SHO-BOND Holdings Co.,Ltd. FY2026 FY Earnings Report

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Executive Summary

Despite a decline in revenue, the Company secured higher profit through improved margins, resulting in an overall solid earnings performance in terms of earnings quality. Revenue contracted to ¥892.0B (-1.7% YoY), while Operating Income increased to ¥208.3B (+0.2%), Ordinary Income to ¥214.8B (+1.6%), and Net Income attributable to owners of the parent to ¥154.4B (+2.5%), securing profit growth at each stage. The primary factors were an improvement in gross margin in the core Domestic Construction Business (29.9%, approximately +0.7pt YoY) and control of SG&A expenses. Thorough project profitability management enabled operating leverage.

Factors Affecting Earnings

【Revenue】Revenue was ¥892.0B, a -1.7% YoY decline. The core Domestic Construction segment contracted to ¥848.5B (-2.2%), weighing on the overall result, while the Other Segments (including overseas construction and product manufacturing and sales) expanded to ¥67.8B (+5.5%), contributing to the broadening of the portfolio. Domestic Construction accounted for 95.1% of the revenue mix, indicating that business concentration remains high.

【Profit and Loss】Operating Income was ¥208.3B (+0.2%), and the Operating Margin improved to 23.4% from 23.0% in the previous year. The Company secured higher profit despite lower revenue through improved gross margin and flat control of SG&A expenses. Ordinary Income was ¥214.8B (+1.6%), aided by a ¥5.5B net increase in non-operating income and expenses, primarily reflecting ¥3.0B in dividend income. Net Income increased substantially to ¥155.1B (+65.6%), due to the recognition of ¥11.4B in gains on the sale of investment securities as extraordinary income; however, it should be noted that the result was significantly affected by temporary factors, including the comparison with extraordinary losses in the previous year (¥1.5B in losses on disposal of fixed assets and other items). In conclusion, the Company achieved higher profit despite lower revenue.

Segment Analysis

The Domestic Construction segment generated revenue of ¥848.5B (95.1% of the total, -2.2%) and Operating Income of ¥196.8B (-0.8%), with a margin of 23.2%, making it the core business driving company-wide profitability. The Other Segments generated revenue of ¥67.8B (7.6% of the total, +5.5%) and Operating Income of ¥10.4B (+13.5%), with a margin of 15.4%. Although small in scale, these segments exceeded Domestic Construction in both revenue growth and profit growth. The improvement in company-wide profit resulted from both the maintenance of the high margin in Domestic Construction and the expansion of the Other Businesses.

Key Financial Indicators

【Profitability】The Operating Margin of 23.4% and Net Profit Margin of 17.4% both improved from the previous year, originating from the improvement in gross margin to 29.9%. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥193.3B, approximately 1.25 times Net Income of ¥155.1B, indicating strong cash backing for earnings. The decrease in trade receivables (+¥60.0B) contributed to cash generation. 【Investment Efficiency】ROE was 14.3%, while ROA (based on Ordinary Income) was 16.6%, indicating an appropriate level of capital efficiency despite the conservative capital structure represented by an Equity Ratio of 83.5%. 【Financial Soundness】With an Equity Ratio of 83.5%, Current Assets of ¥989.7B, and Current Liabilities of ¥190.4B, liquidity was extremely strong. The Company also had low reliance on interest-bearing debt, supporting a stable financial foundation.

Cash Flow Analysis

Operating Cash Flow increased substantially by +104.1% YoY to ¥193.3B, achieving a high level of cash generation even after absorbing the decrease in trade receivables (+¥60.0B) and ¥70.6B in income taxes paid. Investing Cash Flow was positive at ¥2.4B, as capital expenditures of ¥11.7B were offset by proceeds from the sale of investment securities and other sources. Financing Cash Flow was -¥148.7B, primarily reflecting ¥50.0B in share buybacks and dividend payments, indicating active allocation of funds to shareholder returns. Free Cash Flow, calculated as the sum of Operating Cash Flow and Investing Cash Flow, reached ¥195.7B, demonstrating a certain level of capacity to fund shareholder returns such as dividends and share buybacks; however, the balance with total shareholder returns will continue to require monitoring.

Earnings Quality

Recurring earnings power is supported by the high Operating Margin of the Domestic Construction Business, while ¥7.0B in non-operating income is stable in nature, primarily consisting of ¥3.0B in dividend income. On the other hand, the ¥11.4B in extraordinary income resulted from gains on the sale of investment securities and boosted Net Income as a temporary factor. Operating Cash Flow exceeded Net Income, and earnings quality can therefore be assessed as favorable from an accrual perspective, which examines differences between accounting profit and cash flow. The difference between Ordinary Income of ¥214.8B and Net Income of ¥155.1B was primarily attributable to ¥70.6B in income taxes and other taxes, with limited structural causes of divergence.

Earnings Forecast and Guidance

Against the full-year plan (Revenue of ¥900.0B, Operating Income of ¥210.0B, and Ordinary Income of ¥216.0B), actual results were Revenue of ¥892.0B (99.1% achievement rate), Operating Income of ¥208.3B (99.2%), and Ordinary Income of ¥214.8B (99.4%). The Company essentially achieved its plan, with variances of less than 1% in each case. Actual EPS of ¥76.08 was 98.3% of the forecast EPS of ¥77.36, indicating a high degree of forecast accuracy.

Shareholder Returns

The Payout Ratio was 60.1%, while the Total Return Ratio, including dividends and share buybacks, was at an even higher level. During the period, the Company conducted ¥50.0B in share buybacks, and treasury shares increased from the previous period. Although a simple comparison of dividend per share is difficult due to the impact of the stock split, the year-end dividend before taking the split into account was ¥101.00, indicating the continued emphasis on shareholder returns. More aggressive total returns contribute to improved capital efficiency, but the accompanying reduction in net assets should be noted from the perspective of financial flexibility.

Risk Factors

1. Customer concentration risk: East Nippon Expressway Company Limited, West Nippon Expressway Company Limited, and the Ministry of Land, Infrastructure, Transport and Tourism account for a considerable proportion of revenue as the top three customers. Consequently, changes in public works orders and budget allocations can readily affect performance.

2. Business concentration risk: The Domestic Construction segment accounts for 95.1% of revenue, indicating a high degree of dependence on the specific infrastructure repair market and limited diversification of the business portfolio.

3. Temporality risk in earnings: The increase in Net Income includes the temporary factor of ¥11.4B in gains on the sale of investment securities. Accordingly, the Company should be evaluated with the understanding that underlying profit growth excluding this factor is more moderate.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s margins are substantially above the median for the construction industry, positioning it as a highly profitable company within the sector.

Growth and Capital Efficiency

The Revenue Growth Rate was below the industry median, indicating that the Company lags its peers in top-line growth.

※Source: Compiled by the Company

Key Earnings Highlights

1. Based on its highly profitable infrastructure repair business, the Company improved its gross margin and Operating Margin from the previous year and secured higher profit despite lower revenue, demonstrating the effectiveness of operating leverage and cost management.

2. The increase in Net Income included the temporary factor of gains on the sale of investment securities. The underlying earnings trend excluding this factor should be monitored continuously.

3. The Company continues to pursue a total return policy comprising a Payout Ratio of 60.1% and share buybacks. While the expansion of Operating Cash Flow supports these returns, the extent of the reduction in net assets should be monitored from the perspective of financial soundness.

Theoretical Share Price (Reference Value)

Sensitivity: ¥621–¥657 at ±1% for the Cost of Equity, and ¥636–¥642 at ±0.1 for ω.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / These figures are mechanically calculated solely from publicly disclosed data and do not constitute a forecast of the market share price or a recommendation of any specific investment action, nor do they predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at the investor’s own responsibility, after consulting professionals as necessary.

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