| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥6457.4B | ¥5866.6B | +10.1% |
| Operating Income | ¥382.1B | ¥266.4B | +43.5% |
| Ordinary Income | ¥439.8B | ¥290.9B | +51.2% |
| Net Income | ¥309.0B | ¥243.8B | +26.7% |
| ROE | 7.7% | 6.9% | - |
For the fiscal year ended March 2026, Revenue was 6,457 B yen (YoY +591 B yen +10.1%), Operating Income was 382 B yen (YoY +116 B yen +43.5%), Ordinary Income was 440 B yen (YoY +149 B yen +51.2%), and Net Income attributable to owners of the parent was 310 B yen (YoY +65 B yen +26.7%), delivering significant revenue and profit growth. Revenue increased for the second consecutive year, and the operating margin improved by 1.4pt to 5.9% (prior year 4.5%). The primary driver was the expansion of Gross Profit on Completed Contracts to 13.6% (prior year 12.1%, +1.5pt). Gross margin improved to 14.3% (prior year 12.9%, +1.4pt), and with SG&A ratio contained at 8.4% (prior year 8.4%), operating leverage emerged. Ordinary Income benefited from non-operating income of 89 B yen (including dividend income 45 B yen and foreign exchange gains 16 B yen), contributing to the large profit increase. At the Net Income level, Special Gains of 102 B yen (gain on sale of available-for-sale securities 95 B yen) were recorded, while impairment losses of 27 B yen were recognized, compressing income before income taxes from 503 B yen to Net Income 310 B yen. Operating Cash Flow (OCF) improved substantially to 625 B yen (prior year 264 B yen, +136.5%), securing Free Cash Flow of 420 B yen. Dividends were set at an annual ¥58 (yen), with a Payout Ratio of 35.9%, and share buybacks of 70 B yen were executed to strengthen shareholder returns.
[Revenue] Revenue of 6,457 B yen (+10.1%) was led by the Construction (Building + Civil Engineering) segment at 3,626 B yen (+1.2%), accounting for 56% of the total. Overseas group companies 677 B yen (+18.7%) and domestic group companies 679 B yen (+16.6%) drove growth. Domestic Investment & Development declined materially to 334 B yen (-30.0%), reflecting an adjustment in the real estate market. Revenue from Completed Contracts was steady at 5,872 B yen (+11.6%), and Advances on Uncompleted Construction Contracts increased to 702 B yen (year-end prior 587 B yen, +19.5%), indicating project progress and accumulation of backlog. Engineering was flat at 1,279 B yen (+0.5%), while Environment & Energy, though small at 34 B yen (+261.5%), showed high growth. Completed contracts comprised 91% of revenue, maintaining the typical structure of the construction business.
[Profitability] Operating Income of 382 B yen (+43.5%) was achieved through a combination of expanded Gross Profit on Completed Contracts (799 B yen, prior 639 B yen, +25.0%) and controlled SG&A (540 B yen, prior 492 B yen, +9.7%). Improvement in Gross Profit on Completed Contracts to 13.6% (prior 12.1%) was driven by the Construction segment Operating Income of 270 B yen (+62.8%), with better project profitability in building and civil engineering and normalization of large projects contributing. Overseas group companies rapidly expanded Operating Income to 56 B yen (+449.1%), becoming a high-margin business with an Operating Margin of 8.3%, well above the company average. Conversely, Engineering saw Operating Income decline to 46 B yen (-42.9%), reducing margin to 3.6%, and Domestic Investment & Development fell to 21 B yen (-63.0%) due to impairment impacts. Environment & Energy continued to record an operating loss of 13 B yen. Non-operating income included dividend income 45 B yen, interest income 12 B yen, and foreign exchange gains 16 B yen, totaling non-operating income 89 B yen; after deducting non-operating expenses 32 B yen (including interest expense 26 B yen), Ordinary Income reached 440 B yen (+51.2%). Special items included gain on sale of available-for-sale securities 95 B yen, offset by impairment losses 27 B yen, netting a positive 63 B yen. After deducting income taxes of 127 B yen from income before taxes 503 B yen and minority interests, Net Income attributable to owners of the parent was 310 B yen (+26.7%). In conclusion, the company achieved revenue and profit growth driven by the core Construction business and high growth of overseas subsidiaries, while challenges remain in Engineering, Environment & Energy, and Domestic Investment & Development.
The Construction segment (Building + Civil Engineering) reported Revenue 3,626 B yen (+1.2%) and Operating Income 270 B yen (+62.8%), with an Operating Margin of 7.4%, a significant improvement from 4.5% in the prior year. This was mainly due to improved gross profit on completed contracts and normalization of project profitability. Engineering reported Revenue 1,279 B yen (+0.5%) and Operating Income 46 B yen (-42.9%), with margin declining to 3.6% from 6.3% in the prior year, impacted by a tough cost environment and deterioration in project profitability. Domestic Investment & Development reported Revenue 334 B yen (-30.0%) and Operating Income 21 B yen (-63.0%) with a margin of 6.2%, a marked deterioration from 11.7% prior year, pressured by impairment losses of 22 B yen. Domestic group companies recorded Revenue 679 B yen (+16.6%) and Operating Income 28 B yen (-8.8%) with margin 4.1%, where revenue growth outpaced profit. Overseas group companies achieved Revenue 677 B yen (+18.7%) and Operating Income 56 B yen (+449.1%) with margin 8.3%, reflecting high-margin overseas projects and scale expansion. Environment & Energy recorded Revenue 34 B yen (+261.5%) and an operating loss of 13 B yen, with margin -38.0%, continuing in the red despite revenue expansion. Construction and overseas groups drove company-wide profits, while turnaround of Domestic Investment & Development and Engineering remains a priority.
[Profitability] Operating margin 5.9% (prior year 4.5%, +1.4pt) and Net Profit Margin 4.8% (prior year 4.2%, +0.6pt) indicate improved profitability. Improvement in Gross Profit on Completed Contracts to 13.6% (prior year 12.1%, +1.5pt) was the main driver, while SG&A ratio was maintained at 8.4% (prior year 8.4%, flat). ROE 7.7% slightly improved from 7.3% prior year, estimated 3-year average around 7.5%. [Cash Quality] Operating Cash Flow 625 B yen is 2.02x Net Income 310 B yen, indicating high cash quality, and OCF/EBITDA is 1.28x (EBITDA = Operating Income 382 B yen + Depreciation 104 B yen = 486 B yen), which is healthy. Accrual ratio -2.5% is low, indicating strong cash conversion. [Investment Efficiency] Total asset turnover 0.65x (Revenue 6,457 B yen / Average Total Assets 9,610 B yen) is standard for a capital-intensive construction firm. Estimated ROIC 6.3% (NOPAT about 262 B yen / Invested Capital 4,170 B yen) exceeds estimated WACC of about 2.5%, indicating value creation. [Financial Soundness] Equity Ratio 40.4% (prior year 38.3%, +2.1pt) and Debt/Equity 0.50x (Interest-bearing debt 2,039 B yen / Equity 4,032 B yen) indicate high safety. Debt/EBITDA 4.2x is somewhat high, but Interest Coverage 14.7x (OCF 625 B yen / Interest Paid 26 B yen; also 14.7x on operating income basis) shows strong ability to service interest. Current Ratio 136% (Current Assets 4,794 B yen / Current Liabilities 3,517 B yen) indicates sufficient liquidity.
OCF 625 B yen improved substantially from 264 B yen prior year (+136.5%). With OCF subtotal 753 B yen (before working capital changes), working capital contributed net +115 B yen cash inflow: Accounts receivable increase -25 B yen, Accounts payable increase +120 B yen, Advances on uncompleted construction contracts increase +119 B yen, Inventory for sale of real estate decrease +133 B yen, and Advances on uncompleted construction outflows increase -103 B yen. After reflecting income taxes paid -159 B yen, interest & dividends received +56 B yen, and interest paid -25 B yen, OCF of 625 B yen was secured. Investing Cash Flow was -205 B yen, with capital expenditures -272 B yen (2.6x depreciation 104 B yen) indicating active growth investment, partially offset by proceeds from sale of investment securities +139 B yen. Acquisitions of subsidiary shares -71 B yen and business transfer -13 B yen reflect M&A activity. Free Cash Flow 420 B yen (OCF 625 B yen + Investing CF -205 B yen) greatly improved from prior year -347 B yen, sufficiently covering dividends -108 B yen and share buybacks -70 B yen. Financing Cash Flow was -438 B yen, with long-term borrowing proceeds +180 B yen, short-term borrowings repayment -167 B yen, and bond redemptions -102 B yen, effecting net repayment and implementing shareholder returns via dividends and treasury stock acquisition. Cash and cash equivalents at year-end were 846 B yen (opening 861 B yen, -15 B yen), a slight decline but liquidity remains ample.
Quality of earnings is such that Ordinary Income of 440 B yen comprises 87% from core operations (Operating Income 382 B yen) and 13% from non-operating income 89 B yen (dividend income 45 B yen, interest income 12 B yen, foreign exchange gains 16 B yen, etc.). Of the non-operating income, dividend and interest income are stable, and while foreign exchange gains are market-linked, dependence is not excessive, indicating reasonable sustainability. Special items included gain on sale of available-for-sale securities 95 B yen as a temporary boost to Net Income, net of impairment losses 27 B yen for a net +63 B yen. The divergence between Ordinary Income 440 B yen and Net Income 310 B yen is attributable to special gains and income taxes of 127 B yen; therefore, basing sustainable earning power on Ordinary Income of 440 B yen is appropriate. Accrual ratio -2.5% (OCF 625 B yen - Net Income 310 B yen = 315 B yen, about 1.0x of Net Income) is low, and OCF substantially exceeds Net Income, indicating strong cash backing for profits. Comprehensive income 658 B yen far exceeds Net Income 310 B yen, with Other Comprehensive Income 283 B yen (valuation difference on available-for-sale securities 241 B yen, actuarial gains/losses on retirement benefits 37 B yen, etc.) contributing. Expansion of valuation differences on securities reflects improved equity markets and supports increases in equity. Overall, Ordinary Income stage earnings are stable, and excluding volatility in special items, sustainability is high; next fiscal year guidance conservatively assumes Ordinary Income 400 B yen (-9.1%) to reflect potential reversal of special gains.
Full Year / FY forecast: Revenue 7,530 B yen (YoY +16.6%), Operating Income 390 B yen (YoY +2.1%), Ordinary Income 400 B yen (YoY -9.1%), Net Income attributable to owners of the parent 350 B yen (YoY +8.4%). While Revenue is expected to grow in double digits, Operating Income is assumed broadly flat, implying an Operating Margin decline to 5.2% (current period 5.9%). The projected decline in Ordinary Income reflects anticipated reversal of this period’s non-operating gains (e.g., gain on sale of available-for-sale securities) and normalization of non-operating expenses. Net Income is expected to tick up slightly assuming normalization of special items. Progress rates are Revenue 85.8% (5,866 B yen → 6,458 B yen / 7,530 B yen), Operating Income 98.0% (266 B yen → 382 B yen / 390 B yen), Ordinary Income 110.0% (291 B yen → 440 B yen / 400 B yen), indicating Ordinary Income has already exceeded the full-year forecast and Operating Income progress is 98%, implying conservative forecasting. Dividend forecast is annual ¥30 (current period ¥58), a substantial reduction reflecting a conservative stance on a full-year basis. There remains significant scope for upward revisions or additional shareholder returns during the year.
Dividends were annual ¥58 (interim ¥20, year-end ¥38) with a Payout Ratio of 35.9% based on Net Income attributable to owners of the parent 310 B yen. The dividend was substantially increased from prior year ¥14.5, and with Free Cash Flow 420 B yen, total dividends 108 B yen provide FCF coverage of 3.9x. Share buybacks of 70 B yen were executed, bringing combined return to shareholders to 178 B yen, with a Total Return Ratio of approximately 57% (178 B yen / 310 B yen). Treasury stock held at year-end was 21.97 million shares (6.9%) of 318 million shares outstanding. Next fiscal year dividend forecast is annual ¥30, a major reduction of -48% YoY, but on an EPS forecast basis of 118.23 yen, the Payout Ratio is a conservative 25.4%. There is potential for dividend increases depending on performance, and FCF coverage is at a sustainable level. The shareholder return policy targets a Payout Ratio of approximately 30–40% combined with flexible share buybacks, balancing dividend sustainability and cash generation.
Project profitability risk: With Advances on Uncompleted Construction Contracts 244 B yen (prior year 141 B yen, +73.0%) and work-in-progress increasing, while Provision for Construction Losses 30 B yen (prior year 41 B yen, -27.8%) has decreased, if fixed-price contract exposure increases on large projects or materials and labor costs rise, project profitability could deteriorate, necessitating additional loss provisions and reducing margins. Although Gross Profit on Completed Contracts improved to 13.6%, impairment losses of 27 B yen in the Domestic Investment & Development segment highlight the need for project-level profitability management and monitoring of provisioning levels.
Leverage risk: Debt/EBITDA 4.2x is somewhat high. Interest-bearing debt 2,039 B yen (short-term borrowings 528 B yen, long-term borrowings 1,137 B yen, bonds 630 B yen) versus Interest Coverage 14.7x indicates strong interest service capacity, but there is a risk of leverage increasing under profit deterioration. Fixed liabilities ratio 60.4% (fixed liabilities 2,435 B yen / equity 4,032 B yen) and Fixed Long-term Matching Ratio 64.9% (fixed assets 5,191 B yen / (equity 4,032 B yen + fixed liabilities 2,435 B yen)) are within acceptable ranges, but ongoing monitoring of sustainable debt reduction pace from OCF 625 B yen and resilience to rising interest rates is necessary.
Segment profitability risk: Domestic Investment & Development (Operating Margin 6.2%, prior 11.7%), Engineering (3.6%, prior 6.3%), and Environment & Energy (operating loss -13 B yen) show marked deterioration in profitability outside the core Construction business. Domestic Investment & Development recorded impairment losses 22 B yen and inventory for sale of real estate 468 B yen (prior 594 B yen, -21.2%) is being reduced, but valuation loss risk remains in a downturn. Engineering saw flat revenue but halved profits, and Environment & Energy remains in the red despite revenue growth. Delay in turning these segments around could slow the pace of ROE improvement from 7.7% toward the 8% range.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.9% | 5.5% (3.5%–7.2%) | +0.4pt |
| Net Profit Margin | 4.8% | 3.5% (2.5%–4.4%) | +1.3pt |
Both Operating Margin and Net Profit Margin exceed industry medians, placing the company in the upper tier within the construction industry. Improvement in Gross Profit on Completed Contracts and contribution from high-margin overseas projects support this comparative advantage.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 10.1% | 9.8% (-2.1%–15.1%) | +0.2pt |
Revenue growth is in line with industry median, maintaining a standard growth pace amid recovery in construction demand. High growth from overseas group companies underpins company-wide growth.
※ Source: Company compilation
Improvement in the core Construction profitability and expansion of high-margin overseas business resulted in Operating Margin 5.9% (prior 4.5%, +1.4pt) and Net Profit Margin 4.8% (prior 4.2%, +0.6pt). Improvement in Gross Profit on Completed Contracts to 13.6% (prior 12.1%, +1.5pt) was the main driver, and an overseas group Operating Margin of 8.3% has become a structural uplift to company margins. Continued increase in the share of high-margin overseas projects and strict management of profitability for large domestic projects could help push ROE from 7.7% into the 8% range.
OCF 625 B yen (2.02x Net Income) strengthened cash generation, and Free Cash Flow 420 B yen funded dividends 108 B yen and share buybacks 70 B yen, with Total Return Ratio 57% allowing both shareholder returns and growth investment. Although Debt/EBITDA 4.2x indicates somewhat elevated leverage, Interest Coverage 14.7x shows strong interest payment resilience, and sustained OCF expansion would provide scope to reduce interest-bearing debt. Next fiscal year guidance of Ordinary Income 400 B yen (-9.1%) is conservative, but given progress rate 110%, there remains upside potential for upward revisions.
Declines in profitability for Domestic Investment & Development (Operating Margin 6.2%, prior 11.7%) and Engineering (3.6%, prior 6.3%), and continued red ink in Environment & Energy (operating loss 13 B yen) are impediments to raising company ROE. Domestic Investment & Development recognized impairment losses 27 B yen and inventory risk remains with inventory for sale of real estate 468 B yen. Key monitoring points going forward include the pace of return to profitability for loss-making segments, sustainability of Gross Profit on Completed Contracts, backlog and the ratio of backlog to revenue (advances on uncompleted construction contracts 702 B yen trend), changes in Provision for Construction Losses, and the pace of improvement in Debt/EBITDA.
This report was automatically generated by AI 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 public financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional advisor.