CRESTEC Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥4.61B
• Operating Income: ¥516M
• Net Income: ¥157M
• EPS: ¥146.17

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

Crestec Co., Ltd. (7812) reported FY2026 Q1 consolidated results under JGAAP with resilient profitability despite a slight top-line decline. Revenue was ¥4,606 million, down 3.0% YoY, but operating income rose 33.0% YoY to ¥516 million, indicating effective cost control and/or mix improvement. Net income surged 183.8% YoY to ¥442 million, aided by a favorable non-operating balance and a relatively light tax burden in the quarter. Gross profit reached ¥1,430.9 million with a gross margin of 31.1%, underscoring solid margin discipline. Operating margin improved to 11.2%, a healthy level for a content/technical documentation and related services business model. Ordinary income of ¥560 million exceeded operating income by ¥44 million, implying positive net non-operating contributions (likely FX gains or other income) more than offset interest expense of ¥38 million. Net margin printed at 9.6%, which is strong given the modest revenue scale and signals improved profit conversion. DuPont analysis yields ROE of 4.62% for the quarter basis (NPM 9.60% × ATO 0.239 × leverage 2.02), reflecting decent profitability but still constrained by low asset turnover, typical for Q1 seasonality and a service-oriented asset base. The balance sheet appears sound: total assets were ¥19,276 million and total equity ¥9,558 million; this implies an equity ratio of roughly 49.6% even though the disclosed ‘equity ratio’ metric shows 0.0% (likely undisclosed in XBRL rather than zero). Liquidity is comfortable with a current ratio of 193% and quick ratio of 182%, supported by modest inventories of ¥602 million. Debt-to-equity is 0.93x (liabilities/equity), reasonable for the footprint and cash-generative profile typical of the sector. Interest coverage is strong at 13.5x, suggesting manageable financial risk. Cash flow statements were not disclosed (values displayed as 0), so operating cash conversion and free cash flow cannot be evaluated this quarter. Dividend information was also not disclosed (DPS and payout ratio shown as 0), so distribution policy assessment is limited for now. Overall, the quarter demonstrates effective margin management and leverage of operating efficiency, but the sustainability of non-operating tailwinds and cash conversion remains to be confirmed once cash flow data are available.

Profitability Analysis

ROE decomposition: Net profit margin of 9.60%, asset turnover of 0.239x, and financial leverage (assets/equity) of 2.02x produce a calculated ROE of 4.62% on the quarter’s snapshot. Margin quality: Gross margin at 31.1% and operating margin at 11.2% indicate solid cost discipline and pricing/mix benefits; the spread between operating income (¥516m) and ordinary income (¥560m) shows approximately ¥44m net non-operating gains, offsetting ¥38m interest expense and implying roughly ¥80m+ of other non-operating income. Effective tax rate appears modest (income tax ¥67.5m vs. ordinary income ¥560m suggests ~12% on a simple view), though the reported metric reads 0.0% due to non-disclosure. Operating leverage: Despite a 3.0% YoY revenue decline, operating income rose 33.0% YoY, signaling meaningful fixed-cost leverage and/or SG&A optimization; the step-up in operating margin suggests management tightened costs or benefited from a richer project mix.

Growth Assessment

Revenue declined 3.0% YoY to ¥4,606m, indicating a soft demand patch or timing effects in orders/project delivery. Profit growth outpaced sales due to margin expansion and positive non-operating items, with net income up 183.8% YoY. Sustainability: With ordinary income exceeding operating income, part of the earnings uplift stems from items that may be volatile (e.g., FX or investment income); core operating profitability nonetheless improved, as reflected in the 11.2% OPM. Outlook markers: Asset turnover of 0.239x is subdued, likely reflecting seasonality and a sizable asset base relative to quarterly revenue; improving utilization and backlog conversion would support revenue normalization. Without order backlog and segment detail disclosures, revenue trajectory visibility is limited; monitoring sequential trends and overseas exposure (FX sensitivity) will be key. Overall, the quarter points to healthy underlying execution, but sustaining growth will depend on demand recovery and continued cost discipline rather than recurring non-operating gains.

Financial Health

Liquidity: Current assets ¥10,304m vs. current liabilities ¥5,328m yield a current ratio of 193% and quick ratio of 182%, indicating ample short-term coverage; inventories are modest at ¥602m. Solvency: Total liabilities ¥8,853m vs. equity ¥9,558m result in liabilities/equity of 0.93x and an implied equity ratio near 49.6% (the reported 0.0% equity ratio appears undisclosed). Interest coverage is robust at 13.5x (operating income ¥516m / interest expense ¥38m), suggesting comfortable debt service capacity. Capital structure: Leverage (assets/equity) at 2.02x is moderate for a service-oriented name; balance sheet flexibility appears adequate for working capital needs and modest investment. Cash and cash equivalents were not disclosed this quarter, limiting a point-in-time cash buffer assessment.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow figures were not disclosed (displayed as 0). As such, OCF/Net income and free cash flow cannot be meaningfully assessed for this quarter. Earnings quality: The sizeable gap between operating income and net income includes a positive non-operating component; until OCF is available, the cash realization of earnings is uncertain. Working capital: With working capital of ¥4,976m and low inventories, the profile is typically supportive of stable cash conversion, but actual DSO/DPO/turn data are not provided. Free cash flow: Not assessable this quarter; next filings should be reviewed for cash conversion of the improved profitability.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed this quarter (values shown as 0 are placeholders). Without DPS and cash flow information, coverage ratios (payout vs. net income, FCF coverage) cannot be computed. From a capacity standpoint, the company generated ¥442m in quarterly net income and maintains strong liquidity ratios, suggesting potential flexibility; however, absence of cash flow data, full-year guidance, and policy commentary constrains assessment. Monitor for full-year dividend policy updates, historical payout behavior, and the relationship between cash generation and earnings once cash flow statements are available.

Risk Assessment

Business Risks:

• Demand volatility in key end markets affecting project volumes and utilization
• Customer concentration typical of B2B technical documentation/localization services
• Pricing pressure from clients and competition, including offshore vendors
• FX fluctuations impacting both revenue (overseas sales) and non-operating income
• Talent retention and wage inflation affecting margin sustainability
• Technological shifts (AI/automation) altering service delivery models and pricing

Financial Risks:

• Non-operating income reliance in the quarter (ordinary > operating) may not be recurring
• Interest rate risk on floating-rate debt, though current coverage is strong
• Working capital swings potentially impacting cash conversion in project-heavy quarters
• Limited disclosed cash flow data impairs assessment of earnings-to-cash quality

Key Concerns:

• Revenue contracted 3.0% YoY; need visibility on order intake and backlog
• Positive non-operating contribution boosted ordinary income; sustainability uncertain
• Cash flow statements not disclosed this quarter, preventing validation of earnings quality

Investment Implications

Key Takeaways:

• Solid margin execution with operating margin at 11.2% despite a 3.0% revenue decline
• Net income up 183.8% YoY aided by non-operating gains and a modest tax burden
• Balance sheet appears healthy with implied equity ratio ~49.6% and current ratio ~193%
• Interest coverage at 13.5x indicates manageable financial risk
• Cash flow and dividend data not disclosed; confirmation of cash conversion is pending

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue recovery
• Gross and operating margins to assess cost discipline and mix
• Non-operating income/expense breakdown and FX sensitivity
• Operating cash flow and FCF vs. net income once disclosed
• Working capital efficiency (DSO, DPO, inventory turns) and asset turnover
• Dividend policy updates and payout guidance

Relative Positioning: Within domestic small-cap professional/technical services peers, Crestec exhibits above-average operating margin resilience and a conservative balance sheet, though asset turnover is modest and current earnings benefit from non-operating items; visibility would improve with fuller cash flow disclosure.

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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