SECOM CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥593.55B
• Operating Income: ¥67.46B
• Net Income: ¥59.61B
• EPS: ¥119.39

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

Secom Co., Ltd. reported solid top-line and operating performance for FY2026 Q2 (cumulative first half under JGAAP, consolidated), with revenue of ¥593.5bn (+6.0% YoY) and operating income of ¥67.5bn (+14.2% YoY). Gross profit was ¥169.2bn, implying a gross margin of 28.5%, and operating margin expanded to 11.4%, evidencing positive operating leverage. Ordinary income reached ¥79.1bn, outpacing operating profit and suggesting a healthy non-operating contribution (approximately ¥11.6bn), likely from financial income or equity-method affiliates. Despite this, net income declined 2.6% YoY to ¥49.1bn, indicating pressure below the operating line (e.g., higher taxes, minority interests, or extraordinary items), though detailed drivers are not disclosed here. DuPont analysis shows net margin of 8.27%, asset turnover of 0.282x, and financial leverage of 1.47x, resulting in an interim ROE of 3.42%; this should be interpreted as an unannualized mid-year snapshot. Cash generation was robust, with operating cash flow (OCF) of ¥95.9bn and OCF/Net Income of 1.95x, signaling strong earnings quality and working-capital discipline in the half. Liquidity is ample: current ratio 255% and quick ratio 250% underscore a conservative balance sheet, consistent with Secom’s historically prudent financial policy. Solvency appears strong with total liabilities of ¥697.8bn against equity of ¥1.43tn; interest expense is modest at ¥0.64bn and interest coverage is a very high 105.6x. The company’s ordinary income margin (~13.3%) exceeding operating margin implies a buffer from financial/affiliate returns; however, the gap between ordinary and net income points to items below ordinary income weighing on the bottom line this period. The effective tax rate shown in the summarized metrics (0.0%) is not reliable due to missing pre-tax detail; we rely instead on disclosed tax expense of ¥24.0bn to note taxes as a material outflow. Free cash flow cannot be assessed because investing cash flow and cash balances show as zero (undisclosed), and capital expenditure data are not provided in this dataset. The equity ratio is shown as 0.0% in the summary table, which is an undisclosed placeholder rather than an actual metric; based on assets and equity, the implied equity ratio is high. Overall, Secom’s H1 results indicate healthy core profitability, improved operating efficiency, and strong cash conversion, partially offset by a YoY decline in net profit due to non-operating or below-the-line factors not detailed here. Given the recurring, subscription-like nature of security services, the revenue base appears resilient, and operating leverage is trending favorably. Nonetheless, the outlook will hinge on cost control (especially personnel costs), service mix, and the trajectory of non-operating and extraordinary items through the second half.

Profitability Analysis

ROE_decomposition: ROE 3.42% (interim) = Net margin 8.27% × Asset turnover 0.282 × Financial leverage 1.47. The ROE is a half-year snapshot and not annualized; the full-year ROE will differ based on H2 performance and seasonality. margin_quality: Gross margin 28.5% (¥169.2bn/¥593.5bn) and operating margin 11.4% (¥67.5bn/¥593.5bn) indicate healthy unit economics; ordinary income margin ~13.3% reflects positive non-operating contributions. Net margin 8.27% lagged operating momentum due to below-the-line headwinds. operating_leverage: Revenue grew +6.0% YoY while operating income rose +14.2% YoY, demonstrating positive operating leverage from scale benefits and/or mix improvement. EBITDA was ¥100.7bn (17.0% margin), with D&A of ¥33.2bn; fixed-cost absorption appears favorable.

Growth Assessment

revenue_sustainability: Top-line +6.0% YoY suggests steady demand in core security services and related solutions. Given Secom’s subscription-like recurring base, growth appears resilient absent macro shocks. profit_quality: Operating profit growth outpaced sales, indicating improved efficiency or favorable mix. However, net income decline (-2.6% YoY) signals pressure from non-operating/extraordinary items or tax/minority interests; persistence of these items will determine full-year profit quality. outlook: Assuming stable service demand, continued cost control, and normalization of below-the-line items, core earnings momentum should remain intact into H2. Key swing factors include personnel cost inflation, installation/solution demand cycles, FX impacts on overseas ops, and any one-off losses.

Financial Health

liquidity: Current ratio 255.4% and quick ratio 250.4% underscore strong short-term liquidity. Working capital stands at ¥589.5bn, with modest inventories of ¥19.0bn relative to revenue. solvency: Total liabilities ¥697.8bn vs equity ¥1,434.3bn indicates a conservative capital structure. Interest expense is low (¥0.64bn) and interest coverage is very strong at 105.6x, suggesting ample debt service capacity. capital_structure: Financial leverage of 1.47x (Assets/Equity) is modest. The reported debt-to-equity ratio of 0.49x uses total liabilities as a proxy; breakdown of interest-bearing debt is not disclosed here.

Cash Flow Quality

earnings_quality: OCF/Net Income is 1.95x (¥95.9bn/¥49.1bn), indicating strong conversion and limited accruals in the half. EBITDA margins (17.0%) support cash generation. FCF_analysis: Free cash flow cannot be reliably calculated due to missing investing cash flow and capex disclosures in this dataset (zeros indicate undisclosed). As such, FCF coverage metrics are not assessable here. working_capital: High OCF suggests favorable working-capital movements and disciplined receivables/payables management; however, detailed changes by component are not provided.

Dividend Sustainability

payout_ratio_assessment: Payout ratio and DPS show as zero due to non-disclosure in this dataset; they should not be treated as actual values. FCF_coverage: Not assessable given undisclosed investing cash flows and capex; OCF is strong, but FCF visibility is limited. policy_outlook: Without disclosed interim dividend data, we cannot infer policy changes. Historically, sustainability hinges on stable OCF and conservative leverage, both of which look supportive based on available data.

Risk Assessment

Business Risks:

• Labor availability and wage inflation for security personnel impacting margins
• Demand cyclicality in systems installation and large project timing
• Technology disruption and competitive intensity in electronic security/monitoring
• Regulatory and compliance requirements in security services across geographies
• Overseas exposure to FX and geopolitical risks

Financial Risks:

• Potential volatility from non-operating/extraordinary items affecting net income
• Limited visibility on capex and investment cash flows in the period
• Counterparty credit risk in receivables due to broad customer base
• Interest rate shifts affecting financial income/expense and asset valuations

Key Concerns:

• Net income declining YoY despite robust operating profit growth
• Insufficient disclosure of investing cash flows, capex, and cash balances in this dataset
• Interim ROE is subdued on a half-year basis; full-year improvement depends on H2

Investment Implications

Key Takeaways:

• Strong operating momentum: revenue +6% YoY, operating income +14% YoY, operating margin ~11.4%
• High cash conversion: OCF/NI 1.95x supports earnings quality
• Very strong interest coverage (105.6x) and ample liquidity (current ratio ~255%)
• Non-operating/extraordinary items likely pressured bottom-line, resulting in -2.6% YoY net income
• Limited visibility on FCF and dividend metrics due to undisclosed investing CF and DPS

Metrics to Watch:

• Operating margin trajectory and EBITDA margin into H2
• Non-operating/extraordinary items, minority interests, and effective tax rate normalization
• Personnel cost ratio and headcount/productivity metrics
• Capex and investing cash flows to gauge FCF sustainability
• Receivables days and churn in monitoring contracts
• Ordinary income contributions from financial/affiliate lines

Relative Positioning: Within Japanese security services and building solutions peers, Secom appears to maintain superior balance sheet strength and cash conversion, with steady top-line growth and operating leverage; bottom-line softness this half contrasts with resilient core operations.

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