ASAHI INTELLIGENCE SERVICE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.12B
• Operating Income: ¥714M
• Net Income: ¥539M
• EPS: ¥34.72

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

Asahi Information Service Co., Ltd. (single-entity, JGAAP) delivered steady topline and operating growth in FY2026 Q2, with revenue up 4.8% year over year to ¥8.12bn and operating income up 4.8% to ¥0.714bn, indicating disciplined cost control in line with sales expansion. Net income grew a faster 15.3% to ¥0.539bn, suggesting an improvement in non-operating items and/or tax normalization relative to the prior year. Gross margin stands at 19.6%, and operating margin at approximately 8.8%, a reasonable spread that points to solid cost pass-through and controlled SG&A in an IT services context. DuPont decomposition indicates ROE of 4.5% = 6.64% net margin × 0.546x asset turnover × 1.24x financial leverage, reflecting a conservatively levered balance sheet and modest efficiency. The company’s financial position is strong, with total assets of ¥14.88bn, total equity of ¥11.98bn, and total liabilities of ¥2.96bn; implied equity ratio is roughly 80.6% derived from balance sheet figures (the “Equity Ratio: 0.0%” field appears unreported). Liquidity is ample: current assets of ¥10.44bn vs. current liabilities of ¥2.87bn translate to a current ratio of 363%, consistent with cash- and receivables-heavy working capital typical for systems integration/IT services. Interest expense is minimal at ¥0.782m, and interest coverage is extremely high at about 913x, underscoring very low financial risk. Ordinary income of ¥0.74bn modestly exceeds operating income, implying positive net non-operating contributions. The reported effective tax rate of 0.0% appears unreported; using disclosed tax expense of ¥0.219bn and ordinary income of ¥0.74bn implies a tax rate around 29.5%, which aligns with standard Japanese corporate tax norms. Cash flow statements are not disclosed (all zeros indicate unreported), so operating cash conversion and free cash flow cannot be assessed from this release; seasonality in collections often skews cash flow to the second half in this industry. Depreciation is also unreported, so EBITDA metrics are not interpretable this quarter; operating income serves as the primary profitability indicator. No dividend information is available for the period (DPS and payout appear unreported); capital return capacity nonetheless looks adequate given the net cash-like balance sheet and modest capex intensity typical for the business model. Per-share indicators such as shares outstanding and BVPS are unreported, limiting valuation context. Overall, the company exhibits stable growth, healthy margins, a fortress balance sheet, and minimal financial risk, with the main analytic limitation being the absence of cash flow data and dividends detail in this quarter’s disclosures. Outlook hinges on sustaining utilization, pricing, and delivery quality while managing wage inflation in a tight IT labor market.

Profitability Analysis

ROE stands at 4.50%, decomposed via DuPont as: Net Profit Margin 6.64% × Asset Turnover 0.546 × Financial Leverage 1.24. Operating margin is approximately 8.8% (¥714m / ¥8,117m), sitting comfortably above the 19.6% gross margin spread less SG&A indicates SG&A of ~¥874m (about 10.8% of revenue). The stable alignment of revenue and operating income growth (both +4.8% YoY) implies limited operating leverage this quarter—SG&A scaled proportionally with sales, suggesting management kept overheads in check but did not materially expand margins. Gross margin at 19.6% is consistent with a labor-intensive, low-inventory IT services mix where project mix, utilization, and subcontractor rates drive variability; there are no signs of margin stress. Ordinary income (¥740m) exceeding operating income reflects slightly positive non-operating balance (e.g., financial income/expenses), with negligible interest expense (¥0.782m). The implied effective tax rate is ~29.5% (¥218.5m / ¥740m), resulting in a net margin of 6.64%, which is reasonable for the sector. Asset turnover of 0.546x indicates moderate efficiency; room remains to improve utilization or reduce idle working capital. With financial leverage at only 1.24x (assets/equity), returns are primarily driven by margins and turnover rather than leverage. Depreciation and EBITDA are unreported, so assessment of non-cash cost structure and incremental operating leverage from prior investments is not possible this quarter.

Growth Assessment

Revenue grew 4.8% YoY to ¥8.12bn, indicating sustained demand and/or stable pricing in the company’s IT services. Operating income also grew 4.8% to ¥0.714bn, implying growth quality that is operationally driven rather than one-off. Net income rose 15.3% to ¥0.539bn, outpacing operating income growth; drivers likely include favorable non-operating items and standard tax rates versus the prior period. The stability of gross and operating margins suggests the revenue increase is likely volume/utilization-driven rather than pure pricing, though limited data prevents precise mix attribution. Given the ordinary income margin (9.1%) and net margin (6.64%), profitability remains solid for a labor-driven model. Sustainability will hinge on project pipeline, headcount capacity, and control of subcontractor and wage costs; the absence of cash flow and order/backlog data limits forward visibility. Seasonality in the industry could tilt stronger conversions and collections into H2, which is relevant for cash-backed growth. Without capex and D&A, we cannot comment on growth investment intensity; however, the strong equity base suggests capacity to invest if needed. Outlook near term appears steady provided utilization and delivery quality are maintained amid wage inflation and potential client budget scrutiny.

Financial Health

Balance sheet strength is high: total assets ¥14.88bn vs. total equity ¥11.98bn and liabilities ¥2.96bn. Implied equity ratio is ~80.6% (¥11.98bn / ¥14.88bn), despite the reported field showing unreported. Liquidity is robust with current assets of ¥10.44bn and current liabilities of ¥2.87bn, yielding a current ratio of 363% and working capital of ¥7.56bn; quick ratio equals current ratio due to unreported inventories, consistent with an IT services profile. Leverage is minimal with debt-to-equity at ~0.25x using total liabilities as a proxy; interest-bearing debt detail is not disclosed, but interest expense is trivial (¥0.782m). Interest coverage of ~913x (operating income / interest expense) underscores low solvency risk. The company thus has substantial flexibility to absorb shocks, invest in growth, or return capital, subject to undisclosed dividend policy and capex plans.

Cash Flow Quality

Cash flow statements are unreported this quarter (OCF/ICF/FCF all shown as zero placeholders), so earnings-to-cash conversion cannot be assessed. The reported OCF/Net Income ratio of 0.00 is not meaningful under these disclosure limits. Free cash flow cannot be calculated without OCF and capex, and EBITDA is unavailable due to unreported depreciation. That said, balance sheet indicators imply healthy working capital: large current assets relative to current liabilities and strong interest coverage suggest no immediate liquidity stress. In this business model, receivables and accrued revenues are typically the main working capital drivers; collections often improve in H2, so seasonality may mask interim cash conversion. Without AR/AP days or cash flow detail, we cannot identify structural changes in working capital or any one-off cash items.

Dividend Sustainability

Dividend-related items (DPS, payout ratio, and FCF coverage) are unreported for the period. EPS for the half is ¥34.72, providing a reference point for potential payout capacity, but actual policy actions cannot be inferred. Given the strong equity base and low leverage, capacity for dividends appears ample in principle; however, without OCF/FCF data and capex needs, coverage cannot be evaluated. We also lack share count and treasury share information, limiting per-share capital return analysis. Future assessment should incorporate full-year cash flows, any disclosed dividend policy targets, and the cadence of interim vs. year-end dividends common in Japan.

Risk Assessment

Business Risks:

• Wage inflation and retention risk for engineers in a tight IT labor market impacting gross margin
• Project execution and fixed-price contract overrun risk affecting profitability
• Subcontractor cost escalation and availability constraints
• Client budget tightening or delays in IT spending, including potential macro slowdown effects
• Customer concentration risk (common in SI/IT services), though not disclosed here
• Utilization volatility from timing of project starts and acceptance
• Limited pricing power in competitive bids leading to margin pressure

Financial Risks:

• Cash flow timing risk due to receivables concentration and milestone billing
• Potential off-balance sheet commitments or lease obligations (not disclosed)
• Pension or retirement benefit liabilities (not disclosed) that could affect equity if recognized
• Interest rate risk minimal given negligible interest expense; liquidity risk appears low

Key Concerns:

• Lack of cash flow disclosure prevents assessment of earnings quality and FCF sustainability
• Unreported depreciation/EBITDA obscures non-cash cost structure and capex needs
• Dividend policy and payout cadence unreported, limiting capital return visibility

Investment Implications

Key Takeaways:

• Steady H1 with revenue and operating income both +4.8% YoY; NI +15.3% indicates cleaner below-OP line
• Margins are stable: GPM 19.6%, OPM ~8.8%, NPM 6.64%
• ROE at 4.5% reflects modest efficiency (0.546x turnover) and conservative leverage (1.24x)
• Balance sheet is very strong with implied ~80.6% equity ratio and 363% current ratio
• Interest coverage ~913x; financial risk is very low
• Cash flow, depreciation, and dividend data are unreported, limiting depth of analysis

Metrics to Watch:

• Order intake and backlog to gauge revenue visibility
• Utilization rate, headcount growth, and billing rate trends
• Gross margin vs. subcontractor ratio to monitor cost pass-through
• SG&A as % of sales and operating leverage trajectory
• DSO and OCF/Net income once cash flow is disclosed (especially in H2)
• Capex and D&A to assess maintenance vs. growth investment
• Dividend policy updates and full-year payout intentions

Relative Positioning: Within Japanese IT services peers, the company exhibits above-average balance sheet strength and conservative leverage, with profitability in a solid mid-single-digit net margin range; operating leverage appears constrained near term, placing emphasis on utilization and mix to drive incremental ROE.

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