Hit Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.12B
• Operating Income: ¥268M
• Net Income: ¥165M
• EPS: ¥25.06

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

HIT Co., Ltd. (378A0) delivered solid topline growth in FY2026 Q1, with revenue up 15.4% year on year to ¥1,122m. Gross profit reached ¥653.8m, implying a robust gross margin of 58.3%, indicative of strong pricing power and/or favorable mix in higher-margin services or products. Operating income increased 10.4% YoY to ¥268m, lagging revenue growth and signaling some operating margin compression due to higher SG&A or strategic growth investments. Ordinary income was ¥254m, below operating income, suggesting modest non-operating costs (including ¥2.9m interest expense and other net non-operating losses). Net income came in at ¥165m (+2.0% YoY), materially slower than revenue growth, reflecting margin pressure and a normalizing tax burden. The net margin stood at 14.7%, which is healthy but below the operating margin of 23.9%, as non-operating and tax items weighed on the bottom line. The DuPont breakdown shows ROE of 3.34%, with a net margin of 14.71%, asset turnover of 0.146x, and financial leverage of 1.56x; asset efficiency appears low on a quarterly snapshot basis. Balance sheet strength is notable: total assets were ¥7,686m and equity ¥4,942m, implying an equity ratio of roughly 64.3% (the reported 0.0% equity ratio is an undisclosed metric, not a true zero). Liquidity looks ample with a current ratio of approximately 242% and working capital of about ¥2,417m, though cash breakdown is undisclosed. Leverage is modest with total liabilities of ¥3,070m and a debt-to-equity ratio of 0.62x, and interest coverage is very strong at roughly 92x. The effective tax rate is approximately 35% based on ordinary income and income tax expense, despite the “0.0%” value shown in the summary metrics (which reflects non-disclosure). Operating leverage appears positive but moderating: gross margin remains high, yet operating profits grew slower than sales, indicating higher fixed or semi-fixed costs in the quarter. Cash flow data are not disclosed, limiting assessment of earnings-to-cash conversion and free cash flow. Dividend data are not disclosed (DPS and payout appear as zero), so capital return policy visibility is low this quarter. Overall, the quarter shows healthy growth and profitability with a strong balance sheet, but with margin compression at the operating and net levels and limited visibility on cash flow and shareholder returns due to non-disclosures.

Profitability Analysis

ROE decomposition (DuPont): Net margin 14.71% x Asset turnover 0.146x x Financial leverage 1.56x = ROE 3.34%. Operating margin is 23.9% (¥268m / ¥1,122m), ordinary margin 22.6% (¥254m / ¥1,122m), and net margin 14.7% (¥165m / ¥1,122m). Gross margin of 58.3% indicates a high-value offering and/or favorable pricing, though operating expenses increased enough to limit operating profit growth relative to revenue (+10.4% vs +15.4% YoY). SG&A (implied) was approximately ¥385.8m (gross profit minus operating profit), suggesting some cost pressure or stepped-up investments. Non-operating items were a net drag (ordinary income ¥254m vs operating income ¥268m), including interest expense of ¥2.9m and other net non-operating costs. Interest coverage is strong at ~91.6x, confirming limited financing burden on profitability. Effective tax rate is about 35% (¥89.6m tax on ~¥254m pre-tax), contributing to the slower net income growth relative to operating income. Operating leverage: revenue outpaced operating profit, implying modest deleveraging this quarter; sustaining gross margin while managing SG&A will be key to re-accelerate operating profit growth. Overall profitability quality is solid at the gross level, with some compression at operating and net levels.

Growth Assessment

Revenue growth of +15.4% YoY is strong, suggesting healthy demand or successful business development. Operating income growth of +10.4% YoY lagged sales, pointing to higher cost intensity or upfront spending for growth. Net income grew only +2.0% YoY, reflecting non-operating items and a normalized tax rate. Gross margin remains high at 58.3%, supporting revenue sustainability if pricing and mix can be maintained. Ordinary income trailing operating income indicates that non-operating losses or lower financial income slightly weighed on growth. The implied tax rate (~35%) is within a normal Japanese range under JGAAP and may remain a headwind versus prior periods if earlier quarters benefited from lower taxes. Asset turnover at 0.146x (quarterly snapshot) looks low but is expected for a single quarter; annualized turnover could be closer to ~0.6x if sales cadence holds. Outlook hinges on managing SG&A to restore operating leverage; with strong gross margins, incremental revenue could translate to improved operating profit if cost discipline is maintained. Sustainability appears reasonable given the margin profile, but confirmation requires subsequent quarters’ order trends and churn/retention indicators (not disclosed).

Financial Health

Liquidity is strong: current assets ¥4,118m vs current liabilities ¥1,702m yields a current ratio ~242%, and working capital ~¥2,417m. Quick ratio appears ~242% as inventories are undisclosed (treated as not reported). Solvency is sound with total liabilities ¥3,070m and equity ¥4,942m; debt-to-equity is ~0.62x, indicating moderate leverage. Based on the balance sheet, the equity ratio (equity/assets) is approximately 64.3%, despite the reported 0.0% (non-disclosure), underscoring a conservative capital structure. Interest burden is minimal, with interest expense of ¥2.9m and interest coverage of ~92x. No cash and equivalents breakdown is disclosed this quarter, limiting direct assessment of near-term liquidity buffers; however, the overall current asset base is ample relative to obligations.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow are not disclosed for the quarter (values shown as zero reflect non-disclosure). As a result, OCF/Net Income and free cash flow cannot be reliably assessed this period. Earnings quality thus cannot be cross-validated against cash conversion, and working capital dynamics (collections, payables timing) are not visible. Given the strong current ratio and working capital position, liquidity appears adequate, but confirmation via OCF trend is pending future disclosure. Monitor receivables growth versus sales and any buildup in work-in-progress or contract assets (not disclosed) to gauge cash realization.

Dividend Sustainability

Dividend per share is not disclosed for the period (the 0.00 indicates non-disclosure), and payout ratio and FCF coverage metrics are therefore not interpretable this quarter. Without OCF/FCF data and share information, we cannot assess coverage. Balance sheet strength (equity ratio ~64%) suggests capacity for distributions if policy supports it, but there is no explicit visibility on dividend policy or cadence from this dataset. Future sustainability assessment will require DPS, earnings trajectory, and FCF trends.

Risk Assessment

Business Risks:

• Operating margin compression due to rising SG&A or growth investments
• Dependence on maintaining high gross margins; adverse pricing or mix shifts could pressure profitability
• Potential demand cyclicality if end-markets slow, impacting asset turnover and operating leverage
• Execution risk in scaling operations while controlling fixed costs
• Limited disclosure on order backlog and retention metrics, constraining visibility

Financial Risks:

• Cash flow visibility is limited due to non-disclosure of OCF/FCF
• Tax rate normalization (~35%) reduces net earnings growth sensitivity
• Non-operating losses (albeit small) could persist and weigh on ordinary income
• Refinancing or interest rate risk is low currently but could rise if leverage increases

Key Concerns:

• Margin compression with operating income growth lagging revenue growth
• Absence of cash flow data impedes assessment of earnings quality and FCF generation
• Dividend policy and capital return not disclosed, limiting shareholder return visibility

Investment Implications

Key Takeaways:

• Strong top-line growth (+15.4% YoY) with high gross margin (58.3%) indicates a solid core business
• Operating leverage softened; operating income grew +10.4% YoY versus sales growth
• Net income growth (+2.0% YoY) affected by non-operating items and a ~35% effective tax rate
• Balance sheet is conservative with an implied equity ratio of ~64% and D/E of ~0.62x
• Interest coverage ~92x indicates minimal financing pressure
• Cash flow and dividend data are not disclosed this quarter, limiting visibility on cash conversion and capital returns

Metrics to Watch:

• Operating margin trend and SG&A intensity
• OCF and FCF once disclosed; OCF/Net Income conversion
• Order intake/backlog and revenue visibility indicators
• Effective tax rate stability
• Asset turnover (sales vs total assets) and working capital turns
• Any updates to dividend policy or share repurchase activity

Relative Positioning: Within its peer set, the company appears to combine high gross margins and conservative leverage, which is favorable for resilience, but near-term relative performance may hinge on restoring operating leverage and demonstrating consistent cash conversion once cash flow data are available.

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