Altech Corporation FY2026 Q2 Earnings Report

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Executive Summary

For the second quarter of the fiscal year ending December 2026, revenue increased while profit declined, as higher cost of sales and deteriorating profitability in the Global Business put pressure on earnings. Revenue was ¥270.2B (+6.6% YoY), maintaining a trend of revenue growth for the sixth consecutive period, while Operating Income was ¥24.5B (down 9.0% YoY), Ordinary Income was ¥25.4B (down 10.1% YoY), and Net Income was ¥16.8B (down 10.5% YoY), with all three declining. The primary factors were deterioration in the gross profit margin (22.2%, down from 23.7% in the same period last year) and a sharp 65.2% YoY decline in Operating Income in the Global Business by segment. The financial base remains sound, with a substantial Equity Ratio of 69.7%.

Factors Affecting Performance

【Revenue】The core OutSourcingService Business led overall performance, with revenue of ¥246.1B (+7.0% YoY; 91.0% of total revenue). The Global Business generated ¥23.7B (+2.9% YoY; 8.8% of total revenue), while other segments generated ¥0.6B (+7.5% YoY; 0.2% of total revenue), with all segments securing revenue growth. Company-wide Revenue was ¥270.2B (+6.6% YoY), with the primary driver of growth being expansion of the customer base in the core business.

【Profit and Loss】The gross profit margin was 22.2%, down from 23.7% in the same period last year, with the pace of increase in the cost of sales exceeding revenue growth and representing the primary cause of margin pressure. The SG&A ratio was 13.1%, essentially flat year over year (+0.1pt or thereabouts), indicating that cost management itself was generally maintained. The Operating Income margin was 9.1%, down approximately 1.5pt from 10.6% in the same period last year, and the decline in operating earnings flowed directly through to Ordinary Income and Net Income. Since non-operating income and expenses were approximately balanced (non-operating income of ¥1.4B and non-operating expenses of ¥0.5B), the decline in Ordinary Income was attributable primarily to deterioration in Operating Income. Net Income reflects Profit Before Tax of ¥25.4B less income taxes and other taxes of ¥8.5B (effective tax rate: 33.6%), with no significant change in the tax rate itself. In conclusion, the current period resulted in higher revenue but lower profit.

Segment Analysis

By segment, the core OutSourcingService Business generated revenue of ¥246.1B (+7.0%), Operating Income of ¥23.3B (+0.9%), and a profit margin of 9.5% (down from 10.0% in the same period last year). Although it secured revenue growth, its profit margin deteriorated somewhat. The Global Business generated revenue of ¥23.7B (+2.9%), while Operating Income plunged to ¥1.4B (down 65.2%), resulting in a profit margin of 6.1%, a significant decline from 18.0% in the same period last year. Most of the decline in the company-wide profit margin was attributable to deteriorating profitability in the Global Business, likely reflecting changes in utilization rates and the pricing mix. The Other segment (the business of housing for seniors with support services) generated revenue of ¥0.6B (+7.5%) and recorded an Operating Loss of ¥0.3B, with the loss narrowing from the previous year. OutSourcingService accounted for 91.0% of the revenue mix, indicating a high degree of business concentration.

Key Financial Metrics

【Profitability】The Operating Income margin was 9.1%, down from 10.6% in the same period last year, while the Net Income margin also declined to 6.2% from 7.4%. The gross profit margin contracted to 22.2% from 23.7% in the same period last year, with rising costs representing the primary factor behind the deterioration in profitability.【Cash Quality】Accounts receivable increased 10.0% YoY to ¥80.1B, accumulating at a faster pace than the 6.6% growth in Revenue. Accounts payable increased 62.8% YoY to ¥3.8B, but the absolute amount is small and its impact on overall funding remains limited.【Investment Efficiency】ROE was 8.0%, with the decline in the Net Income margin serving as the primary downward factor, while financial leverage remained low and stable at 1.44x. Total asset turnover was 0.89x for the current period (on a semiannual basis), approximately in line with the previous year, with no significant change in asset efficiency.【Financial Soundness】The Equity Ratio remained at the same level as the previous year at 69.7%, while the Current Ratio was 268.6%, securing substantial liquidity. Interest-bearing debt was extremely small, and the conservative financial structure was characterized by Cash and Deposits of ¥141.1B, substantially exceeding short-term liabilities.

Cash Flow Analysis

Since cash flow statement data has not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and Deposits were ¥141.1B, essentially flat from ¥141.2B at the end of the previous fiscal year, with no significant change in funds observed. Accounts receivable were ¥80.1B, up 10.0% YoY and accumulating at a faster pace than the 6.6% revenue growth rate, potentially indicating that a lengthening collection cycle is somewhat slowing the pace of cash generation. Meanwhile, Accounts payable increased 62.8% (an absolute increase of ¥1.5B), partially offsetting this effect from a working capital perspective. Total assets increased to ¥303.0B (¥293.1B in the previous period), while net assets increased to ¥211.1B (¥204.4B), indicating continued expansion of the financial base, primarily driven by the accumulation of retained earnings.

Quality of Earnings

Current-period earnings were centered on operating results, with extraordinary income of ¥0.0B and extraordinary losses of ¥0.0B, indicating that the impact of one-time factors was extremely limited. Non-operating income consisted of dividend income of ¥0.3B and other income of ¥0.9B, while foreign exchange losses accounted for ¥0.3B of non-operating expenses of ¥0.5B. The gap of approximately ¥8.6B between Ordinary Income of ¥25.4B and Net Income of ¥16.8B was primarily attributable to income taxes and other taxes of ¥8.5B (effective tax rate: 33.6%), with no unusual factors other than the tax burden identified. The fact that Accounts receivable are increasing faster than revenue suggests that a certain divergence is emerging between accrual-based revenue recognition and the timing of cash conversion, warranting monitoring when assessing earnings quality.

Earnings Forecast and Guidance

Progress against the full-year earnings forecast was 48.7% for Revenue (¥270.2B/¥555.0B), 42.9% for Operating Income (¥24.5B/¥57.0B), and 43.7% for Ordinary Income (¥25.4B/¥58.0B). Revenue is approximately in line with the standard first-half progress level of 50%, but profit progress is approximately 7–8pt behind, making improvement in the profit margin during the second half a prerequisite for achieving the plan. No revisions were made to the earnings forecast or dividend forecast during the current quarter. Progress of first-half actual EPS of ¥28.50 against forecast EPS of ¥66.27 was 43.0%, consistent with the delay in profit progress.

Shareholder Returns

The interim dividend for Q2 was ¥54 per share, resulting in a simple-calculation Payout Ratio of approximately 189.5% against current-period interim EPS of ¥28.50. However, a 3-for-1 stock split of common shares is scheduled to take effect on July 1, 2026, and the year-end dividend will be calculated on a post-split basis; accordingly, the total annual dividend is currently shown as “－”. Therefore, it would not be appropriate to assess the sustainability of the annual dividend policy based solely on the first-half Payout Ratio, and confirmation on an annual basis is required based on the post-split year-end dividend and full-year earnings level. From a financial perspective, the company has ample capacity to absorb the first-half dividend burden, supported by an Equity Ratio of 69.7% and Cash and Deposits of ¥141.1B.

Risk Factors

1. Deteriorating profitability in the Global Business: Operating Income in the Global Business declined 65.2% YoY to ¥1.4B, and its profit margin fell substantially to 6.1% from approximately 18.0% in the previous year. This was one of the primary causes of the decline in the company-wide Operating Income margin to 9.1% from 10.6% in the previous year, making recovery in the segment’s profitability a key focus going forward.

2. Declining gross profit margin due to higher cost of sales: The gross profit margin contracted to 22.2% from 23.7% in the previous year, with costs increasing relatively more than revenue growth of +6.6%. If this trend continues, it may become difficult to maintain the Operating Income margin through efficient management of SG&A expenses alone.

3. Pace of increase in Accounts receivable: Accounts receivable rose 10.0% YoY to ¥80.1B, exceeding the growth rate of Revenue. If the lengthening collection cycle continues, it may affect the timing of cash generation, requiring close monitoring of working capital trends.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Compared with the median of peer companies, both the Operating Income margin and Net Income margin are at levels positioned in the lower range of the industry.

Growth and Capital Efficiency

The Revenue growth rate is substantially below the industry median and is an underperforming level among peers in terms of revenue growth.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The current period resulted in higher revenue but lower profit, with the primary causes of the decline being the decrease in the gross profit margin (22.2%, compared with 23.7% in the previous year) and deteriorating profitability in the Global Business (Operating Income down 65.2%). The core OutSourcingService Business maintained higher revenue and a slight increase in profit, while differences among businesses created the structure underlying the decline in the profit margin.

2. Progress against the full-year plan was standard for Revenue at 48.7%, while Operating Income was 42.9% and Ordinary Income was 43.7%, indicating a slight delay on the profit side. Improvement in the profit margin during the second half is therefore a prerequisite for achieving the plan.

3. Financial soundness remains high, supported by an Equity Ratio of 69.7% and ample Cash and Deposits. However, the interim dividend for the first half (¥54) exceeded EPS (¥28.50), making it useful to confirm the overall annual dividend policy, including the post-stock-split framework.

Theoretical Stock Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market price or a recommendation of any specific investment action.

Sensitivity: ¥451–¥478 at ±1% for the Cost of Equity, and ¥462–¥469 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future stock price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

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