| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1630.2B | ¥1600.5B | +1.9% |
| Operating Income | ¥176.0B | ¥155.3B | +13.4% |
| Ordinary Income | ¥182.2B | ¥160.3B | +13.6% |
| Net Income | ¥114.3B | ¥103.8B | +10.1% |
| ROE | 8.5% | 8.6% | - |
For the fiscal year ended March 2026, the company achieved revenue of ¥1,630.2B (vs prior year +¥29.7B, +1.9%), Operating Income of ¥176.0B (vs prior year +¥20.7B, +13.4%), Ordinary Income of ¥182.2B (vs prior year +¥21.9B, +13.6%), and Net Income attributable to owners of the parent of ¥128.5B (vs prior year +¥14.2B, +11.1%), delivering both top-line and bottom-line growth. Operating margin improved to 10.8% (prior year 9.7%) (+1.1pt) and gross margin expanded to 17.2% (prior year 15.4%) (+1.8pt). While revenue growth was modest, improvements in cost management and optimization of project mix materially improved margins, with the core Civil Engineering Business and Construction Business both reporting double-digit profit increases. ROE is estimated at 9.6% and remains at a healthy level.
[Revenue] Revenue totaled ¥1,630.2B (+1.9%), securing stable growth. By segment, the Civil Engineering Business led growth with ¥1,079.9B (+7.1%), accounting for 66.2% of the total. The Construction Business declined to ¥464.7B (-7.0%), representing 28.5% of the total, and Other Businesses amounted to ¥112.3B (-0.2%), or 6.9%. Revenue recognized at a point in time was ¥547.3B, revenue recognized over time was ¥1,078.3B, and completed-contract revenue totaled ¥1,538.9B (prior year ¥1,505.1B), showing stable trends. Sales to major customer East Japan Railway Company amounted to ¥1,184.6B, about 73% of total, indicating high customer concentration.
[Profitability] Gross profit on completed contracts increased to ¥256.4B (prior year ¥222.2B), up ¥34.2B, and the gross margin on completed contracts improved to 16.7% (prior year 14.8%) (+1.9pt). Cost of sales ratio improved to 82.8% (prior year 84.6%), reflecting progress in cost management. SG&A expenses were efficiently managed at ¥104.8B (SG&A ratio 6.4%), and Operating Income rose to ¥176.0B (Operating margin 10.8%), up 13.4%. Non-operating income was ¥6.8B (mainly dividend income ¥4.7B) and non-operating expenses were ¥0.6B (interest expense ¥0.6B), both immaterial, resulting in Ordinary Income of ¥182.2B (+13.6%). Special gains were ¥2.2B (gain on sale of investment securities) and special losses were ¥0.4B (loss on disposal of fixed assets ¥0.3B), both small, bringing Profit Before Tax to ¥184.1B. After deducting corporate taxes of ¥54.4B (effective tax rate 29.5%) and non-controlling interests of ¥1.3B, Net Income attributable to owners of the parent was ¥128.5B (+11.1%), achieving revenue and profit growth.
The Civil Engineering Business posted Revenue of ¥1,079.9B (+7.1%), Operating Income of ¥98.3B (+14.6%), and a margin of 9.1%, delivering revenue and profit growth driven by a higher mix of high-unit-price projects. The Construction Business recorded Revenue of ¥464.7B (-7.0%) but Operating Income improved to ¥63.7B (+17.3%), with margin substantially improving to 13.7% due to selective order intake and corrective cost measures. Other Businesses recorded Revenue of ¥112.3B (-0.2%), Operating Income of ¥14.0B (-6.9%), and a margin of 12.5%, showing slight declines. By segment contribution to Operating Income, Civil Engineering accounted for 55.8%, Construction 36.2%, and Other 7.9%, indicating a balanced contribution between the two core businesses. At the segment level, Construction’s margin outperformed Civil Engineering by approximately +4.6pt, supporting consolidated margins.
[Profitability] Operating margin improved to 10.8% (prior year 9.7%, +1.1pt), and Net Income margin is improving at 7.9% (estimate; prior year roughly 7.2%). Expansion of gross margin on completed contracts to 16.7% (prior year 14.8%, +1.9pt) drove profitability improvement; SG&A ratio at 6.4% is slightly up from 6.0% but remains efficient. EBITDA (estimate) is Operating Income ¥176.0B + Depreciation ¥29.7B = ¥205.7B, yielding an EBITDA margin of 12.6%, retaining double-digit level. ROE is about 9.6% (estimate: Net Income ¥128.5B ÷ average equity (¥1,339.8 + ¥1,207.8)/2), maintaining favorable capital efficiency.
[Cash Quality] Operating Cash Flow (OCF) was ¥52.4B versus Net Income ¥128.5B, giving an OCF/Net Income ratio of 0.41x, a low level. OCF/EBITDA ratio is 0.25x (OCF ¥52.4B against EBITDA ¥205.7B), indicating challenges in converting profits to cash. Increases in working capital (accounts receivable increase -¥51.4B, accounts payable decrease -¥40.4B) constrained cash generation. The accrual ratio ((Net Income - OCF)/Total Assets) is approximately 3.7%, a healthy level, but there is significant room to improve working capital management.
[Investment Efficiency] Total asset turnover was 0.80x (Revenue ¥1,630.2B ÷ Total Assets ¥2,038.5B), remaining stable. Capital expenditures were ¥30.6B and depreciation ¥29.7B, roughly balanced, indicating a maintenance/replacement investment stance. Free Cash Flow (OCF ¥52.4B - Investing CF ¥49.0B) was ¥3.4B, minimal, and FCF coverage of dividends (dividend payments ¥53.5B) was 0.06x, insufficient, supplemented by short-term borrowing.
[Financial Soundness] Equity Ratio is 65.7% (prior year 66.6%), remaining high. Current ratio 238.1% and Quick ratio 238.1% indicate extremely strong short-term liquidity. Interest-bearing debt consists only of short-term borrowings of ¥200B; Debt/EBITDA multiple is 0.97x and Debt/Equity ratio is 15.0%, reflecting conservative leverage. Interest coverage (EBITDA ¥205.7B ÷ interest expense ¥0.6B) is approximately 343x, indicating minimal interest burden; however, with 100% of debt short-term, rollover management is important. Cash and deposits totaled ¥205.7B (prior year ¥157.1B), increasing liquidity buffers.
OCF was ¥52.4B (prior year ¥41.6B, +26.0%) and improved year-over-year, but the ratio to Net Income (¥128.5B) was 0.41x, indicating weak cash conversion. Profit before tax ¥184.1B plus non-cash expenses such as depreciation yielded OCF before working capital changes of ¥100.7B, but working capital headwinds—mainly accounts receivable increase -¥51.4B and accounts payable decrease -¥40.4B—caused net cash outflow of approximately -¥91.8B. Increases in contract assets (e.g., unbilled completed contract receivables) appear temporary due to project progress but suggest room for improved collection management. After paying corporate taxes of ¥52.6B, OCF remained at ¥52.4B. Investing CF was -¥49.0B, centered on capital expenditures of -¥30.6B, intangible asset investments ¥-1.3B, purchases of investment securities -¥0.05B and sales ¥2.6B, and acquisition of subsidiary shares and similar -¥19.6B. Free Cash Flow was a minimal ¥3.4B, insufficient to cover dividend payments of ¥53.5B; the company increased short-term borrowings by ¥740B and repaid ¥640B for a net increase of ¥100B, with lease liability repayments ¥1.3B, share buybacks ¥0.01B, and proceeds from treasury stock disposals ¥0.2B, resulting in Financial CF of +¥45.2B. Ending cash rose by ¥48.6B to ¥205.7B, with increased short-term borrowings contributing to the larger liquidity buffer. Seasonality of working capital and project progress timing are the main drivers of cash flow volatility; recovery of working capital and normalization of OCF will be focal points next fiscal year.
Ordinary Income of ¥182.2B versus Operating Income of ¥176.0B indicates non-operating net income of +¥6.2B, showing profit growth led by core operations. Breakdown of non-operating income ¥6.8B includes dividend income ¥4.7B (mainly from investment securities), equity-method investment income ¥1.0B, interest income ¥0.1B, and other ¥0.9B—each small relative to sales (about 0.4%) and non-dependent. Non-operating expense was only interest expense ¥0.6B and immaterial. Special gains ¥2.2B (gain on sale of investment securities) and special losses ¥0.4B (primarily loss on disposal of fixed assets ¥0.3B) were both small and transitory. The divergence between Ordinary Income ¥182.2B and Profit Before Tax ¥184.1B is attributable to special items; the change from Profit Before Tax to Net Income attributable to owners of the parent ¥128.5B is mainly due to corporate taxes ¥54.4B (effective tax rate 29.5%) and non-controlling interests ¥1.3B, with no structural anomalies. Comprehensive income ¥185.3B (owners of parent ¥183.8B) exceeded Net Income ¥128.5B; the difference of approximately ¥55.3B is Other Comprehensive Income, mainly unrealized gains on available-for-sale securities ¥34.8B and actuarial adjustments related to retirement benefits ¥20.8B. EBITDA of ¥205.7B (Operating Income ¥176.0B + Depreciation ¥29.7B) compared to OCF ¥52.4B yields an OCF/EBITDA ratio of 0.25x, indicating weak cash generation driven by increases in working capital, which is a quality-of-earnings concern.
Full-year guidance is Revenue ¥1,670.0B (+2.4%), Operating Income ¥180.0B (+2.3%), Ordinary Income ¥185.0B (+1.5%), Net Income attributable to owners of the parent ¥130.0B (+1.2%), EPS ¥377.48, and annual dividend ¥76. Operating margin is assumed roughly flat at about 10.8%, contingent on sustaining gross margin improvements and continued SG&A control. Year-to-date progress toward the full-year plan is high: revenue 97.6%, Operating Income 97.8%, Ordinary Income 98.5%, Net Income 96.9%, with the company expecting modest further profit increases in H2. The company plan assumes conservative leverage and low interest burden; material and labor price trends and pricing negotiation power for major-customer projects are key to maintaining margins. For cash flow, improvement in working capital recovery is an important assumption; normalization of OCF (at least to the level of Net Income) will be a focus next fiscal year.
Annual dividend was ¥150 (interim ¥70, year-end ¥80), a significant increase of ¥100 year-on-year. Payout ratio is 40.2% (actual dividend ¥150 ÷ EPS ¥372.99), at a sustainable level. On a full-year forecast basis, payout ratio is expected to decline to about 20.1% (annual dividend ¥76 ÷ forecast EPS ¥377.48), likely reflecting that the forecast annual dividend ¥76 includes the interim dividend ¥70 already paid. Free Cash Flow of ¥3.4B versus dividend payments ¥53.5B yields FCF coverage of 0.06x, insufficient, and this fiscal year was supplemented by increases in short-term borrowings. Share buybacks were negligible at ¥0.01B, so total shareholder returns are mainly dividend-driven. Financial leverage is conservative (Debt/Equity 15.0%), and a robust balance sheet supports continuation of dividends, but sustainable dividends going forward require normalization of OCF and improvement in working capital recovery.
Working Capital Management Risk: With OCF ¥52.4B versus Net Income ¥128.5B (OCF/NI ratio 0.41x), cash conversion of profits is weak. Working capital increases—accounts receivable +¥51.4B and accounts payable -¥40.4B—have constrained cash generation, and FCF ¥3.4B could not cover dividend payments ¥53.5B, requiring supplementation via short-term borrowings. Volatility in project progress timing and contract terms may cause significant working capital swings; collection delays or declines in advance payments could impact liquidity.
Customer & Segment Concentration Risk: Sales to major customer East Japan Railway Company account for about 73% of revenue, and the Civil Engineering Business represents 66.2% of sales, indicating high concentration. Changes in major customer investment policies, timing of large project awards, or pricing conditions could have relatively large impacts on consolidated performance. With Construction margin (13.7%) well above Civil Engineering (9.1%), shifts in segment mix could materially affect consolidated margins.
Short-Term Funding Risk: 100% of interest-bearing debt ¥200B is short-term borrowings, concentrating the maturity profile in the short term. While Debt/EBITDA multiple 0.97x and interest coverage 343x are healthy, securing rollover certainty and potential spread widening in a rising-rate environment are potential risks. Cash ¥205.7B and current ratio 238.1% support short-term liquidity, but prolonged reliance on short-term borrowings without OCF improvement could reduce financial flexibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.8% | 5.5% (3.5%–7.2%) | +5.2pt |
| Net Income Margin | 7.0% | 3.5% (2.5%–4.4%) | +3.5pt |
Operating margin 10.8% exceeds the industry median 5.5% by +5.2pt, and Net Income margin 7.0% also exceeds the median 3.5% by +3.5pt. Profitability ranks in the upper tier within the industry, with marked effects from cost control and project selection.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 1.9% | 9.8% (-2.1%–15.1%) | -8.0pt |
Revenue growth of 1.9% lags the industry median 9.8% by -8.0pt, indicating a relatively slow growth pace. Strategy appears to favor stable growth while maintaining high profitability.
※ Source: Company compilation
Achieving both profitability improvement and capital efficiency: Operating margin 10.8% (+1.1pt) and gross margin on completed contracts 16.7% (+1.9pt) show substantial margin improvement, and ROE 9.6% ranks high within the industry. Improvements in Construction margin to 13.7% and revenue and profit growth in Civil Engineering indicate that the two core businesses are increasingly driving profit growth. Industry comparison shows Operating margin +5.2pt above the median, highlighting strong profitability.
Room to improve cash flow management: OCF/Net Income ratio 0.41x and OCF/EBITDA 0.25x indicate weak cash conversion, with working capital increases (accounts receivable +¥51.4B, accounts payable -¥40.4B) constraining cash generation. FCF ¥3.4B could not cover dividend payments ¥53.5B, and the company increased short-term borrowings by ¥100B to compensate. Next fiscal year, recovery of working capital and normalization of OCF are prerequisites for dividend sustainability and maintaining financial flexibility.
Both financial stability and concentration risks: Equity Ratio 65.7%, Current Ratio 238.1%, and Debt/EBITDA 0.97x indicate high financial soundness and limited short-term liquidity risk. However, high concentration—about 73% of sales to a major customer and Civil Engineering representing 66.2% of sales—means project progress and pricing condition changes could have significant impacts. The company plans modest full-year revenue and profit growth and targets stable growth, but improvements in working capital management and diversifying customer/segment exposure are medium- to long-term monitoring points.
This report is an AI-generated financial analysis document created by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on publicly available financial statements. Investment decisions are your responsibility; please consult a professional as needed.