R&D COMPUTER CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.21B
• Operating Income: ¥676M
• Net Income: ¥364M
• EPS: ¥25.09

Income Statement

Balance Sheet

Cash Flow Statement

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

Land Computer Co., Ltd. (TSE: 3924) reported FY2026 Q2 consolidated results under JGAAP showing resilient profitability despite a topline contraction. Revenue declined 8.0% YoY to ¥6.215bn, yet operating income rose 41.0% YoY to ¥676m, evidencing strong margin expansion and operating leverage. Gross profit was ¥1.220bn, translating to a gross margin of 19.6%, while operating margin improved to 10.9%. Ordinary income reached ¥683m, slightly above operating income due to positive non-operating items, and net income was ¥450m (+23.2% YoY), implying a 7.24% net margin. DuPont metrics indicate ROE of 7.33% (Net margin 7.24% × Asset turnover 0.739 × Leverage 1.37), with an implied ROA of roughly 5.3%. Liquidity is strong: current assets of ¥7.225bn vs. current liabilities of ¥1.758bn yield a current ratio of 411% and quick ratio of 411%, reflecting an asset-light, working-capital-rich profile. Solvency appears conservative with total liabilities of ¥2.354bn and total equity of ¥6.141bn (liabilities-to-equity ~0.38x), and interest expense is minimal at ¥0.53m, producing an interest coverage ratio of ~1,275x. Operating cash flow was solid at ¥430m, equating to 0.96x of net income, which supports earnings quality despite the YoY revenue decline. Financing cash outflows totaled ¥449m, suggesting shareholder returns or debt service, though dividends reported here are unlisted (DPS shown as zero indicates not disclosed). The reported equity ratio of 0.0% and cash balance of ¥0 reflect non-disclosure in the dataset, not actual zeros; the balance sheet otherwise implies a healthy equity base and liquidity. EBITDA was ¥732m with an 11.8% margin, consistent with the operating profit improvement and low D&A intensity (¥55.8m). Effective tax rate is best inferred at approximately 31–32% (income tax of ¥217m vs. pretax of ~¥683m) rather than the reported 0.0% placeholder. Overall, cost discipline and mix appear to have more than offset revenue pressure, delivering improved profitability and healthy cash conversion. Key data gaps—cash and equivalents, investing cash flows, dividend details, and share count—limit precision in FCF and capital allocation assessment. Nevertheless, the company exhibits strong liquidity, low financial risk, and improving margins, positioning it to sustain earnings if demand stabilizes in H2. Monitoring order trends and backlog will be crucial to gauge revenue trajectory and the durability of the margin gains.

Profitability Analysis

ROE of 7.33% decomposes into a 7.24% net margin, 0.739x asset turnover, and 1.37x financial leverage, yielding an implied ROA of ~5.3%. Operating margin stands at 10.9% (¥676m/¥6,215m), up sharply YoY given operating income growth of +41% against an -8% revenue decline—clear evidence of operating leverage and cost control (SG&A efficiency or project mix improvement). Gross margin is 19.6%, indicating disciplined delivery and pricing in a system integration/service model; the spread between gross and operating margins (~8.7pp) suggests tight SG&A management in the period. Ordinary margin of ~11.0% (¥683m/¥6,215m) indicates minor net non-operating gains. EBITDA margin is 11.8%, and D&A is modest (¥55.8m), consistent with an asset-light services profile. Interest burden is negligible (interest expense ¥0.53m), supporting very high interest coverage (~1,275x). Profitability quality is reinforced by tax-normalized net income (implied effective tax rate ~31–32%), despite the dataset’s placeholder of 0.0%. Overall, margin quality appears robust, with mix/efficiency rather than one-off gains driving the uplift based on available data.

Growth Assessment

Revenue declined 8.0% YoY to ¥6.215bn, indicating near-term demand softness or timing of project recognition. Despite the contraction, operating income grew 41.0% YoY to ¥676m, pointing to favorable project mix, improved utilization, and SG&A discipline. Net income increased 23.2% YoY to ¥450m, reflecting both operating momentum and a normalized tax burden. Sustainability hinges on order intake, backlog, and customer investment cycles—data not provided here. Given asset turnover of 0.739x, growth is driven more by execution than asset expansion. The strong operating leverage this quarter may not be fully repeatable if revenue pressure persists; however, the lean cost base could support above-trend margins if sales stabilize in H2. With OCF at 0.96x net income, earnings quality supports the reported profit growth. Outlook depends on visibility into pipeline and potential seasonal skew in second-half deliveries typical for SI businesses; absent that, a cautious but constructive stance on maintaining mid-to-high single-digit operating margins appears reasonable.

Financial Health

Liquidity is strong: current assets ¥7,225m vs. current liabilities ¥1,758m yield a current ratio of 410.9% and quick ratio of 410.9% (inventories not disclosed). Working capital is ample at ¥5,467m, providing a cushion for project execution and receivables timing. Solvency is conservative with total liabilities of ¥2,354m and equity of ¥6,141m, implying liabilities-to-equity of ~0.38x and financial leverage (assets/equity) of 1.37x. Interest expense of only ¥0.53m and coverage of ~1,275x indicate minimal reliance on debt and strong capacity to service obligations. The reported equity ratio of 0.0% and cash balance of ¥0 are non-disclosures, not actual figures; however, balance sheet proportions suggest a healthy equity buffer and likely adequate cash. Overall, the capital structure is low risk with substantial headroom for working capital needs and selective investments.

Cash Flow Quality

Operating cash flow was ¥429.8m, 0.96x of net income (¥450.0m), supporting solid earnings quality and indicating limited accrual build. Working capital appears well managed given positive OCF despite revenue decline, though detailed components (AR/AP changes) are not disclosed. Investing cash flow is unreported (shown as 0), preventing assessment of capex intensity; hence true free cash flow cannot be determined from the dataset. Financing cash flow was an outflow of ¥448.8m, likely reflecting dividends and/or share repurchases or debt repayment; detailed breakdown is unavailable. EBITDA of ¥731.8m vs. OCF of ¥429.8m implies some working capital use or tax/cash interest effects within normal ranges for a midyear period. In sum, cash conversion is healthy on available data, but the absence of capex and cash balance disclosures limits a full FCF quality assessment.

Dividend Sustainability

Dividend data are not disclosed in this dataset (DPS and payout ratio presented as zero are placeholders). Financing cash outflow of ¥448.8m suggests potential shareholder returns or debt service, but without DPS, share count, or dividend amounts, payout ratios cannot be validated. On fundamentals, net income of ¥450m and OCF of ¥430m would ordinarily support modest dividends while preserving balance-sheet strength. FCF coverage cannot be computed reliably due to unreported investing cash flows; therefore, dividend sustainability assessment is constrained. Policy outlook cannot be inferred from the provided data; monitoring official guidance and historical payout practices is necessary once disclosed.

Risk Assessment

Business Risks:

• Revenue volatility from project timing and customer IT investment cycles, as evidenced by -8% YoY sales.
• Utilization and mix risk; margin uplift may reverse if project mix deteriorates.
• Talent acquisition and wage inflation pressures in the SI/IT services market affecting delivery capacity and margins.
• Client concentration risk if top customers account for a significant share of revenue (not disclosed).
• Execution risk on fixed-price projects leading to potential cost overruns.

Financial Risks:

• Limited visibility into cash balances and capex due to unreported CF items.
• Potential working capital swings tied to receivables collections and billing milestones.
• Dividend/return of capital uncertainty given lack of disclosure, which could affect cash reserves.
• Low but non-zero exposure to interest rate changes; however, interest burden appears minimal.

Key Concerns:

• Topline contraction alongside strong margins raises questions about sustainability of operating leverage.
• Data gaps (cash, investing CF, dividend details, share count) constrain full valuation and FCF analysis.
• Dependence on second-half seasonality/backlog to meet full-year growth targets if any.

Investment Implications

Key Takeaways:

• Strong margin expansion: operating margin 10.9% with operating income +41% YoY despite -8% revenue.
• Healthy earnings quality: OCF/NI at 0.96 supports reported profit.
• Robust liquidity: current ratio ~4.1x and sizeable working capital of ¥5.47bn.
• Conservative leverage: liabilities-to-equity ~0.38x; interest coverage ~1,275x.
• Data limitations on cash, investing CF, dividends, and share count limit FCF and payout analysis.

Metrics to Watch:

• Order intake and backlog to gauge revenue recovery trajectory.
• Gross margin and SG&A ratio to assess durability of margin gains.
• OCF conversion and working capital days (DSO/DPO) as project mix shifts.
• Capex and investments once disclosed to refine FCF.
• Dividend announcements and buyback activity to clarify capital allocation.

Relative Positioning: Within Japan’s small-to-mid-cap IT services/system integrator cohort, Land Computer demonstrates above-peer operating leverage in the half on an asset-light base, conservative balance sheet, and solid cash conversion, though smaller scale and current topline softness temper near-term growth visibility.

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