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

Financial Highlights

• Net Sales: ¥26.91B
• Operating Income: ¥5.13B
• Net Income: ¥2.56B
• 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

Japan Elevator Service Holdings (consolidated, JGAAP) delivered a strong FY2026 Q2, with revenue of ¥26.9bn growing 15.7% YoY and operating income of ¥5.13bn up 30.7% YoY, indicating clear positive operating leverage. Profitability expanded across the P&L: EBITDA reached ¥5.89bn (21.9% margin), operating margin was approximately 19.1%, and net income was ¥3.29bn for a 12.23% net margin. DuPont metrics are solid: net margin 12.23%, asset turnover 0.741x, and financial leverage 1.74x yield a calculated and reported ROE of 15.77%. Gross profit of ¥8.84bn implies a gross margin of 32.8%, consistent with strong service-mix economics; note that the presented gross profit differs from a simple revenue minus cost of sales calculation, suggesting classification differences within cost lines. Ordinary income (¥5.14bn) tracked close to operating income, implying minimal non-operating drag, though the tax and net income bridge suggests the possibility of small extraordinary or non-operating items. The effective tax rate derived from reported taxes and net/pre-tax earnings appears to be in the mid-20s, not 0% as shown in the calculated metrics, which likely reflects data limitation rather than economics. Liquidity is adequate with a current ratio of 136% and working capital of ¥4.45bn; leverage is moderate with total liabilities/equity at 0.72x and implied equity ratio around the high‑50% range, despite a disclosed equity ratio of 0.0% (non-disclosure artifact). Interest expense is de minimis (¥16m), and interest coverage is extremely strong at about 321x. Cash conversion lagged earnings this half: operating cash flow was ¥2.38bn (OCF/NI of 0.72), pointing to a working capital build or timing factors typical for service/maintenance businesses in growth phases. Investing and cash balances are undisclosed (zero placeholders), limiting visibility into capex, M&A, and net cash, and thus constraining free cash flow assessment. EPS was ¥18.48; back-solving implies roughly 178 million average shares, as outstanding share data are not disclosed. No dividend was disclosed (DPS ¥0; payout ratio 0%), which should be treated as non-reported rather than a confirmed policy shift. Overall, the quarter evidences robust demand, margin discipline, and high ROE, offset by softer cash conversion and limited balance sheet/cash flow granularity. Data limitations (notably zeros for several line items) require caution in interpreting equity ratio, cash position, FCF, and dividend policy.

Profitability Analysis

ROE decomposes as follows: net profit margin 12.23% × asset turnover 0.741 × financial leverage 1.74 = 15.77% ROE, a healthy level for a service-heavy model. Gross margin of 32.8% and EBITDA margin of 21.9% indicate good cost control and value-add from maintenance/services. Operating margin of roughly 19.1% expanded materially relative to revenue growth, consistent with scale benefits and tight SG&A. Ordinary income closely matches operating income, implying limited non-operating noise; interest burden is negligible given only ¥16m interest expense. Based on income tax of ¥1.38bn and net income of ¥3.29bn, the implied pre-tax income is around ¥4.67bn, suggesting an effective tax rate near 29–30% if using that base; the 0% figure in the calculated metrics is not economically representative. Operating leverage is strong: with revenue up ~¥3.64bn YoY (to ~¥26.9bn) and operating income up ~¥1.20bn, the implied incremental operating margin is around 33%, indicating efficient absorption of fixed costs and/or pricing/mix tailwinds. Margin quality appears solid given high interest coverage (320.7x) and minimal reliance on financial income. Overall profitability is robust and improving, with ROE supported by both margin strength and decent asset turnover.

Growth Assessment

Top-line growth of 15.7% YoY to ¥26.9bn reflects healthy demand in maintenance and related services, likely supported by portfolio expansion and stable renewal dynamics. Operating income growth of 30.7% outpaced revenue growth, highlighting favorable operating leverage and improving cost efficiency. Net income increased 30.5% YoY, confirming that expansion in operating profit is translating to the bottom line despite normalizing taxes. The sustainability of revenue growth appears reasonable given the recurring nature of maintenance contracts in this industry, though visibility into order intake, contract renewals, and churn is not provided. Profit growth quality is good at the P&L level but tempered by weaker cash conversion (OCF/NI 0.72), suggesting working capital investment during growth. The near-equality of operating and ordinary income suggests limited exposure to volatile non-operating items this period. Outlook-wise, continued mid-teens growth is plausible near term if the installed base and service penetration continue to expand, but we lack disclosure on backlog and new contract wins. Price/cost dynamics look favorable given margin expansion, though wage inflation and parts procurement could test margins. Given data limitations, we assume no outsized one-offs and steady recurring revenue as key growth drivers.

Financial Health

Total assets are ¥36.30bn, liabilities ¥15.09bn, and equity ¥20.88bn, implying an approximate equity ratio of 57–58% (despite the disclosed 0.0% placeholder). Leverage is moderate with total liabilities/equity at 0.72x. Current assets of ¥16.72bn versus current liabilities of ¥12.27bn yield a current ratio of 136% and working capital of ¥4.45bn; the quick ratio equals the current ratio because inventories are undisclosed, not necessarily zero. Interest expense is minimal (¥16m), and coverage is extremely strong at ~321x, indicating negligible near-term refinancing risk. Ordinary income nearly equals operating income, suggesting minimal financial asset/liability volatility this period. Cash and equivalents were not disclosed (0 placeholder), so net debt and liquidity buffers cannot be assessed precisely. Overall solvency and liquidity appear sound on reported figures, with adequate short-term coverage and conservative balance sheet leverage.

Cash Flow Quality

Operating cash flow was ¥2.38bn versus net income of ¥3.29bn, for OCF/NI of 0.72, indicating weaker-than-earnings cash conversion likely due to working capital investment (e.g., receivables timing or contract-related balances). Depreciation and amortization were ¥0.76bn, consistent with a light-asset service model and supporting EBITDA reconciliation. Investing cash flow and period-end cash balances were undisclosed (0 placeholders), preventing a reliable free cash flow calculation; the reported FCF of 0 reflects missing investing data rather than true FCF. Financing cash flow was an outflow of ¥1.36bn, which could reflect dividends, share buybacks, or debt repayment, but details are not provided. Working capital dynamics likely absorbed cash in the half, consistent with growth; further disclosure on receivables days and contract assets would clarify. Earnings quality at the P&L level is strong, but cash flow quality is moderate this period given the OCF shortfall versus NI and lack of investing detail.

Dividend Sustainability

No dividend was disclosed for the period (DPS ¥0; payout 0%), and free cash flow is not derivable due to absent investing cash flow data. With EPS of ¥18.48 and positive OCF of ¥2.38bn, underlying capacity to fund distributions appears supported by earnings, but cash coverage cannot be confirmed without capex/M&A detail. Financing cash outflow of ¥1.36bn suggests some capital allocation occurred (potentially dividends or buybacks), but the mix is not disclosed. Policy outlook cannot be inferred from the provided data; we treat the zero dividend metrics as placeholders rather than a policy change. Dividend sustainability assessment therefore remains inconclusive pending disclosure of investing cash flows, cash balances, and any stated payout policy.

Risk Assessment

Business Risks:

• Dependence on maintenance contract renewals and installed base growth for revenue sustainability
• Price competition and potential discounting in maintenance/service markets
• Wage inflation and technician availability impacting service margins and delivery quality
• Supply chain and parts procurement timing affecting cost of sales and service lead times
• Safety/regulatory changes requiring higher compliance costs or affecting inspection volumes
• Execution risk in geographic or service-line expansion
• Potential extraordinary items impacting reported pre-tax income in some periods

Financial Risks:

• Weaker cash conversion (OCF/NI 0.72) indicating working capital intensity during growth
• Limited disclosure of cash, investing flows, and inventories impairs visibility on FCF and net cash
• Potential M&A-related spending (if any) not captured due to undisclosed investing cash flow
• Concentration risk if receivables increase with large customers (not disclosed)
• Tax rate variability versus ordinary income due to classification of extraordinary/non-operating items

Key Concerns:

• Free cash flow cannot be assessed due to undisclosed investing cash flow
• Equity ratio and cash balance reported as 0%/¥0 are placeholders and obscure capital structure clarity
• Sustaining margin expansion amid wage and parts cost inflation
• Working capital discipline needed to align cash generation with earnings

Investment Implications

Key Takeaways:

• Strong top-line growth (+15.7% YoY) with outsized operating income growth (+30.7% YoY) evidences positive operating leverage
• High ROE of 15.77% driven by healthy margins, decent asset turnover (0.741x), and moderate leverage (1.74x)
• Margins are robust: gross 32.8%, EBITDA 21.9%, operating ~19.1%, net 12.23%
• Cash conversion lag (OCF/NI 0.72) suggests working capital absorption amid growth
• Balance sheet appears conservative with liabilities/equity 0.72x and very high interest coverage (~321x)
• Visibility gaps persist: cash, investing CF, and dividend policy not disclosed; treat zeros as placeholders

Metrics to Watch:

• OCF/Net income ratio and working capital turnover (receivables days, contract assets/liabilities)
• Incremental margins and SG&A ratio to confirm continued operating leverage
• Contract renewal rates, maintenance portfolio size, and churn
• Gross margin and parts/wage inflation pass-through
• Capex and M&A cash outflows to properly derive free cash flow
• Effective tax rate normalization versus ordinary/pre-tax income

Relative Positioning: Within Japanese service and maintenance peers, the company shows above-average profitability and ROE with moderate leverage, though current-period cash conversion trails earnings; disclosure gaps on cash and investing flows limit direct comparability on FCF.

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