HONYAKU Center Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.34B
• Operating Income: ¥346M
• Net Income: ¥232M
• EPS: ¥71.36

Income Statement

Balance Sheet

Cash Flow Statement

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

Honyaku Center (2483) reported FY2026 Q2 consolidated results under JGAAP showing stable profitability despite a modest revenue decline. Revenue was ¥5,345m (-2.2% YoY), with operating income of ¥346m (-1.6% YoY) and net income of ¥239m (+3.0% YoY), indicating disciplined cost control and minor non-operating support. Gross profit was disclosed at ¥2,581m, implying a gross margin of 48.3%, although the disclosed cost of sales suggests a small inconsistency; we rely on the provided gross margin for analysis. Operating margin stood at approximately 6.5%, broadly flat YoY, and ordinary income exceeded operating income, indicating non-operating contributions (likely financial or other income) were supportive. The DuPont profile shows a net margin of 4.47%, asset turnover of 0.627x, and financial leverage of 1.26x, yielding an ROE of 3.54%, a modest level for a service business. Cash generation was solid: operating cash flow (OCF) reached ¥370m, implying OCF/net income of 1.55x, which signals good earnings quality and working capital discipline. Liquidity is very strong with a current ratio of about 415% and significant working capital of ¥5,819m, pointing to ample short-term solvency. Leverage remains conservative (liabilities/equity ~0.31x), limiting financial risk but also dampening ROE. The effective tax rate is not disclosed in the calculated metrics, but based on income tax and net income, we estimate roughly 34%, consistent with normal statutory ranges. EBITDA of ¥356m (6.7% margin) indicates limited non-cash charges, consistent with an asset-light model. The negative financing cash flow (¥217m) suggests outflows for dividends or share-related/lease repayments; however, dividend data are not disclosed in the XBRL feed, so we cannot confirm distribution specifics. Cash and equivalents are not reported in the feed (listed as zero), but the large current asset base suggests adequate cash reserves. Overall, the company maintained profitability and cash conversion amidst slight top-line pressure, supported by stable margins and non-operating income. Structural headwinds include wage inflation, freelancer supply constraints, and competitive pressures from machine translation/AI, but the company’s mix (e.g., highly specialized domains such as pharma/regulatory and patents) likely supports margins. ROE remains modest due to a strong equity base and conservative leverage; improving utilization, pricing/mix, and SG&A efficiency are key to enhancing returns. Data limitations (notably certain zeros indicating non-disclosure) constrain precision around cash, dividends, and some detailed drivers, but the available metrics indicate steady fundamentals.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 4.47% (NI ¥239m / Revenue ¥5,345m)
• asset_turnover: 0.627x (Revenue ¥5,345m / Assets ¥8,531m)
• financial_leverage: 1.26x (Assets ¥8,531m / Equity ¥6,759m)
• calculated_ROE: 3.54% (consistent with reported) margin_quality: Gross margin is 48.3% (per disclosure), supporting an operating margin of ~6.5% (¥346m/¥5,345m). The discrepancy between disclosed cost of sales and gross profit suggests classification/timing differences; we rely on the stated gross profit. Net margin of 4.47% is stable and benefits from modest non-operating income (ordinary income > operating income). Estimated tax rate ~34% indicates no unusual tax distortions. operating_leverage: Revenue declined 2.2% YoY while operating income fell 1.6% YoY, implying slightly positive operating leverage and decent cost flexibility. EBITDA margin of 6.7% vs. operating margin ~6.5% indicates low D&A (¥10m), consistent with an asset-light service model; incremental margin sensitivity will mainly come from utilization and SG&A efficiency.

Growth Assessment

revenue_sustainability: Top line decreased 2.2% YoY to ¥5,345m. Given the company’s exposure to specialized translation (e.g., pharma, patent, industrial), demand tends to be tied to client R&D/regulatory cycles and overall corporate activity; the slight decline suggests softer volumes or pricing mix normalization. profit_quality: Operating income contraction (-1.6% YoY) was milder than the revenue decline, reflecting cost discipline. Ordinary income exceeded operating income, implying positive non-operating contributions (likely financial income or subsidies), but these are not a structural growth driver. outlook: With stable gross margins and controlled SG&A, profit sustainability hinges on order intake, utilization rates, and mix toward higher value-add segments (pharma/regulatory, IP). Medium-term growth will depend on the balance between specialized human translation demand and productivity gains from MT/AI integration; pricing power in regulated/specialized content is the key swing factor.

Financial Health

liquidity: Current assets ¥7,667m vs. current liabilities ¥1,848m => current ratio ~415% and quick ratio ~415% (no inventories disclosed). Working capital is large at ¥5,819m, indicating strong short-term solvency. solvency: Total liabilities/equity ≈ 0.31x (¥2,076bn/¥6,759bn), reflecting a conservative balance sheet. Equity ratio was shown as 0.0% in the feed but is clearly strong based on totals; the zero reflects non-disclosure under that specific tag. capital_structure: Low leverage limits financial risk but also restrains ROE. Ordinary income above operating income alongside zero reported interest expense suggests net financial income; interest coverage is not meaningful from the provided zeros. The structure is consistent with net cash or low-debt positioning, though exact cash is not disclosed.

Cash Flow Quality

earnings_quality: OCF of ¥369.6m vs. NI of ¥239.0m => OCF/NI = 1.55x, indicating solid cash conversion, likely aided by favorable working capital (collections and/or payables timing). FCF_analysis: Investing cash flow is unreported (listed as zero), so we cannot compute FCF precisely. With low D&A (¥10m), maintenance capex needs are likely modest for an asset-light model, suggesting underlying FCF probably positive; however, we refrain from quantifying due to missing capex data. working_capital: Strong current asset base and large working capital. Continued focus on DSO/collections will be important given the service nature of receivables; the healthy OCF indicates no red flags this period.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed (zeros in the feed). Based on NI of ¥239m and strong liquidity, the capacity to distribute exists, but we cannot assess actual distributions. FCF_coverage: FCF is not computable due to unreported investing cash flows. Financing cash outflow of ¥217m could reflect dividends, share repurchases, or lease/debt repayments, but without DPS data coverage analysis is indeterminate. policy_outlook: Given conservative leverage and steady OCF, a stable-to-cautious payout policy would be financially supportable. Actual policy trends should be validated from company disclosures due to missing XBRL fields.

Risk Assessment

Business Risks:

• Demand cyclicality tied to client R&D, regulatory filings, IP activity, and corporate capex.
• Pricing pressure from machine translation/AI and commoditized segments.
• Talent constraints and wage inflation for specialized translators/editors.
• Project timing risk and utilization variability affecting margins.
• Customer concentration risk in key verticals (e.g., pharma/regulatory, patents).
• Quality/compliance risk in regulated content (potential rework costs, reputational impact).

Financial Risks:

• Receivables concentration and collection timing inherent to B2B services.
• Limited disclosure of cash and investing flows reduces visibility on FCF.
• ROE constrained by low leverage; potential pressure from equity build-up.
• Non-operating income reliance (if persistent) adds volatility to ordinary income.

Key Concerns:

• Sustaining revenue growth amid MT/AI disruption and pricing pressure.
• Maintaining gross margin through mix toward high-value specialized work.
• Working capital management to preserve strong OCF conversion.

Investment Implications

Key Takeaways:

• Stable profitability with slight top-line decline; operating income down less than revenue.
• Healthy cash conversion (OCF/NI 1.55x) supports balance sheet strength.
• ROE modest at 3.54% due to low leverage and moderate margins.
• Liquidity very strong (current ratio ~415%), financial risk low.
• Ordinary income above operating income suggests non-operating tailwinds.
• Data gaps (cash, investing CF, dividends) limit precision on FCF and payout.

Metrics to Watch:

• Order intake/backlog and utilization rates by segment.
• Gross margin and mix shift toward pharma/regulatory and IP translation.
• SG&A efficiency and operating margin progression.
• OCF/NI ratio, DSO/collection trends, and working capital intensity.
• Non-operating items and their sustainability.
• Capex trends to refine FCF assessment; disclosure of DPS/payout.

Relative Positioning: Within small/mid-cap Japanese business services, Honyaku Center appears financially conservative with strong liquidity and cash conversion but exhibits modest ROE and growth, typical of asset-light, low-leverage service models facing technology-driven competitive pressures; differentiation via specialized, regulated content is key to maintaining margins.

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