DAIKO XTECH,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥20.47B
• Operating Income: ¥674M
• Net Income: ¥572M
• EPS: ¥34.90

Income Statement

Balance Sheet

Cash Flow Statement

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

DAIKO XTECH Co., Ltd. (TSE: 80230) reported FY2026 Q2 (cumulative) consolidated results under JGAAP showing modest top-line softness and a sharper compression in profitability. Revenue declined 1.7% year over year to ¥20.47bn, while operating income fell 20.6% to ¥674m, indicative of margin pressure and/or less favorable project mix. Gross profit of ¥4.92bn implies a gross margin of roughly 24.0%, which remains healthy for an engineering/ICT services mix but suggests some cost headwinds versus the prior year. Operating margin compressed to approximately 3.3%, translating to a net profit margin of 2.15% and net income of ¥441m, down 22.5% YoY. Ordinary income of ¥710m exceeded operating income, aided by modest non-operating gains and low interest burden, with interest expense only ¥9.1m and interest coverage a strong 74.5x. The DuPont-derived ROE is 3.38%, driven by a low net margin (2.15%), moderate asset turnover (0.756x), and financial leverage of 2.07x. Liquidity is robust with a current ratio of 221%, quick ratio of 221% (inventory not disclosed), and working capital of ¥11.78bn, supporting execution on orders and seasonal cash needs. Capital structure appears moderate with a debt-to-equity ratio of 1.08x and DuPont leverage of 2.07x, though the reported equity ratio of 0.0% is an unreported metric rather than a true zero. Operating cash flow of ¥361m equates to 0.82x of net income, suggesting adequate but not strong earnings-to-cash conversion in the half, potentially reflecting working capital timing typical in project-based businesses. Free cash flow is shown as zero owing to unreported investing cash flows; this should not be interpreted as actual zero investment. Financing cash outflows of ¥431m imply debt repayment and/or other financing uses; dividends are shown as zero for the period with a payout ratio of 0.0%. Depreciation and amortization totaled ¥101m, consistent with a relatively asset-light profile. Overall, the first-half performance reflects mild demand softness and cost pressure, but the balance sheet and interest coverage remain sound. Near-term focus should be on margin recovery in 2H, project execution discipline, and working capital management to sustain cash conversion. The lack of disclosure for several items (equity ratio, cash balance, investing cash flows, inventories, share count) constrains precision in some ratios and per-share analytics. Within Japan’s ICT engineering and communications infrastructure niche, these results are consistent with a stable but competitive market marked by pricing pressure and tight labor/cost dynamics. Outlook hinges on order intake, backlog quality, pricing, and cost pass-through in the second half.

Profitability Analysis

ROE_decomposition: ROE 3.38% = Net margin 2.15% × Asset turnover 0.756 × Financial leverage 2.07. The primary drag is the compressed net margin; asset utilization is moderate and leverage provides only a modest lift. margin_quality: Gross margin ~24.0% (¥4,922.6m/¥20,472.0m) indicates reasonable value-add, but the step-down in operating income (-20.6% YoY) against a small revenue decline (-1.7%) signals cost inflation, unfavorable mix, or execution slippage. Operating margin ~3.3% and net margin 2.15% are thin for the first half, limiting ROE. operating_leverage: The outsized decline in operating income vs revenue suggests negative operating leverage during the period. With D&A at only ¥101m and EBITDA margin ~3.8%, incremental fixed-cost absorption appears pressured; improving utilization and pricing in 2H will be key to restoring operating leverage.

Growth Assessment

revenue_sustainability: Revenue declined 1.7% YoY to ¥20.47bn, implying stable demand with mild softness. Given the project-based profile, timing of completions and acceptance likely influenced the half. profit_quality: Operating income fell 20.6% and net income 22.5% YoY, indicating margin compression outweighing the small revenue decline. Ordinary income outpaced operating income, supported by low interest costs; reliance on non-operating items remains limited. outlook: Second-half recovery will depend on order intake, backlog conversion, and cost pass-through. Focus areas: pricing discipline on new bids, labor/material cost containment, and project execution to reduce slippage and rework. Any normalization in input costs could provide margin tailwinds.

Financial Health

liquidity: Current ratio 221.3% and quick ratio 221.3% indicate strong short-term coverage; working capital totals ¥11.78bn. Inventories are unreported this period, so quick ratio may be overstated relative to true liquidity if inventory exists. solvency: Debt-to-equity 1.08x suggests moderate leverage. Interest expense of ¥9.1m and interest coverage ~74.5x indicate very low refinancing risk. The reported equity ratio of 0.0% is unreported, not an actual zero; solvency is better gauged via leverage and coverage metrics provided. capital_structure: Financial leverage of 2.07x (DuPont) is measured. Financing cash outflow of ¥431m suggests net repayments and/or other financing uses in 1H, consistent with a conservative posture.

Cash Flow Quality

earnings_quality: OCF/Net income at 0.82 indicates acceptable but sub-1.0 cash conversion; working capital likely consumed cash given project timing. EBITDA of ¥775m vs OCF of ¥361m underscores operational cash drag in the half. FCF_analysis: Free cash flow is shown as zero because investing cash flows are unreported; therefore, true FCF cannot be determined. Capex intensity appears low given D&A of ¥101m, but confirmation requires investing CF detail. working_capital: Strong reported current assets (¥21.49bn) vs current liabilities (¥9.71bn). The YoY profit pressure alongside OCF below net income suggests receivables timing and/or advances from customers normalized; close monitoring of DSO/DPO is warranted, though sub-ledger details are not provided.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.0%, indicating no dividend recognition in the period; this may reflect semiannual timing rather than policy intent. FCF_coverage: FCF coverage is shown as 0.00x due to unreported investing cash flows; hence dividend coverage cannot be assessed reliably for the full year. policy_outlook: Given moderate leverage and strong liquidity, the balance sheet could support dividends; however, with profit compression in 1H and absent FCF data, visibility on payout sustainability and trajectory remains limited pending full-year guidance and cash flow disclosure.

Risk Assessment

Business Risks:

• Project execution risk leading to margin slippage and cost overruns
• Pricing pressure in competitive ICT/engineering bids
• Input cost and labor availability constraints impacting gross margin
• Revenue timing risk due to acceptance milestones and customer budgets
• Customer concentration or sector exposure (telecom/public works) affecting order volatility

Financial Risks:

• Working capital swings reducing operating cash flow conversion
• Potential increase in borrowing costs, though current interest burden is low
• Limited visibility on capex/investing needs due to unreported investing cash flows
• Data gaps on cash balance and equity ratio complicate liquidity/solvency assessment

Key Concerns:

• Operating margin compression despite modest revenue decline
• Sub-1.0 OCF-to-net-income ratio in 1H
• Dependence on 2H recovery to meet annual profitability expectations
• Insufficient disclosure on investing cash flows and cash position in the period

Investment Implications

Key Takeaways:

• Top-line decline was mild (-1.7% YoY), but operating income fell sharply (-20.6%), indicating margin pressure.
• ROE at 3.38% is constrained by a 2.15% net margin; leverage and asset turnover provide limited offset.
• Liquidity is strong (current ratio 221%) and interest coverage is high (74.5x), reducing near-term financial risk.
• Cash conversion is moderate (OCF/NI 0.82); working capital discipline is a key lever for 2H.
• Data limitations (cash, inventories, investing CF, equity ratio, share count) restrict full ratio analysis and per-share metrics.

Metrics to Watch:

• Order intake and backlog mix (to infer 2H revenue visibility)
• Gross and operating margin trajectory in 2H
• OCF/NI and changes in receivables/payables (working capital intensity)
• Capex and investing cash flows (true FCF generation)
• Leverage metrics and any change in financing cash flows

Relative Positioning: Within Japan’s ICT engineering and communications infrastructure space, DAIKO XTECH exhibits stable revenue with compressed margins but strong liquidity and low interest burden; relative performance hinges on the firm's ability to restore operating margin via pricing and execution versus peers facing similar cost and labor pressures.

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
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