HASEKO (1808) FY2026 Q3 Earnings Report

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Executive Summary

Revenue and profits increased, with a substantial rise in net income, driven by improved profitability in the construction-related business and the absence of the overseas business impairment loss recorded in the previous year. Revenue was ¥8,931.0B (+6.7% YoY), operating income was ¥638.3B (+11.1%), ordinary income was ¥611.5B (+4.7%), and net income attributable to owners of the parent was ¥382.8B (+108.4%). While operating leverage was achieved as the operating income growth rate exceeded revenue growth, the substantial increase in net income was largely attributable to the comparison effect of the absence in the current period of the overseas business fixed asset impairment loss (¥146.7B) recorded in the same period of the previous year. Underlying growth therefore needs to be assessed based on operating income and ordinary income.

Factors Affecting Business Results

【Revenue】Revenue was ¥8,931.0B (+6.7% YoY), led by the core construction-related business (external revenue of ¥6,120.4B, +7.4% YoY). The real estate-related business increased revenue to ¥1,681.6B (+2.5%), while the management and operations business increased revenue to ¥1,107.8B (+9.4%); the overseas business remained small at ¥21.1B. Segment profit in the construction-related business increased to ¥530.8B (+26.6%, profit margin of 7.9%), accounting for approximately 74% of total segment profit of ¥717.1B.

【Profit and Loss】Operating income increased to ¥638.3B (+11.1% YoY), with the gross profit margin improving to 14.4% (14.0% in the previous year) and the operating margin improving to 7.1% (6.9% in the previous year). However, SG&A expenses increased 8.6% YoY, outpacing revenue growth and partially offsetting the improvement. Ordinary income increased only to ¥611.5B (+4.7%), weighed down by higher interest expenses (¥35.2B, +35.2% YoY). Special losses declined substantially from ¥207.1B in the same period of the previous year, which included the overseas impairment loss, to ¥3.1B in the current period. This was a temporary factor that boosted net income to ¥382.8B (+108.4%). Revenue and profits increased.

Segment Analysis

The construction-related business was the largest contributor to profit growth, with external revenue of ¥6,120.4B (+7.4% YoY), segment profit of ¥530.8B (+26.6%), and a profit margin of 7.9% (an improvement of approximately 111bp from 6.8% in the previous year). The real estate-related business increased external revenue to ¥1,681.6B (+2.5%), but segment profit declined to ¥194.1B (-5.1%) and the profit margin decreased to 11.4% (down approximately 93bp from 12.3% in the previous year), indicating somewhat weaker profitability. The management and operations business increased external revenue to ¥1,107.8B (+9.4%) and segment profit to ¥54.7B (+24.8%), with the profit margin improving to 4.7% (+59bp YoY). The overseas business recorded external revenue of ¥21.1B against a segment loss of ¥62.5B, with the loss expanding from ¥42.3B in the previous year. Excluding the reversal of the previous year's impairment loss, earnings recovery remains incomplete.

Key Financial Indicators

【Profitability】The operating margin was 7.1%, improving by approximately 28bp from 6.9% in the same period of the previous year. The net profit margin also rose substantially to 4.3% (2.2% in the previous year), although this includes the comparison effect from the absence of the overseas impairment loss recorded in the previous year.【Cash Flow Quality】Net special gains and losses amounted to a loss of ¥2.1B. The increase in net income was driven primarily by improved business profitability and the disappearance of the previous year's loss, rather than by non-operating or special factors.【Investment Efficiency】Annualized ROE was 9.6%, decomposed into a net profit margin of 4.3% × total asset turnover of 0.91x × financial leverage of 2.48x, indicating a significant contribution from leverage.【Financial Soundness】The equity ratio was 40.3% (39.0% in the previous year), the current ratio was approximately 264.9%, interest-bearing debt represented a Debt/Capital ratio of 36.0%, and interest coverage was approximately 18x, indicating a stable financial foundation.

Cash Flow Analysis

As individual data from the statement of cash flows are not included in the disclosed information, fund movements are analyzed based on changes in the balance sheet. Cash and deposits declined by ¥790.3B (-33.5%) to ¥1,569.5B from ¥2,359.8B in the same period of the previous year, while short-term borrowings were substantially reduced to ¥7.4B from ¥150.0B in the same period of the previous year. Long-term borrowings increased to ¥2,963.3B (+¥313.3B YoY), indicating a shift in the funding mix from short-term to long-term financing. The company held ¥2,871.9B in real estate for sale, meaning that capital efficiency in the real estate business depends on the progress of sales and deliveries. Although cash declined, the company maintained high liquidity with a current ratio of 264.9%, securing sufficient financial flexibility.

Quality of Earnings

At the operating income level, the increase in profit was primarily attributable to recurring factors, namely improved profitability in the construction-related business. However, the substantial increase in net income (+108.4%) depended heavily on the temporary factor of the disappearance of the ¥207.1B special loss recorded in the same period of the previous year, including the ¥146.7B fixed asset impairment loss in the overseas business. Special income was ¥1.0B and special losses were ¥3.1B in the current period, resulting in a net loss of only ¥2.1B; accordingly, the impact of special factors on current-period profit itself was limited. Non-operating income was ¥25.5B, including dividend income of ¥6.4B and foreign exchange gains of ¥5.2B, while non-operating expenses totaled ¥52.4B, mainly due to interest expenses of ¥35.2B. Non-operating items therefore reduced profit on a net basis. Comprehensive income was ¥406.2B, exceeding net income of ¥382.8B. The difference resulted from the offset between the +¥76.8B valuation difference on securities and the -¥57.0B foreign currency translation adjustment, with no significant abnormalities observed in accrual quality.

Earnings Forecast and Guidance

The full-year company plan calls for revenue of ¥12,400B (+5.3% YoY), operating income of ¥970.0B (+14.5%), and ordinary income of ¥900.0B (+7.9%). Cumulative progress rates were 72.0% for revenue, 65.8% for operating income, and 67.9% for ordinary income, all below the standard progress rate of 75% as of Q3. Operating income in particular was approximately 9 percentage points below standard progress, requiring operating income of approximately ¥331.7B in Q4 (required operating margin of approximately 10.0%). Achieving the full-year plan therefore depends on profitability exceeding the cumulative margin of 7.1%.

Shareholder Returns

The Q2 dividend was ¥45.00 per share, resulting in a payout ratio of 34.4% against cumulative net income attributable to owners of the parent of ¥382.8B. Based on the full-year company forecast of an annual dividend of ¥90.00 and forecast EPS of ¥219.15, the forecast payout ratio is approximately 41.1%, within the generally accepted guideline of less than 60%. These payout ratios are calculated solely based on dividends and are distinct from the total return ratio, which includes share repurchases. The financial foundation, including an equity ratio of 40.3% and a current ratio of 264.9%, supports both dividends and financial stability.

Risk Factors

1. Risk of rising costs in the construction-related business: Given the low-margin structure, with a gross profit margin of 14.4%, profitability in the core business could come under pressure if increases in material prices, labor costs, and subcontracting expenses cannot be passed through to contract prices. Although the gross profit margin improved by approximately 41bp YoY in the current period, the SG&A ratio also rose by 12bp YoY, requiring continued monitoring of cost controls.

2. Overseas business profitability risk: The overseas business continues to record a segment loss of ¥62.5B, expanded from ¥42.3B in the previous year. Although consolidated net income increased due to the reversal of the ¥146.7B fixed asset impairment loss recorded in the previous year, earnings recovery in the business itself remains incomplete, and the potential for additional losses requires monitoring.

3. Declining profitability in the real estate-related business: While the real estate-related business increased revenue (+2.5% YoY), segment profit declined 5.1% and the profit margin decreased by approximately 93bp. Condominium market conditions, fluctuations in land and construction costs, and the timing of deliveries of ¥2,871.9B in real estate for sale could affect profitability.

Industry Benchmark (For Reference; Company Research)

Industry Benchmark (construction)

Profitability and Returns

Although comparative data for determining the company's relative position within the industry is limited, both the operating margin and net profit margin improved from the same period of the previous year.

Growth and Capital Efficiency

The revenue growth rate of 6.7% was primarily attributable to increased revenue in the construction-related business.

※Source: Company research

Key Takeaways from the Earnings Results

1. Operating income increased 11.1% against a 6.7% increase in revenue, with the profit growth rate exceeding the revenue growth rate. The earnings data indicate that profitability improvements are progressing, primarily in the construction-related business.

2. The 108.4% increase in net income includes the comparison effect from the disappearance of the overseas business fixed asset impairment loss (¥146.7B) recorded in the same period of the previous year. Accordingly, the 4.7% increase in ordinary income more closely reflects the underlying pace of business growth.

3. Cumulative progress rates against the full-year plan were 65.8% for operating income and 67.9% for ordinary income, below the standard progress rate of 75%. The degree of profitability improvement in Q4 will therefore be a key point to monitor in assessing achievement of the full-year plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,110–¥2,234 at a cost of equity of ±1%; ¥2,167–¥2,177 at ω of ±0.1.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly available data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not 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 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 discretion and responsibility, after consulting with a professional as necessary.

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