NISHIKAWA KEISOKU Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥8.68B
• Operating Income: ¥790M
• Net Income: ¥545M
• EPS: ¥161.11

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

FY2026 Q1 was a solid beat on profitability for Nishikawa Keisoku, with double-digit revenue growth translating into even faster profit growth and clear margin expansion. Revenue increased 13.5% YoY to 86.8, while operating income rose 30.6% YoY to 7.9 and net income climbed 31.6% to 5.45. Operating margin improved to 9.1%, ordinary margin to 9.4%, and net margin to 6.3%. Based on back-calculations, operating margin expanded by approximately 118 bps YoY (from ~7.9% to 9.1%), and net margin expanded by roughly 86 bps (from ~5.4% to 6.3%). Ordinary margin expanded by about 128 bps YoY (from ~8.1% to 9.4%). Gross margin stands at 19.6%, though a YoY comparison is not available from disclosed data. SG&A ratio is 12.6%, with salaries and rent being the largest disclosed components, indicating cost discipline alongside topline growth. Non-operating income was modest at 0.17 (mainly dividends of 0.14), contributing about 2% of ordinary income—performance was fundamentally driven by core operations. The effective tax rate was 33.3%, consistent with a normalized rate. On balance sheet strength, current ratio is a healthy 181.7% with 86.07 in cash, and equity ratio (calculated) is approximately 64.9%, underscoring a conservative capital structure. ROE for the period calculates to 2.6% on a DuPont basis (NPM 6.3%, asset turnover 0.273, leverage 1.54x); while acceptable for a quarter, it suggests room for improvement in capital efficiency. ROIC is reported at 4.4%, below the 5% warning threshold, highlighting a structural efficiency challenge despite the good quarter. Cash flow data were not disclosed, preventing validation of earnings quality via OCF/NI or FCF coverage. The reported payout ratio proxy (201.5%) appears elevated and likely reflects timing or policy effects; without OCF and DPS detail, its sustainability cannot be confirmed. Overall, the quarter signals operating leverage and margin improvement, but medium-term upside depends on sustaining demand, further cost efficiency, and improving ROIC.

Profitability Analysis

Decomposing ROE (2.6%): ROE = Net Profit Margin (6.3%) × Asset Turnover (0.273) × Financial Leverage (1.54x). The principal driver of YoY improvement appears to be margin expansion, as operating and net income grew materially faster than revenue, implying positive operating leverage. Operating margin increased by roughly 118 bps YoY to 9.1%, and net margin by about 86 bps to 6.3%, while ordinary margin rose ~128 bps to 9.4%; this indicates mix/price/cost tailwinds. Business-wise, improved gross-to-operating conversion (GPM 19.6% with SG&A ratio 12.6%) points to disciplined cost control and potentially favorable project/product mix. Asset turnover (0.273 for the quarter) is inherently seasonal/project-driven in this business and cannot be reliably compared YoY without prior asset data; leverage at 1.54x (Assets/Equity) is conservative. The margin gain looks partly sustainable if mix and cost discipline hold, but some contribution may be one-time from project timing. Watch for SG&A growth outpacing revenue in subsequent quarters; for now, operating income growth (+30.6%) exceeded revenue growth (+13.5%), evidencing healthy operating leverage.

Growth Assessment

Topline growth of 13.5% YoY to 86.8 indicates solid demand, likely supported by project deliveries in measuring/industrial solutions. Profit growth outpaced sales: operating income +30.6% and net income +31.6%, demonstrating improved cost absorption and mix. Non-operating income was a small contributor (0.17), so growth quality is mainly operating. With ordinary margin +128 bps YoY, momentum appears robust; however, lack of order backlog and segment data limits visibility on sustainability. Given elevated margins this quarter, normalization risk exists if high-margin projects are lumpy. Outlook hinges on pipeline conversion in capex/customer industries and the ability to maintain SG&A discipline.

Financial Health

Liquidity is strong: current ratio 181.7% and quick ratio 181.7%, with cash of 86.07 and accounts receivable of 76.82 comfortably exceeding current liabilities of 123.61. No warning on current ratio (<1.0) or leverage (D/E > 2.0); calculated liabilities-to-equity is 0.65x, and equity ratio is about 64.9% (206.07/317.71). Maturity mismatch risk appears low as current assets (224.56) cover current liabilities (123.61) by 1.8x; inventories are unreported, but the cash and receivables base is ample. Interest-bearing debt is unreported; however, the balance sheet suggests a net cash position when comparing cash to total liabilities due within a year. No off-balance sheet obligations were disclosed in the data provided.

Cash Flow Quality

Operating cash flow, capex, and FCF were not disclosed, so OCF/Net Income and FCF coverage cannot be assessed. As such, we cannot confirm whether earnings were cash-backed this quarter. Working capital assessment is partially constrained by unreported inventories; however, AR of 76.82 vs AP of 48.08 suggests typical trading-cycle dynamics without obvious red flags from the limited data. Absence of OCF raises uncertainty on the timing of collections and project milestone cash receipts.

Dividend Sustainability

Dividend data (DPS, total dividends) were not disclosed, and OCF/FCF are unavailable. The calculated payout ratio of 201.5% appears elevated and would be unsustainable if reflective of ongoing policy, but it may be influenced by timing (e.g., interim/annual payout vs quarterly earnings base) or special distributions. Without FCF data, we cannot verify cash coverage. Balance sheet strength (high equity ratio, sizeable cash) offers some buffer, but sustainable policy assessment requires full-year earnings and cash generation visibility.

Risk Assessment

Business Risks:

• Project timing and lumpiness in high-margin deliveries could cause quarterly volatility in margins and earnings.
• Customer capex cycle exposure in industrial/measurement markets may slow orders if macro conditions weaken.
• Supplier/principal concentration risk typical in distribution/solution integrators may impact pricing and availability.
• Talent and wage inflation risk given salaries are a large SG&A component (5.14 of 10.98).

Financial Risks:

• Cash flow uncertainty due to unreported OCF/FCF; potential collection/timing risks in receivables.
• Possible hidden leverage profile as interest-bearing debt detail is unreported (though overall liabilities are moderate).
• ROIC at 4.4% (<5% threshold) indicates capital efficiency risk if growth requires incremental capital without commensurate returns.

Key Concerns:

• ROIC below 5% despite strong quarterly margins, suggesting structural return headwinds.
• Dividend sustainability unclear; calculated payout ratio above 100% if taken at face value.
• Limited disclosure (no CF statement, inventories, D&A) constrains quality-of-earnings validation.

Investment Implications

Key Takeaways:

• Strong operating leverage: OI +30.6% on revenue +13.5%, with OPM up ~118 bps YoY to 9.1%.
• Core-driven beat: non-operating income modest (0.17), ordinary margin up ~128 bps.
• Solid balance sheet: current ratio 182%, equity ratio ~65%, ample cash at 86.07.
• Capital efficiency remains a watchpoint: ROE 2.6% (quarterly), ROIC 4.4% < 5% warning.
• Earnings quality and dividend coverage unverified due to missing cash flow data.

Metrics to Watch:

• Order backlog and book-to-bill for visibility on revenue sustainability.
• Operating cash flow and FCF conversion vs net income (target OCF/NI > 1.0).
• SG&A growth vs revenue to confirm continued operating leverage.
• ROIC trend and project returns relative to cost of capital.
• Receivables days and collection efficiency; any rise in overdue AR.

Relative Positioning: Within Japanese measurement/industrial solution peers, the company exhibits solid near-term margin momentum and a conservative balance sheet, but lags on capital efficiency (ROIC 4.4%), making sustained improvement in asset turns and project returns key to closing the gap with higher-ROIC competitors.

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