MIYAJI ENGINEERING GROUP,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥28.31B
• Operating Income: ¥2.85B
• Net Income: ¥3.13B
• EPS: ¥67.94

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

Miyaji Engineering Group reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥28.3bn, down 21.6% YoY, reflecting project timing and a softer order conversion in the period. Operating income declined 36.4% YoY to ¥2.85bn, indicating negative operating leverage as fixed costs weighed on a lower top line. Ordinary income was ¥3.00bn, slightly above operating income, suggesting positive non-operating contributions. Net income came in at ¥1.80bn, down 20.0% YoY, with a reported net margin of 6.36%. EBITDA was ¥3.38bn, translating to an 11.9% EBITDA margin, and the implied operating margin is approximately 10.1% (operating income/revenue). DuPont metrics show ROE of 3.68%, driven by a 6.36% net margin, asset turnover of 0.351, and financial leverage of 1.65. Liquidity appears solid with a current ratio of 178.3% and working capital of ¥29.3bn, supported by current assets of ¥66.7bn vs current liabilities of ¥37.4bn. Balance sheet strength is notable: total equity is ¥48.9bn against total assets of ¥80.6bn, implying an equity ratio of ~60.7% (the reported 0.0% is a non-disclosure placeholder). Leverage looks moderate with a debt-to-equity ratio of 0.86x and very high interest coverage of 949x, reflecting minimal interest burden (¥3m interest expense). Cash flow from operations was negative at -¥7.28bn, yielding an OCF/Net income ratio of -4.04, suggestive of a substantial working capital build typical for the steel structure/bridge engineering business during project execution phases. Investing cash flow was not disclosed in the feed, and free cash flow was not available, limiting full cash conversion assessment. The effective tax rate displays as 0.0% due to data limitations, although an income tax line of ¥1.44bn was disclosed; thus tax rate analysis cannot be reliably derived from the provided set. Dividend information (DPS, payout) was not disclosed, so distribution policy or coverage cannot be assessed from this dataset. Overall, profitability remains respectable despite margin compression, liquidity and solvency are sound, but cash conversion was weak in the period and bears monitoring. Given the project-based nature of the business, revenue and cash flow seasonality and timing effects are likely contributors to volatility. Data limitations (several items reported as zero due to non-disclosure) constrain depth on cost structure, inventories/contract assets, investing activities, and capital allocation, and these should be checked against full filings.

Profitability Analysis

ROE of 3.68% decomposes into net margin 6.36% × asset turnover 0.351 × financial leverage 1.65, indicating that profitability is primarily margin-driven with relatively low asset velocity and modest leverage. The operating margin is approximately 10.1% (¥2.847bn / ¥28.307bn), down YoY as operating income fell faster than revenue (-36.4% vs -21.6%), highlighting negative operating leverage in H1. EBITDA margin of 11.9% suggests a limited depreciation drag (D&A ¥0.535bn), consistent with an asset base not overly capital intensive relative to revenue. Ordinary income exceeding operating income (¥2.996bn vs ¥2.847bn) implies positive non-operating contributions (e.g., financial income or other non-operating gains), cushioning operating margin pressure. Interest expense is minimal at ¥3m, producing an interest coverage ratio of 949x, which limits financial drag and supports margin resilience. Gross profit and cost of sales were not disclosed; hence, assessment of direct cost trends, input pass-through, and mix effects at the gross level is not possible from the dataset. The YoY contraction in operating profit underscores fixed-cost absorption issues or less favorable project mix; either a lower volume of high-margin bridge/steel structure projects or pricing pressure may have weighed on margins. Given the project-based nature of the business, quarterly/half-year margin volatility is expected; final margins often normalize with project completions and change orders in H2. Overall, margin quality appears decent at the operating level but is currently compressed; sustaining double-digit OPM will likely depend on backlog quality, cost control, and steel price pass-through. Asset turnover of 0.351 indicates a capital-heavy or working-capital-intensive model over the period; improving turnover via faster billing and collection would benefit ROE. Leverage at 1.65x (assets/equity) contributes moderately to ROE without introducing significant financial risk, which is prudent for a cyclical/project-based business.

Growth Assessment

Revenue declined 21.6% YoY to ¥28.3bn, reflecting slower project execution or delivery scheduling rather than necessarily structural demand loss. Operating income fell 36.4% YoY, outpacing the top-line decline, pointing to negative operating leverage and/or less favorable project mix in the period. Net income decreased 20.0% YoY to ¥1.80bn, with net margin at 6.36%, still solid for the sector but below previous levels. Ordinary income (¥2.996bn) above operating income suggests non-operating support, but reliance on non-operating items is not a sustainable growth driver. With asset turnover at 0.351, volume growth or faster conversion of WIP/contract assets to revenue and cash will be key for sustainable growth. The negative OCF (-¥7.28bn) indicates significant working capital absorption during the half, consistent with active execution phases; normalization commonly occurs as projects reach billing milestones in H2. Without disclosed order backlog/book-to-bill, it is difficult to gauge forward revenue visibility; sector dynamics (public infrastructure, bridge renewal) remain a medium-term tailwind but project timing remains lumpy. Profit quality is acceptable given double-digit operating margin, but the spread between EBITDA and net suggests tax and other below-the-line items can materially influence the bottom line in half-year periods. Outlook hinges on backlog quality, pricing discipline, steel input pass-through, and labor availability; recovery in H2 margins is plausible if higher-margin projects reach delivery. Data limitations (undisclosed cost of sales, inventories/contract assets, investing cash flows) restrict granular growth diagnostics.

Financial Health

Total assets are ¥80.6bn and total equity ¥48.9bn, implying an equity ratio around 60.7% (strong), despite the reported 0.0% placeholder. Total liabilities of ¥42.0bn and current liabilities of ¥37.4bn indicate a conservative capital structure with manageable obligations. Liquidity is robust: current assets ¥66.7bn vs current liabilities ¥37.4bn yields a current ratio of 178.3% and working capital of ¥29.3bn. The quick ratio equals the current ratio because inventories were not disclosed; actual quick liquidity may be lower once inventories/contract assets are considered. Leverage appears moderate with a debt-to-equity ratio of 0.86x, and very low interest expense (¥3m) reduces refinancing and interest-rate sensitivity. The extraordinarily high interest coverage ratio (949x) underscores ample headroom. While solvency and liquidity are strong, the negative operating cash flow in the period highlights execution risk around working capital management; sustained negative OCF across periods would pressure liquidity. No cash and equivalents balance was disclosed in the dataset, limiting precision on immediate cash buffers; however, the large current asset base suggests adequate near-term coverage.

Cash Flow Quality

Operating cash flow of -¥7.28bn versus net income of ¥1.80bn (OCF/NI = -4.04) indicates weak cash conversion in the half, likely driven by increases in receivables, contract assets, or unbilled WIP during project execution. EBITDA of ¥3.38bn and operating income of ¥2.85bn show earnings power is positive; the cash shortfall appears working-capital related rather than profitability driven. Investing cash flow was not disclosed, preventing assessment of capex intensity or growth vs maintenance capex mix. Free cash flow was not provided in the dataset, so we cannot compute FCF coverage of dividends or debt from the current inputs. Given the industry’s milestone billing, OCF can be negative mid-execution and reverse upon delivery/acceptance; hence, monitoring H2 cash conversion is essential. Depreciation of ¥0.535bn suggests moderate capital intensity; if maintenance capex approximates D&A, normalized FCF potential could be healthy when working capital normalizes. The very low interest burden (¥3m) means financing cash drains are limited; however, financing CF of -¥0.879bn implies some outflows (e.g., repayments or dividends), though dividend specifics were not disclosed. Overall, earnings quality appears reasonable, but cash flow quality was weak this period due to timing effects; persistence of negative OCF would be a concern.

Dividend Sustainability

Dividend per share and payout ratio were not disclosed in this dataset (zeros indicate non-disclosure). Consequently, we cannot directly assess headline payout or FCF coverage. From capacity perspective, net income was ¥1.80bn in the half, and balance sheet strength (equity ~¥48.9bn, high liquidity) suggests room for distributions if policy allows. However, negative operating cash flow (-¥7.28bn) in the period would have constrained cash-based coverage of any dividends absent cash reserves or working capital release. Investing cash flows and actual capex were not disclosed, limiting visibility on recurring FCF. Historically, companies in this sector often target stable or progressive dividends aligned with full-year cash generation; given H1 volatility, full-year results are more indicative of sustainability. Policy outlook cannot be inferred from the provided data; confirmation from company guidance or prior-year dividend records is needed.

Risk Assessment

Business Risks:

• Project timing and lumpiness leading to revenue and margin volatility
• Fixed-price contract risk and cost overruns impacting margins
• Steel price fluctuation and pass-through timing affecting profitability
• Labor availability and subcontractor capacity constraints
• Public works budget cycles and order intake variability
• Quality control and safety/inspection risks in large-scale steel structures
• Execution risk on complex bridge/steel projects causing delays and liquidated damages
• Supply chain disruptions for specialized steel and coatings

Financial Risks:

• Working capital swings causing negative operating cash flow during execution phases
• Customer concentration in public-sector clients impacting collection timing
• Potential increase in receivables/contract assets and credit risk on private clients
• Refinancing risk appears low but cannot be fully assessed without debt maturity details
• Limited visibility on capex due to undisclosed investing cash flows

Key Concerns:

• Negative OCF of -¥7.28bn vs ¥1.80bn net income (weak cash conversion in H1)
• Margin compression with operating income down 36.4% on a 21.6% revenue decline
• Insufficient disclosure on cost of sales, inventories/contract assets, and investing CF

Investment Implications

Key Takeaways:

• Revenue down 21.6% YoY with operating income down 36.4% indicates negative operating leverage in H1
• Operating margin ~10.1% and EBITDA margin 11.9% show resilient core profitability despite compression
• ROE at 3.68% is margin-led; asset turnover (0.351) and modest leverage (1.65x) limit overall ROE
• Liquidity and solvency are strong (current ratio 178%, equity ratio ~61%), mitigating financial stress
• Operating cash flow was materially negative (-¥7.28bn), likely timing-driven; watch H2 normalization
• Interest burden is negligible (¥3m), supporting earnings stability
• Non-operating income lifted ordinary income above operating income, but this is not a structural driver

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue visibility
• Contract assets/unbilled receivables and collection cycles to track cash conversion
• Gross margin and project margin mix once disclosed
• Steel price indices and pass-through mechanisms in contracts
• Labor/subcontractor cost trends and capacity utilization
• Capex and investing cash flows to assess FCF potential
• Interest-bearing debt levels and maturities vs debt-to-equity
• H2 OCF and working capital release to validate cash flow normalization

Relative Positioning: Within Japan’s steel bridge/steel structure fabricators, Miyaji Engineering Group demonstrates strong balance sheet quality and high interest coverage, with margins that remain solid but currently compressed; cash flow volatility is in line with project-centric peers, making backlog quality and working capital discipline key differentiators versus competitors.

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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