NIPPON KANZAI Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥71.56B
• Operating Income: ¥4.64B
• Net Income: ¥2.47B
• EPS: ¥101.96

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

Nihon Kanzai Holdings (9347) delivered solid top-line and strong profit expansion in FY2026 Q2 on a consolidated JGAAP basis. Revenue rose 9.5% year over year to ¥71.6 billion, supported by steady demand in facility management and related services. Profitability improved meaningfully: operating income increased 24.5% to ¥4.64 billion, expanding the operating margin to about 6.5%. Ordinary income reached ¥5.73 billion, reflecting minimal interest burden and likely some non-operating gains. Net income surged 62.5% to ¥3.70 billion, driving a net margin of 5.18%. DuPont analysis shows ROE of 5.15% built on a 5.18% net margin, 0.718x asset turnover, and modest leverage of 1.39x—indicating returns are driven primarily by operations rather than balance sheet leverage. Gross margin held at roughly 26.0%, and EBITDA was ¥5.22 billion (7.3% margin), evidencing moderate operating leverage and controlled overhead. The balance sheet is conservative: total equity of ¥71.9 billion against total assets of ¥99.7 billion implies an equity ratio around 72% (the reported 0.0% equity ratio appears unreported rather than truly zero). Liquidity is robust with a current ratio of 3.24x and working capital of ¥44.9 billion, offering resilience to short-term shocks. Interest coverage is exceptionally high at 193.5x, underscoring minimal financial risk from borrowing costs. Cash generation in the half was weaker than earnings, with operating cash flow of ¥1.84 billion versus net income of ¥3.70 billion (OCF/NI of 0.50), likely reflecting working capital outflows tied to growth and seasonal billing patterns. Investing cash flow was not disclosed, preventing a clean free cash flow assessment; the reported FCF figure of 0 should be treated as indeterminate rather than truly zero. Dividend metrics (DPS, payout, FCF coverage) are unreported for the period; thus, dividend sustainability cannot be quantified from this dataset. EPS was ¥101.96, implying roughly 36.3 million shares outstanding, which aids in cross-checking earnings scale notwithstanding unreported share count in the table. The effective tax rate implied by the income tax line appears around one-third, consistent with domestic norms; the reported 0.0% in the metric table is likely a placeholder. Overall, the company shows healthy growth, margin expansion, and strong financial health, with the main watchpoint being cash conversion and working capital intensity in the near term. Data gaps (notably cash and investing flows, equity ratio, dividends, and share count) limit some conclusions, but the available figures point to improving fundamentals and low financial risk.

Profitability Analysis

ROE_decomposition: ROE 5.15% = Net margin 5.18% x Asset turnover 0.718x x Leverage 1.39x. Returns are primarily driven by margin expansion and moderate asset efficiency, with low reliance on leverage. margin_quality: Gross margin at ~26.0% indicates stable pricing and cost control in facility management services. Operating margin expanded to ~6.5%, outpacing revenue growth, suggesting successful mix/pricing and overhead discipline. Net margin of 5.18% benefited from low interest expense (¥24m) and a normalized tax burden. operating_leverage: Operating income grew 24.5% versus 9.5% revenue growth, indicating positive operating leverage from scale benefits and cost containment. EBITDA margin at 7.3% versus OPM ~6.5% suggests limited D&A drag (¥575m), consistent with an asset-light service model.

Growth Assessment

revenue_sustainability: Revenue +9.5% YoY to ¥71.6bn appears underpinned by steady contract wins/renewals and possibly price pass-through in building/facility management. Given the recurring nature of maintenance contracts, growth looks reasonably sustainable absent macro shock. profit_quality: Operating income +24.5% reflects margin expansion rather than non-recurring items. Ordinary income exceeds operating income, helped by negligible interest expense; no significant one-offs are indicated in the provided data. outlook: If cost normalization and price revisions continue, mid-single-digit to high-single-digit revenue growth with incremental margin gains is plausible. Near-term headwinds include wage inflation and potential delays in passing through higher costs in long-term contracts; tailwinds include outsourcing trends and demand for high-value-added building services.

Financial Health

liquidity: Current assets ¥64.9bn vs current liabilities ¥20.0bn yields a current ratio of 3.24x and working capital of ¥44.9bn, indicating strong short-term solvency. Quick ratio mirrors current ratio due to unreported inventories, consistent with a service model. solvency: Total liabilities ¥30.8bn vs equity ¥71.9bn implies a debt-to-equity of 0.43x and an equity ratio around 72% (despite the unreported 0.0%). Interest coverage is 193.5x, highlighting very low financial risk. capital_structure: Leverage is conservative (assets/equity 1.39x), providing ample balance sheet capacity for capex or bolt-on M&A. Minimal interest expense (¥24m) limits earnings volatility from financing costs.

Cash Flow Quality

earnings_quality: OCF/Net income is 0.50 (¥1.84bn vs ¥3.70bn), indicating weaker cash conversion in the half, likely due to receivables and other working capital increases tied to growth and seasonality. EBITDA (¥5.22bn) supports underlying cash generation capacity. FCF_analysis: Investing cash flow is unreported; therefore, true FCF cannot be determined. The reported FCF of 0 should be interpreted as ‘not available.’ Given low D&A and an asset-light model, structural capex needs are likely modest, but M&A and maintenance capex could be meaningful swing factors. working_capital: Working capital is sizable at ¥44.9bn. Growth tends to elevate receivables and contract assets, which can depress interim OCF. Monitor days sales outstanding and billing milestones to assess normalization in H2.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are unreported for the period. With EPS at ¥101.96 for H1, the capacity for distributions appears supported by earnings, but exact payout cannot be assessed from available data. FCF_coverage: FCF coverage is not determinable due to missing investing cash flows; the ‘0.00x’ metric should be treated as undisclosed rather than zero. policy_outlook: Given a strong equity base and low leverage, the company has flexibility in shareholder returns. Actual sustainability will depend on cash conversion in H2, capex/M&A outlays, and any stated capital allocation policy updates.

Risk Assessment

Business Risks:

• Wage inflation and labor shortages in building management impacting cost base and service delivery
• Contract re-pricing risk if cost pass-through lags on longer-term agreements
• Customer concentration in specific regions/assets (typical in facility management) elevating renewal risk
• Macroeconomic slowdown reducing new contracts or discretionary add-on services
• Compliance and safety standards changes increasing operating costs

Financial Risks:

• Working capital intensity causing volatile cash conversion despite stable earnings
• Potential M&A execution risk and integration costs if pursuing inorganic growth
• Unreported investing cash flows obscuring capex and acquisition cash needs
• Interest rate risk limited but present if leverage increases for growth initiatives

Key Concerns:

• OCF/Net income at 0.50 indicates below-par cash conversion in H1
• Lack of disclosed investing cash flows prevents clear FCF assessment
• Dividend details unreported, limiting visibility on payout commitments

Investment Implications

Key Takeaways:

• Healthy top-line growth (+9.5% YoY) with strong operating leverage (+24.5% OI)
• Margins expanded across operating and net levels; interest burden is negligible
• Balance sheet is very conservative with substantial equity and liquidity
• Cash conversion lagged earnings due to working capital; watch for H2 normalization
• Data gaps (investing CF, dividends, cash) constrain full cash return analysis

Metrics to Watch:

• OCF/Net income conversion (targeting >0.8 over the full year)
• Receivables days and contract asset trends
• Operating margin sustainability and labor cost ratio
• Order backlog/renewal rates and price pass-through on contracts
• Capex and M&A outlays (once investing CF is disclosed)
• Capital allocation updates (dividend and buyback policy)
• Equity ratio disclosure in future filings for confirmation

Relative Positioning: Within Japanese facility and building management peers, the company exhibits above-average balance sheet strength, solid margin trajectory, and low financial risk, albeit with typical sector exposure to labor inflation and working capital swings.

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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