HASEKO (1808) FY2027 Q1 Earnings Report

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Executive Summary

The most important point this quarter is that improved profitability in the construction-related business drove not only revenue growth but also a substantial increase in operating income, which significantly outpaced revenue growth. Revenue was ¥3121.5B (+9.2% YoY), operating income was ¥298.6B (+46.0%), ordinary income was ¥304.6B (+58.9%), and net income attributable to owners of the parent was ¥213.0B (+68.6%). The gross profit margin improved to 16.6%, while the SG&A ratio also declined, resulting in profit growth exceeding revenue growth.

Factors Affecting Performance

【Revenue】Revenue was ¥3121.5B (+9.2% YoY), representing a strong start that exceeded the full-year company plan of +8.4% revenue growth. By segment, the Construction-Related Business expanded to ¥2350.1B (+3.7%), and the Real Estate-Related Business grew to ¥598.5B (+18.6%), while the Management and Operations Business contracted to ¥375.2B (-0.4%) and the Overseas Business declined to ¥11.7B (-14.8%). Growth was concentrated in the two businesses of construction-related services and real estate-related services.

【Profit and Loss】Operating income increased to ¥298.6B (+46.0%), ordinary income to ¥304.6B (+58.9%), and net income to ¥213.0B (+68.6%), with profit growth substantially exceeding revenue growth. The primary factor was the expansion of segment profit in the Construction-Related Business to ¥231.6B (+50.6%); the gross profit margin on completed construction contracts improved by 450bp from 13.2% to 17.7%. The gross profit margin rose to 16.6% (approximately 14.6% in the previous year), while the SG&A ratio declined to 7.0%. Consequently, fixed-cost absorption from revenue growth and cost improvements appeared simultaneously as operating leverage. Extraordinary losses consisted solely of an impairment loss of ¥0.8B, resulting in a limited impact on net income. In conclusion, the company achieved both revenue and profit growth, with improved profitability in the Construction-Related Business serving as the core driver of earnings growth.

Segment Analysis

The Construction-Related Business recorded revenue of ¥2350.1B (+3.7%) and segment profit of ¥231.6B (+50.6%), with its profit margin improving substantially year on year to 9.9%. Completed construction sales were ¥1533.6B, approximately in line with the previous year, but the gross profit margin on completed construction contracts increased from 13.2% to 17.7%, making improved project profitability the primary driver of profit growth. The Real Estate-Related Business recorded revenue of ¥598.5B (+18.6%), segment profit of ¥69.0B (+12.2%), and a profit margin of 11.5%; profit growth was moderate relative to revenue growth. The Management and Operations Business reported revenue of ¥375.2B (-0.4%), segment profit of ¥17.4B (-3.8%), and a profit margin of 4.6%, resulting in declines in both revenue and profit. The Overseas Business recorded revenue of ¥11.7B (-14.8%) and a segment loss of ¥4.1B, with its loss widening and its contribution to the total of reportable segments remaining negative. Overall, the company has a high degree of earnings dependence on the Construction-Related Business, which accounts for more than 73% of consolidated profit growth.

Key Financial Indicators

【Profitability】The operating margin was 9.6%, improving from the previous year, while the net profit margin rose to 6.8%. The gross profit margin was 16.6% and the SG&A ratio was 7.0%; improvements at the cost level were the primary contributor to the increase in profit margins.【Cash Flow Quality】Comprehensive income was ¥202.1B, slightly below net income attributable to owners of the parent of ¥212.9B, primarily due to deterioration in the valuation difference on securities of (-¥30.1B).【Investment Efficiency】Annualized ROE was 14.9%, and capital efficiency, combining total asset turnover and financial leverage, was at a favorable level.【Financial Soundness】The equity ratio was 42.2%, and liquidity was ample, with current assets of ¥9909.0B versus current liabilities of ¥3211.6B. Interest-bearing debt was primarily composed of ¥3380.0B in long-term borrowings and ¥800.0B in bonds. With operating income of ¥298.6B against interest expense of ¥14.5B, interest payment capacity was strong.

Cash Flow Analysis

Although the company did not disclose a statement of cash flows, funding trends can be inferred from changes in the balance sheet. Cash and deposits were ¥2302.9B, down from ¥2799.7B at the end of the previous fiscal year. Current liabilities declined year on year, with decreases in deposits received and income taxes payable contributing to the decline, while construction in progress increased by +52.1%, indicating progress in investment. Total assets were ¥13530.5B, contracting from the previous year. While liabilities were reduced, net assets increased to ¥5706.4B, indicating improvements in the capital structure through retained earnings and debt reduction.

Earnings Quality

The increase in profit this period was supported by improved profitability in the core Construction-Related Business, and earnings quality can therefore be assessed as high. Non-operating income was ¥21.9B, or 0.7% of revenue, a small amount primarily consisting of dividend income of ¥3.7B and not the main driver of profit expansion. The difference between ordinary income and net income was primarily attributable to income taxes of ¥90.7B, placing the effective tax rate broadly within a normal range. Extraordinary losses consisted solely of an impairment loss of ¥0.8B, and the impact of temporary factors was limited. Meanwhile, comprehensive income of ¥202.1B was slightly below net income of ¥212.9B, with deterioration in the valuation difference on securities acting as an accrual factor. The gross profit margin of 16.6% is structurally low for the construction industry, and because the 450bp improvement in the gross profit margin on completed construction contracts was the central driver of profit growth this period, the sustainability of this improvement will determine earnings quality.

Earnings Forecast and Guidance

The full-year company plan calls for revenue of ¥1380.0B (+8.4%), operating income of ¥110.0B (+11.4%), and ordinary income of ¥105.0B (+11.6%), with no revisions to either the earnings forecast or dividend forecast. Q1 progress rates were 22.6% for revenue, 27.1% for operating income, and 29.0% for ordinary income, all exceeding the standard progress rate of 25%. While progress on the profit front was particularly strong, the key to achieving the full-year plan will be whether the high Q1 gross profit margin on completed construction contracts can be sustained throughout the fiscal year.

Shareholder Returns

The full-year dividend forecast is ¥100.00 per share, representing a payout ratio of approximately 40.1% against forecast EPS of ¥249.19. Q1 EPS was ¥80.39 (+73.5% YoY), representing a 32.3% progress rate against full-year forecast EPS; current earnings progress is at a level that supports the annual dividend plan. There has been no revision to the dividend forecast, and the company has a strong foundation supporting dividend sustainability, backed by capital accumulation of ¥4973.7B in retained earnings.

Risk Factors

1. Dependence on the Construction-Related Business for profit: Segment profit of ¥231.6B accounts for 73.8% of the total ¥313.9B profit of the reportable segments. Any increase in material prices, subcontracting costs, or delays in project schedules could have a significant impact on consolidated profit.

2. Structurally low gross profit margin and sustainability of improvement: The company-wide gross profit margin of 16.6% is a typical level for the construction industry, but profit growth depends on the 450bp improvement in the gross profit margin on completed construction contracts, resulting in high sensitivity to any cost overruns.

3. Weakness in non-core businesses: The Management and Operations Business experienced declines in both revenue and profit, while the Overseas Business saw its loss widen, resulting in a limited contribution to consolidated growth. The Real Estate-Related Business, which holds ¥2435.0B in real estate for sale, may also see its funding requirements affected by fluctuations in interest rates and selling prices.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (construction)

Profitability and Return

The company is substantially above the industry median, placing its profitability among the top tier of the industry.

Growth and Capital Efficiency

The growth rate also exceeds the industry median, placing the company in the upper portion of the industry IQR.

※Source: Company analysis

Key Points from the Financial Results

1. Operating income increased by +46.0% against revenue growth of +9.2%, clearly demonstrating operating leverage from the improved gross profit margin and lower SG&A ratio. The primary factor was the improvement in the gross profit margin on completed construction contracts in the Construction-Related Business from 13.2% to 17.7%.

2. Annualized ROE was 14.9% and the equity ratio was 42.2%, indicating favorable levels of both profitability and financial soundness. Current assets substantially exceeded current liabilities, providing ample short-term financial capacity.

3. Q1 progress toward the full-year net income plan was 32.3%, exceeding the standard level. However, as the gross profit margin remains at a level approximately in line with the industry average, the key point in evaluating full-year performance will be whether the high gross profit margin on completed construction contracts can be sustained throughout the fiscal year.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,316–¥2,452 at ±1% in the cost of equity, and ¥2,377–¥2,391 at ±0.1 in ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because 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 using only 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 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. You should make investment decisions at your own responsibility and consult a professional as necessary.

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