TAKAMATSU CONSTRUCTION GROUP CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The results indicate a recovery phase driven particularly by improved profit margins, with substantial increases in both revenue and earnings. Revenue was ¥88.45B (+11.8% YoY), Operating Income was ¥5.46B (+173.4%), Ordinary Income was ¥5.32B (+185.0%), and Net Income attributable to owners of the parent was ¥3.29B (+309.4%), all representing substantial increases. The Operating Income margin improved to 6.2%, up +3.7pt from 2.5% in the previous year, driven by both improved gross margins and a lower SG&A ratio. Improved profitability in construction and civil engineering projects, together with the high-margin contribution from the Real Estate Business, were the primary drivers of earnings growth. While progress against the full-year plan was somewhat behind schedule for revenue at 22.1%, earnings were ahead of schedule, with Operating Income at 27.3% and Net Income at 26.3%.

Factors Affecting Performance

【Revenue】Revenue was ¥88.45B, an increase of +11.8% YoY. The Building Construction Business was the largest segment at ¥42.57B (48.1% of total, +8.8%), followed by the Civil Engineering Business at ¥24.29B (27.5%, +10.1%) and the Real Estate Business at ¥23.69B (26.8%, +28.5%). Strong growth in the Real Estate Business drove company-wide growth, while advances received on construction contracts in progress increased to ¥45.28B (¥37.90B in the previous year, +19.5%), indicating an accumulation of advance orders.

【Profit and Loss】Operating Income was ¥5.46B (+173.4%), and the Operating Income margin improved to 6.2%, up +3.7pt from 2.5% in the previous year. The gross margin improved to 16.9% (14.0% in the previous year, +2.9pt), while the SG&A ratio declined to 10.7% (11.4% in the previous year), reflecting increased absorption of fixed costs accompanying revenue growth. The impact of non-operating income and expenses was limited, and Ordinary Income was ¥5.32B (+185.0%). Extraordinary gains and losses were nearly nonexistent (extraordinary gain of ¥0.002B and extraordinary loss of ¥0.004B), with no temporary factors identified. The effective tax rate of 38.0% was somewhat high and was the primary reason for the difference between Ordinary Income and Net Income attributable to owners of the parent of ¥3.29B (+309.4%). The period ended with substantial increases in both revenue and earnings.

Segment Analysis

The Building Construction Business recorded revenue of ¥42.57B (+8.8%), Operating Income of ¥3.34B (+83.1%), and a profit margin of 7.8%, making it the largest contributor to earnings. The Civil Engineering Business recorded revenue of ¥24.29B (+10.1%), Operating Income of ¥1.52B (+151.2%), and a profit margin of 6.2%, reflecting a marked improvement in project profitability. The Real Estate Business recorded revenue of ¥23.69B (+28.5%), Operating Income of ¥2.45B (+142.5%), and a profit margin of 10.3%, the highest among the three segments, contributing to an increase in the company-wide profit margin. Overall, profit margins ranked Real Estate > Building Construction > Civil Engineering, and all three businesses achieved increases in both revenue and earnings. Adjustments, including company-wide common expenses, were -¥1.84B (−¥1.44B in the previous year), with the adjustment from total segment profit of ¥0.73B to Operating Income of ¥0.55B expanding slightly.

Key Financial Metrics

【Profitability】The Operating Income margin improved to 6.2% (2.5% in the previous year), while the Net Income margin (based on income attributable to owners of the parent) improved to 3.7% (1.0% in the previous year). The gross margin also increased to 16.9% (14.0% in the previous year). 【Cash Quality】Accounts receivable from completed construction contracts decreased to ¥94.43B (¥127.20B in the previous year, -25.8%), indicating progress in collections, while advances received on construction contracts in progress increased to ¥45.28B (¥37.90B in the previous year, +19.5%), indicating an accumulation of advance orders. 【Investment Efficiency】ROE was 2.2% (quarterly result, not annualized), based on a decomposition of Net Income margin of 3.7% × total asset turnover of 0.30x × financial leverage of 2.00x. EPS was ¥94.56 (¥23.10 in the previous year). 【Financial Soundness】The Equity Ratio increased to 50.0% (46.7% in the previous year), while cash and deposits of ¥35.07B exceeded short-term borrowings of ¥28.28B (¥47.00B in the previous year, -39.8%), securing a net cash position.

Cash Flow Analysis

As no cash flow statement data is available, funding trends are assessed based on changes in key balance sheet accounts. Cash and deposits were ¥35.07B, representing a +3.4% increase from the same period of the previous year (¥33.92B → ¥35.07B). Accounts receivable from completed construction contracts declined by -25.8% to ¥94.43B from ¥127.20B in the previous year, suggesting that progress in collecting trade receivables contributed to cash generation. Meanwhile, advances received on construction contracts in progress increased to ¥45.28B (¥37.90B in the previous year, +19.5%), confirming cash inflows in the form of customer advances. Short-term borrowings were reduced by -39.8% to ¥28.28B (¥47.00B in the previous year), indicating progress in reducing interest-bearing debt. These movements suggest that the company is strengthening its financial foundation while improving working capital.

Quality of Earnings

Non-operating income was ¥0.18B (0.2% of revenue), while non-operating expenses were ¥0.32B, including ¥0.17B in interest expense, and primarily consisted of recurring financial costs. Extraordinary gains and losses were both immaterial, at an extraordinary gain of ¥0.002B and an extraordinary loss of ¥0.004B, with almost no impact from temporary factors on Net Income. The difference between Ordinary Income of ¥5.32B and Net Income attributable to owners of the parent of ¥3.29B was primarily attributable to income taxes of ¥2.02B (effective tax rate of 38.0%), with the tax burden somewhat restraining Net Income growth. From an accruals perspective, accounts receivable from completed construction contracts declined substantially (-25.8%), while advances received on construction contracts in progress increased (+19.5%). As cash collections commensurate with recognized earnings were achieved, the quality of earnings can be assessed as sound.

Earnings Forecast and Guidance

Progress against the full-year plan was 22.1% for revenue (¥88.45B/¥400.00B), 27.3% for Operating Income (¥5.46B/¥20.00B), 27.3% for Ordinary Income (¥5.32B/¥19.50B), and 26.3% for Net Income (¥3.29B/¥12.50B). Revenue progress was slightly below the simple proportional benchmark of 25%, while progress for all earnings measures exceeded that benchmark, indicating that profitability improvements are ahead of plan. No revisions were made to the earnings forecast during the quarter, and progress is viewed as being in line with company plans. Inventories of real estate for sale of ¥44.34B and advances received on construction contracts in progress of ¥45.28B indicate potential for revenue recognition in the second half of the fiscal year.

Shareholder Returns

The annual dividend forecast is ¥144 (¥45 actual for the previous fiscal year), with no revision to the dividend forecast during the quarter. The Payout Ratio against the full-year EPS forecast of ¥359 is approximately 40.1% (¥144/¥359). Given the financial foundation of cash and deposits of ¥35.07B and an Equity Ratio of 50.0%, the stability of the dividend funding base appears to be secured.

Risk Factors

1. Risk of rising material and labor costs: Although the gross margin improved to 16.9% (14.0% in the previous year), it remains below 20%, and profitability could come under renewed pressure during periods of rising material prices and labor costs.

2. Risk of inventory and delivery concentration: Real estate for sale has accumulated to ¥44.34B, making quarterly performance susceptible to fluctuations depending on the timing of revenue recognition in the Real Estate Business.

3. Maturity profile of interest-bearing debt: Short-term borrowings were reduced to ¥28.28B (¥47.00B in the previous year, -39.8%), but the proportion of short-term debt within interest-bearing debt remains high. Although it is exceeded by cash and deposits of ¥35.07B, refinancing trends require monitoring.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (construction)

Profitability and Returns

Profitability is somewhat above the industry median. While the Operating Income margin is positioned in the upper range of the industry, the Net Income margin is broadly in line with the industry average.

Growth and Capital Efficiency

The revenue growth rate significantly exceeds the industry median, indicating high growth within the industry.

Source: Company compilation

Key Earnings Highlights

1. The Operating Income margin improved to 6.2% from 2.5% in the previous year, an increase of +3.7pt, indicating a turning point in the trend driven by both improved gross margins and a lower SG&A ratio. The primary factors were improved profitability in the Building Construction and Civil Engineering businesses and the high-margin contribution from the Real Estate Business.

2. The -25.8% decline in accounts receivable from completed construction contracts occurred alongside a +19.5% increase in advances received on construction contracts in progress, indicating high earnings quality supported by cash collections accompanying recognized earnings.

3. Full-year progress was earnings-led, with revenue at 22.1% compared with earnings in the 27% range. The accumulation of real estate for sale and advances received on construction contracts in progress may support revenue recognition in the second half of the fiscal year.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson type, explicit 5-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥4,080–¥4,316 at cost of equity ±1%, and ¥4,195–¥4,197 at ω±0.1.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing mismatch with the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat on the high side.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value 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. Industry benchmarks are reference information compiled by the company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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