RIKEI CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥9.80B
• Operating Income: ¥419M
• Net Income: ¥170M
• EPS: ¥13.93

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

For FY2026 Q2 (cumulative), Rikei Corporation posted revenue of ¥9.804bn (+1.9% YoY), operating income of ¥419m (+3.4% YoY), and net income of ¥210m (+25.6% YoY), indicating improved earnings leverage versus modest topline growth. Gross profit is reported at ¥1.561bn (gross margin 15.9%), and operating margin stands at approximately 4.3%, reflecting controlled SG&A and stable project execution. Ordinary income of ¥368m sits below operating income, suggesting net non-operating expense in aggregate, though the interest burden itself is minimal. The DuPont decomposition yields ROE of 3.81%, driven by a net margin of 2.14%, asset turnover of 0.854x, and financial leverage of 2.08x. This profile indicates ROE is currently constrained primarily by thin net margins rather than asset efficiency or leverage. Liquidity is solid with a current ratio of 191% and quick ratio of 174%, underpinned by strong working capital of approximately ¥4.904bn. Solvency appears sound, with liabilities-to-equity (as a proxy for debt-to-equity) of 1.03x and very high interest coverage (186x), implying low financial risk from interest-bearing liabilities. Operating cash flow of ¥583m compares favorably to net income, with an OCF/NI multiple of 2.77x, supporting the quality of earnings and working capital discipline. Inventory of ¥904m looks manageable relative to H1 revenue, mitigating near-term obsolescence risk for a technology-oriented trading/solutions business. Net income growth outpaced operating income growth, pointing to a better below-the-line contribution versus the prior year, although the presented effective tax rate metric (0.0%) is clearly not representative given a reported income tax expense of ¥185m; users should treat tax-rate inferences with caution. Balance sheet line items provided show minor mismatches when recomputed (e.g., gross profit vs revenue minus cost of sales), which can arise from presentation or classification differences; we analyze based on the reported non-zero datapoints. Cash and equivalents, investing cash flow, free cash flow, and share-related metrics are shown as zero in the dataset and should be treated as undisclosed, not actual zeros. Dividend details are not available in the provided data. Overall, the company demonstrates steady revenue, improving profitability, robust liquidity, and high cash conversion year-to-date, albeit with still modest margins and ROE constrained by mix and pricing. Near-term outlook hinges on sustaining order intake, protecting gross margins on projects, and maintaining working capital efficiency to support cash generation.

Profitability Analysis

ROE_decomposition: Reported ROE is 3.81%, decomposed into net margin 2.14% × asset turnover 0.854x × financial leverage 2.08x. The primary drag is the thin net margin, while asset efficiency is moderate and leverage is restrained. margin_quality: Gross margin is 15.9% on reported figures, operating margin ~4.3% (¥419m/¥9.804bn), and ordinary margin ~3.8%. Net margin at 2.14% benefited YoY (net income +25.6% vs operating income +3.4%), suggesting improved non-operating items and/or mix. Interest burden is negligible (interest expense ¥2.25m), so below-the-line drivers likely include FX, JV/affiliates, or other non-operating items and taxes. operating_leverage: Revenue grew +1.9% while operating income grew +3.4%, indicating modest positive operating leverage and some SG&A discipline. The spread between gross margin (15.9%) and operating margin (~4.3%) underscores a cost structure sensitive to mix; incremental margin expansion will depend on higher-value solutions and service content.

Growth Assessment

revenue_sustainability: Top-line growth of +1.9% YoY is steady but modest, consistent with project timing and a solutions/trading mix. Inventory levels (~¥904m) appear proportionate to H1 revenue, supporting near-term delivery capability. profit_quality: Net income rose +25.6% YoY versus operating income +3.4%, implying better non-operating/tax dynamics relative to the base period. Interest costs are de minimis; hence profit quality improvements likely stem from mix or other non-operating items rather than lower financing costs. outlook: Sustained growth will depend on order intake, execution of higher-margin projects, and stable component procurement. With strong liquidity and high OCF/NI, the company is positioned to support working capital for project deliveries; however, margin expansion remains the key determinant of earnings trajectory.

Financial Health

liquidity: Current ratio 191% and quick ratio 174% reflect ample short-term coverage. Working capital is approximately ¥4.904bn, providing buffer for project-driven cash needs. solvency: Total liabilities-to-equity is ~1.03x (¥5.699bn/¥5.510bn), and interest coverage is extremely high at 186x, indicating low refinancing and interest-rate risk based on available data. capital_structure: Financial leverage in DuPont is 2.08x, implying an equity-to-asset ratio around 48% on a functional basis, despite the equity ratio field being undisclosed. Overall leverage is moderate and conservative for a trading/solutions business.

Cash Flow Quality

earnings_quality: OCF of ¥583m vs net income of ¥210m (OCF/NI 2.77x) indicates strong cash conversion and suggests limited accrual build in the period. FCF_analysis: Investing cash flow and free cash flow figures are undisclosed in the dataset (shown as zero placeholders). Without capex and investment detail, true FCF cannot be determined, but positive OCF provides a favorable starting point. working_capital: Current assets of ¥10.292bn vs current liabilities of ¥5.389bn highlight a healthy cushion. Inventory of ¥904m appears manageable; receivables and payables details are not provided, but the OCF strength implies net favorable working capital movements or disciplined collections.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are undisclosed (zeros are placeholders). With EPS of ¥13.93 and positive OCF, capacity for distributions exists in principle, but no conclusion can be drawn without a stated policy or historical pattern. FCF_coverage: Free cash flow is not provided; therefore, dividend coverage by FCF cannot be assessed. Operating cash generation is strong, which would typically support distributions if policy permits. policy_outlook: No dividend policy details are available in the provided data. Future distributions will depend on profitability consistency, investment needs, and capital allocation priorities.

Risk Assessment

Business Risks:

• Project timing risk impacting quarterly revenue and margin recognition
• Procurement and supply chain constraints for technology components
• Price competition and tender-based pricing pressure reducing gross margins
• Customer concentration risk in public-sector or large enterprise projects
• Technology obsolescence and inventory valuation risk
• FX exposure on imported equipment and components

Financial Risks:

• Working capital intensity and potential receivables collection risk
• Tax rate variability and potential one-off tax effects
• Dependence on non-operating items for net income variance
• Potential rise in interest rates (though current interest burden is minimal)

Key Concerns:

• Thin net margins (2.14%) constrain ROE despite moderate leverage
• Limited disclosure on cash, investing cash flows, and free cash flow
• Data presentation differences (e.g., gross profit vs. revenue minus cost of sales) complicate margin interpretation

Investment Implications

Key Takeaways:

• Stable topline with modest positive operating leverage in H1
• ROE at 3.81% limited by margin structure; asset efficiency and leverage are adequate
• Strong cash conversion (OCF/NI 2.77x) supports earnings quality
• Robust liquidity (current ratio 191%, quick ratio 174%) and low interest burden (186x coverage)
• Visibility on FCF and dividend policy is limited due to undisclosed items

Metrics to Watch:

• Order intake/backlog and book-to-bill
• Gross margin trajectory and mix of higher-value solutions
• OCF/NI and working capital turns (inventory and receivables days)
• Ordinary income vs operating income gap (non-operating gains/losses) and tax rate normalization
• Capex/investing cash flows and any policy updates on shareholder returns

Relative Positioning: Within small-to-mid cap Japanese technology trading/solutions peers, the company exhibits conservative leverage, strong liquidity, and solid cash conversion, but trails on profitability due to thin margins; sustained margin expansion would be required to close the ROE gap with higher-return peers.

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