Kyoritsu Computer & Communication Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.38B
• Operating Income: ¥252M
• Net Income: ¥175M
• EPS: ¥146.21

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

Kyoryo Information & Communication Co., Ltd. (TSE:36700, non-consolidated, JGAAP) delivered a strong FY2026 Q2 performance with revenue of ¥2,376 million, up 10.1% year over year, indicating solid demand in its systems/IT services mix. Profitability improved markedly: operating income rose 178.6% YoY to ¥252 million, and net income climbed 184.9% YoY to ¥175 million, signifying significant operating leverage and better cost control. Gross profit reached ¥833 million, translating to a 35.1% gross margin, while operating margin expanded to approximately 10.6%, and ordinary margin to 10.7%. Net profit margin was 7.37%, consistent with the DuPont inputs, and EPS came in at ¥146.21 for the period. The DuPont breakdown shows ROE of 7.85%, supported by net margin of 7.37%, asset turnover of 0.704x, and financial leverage of 1.51x—implying an equity ratio of roughly 66% despite the equity ratio field being unreported in the XBRL. The balance sheet is conservative with total assets of ¥3,373 million, liabilities of ¥1,079 million (D/E of 0.48x), and ample working capital of ¥1,543 million, supporting high liquidity (current ratio ~300%). Operating cash flow was ¥106 million (OCF/NI of 0.61), indicating weaker cash conversion this half, likely from working capital build typical in project-driven businesses. Depreciation was modest at ¥28 million, and interest burden negligible (interest expense ~¥0.083 million; coverage >3,000x), underscoring minimal financial risk. Reported effective tax rate in the “Calculated Metrics” appears anomalous at 0.0%; using available figures (ordinary income ¥255 million, income tax ¥31 million) implies a low-teens effective tax rate on an interim basis, suggesting the 0.0% is a non-usable placeholder. Cash, investing cash flows, dividend and share count disclosures show zeros, which reflect non-disclosure rather than actual zeros; consequently, free cash flow and payout metrics cannot be fully validated. Despite the cash flow disclosure gaps, the non-consolidated balance sheet and strong profitability trajectory indicate a healthy operating position into the second half. The step-up in operating income relative to revenue growth suggests improved project mix, utilization, and/or pricing, but sustainability will depend on backlog quality and labor availability. With single-entity reporting, group-wide dynamics and subsidiary contributions are not visible, limiting cross-entity risk assessment. Overall, fundamentals show clear earnings momentum, sound solvency, and high liquidity, offset by interim cash conversion softness and disclosure limitations on cash, investing activity, and dividends. Near-term performance hinges on execution of larger projects, delivery timing into H2, and maintaining cost discipline amid wage inflation. Investors should monitor orders/backlog, receivables trends, and any updates to dividend policy or capital allocation.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 7.37% (¥175m / ¥2,376m)
• asset_turnover: 0.704x
• financial_leverage: 1.51x (implies equity ratio ~66%)
• calculated_ROE: 7.85% (matches reported DuPont ROE) margin_quality:
• gross_margin: 35.1% (¥833m GP)
• operating_margin: 10.6% (¥252m OI)
• ordinary_margin: 10.7% (¥255m)
• net_margin: 7.37% (¥175m)
• commentary: Substantial YoY operating margin expansion (OI +178.6% on revenue +10.1%) indicates improved mix, utilization, and SG&A efficiency. Low D&A (¥28m) points to earnings driven primarily by operating efficiency rather than depreciation-driven accounting effects. operating_leverage: High in the period: revenue growth of +10.1% translated into +178.6% operating income growth, suggesting strong flow-through and possibly reversal of prior period cost pressures or completion of higher-margin projects.

Growth Assessment

revenue_sustainability: Revenue grew 10.1% YoY to ¥2,376m, indicative of resilient demand in IT services/integration. Sustainability depends on backlog, client concentration, and project timing; no order/backlog data provided. profit_quality: Profit expansion outpaced revenue on higher margins. Interest and non-operating items had minimal impact (ordinary ≈ operating), pointing to core-driven growth. Effective tax rate in provided metrics (0.0%) is not reliable; implied interim ETR is low-teens. outlook: If H2 maintains mix and utilization, full-year margins could remain elevated. Risks include delivery slippage into subsequent periods, wage inflation compressing margins, and limited staffing capacity. Lack of consolidated data tempers visibility.

Financial Health

liquidity:

• current_ratio: 299.9% (CA ¥2,314m / CL ¥772m)
• quick_ratio: 299.9% (inventory not disclosed; ratio likely overstated if inventories exist)
• working_capital: ¥1,542.5m
• commentary: Strong short-term liquidity supported by sizable current assets; cash and equivalents not disclosed, so actual cash buffer is unknown. solvency:
• debt_to_equity: 0.48x (Liabilities ¥1,079m / Equity ¥2,228m)
• interest_coverage: 3,036x (EBIT approx. ¥252m vs. interest expense ¥0.083m)
• equity_ratio: Not disclosed in XBRL (0.0% placeholder); implied equity/asset ~66% using DuPont leverage.
• commentary: Low leverage and negligible interest burden indicate robust solvency and capacity to absorb shocks. capital_structure: Balance sheet is equity-heavy with modest liabilities. No data on interest-bearing debt breakdown or cash; net cash position cannot be determined.

Cash Flow Quality

earnings_quality: OCF/NI at 0.61 indicates weaker cash conversion this half, likely from working capital build (e.g., higher receivables or contract assets) typical in project cycles. FCF_analysis: Free cash flow cannot be determined because investing cash flows and capex are not disclosed (0 indicates non-reporting). Operating CF was ¥106m; D&A ¥28m suggests low capital intensity, but maintenance capex remains unknown. working_capital: Current assets ¥2,314m and current liabilities ¥772m imply a sizable working capital base that can swing cash flows intra-year. Monitoring AR days, unbilled receivables/contract assets, and payables is key.

Dividend Sustainability

payout_ratio_assessment: Payout ratio shown as 0.0% reflects non-disclosure; EPS ¥146.21 suggests capacity for distribution, but no confirmed DPS data for the period. FCF_coverage: FCF coverage cannot be assessed without capex/investing CF. OCF of ¥106m provides a starting point, but sustainability hinges on cash conversion in H2. policy_outlook: No dividend policy details provided. With low leverage and solid profitability, the balance sheet appears capable of supporting ordinary dividends if corporate policy allows; confirmation requires management guidance.

Risk Assessment

Business Risks:

• Project timing and acceptance risk leading to revenue and margin volatility between quarters/halves.
• Client concentration risk typical for SI/IT services (not disclosed here).
• Labor market tightness and wage inflation affecting delivery capacity and margins.
• Execution risk on larger or fixed-price projects.
• Technology/vendor dependency and potential delays in partner ecosystems.

Financial Risks:

• Cash conversion risk evidenced by OCF/NI of 0.61 this half.
• Limited visibility into cash and investing cash flows due to non-disclosure.
• Potential receivables concentration and collection timing risk.
• Single-entity (non-consolidated) reporting obscures group-level financial exposures.

Key Concerns:

• Sustainability of elevated operating margins into H2.
• Working capital swings that may dampen cash generation.
• Disclosure gaps (cash, investing CF, dividends) limiting full assessment.

Investment Implications

Key Takeaways:

• Strong earnings momentum: revenue +10.1% YoY, operating income +178.6% YoY.
• Material margin expansion with operating margin ~10.6% and net margin 7.37%.
• Robust balance sheet: D/E 0.48x, implied equity ratio ~66%, interest coverage >3,000x.
• Cash conversion softer (OCF/NI 0.61); monitor working capital normalization in H2.
• Disclosure limitations on cash, investing CF, and dividends constrain full FCF and payout assessment.

Metrics to Watch:

• Order backlog and book-to-bill to gauge sustainability of revenue growth.
• Receivables days and unbilled/contract assets to track cash conversion.
• Gross and operating margins by project/service line for mix durability.
• Headcount, utilization, and wage trends for capacity and cost pressure.
• Any updates on dividend policy and capital allocation.

Relative Positioning: Within Japanese small-cap IT services, the company exhibits above-peer interim margin expansion and conservative leverage, offset by weaker cash conversion this half and disclosure gaps versus best-in-class peers that provide fuller cash and dividend information.

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