Quick View
| Metric | Current Period | Prior-Year Period | YoY |
|---|---|---|---|
| Revenue | ¥640.09B | ¥649.62B | −1.5% |
| Operating Income | ¥40.52B | ¥37.57B | +7.8% |
| Ordinary Income | ¥44.43B | ¥38.84B | +14.4% |
| Net Income | ¥33.09B | ¥26.98B | +22.7% |
| ROE (annualized) | 9.5% | 7.5% | - |
Executive Summary
Despite a decline in revenue, earnings increased due to improved profitability, with higher margins driving overall performance. Revenue was ¥640.09B (-1.5% YoY), Operating Income was ¥40.52B (+7.8%), Ordinary Income was ¥44.43B (+14.4%), and Net Income was ¥33.09B (+22.7%). A substantial increase in revenue from the Development Business and other operations offset the decline in completed construction revenue. In addition, improved gross profit in the Civil Engineering and Development Businesses, together with increases in non-operating income and extraordinary gains, contributed to the earnings increase.
Factors Affecting Performance
【Revenue】Revenue was ¥640.09B, down 1.5% YoY. Completed construction revenue decreased 6.9% YoY to ¥559.00B, while revenue from the Development Business and other operations increased 65.3% YoY to ¥81.09B, mitigating the decline in total revenue. By segment, revenue increased in the Civil Engineering Business (Engineering) to ¥106.21B (+13.3%), the Development Business to ¥11.32B (+23.1%), domestic affiliates to ¥86.94B (+7.7%), and overseas affiliates to ¥240.59B (+5.1%). In contrast, the Construction Business declined 15.2% YoY to ¥226.16B, and the decline in this business, which represents a significant portion of consolidated revenue, weighed on overall performance.
【Profit and Loss】Operating Income increased 7.8% YoY to ¥40.52B, and the Operating Income margin improved to 6.3% from 5.8% in the prior year. The gross margin increased to 13.3% from 11.7%, including an improvement in the gross margin on completed construction to 12.0% from 10.9% and in the gross margin on the Development Business and other operations to 22.3% from 20.5%. By segment, the Civil Engineering Business made the largest contribution, with segment profit of ¥15.29B (+56.8%, 14.4% margin), while the Construction Business posted lower earnings of ¥12.30B (-24.0%, 5.4% margin), indicating that the earnings increase was not broad-based. SG&A expenses rose 17.0% YoY to ¥44.84B, and the SG&A ratio increased to 7.0% from 5.9%. Without the improvement in gross profit, the Operating Income margin would have deteriorated. Ordinary Income was ¥44.43B (+14.4%), supported by ¥13.13B in non-operating income, including interest income of ¥5.65B and dividend income of ¥3.39B. In addition, extraordinary gains of ¥4.06B, primarily consisting of a gain on the sale of investment securities of ¥4.08B, a non-recurring factor, lifted Profit Before Tax to ¥48.49B and contributed to Net Income of ¥33.09B (+22.7%). Overall, the results reflected lower revenue but higher earnings.
Segment Analysis
The Civil Engineering Business (Engineering) was the largest driver, with segment profit of ¥15.29B accounting for approximately 37.8% of total company segment profit. Overseas affiliates posted a significant earnings increase to ¥8.14B (+48.7%), while domestic affiliates recorded lower earnings of ¥4.20B (-20.2%), and the Development Business contracted to ¥0.49B (-39.5%). The Construction Business posted lower earnings of ¥12.30B (-24.0%), and its large revenue scale means that it has a significant impact on consolidated profit. While higher profitability in the Civil Engineering Business and growth in overseas operations led the earnings increase, deteriorating profitability in the Construction Business remains a structural issue.
Key Financial Metrics
【Profitability】The Operating Income margin was 6.3%, improving from 5.8% in the prior year, while the Net Profit margin rose to 5.2% from 4.2%, based on Net Income of ¥33.09B. The gross margin improved by approximately 1.6pt to 13.3% from 11.7%, although the SG&A ratio also increased to 7.0% from 5.9%; thus, the improvement in gross profit supported the increase in the Operating Income margin.【Cash Quality】Cash and deposits were ¥492.12B. Current assets of ¥1,975.68B exceeded current liabilities of ¥1,451.52B, resulting in a current ratio of approximately 136.1%. Advances received on construction projects of ¥231.73B substantially exceeded costs on uncompleted construction contracts of ¥17.62B, indicating that the advance-payment structure supplemented working capital.【Investment Efficiency】Annualized ROE was 9.5%, based on net assets of ¥1,387.20B and an Equity Ratio of 41.0%. Basic EPS was ¥66.57, an increase of +17.9% from ¥56.46 in the prior year.【Financial Soundness】The Equity Ratio improved to 41.0% from 39.6% in the prior year. Despite an interest-bearing debt structure that includes long-term borrowings of ¥280.14B and bonds of ¥105.85B, Operating Income of ¥40.52B was secured against interest expenses of ¥5.06B. Total assets were ¥3,384.49B, down YoY, indicating progress in balancing asset reduction and capital efficiency.
Cash Flow Analysis
Because a statement of cash flows has not been disclosed, cash movements are analyzed based on changes in the balance sheet. Cash and deposits were ¥492.12B, an increase of ¥88.83B from ¥403.29B in the prior year, indicating improved short-term liquidity. Accounts receivable from completed construction contracts decreased by ¥293.10B to ¥819.30B from ¥1,112.41B in the prior year, suggesting that the working capital burden was reduced through progress in collecting construction payments or changes in the revenue mix. Advances received on construction projects were ¥231.73B, exceeding costs on uncompleted construction contracts of ¥17.62B by ¥214.11B, indicating that advance funds related to ongoing projects supported cash management. Current liabilities decreased by ¥153.24B to ¥1,451.52B from ¥1,604.76B in the prior year, reflecting simultaneous progress in debt reduction and cash accumulation.
Earnings Quality
It should be noted that Net Income of ¥33.09B includes non-recurring items in addition to recurring operating income. Of extraordinary gains of ¥4.18B, gains on the sale of investment securities accounted for ¥4.08B, contributing to Profit Before Tax of ¥48.49B. This is a non-recurring factor that should be distinguished from sustainable earnings power. Non-operating income of ¥13.13B consisted primarily of interest income of ¥5.65B and dividend income of ¥3.39B and has a recurring nature. Meanwhile, comprehensive income of ¥28.29B was below Net Income of ¥33.09B, mainly due to a negative ¥10.64B change in the valuation difference on other securities. This resulted from market-value fluctuations in held equities and represents a factor separate from realized earnings in the current period; the divergence between Net Income and comprehensive income suggests the risk of fluctuations in asset values.
Earnings Forecast and Guidance
The Full-Year forecast is Revenue of ¥2,900.00B (-5.5% YoY), Operating Income of ¥200.00B (-16.9%), and Ordinary Income of ¥206.00B (-14.3%). Q1 progress rates were 22.1% for Revenue, 20.3% for Operating Income, and 21.6% for Ordinary Income, all below the 25% implied by simple quarterly phasing. In particular, the Operating Income progress rate was 4.7pt below the standard level, and Q1’s actual Operating Income margin of 6.3% was below the Full-Year forecast of 6.9%. Recovery in construction volume in the Construction Business and the maintenance of high profitability in the Civil Engineering Business will be key to improving progress in subsequent quarters. No revision to the earnings forecast was announced this time.
Shareholder Returns
The Full-Year dividend forecast is ¥146 per share. Based on average shares outstanding during the period of 464.60 million shares, the forecast total dividend is approximately ¥67.8B, resulting in a Payout Ratio of approximately 39.9% against the Full-Year Net Income forecast of ¥170.00B. Treasury shares increased by ¥31.66B (+27.7%) to ¥146.17B from ¥114.51B in the prior year, acting as a factor reducing shareholders’ equity. No revision was made to the dividend forecast, and dividend-only sustainability is considered to have a reasonable degree of capacity given cash and deposits of ¥492.12B.
Risk Factors
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Deteriorating profitability in the Construction Business: Revenue decreased 15.2% YoY, while segment profit declined 24.0%. Given the business’s large share of consolidated revenue, delays in recovery of construction volume or further deterioration in profitability could have a significant impact on Full-Year earnings.
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Concentration in the short-term debt structure: Interest-bearing debt includes short-term borrowings of ¥41.17B, resulting in a bias toward short-term liabilities. Cash/short-term debt is approximately 1.2x and the current ratio is 136.1%, securing sufficient near-term payment capacity; however, attention should be paid to fluctuations in cash management if refinancing conditions deteriorate.
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Collection trends for accounts receivable from completed construction contracts: The balance remains substantial at ¥819.30B. Although it decreased by ¥293.10B from the prior year, it could affect working capital and cash management depending on customers’ acceptance and billing cycles.
Industry Benchmark (For Reference; Compiled by the Company)
Industry Benchmark (construction)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income margin | 6.3% | 4.5% (2.7%–6.6%) | +1.8pt |
| Net Profit margin | 5.2% | 3.8% (-1.1%–4.4%) | +1.4pt |
The company’s profitability exceeds the industry median, with both its Operating Income margin and Net Profit margin at high levels.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth rate (YoY) | −1.5% | 4.8% (3.4%–10.1%) | −6.3pt |
The Revenue growth rate is substantially below the industry median, and the company is experiencing a decline in revenue within an industry where revenue growth continues.
※Source: Compiled by the Company
Key Takeaways from the Results
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Despite lower revenue, the company achieved higher Operating Income through an improved gross margin of 13.3% from 11.7% in the prior year. Higher profitability in the Civil Engineering Business, with a 14.4% margin, was central to the improvement in the earnings structure.
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The decline in revenue and earnings in the Construction Business, together with the increase in the SG&A ratio to 7.0% from 5.9%, are key factors to monitor regarding the sustainability of the earnings trend. The Full-Year Operating Income progress rate of 20.3% is below the standard level of 25%.
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Net Income benefited from extraordinary gains that included a gain on the sale of investment securities of ¥4.08B. This non-recurring factor must be distinguished when assessing recurring earnings power.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear (downside) | ¥3,268 |
| base (reference) | ¥3,345 |
| bull (upside) | ¥3,409 |
| Valuation Assumption | Value |
|---|---|
| Book value per share (BPS) | ¥3,011 |
| Adjusted forecast EPS | ¥393.9 |
| Cost of equity r | 9.27% (10-year Japanese government bond 2.77% + equity risk premium 6.00% + size premium 0.50%) |
| Persistence coefficient of residual income ω / explicit forecast period | 0.62 / 5 years |
| Assumed Payout Ratio | 39.6% |
| Forecast EPS confidence adjustment | ×1.070 (based on the Company’s historical track record of achieving its guidance) |
| implied PBR / PER | 1.11x / 8.5x |
Sensitivity: ¥3,252–¥3,442 at ±1% for the cost of equity, and ¥3,337–¥3,357 at ±0.1 for 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.
(Model used: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed 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.)
This report is an automatically generated earnings analysis document produced 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 a professional as necessary.
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