DAIICHI JITSUGYO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥107.33B
• Operating Income: ¥6.59B
• Net Income: ¥4.31B
• EPS: ¥155.63

Income Statement

Balance Sheet

Cash Flow Statement

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

Daiichi Jitsugyo Co., Ltd. (80590) delivered solid FY2026 Q2 consolidated results under JGAAP, with revenue up 6.0% YoY to ¥107.3bn and operating income up 7.6% YoY to ¥6.6bn, indicating modest operating leverage. Net income rose 15.8% YoY to ¥5.0bn, outpacing topline growth due to a mix of improved operating efficiency and stable financial costs, as evidenced by the minimal interest expense of ¥23m and very high interest coverage. Gross margin stood at 16.7%, consistent with a value-added trading and solutions model, while operating margin was approximately 6.1%, reflecting disciplined SG&A. The company’s DuPont metrics show a reported ROE of 5.90%, driven by a 4.63% net margin, 0.651x asset turnover, and 1.96x financial leverage—an ROE profile that is steady but not elevated for a trading-oriented business. Cash flow quality appears healthy: operating cash flow (¥6.36bn) exceeded net income (¥4.97bn), yielding an OCF/NI ratio of 1.28, a positive indicator for earnings quality and working capital discipline. The balance sheet is conservative: total assets are ¥164.8bn and total equity is ¥84.1bn, implying an equity ratio of roughly 51% (calculated), despite the equity ratio field being unreported. Liquidity is strong with a current ratio of 170.8% and a quick ratio of 145.5%, supported by ¥62.2bn of working capital and moderate inventory levels at ¥22.2bn. Leverage is moderate with total liabilities/equity at 1.09x, consistent with prudent use of short-term funding typical in trading businesses. Ordinary income (¥6.71bn) modestly exceeded operating income, suggesting small non-operating gains, while the estimated effective tax rate is around 29–30% based on disclosed income tax expense, despite the tax ratio field being unreported. Depreciation and amortization are modest at ¥565m, underscoring a relatively asset-light model and limited capital intensity. The EBITDA margin of 6.7% aligns with the company’s position as an engineering/trading hybrid rather than a heavy manufacturer. Financing cash flow was an outflow of ¥6.0bn, likely reflecting a combination of debt paydown and/or shareholder returns, though dividends and share data are not disclosed in the period dataset provided. Several items (equity ratio, cash and equivalents, investing cash flow, dividends, and share counts) are unreported here; the analysis therefore focuses on available non-zero data. Overall, the company demonstrates steady growth, robust liquidity, solid cash conversion, and conservative leverage, positioning it to navigate working-capital cycles and project timing variability. The key swing factors ahead are order intake/backlog sustainability, maintenance of gross margin amid input cost and FX movements, and continued discipline in working capital to sustain OCF.

Profitability Analysis

ROE decomposition: Reported ROE is 5.90%, derived from a 4.63% net margin, 0.651x asset turnover, and 1.96x financial leverage. Operating margin is approximately 6.14% (¥6.591bn / ¥107.326bn), indicating reasonable operating efficiency for a value-added trading and engineering solutions business. Gross margin of 16.7% provides headroom to cover SG&A and deliver mid-single-digit operating margins. Margin quality appears stable, with ordinary income (¥6.705bn) slightly above operating income, indicating small net non-operating gains rather than reliance on one-offs. Interest burden is negligible (¥23m interest expense) with EBIT/interest coverage of 286.6x, reinforcing margin resilience below the operating line. The estimated effective tax rate based on disclosed tax expense is about 29.6% (¥1.983bn / ~¥6.705bn), consistent with a normalized tax burden. Operating leverage looks modestly positive as operating income growth (+7.6% YoY) exceeded revenue growth (+6.0% YoY), implying some fixed-cost absorption or mix benefits.

Growth Assessment

Revenue increased 6.0% YoY to ¥107.3bn, a healthy pace for a mid-sized trading/engineering solutions company, suggesting resilient demand across key customer sectors. Operating income grew 7.6% YoY, outpacing sales and reflecting disciplined cost control or mix improvement. Net income rose 15.8% YoY, benefitting from stable financing costs and a normalized tax burden, indicating improving profit quality. Ordinary income marginally exceeded operating income, suggesting that core operations, rather than non-recurring items, remain the primary driver. EBITDA of ¥7.156bn and modest D&A (¥565m) underscore a relatively asset-light model, enabling scalable growth without heavy capex. Sustainability of growth will hinge on order intake, backlog execution, and timing of large projects—typical drivers in this business model. The solid OCF/NI ratio (1.28) points to underlying demand translating into cash, improving the quality and sustainability of earnings. Near-term outlook depends on maintaining gross margins against FX and procurement cost swings; with leverage moderate and liquidity strong, the company is positioned to pursue selective growth opportunities while managing volatility. Given data limitations (no investing CF details), the scale of growth capex and M&A activity cannot be assessed here.

Financial Health

Liquidity is strong: current ratio 170.8%, quick ratio 145.5%, and working capital ¥62.163bn indicate ample short-term coverage and flexibility. Inventories are ¥22.216bn, implying manageable stock levels relative to sales in this half-year context. Solvency appears robust: total equity ¥84.145bn against total assets ¥164.764bn implies a calculated equity ratio of roughly 51% (the reported equity ratio field is unreported). Capital structure is conservative to moderate with debt-to-equity (using total liabilities/equity as a proxy, given no split provided) at 1.09x. Interest expense is very low (¥23m), and interest coverage is 286.6x, pointing to minimal financial risk from servicing costs. The financing cash outflow of ¥6.002bn suggests active capital management (debt reduction and/or shareholder returns), but without detailed disclosure of dividends or share activity in this dataset, precise attribution is not possible.

Cash Flow Quality

Earnings quality is solid with OCF of ¥6.36bn exceeding net income of ¥4.97bn (OCF/NI = 1.28), indicating cash-backed profits and favorable working capital movements. Depreciation is modest (¥565m), consistent with low capital intensity; EBITDA of ¥7.156bn supports cash generation capacity. Free cash flow cannot be reliably assessed due to unreported investing cash flows; the FCF value shown as zero should not be interpreted as actual zero. Working capital appears well-managed: strong current and quick ratios and positive OCF suggest effective collection and inventory discipline during the period. Absent capex data, we cannot comment on maintenance versus growth investment levels; however, the asset-light profile implies limited maintenance capex requirements relative to EBITDA.

Dividend Sustainability

Dividend data (annual DPS, payout ratio, and FCF coverage) are unreported in this dataset and should not be interpreted as zero. With net income of ¥4.966bn and positive OCF of ¥6.36bn, the company would have room for shareholder returns in principle, subject to capex and strategic investments. Financing cash outflow of ¥6.002bn may include dividends and/or debt repayment, but the split is not disclosed here. Without investing cash flow and share count details, a robust payout ratio or FCF coverage analysis is not possible. Policy outlook cannot be assessed from the provided data; investors should refer to management guidance and historical payout policies when available.

Risk Assessment

Business Risks:

• Order timing and project execution risk affecting quarterly volatility in revenue and margins
• Customer concentration and sector cyclicality in capital goods and industrial end-markets
• FX exposure impacting both revenue and procurement costs, potentially compressing margins
• Supply chain and logistics disruptions affecting delivery schedules and working capital
• Competitive pressure on pricing and gross margins in trading/engineering solutions
• Technological shifts requiring ongoing product portfolio and vendor alignment

Financial Risks:

• Working capital swings inherent to large projects affecting OCF in certain quarters
• Credit risk from receivables in cyclical industries
• Potential exposure to interest rate changes on short-term funding, albeit low interest burden currently
• Liquidity deployment risk if inventory builds or receivable days extend
• Limited visibility into capex/M&A due to unreported investing cash flow in this period

Key Concerns:

• Sustainability of margin improvement amid FX and input cost volatility
• Dependence on timely backlog conversion to sustain revenue growth
• Data gaps (investing CF, dividend, share details) limit full capital allocation assessment

Investment Implications

Key Takeaways:

• Steady topline growth (+6% YoY) with modest operating leverage (+7.6% YoY OI)
• ROE at 5.90% reflects mid-single-digit profitability with moderate leverage and decent asset turnover
• Strong liquidity (current ratio 171%, quick ratio 146%) and calculated equity ratio ~51% provide resilience
• High cash flow quality (OCF/NI 1.28) supports earnings sustainability
• Interest burden is minimal (coverage 286.6x), reducing downside from financing costs
• Non-operating items modest; core operations drive profitability
• Data limitations on investing cash flow and dividends constrain capital return analysis

Metrics to Watch:

• Order intake and backlog/book-to-bill trends
• Gross margin and operating margin trajectory amid FX and cost dynamics
• OCF/NI ratio and working capital turns (inventory and receivables days)
• Asset turnover and ROE progression
• Leverage (liabilities/equity) and interest coverage
• Disclosure of investing cash flows (capex/M&A) and dividend policy updates

Relative Positioning: Within Japan’s industrial trading/engineering solutions peer set, the company exhibits conservative balance sheet strength, solid cash conversion, and mid-single-digit ROE; profitability is steady rather than high, but liquidity and low financing costs support stability through cycles.

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