Business Engineering Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.28B
• Operating Income: ¥3.37B
• Net Income: ¥1.66B
• EPS: ¥207.92

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

Business Engineering Corp. (4828) delivered robust FY2026 Q2 consolidated results under JGAAP, highlighted by strong top-line growth and outsized operating leverage. Revenue rose 21.7% YoY to ¥12.28bn, while operating income climbed 39.4% YoY to ¥3.37bn, expanding the operating margin to roughly 27.5%. Net income increased 50.2% YoY to ¥2.49bn, yielding a reported net margin of 20.27%. DuPont analysis shows healthy profitability and capital efficiency: asset turnover of 0.590 and financial leverage of 1.39 combined with a 20.27% net margin produce an ROE of 16.60%. Gross profit was ¥4.53bn, implying a gross margin of 36.9%, and EBITDA reached ¥3.77bn for a 30.7% margin, underscoring a capital-light profile. Liquidity is strong, with current assets of ¥14.34bn and current liabilities of ¥5.03bn, resulting in a current ratio of 285% and working capital of ¥9.31bn. The balance sheet appears conservatively structured: total liabilities are ¥5.07bn against total equity of ¥14.997bn, implying an equity ratio of about 72.1% (vs. a reported 0.0% placeholder) and a liabilities-to-equity ratio of 0.34x. Interest expense is negligible at ¥1.48m, driving an interest coverage ratio above 2,200x. Operating cash flow (OCF) was ¥1.67bn, or 0.67x net income, reflecting working capital absorption consistent with rapid growth and project-driven billing cycles. Depreciation and amortization of ¥397m suggest modest capital intensity; however, investing cash flows and cash balances were unreported in this dataset. The effective tax rate appears closer to ~23.7% (¥773m tax on ~¥3.26bn pre-tax) despite a reported metric placeholder of 0.0%. EPS was ¥207.92, implying roughly 12 million shares outstanding based on net income, though share count and book value per share were unreported. Dividend-related fields show zero, likely reflecting non-disclosure in this extract rather than actual zero payouts; therefore no conclusion on dividends can be drawn solely from this data. Overall, profitability momentum is strong, leverage is low, and liquidity is ample, while cash conversion was temporarily softer due to growth-related working capital needs. Data limitations (several items reported as 0) constrain full assessment of FCF and capital return, so conclusions focus on disclosed non-zero figures and standard derivations.

Profitability Analysis

ROE of 16.60% is supported by a 20.27% net margin, 0.590x asset turnover, and 1.39x financial leverage (DuPont). Operating margin stands near 27.5% (¥3.37bn / ¥12.28bn), up faster than revenue (+39.4% vs. +21.7% YoY), indicating positive operating leverage likely from scale benefits and disciplined SG&A. Gross margin is 36.9%, suggesting healthy pricing and mix in solutions/services. EBITDA margin of 30.7% points to low capital intensity and good cost control. Ordinary income margin of roughly 27.6% further confirms limited non-operating drag. Interest burden is negligible (interest expense ¥1.48m), enabling very high interest coverage (>2,200x). Effective tax rate, calculated at ~23.7%, is consistent with domestic norms, supporting the quality of bottom-line earnings. Overall, margin quality appears strong with operating leverage intact; key to sustainability will be maintaining utilization, project execution, and mix of higher-margin software/services.

Growth Assessment

Revenue growth of +21.7% YoY to ¥12.28bn indicates solid demand, likely in core ERP/solutions domains. Operating income outpaced revenue growth (+39.4% YoY), evidencing scale benefits and efficient delivery. Net income growth of +50.2% YoY benefited from operating leverage and minimal interest burden. The durability of growth will hinge on backlog, renewal rates, and new project wins; while not disclosed here, the strong margin profile suggests favorable mix and execution. Calculated asset turnover of 0.590x is reasonable for a solutions provider and could improve with further scale or stronger billing discipline. The OCF/NI ratio of 0.67 points to growth-related working capital investment; monitoring receivables and unbilled work is important to assess sustainability. Outlook is constructive near term given momentum, but visibility would be enhanced with disclosures on backlog, pipeline, and segment mix. Absent investing CF data, we assume no major M&A or heavy capex in the period; growth remains primarily organic and execution-driven.

Financial Health

Liquidity is strong: current assets ¥14.34bn vs. current liabilities ¥5.03bn, yielding a current ratio of 285% and sizable working capital of ¥9.31bn. Quick ratio equals current ratio due to inventories being undisclosed (treated as not reported rather than zero), reinforcing ample near-term coverage. Solvency is robust with total liabilities of ¥5.07bn against equity of ¥14.997bn; implied equity ratio is ~72.1% and liabilities-to-equity at 0.34x. Interest expense of only ¥1.48m and coverage of >2,200x indicate minimal financial risk from debt. Capital structure is conservative, providing flexibility for investment and shareholder returns. Cash and equivalents were not disclosed in this extract, limiting precision on net cash; however, the low liability base suggests low leverage risk.

Cash Flow Quality

OCF of ¥1.67bn vs. net income of ¥2.49bn yields an OCF/NI of 0.67, indicating lower cash conversion this period, likely due to working capital outflows (e.g., receivable buildup and project advances) amid strong growth. Adding back D&A of ¥397m implies pre-WC operating cash roughly ¥2.89bn, so working capital and other adjustments were about -¥1.21bn. Investing CF was not disclosed; therefore, Free Cash Flow cannot be reliably computed despite a placeholder of 0. We infer capex is modest given D&A of ¥397m and the business model, but actual capex and investments (including software capitalization or M&A) are unknown. The quality of earnings appears solid given strong operating margins and minimal non-operating items; nevertheless, sustained improvement in cash conversion will be important to confirm earnings quality. Monitoring days sales outstanding, unbilled receivables, and advance billings will be key. Absent cash balance disclosure, we cannot reconcile change in cash, but financing CF outflow of -¥655m suggests shareholder returns or debt reduction occurred.

Dividend Sustainability

Dividend per share, payout ratio, and FCF coverage are shown as 0 in the extract and should be treated as undisclosed rather than true zeros. With ROE at 16.60%, strong margins, and low leverage, capacity for distributions appears supported by fundamentals, contingent on cash conversion and board policy. However, without actual DPS, historical payout, or FCF data, we cannot assess payout ratio sustainability or FCF coverage quantitatively. If we proxy shares outstanding from EPS (¥2.489bn net income / ¥207.92 ≈ ~12.0m shares), even a modest payout would be serviceable given current earnings, but confirmation requires disclosed DPS and FCF. Policy outlook remains indeterminate from this dataset; investors should reference official dividend guidance and capital allocation policies.

Risk Assessment

Business Risks:

• Project execution risk in large-scale ERP/solutions implementations affecting margins and delivery timelines
• Client concentration in manufacturing/industrial verticals driving cyclicality with capex and production trends
• Talent acquisition and retention pressures impacting utilization and cost structure
• Pricing and competitive intensity against global SIers and domestic peers
• Technology transition risk (cloud/SaaS migration, product roadmap including proprietary solutions) influencing mix and margins
• Supply chain or macro shocks reducing client IT spending

Financial Risks:

• Working capital volatility causing OCF to trail earnings during growth spurts
• Potential increase in receivables and unbilled positions heightening credit/collection risk
• Currency exposure if overseas projects or vendors are material (not disclosed here)
• Limited visibility on cash and investing activities due to undisclosed items

Key Concerns:

• OCF/Net Income at 0.67 suggests cash conversion needs monitoring
• Investing CF and cash balance not disclosed, limiting FCF assessment
• Dividend metrics undisclosed, obscuring capital return profile

Investment Implications

Key Takeaways:

• Strong top-line growth (+21.7% YoY) with outsized operating income growth (+39.4% YoY) indicates positive operating leverage
• High profitability (operating margin ~27.5%, EBITDA margin 30.7%, net margin 20.3%) with minimal interest burden
• Solid capital efficiency: ROE 16.6% driven by healthy margins and moderate leverage (assets/equity 1.39x)
• Robust liquidity and low solvency risk (current ratio 285%, implied equity ratio ~72%)
• Cash conversion lagging earnings (OCF/NI 0.67) due to working capital needs tied to growth

Metrics to Watch:

• OCF/Net Income ratio and trends in working capital (DSO, unbilled receivables)
• Backlog and book-to-bill to gauge revenue sustainability
• Gross margin and operating margin trajectory (utilization, mix, pricing)
• Headcount productivity and SG&A ratio to sustain operating leverage
• Capital allocation: DPS announcements, buybacks, and investing CF (capex/M&A)

Relative Positioning: Within Japanese IT/ERP solutions peers, the company exhibits above-average profitability, conservative leverage, and strong liquidity; near-term differentiation hinges on sustaining margin discipline while normalizing cash conversion amid continued growth.

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