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

Hirayama Holdings reported solid FY2026 Q1 results, with revenue of ¥9.276bn, up 4.9% YoY, indicating steady demand in its core businesses. Gross profit came in at ¥1.529bn, yielding a gross margin of 16.5%, which is respectable for a labor-intensive outsourcing/staffing model. Operating income rose sharply to ¥490m (+62.5% YoY), driving operating margin to 5.3% and signaling meaningful operating leverage and SG&A efficiency. Ordinary income was ¥496m and net income ¥309m (+46.2% YoY), with a net margin of 3.33%, evidencing improved profitability down the P&L. EPS was ¥40.44, though share count data were not disclosed in the dataset. ROE is calculated at 6.10%, decomposed into a 3.33% net margin, 0.741x asset turnover, and 2.47x financial leverage, reflecting moderate profitability with efficient asset use and moderate leverage. Balance sheet strength appears sound: total assets were ¥12.526bn and total equity ¥5.069bn, implying a derived equity ratio of roughly 40.5% (despite the reported equity ratio field being unfilled). Liquidity looks robust with a current ratio of 225.6% and working capital of ¥5.891bn, supporting ongoing operations and potential growth needs. Leverage is moderate (debt-to-equity 1.45x), but interest coverage is very strong at ~143x, mitigating near-term solvency concerns. The effective tax rate appears to be around 27% based on disclosed income tax and net income, despite an uninformative 0.0% placeholder in the calculated metrics. Cash flow figures (OCF, investing, financing) are undisclosed in this quarter’s XBRL, so cash flow quality and FCF cannot be assessed from the provided data. EBITDA is also not meaningful here because depreciation was unreported; operating income should be used as the primary profitability proxy. Dividend data (DPS, payout, FCF coverage) are not disclosed, so dividend sustainability cannot be evaluated this quarter. Overall, the quarter shows healthy top-line growth, strong operating leverage, and solid balance sheet/liquidity, but the absence of cash flow disclosures limits the assessment of earnings quality and capital return capacity. Investors should monitor whether the operating leverage is sustainable and whether working-capital dynamics support conversion of earnings into cash.

Profitability Analysis

ROE of 6.10% is driven by a 3.33% net margin, 0.741x asset turnover, and 2.47x financial leverage, indicating moderate profitability with balanced use of leverage. Operating margin improved to about 5.3% (¥490m / ¥9,276m), a substantial YoY enhancement given operating income growth of 62.5% versus revenue growth of 4.9%, pointing to strong operating leverage and SG&A discipline. Gross margin of 16.5% is consistent with a labor services model; improvements likely came from utilization and mix rather than pricing power alone. Ordinary margin (~5.35%) broadly tracks operating margin, suggesting limited non-operating drag; interest expense of ¥3.4m is de minimis relative to operating income. The estimated effective tax rate is about 27% based on ¥114m taxes and implied pre-tax income of ~¥423m, consistent with domestic statutory norms. EBITDA is not meaningful due to unreported depreciation; however, given minimal interest expense and the nature of the business, operating income is a reasonable proxy for core profitability. The YoY delta between revenue and operating income growth indicates favorable incremental margins; sustaining this will depend on wage inflation management, headcount utilization, and client mix.

Growth Assessment

Revenue growth of 4.9% YoY to ¥9.276bn suggests stable end-market demand and possibly incremental wins or volume expansion with existing clients. The quality of growth appears favorable given the outsized improvement in operating income (+62.5% YoY), implying that growth did not require disproportionate cost additions. Net income growth of 46.2% underscores efficient flow-through despite a normalized tax burden (~27% by our estimate). Without segment disclosures, we cannot attribute growth to specific verticals; however, the staffing/outsourcing profile typically benefits from manufacturing activity stabilizing and continued outsourcing trends. Sustainability hinges on maintaining utilization and controlling labor costs; a 16.5% gross margin leaves limited headroom if wage inflation accelerates. Asset turnover of 0.741x (period-end assets basis) indicates efficient use of assets; sustaining turnover will be important to preserve ROE in a moderate-margin model. Outlook-wise, if revenue growth remains mid-single digit and the current cost discipline persists, operating margins could remain around 5%+; conversely, any demand softness or wage pressure could compress margins quickly. Given the lack of cash flow data, we cannot verify whether growth is supported by healthy cash conversion, which is an important consideration for ongoing expansion.

Financial Health

Total assets were ¥12.526bn, liabilities ¥7.352bn, and equity ¥5.069bn, implying a derived equity ratio of ~40.5% (the reported 0.0% is a non-disclosure placeholder). Liquidity is strong: current assets ¥10.580bn vs. current liabilities ¥4.689bn yields a current ratio of 225.6% and working capital of ¥5.891bn. Inventories were not disclosed; therefore, the quick ratio equaling the current ratio likely overstates true quick liquidity but still suggests a comfortable buffer. Leverage is moderate with a debt-to-equity ratio of 1.45x (total liabilities/equity). Interest expense was only ¥3.4m, producing an interest coverage ratio of ~143x on operating income—very conservative. No cash and equivalents figure was disclosed in the quarter’s dataset, so absolute cash balances cannot be assessed. Overall solvency and liquidity appear adequate to strong based on the disclosed balance sheet and coverage metrics.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed this quarter, so OCF/Net Income and FCF metrics shown as 0.00 are not meaningful. As a result, earnings quality cannot be validated via cash conversion. Working-capital intensity is likely material for this business model (receivables/payables timing in payroll-heavy contracts), but we cannot quantify Q1 changes. With working capital of ¥5.891bn and strong current assets, the company appears positioned to fund operations; however, confirmation requires OCF data. We recommend monitoring DSO/receivables trends and the ratio of OCF to operating income once cash flow data are available.

Dividend Sustainability

Dividend data (annual DPS, payout ratio, and FCF coverage) were not disclosed; DPS shown as 0.00 should be treated as unavailable rather than zero. EPS for the quarter was ¥40.44, but without declared dividends and without OCF/FCF, we cannot assess payout ratios or coverage. There is insufficient information to comment on dividend policy trajectory or capacity this quarter. Assessment should be revisited when management provides dividend guidance and when cash flow figures are reported.

Risk Assessment

Business Risks:

• Demand cyclicality in manufacturing and industrial end-markets affecting staffing volumes
• Labor cost inflation and tight labor markets pressuring gross margins
• Client concentration risk typical in outsourcing contracts
• Regulatory changes to labor dispatch laws and compliance costs
• Pricing pressure from competitors in commoditized staffing services
• Execution risk in scaling headcount while maintaining utilization rates

Financial Risks:

• Working capital swings impacting cash conversion and OCF
• Receivables collection risk and potential credit losses
• Moderate leverage (D/E ~1.45x) requiring continued earnings stability
• Interest rate sensitivity on any floating-rate debt (not disclosed)
• Limited visibility on cash balances and liquidity buffers due to non-disclosure of cash flow items

Key Concerns:

• Absence of cash flow disclosures prevents validation of earnings quality and FCF
• EBITDA and depreciation not disclosed, limiting peer comparability on EV/EBITDA
• Equity ratio field unreported in the dataset despite adequate underlying equity
• Sustainability of operating leverage if growth moderates or wages rise

Investment Implications

Key Takeaways:

• Top-line growth of 4.9% YoY accompanied by a 62.5% surge in operating income signals strong operating leverage
• Net margin at 3.33% and ROE at 6.10% indicate improving but still moderate profitability
• Balance sheet and liquidity appear solid (current ratio 225.6%, derived equity ratio ~40.5%) with very high interest coverage (~143x)
• Cash flow and dividend data were not disclosed, limiting assessment of cash conversion and capital return capacity
• Monitoring cost discipline and utilization will be critical to sustaining 5%+ operating margins

Metrics to Watch:

• Revenue growth rate and order pipeline/backlog (if disclosed)
• Gross margin and SG&A ratio to sales for signs of operating leverage durability
• Operating margin and ROE trajectory
• OCF/Net income and free cash flow once disclosed
• DSO/receivables turnover and working-capital changes
• Leverage (D/E) and any changes in interest expense or debt structure
• Headcount/utilization and wage inflation indicators

Relative Positioning: Within Japan’s staffing/outsourcing peers, Hirayama shows a mid–single-digit operating margin with strong liquidity and moderate leverage; profitability trends are improving, but the lack of cash flow disclosure this quarter tempers visibility relative to peers that report fuller cash conversion metrics.

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