HIRAYAMA HOLDINGS Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥9.28B
• Operating Income: ¥490M
• Net Income: ¥212M
• EPS: ¥40.44

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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: A solid Q1 with strong operating leverage and margin expansion, albeit with limited cash flow visibility and an elevated implied payout ratio. Revenue rose 4.9% YoY to 92.76, while operating income jumped 62.5% YoY to 4.90, evidencing significant efficiency gains. Gross profit reached 15.29 (GPM 16.5%), and SG&A was 12.27 (SG&A ratio 13.2%), supporting a marked improvement in the gross-to-SG&A spread. Operating margin stepped up to 5.3% from an estimated ~3.4% a year ago, implying roughly 186 bps expansion. Ordinary income was 4.96 (+52.0% YoY), and net income was 3.09 (+46.2% YoY), yielding a net margin of 3.3%. The effective tax rate was 35.0%, consistent with the reported income tax of 1.14 against pretax profit of 3.27. Balance sheet quality appears sound: current assets of 106.95 easily cover current liabilities of 48.57, with a current ratio of 220%. Cash and deposits are ample at 61.64, and interest coverage is very strong at 143x, reflecting light interest expense (0.03). Leverage measured as total liabilities to equity is 1.47x, but interest-bearing debt is modest (short-term 0.50, long-term 7.14), implying conservative financial risk from borrowings. ROE (DuPont) is 6.1%, driven primarily by improved net profit margin and moderate asset turnover of 0.741x with financial leverage of 2.47x. Earnings quality cannot be verified this quarter because operating cash flow was not disclosed; this is a key gap. The reported ROIC of -96.2% is a red flag on capital efficiency but is likely a calculation anomaly due to unreported invested capital components; it should not be interpreted at face value without reconciliation. Dividend details were not disclosed, but an implied payout ratio of 132.0% suggests potential pressure if sustained; cash on hand mitigates near-term risk but strategy clarity is needed. Non-operating items were small (income 0.29, expense 0.04), indicating the profit uplift is predominantly operating in nature. Forward-looking, sustaining the widened operating margin while navigating wage inflation and staffing mix will be the swing factor for FY performance. Monitoring OCF when available and confirming dividend policy/trajectory will be crucial to assess sustainability.

Profitability Analysis

ROE (6.1%) = Net Profit Margin (3.3%) × Asset Turnover (0.741) × Financial Leverage (2.47x). Margin improved the most, as OI rose 62.5% on +4.9% sales, pushing operating margin to 5.3% (~186 bps YoY expansion by estimate). Drivers likely include utilization gains and SG&A discipline; asset turnover is steady, and leverage remains conservative in debt terms. Sustainability depends on maintaining pricing power and labor mix; watch for SG&A growth outpacing revenue.

Growth Assessment

Top-line growth of 4.9% YoY to 92.76 indicates steady demand. Profit growth was far stronger (OI +62.5%, NI +46.2%), evidencing operating leverage and improved cost absorption. The profit mix is predominantly operating; non-operating income was small (0.29), suggesting quality of growth is good from a P&L standpoint. However, no disclosure on depreciation, capex, or OCF limits validation of sustainability. Effective tax rate at 35% is normalized, so below-the-line support is minimal. Near-term outlook hinges on maintaining utilization, securing price pass-through to offset wage/minimum-wage increases, and controlling recruitment and training costs. Given the high cash balance, the company has flexibility to invest in human capital and systems to support growth, but confirmation via segment disclosures and order pipelines would improve visibility.

Financial Health

Current ratio 220.2% and quick ratio 220.2% indicate strong liquidity; cash 61.64 more than covers short-term obligations. Total liabilities/equity 1.47x is manageable; interest-bearing leverage is low (~0.15x). Interest coverage 143x suggests minimal servicing risk. No maturity mismatch concerns evident.

Cash Flow Quality

OCF unreported; earnings conversion can’t be assessed. FCF coverage unknown. Receivables are meaningful, but no evidence of manipulation or stress without CF detail. Cash cushion provides near-term flexibility.

Dividend Sustainability

Implied payout ratio 132% suggests potential unsustainability from earnings alone; absent OCF, coverage unknown. Cash can bridge temporarily, but a normalized payout ratio closer to earnings/FCF capacity would be preferable; await policy and CF disclosure.

Risk Assessment

Business Risks:

• Demand cyclicality from key client industries impacting utilization and gross margins.
• Wage inflation and minimum-wage hikes compressing margins if not fully passed through.
• Talent acquisition/retention costs and training expenses increasing SG&A.
• Regulatory and compliance risks in staffing/dispatch operations (Labor Standards/Haken law).
• Client concentration risk if large customers dominate revenue (not disclosed).

Financial Risks:

• Dividend sustainability risk given implied 132% payout ratio absent OCF confirmation.
• Working capital intensity (large receivables) could weaken cash conversion in downturns.
• Tax rate at ~35% leaves limited downside buffer below the line.
• Potential for special losses impacting PBT (PBT below ordinary income this quarter).

Key Concerns:

• No disclosure of operating, investing, or financing cash flows—earnings quality unverified.
• ROIC metric reported at -96.2% likely reflects calculation artifacts due to incomplete invested capital data; requires reconciliation.
• Lack of SG&A breakdown obscures cost drivers and sustainability of margin gains.
• No guidance/dividend policy details provided to contextualize the elevated implied payout.

Investment Implications

Key Takeaways:

• Strong margin-driven earnings beat: OI +62.5% on +4.9% sales; operating margin ~5.3%.
• Healthy balance sheet with ample cash (61.64) and low interest-bearing leverage.
• Earnings quality can’t be confirmed without OCF; cash conversion is the main unknown.
• Implied payout ratio (132%) looks high; sustainability needs policy/OCF clarity.
• ROE at 6.1% improved chiefly via margin expansion; scope to lift via turnover and steady leverage.

Metrics to Watch:

• Operating cash flow and OCF/NI (>1.0 desirable).
• SG&A trend vs revenue and gross margin trajectory.
• Receivables days and collection efficiency.
• Pricing/pass-through rates relative to wage inflation.
• Dividend policy updates and DPS vs EPS/FCF alignment.

Relative Positioning: Among domestic staffing/services peers, the company shows above-peer operating leverage this quarter and conservative borrowing, but stands behind best-in-class operators on verified cash conversion and transparency due to missing CF disclosure; dividend clarity will be a differentiator for investor perception.

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