| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3411.8B | ¥2931.4B | +16.4% |
| Operating Income / Operating Profit | ¥163.1B | ¥88.4B | +84.5% |
| Ordinary Income | ¥175.5B | ¥97.0B | +80.9% |
| Net Income / Net Profit | ¥115.7B | ¥39.0B | +197.0% |
| ROE | 10.3% | 3.8% | - |
For the fiscal year ended March 2026, Tokyu Construction Co., Ltd. achieved significant revenue and profit growth: Revenue/Net Sales of 3,411.8B yen (YoY +480.4B +16.4%), Operating Income of 163.1B yen (YoY +74.7B +84.5%), Ordinary Income of 175.5B yen (YoY +78.5B +80.9%), and Net Income attributable to owners of the parent of 115.7B yen (YoY +76.7B +197.0%). Operating margin improved by 1.8pt to 4.8% (prior year 3.0%), and ROE rose by 4.2pt to 10.3%, indicating a substantial improvement in capital efficiency. The Civil Engineering segment drove high profitability with Operating Income of 97.3B yen (+114.4%), gross margin improved to 11.0% (prior year 9.8%), and provision for construction losses declined to 48.0B yen (prior year 60.4B), reflecting progress in margin management. Equity-method gains of 13.9B yen and Extraordinary Gains of 18.1B yen (including 11.7B yen gain on sale of available-for-sale securities) boosted Ordinary Income and Net Income, with these one-off factors contributing to profit expansion.
[Revenue] Revenue totaled 3,411.8B yen (+16.4%), marking the second consecutive year of growth. Completed construction revenue was 3,335.9B yen (+15.8%) and led the increase, with the Construction segment accounting for 97.8% of total. By segment, Building Construction was 2,592.6B yen (+17.8%) and Civil Engineering (Construction - Civil) was 743.5B yen (+8.6%), both growing; Real Estate and others expanded significantly to 76.0B yen (+52.8%). The increase in completed construction revenue was driven by digestion of backlog and completion of large projects, particularly strong progress in the Building segment. Gross margin on a completed-construction basis improved 1.6pt to 10.8% (prior year 9.2%), with price pass-through and improved project mix lifting profitability. Although gross margin in development and similar businesses declined to 21.0% (prior year 45.1%), the improvement in completed-construction margins drove company-wide margins.
[Profitability] Gross profit rose to 376.4B yen (+31.1%) and gross margin improved to 11.0%. SG&A expenses were 213.4B yen (+7.3%), growing less than revenue and resulting in operating leverage. Operating Income was 163.1B yen (+84.5%), with an operating margin of 4.8% (up 1.8pt from 3.0% prior year). By segment, Civil Engineering posted the highest Operating Income of 97.3B yen (margin 13.1%), Building recorded 155.0B yen (margin 6.0%), and Real Estate produced 10.8B yen (margin 14.2%)—a decline in profit but remaining high-margin. Non-operating income of 21.4B yen included equity-method gains of 13.9B yen and foreign exchange gains of 2.4B yen, supporting Ordinary Income of 175.5B yen (+80.9%). Extraordinary Gains of 18.1B yen (gain on sale of available-for-sale securities 11.7B yen, gain on sale of fixed assets 5.6B yen) lifted Profit before Tax to 192.6B yen. After income taxes of 56.8B yen (effective tax rate 29.5%), Net Income was 133.9B yen and Net Income attributable to owners of the parent was 115.7B yen (+197.0%). In conclusion, the company achieved higher revenue and significantly higher profits.
Building Construction recorded Revenue of 2,592.6B yen (+17.8%) and Operating Income of 155.0B yen (+31.1%) (margin 6.0%). Civil Engineering recorded Revenue of 743.5B yen (+8.6%) and Operating Income of 97.3B yen (+114.4%) (margin 13.1%), achieving high profitability. Real Estate and others saw Revenue increase to 76.0B yen (+52.8%) but Operating Income fell to 10.8B yen (-27.4%), with a margin of 14.2% that, while high, declined from the prior year. The improvement in Civil Engineering margins was attributable to progress on high-margin projects and strict cost control; Building margins improved alongside scale expansion. Real Estate saw profit decline despite revenue growth, likely due to lower gross margins in development projects (21.0%, prior year 45.1%). Corporate expenses not allocated to segments totaled 100.0B yen (prior year 90.1B yen) and were deducted from the sum of segment profits of 263.1B yen, resulting in consolidated Operating Income of 163.1B yen. Civil Engineering’s higher profitability was the primary driver of improved company-wide margins.
[Profitability] Operating margin improved by 1.8pt to 4.8% (prior year 3.0%), and Net Profit Margin rose 2.1pt to 3.4% (prior year 1.3%). ROE substantially increased to 10.3% (prior year 4.0%), well above historical levels, indicating a marked improvement in capital efficiency. Gross margin improved to 11.0% (prior year 9.8%), and provision for construction losses declined to 48.0B yen (prior year 60.4B yen, -20.5%), confirming progress in margin management. [Cash Quality] Operating Cash Flow / Net Income was 0.52x, remaining low and indicating challenges in converting profits to cash. The main drivers were an increase in completed construction accounts receivable (-105.6B yen) and an increase in contract work-in-progress payments (-66.0B yen) which worsened working capital; progress payments decreased by -8.7B yen. OCF/EBITDA (Operating Income + Depreciation 179.2B yen) was 0.39x, indicating room to improve cash conversion efficiency. [Investment Efficiency] Capital expenditures (tangible + intangible) totaled 39.7B yen, about 2.5x depreciation of 16.1B yen, reflecting proactive investments for future growth. Intangible assets increased to 17.1B yen (prior year 12.2B yen, +40.5%), driven by software and similar investments to improve operational efficiency. [Financial Soundness] Equity Ratio was 36.2% (prior year 37.4%), remaining solid; current ratio was 131.0%, indicating short-term liquidity is secured. Interest-bearing debt was 360.7B yen and Debt/EBITDA (Operating Income + Depreciation) was 2.01x, within investment-grade range. However, short-term borrowings surged to 350.8B yen (prior year 55.8B yen) while long-term borrowings fell to 9.8B yen (prior year 211.3B yen), creating a concentration of maturities in the short term that warrants attention. Cash and deposits increased to 495.9B yen (prior year 396.7B yen, +25.0%), and cash/short-term debt was 1.41x, providing some cushion against short-term liabilities.
Operating Cash Flow was 69.1B yen (prior year 411.0B yen, -83.2%), a substantial decline, resulting in a ratio to Net Income of 0.52x. The primary causes were working capital outflows including an increase in completed construction accounts receivable of 105.6B yen, an increase in contract work-in-progress payments of 66.0B yen, and an increase in prepayments of 39.7B yen. An increase in trade payables of 25.6B yen partially offset these outflows. Subtotal (before working capital changes) was 108.0B yen; after working capital changes and corporate tax payments of 47.3B yen, Operating Cash Flow amounted to 69.1B yen. Investing Cash Flow was -24.5B yen, with capital expenditures of 39.7B yen offset by proceeds from sale of fixed assets of 9.4B yen and sale of investment securities of 16.2B yen. Free Cash Flow was 44.6B yen (Operating CF 69.1B yen + Investing CF -24.5B yen), covering dividend payments of 40.4B yen at 1.04x, but with limited surplus. Financing Cash Flow was 53.9B yen, driven by a net increase in short-term borrowings of 95.0B yen and a net decrease in long-term borrowings of -1.4B yen, shortening the funding profile; after dividend payments of -40.4B yen, cash increased by 99.2B yen. The low level of Operating Cash Flow is mainly due to working capital expansion; improving collection of completed construction accounts receivable and rebalancing progress payments remain key challenges.
Operating Income of 163.1B yen is recurring operating profit, and non-operating income of 21.4B yen including equity-method gains of 13.9B yen and foreign exchange gains of 2.4B yen boosted Ordinary Income to 175.5B yen. Extraordinary Gains of 18.1B yen (gain on sale of available-for-sale securities 11.7B yen, gain on sale of fixed assets 5.6B yen) are one-off items and comprise about 9.4% of Profit before Tax of 192.6B yen. Non-operating income of 21.4B yen is small relative to revenue (0.6%), composed mainly of equity-method gains, dividends of 2.6B yen, and foreign exchange gains, and is relatively sustainable. Because Operating CF is considerably lower than Net Income (0.52x), cash conversion is a concern from a quality-of-earnings perspective. Accruals (Net Income - Operating CF) amounted to 64.8B yen, or 48.4% of Net Income, driven by increases in completed construction accounts receivable and contract work-in-progress payments. The divergence between Ordinary Income and Net Income is within expectations given income taxes of 56.8B yen (effective tax rate 29.5%) and the net effect of extraordinary items (Extraordinary Gains 18.1B yen - Extraordinary Losses 1.0B yen). Comprehensive Income was 138.2B yen (136.3B yen attributable to owners of the parent), exceeding Net Income of 133.9B yen, with a positive actuarial gains/losses adjustment of 5.1B yen contributing. Note that the one-off Extraordinary Gains of 18.1B yen are likely to lapse in the next fiscal year.
Full-year guidance is conservative: Revenue/Net Sales 3,340.0B yen (YoY -2.1%), Operating Income 165.0B yen (YoY +1.2%), Ordinary Income 168.0B yen (YoY -4.3%), and Net Income attributable to owners of the parent 91.0B yen (YoY -21.4%). Versus current-year results, revenue guidance represents 97.9% achievement (implying a forecasted decline), Operating Income 101.2% (roughly flat), and Net Income 78.6% (a significant decline). This conservative stance appears to factor in normalization of this year’s Extraordinary Gains of 18.1B yen and equity-method gains of 13.9B yen, as well as potential reversals in non-operating and extraordinary items. Progress rates (actual/forecast) are: Revenue 102.2%, Operating Income 98.8%, Ordinary Income 104.5%, Net Income 127.1% — Operating Income nearly met guidance and Net Income substantially exceeded it. Next fiscal year, focus will be on the lapse of one-off items and normalization of working capital; backlog digestion, project mix, and continued cost control will determine earnings quality.
Annual dividend is ¥40.0 per share (interim ¥19.0, year-end ¥21.0). Payout Ratio is 60.6% (calculated as total dividends 40.4B yen / Net Income attributable to owners of the parent 115.7B yen × average shares outstanding 106.1 million shares). Coverage of dividends by Free Cash Flow (44.6B yen) is 1.10x, leaving limited margin, but ample cash and deposits of 495.9B yen support dividend sustainability. Forecasted year-end dividend of ¥21.0 for next fiscal year is conservative, and the implied payout ratio based on forecast Net Income 91.0B yen is about 23% (annualized), indicating a return to a more cautious stance. There is no mention of share buybacks; shareholder returns are concentrated in dividends. The payout ratio of 60.6% is within an appropriate historical range, but next year it will be important to monitor cash generation and the effect of reversal of one-off gains.
Working capital expansion and weak cash generation: Operating CF / Net Income is low at 0.52x. Completed construction accounts receivable of 158,328 million yen (prior year 147,792 million yen) and contract work-in-progress payments of 13.18B yen (prior year 9.06B yen, +45.5%) have increased, pressuring liquidity. A decline in progress payments to 23.72B yen (prior year 24.59B yen, -3.5%) has further exacerbated working capital deterioration. Future collection delays or skewed project progress could impair cash flow stability.
Concentration of short-term liabilities increasing interest rate and refinancing risk: Short-term borrowings rose sharply to 350.8B yen (prior year 55.8B yen, +528.7%), while long-term borrowings were compressed to 9.8B yen (prior year 211.3B yen, -95.4%), creating a short-term maturity concentration. Short-term liabilities ratio is 97.3%, elevating sensitivity to interest rate increases and changes in bank credit lines. Although cash/short-term debt of 1.41x provides some buffer, high rollover dependence requires ongoing monitoring.
Reversal risk from one-off gains: Extraordinary Gains of 18.1B yen (sale of available-for-sale securities 11.7B yen, sale of fixed assets 5.6B yen) and equity-method gains of 13.9B yen accounted for approximately 16.6% of Profit before Tax of 192.6B yen this fiscal year. Next fiscal year is expected to see a material decline in Net Income as these one-off gains lapse. There remains uncertainty whether the reduction in provision for construction losses to 48.0B yen is permanent or whether additional provisions may be needed, which could affect earnings sustainability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.8% | 5.5% (3.5%–7.2%) | -0.8pt |
| Net Profit Margin | 3.4% | 3.5% (2.5%–4.4%) | -0.1pt |
Operating margin is 0.8pt below the industry median, indicating room for improvement, while Net Profit Margin is around the median and, including one-off items, the relative position is favorable.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 16.4% | 9.8% (-2.1%–15.1%) | +6.5pt |
Revenue growth outperformed the industry median by 6.5pt, driven by backlog digestion and progress on large projects, delivering growth well above the industry average.
※ Source: Company aggregation
Sustainability of Civil Engineering profitability and operating margin improvement: Civil Engineering’s operating margin of 13.1% (improved 4.5pt year-over-year) has driven company-wide margin improvement. Reduction in provision for construction losses and improvement in gross margin to 11.0% indicate progress in margin management. Continued order selection and cost control could enable further improvement from the current operating margin of 4.8% and allow catch-up to the industry median of 5.5%.
Improvement in working capital and cash generation is key: The sharp decline in Operating CF to 69.1B yen (prior year 411.0B yen) is mainly due to expansion in completed construction accounts receivable and contract work-in-progress payments. Next year’s focus will be on collection progress and restoring balance in progress payments. The margin between Free Cash Flow 44.6B yen and dividend payments 40.4B yen is thin; normalization of working capital will be critical for cash flow stability and dividend sustainability.
Assessing the impact of one-off gains on earnings quality: Extraordinary Gains of 18.1B yen and equity-method gains of 13.9B yen accounted for about 16.6% of Profit before Tax, and the conservative guidance for next year (Net Income 91.0B yen, -21.4%) incorporates the lapse of these items. The flat Operating Income guidance of 165.0B yen (+1.2%) suggests stable core operations; if cash generation improves and project margins are maintained, structural earnings improvement could be affirmed.
This report was auto-generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are a reference compiled by the firm based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.