Nippon Information Development Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.77B
• Operating Income: ¥1.45B
• Net Income: ¥1.13B
• EPS: ¥99.03

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

FY2026 Q2 results for 株式会社エヌアイデイ (23490, consolidated, JGAAP) show resilient top-line growth with some margin pressure. Revenue rose 6.5% year on year to ¥12,774 million, while operating income declined 5.0% to ¥1,446 million, indicating negative operating leverage in the period. Gross profit was ¥2,774.964 million, implying a gross margin of 21.7%, broadly stable for an SIer-type business. Operating margin came in at 11.3% (¥1,446 million operating income on ¥12,774 million sales), which remains robust relative to many domestic IT services peers but contracted year on year. Ordinary income reached ¥1,565 million, benefitting from net non-operating gains of roughly ¥119 million versus operating income. Net income was ¥1,081 million (down 4.3% YoY), yielding a net margin of 8.46%. The implied effective tax rate is approximately 35% (¥585 million tax over about ¥1,666 million pre-tax income), notwithstanding the automated metric showing 0.0% which is not reflective of actual tax expense. DuPont analysis indicates ROE of 4.78%, decomposed into a net margin of 8.46%, asset turnover of 0.438x, and financial leverage of 1.29x. Despite the dip in operating profit, cash generation was solid: operating cash flow was ¥1,236 million, exceeding net income (OCF/NI = 1.14), which supports earnings quality. The balance sheet is conservative with total assets of ¥29,134 million, equity of ¥22,619 million, and liabilities of ¥6,704 million, implying low leverage (D/E 0.30x) and strong liquidity (current ratio 595%). Interest coverage is extremely high at ~2,634x, reflecting minimal interest burden. Working capital is ample at ¥17,276 million, consistent with an asset-light model with low inventory exposure. Several data items are undisclosed (e.g., cash and equivalents, investing cash flows, shares outstanding, DPS), so some assessments rely on partial information and typical industry patterns. Overall, NID delivered healthy revenue expansion and strong cash conversion, but operating deleverage suggests wage inflation, mix, or subcontracting costs weighed on margins in this half. The financial position provides capacity to invest and maintain shareholder returns, subject to confirmation of dividend policy and capex cadence.

Profitability Analysis

ROE_decomposition: Reported ROE is 4.78%, consistent with DuPont: Net margin 8.46% × Asset turnover 0.438 × Leverage 1.29. Operating margin is 11.3% (¥1,446m/¥12,774m), net margin 8.46% (¥1,081m/¥12,774m). The step-down from operating to net income is primarily taxes (35% implied effective rate) with minimal interest burden (¥0.549m). margin_quality: Gross margin at 21.7% (¥2,774.964m) supports a healthy value-add profile for a SIer; however, the YoY decline in operating income against revenue growth indicates SG&A and/or subcontracting cost pressure. EBITDA margin is 11.7% (EBITDA ¥1,499.745m), close to operating margin given low D&A (¥53.745m), highlighting an asset-light model. operating_leverage: Revenue grew 6.5% YoY while operating income fell 5.0% YoY, indicating negative operating leverage in the period. This suggests incremental gross profit was offset by higher personnel costs (e.g., wage/bonus hikes), utilization/mix effects, or increased outsourcing costs. Non-operating items were modestly positive (¥119m), not altering the core trend.

Growth Assessment

revenue_sustainability: Top-line growth of 6.5% YoY to ¥12.8bn is consistent with steady demand in enterprise IT/system integration, likely supported by ongoing digital transformation and maintenance contracts. profit_quality: Net margin of 8.46% and operating margin of 11.3% remain solid, but the YoY operating income decline indicates cost escalation or mix shift. OCF/NI >1.0 (1.14x) supports underlying earnings quality this half. outlook: Near-term growth should track backlog and recurring/maintenance revenues, but achieving operating profit growth will require controlling labor and subcontractor costs and maintaining utilization. Pricing discipline and project selection will be key to restoring positive operating leverage.

Financial Health

liquidity: Current assets ¥20,769m vs current liabilities ¥3,493m imply a current ratio of ~595% and quick ratio ~595% (inventory not disclosed), indicating very strong short-term liquidity. Working capital stands at ¥17,276m. solvency: Total liabilities ¥6,704m vs equity ¥22,619m yield a D/E of ~0.30x. Interest expense is de minimis (¥0.549m), and interest coverage is ~2,634x, evidencing low financial risk. capital_structure: Assets ¥29,134m funded primarily by equity (equity ratio not disclosed in XBRL; provided metric shows 0.0% which is a placeholder). Low leverage affords capacity for investment and shareholder returns.

Cash Flow Quality

earnings_quality: Operating cash flow ¥1,236m exceeds net income ¥1,081m (OCF/NI 1.14x), indicating healthy accruals and working capital dynamics in the period. FCF_analysis: Investing CF is undisclosed and free cash flow is listed as 0 (placeholder). Given modest D&A (¥54m), structural capex needs are likely low for an IT services model, but actual capex must be confirmed when investing CF is reported. working_capital: Strong working capital (¥17,276m) and high liquidity ratios suggest timely collections and limited inventory risk. However, detailed breakdown of receivables/payables movements is not provided, so seasonality and project billing could influence OCF.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.0% (undisclosed). With net income of ¥1,081m and low leverage, capacity to fund dividends appears ample, subject to cash deployment priorities. FCF_coverage: FCF coverage is listed as 0.00x due to undisclosed investing cash flows; cannot be assessed definitively this quarter. OCF of ¥1,236m provides a solid base for distributions if capex remains modest. policy_outlook: Given the balance sheet strength and earnings quality, stable to progressive dividends would be consistent with sector norms; confirmation awaits management guidance and full-year cash flow disclosure.

Risk Assessment

Business Risks:

• Project execution and fixed-price project risk impacting margins.
• Wage inflation and talent retention pressures in IT services.
• Subcontractor cost inflation and availability constraints.
• Customer IT budget timing and discretionary project deferrals.
• Competition from larger SIers and cloud-native providers.
• Utilization risk due to demand fluctuations and mix shifts.

Financial Risks:

• Working capital swings from milestone billing and receivables concentration.
• Potential impairment risk on intangibles or deferred costs (not disclosed here).
• Limited visibility on capex/investing outflows this period (Investing CF undisclosed).
• Dividend and buyback commitments versus investment needs.

Key Concerns:

• Negative operating leverage despite 6.5% sales growth.
• Cost pressures (personnel/subcontracting) weighing on margins.
• Data gaps on investing cash flows and cash balances, limiting FCF visibility.

Investment Implications

Key Takeaways:

• Solid revenue growth (+6.5% YoY) with robust gross margin (21.7%).
• Operating margin 11.3% but operating income down 5.0% YoY, indicating cost pressure.
• Strong cash generation (OCF/NI 1.14x) and minimal leverage (D/E ~0.30x).
• Exceptional interest coverage (~2,634x) reflects very low financial risk.
• ROE 4.78% driven by healthy margins but moderated by low asset turnover and conservative leverage.

Metrics to Watch:

• Operating margin trajectory and SG&A/subcontracting cost ratio.
• Utilization rates and headcount/wage trends.
• Backlog and book-to-bill for revenue visibility.
• Working capital movements (DSO/DPO) and OCF sustainability.
• Investing cash flows and capex to refine FCF outlook.
• Dividend policy updates and capital allocation.

Relative Positioning: Within domestic IT services/SI peers, NID exhibits above-average operating margins and very low financial leverage, supporting resilience. However, the latest half shows negative operating leverage versus some peers maintaining margin expansion, making cost control and utilization improvement key differentiators for the remainder of the fiscal year.

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
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