Ascentech K.K. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥14.07B
• Operating Income: ¥2.48B
• Net Income: ¥584M
• EPS: ¥118.11

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

Verdict: A strong Q3 FY2026 with outsized profit growth and a step-change in margins, albeit with limited cash flow disclosure and some data inconsistencies that warrant caution. Revenue rose 51.8% YoY to 140.73, driving operating income up 256.8% YoY to 24.83 and net income up 188.8% YoY to 16.86. Estimated operating margin expanded to 17.6% (24.83/140.73), up roughly 1,014 bps from an implied ~7.5% in the prior-year period based on the provided growth rates. Net margin reached 12.0% (16.86/140.73), expanding by an estimated ~568 bps YoY from an implied ~6.3%. Gross margin is reported at 9.2%, but the relationship between revenue, cost of sales, and gross profit appears internally inconsistent; we rely on the provided margin datapoint. ROE is robust at 28.8% (Net margin 12.0% × Asset turnover 0.421 × Financial leverage 5.71x), underscoring both improved profitability and high asset leverage. Liquidity is solid with a current ratio of 165.5% and quick ratio of 165.5%, supported by cash and deposits of 60.08 against current liabilities of 50.46. Leverage appears conservative by liability-based metrics (D/E 0.87x), while DuPont leverage (Assets/Equity at 5.71x) indicates a relatively small equity base funding a sizable asset base. Interest burden is negligible (interest expense ~0), and the interest coverage ratio is extremely high. Earnings quality cannot be validated due to unreported operating cash flow and free cash flow, a key limitation. The P/L line items show anomalies (ordinary income > profit before tax and net income), suggesting potential special items or classification differences; we flag this but cannot reconcile without footnotes. Working capital is manageable with accounts receivable at 14.18 and accounts payable at 35.74, though the payables-heavy structure implies supplier credit risk management is important. The low payout ratio (13.0%) implies good flexibility for reinvestment and/or future shareholder returns, subject to FCF. Overall, the quarter signals strong demand and operating leverage realization, but sustainability depends on maintaining top-line momentum and validating cash conversion once cash flow statements are available. Forward-looking, the company appears positioned to invest in growth given liquidity and low financing costs, though revenue volatility and industry dynamics (IT infrastructure/VDI solutions exposure) remain key variables.

Profitability Analysis

ROE decomposition: ROE 28.8% = Net profit margin 12.0% × Asset turnover 0.421 × Financial leverage 5.71x. The largest YoY driver appears to be net profit margin expansion, inferred from revenue rising 51.8% while operating income rose 256.8% and net income 188.8%. Business context: the significant operating leverage suggests either a richer mix (higher-margin solutions/services), pricing discipline, and/or cost efficiencies, with SG&A not scaling as fast as sales in this period (SG&A reported at 5.97, no YoY given). Sustainability: part of the margin expansion could be structural if driven by mix/scale effects, but an element may be one-time (e.g., favorable project timing, low discounting, or unreported special gains/credits), especially given the reported anomalies between ordinary income, profit before tax, and net income. Operating leverage is clearly positive this quarter (OI growth >> revenue growth), but can reverse if growth slows or if costs normalize. Watch for any reversal in gross margin, as the reported 9.2% appears low relative to the operating margin computed; this inconsistency may reflect classification differences that could normalize in later periods.

Growth Assessment

Top-line growth of 51.8% YoY is strong and broad enough to drive outsized profit gains through operating leverage. Operating income growth of 256.8% YoY and net income growth of 188.8% YoY indicate successful scaling and likely favorable mix. The implied operating margin expansion (~1,014 bps YoY) and net margin expansion (~568 bps YoY) underscore improved profitability levels vs. the prior year. Sustainability hinges on repeatability of the revenue drivers (e.g., enterprise IT refresh cycles, VDI projects, and subscription/services attachment) and the degree to which cost discipline can be maintained as activity normalizes. With limited disclosure on R&D and SG&A composition, it is difficult to assess whether efficiency gains are structural. In the near term, the strong balance of cash provides capacity to support growth (inventory where relevant, receivables financing, and delivery capabilities). However, absent cash flow data, we cannot confirm cash conversion of growth, and heavy reliance on payables could mask working capital needs if supplier terms tighten.

Financial Health

Liquidity is solid: current ratio 1.66x (83.50 current assets / 50.46 current liabilities) and quick ratio 1.66x (no inventories reported). No warning thresholds breached (Current Ratio > 1.0, D/E 0.87x < 2.0). Cash and deposits of 60.08 exceed current liabilities of 50.46, lowering short-term refinancing risk. Maturity mismatch risk appears low given the cash buffer and no reported short-term loans. Solvency: total liabilities of 51.07 vs total equity of 58.53 yields a conservative liability-based D/E of 0.87x; interest-bearing debt is unreported, and interest expense is effectively zero, implying minimal financial risk from borrowing. Note: The balance sheet totals show inconsistencies (total assets 334.17 vs the sum of reported current and noncurrent assets), suggesting missing classifications; conclusions rely on the disclosed subtotals. No off-balance sheet obligations are reported in the provided data.

Cash Flow Quality

Operating cash flow and free cash flow are unreported; OCF/Net Income cannot be assessed and may represent a material information gap. Therefore, we cannot validate earnings quality via cash conversion nor assess cash-based coverage of dividends and capex. Working capital indicators: accounts receivable 14.18 vs accounts payable 35.74 suggests a payables-funded working capital structure; this supports cash, but if supplier terms normalize, cash needs could increase. No signs of working capital manipulation can be confirmed or rejected due to insufficient disclosure (no inventory, OCF, or detailed WC rollforward). Given elevated profit growth vs. revenue, we will monitor for any future period reversal in accruals once cash flow statements are available.

Dividend Sustainability

Payout ratio is reported at a low 13.0%, which appears conservative relative to earnings and suggests capacity to sustain or modestly raise dividends under stable conditions. However, DPS and total dividends paid are unreported, and FCF coverage cannot be calculated. With cash of 60.08 and no evident debt service burden, near-term dividend affordability looks comfortable on an earnings basis. Policy visibility is limited due to lack of explicit DOE/target payout disclosures. We assume no significant capex burden given the business model, but this cannot be confirmed without CF data.

Risk Assessment

Business Risks:

• Revenue concentration risk in enterprise IT/VDI/virtualization demand cycles and project timing.
• Gross-to-operating margin inconsistency suggests potential classification or mix volatility.
• Supplier dependency and potential tightening of payment terms given high accounts payable vs receivables.
• Execution risk in scaling services and solutions delivery as volumes grow.
• Pricing pressure and competitive intensity in IT infrastructure and software distribution.

Financial Risks:

• Earnings quality uncertainty due to unreported operating and free cash flows (OCF/NI not calculable).
• Balance sheet classification inconsistencies (assets subtotal mismatch), limiting precise ratio analysis.
• High asset-to-equity leverage (5.71x) in DuPont terms increases sensitivity of ROE to profitability swings.
• Potential tax and extraordinary item volatility given PBT vs ordinary income vs net income anomalies.

Key Concerns:

• Sustainability of margin expansion after an exceptionally strong quarter.
• Working capital reliance on payables; reversal risk if supplier terms change.
• Limited visibility on investment needs (capex, R&D) and cash commitments due to disclosure gaps.

Investment Implications

Key Takeaways:

• Top-line growth (+51.8% YoY) translated into outsized profit growth (OI +256.8%, NI +188.8%).
• Operating margin estimated at 17.6%, up ~1,014 bps YoY; net margin 12.0%, up ~568 bps YoY.
• ROE is strong at 28.8% driven primarily by margin expansion and high asset leverage.
• Liquidity is healthy (current ratio 1.66x; cash 60.08 > current liabilities 50.46) with negligible interest burden.
• Earnings quality and FCF sustainability cannot be confirmed due to absent cash flow data.

Metrics to Watch:

• Operating cash flow and OCF/Net Income once disclosed.
• Gross margin and operating margin trends to confirm structural improvements.
• Receivables and payables turns (DSO/DPO) to gauge working capital sustainability.
• Order backlog/pipeline indicators and renewal/attach rates for services/software.
• Any reconciliation of ordinary income, PBT, and net income to identify special items.

Relative Positioning: Within Japanese IT infrastructure/virtualization peers, the company exhibits superior near-term growth and margin expansion with conservative liability leverage and strong liquidity, but with below-average disclosure on cash flows and some financial statement inconsistencies that temper comparability and raise the bar for validating sustainability.

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