Hibiya Engineering,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥40.54B
• Operating Income: ¥3.62B
• Net Income: ¥2.60B
• EPS: ¥130.15

Income Statement

Balance Sheet

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

Hibiya Engineering (19820) reported FY2026 Q2 consolidated results under JGAAP showing solid top-line growth and operating leverage. Revenue was 40,542 million yen, up 7.7% YoY, with gross profit of 7,315 million yen (gross margin 18.0%). Operating income rose 11.7% YoY to 3,615 million yen, expanding the operating margin to 8.9% from roughly 8.6% a year ago. Ordinary income reached 3,998 million yen, indicating healthy non-operating contributions. Net income was 2,833 million yen, up 10.1% YoY, implying a net margin of 6.99%. EPS was 130.15 yen for the period. DuPont metrics point to ROE of 3.84%, driven by a 6.99% net margin, asset turnover of 0.431, and modest financial leverage of 1.27x. Balance sheet strength is notable: total assets were 94,044 million yen, with total equity of 73,796 million yen, implying an equity ratio near 78.5% despite a reported 0.0% (the latter reflects unreported field formatting rather than economics). Current assets of 72,886 million yen and current liabilities of 26,536 million yen yield a current ratio of 274.7% and working capital of 46,350 million yen. Leverage is low with total liabilities of 28,230 million yen (debt-to-equity about 0.38x using total liabilities). Cash flow statement line items were not disclosed in this dataset (zeros indicate unreported), so operating cash flow and free cash flow cannot be assessed from the provided figures. The reported OCF/Net Income of 0.00 and zero EBITDA reflect missing disclosure (e.g., D&A and interest expense not provided), not true zeros. Tax expense of 1,181 million yen implies an effective tax rate around 29–30%, consistent with Japan’s statutory levels, even though the provided effective tax rate shows 0.0% due to unreported calculation fields. Overall profitability improved on both revenue growth and margin expansion, supported by SG&A containment and stable gross margin management. The company’s capital structure and liquidity provide ample shock absorption for project-based cash flow variability typical of building equipment and HVAC contractors. Dividend data are not available in this extract (DPS 0.00 likely indicates timing/non-disclosure), so payout analysis relies on earnings capacity and balance sheet strength rather than cash flow coverage. Key watchpoints include order intake/backlog, project mix, cost pass-through amid material and labor inflation, and conversion of earnings to cash as contract assets/liabilities evolve. Given the strong equity base and low leverage, financial risk is modest, but business risk remains linked to project execution and public/private sector demand cycles. Data limitations constrain cash flow and per-share book value analysis; conclusions focus on the disclosed non-zero items.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 6.99%
• asset_turnover: 0.431
• financial_leverage: 1.27
• calculated_ROE: 3.84%
• commentary: ROE of 3.84% is primarily margin-driven with modest balance-sheet leverage; asset turnover is low as typical for mid-year construction/engineering snapshots. margin_quality:
• gross_profit: 7315000000
• gross_margin: 18.0%
• operating_income: 3615000000
• operating_margin: 8.9%
• ordinary_income: 3998000000
• ordinary_margin: 9.9%
• net_income: 2833000000
• net_margin: 6.99%
• tax_rate_estimate: ≈29.4% (1,181/≈4,014 pre-tax)
• assessment: Margins improved YoY, with operating margin up ~32 bps (from ~8.6% to ~8.9%) as revenue growth outpaced cost and SG&A growth. Ordinary income exceeded operating income, implying positive non-operating items (e.g., financial income/other). Tax burden appears normal. operating_leverage:
• revenue_growth_YoY: 7.7%
• operating_income_growth_YoY: 11.7%
• interpretation: Positive operating leverage evidenced by operating profit growing faster than revenue. Cost discipline and project mix likely supported incremental margin.

Growth Assessment

revenue_sustainability: Revenue growth of 7.7% YoY is healthy for a building equipment/HVAC contractor and suggests good execution and order conversion in 1H. Sustainability will depend on order intake and backlog trends, which are not disclosed here. profit_quality: Profit growth (+10.1% net) is backed by margin expansion and ordinary income uplift. However, absence of cash flow data precludes confirmation of cash conversion; quality should be validated against movements in contract assets/liabilities and retention money. outlook: With a strong balance sheet and improved margins, the company is positioned to navigate cost inflation and labor tightness, but continued growth hinges on public/private capex cycles, project mix, and ability to pass through costs. Monitoring 2H seasonality and backlog is key.

Financial Health

liquidity:

• current_assets: 72886000000
• current_liabilities: 26536000000
• current_ratio: 274.7%
• quick_ratio: ≈274.7% (inventories undisclosed)
• working_capital: 46350000000
• commentary: Very strong liquidity with substantial working capital buffers; note cash and inventories were not disclosed in this extract. solvency:
• total_assets: 94044000000
• total_liabilities: 28230000000
• total_equity: 73796000000
• equity_ratio_estimated: ≈78.5% (73,796/94,044)
• debt_to_equity_total_liabilities_basis: 0.38x
• interest_coverage: N/A (interest expense undisclosed; ordinary income well above zero)
• commentary: Low leverage and a high equity ratio indicate strong solvency and capacity to absorb project timing swings. capital_structure: Financed predominantly by equity; limited reliance on interest-bearing debt inferred. Financial leverage at 1.27x in DuPont corroborates conservative structure.

Cash Flow Quality

earnings_quality: Earnings improved; however, the absence of OCF, capex, and D&A data prevents assessment of accrual intensity and cash conversion. For contractors, working capital swings (receivables, contract assets) can be material. FCF_analysis: Free cash flow cannot be derived due to missing OCF and investing cash flows. Capex intensity is typically modest in this industry, but verification is needed. working_capital: Working capital is sizable at 46.35 billion yen. Key drivers likely include trade receivables, contract assets, and advances received; without detail, we cannot assess days outstanding or retention impact.

Dividend Sustainability

payout_ratio_assessment: Reported payout ratio is 0.0% due to undisclosed DPS. EPS for 1H is 130.15 yen; if profitability is maintained, annual capacity for dividends appears supported by earnings but timing/policy details are unavailable here. FCF_coverage: Not assessable; OCF and FCF are undisclosed. Balance sheet strength (equity ratio ~78.5%) provides flexibility, but sustainable dividends depend on stable OCF. policy_outlook: Dividend policy not disclosed in this dataset. Assuming a typical stable-to-progressive policy for established contractors, distributions would be anchored by full-year results and cash conversion; confirm in company guidance.

Risk Assessment

Business Risks:

• Execution risk on large projects (cost overruns, delays, change orders)
• Material and labor cost inflation challenging margin pass-through
• Order intake/backlog volatility tied to public/private capex cycles
• Skilled labor availability and subcontractor capacity constraints
• Project mix shifts affecting gross margin (e.g., competitive bids vs. negotiated work)
• Warranty and defect liability risks post-completion
• Client credit risk and payment timing (retentions, milestone-based billing)

Financial Risks:

• Cash flow timing risk from contract assets/liabilities and receivables collections
• Potential increase in working capital needs during growth phases
• Exposure to interest rate changes is limited by low leverage but could affect financial income
• Tax rate variability due to project geographies or one-off items

Key Concerns:

• Lack of disclosed operating cash flow and capex data in this period
• Reliance on non-operating contributions to lift ordinary income
• Need to sustain margin gains amid competitive bidding and input cost pressures

Investment Implications

Key Takeaways:

• Revenue up 7.7% YoY with operating income up 11.7% demonstrates positive operating leverage.
• Margins improved: operating margin ~8.9% and net margin ~7.0%; ordinary income margin ~9.9%.
• Strong balance sheet with estimated equity ratio ~78.5% and low leverage (total liabilities/equity ~0.38x).
• Cash flow information is not disclosed; earnings-to-cash conversion remains a key unknown.
• Tax rate appears normal (~29–30%), supporting profit quality.
• Working capital is ample at 46.35 billion yen, providing liquidity for project execution.
• Dividend visibility is limited in this dataset; capacity appears supported by earnings but requires OCF confirmation.

Metrics to Watch:

• Order backlog and book-to-bill
• Gross margin by project and overall gross margin trend
• SG&A ratio and labor productivity
• Contract assets/liabilities and operating cash flow
• Receivables days and retention balances
• Non-operating income components within ordinary income
• Full-year guidance updates and win rates on large bids

Relative Positioning: Within Japan’s building equipment/HVAC contractors, Hibiya Engineering exhibits conservative leverage and strong liquidity with mid-to-high single-digit operating margins, positioning it defensively versus peers that rely more on debt or exhibit higher earnings volatility.

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