HPC SYSTEMS Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.78B
• Operating Income: ¥156M
• Net Income: ¥46M
• EPS: ¥27.55

Income Statement

Balance Sheet

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

HPC Systems Co., Ltd. (6597) reported FY2026 Q1 consolidated results under JGAAP with solid top-line growth and significant operating leverage. Revenue was ¥1,777 million, up 10.2% YoY, indicating healthy demand in its HPC-related solution businesses early in the fiscal year. Gross profit was ¥475 million, implying a gross margin of 26.7%, which supports the quality of revenue and suggests product/service mix and pricing remain favorable. Operating income rose to ¥156 million (+42.1% YoY), lifting the operating margin to 8.8%, a material expansion relative to sales growth that signals improved cost discipline and fixed-cost absorption. Ordinary income reached ¥167 million, and net income rose sharply to ¥114 million (+151.3% YoY), driving a Q1 net margin of 6.4%. DuPont analysis indicates calculated ROE of 4.38% for the period, based on a net margin of 6.42%, asset turnover of 0.448, and financial leverage of 1.53, consistent with the reported ROE metric provided. Balance sheet strength is a notable feature: total assets are ¥3,970 million and total liabilities are ¥1,920 million, implying equity of ¥2,602 million and a computed equity ratio of roughly 65.6%. Liquidity appears robust with a current ratio of 255% and working capital of approximately ¥2,532 million, suggesting ample capacity to fund operations and growth. Financial risk looks modest; interest expense was only ¥2.4 million and interest coverage is a very strong 65x. The effective tax burden, recalculated from disclosed numbers, appears to be roughly 15.7% (¥26.2 million tax on approximately ¥167 million pre-tax), despite the tabulated 0.0% placeholder. Cash flow data (OCF/FCF) and depreciation are not disclosed in this dataset, limiting visibility into earnings quality and capital intensity; zeros here should be treated as unreported, not actual zeros. Inventory levels are also undisclosed, which mechanically inflates the “quick ratio” to equal the current ratio and constrains working capital diagnostics. There is an apparent mapping inconsistency where current assets exceed total assets in the disclosure snapshot, so the current-asset figure should be treated cautiously; the liquidity ratios provided likely reflect the company’s intended classification. Dividend data show 0 for DPS and payout ratio, which likely reflects non-disclosure or timing rather than a confirmed zero dividend policy for the year. Overall, the quarter shows healthy growth, margin expansion, and strong solvency, but the lack of cash flow and capital expenditure disclosures tempers confidence in assessing the durability of earnings and free cash flow conversion.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 6.42% (NI ¥114m / Revenue ¥1,777m)
• asset_turnover: 0.448 (provided; Q1 snapshot basis)
• financial_leverage: 1.53 (Assets/Equity ≈ 3,970/2,602)
• calculated_ROE: 4.38% (matches provided DuPont ROE) margin_quality:
• gross_margin: 26.7% (¥475m/¥1,777m), indicating decent pricing and mix in HPC solutions/services
• operating_margin: 8.8% (¥156m/¥1,777m), up YoY given +42.1% OI vs +10.2% revenue
• ordinary_margin: 9.4% (¥167m/¥1,777m)
• net_margin: 6.4% (¥114m/¥1,777m)
• tax_rate: Approx. 15.7% (¥26.2m/¥167m), recalculated from disclosed items operating_leverage: Strong positive operating leverage in Q1, evidenced by operating income growth (+42.1% YoY) significantly outpacing revenue (+10.2% YoY), implying improved cost control and fixed-cost absorption.

Growth Assessment

revenue_sustainability: Q1 revenue growth of 10.2% YoY suggests steady demand; sustainability will depend on pipeline visibility in HPC deployments, seasonal patterns, and macro-sensitive capex from industrial/academic customers. profit_quality: Margin expansion across operating and net levels is favorable; however, absence of depreciation and OCF disclosures limits assessment of capital intensity and earnings-to-cash conversion. outlook: Near-term outlook appears constructive given leverage on fixed costs and low interest burden. Maintaining gross margin near the mid-20s and continued SG&A discipline would support further operating profit growth if revenue growth persists.

Financial Health

liquidity:

• current_ratio: 254.5% (provided)
• quick_ratio: 254.5% (mechanically equals current ratio due to undisclosed inventories; interpret cautiously)
• working_capital: ¥2,532 million solvency:
• debt_to_equity: 0.74x (Total liabilities ¥1,920m / Equity ¥2,602m)
• interest_coverage: 65.0x (Operating income ¥156m / Interest expense ¥2.4m)
• equity_ratio: Approx. 65.6% (Equity ¥2,602m / Assets ¥3,970m), despite the reported placeholder capital_structure: Low financial leverage with ample equity base; modest interest expense indicates limited reliance on interest-bearing debt.

Cash Flow Quality

earnings_quality: Undetermined from this dataset. OCF is undisclosed (shown as 0 by placeholder), preventing analysis of accrual intensity and cash conversion. FCF_analysis: Free cash flow not disclosed (0 placeholder). Without capex and depreciation, we cannot infer maintenance vs. growth investment needs. working_capital: Inventories not disclosed; changes in receivables/payables are unknown. Despite strong reported working capital, the item-level dynamics cannot be assessed.

Dividend Sustainability

payout_ratio_assessment: Payout ratio shown as 0.0% reflects non-disclosure/timing rather than a confirmed policy. With EPS of ¥27.55 in Q1, capacity exists, but sustainability depends on full-year earnings and FCF. FCF_coverage: FCF coverage shown as 0.00x is a placeholder; insufficient data to assess coverage. policy_outlook: Absent explicit guidance, assume a conservative stance pending full-year visibility on cash generation and capital requirements.

Risk Assessment

Business Risks:

• Demand cyclicality and budget timing for HPC systems among industrial, academic, and government clients
• Project concentration and milestone risk in large integration or cluster deployments
• Supply chain and lead-time volatility for semiconductors, accelerators, and networking components
• Technological obsolescence and rapid performance cycles in HPC hardware impacting pricing and inventory
• Talent retention and specialized engineering capacity constraints

Financial Risks:

• Working capital swings tied to project billing and component procurement
• Potential FX exposure on imported components (if unhedged)
• Limited disclosure of OCF/FCF and capex creates uncertainty around cash conversion
• Customer credit risk in periods of macro slowdown

Key Concerns:

• Lack of cash flow and depreciation disclosure obscures earnings quality and capital intensity
• Balance sheet classification anomaly (current assets exceeding total assets) suggests data mapping issues
• Inventory data absent, limiting assessment of supply risk and obsolescence

Investment Implications

Key Takeaways:

• Solid Q1 revenue growth (+10.2% YoY) with pronounced operating leverage (+42.1% OI)
• Healthy profitability with operating margin 8.8% and net margin 6.4%
• Strong balance sheet and liquidity; interest coverage 65x and equity ratio ~66%
• Cash flow visibility limited due to undisclosed OCF/FCF and depreciation
• Inventory and working capital granularity lacking; interpret quick/current ratios cautiously

Metrics to Watch:

• Order backlog and book-to-bill for HPC systems and solutions
• Gross margin trend and project mix (hardware vs. services)
• Operating expense ratio (SG&A/revenue) to gauge sustained leverage
• OCF/Net income and FCF when disclosed, including capex requirements
• Inventory turns and days receivable once available
• Effective tax rate normalization over the fiscal year

Relative Positioning: Within the Japanese HPC/systems integration peer set, HPC Systems exhibits strong early-year operating leverage and conservative leverage, positioning it favorably on solvency and interest coverage, though transparency on cash flows and capital intensity trails best-in-class peers.

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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