| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥4396.1B | ¥4251.6B | +3.4% |
| Operating Income | ¥336.2B | ¥352.4B | -4.6% |
| Ordinary Income | ¥332.6B | ¥340.5B | -2.3% |
| Net Income | ¥289.8B | ¥257.8B | +12.4% |
| ROE | 13.8% | 15.0% | - |
For the fiscal year ended March 2026, Revenue was ¥4,396B (YoY +¥144B +3.4%), Operating Income was ¥336B (YoY -¥16B -4.6%), Ordinary Income was ¥333B (YoY -¥8B -2.3%), and Net Income attributable to owners of the parent was ¥290B (YoY +¥32B +12.4%). The company delivered higher revenue but lower operating profitability. Gross profit on completed construction was ¥598B (gross margin 14.6%), an improvement of +1.8% YoY, while SG&A rose to ¥303B (+18.0%), causing the operating margin to fall to 7.6% (down -0.7pt from 8.3% a year earlier). The increase in Net Income was largely driven by a one-off extraordinary gain of ¥106B, including ¥104B in gains on sales of available-for-sale securities; Pre-tax Profit was ¥431B (+12.4%). Ordinary-level profits were slightly down, but improvement in extraordinary items led to a double-digit increase in Net Income.
[Revenue] Completed-contract revenue was ¥4,092B (YoY +2.8%). By segment: Civil Engineering Business ¥1,409B (+6.1%), Construction Business ¥2,623B (+0.4%), Consolidated Subsidiaries ¥938B (+15.9%), Other ¥100B (+37.6%). Civil Engineering expanded robustly, Construction remained flat, and double-digit growth at consolidated subsidiaries supported overall results. Gross profit margin on completed contracts improved to 14.6% (from 14.5% YoY, +0.1pt), indicating modest success in cost control. Meanwhile, SG&A rose significantly to ¥303B (+¥45.7B +17.8%), notably due to increases in advertising & promotion, retirement benefit expenses, and depreciation. SG&A ratio increased to 6.9% (from 6.0% YoY, +0.9pt), reducing operating leverage.
[Profitability] Operating Income of ¥336B was down -4.6% YoY. Civil Engineering generated ¥154.8B (margin 11.0%, YoY +2.0%) and maintained high margins, while Construction generated ¥243.7B (margin 9.3%, YoY -9.4%) and declined due to rising costs and project mix. Consolidated subsidiaries improved sharply to ¥20.2B (+90.6%) but remain low-margin at 2.2%. Non-operating items included dividend income ¥7.7B, equity-method losses ¥-1.1B, interest expense ¥6.6B, and foreign exchange losses ¥2.8B, for a net -¥3.6B. Ordinary Income of ¥333B reflects the operating-stage decline (-2.3%). Extraordinary gains included ¥104B from sales of available-for-sale securities; extraordinary losses were limited to ¥7.7B (¥2.0B valuation loss on investment securities, ¥1.2B loss on disposal of fixed assets, etc.). Pre-tax Profit was ¥431B (+12.4%); after income taxes of ¥132B (effective tax rate 30.8%), Net Income attributable to owners of the parent was ¥290B (+12.4%). In summary, the company posted revenue growth with operating decline, and Net Income growth was driven by extraordinary gains.
The Civil Engineering Business reported Operating Income of ¥154.8B (YoY +2.0%) and the highest profitability with an 11.0% margin. The Construction Business reported Operating Income of ¥243.7B (YoY -9.4%) with a 9.3% margin; despite flat revenues, cost increases and higher SG&A led to lower profits. Consolidated Subsidiaries posted Operating Income of ¥20.2B (+90.6%) but at a low margin of 2.2%, diluting the company average. Other businesses (research/commissioned work, etc.) posted Operating Income of ¥10.0B (+46.6%) with a 10.0% margin and performed solidly. Construction accounts for 59.7% of sales as the core, but the high-margin Civil Engineering business underpins overall company profitability.
[Profitability] Operating margin 7.6% (down -0.7pt from 8.3% prior year), Net margin 6.6% (up +0.5pt from 6.1%). ROE of 13.8% is healthy, but excluding the contribution of extraordinary gains, the underlying figure is likely in the low teens. Gross margin 14.5% improved slightly by +0.1pt YoY, suggesting modest progress in cost control, but the rise in SG&A ratio to 6.9% (+0.9pt) compressed operating margins. [Cash Quality] Operating Cash Flow (OCF) ¥284B, OCF/Net Income 0.98x, broadly consistent. OCF/EBITDA 0.76x (OCF ¥284B ÷ EBITDA ¥373B) is below the benchmark 0.9, and the mid-year reduction in advances received on uncompleted contracts (¥353B → ¥317B) weakened cash generation. Free Cash Flow (FCF) ¥221B is positive, but CapEx ¥25B remains below Depreciation ¥37B, indicating continued investment restraint. [Investment Efficiency] Total asset turnover 1.07x, Tangible fixed asset turnover 12.3x. [Financial Soundness] Equity Ratio 50.9% (from 46.3% prior year, +4.6pt), Debt/Equity 13.7%, Debt/EBITDA 0.74x, Interest Coverage 50.6x, indicating very strong balance sheet. Current ratio 161%, Quick ratio 161% show ample liquidity, although 91.9% of liabilities are current. Cash and deposits ¥662B vs. interest-bearing debt ¥274B indicate a net cash position.
OCF was ¥284B (YoY +154.4%). Adding back Depreciation ¥37B to Operating Income ¥336B gave an OCF subtotal of ¥422B; changes in working capital added, notably an improvement in unbilled receivables on completed contracts of ¥139B. However, a decrease in advances received on uncompleted contracts (-¥367B) was a major cash outflow. After corporate tax payments of ¥135B, OCF generated ¥284B. Investing Cash Flow was -¥64B, including CapEx ¥25B, acquisition of subsidiary shares ¥34B, and purchases of investment securities ¥17B, partly offset by government subsidies ¥0.3B and proceeds from tangible fixed asset sales ¥1.8B. Financing Cash Flow was -¥138B: long-term borrowings ¥38B vs. long-term repayments ¥43B, short-term borrowings essentially flat, and dividends paid ¥128B. FCF (OCF + Investing CF) was ¥221B; after dividend payments, surplus was +¥83B. Cash and cash equivalents increased from ¥558B at the beginning of the period to ¥646B at period-end (+¥88B). The decrease in advances received on uncompleted contracts (prepayments) that pressured OCF is characteristic of the construction industry; rebuilding orders and prepayments will be key to improving next-period cash flows.
This period's Net Income increase (+12.4%) was heavily dependent on ¥106B in extraordinary gains, including ¥104B from sales of available-for-sale securities; ordinary-stage earnings slowed by -2.3% YoY. Non-operating items were small (dividend income ¥7.7B, interest expense ¥6.6B), with equity-method losses of ¥-1.1B partially offsetting. The accrual ratio ((OCF ¥284B - Net Income ¥290B) / Total Assets) = -0.1% is very low, indicating limited accounting discretion. OCF/Net Income 0.98x suggests strong cash backing for reported Net Income. Conversely, OCF/EBITDA 0.76x is mainly due to the decline in advances received on uncompleted contracts, so assessment of recurring cash generation should focus on operating-profit level. Comprehensive income was ¥499B (Net Income ¥290B + Other Comprehensive Income ¥201B), with valuation differences on securities ¥152B and actuarial differences on retirement benefits ¥30B contributing significantly, bolstering equity. On an ordinary-operating basis, earnings quality is roughly flat, but fluctuations in extraordinary items lifted Net Income.
For FY ending March 2027, the company forecasts Revenue ¥4,900B (YoY +11.5%), Operating Income ¥340B (+1.1%), Ordinary Income ¥336B (+1.0%), Net Income attributable to owners of the parent ¥222B (-27.5%), EPS 141.51円. The large decline in Net Income assumes a reversal of this period’s extraordinary gains (¥104B from sales of available-for-sale securities); core earnings are expected to be flat at both operating and ordinary levels. The assumed double-digit revenue growth, coupled with only a modest +1.1% rise in Operating Income, suggests conservative assumptions on cost environment and project mix. Progress rates are: Revenue 89.7%, Operating Income 98.9%, Net Income 130.5% (the denominator is smaller due to the extraordinary gain this year). There is upside potential if backlog and prepayments grow, but upside risk from increases in material, subcontract, and labor costs could push results below guidance.
Annual dividend ¥80 (interim ¥40 + year-end ¥40), which against EPS 189.68円 implies a Payout Ratio of 42.2%. This is effectively a +33% increase from the prior-year dividend of ¥60 (DPS ¥30 × 2). Total dividends amount to ¥128B vs. FCF ¥221B, giving an FCF coverage of 1.73x — a level sufficiently covered by internal funds. The forecast for FY Mar 2027 dividend is ¥42 per year, implying a payout ratio of 29.7% against forecast EPS 141.51円, reflecting a conservative stance post one-off gains. DOE (dividend on equity) is 6.8%, slightly up from historical levels. Share buybacks are minimal (purchases ¥0.003B), so total shareholder returns remain dividend-centric. Financial soundness is very strong (Equity Ratio 50.9%, Debt/EBITDA 0.74x), supporting dividend sustainability. Stabilizing OCF and improving working capital efficiency will be key to further enhancing dividend growth and stability.
Risk of declining profitability in the Construction Business: Construction Operating Income declined -9.4% YoY, with a 9.3% margin below Civil Engineering’s 11.0%. Continued increases in materials, subcontract, and labor costs and adverse project mix could weaken the core segment (59.7% of sales) and pressure corporate profits. Provisions for construction loss reserves improved to ¥6.0B (from ¥9.7B prior year, -37.4%), but volatility from large-project progress and cost-estimate variances remains.
Cash flow instability risk from working capital fluctuations: Advances received on uncompleted contracts decreased from ¥353B to ¥317B (-¥36.7B), pressuring OCF. Payments on uncompleted construction were also up to ¥54.5B (from ¥35.8B prior year, +52.2%), indicating sizable working capital swings. Without recovery in orders and prepayments, the low OCF/EBITDA of 0.76x (below the 0.9 benchmark) may persist, dampening cash generation.
Market risk for investment securities: Investment securities rose to ¥495B (12.0% of total assets), and unrealized gains on securities increased to ¥220B. While ¥104B of gains on securities were recognized this period, market downturns could trigger valuation losses (¥2.0B valuation loss recorded this period) and reduce comprehensive income and shareholders’ equity. Although Debt/Equity is low at 13.7%, sensitivity to OCI volatility has increased.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.6% | 5.5% (3.5%–7.2%) | +2.1pt |
| Net Margin | 6.6% | 3.5% (2.5%–4.4%) | +3.1pt |
Both Operating and Net margins exceed the industry median, placing the company in the upper tier within the construction industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 3.4% | 9.8% (-2.1%–15.1%) | -6.5pt |
Revenue growth lags the industry median 9.8%, indicating a somewhat slower growth pace.
※ Source: Company compilation
Operating-stage profitability declined due to higher SG&A (Operating Income -4.6%), but Civil Engineering’s high margins (11.0%) underpin corporate earnings. The Net Income increase (+12.4%) was largely driven by the one-off ¥104B gain on sale of available-for-sale securities; guidance for next fiscal year assumes a -27.5% fall in Net Income for this reason. Core earnings should be assessed as roughly flat at operating/ordinary levels, and restoring Construction cost structure and deepening high-margin Civil Engineering projects are keys to recovery.
Financial soundness is very strong (Equity Ratio 50.9%, Debt/EBITDA 0.74x, Interest Coverage 50.6x), and shareholder returns are sustainable (Payout Ratio 42.2%, FCF coverage 1.73x). However, OCF/EBITDA at 0.76x and declines in advances received on uncompleted contracts are pressuring cash generation. Rebuilding orders and prepayments and improving collection cycles are catalysts for next-period cash-flow improvement. CapEx remains below Depreciation (CapEx ¥25B / Depreciation ¥37B), and accelerating investment to improve medium-term productivity and competitiveness is an issue.
This report was auto-generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions are your responsibility; consult advisors as needed prior to making investment decisions.
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