| Metric | Current | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥77.1B | ¥75.0B | +2.8% |
| Operating Income | ¥5.4B | ¥5.3B | +3.3% |
| Ordinary Income | ¥5.2B | ¥5.3B | -1.6% |
| Net Income | ¥3.4B | ¥3.6B | -4.9% |
| ROE | 3.1% | 3.1% | - |
In FY2026 Q1, Revenue was ¥77.1B (¥75.0B in the prior-year period, +¥2.1B, +2.8%), Operating Income was ¥5.4B (¥5.3B, +¥0.2B, +3.3%), Ordinary Income was ¥5.2B (¥5.3B, -¥0.1B, -1.6%), and Net Income was ¥3.4B (¥3.6B, -¥0.2B, -4.9%). While operating-stage results showed higher revenue and operating profit, increases in non-operating expenses led to declines in ordinary and net income. Cost of goods sold ratio improved by 1.5pt year-on-year to 76.7%, expanding gross margin to 23.3% (21.8%). Conversely, SG&A ratio rose to 16.2% (14.8%) up 1.4pt, offsetting most of the gross margin improvement. Operating margin remained roughly flat at 7.0% (7.0%). In non-operating items, interest expense increased from ¥0.1B to ¥0.2B, compressing ordinary margin to 6.8% (7.1%) by 0.3pt. Net margin fell to 4.4% (4.8%) down 0.4pt, influenced by a persistently high effective tax rate of 34.4%. Progress against full-year guidance stands at Revenue 20.8%, Operating Income 18.7%, and Net Income 17.3%, below the standard 25% quarterly run-rate; this reflects seasonality in construction/residential businesses where Q1 activity and volumes are relatively low.
[Revenue] Revenue was ¥77.1B (¥75.0B, +2.8%), a slight increase. Segment detail is not disclosed, but given the construction/residential nature of the business, Q1 typically sees fewer housing starts and public works orders, with revenues accumulating in the latter half of the fiscal year. Year-on-year revenue growth likely reflects the pass-through of price revisions and progress on backlog from the prior year. Notes and accounts receivable declined to ¥69.3B (¥79.8B), and inventories were compressed to ¥26.0B (¥28.9B), indicating improved asset-side efficiency; however, accounts payable also fell substantially to ¥62.4B (¥75.3B), suggesting changes in payment terms or shifts in procurement timing.
[Profitability] Cost of goods sold was ¥59.1B, improving the COGS ratio to 76.7% (78.2%) by 1.5pt. Gross profit was ¥18.0B (¥16.3B, +10.1%), and gross margin expanded to 23.3% (21.8%). Cost improvements appear driven by stabilizing material prices, price pass-through, and improved construction efficiency. SG&A increased to ¥12.5B (¥11.1B, +13.0%), raising the SG&A ratio to 16.2% (14.8%) by 1.4pt. The SG&A increase is attributed to higher personnel and logistics costs and upfront investment to strengthen sales channels. Operating Income was ¥5.4B (¥5.3B, +3.3%), with operating margin at 7.0% (7.0%) essentially flat. Non-operating items increased to a net ¥0.5B expense (¥0.2B prior), with interest expense rising from ¥0.1B to ¥0.2B, affected by higher short-term borrowings of ¥51.0B (¥48.0B) and rising rates. Ordinary Income was ¥5.2B (¥5.3B, -1.6%). Extraordinary items were negligible, with Extraordinary Loss ¥0.0B (Impairment on fixed assets ¥0.0B). Pre-tax income was ¥5.2B, from which income taxes of ¥1.8B (effective tax rate 34.4%) were deducted, resulting in Net Income of ¥3.4B (¥3.6B, -4.9%), and a net margin of 4.4% (4.8%). In summary, operating-stage revenue and operating income increased slightly, but higher non-operating expenses turned ordinary and net income into declines.
[Profitability] Operating margin is 7.0%, unchanged from the prior year. Improvement in gross margin to 23.3% (21.8%, +1.5pt) reflects price revisions and cost control, but the rise in SG&A ratio to 16.2% (14.8%, +1.4pt) offsets operating-level margin gains. Ordinary margin is 6.8% (7.1%, -0.3pt) and net margin is 4.4% (4.8%, -0.4pt), indicating compression in downstream profitability. ROE is 3.1%, low and indicating constrained capital efficiency. EPS of 10.60円 (11.25円, -5.8%) tracks the decline in net income. [Cash Quality] Working capital decreased to ¥51.8B year-on-year. Days Sales Outstanding (DSO) is 328 days, and Days Inventory Outstanding (DIO) is 161 days, both long and reflective of extended lead times from order to recognition and collection in the construction/residential business. The reduction in accounts payable limits the working capital compression effect. [Investment Efficiency] Total asset turnover is 0.33x (annualized 1.30x), low and indicating room for asset efficiency improvement. Tangible fixed assets are ¥44.5B (18.8% of total assets) and intangible assets ¥1.2B (0.5%), indicating a relatively light asset base and good asset quality. [Financial Soundness] Equity Ratio is 45.7% (45.1%, +0.6pt), a mid-level stable position. Current ratio is 140.5% (142.0%), and quick ratio is 120.1% (121.6%), indicating acceptable short-term liquidity. Interest-bearing debt consists solely of short-term borrowings of ¥51.0B, with debt/equity multiple 1.19x, Debt/Equity 47.0%, and Debt/Capital 32.0%. Interest coverage is 36.4x (Operating Income / Interest Expense), indicating high interest tolerance, but 100% short-term debt concentration flags refinancing risk. Cash and deposits are ¥26.9B (¥24.2B prior), with cash/short-term debt ratio at 21.0%; given the maturity concentration of short-term borrowings, on-hand liquidity is not clearly sufficient.
As the cash flow statement is not disclosed, funding flows are inferred from balance sheet movements. Cash and deposits increased to ¥26.9B (¥24.2B, +¥2.8B). Working capital tightened to ¥51.8B year-on-year, with receivables down to ¥69.3B (¥79.8B, -¥10.5B) and inventories down to ¥26.0B (¥28.9B, -¥2.9B). Conversely, accounts payable fell sharply to ¥62.4B (¥75.3B, -¥12.9B), offsetting working capital improvements due to payment progress on procurement liabilities. Short-term borrowings rose to ¥51.0B (¥48.0B, +¥3.0B), indicating reliance on financing to fund working capital. Accrued corporate taxes decreased to ¥2.3B (¥6.9B, -¥4.6B), reflecting tax outflows for prior periods. Tangible fixed assets were flat at ¥44.5B (¥44.8B), signaling restrained major capital expenditure. Retained earnings declined to ¥83.8B (¥91.7B, -¥7.9B); the reduction exceeding the ¥3.4B net income suggests dividends in the prior period or other equity transactions. Overall, receivable and inventory compression progressed, but decreases in payables combined with higher short-term borrowings mean free cash flow generation is limited and the financing structure remains dependent on short-term debt.
Operating Income of ¥5.4B is adjusted by non-operating income of ¥0.3B (including interest income ¥0.2B) and non-operating expense of ¥0.5B (including interest expense ¥0.2B) to arrive at Ordinary Income of ¥5.2B. The ¥0.2B gap between ordinary income and operating income is small, indicating high dependence on core business. Extraordinary items are negligible: Extraordinary Gain ¥0.0B (gain on sale of fixed assets ¥0.0B) and Extraordinary Loss ¥0.0B (impairment/asset retirement ¥0.0B). Pre-tax income of ¥5.2B is taxed at ¥1.8B (current tax ¥2.1B, deferred tax -¥0.3B), yielding an effective tax rate of 34.4%. Recurring earnings account for the majority of profit, and cash backing is partially secured through receivable and inventory compression; however, the reduction in payables constrains cash generation from operations. Direct calculation of accrual (profit minus Operating Cash Flow) is not possible here, but working capital movements and increased short-term borrowings suggest a standard cash conversion rate. Comprehensive income is not disclosed; other comprehensive income cumulative amount is ¥0.1B (valuation differences ¥0.1B), so divergence between net income and comprehensive income is minimal.
Full-year guidance is Revenue ¥370.0B (+9.9% YoY), Operating Income ¥29.0B (+4.5%), Ordinary Income ¥29.1B (+4.1%), and Net Income ¥19.7B (+4.1%). Q1 progress rates against full-year guidance are Revenue 20.8%, Operating Income 18.7%, Ordinary Income 17.9%, and Net Income 17.3%, below a standard 25% quarterly pace. The seasonal nature of construction/residential operations, with volumes accumulating in H2, means order fulfillment and construction progress from Q2 onward are key to achieving the full-year targets. Continued improvement in gross margin could provide upside to operating income, but persistence of an elevated SG&A ratio poses a downside risk to margin improvement. No revisions to the initial full-year forecast have been announced; the guidance remains unchanged. Key assumptions for achieving guidance include H2 housing starts, public works order flow, and trends in materials and labor costs.
At the end of Q1, the dividend forecast is ¥0 (¥0 in the prior-year period). Payout Ratio is 0%, reflecting a policy to prioritize retaining earnings to maintain the financial base and reallocate to growth investments. Short-term borrowings of ¥51.0B constitute all interest-bearing debt, and compared with cash on hand of ¥26.9B, the liquidity buffer is limited. Given seasonal working capital swings and reliance on short-term debt, resumption of dividends would require stabilization of operating cash flow and improvements in working capital efficiency. No share buybacks have been confirmed; shareholder returns remain minimal at this time.
Short-term debt concentration risk: 100% of interest-bearing debt (¥51.0B) is short-term borrowings, creating refinancing risk from maturity concentration. While interest coverage is high at 36.4x, sensitivity to rising interest rates increases. With cash and deposits of ¥26.9B versus short-term borrowings of ¥51.0B, the on-hand liquidity covers 52.7% of short-term debt; seasonal increases in working capital could thin the liquidity buffer. Extending debt maturities or diversifying repayment schedules is a priority.
Low working capital efficiency: DSO 328 days and DIO 161 days are long, reflecting extended lead times from order to completion and collection. Although days payable outstanding is also long at 384 days, the ¥12.9B year-on-year reduction in payables weakens the financing function of payables. Improving the cash conversion cycle will require strengthened credit management, shortened construction schedules, and SKU rationalization. Working capital expansion increases dependence on short-term borrowings and amplifies liquidity risk.
SG&A ratio pressure on margins: SG&A ratio rose to 16.2% (14.8%, +1.4pt), with SG&A growth of +13.0% substantially outpacing revenue growth of +2.8%, hindering margin improvements. Increases in personnel and logistics costs and upfront investments in sales channels are cited drivers; if this level becomes persistent, operating leverage will be difficult to realize. Even with sustained gross margin improvement, without SG&A efficiency gains, expansion of operating margin will be limited.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.0% | – | – |
| Net Margin | 4.4% | – | – |
Industry median data are insufficient; relative evaluation is pending.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 2.8% | – | – |
Industry median data are insufficient; relative evaluation is pending.
※Source: Company compilation
The trend of improving gross margin is attributable to price revisions and cost management, but the rise in SG&A ratio is offsetting gains in operating margin. If SG&A growth of +13.0% continues to far exceed revenue growth of +2.8%, operating leverage will be difficult to achieve. Achieving full-year results will depend on SG&A efficiency improvements in H2 alongside maintaining gross margin improvements.
The 100% concentration of short-term borrowings of ¥51.0B versus cash and deposits of ¥26.9B indicates a limited liquidity buffer. Lengthening of working capital days (DSO 328, DIO 161) suggests collection delays risk, and the reduction in payables decreases the working-capital financing function. Refinancing risk and working capital efficiency improvement are key to strengthening financial stability.
Q1 progress vs full-year guidance (Revenue 20.8%, Operating Income 18.7%) is below a standard 25%, but is acceptable given construction/residential seasonality. Achievement of guidance depends on backlog digestion and construction progress from Q2 onward, penetration of price pass-through, and constraint of SG&A; quarterly monitoring of progress is important.
This report was automatically generated by AI analyzing XBRL earnings release data to produce a financial analysis. It is not a recommendation to invest in any specific security. Industry benchmarks are compiled by the company from public financial statements for reference. Investment decisions are your responsibility; consult a professional advisor as needed.