ABIST (6087) FY2026 Q1 Earnings Report

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Executive Summary

Although revenue and profit increased in 2026 Q1, the operating margin was almost flat year on year, making this an earnings period requiring confirmation of the quality of earnings growth. Revenue was ¥2.81B (+8.0% YoY), Operating Income was ¥0.33B (+8.3%), Ordinary Income was ¥0.34B (+8.2%), and Net Income was ¥0.23B (+31.1%). Cost of sales increased 6.5%, below revenue growth, improving the gross margin to 29.7%; however, SG&A expenses increased ahead of revenue by 14.3%, leaving the operating margin at 11.9%, essentially unchanged from the same period last year. The substantial increase in Net Income includes a comparison effect because the ¥0.04B extraordinary loss recorded in the same period last year did not recur this period. Accordingly, it is appropriate to assess the underlying improvement in performance based on the +8.3% increase in Operating Income.

Factors Affecting Performance

【Revenue】Revenue increased 8.0% year on year to ¥2.81B. Progress against the full-year company forecast of ¥11.20B was 25.1%, broadly consistent with the standard quarterly allocation. Although revenue composition by segment is not disclosed, an adjustment of △¥0.188B was recorded as a company-wide expense without being allocated to segment profit.

【Profit and Loss】Operating Income was ¥0.33B (+8.3% YoY), while Ordinary Income was ¥0.34B (+8.2%). The gross margin improved by approximately 101bp to 29.7%, from 28.7% in the same period last year, primarily because the increase in cost of sales (+6.5%) was below revenue growth (+8.0%). Meanwhile, SG&A expenses increased 14.3% year on year to ¥0.499B, and the SG&A ratio rose approximately 98bp to 17.8%, offsetting most of the benefit from the gross margin improvement and leaving the operating margin at 11.9%, approximately the same as in the same period last year. Net Income increased substantially by 31.1% to ¥0.23B, largely reflecting the reversal of the ¥0.04B extraordinary loss recorded in the same period last year; the effective tax rate was 32.4%, a normal level. Overall, the structure was one of modest revenue and operating profit growth on the operating side, but substantial Net Income growth including a one-time factor.

Key Financial Indicators

【Profitability】The operating margin was 11.9%, approximately the same level as in the same period last year, while the net margin rose approximately 139bp to 8.0%, from 6.6% in the same period last year. Annualized ROE was 12.9% and annualized ROA was approximately 9.5%, both healthy levels.【Cash Quality】Cash and deposits were ¥3.91B, accounting for 42.5% of total assets. Accounts receivable were ¥1.68B, increasing only 1.4% year on year and growing more slowly than revenue; thus, no notable expansion in accounts receivable relative to revenue growth was observed. Work in process of ¥0.06B accounted for 87.8% of total inventories and is an item requiring confirmation of project progress and acceptance status.【Investment Efficiency】Annualized total asset turnover was 1.221x and financial leverage was 1.31x. The source of ROE is therefore not high leverage, but strong profitability and asset efficiency.【Financial Soundness】The equity ratio was 76.4%, the current ratio was 421.8%, and the debt-to-equity ratio was 0.31x, all indicating a conservative financial structure.

Cash Flow Analysis

Although cash flow statement data has not been disclosed, changes in the balance sheet provide insight into funding trends. Cash and deposits were ¥3.91B, down from ¥4.14B in the same period last year, but remained at a high level equivalent to approximately 2.8x current liabilities of ¥1.38B. Accounts receivable were ¥1.68B, representing only a modest year-on-year increase, and no deterioration in the collection cycle relative to revenue growth was observed. Other accounts payable increased 27.7% year on year to ¥0.89B, suggesting that increases in subcontracting expenses and accrued expenses had a certain impact on working capital. Overall, given the ample cash balance and conservative liability structure, concerns regarding short-term liquidity are considered limited.

Quality of Earnings

Current-period profit was generally generated by recurring operating activities; however, the Net Income growth rate (+31.1%) significantly exceeded the Operating Income growth rate (+8.3%), with the difference attributable to the reversal of the ¥0.04B extraordinary loss recorded in the same period last year. Both non-operating income and expenses were small, at approximately ¥0.01B, and Ordinary Income largely tracked Operating Income, indicating limited profit enhancement or reduction from non-operating factors. The effective tax rate remained at 32.4%, a normal corporate tax burden, with no unusual tax-related fluctuations observed. From an accrual perspective, accounts receivable increased less than revenue, while other accounts payable increased 27.7% year on year, suggesting that the recognition of unpaid expenses may have had a certain impact on profit margins. Overall, Operating Income growth was moderate, and caution is warranted in treating the substantial increase in Net Income as a direct indication of a structural improvement in recurring earnings power.

Earnings Forecast and Guidance

Progress in Q1 against the full-year company forecast was 25.1% for Revenue, 39.3% for Operating Income, 39.4% for Ordinary Income, and 38.3% for Net Income. While revenue progress was consistent with a standard quarterly allocation, the profit indicators exceeded the standard level of 25% by 13–14 points. The Q1 operating margin of 11.9% was approximately 430bp above the full-year plan operating margin of 7.6%. The full-year plan assumes revenue growth of +5.4% YoY, while projecting declines of -11.8% in Operating Income and -9.2% in Net Income. This suggests that the company has factored in lower profitability or higher costs from Q2 onward, with the operating margin for the remaining period mathematically assumed to decline to approximately 5.6%.

Shareholder Returns

The full-year forecast dividend per share is ¥102.0, and forecast EPS is ¥148.27, implying a forecast payout ratio of approximately 68.8%. Against expected total dividends of approximately ¥0.41B, cash and deposits of ¥3.91B are equivalent to approximately 9.6x the annual forecast dividend amount, indicating strong dividend payment capacity on the balance sheet. Although the payout ratio of 68.8% remains within earnings, it is relatively high. With declines in Operating Income and Net Income planned for the full year, maintaining stable dividends rather than pursuing earnings growth may become the focus of capital allocation.

Risk Factors

1. High work-in-process composition: Work in process accounts for 87.8% of inventories. Although its amount of ¥0.06B is small, representing 0.6% of total assets, it should be monitored as a leading indicator of potential delays in project acceptance or recognition of valuation losses.

2. SG&A expenses increasing ahead of revenue: SG&A expenses increased 14.3% year on year, exceeding revenue growth of +8.0%. If this trend continues, the expansion in the operating margin resulting from gross margin improvement may be constrained.

3. Declining profitability in the second half under the full-year plan: The full-year company forecast assumes a +5.4% increase in revenue but an -11.8% decline in Operating Income. Meanwhile, the Q1 Operating Income progress rate was high at 39.3%, potentially resulting in significant fluctuations in quarterly profit margins from Q2 onward.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The operating margin was approximately in line with the industry median, while the net margin was below the industry median.

Growth and Capital Efficiency

The revenue growth rate was below the industry median and positioned toward the lower end of the IQR.

Source: Compiled by the Company

Key Points from the Earnings Results

1. The gross margin improved approximately 101bp year on year, but the SG&A ratio also increased approximately 98bp, leaving the operating margin almost flat year on year at 11.9%. Whether margin expansion can be achieved after absorbing cost increases will be a key focus going forward.

2. The +31.1% increase in Net Income includes the reversal of the ¥0.04B extraordinary loss recorded in the same period last year. Caution is therefore warranted in viewing the growth in current-period Net Income as a direct indication of a structural improvement in recurring earnings power.

3. Although the full-year plan assumes declining profit, the Q1 profit progress rate was high at approximately 39%. The extent of the decline in profitability from Q2 onward will be a key point in interpreting full-year performance.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,651–¥1,741 at ±1% for the cost of equity, and ¥1,693–¥1,697 at ±0.1 for ω.

Notes:

• Because Net Income progress against the full-year forecast (38%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of forecast tend to exceed their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest Rate Reference Month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmark is reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional as necessary.

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