NISSO HOLDINGS Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥53.16B
• Operating Income: ¥981M
• Net Income: ¥877M
• EPS: ¥15.52

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

NISSO Holdings (93320) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥53.165 billion, up 6.0% year over year, indicating modest top-line expansion. Despite higher sales, profitability deteriorated: operating income declined 33.6% to ¥0.981 billion and net income fell 40.2% to ¥0.521 billion, pointing to margin compression. Gross profit was ¥8.409 billion, implying a gross margin of 15.8%, while operating margin compressed to roughly 1.8%, highlighting cost pressures or weaker pricing in the period. EBITDA was ¥1.119 billion (2.1% margin), suggesting limited operating leverage and higher sensitivity of earnings to small changes in gross margin. Ordinary income of ¥0.970 billion is close to operating income, and minimal interest expense (¥4 million) yields an exceptionally high interest coverage of 245x, indicating low financing burden. DuPont decomposition shows a net profit margin of 0.98%, asset turnover of 1.523x, and financial leverage of 2.03x, resulting in a calculated ROE of 3.03%, which is subdued versus typical cost of equity expectations. The balance sheet appears moderately levered with total liabilities of ¥14.481 billion against equity of ¥17.172 billion (debt-to-equity 0.84x) and healthy liquidity (current ratio 166.8%), supporting short-term solvency. Operating cash flow was negative at ¥-0.998 billion despite positive net income, driving an OCF/Net Income ratio of -1.92; this divergence suggests earnings quality issues or temporary working capital absorption. Financing cash flow was ¥-0.947 billion, implying outflows for debt repayment or shareholder returns; investing cash flow and cash & equivalents were not disclosed in the dataset (zeros treated as unreported). Working capital stands at a comfortable ¥8.175 billion, though the negative OCF signals that receivable collections or other working capital elements may have tightened in the half. EPS was ¥15.52, but per-share balance sheet metrics and share counts were not disclosed, limiting per-share capital analysis. The equity ratio is listed as 0.0% in the dataset but should be treated as not disclosed; based on totals, implied equity-to-assets is roughly 49%, indicating a comparatively solid capital base. Tax expense is stated at ¥0.566 billion, while the provided effective tax rate metric shows 0.0%; we rely on the raw figures and acknowledge metric inconsistencies. Overall, the quarter shows resilient revenue but weaker margins, softer ROE, and negative operating cash flow that tempers the quality of earnings. With limited disclosure on investing cash flows, cash balances, and dividends, conclusions on long-term capital allocation and dividend capacity must be qualified. Near-term focus should be on restoring operating margin, normalizing working capital, and stabilizing cash conversion.

Profitability Analysis

ROE_decomposition: ROE 3.03% = Net margin 0.98% × Asset turnover 1.523 × Financial leverage 2.03. The low net margin is the primary drag; leverage is moderate, and asset turnover is reasonable for a human resources/services model. margin_quality: Gross margin 15.8% (¥8.409bn / ¥53.165bn) indicates limited pricing power against cost inflation or mix headwinds. Operating margin compressed to ~1.8% (¥0.981bn / ¥53.165bn), implying higher SG&A or weaker utilization. EBITDA margin is 2.1%, underscoring thin profitability and narrow buffer for shocks. operating_leverage: Revenue grew 6.0% YoY, yet operating income declined 33.6%, evidencing negative operating leverage in the period as costs rose faster than sales. Interest expense is negligible, so below-EBIT items did not drive the decline; the pressure sits within cost of sales and SG&A.

Growth Assessment

revenue_sustainability: Top-line growth of 6.0% YoY to ¥53.165bn suggests steady demand in core staffing/outsourcing segments. Sustainability will hinge on client activity in manufacturing and services, hiring trends, and retention of key contracts. profit_quality: Net margin at 0.98% and EBITDA margin at 2.1% reflect fragile earnings quality. The OCF/Net Income ratio of -1.92 points to poor cash conversion in the half, likely driven by working capital strain (e.g., receivables). outlook: Without disclosure of segment details, cost initiatives, or pricing actions, near-term profit growth is uncertain. Stabilizing gross margin and reducing SG&A intensity are prerequisites for restoring operating leverage. If working capital normalizes in H2, cash conversion could improve, but this remains a key watchpoint.

Financial Health

liquidity: Current assets of ¥20.408bn vs. current liabilities of ¥12.233bn yield a current ratio of 166.8% and working capital of ¥8.175bn, indicating ample short-term liquidity. Quick ratio matches current ratio due to inventories being unreported. solvency: Total liabilities of ¥14.481bn against equity of ¥17.172bn imply a debt-to-equity of 0.84x and an implied equity-to-assets near 49% (equity ¥17.172bn / assets ¥34.913bn). Interest coverage is strong at ~245x, reflecting minimal interest burden. capital_structure: Leverage is moderate with room for additional funding if needed, but negative OCF in the half and financing outflows (¥-0.947bn) require vigilance to prevent cash tightness should working capital remain elevated.

Cash Flow Quality

earnings_quality: OCF of ¥-0.998bn vs. net income of ¥0.521bn yields OCF/Net Income of -1.92, signaling that accounting earnings were not supported by cash in the period. This gap is likely due to working capital outflows rather than non-cash add-backs, as D&A is modest (¥0.138bn). FCF_analysis: Investing cash flow is undisclosed and free cash flow is listed as 0 in the dataset (treated as not available). Without capex data, we cannot assess true FCF; however, negative OCF suggests FCF pressure unless offset by low capex or asset disposals. working_capital: Working capital is positive at ¥8.175bn, but the negative OCF implies cash was absorbed by increases in receivables or other current assets, or reductions in payables. Monitoring days sales outstanding and billing cycles is critical.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is undisclosed (listed as 0.00) and payout ratio appears as 0.0% in the dataset; thus, we cannot confirm actual dividends. Based on EPS of ¥15.52 and net income of ¥0.521bn, the capacity for dividends exists but is constrained by cash conversion. FCF_coverage: FCF is not available due to undisclosed investing cash flows; OCF is negative, indicating weak coverage of any potential dividend from internal cash generation during the half. policy_outlook: Given thin margins and negative OCF in the period, a conservative stance on shareholder returns would be prudent until cash conversion normalizes. Formal dividend policy commentary is not provided in the dataset.

Risk Assessment

Business Risks:

• Margin compression due to wage inflation, subcontracting costs, and pricing pressure in staffing/outsourcing.
• Demand cyclicality tied to client industries’ production and hiring plans.
• Utilization and placement mix shifts impacting gross margin.
• Talent attraction/retention challenges raising recruitment costs.
• Client concentration risk if large contracts drive a significant share of revenue.

Financial Risks:

• Negative operating cash flow despite positive earnings indicating cash conversion risk.
• Potential working capital volatility (receivables collection, payables timing).
• Limited EBITDA margin leaves little buffer for downturns.
• Reliance on moderate leverage; if cash remains weak, refinancing or liquidity buffers may be tested.

Key Concerns:

• Sustained negative operating leverage (OP margin down despite revenue growth).
• OCF/Net Income at -1.92 highlighting earnings quality issues.
• Low ROE at 3.03% below typical cost of equity benchmarks.
• Limited disclosure on investing cash flows and cash balances.

Investment Implications

Key Takeaways:

• Revenue growth of 6.0% YoY but significant margin compression (OP margin ~1.8%).
• ROE of 3.03% driven by low net margin; leverage is moderate at 2.03x assets/equity.
• Negative operating cash flow of ¥-0.998bn undermines earnings quality.
• Liquidity is adequate (current ratio 166.8%), and interest burden is minimal (coverage ~245x).
• Data gaps on cash, investing CF, and dividends limit full capital allocation assessment.

Metrics to Watch:

• Gross and operating margin trajectory in H2.
• OCF and working capital metrics (DSO, DPO, unbilled receivables).
• EBITDA margin and utilization rates.
• Client demand indicators and order backlog (if disclosed).
• Leverage and liquidity buffers (cash balance, undrawn facilities, if disclosed).

Relative Positioning: Within Japan’s staffing/outsourcing cohort, NISSO exhibits respectable top-line growth but lags on profitability and cash conversion this half, placing it below peers on margin resilience and ROE while maintaining a comparatively solid balance sheet and low interest burden.

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