TODA CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

For Q1 of the fiscal year ending March 2027, revenue and earnings increased, driven by improved profitability in the Construction Business and a boost from extraordinary income. However, the operating margin remained below 5%, leaving room for improvement in underlying earnings. Revenue was ¥155.36B (+18.3% YoY), operating income was ¥7.42B (+82.9%), ordinary income was ¥10.81B (+74.5%), and net income was ¥11.85B (+206.3%). The sharp increase in net income was primarily attributable to extraordinary income, including a gain on the sale of investment securities of ¥7.76B, as well as increased non-operating income from dividend income and foreign exchange gains. Attention is warranted because of the high dependence on non-recurring factors.

Factors Affecting Financial Results

【Revenue】Revenue was ¥155.36B, representing an increase of +18.3% YoY. By segment, the core Construction (Building and Civil Engineering) segment led overall growth, with revenue of ¥95.59B (+26.8%), accounting for 61.5% of total revenue. Engineering expanded to ¥31.90B (+18.3%), while domestic group companies grew to ¥14.90B (+16.3%). Overseas group companies, however, reported a decline in revenue to ¥12.86B (-23.2%).

【Profit and Loss】Operating income was ¥7.42B (+82.9% YoY), and the operating margin improved to 4.8% from 3.1% in the previous year. The gross margin increased slightly to 12.6% from 12.2%, while the SG&A ratio declined to 7.8%, contributing to the improvement in profitability. Ordinary income reached ¥10.81B, boosted by non-operating income of ¥4.12B, including dividend income of ¥2.51B and foreign exchange gains of ¥0.90B. Net income reached ¥11.85B after the addition of extraordinary income of ¥7.76B, primarily consisting of gains on the sale of investment securities. By segment, Construction generated income of ¥8.26B, while Domestic Real Estate Investment and Development, Environment and Energy, and overseas group companies recorded operating losses, leaving the earnings mix relatively burdened. Although revenue and earnings increased, the growth in net income was heavily dependent on temporary factors.

Segment Analysis

Construction (combined Building and Civil Engineering) generated revenue of ¥95.59B (+26.8%) and operating income of ¥8.26B (+100.4%), with an operating margin of 8.6%, making it the core contributor to company-wide earnings. Engineering generated revenue of ¥31.90B (+18.3%) and operating income of ¥0.61B (+75.8%), with a margin of 1.9%, contributing to the increase in earnings. Domestic group companies generated revenue of ¥14.90B (+16.3%) and operating income of ¥0.49B (+138.0%), demonstrating continued improvement. In contrast, overseas group companies reported revenue of ¥12.86B (-23.2%) and an operating loss of ¥0.33B, falling into the red. Domestic Real Estate Investment and Development generated revenue of ¥3.05B and an operating loss of ¥0.60B, while Environment and Energy generated revenue of ¥1.21B (+248.7%) and an operating loss of ¥0.40B. After reflecting an adjustment of △¥0.60B against total segment operating income of ¥8.03B, consolidated operating income was ¥7.42B. The high profitability of Construction is absorbing losses from loss-making segments, and earnings quality remains highly dispersed across segments.

Key Financial Indicators

【Profitability】The operating margin of 4.8% improved from 3.1% in the previous year but remained below 5%. The net margin improved significantly to 7.6% from 2.7%, although it includes the impact of extraordinary income. ROE was 2.4%, with the increase in net assets (+22.5% YoY) also expanding the denominator.【Cash Flow Quality】Accounts receivable from completed construction contracts decreased by ¥22.60B from ¥268.05B at the end of the previous fiscal year to ¥245.45B, indicating improved collections. However, advances received on construction contracts in progress decreased by ¥8.75B from ¥70.19B to ¥61.44B, weakening the advance-payment structure. Costs on construction contracts in progress increased by ¥3.95B to ¥28.38B, indicating an accumulation of work in progress.【Investment Efficiency】Investment securities increased by +58.6% YoY to ¥350.11B, accounting for 31.7% of total assets. The expansion of financial assets was more pronounced than business investment.【Financial Soundness】The equity ratio improved to 44.7% from 39.1% in the previous year. Total assets stood at ¥1,104.40B and net assets at ¥493.66B, indicating a strengthening capital base.

Cash Flow Analysis

As the company does not disclose a statement of cash flows, cash trends are analyzed based on changes in balance sheet items. Accounts receivable from completed construction contracts decreased by ¥22.60B, contributing to an improvement in working capital as collections of construction proceeds progressed. Meanwhile, advances received on construction contracts in progress decreased by ¥8.75B, weakening the funding effect from customer advances. Costs on construction contracts in progress increased by ¥3.95B, and real estate for sale increased by ¥13.55B, indicating greater cash tied up in work in progress and inventory. Investment securities increased by ¥129.33B. Although this includes increases from fair-value measurement, funding requirements associated with investment activities are considered substantial. Cash and deposits stood at ¥66.65B, remaining at approximately the same level as at the end of the previous fiscal year, indicating that the funding balance between operating and investing activities was generally maintained.

Earnings Quality

Current-period earnings comprise a mixture of recurring operating earnings and temporary factors. Of the ¥7.76B in extraordinary income, ¥7.75B consisted of gains on the sale of investment securities, a non-recurring item with low repeatability. Of the ¥4.12B in non-operating income, dividend income of ¥2.51B and foreign exchange gains of ¥0.90B depend on financial assets and foreign exchange market conditions and should be evaluated separately from the earnings power of the core business. Extraordinary income accounted for approximately 4割 of profit before tax of ¥18.56B, and much of the increase in net income of ¥11.85B (net income attributable to owners of the parent was ¥11.79B) was supported by non-recurring factors. Comprehensive income was ¥102.03B, substantially exceeding net income, primarily due to an increase of ¥88.83B in valuation difference on available-for-sale securities. Attention is warranted because unrealized gains, which differ from realized earnings, are driving the increase in net assets.

Earnings Forecast and Guidance

Progress against the full-year forecast was 20.6% for revenue, at ¥155.36B/¥753.00B, and 19.0% for operating income, at ¥7.42B/¥39.00B, both slightly below the simple quarterly progress benchmark of 25%. Progress was higher for ordinary income, at ¥10.81B/¥40.00B or 27.0%, and net income, at ¥11.85B/¥35.00B or 33.9%, primarily because of the boost from extraordinary income of ¥7.76B. The company has not revised either its earnings forecast or dividend forecast. The full-year ordinary income forecast represents a decline of -9.1% YoY, suggesting that the high progress rate in the current period may assume a decline in non-recurring income in subsequent quarters.

Shareholder Returns

The company’s annual dividend forecast is ¥60, indicating a policy of increasing dividends compared with the previous year’s annual results, including the interim dividend of ¥20. The payout ratio against forecast EPS of ¥118.23 is approximately 50.7% (dividends only, based on forecast full-year net income of ¥35.00B), which is considered to be within a reasonable range. There was no revision to the dividend forecast for the current quarter, and the increase in net income resulting from extraordinary income has not been directly reflected in the dividend policy. The company holds 21,966 thousand treasury shares, equivalent to 6.9% of issued shares, but has not disclosed any new acquisition policy during the current quarter.

Risk Factors

1. Segment mix deterioration risk: Overseas group companies fell to revenue of ¥12.86B (-23.2%) and an operating loss of ¥0.33B, while Domestic Real Estate Investment and Development (margin of -19.5%) and Environment and Energy (margin of -33.5%) also remained loss-making. The company’s earnings are supported by the high profitability of Construction (margin of 8.6%), and overall earnings could become rapidly vulnerable if profitability in the core segment deteriorates.

2. Sensitivity to marketable assets: Investment securities reached ¥350.11B, or 31.7% of total assets, an increase of +58.6% YoY. Valuation difference on securities increased by ¥88.83B and boosted comprehensive income, while deferred tax liabilities also increased by ¥40.61B. A reversal in equity markets could therefore have adverse effects on both the balance sheet and tax effects.

3. Dependence on temporary profitability factors: Net income of ¥11.85B was boosted by extraordinary income, including gains on the sale of investment securities of ¥7.75B. The gross margin remains low at 12.6%, limiting the company’s capacity to absorb losses if costs rise or project schedules are delayed.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (construction)

Profitability and Returns

The company’s profitability is slightly above the industry median, while its net margin ranks relatively high within the industry partly because of the impact of extraordinary income.

Growth and Capital Efficiency

The revenue growth rate is substantially above the industry median, representing a high growth pace within the construction industry.

※Source: Company analysis

Key Points from the Earnings Results

1. Improved profitability in the Building segment (margin of 8.6%, +100.4% YoY) drove the increase in company-wide earnings. Continued project selection and cost management will determine the future earnings base.

2. The increase in net income (+206.3%) was substantially supported by gains on the sale of investment securities and financial income. As indicated by the difference from the increase in operating income (+82.9%), the impact of temporary factors must be considered when evaluating earnings quality.

3. Investment securities expanded to account for 31.7% of total assets, boosting comprehensive income and net assets. Deferred tax liabilities also increased in tandem, raising the sensitivity of the balance sheet to market conditions as the asset composition changes.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,561–¥1,651 for a ±1% change in the cost of equity, and ¥1,603–¥1,606 for a change of ±0.1 in ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used; there is a timing difference relative to the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price.)

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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 responsibility, after consulting a professional as necessary.

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