GEOSTR Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.58B
• Operating Income: ¥632M
• Net Income: ¥397M
• EPS: ¥13.89

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

GeoStar Co., Ltd. (TSE: 5282) delivered steady topline growth in FY2026 Q2, with revenue up 7.2% YoY to ¥12.58bn, while operating income rose 4.4% YoY to ¥632m, indicating modest negative operating leverage in the period. Gross profit of ¥1.999bn implies a gross margin of 15.9%, suggesting pricing and cost control held roughly stable despite input cost pressures common in precast concrete and infrastructure-related products. Operating margin of approximately 5.0% remains thin but is consistent with industry norms for engineered building materials. Ordinary income exceeded operating income by ¥23m, driven by net non-operating gains and very low interest expense, indicating negligible financial burden. Net income increased 9.3% YoY to ¥434m, pushing net margin to 3.45%, and EPS to ¥13.89 for the interim period. DuPont analysis shows a calculated ROE of 1.80%, driven by a 3.45% net margin, 0.363x asset turnover, and modest financial leverage of 1.44x; these inputs depict a profitability profile anchored more by efficiency and a strong equity base than by leverage. Based on reported assets and equity, the computed equity ratio is about 69.5% (¥24.088bn/¥34.673bn), reflecting a conservative capital structure despite the equity ratio being shown as 0.0% due to reporting omissions. Liquidity appears robust with a current ratio of 205.6% and a quick ratio of 169.3%, supported by sizable working capital of roughly ¥13.28bn. Interest coverage is exceptionally strong at ~698x on an EBIT basis, highlighting minimal debt service risk. Cash flow quality, however, is weak this half: operating cash flow was negative at -¥722m versus net income of ¥434m, yielding an OCF/NI ratio of -1.66, pointing to a significant working capital outflow (likely receivables and inventory build tied to revenue growth and project timing). Free cash flow is shown as 0 due to unreported investing cash flows; with negative OCF, underlying FCF is likely negative for the half. Dividend payout and DPS are indicated as zero, suggesting either no dividend in the period or timing differences; coverage analysis is constrained by missing FCF data. Overall, the company exhibits healthy solvency and liquidity with modest but stable margins, while the main watchpoint is the interim negative operating cash flow and potential working capital intensity. Revenue growth outpaced operating profit growth, implying cost pressure or mix effects that should be monitored into H2 when seasonality often normalizes cash conversion. The effective tax rate implied by the data is roughly 32.8% (¥215m tax on ¥655m pre-tax), despite a displayed 0.0% figure due to data limitations. With limited disclosure on cash, investing cash flows, and share count, conclusions on per-share capital allocation and FCF are constrained, but the balance sheet provides a meaningful cushion. Near-term outlook hinges on order backlog conversion, price pass-through of materials, and normalization of working capital. In sum, fundamentals are sound from a balance sheet perspective, profitability is adequate for the industry, and cash flow execution in H2 will be critical to sustain the improvement in earnings.

Profitability Analysis

ROE_decomposition: DuPont drivers: Net margin 3.45% x Asset turnover 0.363x x Financial leverage 1.44x = ROE 1.80%. Low leverage and moderate turnover constrain ROE; sustaining or improving margin is the most direct lever given the conservative balance sheet. margin_quality: Gross margin 15.9% and operating margin ~5.0% (¥632m/¥12.58bn) indicate disciplined cost control but thin industry economics. Ordinary income exceeded operating income by ~¥23m, suggesting minor non-operating tailwinds. Net margin of 3.45% is consistent with prior periods’ mid-single-digit profitability for infrastructure materials. operating_leverage: Revenue +7.2% YoY vs operating income +4.4% YoY indicates mild negative operating leverage in H1, likely due to input cost pressure, product mix, or higher SG&A tied to growth. Monitoring whether H2 operating income growth re-accelerates above revenue growth will be important for validating operating leverage.

Growth Assessment

revenue_sustainability: Topline growth of 7.2% YoY appears supported by demand for precast and infrastructure-related products; inventory of ¥4.56bn (~36% of H1 revenue) suggests preparation for deliveries, but also highlights working capital intensity. profit_quality: Net income +9.3% YoY outpaced operating income growth, aided by low financial costs and small non-operating gains. Core profit quality is acceptable, but the divergence between earnings and OCF (OCF/NI = -1.66) flags timing risk in cash realization. outlook: Outlook depends on backlog execution, price pass-through for cement/steel inputs, and seasonality-driven cash conversion in H2. If working capital normalizes and cost pass-through holds, margins can stabilize near current levels with potential upside from mix and utilization.

Financial Health

liquidity: Current ratio 205.6% and quick ratio 169.3% underscore ample near-term liquidity; working capital stands at ~¥13.28bn. Cash-on-hand is undisclosed, but current assets of ¥25.85bn provide a buffer. solvency: Computed equity ratio ~69.5% (equity ¥24.09bn / assets ¥34.67bn) indicates a strong capital base. Interest coverage ~698x (EBIT/interest) reflects minimal debt service burden. capital_structure: Debt-to-equity of 0.54x (as provided) and financial leverage 1.44x show restrained use of leverage. Ordinary income only modestly above operating income implies limited reliance on financial or investment income.

Cash Flow Quality

earnings_quality: OCF of -¥722m versus net income of ¥434m yields OCF/NI of -1.66, signaling cash earnings lag due to working capital outflows. This is consistent with growth-driven builds in receivables and inventory typical for the industry but requires H2 normalization. FCF_analysis: Investing cash flow is undisclosed (shown as 0). Given negative OCF, underlying FCF likely negative in H1. Without capex disclosure, we cannot precisely assess maintenance vs growth spend or true FCF. working_capital: Inventories at ¥4.56bn and high current assets suggest material cash tied in operations. The negative OCF indicates increases in receivables and/or inventory outweighing payables; monitoring days sales outstanding, inventory turns, and payables days is key.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.0%, indicating either no dividend or undisclosed interim dividend. With net income positive but OCF negative in H1, immediate cash coverage of dividends would be weak if a payout were made. FCF_coverage: FCF coverage cannot be reliably assessed due to missing investing cash flow data; given negative OCF, FCF was likely negative, implying no coverage in H1. policy_outlook: Given a strong equity base and low leverage, the company has capacity over the cycle, but cash flow volatility and working capital seasonality argue for a conservative or back-loaded payout approach tied to H2 cash conversion.

Risk Assessment

Business Risks:

• Input cost volatility for cement, steel, and energy affecting margins
• Project timing and backlog execution risk leading to revenue and cash flow lumpiness
• Pricing power and pass-through effectiveness in fixed-price or long-lead contracts
• Demand cyclicality in public works, rail, and infrastructure end-markets
• Labor constraints and subcontractor availability impacting delivery schedules
• Weather and logistics disruptions affecting precast production and shipments

Financial Risks:

• Working capital intensity driving negative OCF during growth phases
• Potential build-up of receivables and credit risk with public/private customers
• Limited disclosure of cash and investing cash flows reducing visibility into FCF
• Margin compression risk if material cost inflation outpaces price adjustments

Key Concerns:

• Negative OCF of -¥722m despite positive earnings (OCF/NI = -1.66)
• Operating income growth (+4.4% YoY) lagging revenue growth (+7.2% YoY)
• Lack of disclosure on cash balance and capex/investing cash flows

Investment Implications

Key Takeaways:

• Topline growth solid at +7.2% YoY with stable gross margin at 15.9%
• ROE of 1.80% reflects low leverage and moderate turnover; margin improvements are the main lever
• Strong liquidity and solvency (current ratio 205.6%, equity ratio ~69.5%) underpin resilience
• Negative operating cash flow highlights execution/timing risk; H2 normalization is pivotal
• Interest burden is negligible (interest expense ¥0.9m; EBIT coverage ~698x)

Metrics to Watch:

• Order backlog and book-to-bill
• OCF recovery and working capital metrics (DSO, inventory turns, DPO)
• Gross and operating margin progression and cost pass-through rates
• Capex and investing cash flows to clarify FCF trajectory
• Receivables quality and collection timing

Relative Positioning: Within Japanese construction materials/precast peers, the company exhibits stronger-than-average capital adequacy and very low financial risk, with profitability in the typical low-to-mid single-digit margin range; cash conversion appears more volatile this half, warranting closer monitoring versus peers with steadier OCF.

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