects the step-up in profitability, though outstanding shares and treasury shares were not disclosed, limiting per-share context. Dividend DPS is undisclosed (shown as 0.00), and payout appears 0%, indicating either a timing issue in H1 disclosure or an as-yet-undecided interim payout; policy clarity will be important in H2. Asset turnover at 0.594x is reasonable for an engineer/contractor with sizable balance sheet tied to receivables, WIP, and advances. Given industry norms, second-half seasonality and backlog conversion will be crucial to sustain margins and support cash recovery. Overall, fundamentals are improving with strong profitability and liquidity, but cash conversion lags due to working capital, a typical mid-year pattern that requires monitoring. Data gaps (gross profit, inventories, cash balance, investing CF, equity ratio, shares) constrain deeper granularity; the analysis focuses on available non-zero disclosures.

Profitability Analysis

ROE of 10.58% decomposes into: Net profit margin 10.58% × Asset turnover 0.594 × Financial leverage 1.68. Margin expansion is the key driver, as operating income rose far faster than revenue (+159% vs +12%), indicating either a recovery from prior cost pressures, improved project mix, and/or cost control. EBITDA margin of 15.2% corroborates healthy operating profitability for a building and facility systems contractor. Ordinary income (¥18.14bn) exceeding operating income (¥17.58bn) implies positive net non-operating balance (e.g., financial income or JV/affiliates), modest in scale but supportive to bottom line. The interest burden is minimal (¥102m), with interest coverage of 172.4x, reflecting strong operating earnings relative to financing costs. Estimated effective tax rate based on NI and income tax appears around the mid-to-high teens, despite the undisclosed metric reading of 0.0%. Operating leverage looks favorable: the sharp YoY increase in operating income on 12% revenue growth suggests fixed cost absorption and better pricing/contingency realization on projects. Gross profit was not disclosed (shown as zero), restricting margin bridge analysis (gross to operating). Overall margin quality appears improved, but confirmation via segment/gross margin disclosure would increase confidence.

Growth Assessment

Top-line growth of 12.1% YoY to ¥118.36bn indicates solid demand, likely supported by robust order backlog conversion in mechanical/electrical and HVAC-related projects. Profit growth outpaced sales, with operating income up 159% YoY and net income up 129% YoY, implying mix and execution benefits. The sustainability of this profitability hinges on backlog quality, cost pass-through (materials/labor), and execution on large projects in H2. Given the industry’s back-half weighting, some normalization of margins may occur, but full-year trajectory appears favorable if cost discipline holds. The negative OCF suggests higher WIP/unbilled receivables tied to ongoing projects; as milestones bill and projects complete, cash conversion typically improves. Revenue sustainability should be underpinned by secular needs for building renovation, energy efficiency, and data center/healthcare-related MEP demand in Japan, although timing risks from customer capex cycles persist. Outlook drivers include book-to-bill, backlog duration, and large project wins; ordinary income support from non-operating items is a secondary factor. Without segment detail, we assume growth was broad-based within core installation/construction services. Near-term growth quality will be judged by whether margin gains translate into cash in H2 and whether the company avoids cost overruns on late-stage projects.

Financial Health

Total assets are ¥199.26bn, liabilities ¥106.10bn, and equity ¥118.39bn, indicating a solid capital base. The reported debt-to-equity ratio of 0.90x likely reflects total liabilities to equity; interest coverage of 172.4x suggests limited reliance on interest-bearing debt. Liquidity is comfortable: current assets ¥165.33bn versus current liabilities ¥100.52bn yields a current ratio of 164.5% and ample working capital of ¥64.80bn, suitable for project execution and bonding needs. Quick ratio mirrors current ratio because inventories were not disclosed (shown as zero), implying liquid asset coverage of short-term obligations. Equity ratio was not disclosed (reported as 0%), but the balance sheet implies a healthy equity cushion. Financing cash inflows of ¥18.08bn likely funded working capital, indicating proactive treasury management rather than stress. No cash balance was disclosed; this is assumed undisclosed rather than zero. Overall solvency appears robust with low financial risk and strong earnings capacity.

Cash Flow Quality

OCF was -¥6.00bn against net income of ¥12.52bn, producing an OCF/NI ratio of -0.48, indicative of significant working capital outflows typical in the first half for contractors as WIP and receivables build. EBITDA of ¥18.04bn provides ample internal capacity to fund operations over the full year, but near-term cash needs are being bridged by financing inflows. Investing CF was not disclosed (shown as zero), limiting assessment of maintenance capex versus growth capex; D&A of ¥0.45bn suggests a relatively light asset base. Free cash flow was not disclosed (shown as zero), so true FCF cannot be computed; qualitatively, pre-financing cash flow is likely negative in H1 given OCF outflows and assumed capex. Working capital dynamics (trade receivables, unbilled receivables/WIP, advance receipts, retention money) are the key swing factors; absent line-item disclosure, we attribute the OCF shortfall to build-up in projects in progress. Earnings quality appears supported by strong operating profit and minimal interest burden, but conversion to cash remains to be validated in H2. Monitoring cash collection and milestone billings will be essential.

Dividend Sustainability

Annual DPS and payout ratio were not disclosed (both shown as 0.00), so dividend sustainability cannot be quantified from this dataset. On fundamentals, earnings capacity is strong, and balance sheet liquidity is sound, which would typically support distributions assuming no outsized capital commitments. However, negative OCF in H1 and reliance on financing inflows caution that cash distributions should be assessed over the full fiscal year when cash conversion improves seasonally. Free cash flow coverage of dividends cannot be evaluated as FCF is undisclosed. Policy clarity (target payout ratio, stability vs. flexibility, and interim vs. year-end dividends) will be important; historically in the sector, year-end dividends are more indicative due to H2-weighted cash generation. Until cash conversion is evidenced, dividend capacity should be viewed through the lens of full-year OCF and capex needs rather than H1 earnings alone.

Risk Assessment

Business Risks:

• Project execution risk on large MEP/building systems contracts (cost overruns, delays).
• Input cost volatility (materials, subcontracting, labor) and pass-through effectiveness.
• Order timing and backlog conversion risk, especially given H2 seasonality.
• Customer capex cycles in commercial, industrial, and public sectors affecting bookings.
• Competition and pricing pressure in installation and maintenance markets.
• Regulatory and safety compliance in construction and building codes.
• Supply chain constraints for key equipment/components.

Financial Risks:

• Working capital intensity leading to negative OCF in H1 and dependence on financing inflows.
• Counterparty credit risk on receivables and retention money.
• Potential interest rate risk if financing needs increase, despite current low interest burden.
• Limited disclosure on cash, investing CF, and inventories impedes liquidity granularity.
• Exposure to fixed-price contracts that can compress margins if costs escalate.

Key Concerns:

• Cash conversion lag (OCF/NI -0.48) despite strong earnings.
• Data gaps (gross profit, inventories, cash, investing CF, equity ratio, share count) constrain precision.
• Sustainability of elevated margins without detailed gross margin/segment disclosure.
• Reliance on financing inflows in H1 to fund operations.

Investment Implications

Key Takeaways:

• Strong profitability with operating income up 159% YoY and EBITDA margin at 15.2%.
• ROE of 10.58% supported by high net margin and moderate asset turnover with conservative leverage.
• Liquidity is solid (current ratio 164.5%), but OCF negative on working capital build.
• Interest burden is minimal (coverage 172x), lowering financial risk.
• Non-operating income modestly supports ordinary income above operating income.

Metrics to Watch:

• Order backlog and book-to-bill to gauge sustainability of revenue growth.
• Gross margin by segment/project and cost variance to validate margin quality.
• Working capital components: receivables, unbilled WIP, advances, and retention balances.
• H2 operating cash flow and full-year free cash flow conversion.
• Interest-bearing debt levels and funding mix underlying the ¥18.08bn financing inflow.
• Tax rate normalization vs. special factors (reconciling ordinary income to net income).

Relative Positioning: Within Japan’s building facilities engineering/MEP peers, Daidan’s current margins and ROE appear solid-to-strong, with lower interest burden and healthy liquidity; key differentiators over the next two quarters will be backlog quality and the pace of cash conversion relative to peers experiencing similar H2 seasonality.

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