MIRAIT ONE (1417) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period, the Company recorded higher revenue and earnings, with a significant improvement in profitability. Revenue was ¥4121.0億 (up +3.8% year on year, +152.6億円), Operating Income was ¥174.8億 (up +44.2%, +53.6億円), Ordinary Income was ¥190.2億 (up +53.4%, +66.2億円), and Net Income attributable to owners of the parent was ¥111.0億 (up +95.1%, +54.1億円). The primary drivers of earnings growth were the improvement in gross margin (13.7%→14.7%) and the realization of operating leverage, as SG&A expense growth (+1.7%) remained below revenue growth.

Factors Affecting Results

【Revenue】Revenue increased +3.8% year on year to ¥4,121.0億. The core Mirait One remained broadly flat at ¥2,120.0億 (51.4% of total revenue, up +1.0%), while Lantrovision at ¥304.8億 (up +24.2%), TTK at ¥308.9億 (up +22.7%), and Shikoku Tsuken at ¥195.8億 (up +22.3%) posted strong growth and drove overall revenue expansion. Meanwhile, Seibu Construction at ¥443.2億 (down -10.0%) and Kokusai Kogyo at ¥357.0億 (down -0.8%) recorded lower revenue.

【Profit and Loss】Operating Income improved significantly to ¥174.8億 (up +44.2%; operating margin 4.2% versus 3.1% in the same period last year). Cost of sales growth (+2.7%) was below revenue growth (+3.8%), resulting in a 98bp increase in gross margin. SG&A expense growth was also contained at +1.7%, contributing to earnings growth. Ordinary Income increased +53.4% to ¥190.2億, helped by improved non-operating income and expenses, including foreign exchange gains of ¥10.0億 and dividend income of ¥4.8億. Special income and expenses resulted in a net gain of only ¥1.1億, making the expansion in Operating Income the primary driver of Net Income growth. The effective tax rate was relatively high at 39.5%, partially constraining growth in profit after tax; nevertheless, Net Income nearly doubled to ¥111.0億 (up +95.1%). Revenue and earnings both increased.

Segment Analysis

Of total segment profit of ¥179.5億, Mirait One made the largest contribution at ¥93.9億 (52.3% of the total). The segment’s performance was driven primarily by improved profitability, with profit increasing +35.9% against revenue growth of +1.0%. Lantrovision (profit +107.3%) and TTK (up +76.8%) recorded higher revenue and substantial earnings growth. Shikoku Tsuken maintained the highest profit margin among the reported segments at 8.6%. Despite a 10.0% decline in revenue, Seibu Construction turned profitable, from a loss of ¥1.2億 in the same period last year to a profit of ¥4.9億. Solcom’s profit deteriorated to ¥0.4億 (down -50.0%) despite revenue growth of +14.4%, indicating challenges in converting revenue growth into profitability. Kokusai Kogyo improved efficiency, with profit increasing +21.6% despite a -0.8% decline in revenue.

Key Financial Metrics

【Profitability】Operating margin improved to 4.2% from 3.1% in the same period last year, while Net Income margin improved to 2.7% from 1.4%. However, the low-margin business structure remains in place, with gross margin at 14.7%. 【Cash Quality】Special income and expenses were limited to a net gain of ¥1.1億. Non-operating income was primarily composed of foreign exchange gains of ¥10.0億 and dividend income of ¥4.8億. Recurring earnings improvement therefore primarily explains the increase in Net Income. 【Investment Efficiency】Annualized ROE was 5.7% and the Equity Ratio was 50.4%, indicating strong financial soundness; however, there remains room for further improvement in capital efficiency. 【Financial Soundness】Liquidity was robust, with a current ratio of 198.8% and cash and deposits of ¥644.3億. Interest-bearing debt primarily consisted of long-term borrowings of ¥403.7億 and bonds of ¥300.0億.

Cash Flow Analysis

Although detailed disclosure of the statement of cash flows is not available, changes in the balance sheet provide some insight into cash trends. Cash and deposits increased by ¥109.5億 to ¥644.3億 from ¥534.8億 at the end of the previous fiscal year, indicating increased financial flexibility. Meanwhile, short-term borrowings increased from ¥425.96億 to ¥500.83億, suggesting a trend toward a shorter maturity profile for interest-bearing debt. Accounts receivable from completed construction contracts decreased by ¥351.5億, from ¥2,228.6億 to ¥1,877.1億, potentially contributing to cash generation through progress in collections. Advances received on construction contracts in progress increased +73.7%, from ¥67.1億 to ¥116.6億, with increased customer advances supporting working capital.

Quality of Earnings

This period’s earnings growth was driven by recurring improvement in profitability led by the expansion in Operating Income, while the impact of special income and expenses was limited. Special income of ¥4.1億, including a ¥3.3億 gain on the sale of investment securities, and special losses of ¥3.0億 largely offset each other, resulting in a net gain of ¥1.1億 and a limited contribution to Net Income growth. Non-operating income of ¥23.0億 was primarily composed of foreign exchange gains of ¥10.0億 and dividend income of ¥4.8億. Although both have a certain degree of recurrence, foreign exchange gains are subject to market fluctuations and therefore warrant attention. The effective tax rate was relatively high at approximately 39.5% (¥75.5億 in income taxes and other taxes / ¥191.3億 in profit before tax). Net Income growth (+88.2% on a consolidated basis) exceeded profit before tax growth (+56.4%), presumably due to the reversal from the high effective tax rate in the previous year. Comprehensive income was ¥121.5億, exceeding Net Income of ¥115.8億, primarily due to valuation differences on securities of +¥26.6億, while foreign currency translation adjustments made a negative contribution of -¥15.7億.

Earnings Forecast and Guidance

Progress toward the full-year revenue forecast of ¥6,200.0億 was 66.5%; progress toward the full-year Operating Income forecast of ¥340.0億 was 51.4%; progress toward the Ordinary Income forecast of ¥340.0億 was 55.9%; and progress toward the Net Income forecast attributable to owners of the parent of ¥210.0億 was 52.9%. Revenue progress is broadly on track, but each profit metric is more than 20 percentage points below the 75% benchmark at the nine-month stage. The plan appears to assume seasonality involving the concentration of construction completions and acceptance inspections in Q4. Profit generation in Q4 will be the key to achieving the full-year plan.

Shareholder Returns

The Q2 dividend was ¥40.00 per share, and the full-year dividend forecast is ¥85.00 (implying a year-end dividend of ¥45.00). Based on forecast Net Income of ¥210.0億 and the average number of shares outstanding during the period of 89,046,526 shares, the forecast Payout Ratio is approximately 36.0%, below the generally cited benchmark of 60%. Treasury stock increased +97.3%, from ¥29.3億 in the same period last year to ¥57.9億, indicating a more active shareholder return and capital policy. The Payout Ratio based solely on dividends should be distinguished from the Total Return Ratio, which includes share repurchases.

Risk Factors

1. Cost volatility risk: Gross margin of 14.7% is low, and the business structure is susceptible to pressure on profit margins from increases in labor costs, outsourcing expenses, and materials prices. Provision for losses on construction contracts increased to ¥17.3億 from ¥16.4億 in the previous year, up +5.6%.

2. Collection risk for accounts receivable from completed construction contracts: Accounts receivable from completed construction contracts totaled ¥1,877.1億, representing 34.8% of total assets. Delays in acceptance inspections and settlements for large projects could affect both cash collection and revenue recognition.

3. Financing structure risk: Short-term borrowings of ¥500.8億 account for more than half of interest-bearing debt, and refinancing terms could affect expenses in a rising interest-rate environment. Cash and deposits of ¥644.3億 and a current ratio of 198.8% support near-term payment capacity.

Industry Benchmark (Reference; Based on Company Research)

Industry Benchmark (construction)

Profitability and Returns

Growth and Capital Efficiency

Quantitative comparison of relative positioning is limited because industry median data has not been fully compiled.
※Source: Company research

Key Earnings Highlights

1. Against revenue growth of +3.8%, Operating Income increased +44.2% and Net Income increased +95.1%, indicating a period of margin improvement accompanied by earnings growth exceeding revenue growth. The structure in which improvements in gross margin and operating margin generated earnings growth greater than revenue growth is a key point to monitor in assessing the sustainability of cost and SG&A discipline.

2. Progress toward the full-year earnings plan was 51.4% for Operating Income, 55.9% for Ordinary Income, and 52.9% for Net Income, below revenue progress of 66.5%. Progress reflects a plan that assumes earnings will be concentrated in Q4, and performance in the second half will determine the full-year outcome.

3. By segment, Solcom experienced a decline in profit (-50.0%) despite revenue growth, while Seibu Construction turned profitable despite lower revenue, indicating variation in profitability trends across businesses. The fact that revenue growth and profitability improvement are not progressing uniformly across all businesses is an important consideration in understanding the earnings structure.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,927–¥3,098 at ±1% for the cost of equity; ¥3,009–¥3,012 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used; there is a timing difference relative to the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly available data; this does not constitute a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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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. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting professionals as necessary.

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