HARIMA B.STEM CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.42B
• Operating Income: ¥541M
• Net Income: ¥409M
• EPS: ¥43.82

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

Harima B.Stem (9780) reported FY2026 Q2 consolidated results showing steady top-line growth but modest operating leverage. Revenue rose 7.8% year on year to ¥14.419bn, while operating income increased 2.8% to ¥541m, indicating some margin pressure despite scale benefits. Gross profit reached ¥1.820bn, implying a gross margin of 12.6%, which appears thin for a labor-intensive building maintenance model and suggests wage and subcontract cost inflation are weighing on spreads. Ordinary income (¥584m) exceeded operating income, indicating positive non-operating contributions, likely financial income and/or subsidies, with minimal interest burden given the low interest expense of ¥3.75m. Net income decreased slightly by 0.7% to ¥401m, pointing to higher tax burden or other below-the-line items offsetting operating performance; the effective tax rate based on disclosed figures approximates 28% (¥164m tax on ¥584m pre-tax), despite a reported metric of 0% that appears to be a data placeholder. DuPont analysis shows a net margin of 2.78%, asset turnover of 0.873, and financial leverage of 1.73, producing an ROE of 4.19%—a modest level for the sector. Asset turnover of 0.873 likely reflects the semiannual nature of revenue; on an annualized view, turnover would be higher, suggesting stronger underlying efficiency than the point figure implies. Liquidity is strong with a current ratio of 205.8% and working capital of ¥4.867bn, supporting operational stability and contract execution. The balance sheet is conservative: total liabilities of ¥5.596bn against equity of ¥9.559bn (liability-to-equity 0.59x), and interest coverage is extremely high at 144x, indicating very low financial risk. Operating cash flow of ¥318m is 0.79x net income, reflecting a working capital build typical of first-half seasonality and receivables timing in facility management contracts. EBITDA of ¥623m (margin 4.3%) underscores modest operating cash generation capacity relative to sales, consistent with the low-margin nature of the business. Free cash flow is not determinable from the provided data due to unreported investing cash flows; the reported zero should be treated as unavailable rather than an actual zero. Dividend information (DPS/payout) is unreported; therefore, dividend sustainability cannot be directly assessed this quarter, though the balance sheet and cash generation profile suggest capacity for ongoing shareholder returns depending on capex and policy. Overall, the company exhibits sound financial health and defensive characteristics, but margin compression and modest ROE highlight the need for continued efficiency gains and pricing discipline. Key data limitations include unreported cash and equivalents, investing cash flows, share count, and equity ratio metric, which constrain precision in some analyses.

Profitability Analysis

ROE decomposition: ROE 4.19% = Net profit margin 2.78% × Asset turnover 0.873 × Financial leverage 1.73. The ROE is modest, driven more by asset efficiency and low leverage than by margin strength. margin_quality: Gross margin at 12.6% and EBITDA margin at 4.3% indicate tight spreads typical for building maintenance. Operating income grew 2.8% vs revenue +7.8%, implying cost escalation (labor/subcontracting/materials) outpaced pricing gains and mix improvements. Net margin at 2.78% contracted vs revenue growth and was further pressured by a normalized tax burden (~28%). Ordinary income exceeding operating income by ¥43m suggests stable non-operating gains, partly offsetting operating margin compression. operating_leverage: Revenue growth of +7.8% delivered only +2.8% operating income growth, implying negative operating leverage in the period. This suggests fixed-cost absorption benefits were outweighed by variable cost increases and/or one-off cost items. To restore leverage, the company likely needs better contract repricing, workforce productivity gains, and mix shift to higher-margin services.

Growth Assessment

revenue_sustainability: Top-line growth of 7.8% is solid for a mature facilities services provider and likely reflects new contract wins and/or scope expansions. The backlog nature of multi-year maintenance contracts supports a recurring revenue base. profit_quality: Ordinary income exceeding operating income indicates diversified earnings with low financial drag. However, thin gross/EBITDA margins and a tax burden restoring to ~28% limit net income expansion. The OCF/NI of 0.79 suggests working capital intensity in-period, consistent with timing of receivables collections in H1. outlook: Near-term growth should remain supported by stable demand for building maintenance, ESG/energy-efficiency retrofits, and public/private facility outsourcing. Profitability hinges on passing through wage inflation, optimizing staffing utilization, and cross-selling higher-margin technical services. Absent mix improvements, ROE is likely to remain mid-single-digit.

Financial Health

liquidity: Current assets ¥9.467bn vs current liabilities ¥4.600bn yield a current ratio of 205.8% and quick ratio of 205.7% (inventories minimal at ¥3.8m). Working capital is ample at ¥4.867bn, supporting bid performance and seasonal cash needs. solvency: Total liabilities ¥5.596bn vs equity ¥9.559bn imply a liability-to-equity ratio of 0.59x and assets/equity of ~1.73x, indicating conservative leverage. Interest expense is only ¥3.75m with interest coverage of ~144x, reflecting minimal debt burden. capital_structure: Balance sheet is equity-heavy and resilient. The reported equity ratio of 0.0% appears unreported; using disclosed totals implies an equity ratio near 58% (¥9.559bn/¥16.518bn).

Cash Flow Quality

earnings_quality: OCF/Net income of 0.79 indicates lower cash conversion in the half, likely due to receivables growth and contract mobilization costs. Depreciation is modest at ¥82m, consistent with an asset-light, labor-intensive model. FCF_analysis: Free cash flow cannot be reliably computed because investing cash flow is unreported (reported zero is a placeholder). EBITDA of ¥623m suggests capacity to fund maintenance capex, but the absence of capex data prevents assessing structural FCF. working_capital: Minimal inventories (¥3.8m) imply receivables and payables are the primary swing factors. The sizeable working capital base (¥4.867bn) and OCF shortfall versus net income indicate a temporary build—monitor DSO and contract billing milestones into H2.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are unreported in this dataset; the displayed zeros should not be interpreted as actual figures. Therefore, payout adequacy cannot be quantified. FCF_coverage: Not assessable due to missing investing cash flow and capex details; reported FCF of zero is a placeholder. policy_outlook: With low financial leverage, strong liquidity, and recurring cash flows, the company appears to have capacity to sustain dividends subject to capex and working capital needs. Formal assessment requires confirmed DPS, payout policy, and full-year cash flow data.

Risk Assessment

Business Risks:

• Wage inflation and staffing shortages pressuring margins in a labor-intensive model
• Contract repricing risk where inflation pass-through is delayed or capped
• Customer concentration in large facilities or public-sector contracts
• Competitive bidding pressure compressing gross margins
• Execution risk on multi-site, multi-year maintenance contracts
• Potential cost spikes in subcontracting and materials
• Seasonality and billing milestone timing affecting interim cash flows

Financial Risks:

• Working capital swings reducing cash conversion in certain periods
• Interest rate normalization marginally increasing finance costs (though current burden is low)
• Pension/employee benefit obligations (not disclosed here) potentially impacting equity and cash
• Limited operating margin buffer against cost shocks

Key Concerns:

• Negative operating leverage in the period despite revenue growth
• Thin EBITDA margin at 4.3% limiting internal reinvestment and ROE
• OCF below net income (0.79x) indicating working capital headwinds
• Data gaps (cash balance, investing cash flows, share count, DPS) limiting visibility on per-share metrics and FCF

Investment Implications

Key Takeaways:

• Top-line growth +7.8% with only +2.8% operating income indicates margin pressure
• ROE at 4.19% reflects modest margins and conservative leverage
• Liquidity is strong (current ratio ~206%) and solvency solid (liability/equity 0.59x)
• Interest coverage of 144x underscores low financial risk
• OCF/NI at 0.79 suggests working capital build; watch H2 cash conversion
• Ordinary income above operating income indicates stable non-operating gains
• Dividend capacity likely adequate, but actual DPS/payout unreported

Metrics to Watch:

• Gross and operating margin trajectory (cost pass-through effectiveness)
• DSO and receivables turnover; OCF/NI recovery in H2
• Contract win rate and pricing vs wage inflation
• EBITDA margin and utilization rates
• Capex and investing cash flows to gauge structural FCF
• Equity ratio (confirmed) and any changes in leverage
• Tax rate normalization vs prior periods

Relative Positioning: Within Japan’s building maintenance and facility services peer set, Harima B.Stem exhibits typical low-double-digit gross margins and low-single-digit net margins, coupled with above-average balance sheet strength and very low financial risk. Its profitability profile is slightly constrained relative to best-in-class peers that achieve higher EBITDA margins via technical services mix and automation; however, recurring revenue and conservative leverage provide defensive characteristics.

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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