BIKEN TECHNO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥17.67B
• Operating Income: ¥1.02B
• Net Income: ¥672M
• EPS: ¥89.05

Income Statement

Balance Sheet

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

Verdict: A strong FY2026 Q2 with clear operating leverage and margin expansion, delivering robust profit growth on modest top-line gains. Revenue rose 5.7% YoY to 176.74, while operating income surged 81.1% YoY to 10.22, significantly outpacing sales growth. Net income climbed 65.4% YoY to 6.71, with EPS at 89.05 JPY. Gross margin stands at 23.2%, and operating margin improved to 5.8% (10.22/176.74). Based on reported growth rates, we estimate operating margin expanded by roughly 240 bps YoY (from ~3.4% to ~5.8%). Net margin improved to 3.8%, an estimated expansion of about 140 bps YoY (from ~2.4% to 3.8%). SG&A ratio is contained at 17.4% (30.75/176.74), indicating disciplined overhead relative to sales. Ordinary income rose 63.8% to 10.38, with non-operating net contributions modest at +0.15 (1.45 income vs 1.30 expenses). Interest coverage is strong at 15.45x, reflecting improved earnings resilience against financing costs. Balance sheet strength is solid: current ratio 199%, quick ratio 198.7%, and equity ratio (calculated) ~54.9% (221.82/403.56). Cash on hand of 84.93 covers short-term loans (21.00) comfortably; net cash is approximately neutral when including long-term debt (cash ~84.93 vs interest-bearing debt ~84.09). The effective tax rate is elevated at 37.9%, tempering bottom-line conversion. ROE is 3.0% via DuPont (3.8% margin × 0.438 asset turnover × 1.82x leverage), helped primarily by margin gains rather than leverage. A key structural yellow flag is low ROIC at 2.9% (<5% benchmark), suggesting capital efficiency remains a medium-term improvement area. Earnings quality cannot be fully assessed as operating cash flow is unreported; thus, we cannot corroborate accrual-to-cash conversion for this period. Forward-looking, maintaining pricing discipline and utilization while managing labor costs will be critical to sustain the margin gains, and improving ROIC above 5% should be a management priority.

Profitability Analysis

ROE decomposition (DuPont): ROE 3.0% = Net Profit Margin 3.8% × Asset Turnover 0.438 × Financial Leverage 1.82x. The largest driver of improvement appears to be net profit margin expansion, inferred from operating income growth (+81.1% YoY) far outpacing revenue growth (+5.7% YoY); we estimate operating margin expansion of ~240 bps YoY (from ~3.4% to ~5.8%). Asset turnover at 0.438 is modest for a service-heavy model and likely similar YoY given limited data; leverage at 1.82x is conservative and not a material driver. Business explanation: better cost control (SG&A ratio at 17.4%), improved gross margin mix, and scale benefits likely underpinned operating leverage; non-operating items netted only +0.15 and did not drive the jump. Sustainability: margin gains appear operational rather than one-off, but sustaining them will depend on wage inflation management and contract repricing cadence in building maintenance and facilities services. Watch for any reversion if labor costs accelerate or renewal pricing lags. No red flags of SG&A growing faster than revenue this quarter; in fact, operating leverage is positive.

Growth Assessment

Top-line growth of 5.7% YoY to 176.74 reflects steady demand in building maintenance/facility services. Profit growth is outsized: operating income +81.1% and net income +65.4%, indicating strong operating leverage and potentially improved project/pricing mix. Gross profit of 40.97 supports a 23.2% gross margin; SG&A at 30.75 implies overhead absorption improved. Non-operating items are largely neutral (dividends 0.13, interest income 0.10, interest expense 0.66), so growth is fundamentally operating-driven. Outlook considerations: maintaining backlog and contract renewal pricing should sustain revenue momentum; wage and subcontractor cost trends are the key swing factors. Elevated tax rate (37.9%) caps net leverage from operating gains; any normalization would aid EPS. Overall revenue sustainability looks reasonable given sector dynamics, but incremental growth likely hinges on new contract wins and cross-selling value-added services.

Financial Health

Liquidity is strong: current ratio 199% and quick ratio 198.7% well above benchmarks. No warning on near-term liquidity; cash and deposits (84.93) exceed short-term loans (21.00), and current assets (198.48) comfortably cover current liabilities (99.76). Solvency: total liabilities/equity (proxy D/E) is 0.82x; calculated interest-bearing debt is ~84.09 (21.00 short-term + 63.09 long-term), against equity 221.82 (equity ratio ~54.9%), a conservative structure. No explicit maturity mismatch risk: ample liquidity versus short-term obligations. Off-balance sheet obligations are unreported; none identified from provided data. No explicit financial covenant risks flagged by the data.

Cash Flow Quality

Operating cash flow is unreported; OCF/Net Income cannot be assessed, so we cannot validate accrual earnings quality this quarter. Free cash flow and capex are also unreported, preventing coverage analysis for dividends or growth investment. Working capital appears well-managed given high cash and modest receivables (40.43) versus payables (14.95); inventories are minimal (0.23), typical for a services model and reduces stock obsolescence risk. No signs of working capital manipulation can be inferred from the limited data, but the absence of cash flow disclosure is a key limitation.

Dividend Sustainability

The calculated payout ratio is 32.2%, indicating room for continued distributions relative to earnings. DPS/total dividends are unreported; FCF coverage cannot be assessed due to missing OCF and capex data. Balance sheet strength (net cash roughly neutral; strong liquidity) supports dividend stability even absent FCF detail. Policy outlook: with ROE at 3.0% and ROIC at 2.9%, there is a trade-off between shareholder returns and reinvestment to lift capital efficiency; a moderate payout appears prudent until ROIC improves.

Risk Assessment

Business Risks:

• Labor cost inflation and labor availability constraints in building maintenance, potentially pressuring margins
• Contract renewal pricing risk and competitive bidding intensity
• Service quality/compliance risk affecting retention of long-term contracts
• Potential demand cyclicality in commercial real estate utilization and facility operating budgets
• Goodwill impairment risk (goodwill 4.69) if acquired units underperform

Financial Risks:

• ROIC at 2.9% below 5% benchmark indicates capital efficiency risk
• High effective tax rate (37.9%) reducing net conversion
• Interest rate exposure on 84.09 of interest-bearing debt (if floating-rate portions rise)
• Cash flow visibility risk due to unreported OCF/FCF

Key Concerns:

• Sustainability of recent margin expansion amid potential wage pressures
• Low capital efficiency (ROIC 2.9%) versus typical 7–8% targets for value creation
• Data limitations on cash flow and dividends constrain assessment of earnings quality and distribution coverage

Investment Implications

Key Takeaways:

• Strong margin-led earnings beat: operating income +81.1% on revenue +5.7%
• Operating margin estimated up ~240 bps YoY to 5.8%
• Net margin at 3.8%, estimated up ~140 bps YoY
• Liquidity robust: current ratio 199%, cash 84.93 > ST loans 21.00
• Interest coverage strong at 15.45x
• Conservative balance sheet: equity ratio ~54.9%, total liabilities/equity 0.82x
• ROE 3.0% driven by margin improvement; leverage not a major driver
• ROIC 2.9% signals capital efficiency improvement is needed
• Non-operating items are minor; results are operationally driven
• Tax rate elevated at 37.9%, limiting net income scalability

Metrics to Watch:

• Operating cash flow and FCF (when disclosed) vs net income
• Wage inflation, subcontractor costs, and SG&A ratio
• Contract renewal/pricing discipline and new order intake
• ROIC trajectory toward >5% and ultimately 7–8%
• Effective tax rate normalization potential
• Interest-bearing debt mix (fixed vs floating) and average borrowing cost

Relative Positioning: Within Japan’s building maintenance and facility services space, Bikentechno shows solid near-term execution with strong operating leverage and a healthy balance sheet, but lags on capital efficiency (ROIC 2.9%), making sustained improvement in asset productivity and pricing key to closing the gap with best-in-class peers.

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