| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥405.3B | ¥356.1B | +13.8% |
| Operating Income / Operating Profit | ¥42.6B | ¥38.9B | +9.4% |
| Ordinary Income | ¥45.7B | ¥39.7B | +15.1% |
| Net Income / Net Profit | ¥31.6B | ¥30.0B | +5.4% |
| ROE | 12.1% | 12.9% | - |
For the fiscal year ended March 2026, the company reported Revenue ¥405.3B (YoY +¥49.1B +13.8%), Operating Income ¥42.6B (YoY +¥3.7B +9.4%), Ordinary Income ¥45.7B (YoY +¥6.0B +15.1%), and Net Income ¥31.6B (YoY +¥1.6B +5.4%), resulting in year-over-year revenue and profit growth. The core Construction Business drove results with Revenue ¥354.7B (+23.9%) and Operating Income ¥51.5B (+18.1%). Conversely, Development & Other fell sharply with Operating Income ¥0.6B (-73.8%), and Engineering contracted to Revenue ¥30.7B (-23.4%) and Operating Income ¥5.5B (-17.9%). Gross margin declined to 18.5% (from 19.9% a year earlier, -1.4pt) due to higher cost of completed construction and deteriorating profitability in Development. Operating margin softened slightly to 10.5% (from 10.9%, -0.4pt); however, dividends and interest received plus a reversal of allowance for doubtful accounts of ¥1.48B contributed, producing double-digit growth at the Ordinary Income stage (+15.1% YoY). Operating Cash Flow (OCF) reversed to -¥16.1B, mainly driven by an increase in trade receivables -¥63.8B and additional inventory for properties for sale -¥9.87B. Investing Cash Flow was -¥22.9B (including capital expenditures ¥9.36B), leaving Free Cash Flow at -¥38.9B. Cash and deposits declined 27.8% to ¥88.4B, but liquidity and balance-sheet health remain strong with a current ratio of 289.6% and Equity Ratio of 72.7%.
[Revenue] Revenue ¥405.3B (+13.8%) was driven by a significant expansion in the Construction Business. Completed contract revenue was ¥385.4B (prior year ¥326.4B), an increase of +18.1%, while Development & Other declined to ¥19.9B (prior year ¥29.7B, -33.0%). By segment, Construction accounted for ¥354.7B (+23.9%), representing 87.5% of total revenue, supported by backlog conversion and accelerated project progress. Engineering decreased materially to ¥30.7B (-23.4%), and Development & Other contracted to ¥20.1B (-32.9%), contributing to a worsening revenue mix. Contract liabilities increased to ¥33.1B (+¥7.65B, +30.0%), improving pre-contract deposits.
[Profitability] Gross margin declined to 18.5% (from 19.9%, -1.4pt). Completed construction gross margin fell to 18.7% (from 20.2%, -1.5pt), and Development & Other gross margin deteriorated to 13.6% (from 16.4%, -2.8pt), mainly due to delayed pass-through of rising materials, subcontract and labor costs and reduced profitability of development inventory. SG&A expenses were restrained at ¥32.4B (prior year ¥31.9B), improving the SG&A ratio to 8.0% (from 9.0%, -1.0pt) and enabling operating leverage. Operating Income was ¥42.6B (+9.4%), with an operating margin of 10.5% (-0.4pt). Non-operating income of ¥3.2B (including dividends received ¥0.7B, interest received ¥0.3B, and reversal of allowance for doubtful accounts ¥1.48B) contributed, while non-operating expenses were limited to ¥0.1B, yielding Ordinary Income ¥45.7B (+15.1%), outpacing operating-stage growth. Income taxes were ¥14.0B (effective tax rate 30.7%), resulting in Net Income ¥31.6B (+5.4%) and a Net Income Margin of 7.8% (from 8.4%, -0.6pt). In summary, although revenue and profit increased, gross margin compression caused profit growth to lag revenue growth.
The Construction Business reported Revenue ¥354.7B (+23.9%) and Operating Income ¥51.5B (+18.1%), with a margin of 14.5%, remaining the core segment. Volume growth from backlog conversion boosted absolute profits, though margins slightly declined YoY. Engineering recorded Revenue ¥30.7B (-23.4%) and Operating Income ¥5.5B (-17.9%), maintaining a high margin of 17.9% but shrinking in scale due to fewer projects. Development & Other had Revenue ¥20.1B (-32.9%) and Operating Income ¥0.6B (-73.8%), with margins deteriorating to 2.9% due to increased inventory for properties for sale and low-margin projects. After allocation of corporate costs, Construction contributed approximately 80% of consolidated Operating Income, underscoring segment concentration. Leveraging Engineering’s high-margin structure to improve mix is key to margin recovery.
[Profitability] Operating margin 10.5% (from 10.9%, -0.4pt), Net Income Margin 7.8% (from 8.4%, -0.6pt), Gross Margin 18.5% (from 19.9%, -1.4pt) — each slightly declined. ROE 12.1% (from 13.7%, -1.6pt) remains at a healthy level despite lower Net Income Margin. [Cash Quality] OCF / Net Income -0.51x indicating negative cash conversion, OCF / EBITDA -0.35x, and an accrual ratio of 13.2% are elevated, reflecting working capital expansion and weakened cash conversion. [Investment Efficiency] Total Asset Turnover 1.13x (prior 1.16x) remains high; asset efficiency is good. Capex / Depreciation 2.53x indicates continued growth investment. [Financial Soundness] Equity Ratio 72.7% (from 75.5%, -2.8pt) and Debt-to-Equity 0.38x indicate a conservative capital structure, with a current ratio of 289.6% and interest coverage exceeding 450x, supporting strong financial safety. Cash and deposits ¥88.4B decreased -27.8% YoY but remain a solid cushion.
OCF turned negative at -¥16.1B (prior year +¥0.79B), producing OCF/Net Income -0.51x and indicating cash quality issues relative to Net Income ¥31.6B. The primary cause was an increase in trade receivables -¥63.8B, reflecting a temporary cash burden from year-end work volume. Additional inventory for properties for sale -¥9.87B also absorbed cash, with slower turnover of development inventory. Offsetting items included recovery of construction in-progress payments +¥5.57B, increases in trade payables +¥7.70B, and contract liabilities +¥7.65B. OCF subtotal (before working capital changes) was -¥8.4B; adding depreciation ¥3.7B, EBITDA was ¥46.3B but OCF/EBITDA remained -0.35x, and accrual ratio at 13.2% suggests working capital expansion. Investing Cash Flow was -¥22.9B, primarily capital expenditures ¥9.36B and additional investment securities. Free Cash Flow was -¥38.9B, and total shareholder returns of ¥10.2B (dividends ¥5.58B + share buybacks ¥4.63B) exceeded FCF, requiring drawdown of existing cash. Financing Cash Flow was -¥5.6B driven by buybacks and dividends. Cash and deposits decreased from ¥122.4B to ¥88.4B (-¥34.0B, -27.8%) but liquidity remains ample. Improving collection efficiency on receivables and shortening turnover of properties for sale are key to future cash generation.
Of Ordinary Income ¥45.7B, Operating Income accounted for ¥42.6B, representing 93.2% and indicating high quality of core earnings. Non-operating income ¥3.2B includes dividends received ¥0.7B, interest received ¥0.3B, and reversal of allowance for doubtful accounts ¥1.48B — the latter being a one-off contributor. While the reversal suggests progress in receivable collection, its repeatability is limited. Comprehensive income was ¥34.7B, above Net Income ¥31.6B; the ¥3.1B difference comprised valuation gains on securities ¥2.7B and retirement benefits adjustments ¥0.4B. The valuation gain reflects increased unrealized gains on investment securities of ¥26.1B, boosting balance-sheet value though realization timing is uncertain. With OCF -¥16.1B against Net Income ¥31.6B, accruals increased by +¥47.7B, indicating short-term working capital expansion delaying cash conversion of profits. Trade receivables -¥63.8B and properties for sale -¥9.87B were primary drivers, likely seasonal and related to development inventory build-up. Contract liabilities +¥7.65B indicate stronger prepayments and are a source of future revenue and cash inflows. Construction loss reserves of ¥0.3B are small, implying limited current large-scale loss risk, but the trend of falling gross margins warrants monitoring. Overall, core earnings quality is high but delayed cash conversion is a near-term issue.
Full Year plan called for Revenue ¥411.3B (+1.5%), Operating Income ¥36.9B (-13.3%), Ordinary Income ¥39.5B (-13.5%), and Net Income ¥27.1B (-13.9%), forecasting lower profits. Actual results were Revenue ¥405.3B (vs plan -1.5%), but Operating Income ¥42.6B (vs plan +15.4%), Ordinary Income ¥45.7B (vs plan +15.7%), and Net Income ¥31.6B (vs plan +16.6%)—a substantial beat on profit lines. Initial forecast EPS ¥143.41 was exceeded with actual EPS ¥167.22 (+16.6%). The profit beat versus plan was achieved by offsetting gross margin decline with SG&A restraint and contributions from non-operating income, indicating potential for profitability improvement. Annual dividend was planned at ¥17 but actual was raised to ¥30 (interim ¥13 + year-end ¥17), confirming a stronger shareholder-return stance. Key items to watch going forward include recovery of gross margins in H2, normalization pace of working capital efficiency, and speed of backlog digestion.
Annual dividend was ¥30 (same as prior year) with a Payout Ratio of 20.0% (adjusted, based on actual EPS ¥167.22), maintaining a healthy level. Total dividends amounted to ¥5.58B (prior year ¥2.83B, based on annual ¥7.5 per share), representing a substantive increase. Share buybacks totaled ¥4.63B, increasing treasury stock to 2,176 thousand shares. Combined dividends ¥5.58B and buybacks ¥4.63B produced total shareholder returns of ¥10.2B, equivalent to approximately 32.3% of Net Income ¥31.6B. With Cash and deposits ¥88.4B and a current ratio of 289.6%, the company strengthened returns via dividends and buybacks. However, FCF was -¥38.9B and returns were funded from existing cash, not FCF. While a Payout Ratio of 20% appears sustainable, continuation of buybacks depends on recovery of Operating Cash Flow and FCF generation. The balance between dividend continuity and total return policy is reasonable, but improving cash conversion is key to sustaining returns over the medium to long term.
Cost inflation pass-through delay risk: Gross margin declined to 18.5% (from 19.9%, -1.4pt), with completed construction gross margin 18.7% (-1.5pt) and Development gross margin 13.6% (-2.8pt), showing profitability deterioration across segments. Delays in passing through higher materials, subcontract and labor costs are the main cause, and fixed-price contracts could further compress margins. Construction loss reserves are small at ¥0.3B, but strict cost control and appropriate price pass-through are urgently needed.
Working capital expansion and cash quality risk: OCF -¥16.1B, OCF/Net Income -0.51x, OCF/EBITDA -0.35x, and accrual ratio 13.2% indicate worsening cash quality. Trade receivables increase -¥63.8B and properties for sale build-up -¥9.87B are primary drivers; year-end work concentration and slower development inventory turnover pressured liquidity. Cash and deposits declined ¥34.0B, and FCF -¥38.9B funded dividends and buybacks from equity, meaning normalizing cash generation is a precondition for sustainable returns.
Business concentration and Development profitability risk: Construction accounts for 87.5% of sales, creating portfolio concentration. Development & Other’s Operating Income fell to ¥0.6B (-73.8%), with margins down to 2.9%. Inventory for properties for sale ¥30.8B carries market fluctuation and impairment risk; improving turnover and profitability of development inventory is urgent. Engineering maintains high margin at 17.9% but revenue has contracted; improving mix via Engineering revenue expansion could raise consolidated margins.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.5% | 5.5% (3.5%–7.2%) | +5.0pt |
| Net Income Margin | 7.8% | 3.5% (2.5%–4.4%) | +4.3pt |
Profitability materially exceeds industry medians and sits at an upper level.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 13.8% | 9.8% (-2.1%–15.1%) | +4.0pt |
Growth outperforms the median, indicating solid expansion within the industry.
※ Source: Company compilation
While achieving revenue and profit growth and maintaining ROE at 12.1%, gross margin declined to 18.5% (-1.4pt) due to delayed pass-through of cost increases and deteriorating Development profitability. Construction is expanding with Revenue ¥354.7B (+23.9%) and Contract Liabilities ¥33.1B (+30.0%) indicating backlog depth; however, improving completed construction gross margin of 18.7% (-1.5pt) is key to future profit growth. Engineering maintains a high margin of 17.9% and expanding its revenue offers room to improve consolidated mix.
OCF reversed to -¥16.1B with OCF/Net Income -0.51x and accrual ratio 13.2% indicating deteriorated cash quality. Trade receivables increase -¥63.8B and properties for sale build-up -¥9.87B were primary causes, and short-term working capital expansion strained liquidity. FCF -¥38.9B while total shareholder returns were ¥10.2B funded from existing cash; normalizing OCF and improving inventory turnover are essential for sustainable returns. Equity Ratio 72.7% and current ratio 289.6% show a solid financial base with low short-term liquidity risk, but improving the cash conversion cycle is the next focus.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the Company based on publicly disclosed financial statements. Investment decisions are your own responsibility; consult a professional as necessary.