Japan System Techniques Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.93B
• Operating Income: ¥1.69B
• Net Income: ¥677M
• EPS: ¥44.77

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

Japan System Techniques Co., Ltd. (4323) delivered a strong FY2026 Q2 consolidated result under JGAAP, with clear signs of positive operating leverage and margin expansion. Revenue grew 12.6% year over year to ¥14,929 million, demonstrating solid demand momentum across its systems/software businesses. Operating income rose 61.9% YoY to ¥1,693 million, significantly outpacing top-line growth and lifting the operating margin to roughly 11.3%, a step-up consistent with improved mix and cost discipline. Ordinary income reached ¥1,720 million, indicating stable non-operating items and negligible financing costs. Net income increased 64.7% YoY to ¥1,106 million, translating to a net margin of 7.41% at the half-year mark. DuPont decomposition yields an ROE of 7.30% (net margin 7.41% × asset turnover 0.655 × financial leverage 1.50), aligning with the reported figure. Gross margin was 23.1%, reflecting value-add in project execution and/or a higher contribution from proprietary or higher-margin service lines. EBITDA was ¥1,778.979 million and the EBITDA margin was 11.9%, indicating low D&A intensity (depreciation and amortization of ¥85.979 million), consistent with an asset-light software/SI profile. Liquidity is strong with a current ratio of 274.8% and quick ratio of 273.1%, supported by ample current assets versus modest current liabilities. The capital structure is conservative: total liabilities/ equity is 0.53x and interest expense is only ¥0.862 million, driving a very high interest coverage (approx. 1,964x). Operating cash flow of ¥587.718 million lagged net income (OCF/NI 0.53x), likely reflecting working capital build typical for the first half in project-based businesses; this should be monitored but is not uncommon seasonally. Financing cash flow was an outflow of ¥588.225 million, suggesting shareholder returns or debt reduction, though specific line items were not disclosed. Several line items show as zero (e.g., cash and equivalents, investing CF, equity ratio, DPS, shares), which indicates non-disclosure in the dataset rather than true zeros; conclusions are therefore based on the available non-zero data. Tax expense of ¥399.916 million implies a normal tax burden despite the calculated “Effective Tax Rate: 0.0%” being an unreported placeholder; the implied tax rate appears broadly in a mid-20s range. Overall, the company exhibits strong profitability trends, tight cost control, robust liquidity, and minimal financial risk, with the main near-term analytical focus on the conversion of earnings to cash through the second half.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 7.41%
• asset_turnover: 0.655
• financial_leverage: 1.5
• calculated_ROE: 7.30%
• commentary: ROE uplift is driven mainly by margin expansion and steady asset turnover; leverage is modest and not the primary driver. margin_quality: Gross margin at 23.1% and operating margin at ~11.3% show improved operating efficiency YoY, with operating income up 61.9% on 12.6% revenue growth. Low D&A (¥85.979m) results in EBITDA margin (11.9%) only slightly above operating margin, suggesting limited capital intensity and clean operating profitability. operating_leverage: Strong positive operating leverage evident: +61.9% operating income on +12.6% revenue indicates SG&A discipline/mix benefits. The gap between gross and operating margins suggests opex scaling favorably as revenue grows.

Growth Assessment

revenue_sustainability: Revenue grew 12.6% YoY to ¥14,929m, indicating healthy demand. Given the SI/software business seasonality (back-half weighted), H1 growth is encouraging and suggests a supportive order environment. profit_quality: Operating and net profit growth (+61.9% and +64.7% YoY) exceeded revenue growth, underscoring mix improvements and cost leverage. Interest burden is negligible (¥0.862m), and ordinary income tracks operating performance closely. outlook: If project execution and mix tailwinds persist into H2, full-year margins could land above the prior year. Key to sustaining growth will be backlog conversion, headcount productivity, and pricing power on new wins.

Financial Health

liquidity: Current ratio 274.8% and quick ratio 273.1% indicate ample short-term liquidity. Working capital of ¥10,589.198m provides a strong buffer against project timing fluctuations. solvency: Total liabilities/ equity of 0.53x and extremely high interest coverage (~1,964x) reflect low financial risk and minimal reliance on debt financing. capital_structure: Assets ¥22,775m vs equity ¥15,155m (leverage 1.50x). The equity ratio is shown as 0.0% in the dataset but is undisclosed rather than zero; based on assets and equity, the implied equity ratio would be approximately 66.6%.

Cash Flow Quality

earnings_quality: Operating CF of ¥587.718m equals 0.53x net income (¥1,106m), indicating weaker cash conversion in H1, likely due to receivables build and project work-in-progress typical of SI seasonality. Low interest and D&A reinforce that accounting earnings are not materially inflated by non-cash or financing items. FCF_analysis: Free cash flow cannot be precisely determined due to undisclosed investing cash flows and capex. Using OCF as a proxy is conservative; sustained H2 collections would be needed to confirm full-year FCF generation. working_capital: Inventories are minor (¥100.632m), implying the main working capital drivers are receivables and unbilled work. The large positive working capital base supports operations but can create timing-related OCF volatility.

Dividend Sustainability

payout_ratio_assessment: Dividend data (DPS, payout ratio) are undisclosed in the dataset. Given net income of ¥1,106m and historically conservative balance sheet, capacity for shareholder returns likely exists, but no definitive assessment can be made without actual DPS. FCF_coverage: Not assessable due to missing capex and investing CF data. OCF coverage alone is 0.53x NI in H1, which is seasonally weak and not indicative of full-year coverage. policy_outlook: If H2 cash conversion normalizes and profitability momentum continues, there is room for stable or improving distributions; however, confirmation requires disclosed dividend policy and full-year cash flow.

Risk Assessment

Business Risks:

• Project execution and acceptance timing risk affecting revenue recognition and OCF.
• Client concentration risk typical in SI/enterprise software segments.
• Talent retention and wage inflation pressure impacting delivery margins.
• Competition and pricing pressure from larger SIers and cloud-native vendors.
• Technology shift risk (cloud, AI, cybersecurity) requiring continual investment.

Financial Risks:

• Working capital swings leading to volatile OCF despite stable earnings.
• Potential for longer receivables cycles in large projects.
• Limited disclosure on investing cash flows capex/M&A could alter cash needs.
• FX exposure if there are overseas projects or imported tools/licenses (not disclosed).

Key Concerns:

• H1 cash conversion (OCF/NI 0.53x) below 1.0x; need to see H2 normalization.
• Limited visibility on dividends and share count due to undisclosed data.
• Dependence on H2 seasonality to achieve full-year targets.

Investment Implications

Key Takeaways:

• Strong H1 topline growth (+12.6% YoY) with outsized profit expansion (OP +61.9%, NP +64.7%).
• Margin profile improving: OP margin ~11.3%, gross margin 23.1%, low D&A intensity.
• Robust balance sheet and negligible interest burden (coverage ~1,964x).
• Cash conversion lagging in H1 (OCF/NI 0.53x) likely due to working capital build.
• Multiple disclosures (cash, equity ratio, DPS, shares) are missing, limiting precision on per-share and payout analysis.

Metrics to Watch:

• H2 operating cash flow and collections (OCF/NI > 1.0x target over full year).
• Backlog, order intake, and book-to-bill to gauge revenue sustainability.
• Headcount productivity and subcontracting ratio to monitor margin resilience.
• SG&A ratio and pricing on new projects to assess operating leverage durability.
• Capex and investing CF disclosure for FCF clarity and dividend capacity.

Relative Positioning: Within Japanese mid-cap SI/software peers, JST appears operationally efficient with improving margins and conservative leverage; the primary differentiation will hinge on sustained H2 cash conversion and visibility into shareholder return policy.

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