ALPHA SYSTEMS INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.57B
• Operating Income: ¥2.38B
• Net Income: ¥1.69B
• EPS: ¥120.10

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

Alpha Systems Co., Ltd. (TSE: 4719) reported solid FY2026 Q2 standalone results under JGAAP, with revenue of ¥19.57bn, up 7.9% YoY, evidencing healthy topline momentum. Gross profit reached ¥4.36bn, translating to a gross margin of 22.3%, suggesting stable pricing and cost discipline. Operating income rose 12.5% YoY to ¥2.375bn, outpacing revenue growth and indicating positive operating leverage. Ordinary income was ¥2.454bn, modestly above operating income, aided by non-operating items and with no reported interest expense. Net income increased 14.3% YoY to ¥1.686bn, driving a net margin of 8.62%, which supports the DuPont-reported ROE of 3.82%. The DuPont breakdown (net margin 8.62%, asset turnover 0.378x, financial leverage 1.17x) indicates that ROE is driven primarily by profitability rather than leverage. Liquidity appears very strong, with a current ratio of 449.7% and low overall liabilities (¥8.54bn) against sizable equity (¥44.12bn). Although the reported equity ratio field shows 0%, the balance sheet implies an equity ratio of roughly 85% (equity/assets), highlighting a conservative capital structure. Operating cash flow came in at ¥0.882bn, below net income (OCF/NI 0.52), implying working capital outflows or accruals in the period. Free cash flow cannot be reliably assessed because investing cash flows and capital expenditure disclosures are not available in the provided dataset. Dividend data (DPS and payout) show zeros, which should be treated as undisclosed rather than actual zero distributions, so dividend policy cannot be inferred from these fields. Earnings quality merits monitoring given the OCF shortfall relative to net income, though the balance sheet strength offers cushion. Operating leverage looks favorable, with operating profit growing faster than sales; our back-of-the-envelope suggests OP margin expansion of roughly 50 bps YoY. With no interest burden and ample liquidity, solvency risk is low. Overall, the company delivered profitable growth with expanding margins and robust financial health, offset by lower cash conversion in the half and limited visibility on capex and dividends due to undisclosed items. Key watchpoints include working capital movements, sustainability of the margin gains, and any updates to capital allocation.

Profitability Analysis

roe_decomposition:

• net_profit_margin: 8.62%
• asset_turnover: 0.378
• financial_leverage: 1.17
• calculated_roe: 3.82%
• interpretation: ROE is primarily a function of solid net margin and modest asset turnover, with low leverage dampening both risk and return. margin_quality:
• gross_margin: 22.3%
• operating_income: 2375000000
• operating_margin_est: 12.1%
• net_margin: 8.62%
• commentary: Gross margin is healthy for a systems/services-oriented business. Operating margin expansion YoY is evidenced by OP growing 12.5% vs revenue 7.9%. operating_leverage:
• revenue_growth_yoy: 7.9%
• operating_income_growth_yoy: 12.5%
• inference: Positive operating leverage; estimated OP margin improved ~50 bps YoY (prior OP ~¥2.11bn on prior revenue ~¥18.13bn).

Growth Assessment

revenue_sustainability: Revenue growth of 7.9% YoY suggests steady demand; sustainability will depend on continued project intake and execution, which are not disclosed here (no backlog or order info). profit_quality: Net income growth (+14.3% YoY) outpaced sales, supported by margin expansion. However, OCF lagging net income (0.52x) tempers the quality assessment pending working capital detail. outlook: With low leverage and margin momentum, the near-term earnings trajectory appears supported. Visibility on 2H performance hinges on order conversion and cost control, which are not available in the dataset.

Financial Health

liquidity:

• current_assets: 34102138000
• current_liabilities: 7583739000
• current_ratio: 449.7%
• quick_ratio: 449.7%
• working_capital: 26518399000
• assessment: Very strong liquidity with substantial working capital headroom. solvency:
• total_assets: 51747000000
• total_liabilities: 8544035000
• total_equity: 44123000000
• equity_ratio_inferred: ≈85.3%
• debt_to_equity_proxy: 0.19x (liabilities/equity)
• interest_expense: 0
• interest_coverage: Not meaningful given no reported interest expense
• assessment: Low balance-sheet risk; ample equity base and negligible financial gearing. capital_structure: Conservative, equity-heavy structure with limited reliance on debt financing; financial flexibility is high.

Cash Flow Quality

earnings_quality:

• net_income: 1686000000
• operating_cash_flow: 882488000
• ocf_to_net_income: 0.52
• interpretation: Cash conversion below 1.0 indicates accruals and/or working capital investment; requires monitoring over a longer horizon. free_cash_flow_analysis:
• ocf: 882488000
• investing_cf_reported: 0
• capex_disclosure: Not provided
• fcf_commentary: Unable to determine FCF due to undisclosed investing cash flows and capex; the displayed zero should not be interpreted as actual zero. working_capital:
• inventories_reported: 0
• notes: Inventories and cash balance are undisclosed in the provided fields. Given the service-centric profile suggested by margins, inventory may be structurally low, but no conclusion can be drawn from the zero field.
• implication: The OCF shortfall vs NI likely reflects receivables timing and project billing; details are not disclosed.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is shown as 0.0% and DPS as ¥0.00; these appear undisclosed rather than indicative of no dividend. Without DPS and board resolutions, payout sustainability cannot be assessed. fcf_coverage: Not assessable due to absence of investing cash flow/capex data; the 0.00x display should not be taken as actual coverage. policy_outlook: No dividend policy information is provided in the dataset. Balance sheet strength would typically allow flexibility, but no inference is made without disclosures.

Risk Assessment

Business Risks:

• Revenue concentration risk in large projects or key customers (not disclosed; typical for SI-centric models).
• Execution risk on fixed-price projects affecting margins.
• Human resource constraints and wage inflation impacting delivery capacity and cost base.
• Timing of project acceptances and milestone billings causing earnings and cash flow volatility.

Financial Risks:

• Cash flow conversion risk, evidenced by OCF at 0.52x of net income in the period.
• Working capital swings driven by receivables collection cycles.
• Limited visibility on capex and investment needs due to undisclosed investing CF.
• Potential pension/retirement benefit obligations not visible in the provided snapshot.

Key Concerns:

• Sustainability of margin expansion amid labor cost pressures.
• Normalization of OCF relative to earnings in 2H.
• Lack of disclosure on dividends and investing cash flows limiting capital allocation assessment.

Investment Implications

Key Takeaways:

• Topline grew 7.9% YoY with stronger 12.5% YoY operating profit growth, indicating positive operating leverage.
• Net margin at 8.62% supports a DuPont ROE of 3.82% on modest leverage (1.17x).
• Liquidity and solvency are very strong, with an inferred equity ratio of ~85% and current ratio ~450%.
• Cash conversion is weak this half (OCF/NI 0.52), likely due to working capital dynamics.
• Dividend and FCF cannot be assessed from the provided data as key items are undisclosed.

Metrics to Watch:

• Order intake/backlog and book-to-bill (when disclosed)
• Operating margin trajectory and utilization rates
• Receivables days and OCF/NI ratio normalization
• Capex and investing cash flows to gauge FCF
• Headcount growth and labor cost trends impacting delivery capacity

Relative Positioning: Based on the provided figures, Alpha Systems appears financially conservative with above-average balance sheet strength and improving operating margins; however, relative benchmarking versus domestic peers cannot be completed without additional disclosures (e.g., backlog, headcount, capex, and consolidated data).

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