Daiki Axis H1 FY2026 Earnings Analysis: Strong Growth Across All Core Segments Drives Operating Profit to Double, Reaching Over 75% of Full-Year Guidance

1. H1 FY2026 Consolidated Financial Highlights

Daiki Axis Co., Ltd. delivered an exceptionally strong performance for the first half of the fiscal year ending December 2026, with both revenue and profit at all levels significantly exceeding the same period last year. Notably, operating profit more than doubled (+108.2% year-on-year).

As shown in the consolidated financial summary above, the company recorded net sales of 25,606 million yen (+9.0% YoY) , gross profit of 5,799 million yen (+11.6% YoY) , operating profit of 1,093 million yen (+108.2% YoY) , ordinary profit of 1,076 million yen (+82.5% YoY) , net profit attributable to owners of the parent of 556 million yen (+215.0% YoY) , and EBITDA of 1,786 million yen (+59.8% YoY).

Revenue growth was driven by the progress of large-scale construction projects in the Housing Equipment segment, the expansion of the groundwater-to-potable-water business and international operations in the Environmental Equipment segment, and increased revenue in the Renewable Energy segment. On the profit front, despite investments in human capital and digital transformation (DX), the increase in SG&A expenses was contained to just 0.7%. Consequently, the gross profit margin improved significantly to 22.6% (+0.5pt YoY) , the operating profit margin to 4.3% (+2.1pt YoY) , and the EBITDA margin to 7.0% (+2.2pt YoY).

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2. Operating Profit Drivers and Segment Performance

A key feature of this first half is that all core segments (Environmental Equipment, Housing Equipment, and Renewable Energy) achieved significant profit growth.

As illustrated in the waterfall chart above, the increase in operating profit from 525 million yen in the same period last year to 1,093 million yen this period (+568 million yen) was achieved through balanced profit contributions from each segment.

① Environmental Equipment Segment: Net Sales 12,494 million yen (+2.3%), Operating Profit 1,131 million yen (+20.3%)

Although sales of domestic johkasou (septic tanks) and wastewater treatment systems declined to 7,270 million yen (-3.3% YoY) due to a decrease in new housing starts, domestic maintenance revenue grew steadily to 2,300 million yen (+7.8% YoY). This growth was supported by increased demand for inspections following stricter administrative guidance and the successful implementation of price pass-throughs. Of particular note is the groundwater-to-potable-water business , which surged with sales of 707 million yen (+30.9% YoY) and operating profit of 199 million yen (+56.5% YoY, 28.3% margin). The company successfully captured demand driven by rising water utility rates and Business Continuity Plan (BCP) initiatives. The building management business also maintained stable growth with sales of 1,192 million yen (+4.7% YoY).

② Housing Equipment Segment: Net Sales 11,412 million yen (+17.1%), Operating Profit 606 million yen (+72.9%)

The housing equipment sales and distribution business remained steady with sales of 5,830 million yen (+2.1% YoY). Furthermore, the construction and equipment installation business saw a significant increase, with sales reaching 5,582 million yen (+38.4% YoY). Segment operating profit was substantially boosted by the completion and collective profit recognition of several large-scale refrigeration, air conditioning, and equipment installation projects that had previously been accounted for under the "cost recovery method," where no profit is recognized until completion.

③ Renewable Energy Segment: Net Sales 1,546 million yen (+24.0%), Operating Profit 139 million yen (+355.5%)

The solar power generation business recorded sales of 1,160 million yen (+9.6% YoY), with the "Green Data Center (GDC)" utilizing solar power, which began operations in March 2026, contributing 130 million yen in sales as it entered full-scale monetization. Additionally, improvements in the profitability of the biodiesel fuel business (sales of 169 million yen, +39.1% YoY) and progress in actual unit sales in the hydrothermal treatment business (sales of 194 million yen, +384.2% YoY) contributed significantly to the profit growth.

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3. Progress in Global Expansion (Environmental Equipment)

Overseas (global) segment sales reached 1,023 million yen (+15.7% YoY), and the operating loss narrowed to 235 million yen (compared to a loss of 329 million yen in the same period last year), representing an improvement of 93 million yen.

• India : Sales expanded rapidly to 503 million yen (+65.5% YoY). Operating loss also improved significantly to 24 million yen (from 75 million yen in the same period last year). The strategy of strengthening direct transactions with trading companies and general contractors, in addition to traditional agency sales, proved successful, leading to a substantial increase in shipments of medium-to-large johkasou units.
• Indonesia : Sales were 163 million yen (-7.9% YoY), with an operating loss of 42 million yen (compared to a loss of 37 million yen in the same period last year). Despite the reactionary decline following the completion of large-scale projects in the previous period, the company is building a structure for industrial wastewater treatment orders.
• Sri Lanka & China : In Sri Lanka, the company has begun local assembly of small johkasou units and is promoting a transition to paid maintenance. In China, while revenue and profit declined due to stagnant economic conditions, the company continues to pursue business structural reforms.

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4. Financial Position and Cash Flow

Total assets as of the end of June 2026 stood at 37,613 million yen (a decrease of 433 million yen from the end of the previous fiscal year). While current assets decreased to 18,705 million yen (-1,310 million yen) due to the collection of trade receivables associated with seasonal fluctuations, non-current assets increased to 18,908 million yen (+877 million yen) due to capital investment in the Green Data Center. Liabilities were reduced to 27,299 million yen (-1,108 million yen), and net assets increased to 10,314 million yen (+675 million yen) due to the accumulation of interim net profit, reflecting a strengthening of equity.

Regarding cash flow, net cash provided by operating activities was +1,662 million yen. This offset the investment cash flow used for the Green Data Center and other projects (-2,057 million yen), resulting in a free cash flow (FCF) of -395 million yen , a significant improvement from the same period last year (-1,693 million yen).

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5. Full-Year FY2026 Earnings Forecast and Progress

Regarding the full-year consolidated earnings forecast, although progress is extremely high as of the interim period, the initial plan remains unchanged.

As shown in the slide above, the progress rates against the full-year plan at the end of the second quarter are 51.2% for net sales , 75.4% for operating profit , 79.7% for ordinary profit , and 103.1% for net profit attributable to owners of the parent.

The reasons for maintaining the full-year forecast are as follows:

1. Reactionary decline in large-scale housing equipment projects : Since the completion of large-scale projects accounted for under the cost recovery method was concentrated in the first half, a reactionary decline is expected in the second half.
2. Cost increase risks and price pass-through time lag : Upward pressure on material and logistics costs due to the situation in the Middle East and other factors continues, and it is necessary to assess the profitability of large-scale projects in the second half.

For the second half, the company plans to maintain profitability by thoroughly managing inventory, diversifying procurement sources, and making strategic order-taking decisions.

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6. Mid-to-Long-Term Growth Story: Global Expansion of Water Infrastructure

With a mission to "transfer Japan's public health technology to the world," the company is transforming from a domestic-focused johkasou manufacturer into a "global water business player."

• Global water market exceeding 100 trillion yen : The global water business market is expected to expand to approximately 112 trillion yen by 2030. Depending on the economic development phase of developing countries, the company envisions a synergy model: first deploying "Wave 1" (decentralized wastewater treatment/johkasou) to improve public health, followed by the introduction of "Wave 2" (housing equipment/comfortable living spaces).
• Horizontal expansion of the India model : The company plans to horizontally deploy the model established in India—its Tier 1 country—which includes local production, direct sales, and a government-focused approach, to Indonesia, Bangladesh, Sri Lanka, and eventually to future Tier 2 and Tier 3 regions (Middle East, Africa, etc.).

Leveraging its solid earnings base from domestic stock-type revenue (maintenance, groundwater-to-potable-water) and housing equipment/renewable energy, the company's structure for accelerating growth in the global market is becoming increasingly clear.