HIRATA Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥45.65B
• Operating Income: ¥4.82B
• Net Income: ¥1.77B
• EPS: ¥112.35

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

Hirata (62580) delivered a solid FY2026 Q2 (cumulative) performance with revenue of ¥45.65bn, up 13.1% YoY, and strong operating leverage driving operating income up 74.4% YoY to ¥4.82bn. Gross profit reached ¥8.44bn, translating to an 18.5% gross margin, while operating margin expanded to approximately 10.6%, indicating improved mix and/or better project execution and cost control. Ordinary income of ¥5.01bn exceeded operating income by about ¥0.19bn, suggesting positive non-operating contributions (e.g., FX or interest income) more than offsetting interest expense of ¥0.10bn. Net income rose 90.5% YoY to ¥3.44bn, yielding a 7.53% net margin. DuPont analysis indicates ROE of 4.86%, decomposed into a 7.53% net margin, 0.338x asset turnover, and 1.91x financial leverage, highlighting that profitability improvement is the key current driver while asset efficiency remains moderate. Liquidity is strong with a current ratio of 203% and quick ratio of 168%, supported by working capital of ¥44.74bn. The balance sheet appears conservative with a debt-to-equity ratio of 0.87x and total liabilities of ¥61.44bn against total equity of ¥70.75bn. Interest coverage is robust at 47.1x (operating income basis), indicating low near-term refinancing risk. Cash flow conversion was weak this period with operating cash flow of ¥0.92bn versus net income of ¥3.44bn (OCF/NI of 0.27), likely reflecting working capital absorption typical of project-based businesses. Inventories stand at ¥15.51bn, implying ongoing builds for deliveries; without receivables and advances detail, the magnitude and timing of WC unwinds are uncertain. The reported effective tax rate shown in the summary as 0.0% appears to be a placeholder; using disclosed tax expense of ¥0.96bn versus ordinary income of ¥5.01bn suggests an implied tax rate around 19–20%. Dividend per share is shown as ¥0.00 for the period (payout 0%), which may reflect timing or policy conservatism; data on full-year dividend policy is not provided. Several fields (equity ratio, cash and equivalents, investing cash flow, free cash flow, share data) appear unreported rather than truly zero, limiting precision in per-share and capital deployment analysis. Overall, the company demonstrates healthy margin expansion and a strong financial position, but cash conversion and visibility into orders/backlog will be critical to sustain momentum. Given Hirata’s exposure to semiconductors and automotive automation, revenue trajectory will remain sensitive to capex cycles and project timing. Management’s ability to manage working capital, secure advance payments, and convert profit to cash will be key for sustaining returns and potential shareholder returns.

Profitability Analysis

ROE of 4.86% is driven by net margin of 7.53%, asset turnover of 0.338x, and financial leverage of 1.91x. Operating margin of ~10.6% (¥4.82bn/¥45.65bn) expanded markedly versus revenue growth, indicating strong operating leverage and improved project profitability. Gross margin at 18.5% provides adequate headroom for SG&A and R&D while supporting the higher operating margin; the gap between gross and operating margins (~7.9pp) suggests effective overhead control. EBITDA of ¥5.79bn implies a 12.7% margin, with D&A of ¥0.97bn (≈2.1% of sales), indicating modest capital intensity for the period. Ordinary income exceeding operating income by ~¥0.19bn points to supportive non-operating items (e.g., FX), partially offset by interest expense of ¥0.10bn. Interest coverage is strong at 47.1x (operating income/interest), underscoring low financial strain. Profitability quality is good at the P&L level, but conversion to cash is weak this half, tempering quality assessment until WC normalizes.

Growth Assessment

Revenue grew 13.1% YoY to ¥45.65bn, outpacing typical mid-cycle automation growth and implying healthy project wins and/or improved execution. Operating income surged 74.4% YoY to ¥4.82bn, indicating high incremental margins and favorable mix. Net income rose 90.5% YoY to ¥3.44bn, benefiting from both operating leverage and non-operating tailwinds. Sustainability hinges on orders and backlog in core end-markets (semiconductor equipment integration, automotive/EV production lines, and home appliance automation), which are not disclosed here. The improved margins suggest that prior cost restructuring and pricing discipline are gaining traction; however, project timing can create volatility in quarterly/half-year results. Asset turnover of 0.338x is moderate for a systems integrator and may improve if backlog converts on schedule and WC unwinds in H2. With OCF lagging earnings, near-term growth will be best supported by advance payments and disciplined milestone billing to mitigate WC drags. Outlook is cautiously positive assuming semicap and auto investment cycles remain supportive; visibility would improve with disclosed orders, book-to-bill, and backlog.

Financial Health

Total assets are ¥135.13bn with equity of ¥70.75bn and liabilities of ¥61.44bn, resulting in debt-to-equity of 0.87x and financial leverage of 1.91x. Liquidity is strong: current assets ¥88.04bn vs current liabilities ¥43.30bn yields a current ratio of 203% and quick ratio of 168%, indicating ample short-term coverage. Working capital is substantial at ¥44.74bn; inventories of ¥15.51bn suggest ongoing project builds and potential cash tied up pending deliveries/milestones. Interest burden is modest (¥0.10bn), and interest coverage is very strong (47.1x). Ordinary income exceeds operating income, implying some non-operating support; reliance on such items should be monitored. The equity ratio is shown as 0.0% in the data but should be treated as undisclosed; based on provided totals, equity/asset ratio would be roughly 52% if computed from period-end figures (¥70.75bn/¥135.13bn). Overall solvency appears healthy with conservative leverage and robust liquidity cushions.

Cash Flow Quality

Operating cash flow was ¥0.92bn versus net income of ¥3.44bn, yielding an OCF/NI ratio of 0.27, indicating weak cash conversion in the period. This likely reflects working capital absorption (higher inventories, progress costs, or receivables) typical of project ramp phases. D&A (¥0.97bn) is close to non-cash charges implied in EBITDA-EBIT, but without detail on provisions or other non-cash items, reconciliation is limited. Investing cash flow is shown as ¥0, which should be interpreted as undisclosed; therefore, capital expenditure and disposals cannot be assessed. Free cash flow is listed as 0 in the summary but cannot be reliably determined without investing cash flow data; do not interpret this as actual zero FCF. The divergence between profits and cash underscores the importance of milestone billing, customer advances, and timely collections to normalize cash conversion in H2. Monitoring changes in inventories, contract assets/liabilities, and receivables/payables will be key to assessing earnings quality.

Dividend Sustainability

Annual DPS is shown as ¥0.00 and payout ratio at 0.0%, which likely reflects an interim position or non-disclosure rather than a definitive full-year policy. Given net income of ¥3.44bn and strong liquidity, the capacity to pay dividends depends on free cash flow generation and capital allocation priorities; however, FCF is not determinable due to undisclosed investing cash flows. Near-term dividend sustainability should be evaluated against: (1) full-year earnings trajectory, (2) cash conversion (OCF recovery from 0.27x NI), and (3) prospective capex and working capital needs for project growth. With leverage moderate (0.87x liabilities/equity) and interest coverage high, balance sheet capacity is available, but management may prioritize growth investment and WC funding. Policy outlook cannot be inferred from the provided data; watch for company guidance on full-year DPS and payout targets.

Risk Assessment

Business Risks:

• End-market cyclicality in semiconductor and automotive capex affecting order intake and project timing
• Project execution risk leading to cost overruns, margin erosion, or revenue deferrals
• Customer concentration risk typical in large automation projects
• Supply chain and component lead-time constraints impacting delivery schedules
• FX fluctuations affecting non-operating income and competitiveness

Financial Risks:

• Weak cash conversion this period (OCF/NI 0.27) indicating working capital strain
• Inventory build (¥15.51bn) raising risk of delays or write-downs if demand softens
• Potential reliance on non-operating gains (ordinary > operating by ~¥0.19bn)
• Timing mismatch between revenue recognition and cash collection
• Lumpy capex needs not disclosed (investing cash flow unreported)

Key Concerns:

• Sustainability of elevated operating margin (~10.6%) amid cyclical demand
• Visibility on orders/backlog and book-to-bill not provided
• Lack of investing cash flow data prevents FCF and capex assessment
• Dividend policy clarity absent; DPS currently shown as ¥0.00
• Equity ratio reported as 0.0% in the dataset reflects non-disclosure, complicating quick solvency checks

Investment Implications

Key Takeaways:

• Strong H1 operating leverage: revenue +13.1% YoY, operating income +74.4% YoY, net margin 7.53%
• Healthy balance sheet with D/E ~0.87x and interest coverage 47.1x
• Cash conversion weak (OCF/NI 0.27), likely from working capital build; watch H2 unwind
• Asset efficiency moderate (ATO 0.338x); potential upside if backlog converts
• Non-operating tailwinds contributed to ordinary income; quality of earnings to be monitored

Metrics to Watch:

• Order intake, backlog, and book-to-bill in semiconductor and automotive segments
• Working capital components: inventories, receivables, contract assets/liabilities, and advance receipts
• Free cash flow (once investing cash flows disclosed) and OCF/NI recovery
• Gross and operating margin trends by project mix
• FX impacts on non-operating income and pricing
• Capex commitments and depreciation trajectory

Relative Positioning: Within Japanese factory automation and systems integration peers, Hirata shows improving margins and conservative leverage but lags on cash conversion this period; sustained order momentum and WC normalization would strengthen its relative standing.

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