| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥25862.6B | ¥25907.7B | -0.2% |
| Operating Income | ¥1946.8B | ¥1424.7B | +36.6% |
| Ordinary Income | ¥2042.0B | ¥1522.4B | +34.1% |
| Net Income | ¥1628.4B | ¥1157.2B | +40.7% |
| ROE | 12.4% | 9.6% | - |
The fiscal year ended March 2026 delivered largely flat Revenue of 2兆5,862B (YoY ▲45B ▲0.2%), while Operating Income rose sharply to ¥1,947B (YoY +¥522B +36.6%), Ordinary Income to ¥2,042B (YoY +¥520B +34.1%), and Net Income attributable to owners of the parent to ¥1,628B (YoY +¥471B +40.7%). The cost of sales ratio improved by 270bp to 85.9% (prior 88.6%), lifting the gross margin to 14.1% (prior 10.8%) and expanding the operating margin to 7.5% (prior 5.5%, +200bp). Selling, general and administrative expenses rose to ¥1,700B (YoY +¥171B +11.2%) but were absorbed by the substantial gross margin improvement, resulting in operating leverage. A special gain of ¥489B from the sale of investment securities lifted profit before tax to ¥2,494B; however, even on an ordinary income basis the company achieved strong YoY growth of +34.1%. Operating Cash Flow (OCF) was ¥2,529B (YoY +200.5%), equal to 1.55x Net Income ¥1,628B, and Free Cash Flow (FCF) was ¥1,686B, sufficiently covering dividends of ¥578B and share buybacks of ¥581B for total shareholder return of approx. ¥1,159B. Advances on uncompleted construction contracts increased sharply to ¥2,999B (from ¥1,934B at prior fiscal year-end, +55.1%), suggesting strong order momentum. Significant margin improvement in the Domestic Building Business (Operating Margin 8.9%, up from 4.7%) led the company-wide profitability uplift.
[Revenue] Completed construction revenue amounted to ¥2,4094B (composition 93.2%), remaining broadly flat, while revenue from development and other businesses was ¥1,769B (6.8%) and grew +43.8% YoY. By segment, Domestic Building recorded Revenue of ¥1,1656B (YoY ▲14.0%) and declined, whereas Overseas Building ¥5,095B (YoY +6.6%), Domestic Civil Engineering ¥4,430B (YoY +6.1%), Overseas Civil Engineering ¥3,360B (YoY +34.2%), and Real Estate ¥1,076B (YoY +46.3%) drove growth. The Domestic Building revenue decline reflects project selection and concentrated project schedules, but advances on uncompleted construction contracts rose to ¥2,999B (FY-end +55.1%), thickening the revenue base for subsequent periods. Strong growth in Overseas Civil Engineering reflected progress on local-currency contracts and FX effects. Overall Revenue fell only slightly by YoY ▲0.2%, with backlog and advances indicating future growth potential.
[Profitability] Cost of sales was ¥2,2216B (cost ratio 85.9%), down ¥796B YoY, improving the cost ratio by 270bp from 88.6% a year earlier. The completed-construction gross profit margin was 13.6% (prior 10.8%), and the development-and-other gross profit margin was 20.3% (prior 24.4%); improvement in completed construction profitability drove the company gross margin to 14.1% (prior 11.4%). The source of profit was the large operating-margin improvement in Domestic Building to 8.9% (prior 4.7%), supported by better project margins, expansion of design-proposal projects, peak-out in material prices, and progress on cost pass-through. Overseas Building saw a slight decline in operating margin to 2.2% (prior 2.7%), Overseas Civil Engineering recovered to 4.5% (prior 3.2%), and Real Estate maintained a high level at 18.5% (prior 22.1%). SG&A rose to ¥1,700B (SG&A ratio 6.6%, prior 5.9%) but was fully absorbed by gross margin expansion, driving Operating Income to ¥1,947B (YoY +36.6%). Non-operating items included interest income ¥52B, dividend income ¥68B, and FX gains ¥36B, and equity-method income ¥13B, with total non-operating income of ¥193B (YoY +22.3%) and non-operating expenses of ¥98B (YoY +62.8%), producing net non-operating income of +¥95B (prior +¥98B) roughly stable. Special gains were ¥498B (mainly ¥489B from sale of investment securities), and special losses were ¥46B (impairment losses ¥17B, loss on retirement of fixed assets ¥12B, valuation losses on investment securities ¥9B), producing profit before tax of ¥2,494B (YoY +35.6%). After deducting corporate taxes of ¥717B, Net Income was ¥1,628B (YoY +40.7%), achieving a large increase attributable to owners of the parent. In conclusion, high-margin Domestic Building led the gains, complemented by recovery in Overseas Civil Engineering and resilience in Real Estate.
Domestic Building: Revenue ¥1,1656B (YoY ▲14.0%), Operating Income ¥1,036B (YoY +65.1%), Margin 8.9% (prior 4.7%) — a substantial margin improvement driven by a shift to higher-value projects and cost corrections. Overseas Building: Revenue ¥5,095B (YoY +6.6%), Operating Income ¥114B (YoY ▲9.9%), Margin 2.2% (prior 2.7%) — revenue up but profit down, with FX and local margin variability pressuring results. Domestic Civil Engineering: Revenue ¥4,430B (YoY +6.1%), Operating Income ¥406B (YoY +0.5%), Margin 9.2% (prior 9.7%) — steady performance. Overseas Civil Engineering: Revenue ¥3,360B (YoY +34.2%), Operating Income ¥152B (YoY +90.3%), Margin 4.5% (prior 3.2%) — sharp recovery thanks to progress and margin improvement on large projects. Real Estate: Revenue ¥1,076B (YoY +46.3%), Operating Income ¥199B (YoY +24.2%), Margin 18.5% (prior 22.1%) — high margins sustained. Others: Revenue ¥841B (YoY +34.5%), Operating Income ¥28B (YoY +29.8%) — expanding. The Domestic Building margin improvement contributed most to the consolidated operating margin of 7.5%; despite remaining inter-segment margin dispersion, recovery in Overseas Civil Engineering enhanced diversification effects.
[Profitability] Operating margin 7.5% (prior 5.5%, +200bp), Net margin 6.3% (prior 4.5%, +180bp), ROE 12.4% (prior 12.6%, ▲0.2pt) — high levels maintained. Completed-construction gross profit margin 13.6% (prior 10.8%), Development & other gross profit margin 20.3% (prior 24.4%) — notable improvement in completed construction profitability. SG&A ratio 6.6% (prior 5.9%) rose but was absorbed by gross margin expansion. EBITDA margin 8.9% (Operating margin 7.5% + Depreciation rate 1.4%) is healthy. [Cash Quality] OCF ¥2,529B equals 1.55x Net Income ¥1,628B, and OCF/EBITDA = 1.09x — strong cash backing for profits. Accrual ratio ▲2.5% ((OCF − Net Income) ÷ Total Assets) is in a healthy range. [Investment Efficiency] Total asset turnover 0.823x (prior 0.852x) slightly declined; estimated ROIC (NOPAT ÷ Invested Capital) 6.9%. Total assets increased to ¥3,1434B (YoY +¥1,007B +3.3%), reflecting increases in working capital and fixed assets. [Financial Soundness] Equity Ratio improved to 41.9% (prior 39.8%). D/E ratio 16.7% (Debt/Equity) remains low. Interest-bearing debt ¥2,195B (short-term borrowings ¥752B + bonds ¥600B + long-term borrowings ¥1,443B) vs. cash ¥4,309B results in a net cash position. Debt/EBITDA = 0.95x, Interest Coverage 36.7x (Operating Income ÷ Interest Expense) — very strong financial resilience. Current ratio 124.4% and Quick ratio 124.4% are standard.
OCF increased substantially to ¥2,529B (YoY +200.5%). The subtotal (before working capital changes) was ¥3,283B; working capital factors included inventory increase (cash outflow △¥389B), decrease in trade receivables (cash inflow +¥698B), decrease in trade payables (cash outflow △¥1,025B), and increase in advances on uncompleted construction contracts (estimated cash inflow +¥1,002B). Large increases in advances improved working capital; after corporate tax payments △¥822B, OCF remained high. Investing Cash Flow was △¥844B, including acquisition of tangible and intangible assets △¥1,256B and acquisition of subsidiary shares △¥269B, partially offset by proceeds from sale of securities +¥753B and recovery of long-term loans +¥1B. FCF was ¥1,686B (OCF ¥2,529B − Investing CF ¥844B) and, after covering dividends ~¥578B and share buybacks ¥581B for total shareholder returns ~¥1,159B, left surplus. Financing Cash Flow was △¥1,414B, reflecting repayment of long-term borrowings △¥441B, bond redemption △¥0.2B, short-term borrowings net +¥1B, bond issuance +¥200B, dividend payments △¥578B, share buybacks △¥581B, and dividends to non-controlling interests △¥19B. Cash increased from ¥3,802B at the beginning of the period to ¥4,160B at year-end (+¥358B), further strengthening the cash position. Liquidity including cash and deposits ¥4,309B and short-term investments ¥98B totaled ¥4,407B, representing cash / short-term liabilities = 5.73x vs. short-term borrowings ¥752B — an extremely robust buffer. The quality of OCF, which includes interest and dividend receipts ¥114B and interest paid △¥45B, is strong, confirming high cash-generation capacity.
Ordinary recurring earnings are anchored by Operating Income ¥1,947B, with stable contributions from non-operating income such as interest income ¥52B, dividend income ¥68B, FX gains ¥36B, and equity-method income ¥13B. Total non-operating income ¥193B is 0.7% of Revenue and well below 5%, indicating limited reliance on non-core activities. Among one-off items, special gains of ¥498B include ¥489B from sale of investment securities, representing about 19.6% of profit before tax ¥2,494B. Special losses of ¥46B (impairment ¥17B, loss on retirement of fixed assets ¥12B, valuation losses on investment securities ¥9B) are limited. Ordinary Income excluding non-recurring items of ¥2,042B (ordinary income margin 7.9%) is close to the underlying performance. The accrual ratio of ▲2.5% ((OCF ¥2,529B − Net Income ¥1,628B) ÷ Total Assets ¥3,1434B) is healthy, with no signs of excessive profit acceleration. OCF/Net Income 1.55x and OCF/EBITDA 1.09x confirm strong cash backing. The difference between Ordinary Income ¥2,042B and Net Income ¥1,628B (¥414B) is within the range explained by tax effects (corporate taxes ¥717B − difference from theoretical tax application) and non-controlling interests ¥40B, with no abnormal divergence. Comprehensive income ¥2,226B (Net Income ¥1,628B + Other Comprehensive Income ¥449B) reflects FX translation adjustments ¥135B, valuation differences on securities ¥211B, deferred hedge gains/losses ¥35B, and retirement benefit adjustments ¥30B, indicating added valuation gains. The difference between Operating Income and Ordinary Income (+¥95B) is from non-operating items; stable financial income and FX gains contributed and present no qualitative concerns.
The company’s FY2027 forecast: Revenue ¥2,9450B (YoY +13.9%), Operating Income ¥1,800B (YoY ▲7.5%), Ordinary Income ¥1,830B (YoY ▲10.4%), Net Income attributable to owners of the parent ¥1,570B (YoY ▲3.6%), and Net Income ¥1,310B (YoY ▲19.6%) — a plan for revenue growth but profit decline. Progress rates: Revenue 87.8% (first-half actual ¥2,5862B ÷ full-year forecast ¥2,9450B) is steady, while Operating Income 108.2% (first-half ¥1,947B ÷ full-year ¥1,800B) shows profit concentration in the first half. The main drivers of the planned profit decline are a reduction in non-recurring items such as the current-year ¥489B gain on sale of investment securities, a conservative assumption on materials and labor costs, and normalization of FX effects. Advances on uncompleted construction contracts ¥2,999B (FY-end +55.1%) underpin the revenue growth plan. Achieving the plan requires maintaining the high margin in Domestic Building (8.9%) and improving Overseas Building profitability (2.2% → target level), with stable cost environment and continued project selection. The company maintains a conservative outlook and will monitor second-half cost trends and the scale of non-recurring gains. First-half EPS actual ¥249.42 vs. forecast annual EPS ¥228.39 — first half exceeded the full-year EPS projection. Dividend forecast ¥47 (annual) implies a Payout Ratio of 20.6% and appears comfortable.
Annual dividend is ¥88 (interim ¥41, year-end ¥47), a substantial increase from prior-year ¥40. Payout Ratio 35.3% (¥88 ÷ EPS ¥249.42) is within a sustainable range. FCF coverage is 2.91x (FCF ¥1,686B ÷ dividends ¥578B), indicating ample coverage. The company executed share buybacks of ¥581B, helping limit dilution against the average shares outstanding of 696,649 thousand during the period. Total shareholder return of dividends ¥578B plus buybacks ¥581B ≈ ¥1,159B, with Total Return Ratio to FCF at 68.8% — appropriate. Net assets ¥1,3165B and retained earnings ¥9,055B indicate ample internal reserves and dividend capacity. Next-year dividend forecast ¥47 (company plan, assuming interim undecided and year-end ¥47) implies a cut, but given FCF generation and net cash position, downside risk is limited. However, in a period of reduced non-recurring gains, attention to the allocation pace of total returns is warranted. The company’s planned Payout Ratio of 20.6% (¥47 ÷ forecast EPS ¥228.39) is somewhat lower but sustainable given financial strength.
Materials and labor cost inflation risk: Under fixed-price construction contracts, unexpected rises in material prices or labor costs can compress margins. Although completed-construction gross profit margin improved to 13.6% (prior 10.8%) this period, deterioration in cost conditions could make maintaining Domestic Building’s high margin (8.9%) difficult. Provision for construction loss reserves ¥85.8B (prior ¥167.3B, ▲48.7%) decreased, but the risk of margin volatility on large projects remains.
Risk of company-wide margin dilution due to inter-segment margin dispersion: High margins in Domestic Building (8.9%) and Domestic Civil Engineering (9.2%) contrast with low margins in Overseas Building (2.2%) and Overseas Civil Engineering (4.5%). If Overseas Building’s sales mix increases (current composition 19.7%), sustaining consolidated operating margin 7.5% may be challenging. FX fluctuations also materially affect project profitability and translation; yen depreciation may temporarily inflate revenue and profit, whereas yen appreciation could lead to a reverse effect.
Reliance on non-recurring gains: Gain on sale of investment securities ¥489B accounted for ~19.6% of profit before tax ¥2,494B, creating a significant gap with ordinary recurring earnings. The company’s profit forecast factors in reduced non-recurring gains and plans a profit decline, but reproducibility of securities sale gains is low, making preservation of ordinary income ¥2,042B a medium-term challenge. A downturn in the real estate market could reduce the Real Estate gross margin (20.3% prior 24.4%), exerting downward pressure on consolidated margins.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.5% | 5.5% (3.5%–7.2%) | +2.0pt |
| Net Margin | 6.3% | 3.5% (2.5%–4.4%) | +2.8pt |
Profitability significantly exceeds industry medians, driven by high-margin Domestic Building.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -0.2% | 9.8% (-2.1%–15.1%) | -10.1pt |
Revenue growth lags industry median, but the large increase in advances on uncompleted construction contracts secures growth resources for subsequent periods.
※ Source: Company compilation
Sustained margin improvement in Domestic Building is driving a lasting uplift in profitability. Operating margin rose to 7.5% (prior 5.5%, +200bp) and completed-construction gross profit margin to 13.6% (prior 10.8%), reflecting project selection and cost control. The large increase in advances on uncompleted construction contracts to ¥2,999B (FY-end +55.1%) indicates strong order momentum and supports the next-year revenue growth plan.
Cash generation is very strong: OCF ¥2,529B is 1.55x Net Income ¥1,628B, and FCF ¥1,686B covered total shareholder returns of about ¥1,159B (dividends + buybacks) while leaving surplus. Cash ¥4,309B vs. interest-bearing debt ¥2,195B yields a net cash position; Debt/EBITDA = 0.95x and Interest Coverage = 36.7x indicate very high financial resilience. Payout Ratio 35.3% and FCF coverage 2.91x support sustainable shareholder returns.
Next-year guidance is conservative with Operating Income ¥1,800B (▲7.5%), primarily reflecting reduced non-recurring gains (¥489B this year). Ordinary-income-level strength remains solid. Inter-segment margin dispersion (Domestic Building 8.9% vs Overseas Building 2.2%) remains a source of margin volatility, though recovery in Overseas Civil Engineering (Operating Margin 4.5%, prior 3.2%) improves diversification. Low R&D-to-sales ratio 0.7% is a structural issue, but continued productivity investments and strengthening design-proposal capabilities are key to maintaining medium-term competitiveness.
This report was auto-generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute an investment recommendation for specific securities. Industry benchmarks are reference information compiled by the firm from public financial disclosures. Investment decisions are your responsibility; consult a professional advisor as needed.