HARIMA B.STEM (9780) FY2026 Q3 Earnings Report

Quick View

Executive Summary

FY2026 Q3 results show revenue of 226.0 billion yen (YoY +9.4%), operating income of 9.5 billion yen (+19.3%), ordinary income of 10.2 billion yen (+17.1%), and net income of 7.0 billion yen (+16.3%). The company achieved both revenue and profit growth, with operating income expanding at a faster pace than revenue due to improved cost management. Total assets increased to 167.9 billion yen from 147.9 billion yen, primarily driven by significant increases in goodwill and intangible assets following business acquisitions. The company maintains a conservative capital structure with equity of 97.5 billion yen and cash position of 58.2 billion yen, supporting continued dividend payments and operational flexibility.

Performance Drivers

Revenue increased 19.4 billion yen or 9.4% year-over-year to 226.0 billion yen, driven by steady demand from existing customers and the consolidation of newly acquired subsidiaries during the period. The number of consolidated subsidiaries increased by two, contributing to the top-line expansion. Gross profit reached 33.3 billion yen with a gross margin of 14.7%, which remains at the lower end of industry standards, reflecting the company's service-oriented business model with potentially competitive pricing pressure. Selling, general and administrative expenses totaled 23.8 billion yen, growing at a slower pace than revenue and resulting in operating leverage improvements. The SG&A to sales ratio declined on a relative basis, demonstrating scale effects and cost discipline. Operating income reached 9.5 billion yen, improving 19.3% year-over-year with the operating margin expanding to 4.2% from 3.9% in the prior period. Non-operating income contributed a net positive 0.7 billion yen, comprising 1.0 billion yen in non-operating income offset by 0.3 billion yen in non-operating expenses, primarily interest and dividend income. Ordinary income reached 10.2 billion yen, up 17.1% from the prior year. The variance between operating income growth of 19.3% and ordinary income growth of 17.1% reflects slightly higher non-operating expenses relative to the prior period. Net income attributable to owners reached 7.0 billion yen, up 16.3%, with an effective tax rate of approximately 33.3%. The company recorded significant increases in goodwill (up 714.7%) and intangible fixed assets (up 418.1%) year-over-year, indicating business acquisitions and software asset capitalization during the period, which represent potential future amortization and impairment considerations. This represents a revenue growth with accelerated profit growth pattern, demonstrating operational efficiency improvements alongside top-line expansion.

Key Metrics

[Profitability] ROE of 7.2% calculated based on net profit margin of 3.1%, asset turnover of 1.35 times, and financial leverage of 1.72 times. Operating margin improved to 4.2% from 3.9% in the prior year, representing a 0.3 percentage point expansion. Net profit margin of 3.1% reflects the low gross margin structure of 14.7% partially offset by disciplined SG&A management. Basic earnings per share reached 76.49 yen based on average shares outstanding of 9,183,460. [Cash Quality] Cash and deposits totaled 58.2 billion yen, providing coverage of 8.1 times against interest-bearing debt of 7.2 billion yen. The cash position covers short-term liabilities at a ratio of 13.0 times, indicating strong immediate liquidity. Days sales outstanding stands at approximately 64 days based on accounts receivable of 39.9 billion yen, indicating room for working capital efficiency improvement. [Investment Efficiency] Asset turnover ratio of 1.35 times demonstrates reasonable asset utilization. Goodwill and intangible assets increased substantially to 5.6 billion yen and 13.7 billion yen respectively, representing critical future return generation assets requiring ongoing monitoring for impairment risk. Interest coverage ratio of approximately 118 times reflects minimal interest burden of 0.08 billion yen against operating income of 9.5 billion yen. [Financial Health] Equity ratio calculation not disclosed but debt-to-capital ratio of 6.9% and debt-to-equity ratio of 0.72 times indicate conservative leverage. Current ratio of 210.1% and quick ratio of 210.0% demonstrate healthy short-term liquidity. However, short-term liabilities represent 62.4% of total liabilities, warranting attention to refinancing risk despite adequate cash coverage.

Cash Flow Analysis

Cash and deposits increased to 58.2 billion yen, reflecting strong operating profit generation and conservative financial management. The company maintains cash coverage of 8.1 times against total interest-bearing debt of 7.2 billion yen, indicating substantial financial flexibility. Working capital composition shows accounts receivable of 39.9 billion yen with a collection cycle of approximately 64 days, representing an area for potential efficiency gains. Long-term borrowings decreased by 0.9 billion yen or 25.0% to 2.7 billion yen, reflecting debt repayment or refinancing activity. The balance sheet expansion through goodwill and intangible asset increases of 5.0 billion yen and 11.0 billion yen respectively suggests significant investing activity related to business acquisitions during the period. Interest expense remains minimal at 0.08 billion yen, confirming low financial cost burden. The substantial cash position relative to short-term liabilities of 4.5 billion yen provides a coverage ratio of 13.0 times, ensuring adequate liquidity for near-term obligations despite the 62.4% concentration of liabilities in short-term categories.

Earnings Quality

Ordinary income of 10.2 billion yen versus operating income of 9.5 billion yen reflects a net non-operating contribution of approximately 0.7 billion yen, representing 0.3% of revenue. Non-operating income of 1.0 billion yen primarily consists of interest and dividend income, with non-operating expenses of 0.3 billion yen including interest payments of 0.08 billion yen and other financial costs. The non-operating net contribution enhanced ordinary income by 7.4% above operating income, indicating positive financial income generation from the company's substantial cash holdings. The modest differential between operating and ordinary income suggests core operating performance drives earnings with limited reliance on non-recurring or financial engineering activities. The effective tax rate of 33.3% aligns with statutory corporate tax rates, indicating normal tax treatment without significant deferred tax adjustments or extraordinary items. The increase in goodwill and intangible assets introduces future amortization considerations that will affect earnings sustainability, requiring assessment of cash generation against these non-cash charges. While cash flow statement data is not available for this quarterly period, the strong cash position relative to net income and absence of significant non-operating volatility suggest reasonable earnings quality with cash-backed profitability.

Guidance Update

Full-year guidance projects revenue of 295.0 billion yen, operating income of 14.0 billion yen, ordinary income of 14.5 billion yen, and net income of 9.5 billion yen, representing year-over-year growth of 5.3%, 23.2%, and 18.7% respectively for revenue, operating income, and ordinary income. Q3 cumulative results show revenue progress of 76.6% (226.0 billion yen against full-year guidance of 295.0 billion yen), operating income progress of 67.9% (9.5 billion yen against 14.0 billion yen), and net income progress of 73.9% (7.0 billion yen against 9.5 billion yen). Operating income progress of 67.9% at the nine-month mark trails the standard expectation of 75%, suggesting potential conservatism in full-year guidance or anticipated fourth-quarter margin pressure. Revenue and net income progress rates of 76.6% and 73.9% respectively align reasonably with the 75% benchmark, indicating balanced performance trajectory. The full-year dividend forecast of 15.0 yen per share with an interim payment of 12.0 yen implies a year-end dividend of 3.0 yen. Based on the forecast net income of 9.5 billion yen and indicated share count, the projected payout ratio approximates 35.6%, representing a sustainable return to shareholders given the company's cash reserves and profit generation capacity.

Shareholder Returns

The company paid an interim dividend of 12.0 yen per share with a forecast year-end dividend of 14.0 yen per share, implying a full-year dividend of 15.0 yen based on the forecast disclosure. This represents a payout ratio of approximately 35.6% against the nine-month net income of 7.0 billion yen and forecast full-year net income of 9.5 billion yen. The dividend level is supported by the company's substantial cash position of 58.2 billion yen and strong equity base of 97.5 billion yen, ensuring sustainability of shareholder distributions. No share buyback programs were disclosed in the available information, indicating that the payout ratio reflects dividend distributions only rather than a broader total return ratio. The conservative payout ratio leaves significant earnings retention for potential reinvestment in business growth, working capital requirements, or future acquisitions, consistent with the company's recent expansion reflected in increased goodwill and intangible assets.

Risk Factors

Low gross margin structure at 14.7% exposes the company to pricing pressure and competitive intensity in the building services sector, limiting operating leverage and requiring continuous volume growth or value-added service expansion to sustain profitability improvements. Goodwill and intangible assets increased by 495 million yen and 1.1 billion yen respectively to reach 5.6 billion yen and 13.7 billion yen, representing 11.5% of total assets and introducing impairment risk if acquired businesses or capitalized assets fail to generate anticipated returns. Days sales outstanding of 64 days indicates extended receivables collection cycles which could pressure working capital if customer payment terms deteriorate or if credit quality issues emerge, particularly given the concentration in the building services sector dependent on real estate and construction market conditions.

Industry Benchmark (Reference - Proprietary Data)

[Industry Position] (Reference - Proprietary Analysis) The company operates in a single segment of building services, benchmarked against the IT and telecommunications sector given service-oriented business characteristics. Profitability metrics show operating margin of 4.2% significantly below the industry median of 8.0% (Q3 2025, n=99), and net profit margin of 3.1% also trails the industry median of 5.6%, reflecting the low gross margin structure inherent to the company's service model. ROE of 7.2% is slightly below the industry median of 8.2% (IQR: 3.5%-13.3%), indicating comparable but below-median return efficiency. Financial health metrics demonstrate relative strength with equity ratio estimated above 50% comparing favorably to the industry median of 59.5% (IQR: 43.7%-72.8%), and current ratio of 210.1% well above the industry median of 2.13 times, reflecting conservative balance sheet management. Asset turnover of 1.35 times exceeds the industry median of 0.68 times, demonstrating superior asset utilization efficiency. Receivables turnover of approximately 64 days aligns closely with the industry median of 60.53 days (IQR: 45.96-79.94 days). Revenue growth of 9.4% is slightly below the industry median of 10.5% but within the interquartile range. The company's Rule of 40 (revenue growth plus operating margin) of approximately 13.6% falls below the industry median of 20.0%, primarily due to the lower operating margin despite reasonable revenue expansion. (Source: Proprietary analysis, IT and telecommunications sector, n=92-99 companies, Q3 2025 comparison period)

Key Takeaways from Earnings

The company demonstrates solid revenue momentum with 9.4% growth and superior operating profit expansion of 19.3%, indicating successful cost management and operational leverage realization despite operating in a low-margin service sector. The substantial increases in goodwill and intangible assets totaling 19.3 billion yen represent a strategic shift toward asset-light expansion through acquisitions, creating both growth opportunities and impairment monitoring requirements as the company integrates new businesses and validates return assumptions. Conservative financial positioning with 58.2 billion yen in cash, minimal interest-bearing debt of 7.2 billion yen, and sustainable dividend payout ratio of 35.6% provides financial flexibility for continued investment while maintaining shareholder returns, though the persistent low gross margin of 14.7% and operating margin of 4.2% below industry benchmarks indicate structural profitability challenges requiring strategic initiatives for margin expansion.

---

This report was automatically generated by AI analyzing XBRL earnings data as an earnings analysis tool. This is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled from publicly available earnings data. Please make investment decisions at your own responsibility and consult professionals as needed.

---

AI Financial Analysis

Executive Summary

FY2026 Q3 earnings were solid, with revenue growth, operating-margin expansion and double-digit profit growth, although profitability remains structurally modest for the building-services business. Cumulative Q3 revenue rose 9.4% YoY to ¥22.60bn. Operating income increased 19.3% to ¥0.95bn, outpacing revenue growth and demonstrating positive operating leverage. Ordinary income grew 17.1% to ¥1.02bn. Net income increased 17.3% to ¥0.70bn. Gross profit rose to ¥3.33bn from ¥2.78bn in the prior-year period. The gross margin improved to 14.7% from approximately 13.5%, an expansion of about 124bp. Operating margin improved to 4.2% from approximately 3.9%, an expansion of about 35bp. Net margin improved to 3.1% from approximately 2.9%, an expansion of about 21bp. The margin improvement indicates that revenue growth more than absorbed a material increase in SG&A expenses. However, SG&A rose approximately 19.7% YoY, materially faster than revenue, and this remains the principal constraint on further operating-margin expansion. Directors' compensation increased to ¥0.21bn and rent expense rose to ¥0.22bn, while goodwill amortization under JGAAP was ¥0.04bn. Ordinary income benefited from ¥0.10bn of non-operating income, including ¥0.03bn of dividend income and ¥0.02bn of equity-method income. Profit before tax also included a ¥0.03bn gain on sales of investment securities, which is non-recurring and modest relative to total earnings. The balance sheet remains liquid, with cash of ¥5.82bn exceeding interest-bearing debt of ¥0.72bn by roughly ¥5.10bn. The FY2026 forecast appears broadly achievable, as Q3 revenue progress is 76.6% versus a standard 75% seasonal benchmark and net-income progress is 73.9%. Operating-income progress of 67.9% is below the standard 75% benchmark, implying a relatively stronger fourth-quarter operating result is required. The principal forward-looking issue is whether the company can sustain gross-margin gains while integrating recently consolidated subsidiaries and absorbing higher personnel, rent and acquisition-related costs.

Profitability Analysis

The reported annualized ROE is 9.6%, derived through the three-factor DuPont framework from a 3.1% net profit margin, 1.795x asset turnover and 1.72x financial leverage. Asset turnover is the principal positive contributor to returns, consistent with a labor-intensive, service-oriented building-management model that generates substantial revenue relative to its asset base. Financial leverage is moderate in the DuPont calculation, but balance-sheet interest-bearing debt is low at ¥0.72bn and net cash is substantial, limiting balance-sheet financial risk. The main constraint on ROE is the low 3.1% net margin rather than weak revenue productivity. The greatest YoY profitability improvement was at the gross-profit level: gross margin expanded about 124bp to 14.7%. Operating margin expanded by a smaller approximately 35bp to 4.2%, because SG&A grew faster than sales. SG&A increased to ¥2.37bn from ¥1.98bn, or roughly 19.7% YoY, versus 9.4% revenue growth. This expense growth warrants monitoring because sustained SG&A growth above revenue would reverse operating leverage. EBIT margin of 4.2% is below the 5% efficiency threshold and is specifically a quality-alert concern; the business needs further pricing, labor-productivity, procurement, or service-mix improvement to generate a more resilient earnings buffer. The 14.7% gross margin is also below the 20% benchmark, reflecting limited gross-profit headroom typical of outsourced building-services operations with substantial labor and subcontracting costs. The five-factor analysis shows a 0.667 tax burden, corresponding to a 33.3% effective tax rate, while the 1.107 interest burden reflects net non-operating income rather than debt stress. Interest coverage is very strong at 118.3x. Under JGAAP, ¥0.04bn of goodwill amortization was charged to SG&A, reducing reported operating income and net income relative to an IFRS reporter with otherwise equivalent acquisition accounting.

Growth Assessment

Revenue growth of 9.4% to ¥22.60bn is robust relative to the FY revenue forecast growth rate of 5.3%, suggesting favorable year-to-date demand, contract expansion, or consolidation effects. The consolidation of two new subsidiaries is consistent with the sharp increase in goodwill and intangible assets and likely contributed to reported growth. Operating income growth of 19.3% exceeded sales growth, supported by gross-margin expansion. This is a favorable earnings mix outcome, but the 4.2% operating margin leaves limited protection against wage inflation, subcontractor-cost escalation, or pricing pressure. The FY forecast calls for revenue of ¥29.50bn, operating income of ¥1.40bn and profit attributable to owners of ¥0.95bn. Q3 cumulative progress is 76.6% for revenue, 67.9% for operating income, 70.3% for ordinary income and 73.9% for net income. Revenue progress is 1.6 percentage points above the standard Q3 progress rate, while operating-income progress is 7.1 percentage points below it and does not constitute a greater-than-10-percentage-point deviation. Achieving guidance requires implied Q4 revenue of ¥6.90bn, operating income of ¥0.45bn and net income attributable to owners of ¥0.25bn. The implied Q4 operating margin is approximately 6.5%, above the Q3 cumulative 4.2% margin, making cost control and seasonal execution important. The current period's ¥0.03bn securities-sale gain is not a core operating driver and should not be extrapolated. Recurring earnings momentum is therefore best assessed through revenue, gross profit and operating income rather than reported pre-tax profit alone.

Financial Health

Liquidity is strong. The current ratio is 210.1% and the quick ratio is 210.0%, supported by current assets of ¥10.19bn against current liabilities of ¥4.85bn. Working capital is ¥5.34bn. Cash and deposits of ¥5.82bn represent 34.7% of total assets and cover short-term loans of ¥0.45bn by 12.97x. Accounts receivable were ¥3.99bn, or 23.7% of total assets, consistent with the working-capital profile of a contract-service business. Interest-bearing debt totals ¥0.72bn, comprising ¥0.45bn of short-term loans and ¥0.27bn of long-term loans. Interest-bearing debt equals approximately 7.4% of owners' equity and debt/capital is 6.9%, indicating conservative debt funding. The reported 0.72x debt-to-equity ratio is below the 2.0x leverage-warning threshold. The refinancing-risk alert stems from the 62.4% short-term debt ratio, as ¥0.45bn of ¥0.72bn interest-bearing debt matures within one year. However, this maturity concentration is substantially mitigated by the large cash balance and 12.97x cash-to-short-term-debt coverage. Long-term loans declined 25.0% YoY to ¥0.27bn, further reducing longer-dated borrowing. Goodwill rose by ¥4.91bn YoY to ¥5.60bn and intangible assets increased by ¥11.03bn to ¥13.67bn, reflecting a significant acquisition or consolidation-related balance-sheet change. Goodwill is nevertheless only 5.7% of equity and 3.3% of assets, well below levels associated with material balance-sheet dependence on acquired value. Lease obligations of ¥0.04bn and a net defined-benefit liability of ¥0.47bn are additional fixed obligations to monitor, but neither currently appears large relative to equity of ¥9.75bn.

Notable B/S Changes

Goodwill: +¥4.91bn (+714.7%) to ¥5.60bn - substantial acquisition or consolidation effect; monitor integration performance and potential impairment, although goodwill remains only 5.7% of equity. Intangible assets: +¥11.03bn (+418.1%) to ¥13.67bn - material expansion of acquired or contractual intangible assets; future amortization and return generation are important for operating-profit quality. Long-term loans: -¥0.09bn (-25.0%) to ¥0.27bn - reduced long-term borrowing supports conservative solvency, while a larger share of debt is now short term. Cash and deposits: +¥1.05bn to ¥5.82bn - strengthened liquidity and substantial coverage of short-term borrowings. Total assets: +¥1.997bn to ¥16.79bn - balance-sheet growth was concentrated in goodwill and intangible assets rather than inventory.

Cash Flow Quality

Profitability is supported by operating-income growth and gross-margin expansion, but cash-conversion metrics cannot be quantified from the reported figures. The balance sheet provides some indirect support for liquidity quality because cash increased to ¥5.82bn from ¥4.77bn YoY while interest-bearing debt remained low. Receivables declined to ¥3.99bn from ¥4.37bn YoY despite revenue growth, which is directionally favorable for working-capital discipline. Accounts payable decreased modestly to ¥1.21bn from ¥1.24bn YoY, so the receivables improvement does not appear to be driven by an expansion in supplier financing. Contract liabilities increased to ¥0.87bn from ¥0.84bn YoY, providing a modest source of customer-funded working capital. Net income included a ¥0.03bn gain on sales of investment securities, which should be excluded when assessing recurring cash-generating capacity. JGAAP goodwill amortization of ¥0.04bn is a non-cash expense that depresses reported earnings relative to pre-amortization operating performance. The absence of large inventory exposure, with finished goods of only ¥0.06bn, limits inventory-obsolescence and inventory-build risks. Future assessment of earnings quality should focus on whether cash generation keeps pace with earnings as newly consolidated businesses are integrated and acquisition-related intangibles are amortized.

Dividend Sustainability

The company paid an interim Q2 dividend of ¥15.0 per share and forecasts a full-year dividend of ¥30.0 per share. Based on forecast EPS of ¥103.34, the forecast dividend payout ratio is approximately 29.0%. This is below the 60% sustainability benchmark and leaves meaningful earnings retention capacity. The Q3-period calculated payout ratio of 20.6% reflects the interim dividend relative to cumulative net income. Retained earnings of ¥83.41bn provide substantial balance-sheet support for shareholder distributions. Net cash of approximately ¥5.10bn after interest-bearing debt also supports dividend capacity. Dividend coverage should remain comfortable if the company achieves the ¥0.95bn full-year profit forecast. The key constraint on future dividend growth is not leverage but the durability of operating-margin improvement and any capital needs associated with acquisitions and subsidiary integration. The current distribution profile appears conservative relative to earnings and capital resources.

Risk Assessment

Business risks include Labor-cost and subcontractor-cost inflation: the building-services model has a low 14.7% gross margin, so wage inflation or difficulty passing through costs can materially pressure profitability., Pricing and contract-renewal risk: a 4.2% EBIT margin provides limited room for contract repricing delays, competitive bidding pressure, or service-quality penalties., Integration risk: two newly consolidated subsidiaries coincide with material increases in goodwill and intangible assets, raising execution risk around systems, personnel retention, cross-selling and expected synergies., Customer-credit and collection risk: trade receivables of ¥3.99bn are a material operating asset, although their YoY decline is currently favorable., Industry-specific service-continuity risk: labor shortages, workplace safety incidents, and disruptions in outsourced building operations could impair service delivery and contract retention..

Financial risks include Short-term debt concentration: 62.4% of interest-bearing debt is short term, creating a refinancing-risk alert, although cash covers short-term loans by 12.97x., Acquisition-accounting risk: goodwill increased 714.7% YoY to ¥5.60bn, and the acquired-value base must generate sufficient returns to avoid future impairment., Margin sensitivity: SG&A increased approximately 19.7% YoY, more than twice the 9.4% revenue-growth rate, which could constrain further profit conversion if persistent., Securities-market exposure: investment securities total ¥1.12bn and the period included a ¥0.03bn gain on sale of securities, exposing reported income and equity to market-value movements..

Key concerns include Highest priority: sustaining gross-margin improvement while managing labor and SG&A inflation, given EBIT margin remains below 5%., High priority: delivering the implied Q4 operating margin of approximately 6.5% needed to meet full-year operating-income guidance., Moderate priority: demonstrating that the sharp increase in goodwill and intangible assets produces sustainable earnings and cash returns., Moderate priority: maintaining receivable collection discipline as the revenue base expands..

Investment Implications

Key takeaways include Q3 revenue, operating income and net income grew 9.4%, 19.3% and 17.3% YoY, respectively., Gross margin improved by approximately 124bp and operating margin by approximately 35bp, confirming positive year-to-date operating leverage., Profitability remains modest, with 4.2% EBIT margin and 3.1% net margin, both sensitive to cost inflation and execution., The balance sheet is conservatively funded, with ¥5.82bn of cash, ¥0.72bn of interest-bearing debt and 210.1% current ratio., The acquisition-related rise in goodwill and intangible assets is substantial in absolute YoY terms but remains modest relative to total equity and assets., FY guidance is broadly within reach, but the operating-income target requires stronger Q4 profitability than the cumulative Q3 margin..

Metrics to watch include Gross margin and EBIT margin, particularly the ability to move EBIT margin sustainably above 5%., SG&A growth relative to revenue growth., Q4 operating income versus the implied ¥0.45bn required to achieve FY guidance., Receivable days and operating cash conversion as the revenue base expands., Goodwill, intangible-asset amortization and any impairment indicators following the consolidation of two subsidiaries., Short-term debt renewal terms despite strong cash coverage., Dividend payout ratio against the ¥30.0 per share full-year dividend plan..

Regarding relative positioning, Harima Bistem combines strong liquidity, low interest-bearing leverage and respectable annualized ROE of 9.6% with a low-margin outsourced-services earnings profile. Its current financial position is more conservative than that of a highly leveraged acquirer, but its relative earnings resilience depends primarily on labor-cost pass-through, contract pricing and successful integration rather than financial engineering.