| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥20578.0B | ¥19443.6B | +5.8% |
| Operating Income | ¥1186.7B | ¥710.3B | +67.1% |
| Ordinary Income | ¥1223.2B | ¥716.6B | +70.7% |
| Net Income | ¥1329.5B | ¥621.4B | +114.0% |
| ROE | 13.3% | 6.7% | - |
For the fiscal year ending March 2026, Revenue was ¥20578.0B (YoY +¥1134.4B +5.8%), Operating Income was ¥1186.7B (YoY +¥476.4B +67.1%), Ordinary Income was ¥1223.2B (YoY +¥506.6B +70.7%), and Net Income attributable to owners of the parent was ¥1266.2B (YoY +¥606.0B +91.8%). Operating margin improved to 5.8% (up +2.1pt from 3.7% a year earlier). Gross profit margin on completed construction increased to 11.9% (up +2.6pt), and development business gross margin to 18.6% (up +3.5pt), indicating significant margin recovery. Extraordinary gains of ¥964.0B (including ¥881.7B gain on sale of investment securities) boosted pre-tax profit; approximately 21% of Net Income was driven by one-time items. By segment, the Company’s Construction Business led results with Operating Income of ¥906.8B (+60.7%), while the Investment & Development Business maintained a high profitability of 31.5%.
Revenue: Revenue was ¥20578.0B, up +5.8% YoY. Core completed construction revenue was ¥18453.0B (approximately +8.8% YoY), driven by recovery in construction market conditions and contributions from large projects. Development-related revenue declined to ¥2125.0B (YoY -14.4%) but maintained high gross margins. By segment, the Company’s Construction Business recorded Revenue of ¥14774.8B (YoY +7.0%), accounting for 71.8% of total, followed by Other Businesses ¥4892.9B (-1.5%) and Investment & Development Business ¥531.5B (-0.8%). The Construction Business benefited from improved order conditions and project progress recognizing revenue, while the Development Business remained flat due to project timing.
Profitability: Operating Income rose to ¥1186.7B (+67.1% YoY). Gross margin increased to 12.5% (up +2.4pt from 10.1% prior year), far outpacing a modest rise in SG&A ratio to 6.8% (up +0.4pt). Completed construction gross profit margin improved to 11.9% (up +2.6pt) and development business gross profit margin to 18.6% (up +3.5pt). Allowance for construction losses decreased to ¥645.4B (down -37.9% from ¥1040.0B), suggesting resolution of loss-making projects and improved cost control. Segment Operating Income: Construction Business ¥906.8B (+60.7%, margin 6.1%), Other Businesses ¥305.3B (+22.4%, margin 6.2%), Investment & Development Business ¥167.3B (-0.8%, margin 31.5%). Non-operating income comprised dividend income ¥56.7B and foreign exchange gains ¥27.3B, totaling non-operating income ¥144.8B; after non-operating expenses ¥108.3B (including interest expense ¥75.7B), Ordinary Income reached ¥1223.2B (+70.7%). Extraordinary income was ¥964.0B (gain on sale of investment securities ¥881.7B, gain from negative goodwill ¥59.3B, etc.), extraordinary losses were ¥253.9B (impairment losses ¥244.5B, etc.), resulting in profit before tax ¥1933.4B. After income taxes of ¥642.5B, Net Income attributable to owners of the parent was ¥1266.2B (+91.8%). Given the large contribution from extraordinary gains (about 21% of Net Income), attention is warranted on earnings quality. In conclusion, topline and profitability increased, but sustainable improvement hinges on gross margin gains and whether one-time gains can be absorbed in the next fiscal year.
The Company’s Construction Business reported Revenue of ¥14774.8B (YoY +7.0%) and Operating Income of ¥906.8B (YoY +60.7%, margin 6.1%), accounting for approximately 76% of consolidated Operating Income. The large improvement in completed construction gross profit margin to 11.9% (up +2.6pt from 9.3%) drove profits to grow faster than revenue. Recovery in construction market conditions, rigorous cost management, and improved project mix likely contributed. The Investment & Development Business posted Revenue ¥531.5B (-0.8%) and Operating Income ¥167.3B (-0.8%, margin 31.5%), maintaining high profitability despite slightly lower revenue. Development business gross margin improved to 18.6% (up +3.5pt), aided by resilient real estate market conditions and selective project quality. Other Businesses (including Engineering, Green Energy, Building Life Cycle, various subsidiaries) recorded Revenue ¥4892.9B (-1.5%) and Operating Income ¥305.3B (+22.4%, margin 6.2%), achieving higher profit despite lower sales through efficiency gains. The road paving business (Nippo Corporation) is estimated at Revenue ¥1557.5B and Operating Income ¥105.9B, a stable margin of 6.8%. Overall, strengthened profitability in Construction drove results, complemented by high-margin Investment & Development and efficiency gains in Other Businesses.
Profitability: Operating margin 5.8% (up +2.1pt from 3.7%), Net margin 6.5% (up +3.1pt from 3.4%). Completed construction gross margin 11.9% (up +2.6pt), development business gross margin 18.6% (up +3.5pt), reflecting improved cost control and project mix. SG&A ratio was contained at 6.8% (up +0.4pt). ROE improved substantially to 13.3% (from approximately 7.6% prior year, +5.7pt); DuPont decomposition: Net margin 6.5% × Total Asset Turnover 0.775 × Financial Leverage 2.65 ≈ 13.3%. The net margin improvement is the primary driver, but about 21% of this includes one-time gain on sale of investment securities and should be discounted when assessing sustainability. ROA (based on Ordinary Income) improved to 4.7% (up +1.9pt from 2.8%).
Cash Quality: Operating Cash Flow (OCF) was ¥416.4B, giving OCF/Net Income = 0.31x and OCF/EBITDA = 0.27x, both low and indicating issues converting profit to cash. From OCF subtotal ¥732.7B (starting from profit before tax ¥1933.4B with depreciation ¥335.1B added back), increases in working capital (increase in accounts receivable on completed construction ▲¥1307.3B, etc.) and income tax payments ▲¥335.7B significantly reduced OCF. Free Cash Flow was ¥347.8B (OCF ¥416.4B + Investing CF ▲¥68.6B), positive. Capital expenditures were ¥986.5B, about 2.9x depreciation ¥335.1B, indicating aggressive investment.
Investment Efficiency: Total Asset Turnover 0.775x (prior year 0.782x, essentially flat). Fixed asset turnover about 3.1x (prior year ~3.2x). Days Sales Outstanding 168 days (up +11 days from 157), indicating some lengthening of collections. Inventories are minimal (merchandise ¥12.0B) with inventory days 2.1 days, limiting inventory risk.
Financial Soundness: Equity Ratio 37.7% (up +3.6pt from 34.1%), Current Ratio 130.0% (up +4.5pt from 125.5%). Interest-bearing debt ¥3663.4B (short-term borrowings ¥2373.8B, long-term borrowings ¥1289.3B, corporate bonds ¥1560.0B, bonds maturing within one year ¥100.0B). Debt/Equity ratio 0.38x, Debt/EBITDA 2.41x, Interest Coverage (EBITDA / Interest Expense) 20.1x—credit indicators generally healthy. Short-term debt ratio is high at 64.8%; cash & deposits ¥2379.9B / short-term interest-bearing debt (short-term borrowings + bonds maturing within one year) ¥2473.8B = 0.96x, indicating tight short-term liquidity, though advances on construction contracts ¥1837.1B provide a buffer. Net cash position (cash & deposits + short-term securities - interest-bearing debt) is ▲¥525.5B, effectively net debt, but improved OCF limits liquidity risk.
OCF ¥416.4B was down ▲73.8% YoY. From OCF subtotal ¥732.7B (profit before tax ¥1933.4B plus depreciation ¥335.1B, etc.), increases in working capital (increase in accounts receivable on completed construction ▲¥1307.3B, increase in accounts payable +¥235.4B, increase in advances received +¥142.2B, etc.) were large deductions, and corporate tax payments ▲¥335.7B further suppressed OCF. Reduction in allowance for construction losses ▲¥394.6B (reversal) temporarily reduced OCF. Investing CF was ▲¥68.6B, dominated by purchases of tangible fixed assets ▲¥986.5B, partially offset by proceeds from sales +¥52.7B and acquisition of subsidiaries ▲¥81.6B. Proceeds from sale of investment securities may have been reflected partly in interest/dividend received within OCF, but no explicit sale proceeds are recorded in Investing CF. Financing CF was ▲¥1205.9B, including bond issuance +¥400.0B, bond redemptions ▲¥300.0B, long-term borrowing +¥400.3B, repayments ▲¥667.2B, dividends ▲¥288.7B, and share buybacks ▲¥100.1B. Free Cash Flow ¥347.8B (OCF + Investing CF) was down ▲79.2% YoY but remained positive. Cash & deposits decreased from ¥2941.6B at the beginning of the period to ¥2379.9B at year-end, a decrease of ¥561.7B; net decrease including foreign exchange effect +¥21.6B was ▲¥836.5B. Expansion of working capital and elevated CapEx drove cash outflows; next year, accelerating collection of accounts receivable on completed construction and normalization of allowance for construction losses will be key to improving OCF.
The recurring earnings base is driven by Operating Income from completed construction and development businesses; Operating Income of ¥1186.7B is core. Non-operating income ¥144.8B (interest received ¥38.7B, dividend income ¥56.7B, foreign exchange gains ¥27.3B, etc.) is a moderate 0.7% of Revenue. However, extraordinary income ¥964.0B (gain on sale of investment securities ¥881.7B, gain from negative goodwill ¥59.3B, gain on sale of fixed assets ¥23.0B, etc.) accounted for roughly 50% of profit before tax ¥1933.4B and raised Net Income ¥1329.5B by about 21% via one-time items. Extraordinary losses ¥253.9B (impairment losses ¥244.5B, loss on disposal of fixed assets ¥1.1B, valuation losses on investment securities ¥8.3B, etc.) notwithstanding, net non-recurring amount of ¥710.1B (extraordinary income - extraordinary losses) materially contributed to Net Income. OCF/Net Income ratio of 0.31x signals that much of the profit is not yet converted into cash, primarily due to working capital increases (increase in trade receivables +¥1427.2B equivalent, increase in advances received +¥182.5B, increase in accounts payable +¥239.5B, etc.). Accrual quality is low with OCF/EBITDA 0.27x; cash effects of one-time gains on sale of investment securities are not fully reflected in OCF. The difference between Ordinary Income ¥1223.2B and Net Income ¥1329.5B is due to taxes and extraordinary items: profit before tax ¥1933.4B → income taxes ¥642.5B deducted → non-controlling interests ¥24.7B deducted → Net Income attributable to owners of the parent ¥1266.2B. Comprehensive income ¥1576.2B (Other Comprehensive Income +¥246.7B) including valuation differences on available-for-sale securities +¥102.3B, actuarial gains on retirement benefits +¥168.8B, foreign currency translation adjustments +¥14.4B, added to Net Income and increased shareholders’ equity. Overall, the P&L is strong, but high dependence on one-time gains necessitates monitoring; sustainable earnings will depend on maintaining improved gross margins and construction profitability.
The company’s plan for the coming fiscal year calls for Revenue ¥23100.0B (YoY +12.3%), Operating Income ¥1530.0B (YoY +28.9%), Ordinary Income ¥1480.0B (YoY +21.0%), Net Income attributable to owners of the parent ¥1240.0B (YoY -6.7%), EPS ¥191.40, DPS ¥38.50. Net Income is expected to decline due to the reversal of one-time gains from sale of investment securities, though Operating and Ordinary Income are planned to increase. Operating margin is projected at 6.6% for the full year (vs. current 5.8%, +0.8pt), incorporating further margin improvement. The revenue increase assumption relies on order fulfillment in the Construction Business and project accumulation in Development, with completed construction growth and gross margin maintenance as prerequisites. Compared to this period, the plan assumes Revenue +12.3% and Operating Income +28.9%, indicating leverage on operating profit, but control over SG&A growth will be critical. The projected decline in Net Income reflects a conservative stance accounting for the reversal of extraordinary gains; underlying earnings are expected to continue improving. Payout Ratio on the full-year projection is 20.1% (38.5 / 191.4), down from 40.1% this period; this could reflect a reset of total dividend amount and requires confirmation of dividend policy in company materials. Although backlog disclosure is not in this dataset, the increase in advances received to ¥1837.1B (YoY +11.0%) suggests firm order conditions. While first-half progress is outside the scope of this data, achieving full-year Revenue +12.3% and Operating Income +28.9% will likely require strengthened margin and SG&A controls in the second half.
Actual dividends comprised interim ¥22 and year-end ¥50, total ¥72 (up ¥54.5 from prior ¥17.5). Total dividends amounted to ¥262.0B against Net Income ¥1329.5B for a payout ratio of 19.7%; versus Net Income attributable to owners of the parent ¥1266.2B the payout ratio is 20.7%. Excluding gain from negative goodwill ¥59.3B, payout ratio is 20.5%. Share buybacks amounted to ¥100.1B, making total shareholder returns ¥362.1B and Total Return Ratio 28.6% (relative to Net Income). Total returns ¥362.1B relative to Free Cash Flow ¥347.8B is 1.04x, roughly balanced; dividends alone are 0.75x of FCF, a sustainable level. Although medium-term policy may target a payout ratio around 40% per the mid-term management plan, this period’s payout ratio 19.7% is well below that. The company’s planned full-year dividend ¥38.5 (on EPS ¥191.4) equates to a payout ratio of 20.1%—interpreted as an adjustment reflecting the reversal of one-time gains rather than a structural cut. Expansion of dividends in the prior year from ¥17.5 to ¥72 was largely driven by one-off profit; the ¥38.5 plan for next year represents a return toward sustainable dividend levels. Room for further increases depends on improving OCF to match Net Income and accumulating cash generation not reliant on sale of investment securities. Cash & deposits ¥2379.9B and internal reserves are ample, so dividend payment capacity is not currently constrained from a financial perspective.
Working Capital Risk: Accounts receivable on completed construction increased to ¥9531.9B (YoY +18.4%), markedly higher, and OCF/Net Income is 0.31x, indicating low cash conversion of profits. Days Sales Outstanding 168 days (up +11 days from 157) shows lengthening collection terms; delays in collection or receivable asset deterioration from large projects pose risk. While advances on construction contracts ¥1837.1B provide cushioning, working capital expansion pressures liquidity, and with short-term debt ratio high at 64.8% there is concern over tightening short-term liquidity.
Construction Profitability Risk: Allowance for construction losses decreased to ¥645.4B (from ¥1040.0B, down -37.9%), but amid continued pressure from rising material and labor costs and labor shortages, fixed-price contracts could suffer margin deterioration or delays increasing costs, potentially leading to re-accumulation of loss provisions. Completed construction gross margin improved to 11.9%, but delayed cost pass-through or weather/disaster risks could necessitate provisioning, pressuring earnings and cash flow in coming years.
One-time Gain Dependency Risk: Of Net Income ¥1329.5B, extraordinary income ¥964.0B (gain on sale of investment securities ¥881.7B, negative goodwill ¥59.3B, etc.) accounts for roughly 21%, making assessment of sustainable earnings difficult. Next year’s plan forecasts Net Income ¥1240.0B (down -6.7%); whether increased Operating Income can offset the reversal of one-time gains is pivotal. Book value of investment securities remains high at ¥3033.4B (YoY +1.3%), leaving valuation loss risk from market volatility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.8% | 5.5% (3.5%–7.2%) | +0.2pt |
| Net Margin | 6.5% | 3.5% (2.5%–4.4%) | +2.9pt |
Operating margin is 0.2pt above the industry median 5.5%, and Net margin 6.5% is 2.9pt above the median 3.5%. While contribution from one-time gain on sale of investment securities is significant, improvements in core profitability also contributed.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 5.8% | 9.8% (-2.1%–15.1%) | -4.1pt |
Revenue growth of 5.8% trails the industry median 9.8% by 4.1pt. Recovery in construction market conditions appears somewhat slower versus peers, reflecting order environment differences.
※ Source: Company aggregation
Gross Margin Improvement and ROE Recovery: Completed construction gross margin improved to 11.9% (from 9.3%, +2.6pt) and development gross margin to 18.6% (+3.5pt), driving ROE to 13.3% (from ~7.6%, +5.7pt). Continued cost control and improved project mix could sustain profitability gains. The next fiscal year plan assumes Operating margin 6.6% (vs. current 5.8%, +0.8pt), indicating focus on improving operational efficiency.
One-time Gain Dependency and Earnings Quality: Extraordinary income ¥881.7B from sale of investment securities (part of total extraordinary income ¥964.0B) accounts for roughly 21% of Net Income, and OCF/Net Income is 0.31x, indicating weak cash conversion. Next year’s forecast Net Income ¥1240.0B (down -6.7%) implies that whether core operating profit increases can absorb the reversal of one-time gains is the key evaluation point. Correcting working capital expansion (completed construction receivables +18.4%) and restoring OCF/Net Income to above 0.8x will be essential for sustainable growth and valuation enhancement.
Balance Between Short-term Liquidity and Capital Efficiency: Equity Ratio improved to 37.7% (+3.6pt), but short-term debt ratio remains high at 64.8%; Cash & Deposits ¥2379.9B / short-term interest-bearing debt ¥2473.8B = 0.96x, indicating tight short-term liquidity. Advances on construction contracts ¥1837.1B serve as a buffer, but further improvements in OCF and moderate lengthening of debt maturity (e.g., a portion of bond issuance ¥400B) could strengthen financial stability. Capital expenditure ¥986.5B (about 2.9x depreciation) is aggressive and positions the company for medium-term growth.
This report was auto-generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.