BUSINESS BRAIN SHOWA・OTA INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥20.41B
• Operating Income: ¥1.49B
• Net Income: ¥1.24B
• EPS: ¥113.57

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

Business Brain Ota Sho (9658) delivered solid FY2026 Q2 consolidated results under IFRS, with top-line growth translating into enhanced profitability. Revenue rose 13.0% year over year to 204.1, while operating income increased 26.7% to 14.9, evidencing positive operating leverage. Net income advanced 23.9% to 12.29, with a reported net margin of 6.0%, and an effective tax rate of 19.6% (tax 3.86 on PBT 19.75), suggesting a normalized tax profile. DuPont analysis shows ROE of 4.1% based on net margin 6.0%, asset turnover 0.441x, and financial leverage of 1.54x, reflecting a conservative balance sheet and moderate asset utilization. The operating margin is approximately 7.3% this period (14.9/204.1), up from an estimated ~6.5% in the prior year’s comparable period, indicating better cost control or mix. Gross profit margin is reported at 19.7%; note that cost of sales and gross profit figures do not arithmetically reconcile to revenue, likely due to IFRS classification nuances, so we rely on the provided gross margin ratio. Equity stands at 300.35 with an equity ratio of 63.9% and total liabilities of 157.11, highlighting strong solvency and low balance-sheet risk. Cash and equivalents of 99.08 provide a sizeable liquidity buffer even though detailed current liabilities are unreported. Accounts receivable of 50.93 against half-year revenue imply a DSO in the mid-40s days range, which is reasonable for a consulting/SI-centric business; inventory is minimal at 1.04, consistent with an asset-light services model. Profit before tax of 19.75 suggests a meaningful contribution from non-operating items (including 1.85 from equity-method investments), given operating income of 14.9. Despite healthy earnings momentum, reported ROE remains modest due to a large equity base; further margin expansion or higher asset turnover would be required to lift returns. Dividend data are largely unreported, but a calculated payout ratio of 73.7% indicates a potentially high distribution intensity versus profit, warranting cash flow corroboration once OCF is disclosed. With operating, investing, and financing cash flows unreported, free cash flow quality cannot yet be assessed; however, the strong equity base and cash balance mitigate near-term financial risk. Overall, the company exhibits improving profitability, robust solvency, and reasonable working capital discipline, with the main analytical gap being the absence of cash flow disclosure. Our assessment focuses only on non-zero disclosed items; unreported items are treated as unavailable, not zero.

Profitability Analysis

ROE_decomposition: ROE 4.1% = Net margin 6.0% x Asset turnover 0.441 x Financial leverage 1.54x. The result indicates modest overall returns driven by a healthy net margin but constrained by moderate asset turnover and conservative leverage. margin_quality: Operating margin ~7.3% (14.9/204.1), up from an estimated ~6.5% in the prior period (back-solved from YoY growth), implying ~80 bps expansion. Gross margin is reported at 19.7%. The lack of reconciliation between revenue, cost of sales, and gross profit suggests IFRS presentation differences; we therefore anchor on the reported gross margin percentage and the consistent operating income figure to assess profitability. operating_leverage: Revenue +13.0% YoY vs operating income +26.7% YoY evidences positive operating leverage, likely from fixed-cost absorption and improved project mix. Net income +23.9% also outpaced sales, indicating limited dilution from non-operating/financials and tax.

Growth Assessment

revenue_sustainability: 13.0% YoY growth to 204.1 suggests resilient demand in consulting/IT-related services. The low inventory base and services-heavy mix imply less cyclicality from physical goods; however, sustainability depends on backlog, project timing, and client IT budgets (not disclosed). profit_quality: PBT (19.75) exceeds operating income (14.9), implying ~4.85 of net non-operating gains, including 1.85 equity-method income. Profit growth is not purely operational but remains quality-positive given modest effective tax and absence of reported interest burden. outlook: With margin expansion and stable tax rate, H2 trajectory will hinge on utilization, pricing, and SG&A discipline. Maintaining revenue growth with current operating leverage would continue to lift margins, though mix and hiring costs could temper gains. Absent backlog and order metrics, we assume steady demand as the base case.

Financial Health

liquidity: Cash and equivalents of 99.08 provide a substantial buffer, but current ratio and quick ratio are not calculable due to unreported current liabilities. Working capital is listed as 182.51 (equal to current assets; current liabilities unreported), so we cannot compute net working capital precisely. solvency: Equity ratio 63.9% and debt-to-equity of 0.52x (total liabilities to equity) reflect a conservative capital structure. Interest-bearing debt is unreported; however, overall liabilities are modest relative to equity. capital_structure: Total assets 462.73 vs equity 300.35 yields financial leverage of 1.54x, indicating low reliance on debt. The balance sheet is equity-heavy, which dampens ROE but strengthens resilience.

Cash Flow Quality

earnings_quality: Effective tax rate ~19.6% aligns with statutory norms, supporting earnings quality. The contribution from equity-method income (1.85) is meaningful but not dominant. Interest expense and D&A are unreported, limiting full assessment. FCF_analysis: Operating CF and investing CF are unreported, so FCF cannot be calculated. Cash balance (99.08) is strong versus total liabilities (157.11), but sustainability of dividends and buybacks requires OCF confirmation. working_capital: AR 50.93 against half-year revenue implies DSO ~45 days ((50.93/204.10)*~182 days), reasonable for a project/services business. AP 21.16 vs cost base suggests DPO ~28 days using the reported cost of sales as a proxy; inventory is minimal at 1.04, indicating limited cash tied up in stocks.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 73.7%, implying a high distribution relative to earnings. DPS and total dividends paid are unreported, so we cannot cross-verify against cash flows. FCF_coverage: Not assessable due to unreported OCF/FCF. The strong cash position provides a buffer, but ongoing coverage depends on operating cash conversion. policy_outlook: With robust equity and cash, the company appears positioned to maintain distributions in the near term, subject to OCF support. Absent explicit guidance or DOE/ROE targets, we cannot infer policy changes.

Risk Assessment

Business Risks:

• Project timing and utilization risk affecting quarterly revenue recognition and margins
• Client IT budget sensitivity and potential delays in large-scale implementations
• Talent acquisition and wage inflation pressures impacting SG&A and delivery margins
• Dependence on equity-method affiliates for a portion of earnings
• Competition in consulting/SI leading to pricing pressure and mix shifts

Financial Risks:

• Limited visibility on cash flow generation due to unreported OCF/FCF
• Potential working capital swings from receivables and unbilled revenue (not disclosed)
• Concentration risk if large clients dominate receivables (counterparty risk not disclosed)
• Dividend sustainability sensitive to cash conversion given high calculated payout ratio

Key Concerns:

• Absence of detailed cash flow statements hampers FCF and dividend coverage analysis
• Inconsistency between reported revenue, cost of sales, and gross profit lines under IFRS classification
• Modest ROE (4.1%) despite improving margins due to a large equity base

Investment Implications

Key Takeaways:

• Top-line growth of 13.0% translated into 26.7% operating profit growth, demonstrating positive operating leverage
• Operating margin improved to ~7.3%, with net margin at 6.0% and a normalized tax rate near 20%
• ROE at 4.1% remains modest, constrained by conservative leverage and asset turnover
• Strong solvency with equity ratio 63.9% and liabilities of 157.11 against cash of 99.08
• Earnings include a non-trivial but not dominant contribution from equity-method income (1.85)
• Cash flow data are missing; dividend sustainability assessment awaits OCF/FCF disclosure
• Working capital discipline appears reasonable with DSO ~45 days and minimal inventory

Metrics to Watch:

• Operating cash flow and free cash flow in the upcoming full-year disclosure
• Order backlog and book-to-bill (if disclosed) to gauge revenue sustainability
• Utilization rates and headcount/wage trends impacting margins
• Receivables quality and unbilled balances; DSO trend
• Composition of non-operating income, especially equity-method contributions
• Dividend policy guidance and payout ratio trajectory versus FCF

Relative Positioning: Within Japanese IT consulting/SI peers, the company shows solid growth and improving margins with a conservative balance sheet, but ROE is below many peers that operate with leaner equity and higher asset turnover; greater cash flow visibility is needed to assess relative cash generation and shareholder return capacity.

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