HOCHIKI CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥48.59B
• Operating Income: ¥4.31B
• Net Income: ¥2.29B
• EPS: ¥121.25

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

HoChi Co., Ltd. (TSE: 6745) delivered solid FY2026 Q2 results with revenue up 6.7% YoY to ¥48.6bn and operating income up 27.5% to ¥4.31bn, indicating clear operating leverage. Net income rose 32.0% YoY to ¥3.02bn, outpacing revenue growth and reflecting improved margin dynamics. The operating margin stands at roughly 8.9%, up about 1.4 percentage points from the prior year’s implied level, suggesting better cost control and/or a favorable sales mix. Gross profit margin is reported at 34.1%, supporting the margin-led earnings growth narrative. The DuPont decomposition shows ROE of 4.88% built from a 6.20% net margin, 0.565x asset turnover, and 1.39x financial leverage; the low leverage constrains ROE but also de-risks the balance sheet. Liquidity is strong with a current ratio of 286.6% and working capital of ¥43.0bn, providing ample cushion for execution and seasonality. The capital structure is conservative: liabilities-to-equity is 0.49x and the implied equity ratio (equity/assets) is approximately 71.9% despite the reported equity ratio field showing 0.0% (likely undisclosed). Interest burden is minimal with interest expense of only ¥15m and an interest coverage ratio around 287x. Ordinary income closely tracks operating income, indicating limited non-operating distortions. Based on income tax expense of ¥1.06bn and a back-solved pre-tax income, the effective tax rate appears to be approximately 26%, not 0% as the placeholder metric suggests. Cash flow statement items are not disclosed (shown as zeros), limiting assessment of earnings-to-cash conversion and free cash flow. Dividend data for the period are also undisclosed (DPS and payout shown as zero placeholders), so distribution policy for the current year cannot be inferred from the dataset. Inventory is shown as zero, implying non-disclosure rather than absence, so quick and current ratios are effectively the same. There is a small internal inconsistency between the reported cost of sales and gross profit; we rely on the reported gross margin and income statement endpoints (revenue and operating income) for analysis. Overall, the company demonstrates healthy profitability momentum on top of a fortified balance sheet, though lack of cash flow disclosure is a key analytical gap. Near-term outlook appears supported by margin expansion and low financial risk, with sustainability hinging on order trends, price pass-through, and project execution.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 6.20%
• asset_turnover: 0.565
• financial_leverage: 1.39
• calculated_ROE: 4.88%
• commentary: ROE is driven primarily by improved margins; leverage remains low, limiting ROE but enhancing risk profile. margin_quality:
• gross_margin: 34.1% (reported)
• operating_margin: 8.9% (¥4.306bn / ¥48.594bn)
• ordinary_margin: 9.0% (¥4.375bn / ¥48.594bn)
• net_margin: 6.20% (reported)
• observations: Operating and net margins expanded meaningfully YoY. Cost discipline and sales mix likely improved. Note: cost of sales and gross profit figures are not fully reconcilable; we anchor on the reported gross margin. operating_leverage:
• revenue_growth_yoy: 6.7%
• operating_income_growth_yoy: 27.5%
• implication: Positive operating leverage is evident; implied prior-year operating margin ~7.4% vs. current ~8.9%.

Growth Assessment

revenue_sustainability: Mid-single-digit top-line growth indicates healthy demand. Sustainability will hinge on order intake, backlog, and timing of project revenue recognition. profit_quality: Earnings growth outpaced sales due to margin expansion; ordinary income closely tracks operating income, suggesting limited non-operating noise. outlook: Momentum is favorable given cost control and pricing/mix. Key to durability will be procurement stability and the ability to pass through input costs, as well as the construction/project cycle. Seasonality and project timing may influence H2.

Financial Health

liquidity:

• current_ratio: 286.6% (¥66.087bn / ¥23.055bn)
• quick_ratio: ≈286.6% (inventory undisclosed, reported as zero)
• working_capital: ¥43.032bn
• commentary: Very strong short-term liquidity with a sizable working capital buffer. solvency:
• total_assets: ¥86.075bn
• total_liabilities: ¥30.333bn
• total_equity: ¥61.841bn
• liabilities_to_equity: 0.49x
• implied_equity_ratio: ≈71.9% (vs. reported 0.0% field, likely undisclosed)
• interest_coverage: ≈287x (EBIT/interest)
• commentary: Low leverage and ample equity base minimize refinancing and interest-rate risk. capital_structure: Predominantly equity-financed with minimal reliance on interest-bearing debt (interest expense only ¥15m). Financial flexibility appears high.

Cash Flow Quality

earnings_quality: Cannot be fully assessed due to non-disclosure of cash flow statement items (OCF, capex, and FCF shown as zero placeholders). FCF_analysis: Free cash flow not available. With strong working capital and low interest burden, cash generation could be solid, but confirmation awaits disclosure. working_capital: Receivables and inventories are not provided in detail (inventory shown as zero placeholder). Changes in receivables/payables cannot be analyzed.

Dividend Sustainability

payout_ratio_assessment: Payout and DPS are not disclosed for the period (zeros treated as undisclosed). With net income of ¥3.02bn and low leverage, capacity likely exists, but actual policy and interim distribution remain unknown. FCF_coverage: Not assessable due to absent OCF and capex data. policy_outlook: Given balance sheet strength, dividends are plausible; however, without cash flow data and formal guidance, no conclusion on sustainability or trajectory can be drawn.

Risk Assessment

Business Risks:

• Project timing and revenue recognition variability across half-year periods
• Input cost inflation and price pass-through execution
• Supply chain constraints affecting equipment and components
• Dependence on construction and refurbishment cycles in end markets
• Competitive pricing pressure impacting gross margins

Financial Risks:

• Working capital swings (receivables collection, advance payments) not observable due to undisclosed CF data
• Potential concentration risk in large projects or customers (not disclosed)
• Tax rate variability (back-solved ~26%) could affect net margin

Key Concerns:

• Lack of operating, investing, and financing cash flow disclosure limits earnings-to-cash assessment
• Inventory data undisclosed, obscuring true liquidity composition and supply chain posture
• Inconsistency between reported cost of sales and gross profit necessitates caution in margin analysis

Investment Implications

Key Takeaways:

• Margin-led earnings growth with clear operating leverage in H1
• Conservative balance sheet with implied equity ratio ~72% and minimal interest burden
• ROE of 4.88% constrained by low leverage despite improved profitability
• Cash flow and dividend data are undisclosed, limiting assessment of payout capacity and FCF quality
• Monitoring H2 order intake and cost pass-through is critical for sustainability

Metrics to Watch:

• Order backlog and book-to-bill
• Gross margin and SG&A-to-sales ratio
• Operating cash flow and OCF/Net income conversion once disclosed
• Capex and resulting free cash flow
• Receivables days and any emergence of inventory levels
• Effective tax rate stability
• Ordinary income vs. operating income gap (non-operating items)

Relative Positioning: Financially conservative with strong liquidity and low leverage versus typical capital goods/electrical equipment peers; profitability trending up, though ROE remains moderate given the balance sheet’s low leverage.

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