MIRAIT ONE (1417) FY2027 Q1 Earnings Report

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Executive Summary

In Q1, in addition to revenue growth, an improvement in gross margin drove Operating Income higher, resulting in a return to profitability from the net loss recorded in the same period of the previous year. Revenue was ¥1300.3B (+7.1% YoY), Operating Income was ¥28.0B (+172.9%), Ordinary Income was ¥33.4B (+156.6%), and net income attributable to owners of the parent was ¥18.6B, improving from the ¥13.1B loss recorded in the same period of the previous year. The primary driver of profit growth was the improvement in gross margin from 13.0% to 14.2%, which absorbed the increase in SG&A expenses.

Factors Affecting Results

【Revenue】Revenue was ¥1300.3B, up +7.1% YoY. The core MIRAIT ONE segment led overall performance with revenue of ¥679.4B (+7.7%), while Rantrobision posted strong growth of ¥115.3B (+39.7%). Meanwhile, Seibu Construction reported a revenue decline to ¥128.2B (-4.1%), and MIRAIT ONE Systems declined to ¥72.0B (-2.8%), resulting in divergent performance across segments.

【Profit and Loss】Gross profit was ¥184.1B (+17.0%), exceeding revenue growth, and gross margin improved from 13.0% to 14.2%. SG&A expenses were ¥156.1B (+9.0%), exceeding revenue growth, but decreased slightly as a percentage of revenue from 12.1% to 12.0%. As a result, the Operating Income margin improved from 0.8% to 2.2%, and Operating Income increased to ¥28.0B (+172.9%). Ordinary Income of ¥33.4B benefited from ¥8.5B in non-operating income, including ¥3.1B in dividends received and ¥1.6B in foreign exchange gains. Special gains and losses amounted to a net gain of ¥1.7B, primarily due to a ¥1.5B gain on the sale of fixed assets, and lifted Profit Before Tax to ¥35.2B as a temporary factor. The effective tax rate was high at 44.0%, and tax expenses of ¥15.5B constrained the conversion to net income; nevertheless, net income attributable to owners of the parent of ¥18.6B improved substantially from the ¥13.1B loss in the same period of the previous year. Both revenue and profit increased.

Segment Analysis

MIRAIT ONE generated revenue of ¥679.4B (+7.7%) and segment profit of ¥19.8B (+224.4%), serving as the core contributor to consolidated profits and accounting for 71.8% of total segment profit of ¥27.6B. Rantrobision generated revenue of ¥115.3B (+39.7%) and profit of ¥8.9B (+161.4%), making it the most profitable segment with a profit margin of 7.8%. Meanwhile, Seibu Construction generated revenue of ¥128.2B (-4.1%) and recorded a loss of ¥2.8B, although the loss narrowed YoY. Kokusai Kogyo generated revenue of ¥106.2B (+1.0%) but swung to a loss of ¥2.1B, while Shikoku Tsuken also swung to a loss of ¥0.3B. TTK posted revenue growth to ¥102.6B (+16.8%), but profit declined to ¥1.9B (-41.9%), and MIRAIT ONE Systems also posted lower profit of ¥2.2B (-29.9%). While profit growth at the highly profitable Rantrobision and core MIRAIT ONE segments is driving overall earnings, losses and profit declines across multiple segments are constraining the improvement in the consolidated profit margin.

Key Financial Metrics

【Profitability】The Operating Income margin was 2.2%, improving from 0.8% in the same period of the previous year, while the net profit margin was 1.4% (negative in the same period of the previous year). Gross margin was 14.2%, up 119bp from 13.0% in the same period of the previous year, and was the primary driver of profit growth.【Cash Flow Quality】Notes receivable for completed construction contracts were ¥1562.1B, a decrease of ¥784.3B YoY. The reduction in trade receivables amid revenue growth represents a positive development in terms of working capital. Advances received on construction contracts in progress increased to ¥139.8B, up +29.9% from the end of the previous fiscal year, providing support for cash management.【Investment Efficiency】ROE was 2.8% (annualized), while the EBIT margin was 2.2%; both remained at low levels, indicating room for improvement in capital efficiency. The effective tax rate was high at 44.0%, constraining the conversion of Profit Before Tax into net income.【Financial Soundness】The Equity Ratio remained high at 56.1%, while short-term borrowings declined substantially YoY, indicating a stable financial base.

Cash Flow Analysis

As cash flow statement data has not been disclosed, cash flow trends are analyzed based on changes in the balance sheet. Notes receivable for completed construction contracts were ¥1562.1B, down ¥784.3B from ¥2346.4B in the same period of the previous year. The reduction in trade receivables amid revenue growth is contributing to working capital improvement. Advances received on construction contracts in progress increased to ¥139.8B, up +29.9% from the end of the previous fiscal year, and the increase in construction advances is supporting cash management. Cash and deposits increased to ¥628.0B, up ¥29.6B YoY, and the Company maintained sufficient liquidity even after the balance of short-term borrowings declined substantially from the same period of the previous year. In the construction industry, working capital tends to fluctuate from quarter to quarter due to the timing of progress billings, construction progress recognition, and collection of retention receivables. Accordingly, the relationship between notes receivable for completed construction contracts and advances received on construction contracts in progress requires continued monitoring.

Earnings Quality

Recurring earnings power improved due to the improvement in gross margin and the decline in the SG&A ratio. Operating Income of ¥28.0B increased substantially from ¥10.3B in the same period of the previous year and was supported by recurring factors. Non-operating income of ¥8.5B consisted of multiple non-core income sources, including ¥3.1B in dividends received, ¥1.6B in foreign exchange gains, and ¥0.8B in interest income. These items lifted Ordinary Income, although some of them, such as foreign exchange gains, are susceptible to market fluctuations. Special gains and losses amounted to a net gain of ¥1.7B, primarily due to a ¥1.5B gain on the sale of fixed assets, meaning that a portion of Profit Before Tax of ¥35.2B included non-recurring factors. The effective tax rate of 44.0% exceeded the statutory effective tax rate, and tax expenses of ¥15.5B constrained the conversion of Profit Before Tax into net income. Consequently, the current period’s earnings growth rate is structured to fluctuate more significantly at the net income level (+256.9%, although simple comparison should be treated with caution because the previous year was loss-making) than at the Profit Before Tax level (+188.2%). Comprehensive income was ¥32.8B, exceeding net income of ¥19.7B, with other comprehensive income items including ¥9.7B in valuation differences on securities and ¥4.7B in foreign currency translation adjustments.

Earnings Forecast and Guidance

The full-year Company forecast is revenue of ¥6600.0B (+9.6% YoY), Operating Income of ¥400.0B (+16.7%), and Ordinary Income of ¥400.0B (+9.5%), with no revisions to the current-period or dividend forecasts. While Q1 revenue progress toward the full-year forecast was 19.7%, Operating Income progress was only 7.0%. Q1’s Operating Income margin of 2.2% was significantly below the full-year forecast Operating Income margin of 6.1%. The construction and telecommunications construction businesses tend to recognize construction progress and completed-work revenue disproportionately in the second half of the fiscal year. Improvement in profitability and acceleration of construction progress from Q2 onward will be key to achieving the full-year forecast.

Shareholder Returns

The full-year dividend forecast is ¥95.0 per share. Based on forecast EPS of ¥290.79, the forecast Payout Ratio is 32.7%, below the general benchmark of 60%. Q1 net income attributable to owners of the parent of ¥18.6B represented progress of only 7.3% against the full-year forecast of ¥255.0B, meaning that support for the annual dividend will depend on earnings progress from Q2 onward. Treasury stock was ¥87.1B, an increase of ¥29.2B YoY. If share repurchases continue, the balance of capital allocation should be assessed using the Total Return Ratio separately from the Payout Ratio.

Risk Factors

1. Concentration of profits in the core segment: MIRAIT ONE’s contribution to segment profit accounted for 71.8% of total segment profit of ¥27.6B. This creates a structure in which fluctuations in orders, construction progress, and profitability in this business directly affect consolidated earnings.

2. Losses and profit declines across multiple segments: Seibu Construction (loss of ¥2.8B), Kokusai Kogyo (loss of ¥2.1B), and Shikoku Tsuken (loss of ¥0.3B) were loss-making, while TTK (-41.9% YoY) and MIRAIT ONE Systems (-29.9% YoY) posted lower profits. A provision for construction losses of ¥14.8B was recorded, making continued management of cost increases and unprofitable projects important.

3. Delayed profit progress against the full-year forecast: Operating Income progress was only 7.0%, compared with revenue progress of 19.7%. The effective tax rate was also high at 44.0%, making the efficiency of converting Profit Before Tax into net income a key issue.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (construction)

Profitability and Returns

The Company’s profitability remains below the industry median.

Growth and Capital Efficiency

Revenue growth exceeds the industry median, but improving profitability will be the focus going forward.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. In Q1, revenue increased +7.1%, Operating Income increased +172.9%, and net income returned to profitability, indicating a clear improvement in profitability. The 119bp improvement in gross margin was the primary driver of profit growth, and the SG&A ratio also declined, although the increase in SG&A expenses exceeded revenue growth.

2. Progress toward the full-year Operating Income forecast of ¥400.0B was only 7.0%, and the gap between the Q1 Operating Income margin of 2.2% and the full-year forecast margin of 6.1% was substantial. Improvement in second-half profitability and acceleration of construction progress will be key areas of focus for achieving the full-year forecast.

3. While profit growth at the highly profitable Rantrobision and core MIRAIT ONE segments is driving overall earnings, the continued losses at Seibu Construction, Kokusai Kogyo, and Shikoku Tsuken, together with lower profits at TTK and MIRAIT ONE Systems, are constraining the improvement in the consolidated margin.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,217–¥3,406 at ±1% for the Cost of Equity, and ¥3,308–¥3,312 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from 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 / This is a mechanically calculated value based solely on publicly disclosed data; it is not 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 summary 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 your own responsibility, after consulting with a professional as necessary.

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