| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥740.6B | ¥719.5B | +2.9% |
| Operating Income | ¥27.3B | ¥21.7B | +25.9% |
| Ordinary Income | ¥28.4B | ¥23.1B | +23.0% |
| Net Income | ¥19.7B | ¥14.3B | +37.3% |
| ROE | 1.8% | 1.3% | - |
Revenue and profit both exceeded the previous year, resulting in higher revenue and higher profit, with the particularly notable feature being the significant improvement at the operating income level. Revenue was ¥740.6B (+2.9% YoY), operating income was ¥27.3B (+25.9%), ordinary income was ¥28.4B (+23.0%), and net income attributable to owners of the parent was ¥19.5B (+36.9%). Revenue growth was driven by the expansion of the Construction Business, while profit growth was primarily attributable to the improvement in gross margin (10.8%, +0.9pt), which absorbed the increase in SG&A expenses.
【Revenue】Revenue was ¥740.6B, representing a 2.9% YoY increase. The segment composition was Construction 79.1%, Civil Engineering 19.9%, and Real Estate, etc. 1.0%; the Construction Business (¥585.6B, +4.4%) drove overall performance. Meanwhile, the Civil Engineering Business declined to ¥147.7B (-3.9%), while the Real Estate Business, etc. increased significantly to ¥7.3B (+44.7%), although its scale remained limited.
【Profit and Loss】Operating income was ¥27.3B (+25.9%), ordinary income was ¥28.4B (+23.0%), and net income attributable to owners of the parent was ¥19.5B (+36.9%), representing profit growth at each level. The gross margin improved to 10.8% from 9.9% in the previous year (+0.9pt), while the SG&A ratio rose slightly to 7.2% (+0.2pt), with the improvement in gross margin absorbing the increase. Non-operating items, including dividend income of ¥1.1B and foreign exchange gains of ¥0.9B, contributed a net +¥1.05B and boosted ordinary income. No extraordinary gains or losses were recorded, and the profit increase was primarily attributable to improved profitability in the core business. In conclusion, the Company achieved both revenue and profit growth.
Operating income by segment was led by the Construction Business, while profitability in the Civil Engineering Business deteriorated significantly.
Company-wide expenses (inter-segment adjustment) were ¥23.0B, up 3.0% from ¥22.3B in the previous year. After deducting these expenses from total reported segment profit of ¥50.3B, operating income came to ¥27.3B.
【Profitability】Operating margin was 3.7% (+0.7pt from 3.0% in the previous year), net margin was 2.6% (+0.7pt from 2.0% in the previous year), and gross margin was 10.8% (+0.9pt from 9.9% in the previous year), indicating improvement in margins at each level.【Cash Flow Quality】Comprehensive income was ¥15.7B, below net income of ¥19.5B. The difference was attributable to valuation items, including valuation difference on securities of -¥1.9B, adjustments related to retirement benefits of -¥1.3B, and the share of OCI of equity-method affiliates of -¥0.9B. Accordingly, comprehensive performance was somewhat conservative relative to earnings generated during the period.【Investment Efficiency】ROE was 1.8% based on Q1 results (net income attributable to owners of the parent of ¥19.5B ÷ equity of ¥110.8B); it should be noted that this is not an annualized figure.【Financial Soundness】The equity ratio rose to 39.6%, up +3.3pt from 36.3% in the previous year. While total assets declined 9.0% YoY to ¥2829.7B, short-term borrowings were sharply reduced by 42.8% YoY to ¥200.8B, indicating that the financial structure is becoming more conservative.
Although no cash flow statement items have been disclosed, changes in the balance sheet indicate cash generation originating from working capital. Cash and deposits increased 29.6% from the end of the previous fiscal year to ¥642.4B, while accounts receivable from completed construction contracts decreased 29.0% from the end of the previous fiscal year to ¥1124.3B, and advances received on construction contracts in progress increased 27.1% to ¥301.4B. These figures indicate simultaneous progress in receivables collection and the accumulation of advance payments, contributing to improved liquidity stability. Against this backdrop of cash generation, short-term borrowings were reduced by 42.8% to ¥200.8B, while property, plant and equipment increased 14.9% from the end of the previous fiscal year to ¥233.3B, indicating that capital investment is continuing. The accumulation of advance payments is expected to be reversed in the future as construction progresses, and the management of progress billings and collection periods will continue to influence cash trends.
The profit increase during the current period was attributable to improved profitability in the core business at both the operating income and ordinary income levels. No extraordinary gains or losses were recorded, and dependence on temporary factors was limited. Non-operating income and expenses contributed a net +¥1.05B and boosted ordinary income, with dividend income of ¥1.1B and foreign exchange gains of ¥0.9B comprising the main components. Nevertheless, expansion of earnings from the core business remains the primary factor. Meanwhile, comprehensive income of ¥15.7B was below net income attributable to owners of the parent of ¥19.5B, as valuation-related OCI items, including valuation difference on securities and adjustments related to retirement benefits, had a negative impact. Therefore, comprehensive performance including the fair-value measurement of assets and liabilities has not improved to the same extent as earnings on the income statement. Assessing earnings quality requires reviewing both the increase in income-statement earnings and movements in balance-sheet valuations.
Q1 progress against the full-year plan was 22.2% for revenue (¥740.6B/¥3340.0B), 16.5% for operating income (¥27.3B/¥165.0B), 16.9% for ordinary income (¥28.4B/¥168.0B), and 17.8% for net income (¥19.5B/¥110.0B), all below the 25% benchmark based on simple proportional allocation. As of the current quarter, no revisions had been made to the earnings forecast or dividend forecast, and the Company’s plan can be interpreted as assuming progress weighted toward the second half of the fiscal year. The full-year plan’s YoY assumptions are revenue -2.1%, operating income +1.2%, and ordinary income -4.3%. Unlike the revenue and profit growth recorded in Q1, the full-year plan incorporates a slight revenue decline and a slowdown in the profit growth rate, which is noteworthy.
The full-year dividend forecast is ¥43.00 per share, and no revision to the dividend forecast was made during the current quarter. Based on the number of shares outstanding (after deducting treasury shares, approximately 1 billion 629 million shares), total annual dividends are estimated at approximately ¥45.7B, implying a payout ratio of approximately 42% against the full-year net income plan of ¥110.0B. Given the level of cash and deposits of ¥642.4B and the trend toward reducing short-term borrowings, this payout ratio can be considered supported by both earnings and cash flow.
Polarization of segment profitability: The operating margin of the Civil Engineering Business was 3.4%, halved from 6.7% in the previous year, and operating income declined 50.5%. The contrast with the Construction Business (7.6% margin, +34.8%) is pronounced, making the recovery of profitability in the Civil Engineering division an area of focus.
Concentration of the business portfolio: The Construction Business accounted for 79.1% of revenue, indicating a high degree of dependence on a specific segment. Although the Real Estate Business, etc. recorded revenue growth of +44.7%, operating income declined 16.7%, indicating that expansion in scale has not translated directly into profitability.
Construction-related costs and provision levels: Costs on uncompleted construction contracts increased 5.4% from the end of the previous fiscal year to ¥138.9B, while the provision for construction loss was ¥46.8B (¥48.0B in the previous year), remaining at a high level. Cost trends and the occurrence of loss-making projects will affect the sustainability of the improvement in gross margin.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.7% | 4.5% (2.7%–6.6%) | -0.8pt |
| Net Margin | 2.7% | 3.8% (-1.1%–4.4%) | -1.1pt |
Both operating margin and net margin are below the industry median, placing profitability at a somewhat low level within the industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 2.9% | 4.8% (3.4%–10.1%) | -1.9pt |
Revenue growth also falls below the industry median, indicating that the pace of revenue growth is relatively moderate within the industry.
Source: Compiled by the Company
The main drivers of profit growth were the improvement in gross margin (+0.9pt) and the absorption of company-wide expenses. The limited dependence on non-recurring factors is an important point in evaluating the quality of the results.
Cash management improved as accounts receivable from completed construction contracts declined and advances received on construction contracts in progress accumulated, while short-term borrowings were sharply reduced by 42.8%. The decline in financial leverage indicates a more conservative capital structure.
Progress against the full-year plan was below the 25% simple allocation benchmark for all four key indicators, indicating that the Company’s plan assumes progress weighted toward the second half. In addition, the deterioration in profitability in the Civil Engineering Business is a monitoring point for achieving the full-year plan.
This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥1,055 |
| base | ¥1,090 |
| bull | ¥1,114 |
| Calculation Assumption | Value |
|---|---|
| Book Value per Share (BPS) | ¥1,054 |
| Adjusted Forecast EPS | ¥115.6 |
| Cost of Equity r | 9.77% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 1.00%) |
| Residual Income Persistence Coefficient ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 41.5% |
| Forecast EPS Confidence Adjustment | ×1.117 (based on the industry’s historical guidance achievement rate) |
| Implied PBR / PER |
Sensitivity: ¥1,060–¥1,121 at ±1% for the cost of equity, and ¥1,089–¥1,091 at ±0.1 for ω.
Notes:
(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value does not predict or guarantee the future share price)
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. 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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| 1.03x / 9.4x |
These are mechanically computed values based on a residual income model. They are not a forecast of market prices or a recommendation of any investment action, and do not predict or guarantee future share prices. Historical values are computed retrospectively using current guidance-achievement statistics.