JAPAN ELEVATOR SERVICE HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.91B
• Operating Income: ¥5.13B
• Net Income: ¥3.32B
• EPS: ¥18.48

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

Verdict: Strong FY2026 Q2 performance with double-digit topline growth and outsized profit expansion, underpinned by clear operating leverage and solid cash conversion. Revenue rose 15.7% YoY to 269.12, while operating income increased 30.7% YoY to 51.31, demonstrating robust margin discipline. Gross profit reached 104.49 with a gross margin of 38.8%, and EBITDA was 58.55 (EBITDA margin 21.8%), indicating healthy scale benefits. Operating margin expanded to 19.1%, up roughly 219 bps from an estimated 16.9% in the prior-year period. Net income increased 30.5% YoY to 32.91, lifting net margin to 12.2%, an expansion of approximately 139 bps versus an estimated 10.8% a year ago. Ordinary income closely tracked operating income (51.39), suggesting limited reliance on non-operating items. Earnings quality was solid: operating cash flow of 41.47 exceeded net income (OCF/NI 1.26x), indicating good cash conversion and manageable working-capital needs amid growth. The balance sheet remains sound with a current ratio of 135% and debt-to-equity of 0.74x; interest coverage is exceptionally strong at 213.8x. Short-term borrowings (32.29) exceed cash (26.14), but overall current assets (175.08) comfortably cover current liabilities (129.72). Intangibles (42.63) and goodwill (16.98) total 59.61 (about mid-teens percentage of assets), which supports the growth platform but introduces medium-term impairment risk if growth slows. Effective tax rate remains elevated at 35.4%, a mild drag on net margin progression. Reported ROE of 15.8% is attractive, supported by a 12.2% net margin, 0.741x asset turnover, and 1.74x financial leverage. Although dividend details are unreported, the calculated payout ratio of 167.8% appears high and warrants verification; cash generation and modest capex (5.76) suggest capacity to fund operations and measured shareholder returns. With operating leverage evident and ROIC at 15.0% (above typical 7–8% targets), the outlook is favorable provided demand and pricing in maintenance/services remain resilient. Key watchpoints include wage and parts cost inflation, receivables collection, and the reliance on short-term debt for funding growth. Overall, the quarter reinforces the company’s scalable model in elevator maintenance and related services, while leaving room for cautious monitoring of capital allocation and intangible asset risks.

Profitability Analysis

Decomposition (DuPont): ROE 15.8% = Net Profit Margin 12.2% × Asset Turnover 0.741 × Financial Leverage 1.74x. The most notable change this period is margin expansion: operating income grew 30.7% YoY versus revenue at 15.7%, lifting the operating margin from an estimated 16.9% to 19.1% (~+219 bps) and net margin from 10.8% to 12.2% (+139 bps). Business drivers include operating leverage from scale in maintenance/service revenues and disciplined SG&A growth relative to revenue (SG&A at 53.18 vs gross profit 104.49). Non-operating items were modest (non-operating income 0.55 and expenses 0.47), so core operations drove the improvement. Asset turnover at 0.741 suggests efficient use of the asset base for a services-centric model, and leverage at 1.74x is moderate, aiding ROE without excessive risk. Sustainability: Structural drivers (installed base growth, recurring maintenance) support margins, but labor and parts cost inflation could cap further expansion; near-term margin gains appear partially sustainable given scale effects. Watch for SG&A growth outpacing revenue in future periods; for now, operating leverage is positive. Effective tax rate at 35.4% tempers ROE; any normalization could further support bottom line.

Growth Assessment

Top-line growth of 15.7% YoY to 269.12 is robust and consistent with a healthy service/maintenance demand environment and likely market share gains or price/mix benefits. Operating income rose 30.7% YoY to 51.31, evidencing strong operating leverage. Net income increased 30.5% YoY to 32.91 despite a high effective tax rate, underscoring core profitability improvements. EBITDA of 58.55 (21.8% margin) indicates scaling benefits and cost control. With ROIC at 15.0%, current growth appears value-accretive. Outlook: Assuming continued growth in the installed base and stable churn in maintenance contracts, revenue growth should be sustainable in the mid-teens near term, though macro slowdown or construction cycle softness could affect new installations and value-added projects. Key forward drivers include pricing power in maintenance contracts, upselling modernization, and disciplined M&A integration.

Financial Health

Liquidity is solid: current ratio 135% and quick ratio 135%, indicating adequate near-term coverage. No warning thresholds triggered (Current Ratio > 1.0; D/E 0.74x < 2.0). Short-term loans (32.29) exceed cash (26.14), but current assets (175.08) materially exceed current liabilities (129.72), limiting maturity mismatch risk; receivables (67.15) provide additional liquidity upon collection. Long-term debt is modest at 5.78, and interest coverage is exceptionally strong at 213.79x, suggesting low refinancing risk under current conditions. Total equity is 208.75 against total assets of 362.96, indicating a balanced capital structure. No off-balance sheet obligations are reported in the provided data.

Cash Flow Quality

OCF/Net Income of 1.26x indicates healthy earnings quality with cash conversion exceeding reported profit. Operating cash flow of 41.47 comfortably covers reported capex of 5.76, implying an implied positive pre-investing free cash flow buffer, though full investing cash flows are unreported. Financing cash flow was an outflow of -28.37, including share repurchases of -0.61 and likely debt/dividend movements (dividends unreported). Working-capital dynamics appear manageable given positive OCF amid double-digit growth; no overt signs of working-capital-driven earnings inflation are evident from the limited disclosures. Overall, cash generation supports ongoing operations and measured shareholder returns.

Dividend Sustainability

Dividend data is unreported; the calculated payout ratio of 167.8% suggests potential over-distribution if accurate, but this cannot be confirmed without official DPS. On a cash basis, OCF of 41.47 less capex of 5.76 implies ample capacity to fund reasonable dividends and small buybacks, with residual for debt management. Given strong profitability and low capex intensity, the dividend appears potentially supportable from cash flows, but confirmation of actual DPS and policy is needed. Policy outlook: With ROE at 15.8% and solid cash conversion, management has room to maintain or gradually raise shareholder returns, contingent on growth investment needs and maintaining balance sheet flexibility.

Risk Assessment

Business Risks:

• Cost inflation risk in labor and parts potentially compressing service margins
• Execution and integration risk associated with growth and accumulated intangibles/goodwill (total 59.61)
• Demand cyclicality in modernization/new installation projects tied to construction cycles
• Customer concentration or competitive pricing pressure in maintenance contracts

Financial Risks:

• Reliance on short-term borrowings (32.29) relative to cash (26.14), though mitigated by strong current assets
• High effective tax rate (35.4%) dampening net profitability
• Potential impairment risk given sizable intangibles and goodwill
• Interest rate sensitivity on floating-rate short-term debt

Key Concerns:

• Sustainability of recent margin gains if wage and materials inflation accelerate
• Receivables collection risk (AR 67.15) as business scales
• Uncertainty around actual dividend payouts given unreported DPS despite a high calculated payout ratio

Investment Implications

Key Takeaways:

• Strong operating leverage: operating margin up ~219 bps YoY to ~19.1%
• Solid cash conversion with OCF/NI at 1.26x supports quality of earnings
• Healthy balance sheet: D/E 0.74x and interest coverage >200x
• ROE 15.8% and ROIC 15.0% indicate value-accretive growth
• Intangibles and goodwill at ~mid-teens of assets require monitoring for impairment risk

Metrics to Watch:

• Operating and net margin trajectories (bps changes)
• OCF/NI and working capital (receivables days)
• Short-term debt versus cash and the evolution of financing flows
• Effective tax rate trends
• Capex discipline and any M&A-related intangible build
• Order backlog/maintenance contract retention and pricing (when disclosed)

Relative Positioning: Within Japan’s building maintenance and elevator service space, the company demonstrates above-average growth, strong operating leverage, and superior returns (ROE/ROIC), supported by a robust cash profile and moderate leverage; primary differentiators are scale benefits and recurring maintenance revenues, with key sensitivities around cost inflation and receivables management.

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
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