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.
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥151.8B | ¥183.0B | -17.1% |
| Operating Income | ¥4.3B | ¥20.5B | -78.8% |
| Ordinary Income | ¥5.5B | ¥20.9B | -73.6% |
| Net Income | ¥4.1B | ¥14.7B | -71.8% |
| ROE | 0.8% | 2.8% | - |
The first quarter of FY2027 saw declines in both revenue and earnings, as deteriorating profitability in the core Construction Business and losses in non-core businesses weighed on overall results. Revenue was ¥151.8B (¥183.0B in the same period of the previous year, -17.1%), Operating Income was ¥4.3B (¥20.5B, -78.8%), Ordinary Income was ¥5.5B (¥20.9B, -73.6%), and Net Income attributable to owners of the parent was ¥4.2B (¥14.9B, -71.5%). The primary cause of the earnings decline was the deterioration in the gross profit margin on completed construction contracts from 21.4% to 14.8%; as SG&A expenses remained broadly flat, the deterioration in profitability directly pressured Operating Income.
【Revenue】Revenue was ¥151.8B, a year-on-year decline of -17.1%. By segment, the core Construction segment generated ¥136.4B (89.9% of total revenue, -11.0% year on year), making it the largest contributor to the revenue decline. SteelStructure posted a substantial revenue decline to ¥9.9B (-58.9%), while PortOperationService increased revenue to ¥6.1B (+17.7%), although its scale remained small.
【Profit and Loss】The gross profit margin on completed construction contracts declined to 14.8%, down -660bp from 21.4% in the previous year, apparently reflecting an adverse project mix and a lag in passing through higher costs. As SG&A expenses were ¥1.82B and remained broadly flat, the contraction in gross profit directly pressured Operating Income, which fell to ¥4.3B (-78.8%). By segment, Construction’s profit declined to ¥6.5B (-67.3%), while SteelStructure posted a loss of ¥-1.5B and PortOperationService posted a loss of ¥-0.9B. The two non-core divisions became loss-making, diluting overall profitability. Ordinary Income exceeded Operating Income at ¥5.5B due to ¥1.6B in non-operating income, including ¥1.1B in dividend income, but declined sharply by -73.6% year on year. Extraordinary income of ¥0.9B from gains on the sale of fixed assets contributed to part of Net Income of ¥4.2B, indicating a contribution from temporary factors. In conclusion, both revenue and earnings declined.
Construction generated revenue of ¥136.4B (89.9% of total revenue, -11.0% year on year) and Operating Income of ¥6.5B (-67.3%), with a profit margin of 4.8%; although it remained the core business, profitability deteriorated significantly. SteelStructure generated revenue of ¥9.9B (-58.9%) and Operating Income of ¥-1.5B, falling into the red from a profit of ¥+1.3B in the previous year, with a profit margin of -14.8%, making it a drag on earnings. PortOperationService increased revenue to ¥6.1B (+17.7%), but continued to post a loss of ¥-0.9B, with a profit margin of -14.7%. Other Businesses, including solar power generation and real estate leasing, generated revenue of ¥0.6B and Operating Income of ¥0.2B (+31.2%), maintaining a high profit margin of 33.9% despite their small scale. Overall, losses in the two non-core divisions compounded the decline in earnings from the core business, with disparities in segment profit margins weighing on company-wide profitability.
【Profitability】The Operating Income margin was 2.9%, down -830bp from 11.2% in the previous year, while the Net Income margin was 2.8%, down -530bp from 8.1%; the deterioration in the gross profit margin was directly reflected in the profitability indicators.【Cash Quality】While the working capital structure remains characterized by a large receivables balance, with accounts receivable from completed construction contracts of ¥273.3B versus accounts payable for construction contracts of ¥85.6B, advances received on construction contracts in progress increased to ¥29.8B (¥17.0B in the previous year, +75.1%), providing a cash cushion.【Investment Efficiency】ROE was 0.8%, and capital efficiency remained low due to the combination of a lower Net Income margin and low total asset turnover. BPS was ¥408.48 (¥413.03 in the previous year), remaining broadly flat.【Financial Soundness】The Equity Ratio rose to 66.9% (64.2% in the previous year), while current assets of ¥515.2B substantially exceeded current liabilities of ¥187.8B, indicating that liquidity and the capital structure remained conservative.
Although an individual cash flow statement disclosure was not available, the balance sheet movements indicate that cash and deposits increased to ¥192.1B (+23.1% from ¥156.0B at the end of the previous year), while short-term borrowings were sharply reduced from ¥2.08B to ¥0.08B. Costs on construction contracts in progress declined to ¥1.71B (¥2.30B in the previous year, -26.0%), indicating a reduction in work-in-progress inventories, while advances received on construction contracts in progress increased to ¥2.98B (+75.1%), showing an accumulation of customer advances. Accounts receivable from completed construction contracts remained high at ¥273.3B, and the working capital structure remains heavily weighted toward receivables; however, the reduction in short-term borrowings and increase in cash suggest the generation of internal funds and progress in collections.
The weakness of recurring earnings power was partially offset by ¥1.6B in non-operating income, primarily consisting of ¥1.1B in dividend income. Extraordinary income of ¥0.9B from gains on the sale of fixed assets represented slightly more than approximately 20% of Net Income of ¥4.2B, indicating that the contribution from temporary factors was significant enough to warrant a somewhat cautious assessment of earnings quality. Extraordinary losses were small at ¥0.1B, and the difference between Profit Before Tax of ¥0.63B and Ordinary Income of ¥5.5B was mainly attributable to these extraordinary gains and losses. After deducting income taxes of ¥2.1B, Net Income was ¥4.1B, maintaining consistency, with no unusual divergence in the tax burden. Accounts receivable from completed construction contracts remain high, and attention should be paid to the time lag between revenue recognition and cash conversion.
Q1 progress against the full-year plan was 20.2% for Revenue (¥150.0B ÷ ¥750.0B), 10.9% for Operating Income, 12.2% for Ordinary Income, and 15.4% for Net Income, all below the simple progress benchmark of 25%. The delay in Operating Income progress was particularly pronounced, and achieving the full-year plan of ¥40.0B (-25.0% year on year) requires improved profitability in the Construction Business and earnings improvement in SteelStructure during the second half. While full-year Revenue is forecast to increase to ¥750.0B (+8.9% year on year), the plans for Operating Income and Ordinary Income call for year-on-year declines, and no revisions have been made to the earnings or dividend forecasts as of the current quarter.
Under the company’s full-year plan, DPS of ¥14.5 is scheduled against EPS of ¥21.37, implying a Payout Ratio of approximately 67.9% based on these assumptions. There has been no revision to the dividend forecast, and the same dividend policy as the previous year is currently being maintained. Given cash on hand of ¥192.1B and an Equity Ratio of 66.9%, the company appears to have sufficient capacity to pay the expected annual dividend total; however, as profit progress as of Q1 is below plan, the actual level of the Payout Ratio will depend on the realization of full-year Net Income.
Risk of continued gross margin deterioration: The gross profit margin on completed construction contracts declined from 21.4% to 14.8%, or -660bp. If the adverse project mix and delays in passing through higher costs continue, achievement of the full-year Operating Income plan of ¥40.0B could be affected.
Risk of continued losses in non-core businesses: SteelStructure posted an Operating Income loss of ¥-1.5B amid a -58.9% revenue decline, while PortOperationService also posted a loss of ¥-0.9B. The core business is absorbing losses from the two divisions that, in aggregate, exceed company-wide Operating Income of ¥4.3B.
Risk of working capital becoming tied up: Accounts receivable from completed construction contracts amounted to ¥273.3B, representing 34.7% of total assets of ¥786.8B, with a significant gap versus accounts payable for construction contracts of ¥85.6B. A delay in the collection cycle could affect cash generation capacity.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 2.9% | 4.5% (2.7%–6.6%) | -1.6pt |
| Net Income Margin | 2.7% | 3.8% (-1.1%–4.4%) | -1.0pt |
The company’s profitability is below the industry median on both measures and ranks relatively low within the construction industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | -17.1% | 4.8% (3.4%–10.1%) | -21.9pt |
Revenue growth was significantly below the industry median, with the company shifting to a revenue decline while many peers secured revenue growth.
※Source: Compiled by the Company
The deterioration in profitability indicators was pronounced. The Operating Income margin of 2.9% (11.2% in the previous year), Net Income margin of 2.8% (8.1% in the previous year), and ROE of 0.8% all declined substantially from the previous year and were also below the industry median.
Financial soundness remains robust. The Equity Ratio was 66.9% (64.2% in the previous year), short-term borrowings were reduced by 96%, and cash and deposits increased by 23.1%; the conservative nature of liquidity and the capital structure remains unchanged.
Temporary factors contributed to earnings quality. Gains on the sale of fixed assets of ¥0.9B, recognized as extraordinary income, accounted for a certain proportion of Net Income of ¥4.2B. The fact that recurring earnings power alone has not secured a profit level comparable to the previous year warrants attention when monitoring progress against the full-year plan.
This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥359 |
| base | ¥366 |
| bull | ¥370 |
| Calculation Assumption | Value |
|---|---|
| Book Value per Share (BPS) | ¥408 |
| Adjusted Forecast EPS | ¥23.9 |
| 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 | 67.8% |
| Forecast EPS Confidence Adjustment | ×1.117 (based on the industry’s historical guidance achievement rate) |
| Implied PBR / PER |
Sensitivity: ¥356–¥376 at Cost of Equity ±1%, and ¥364–¥367 at ω ±0.1.
Notes:
(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast 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 professionals as necessary.
---End of Report---
| 0.90x / 15.3x |