MORIYA (1798) FY2026 Q3 Earnings Report

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Executive Summary

The Company achieved profit growth substantially exceeding revenue growth, driven by improved project profitability centered on the Construction Business. Revenue was ¥390.2B (+7.6% YoY), while Operating Income was ¥31.9B (+87.2%), Ordinary Income was ¥32.6B (+83.5%), and Net Income was ¥22.6B (+89.8%). Against a ¥27.6B increase in revenue, Operating Income increased by ¥14.9B, indicating that improved gross margin, rather than the revenue growth effect, was the primary driver of profit expansion. Progress against the full-year company forecast was 101.1% for Operating Income and 102.9% for Net Income, meaning that the cumulative Q3 results have already exceeded the full-year plan.

Factors Affecting Performance

【Revenue】Revenue was ¥390.2B, an increase of +7.6% YoY. The Construction Business grew strongly to ¥334.9B (+21.6% YoY) and led the Company-wide revenue growth, while the Civil Engineering Business declined substantially to ¥54.4B (-8.5% YoY), and the Real Estate Business fell sharply to ¥0.9B (-96.7% YoY). The sharp decline in the Real Estate Business appears to have resulted from the timing of project recognition, and attention should be paid to the significant fluctuations in revenue by business segment.

【Profit and Loss】Gross margin improved by 419bp from 9.7% in the same period last year to 13.9%, while Operating Income margin rose by 347bp from 4.7% to 8.2%. Segment profit in the Construction Business was ¥40.1B (+70.0% YoY), accounting for 86.1% of Company-wide profit, and its margin improved from 8.6% to 12.0%. The Civil Engineering Business also recorded segment profit of ¥6.5B (+89.3% YoY), with its margin improving from 5.3% to 10.6%, indicating improved profitability despite lower revenue. Meanwhile, the Real Estate Business’s segment result turned slightly negative. SG&A expenses increased to ¥22.2B (+23.1% YoY), outpacing revenue growth, but the increase in gross profit absorbed the higher expenses. This was a case of simultaneous revenue and profit growth, with profitability-led earnings growth substantially exceeding revenue growth.

Segment Analysis

The Construction Business generated revenue of ¥334.9B (85.9% of total) and segment profit of ¥40.1B (86.1% of total), driving profit growth as the core business. The Civil Engineering Business generated revenue of ¥60.8B (15.6% of total) and segment profit of ¥6.5B (13.9% of total), securing higher profit through margin improvement despite lower revenue. The Real Estate Business generated only ¥0.9B in revenue, and its segment result was slightly negative. Company-wide expenses (adjustments) were ¥14.7B, an increase of +23.8% YoY, indicating that expense growth has also progressed materially relative to the pace of growth in segment earnings.

Key Financial Indicators

【Profitability】Operating Income margin of 8.2% (4.7% in the prior year), Net Income margin of 5.8% (3.3% in the prior year), and gross margin of 13.9% (9.7% in the prior year) all improved substantially, clearly reflecting higher project profitability.【Cash Flow Quality】Accounts receivable from completed construction contracts were ¥136.4B, accounting for 36.3% of total assets and increasing by ¥7.2B from the same period last year. Advances received on construction contracts in progress increased to ¥29.1B (+35.3% YoY), indicating growth in customer advances, while real estate for sale increased significantly to ¥11.9B (+¥11.7B YoY).【Investment Efficiency】Annualized ROE of 16.6% remained at a high level due to profit growth exceeding the increase in equity. EPS increased by +89.5% from ¥548.36 in the prior year to ¥1,039.39, while BPS increased from ¥7,323.59 in the prior year to ¥8,343.60.【Financial Soundness】The Equity Ratio was 48.4% (46.7% in the prior year), and the current ratio was 160.2%, both healthy levels. However, long-term borrowings increased sharply from ¥0.2B to ¥7.9B, and the short-term liabilities ratio also rose.

Cash Flow Analysis

As a cash flow statement could not be confirmed, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits increased by ¥16.1B to ¥108.8B from ¥92.8B in the same period last year, indicating a stable level of liquidity. Meanwhile, accounts receivable from completed construction contracts increased by ¥7.2B, and real estate for sale increased by ¥11.7B, indicating that funds are being invested in working capital and inventories alongside business expansion. In contrast, advances received on construction contracts in progress increased by ¥7.6B, partially offsetting funding requirements through customer advances. Long-term borrowings increased by ¥7.7B, suggesting that a portion of investment and working capital requirements may have been financed through borrowings. The coexistence of higher cash balances and increased borrowings suggests rising funding needs during the business expansion phase.

Earnings Quality

The increase in profit for the current period primarily reflects recurring improvement in profitability from higher project margins. Temporary factors seen in the same period last year, such as a gain on the occurrence of negative goodwill of ¥3.5M and losses on disposal of fixed assets, were largely absent in the current period. Non-operating income was ¥1.1B, primarily consisting of dividend income of ¥0.3B, while non-operating expenses were ¥0.4B, mainly comprising interest expenses of ¥0.4B. Accordingly, the contribution of non-operating income and expenses to Operating Income was limited, and the difference between Ordinary Income and Net Income was primarily attributable to corporate income taxes and other taxes of ¥9.9B. Comprehensive Income was ¥24.6B, and the ¥2.0B difference from Net Income of ¥22.6B was mainly attributable to valuation differences on securities of ¥1.9B. There was no significant divergence, and earnings quality can be assessed as sound.

Earnings Forecast and Guidance

Revenue progress against the full-year company forecast was 74.3%, broadly in line with the standard Q3 level (approximately 75%). Meanwhile, progress was 101.1% for Operating Income, 103.4% for Ordinary Income, and 102.9% for Net Income, with all three already exceeding the full-year forecast as of the cumulative Q3 results. This divergence can be interpreted as resulting not from an upside in revenue, but from greater-than-expected improvement in profitability (gross margin and Operating Income margin). Project profitability and trends in Company-wide expenses in Q4 will determine the final full-year outcome.

Shareholder Returns

The full-year company forecast calls for annual dividends of ¥150 per share, implying a Payout Ratio of approximately 14.9% against forecast full-year EPS of ¥1,009.98. No dividend was paid for Q2, suggesting a policy of concentrating the annual dividend in the year-end payment. Cumulative Q3 Net Income of ¥22.6B has already exceeded the full-year Net Income forecast of ¥22.0B, providing strong earnings coverage for the forecast dividend. The financial base, including retained earnings of ¥146.9B and cash and deposits of ¥108.8B, also supports dividend sustainability.

Risk Factors

1. Concentration of earnings in the Construction Business: Since the Construction Business accounts for 86.1% of segment profit, a slowdown in demand or deterioration in project profitability in this business would have a significant impact on consolidated earnings.

2. Resilience to rising construction costs: Although gross margin improved to 13.9%, continued increases in material prices and subcontracting expenses could pressure project profitability, particularly for fixed-price contracts.

3. Sharp increase in long-term borrowings and short-term liabilities ratio: Long-term borrowings increased by ¥7.7B YoY (¥0.2B→¥7.9B), and the short-term liabilities ratio is also trending upward. Although liquidity is secured, with a current ratio of 160.2% and cash and deposits of ¥108.8B, continued monitoring of the use of funds and repayment plans would be useful.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (construction)

Profitability and Return

Although relative comparison data for the Company’s Operating Income margin and Net Income margin within the industry is limited, the extent of improvement from the prior year is significant.

Growth and Capital Efficiency

Comparison data with the industry median is also limited for the growth rate, which can be viewed as the Company’s standalone growth rate.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Operating Income increased by +87.2% against revenue growth of +7.6%, with profit growth substantially exceeding revenue growth due to improvements in gross margin and Operating Income margin. Higher profitability in both the Construction and Civil Engineering Businesses can be observed as a structural change.

2. The full-year Operating Income and Net Income forecasts had already been exceeded as of the cumulative Q3 results. Compared with the revenue progress rate of 74.3%, this indicates that the upside in profitability was the primary reason for exceeding the earnings forecasts.

3. The 96.7% YoY decline in external revenue from the Real Estate Business, which also generated a slight loss, and the increase in long-term borrowings from ¥0.2B to ¥7.9B are notable developments in the earnings results as changes in the business mix and funding structure.

Theoretical Share Price (Reference Value)

Sensitivity: ¥8,763–¥9,286 at ±1% for the cost of equity, and ¥9,003–¥9,043 at ±0.1 for ω.

Note:

• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this does not constitute a forecast of the market share price or a recommendation of any specific investment action, nor does it 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. 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.

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