| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥1493.7B | ¥1356.3B | +10.1% |
| Operating Income | ¥129.3B | ¥123.2B | +5.0% |
| Ordinary Income | ¥127.2B | ¥122.5B | +3.8% |
| Net Income | ¥84.9B | ¥72.7B | +16.8% |
| ROE | 13.0% | 12.6% | - |
For the fiscal year ended March 2026, results landed at Revenue ¥1493.7B (YoY +¥137.4B +10.1%), Operating Income ¥129.3B (YoY +¥6.2B +5.0%), Ordinary Income ¥127.2B (YoY +¥4.7B +3.8%), and Net Income attributable to owners of the parent ¥84.9B (YoY +¥12.2B +16.8%), reflecting higher sales and profits. The two core businesses expanded double-digit: Civil Engineering Business Revenue ¥758.5B (+10.5%) and Building Business ¥629.1B (+19.0%), with gross profit increases of Civil Engineering ¥141.7B and Building ¥59.5B. Operating margin softened to 8.7% (down 0.4pt from 9.1% prior year) and gross margin to 16.6% (down 0.4pt from 17.0%), but ROE remained at double-digit 13.0%. Conversely, Operating Cash Flow (OCF) turned sharply negative to ▲¥174.7B (vs. +¥159.5B prior year; deterioration of +209.5%), driven by an accumulation of contract assets +¥196.5B, increase in trade receivables ▲¥210.9B, and decrease in contract liabilities ▲¥86.6B, expanding working capital and pressuring liquidity. Cash and cash equivalents declined to ¥93.4B (▲57.7%), with short-term borrowings +¥56.0B and new long-term borrowings +¥85.0B used to meet funding needs. The plan for next fiscal year is conservative: Revenue ¥1426.0B (▲4.5%), Operating Income ¥108.0B (▲16.5%), reflecting revisions to project profitability and smoothing of progress billings.
[Revenue] Revenue reached ¥1493.7B (YoY +¥137.4B +10.1%), a double-digit increase. By segment, Civil Engineering Business external sales were ¥758.1B (+10.5%, segment sales ¥758.5B), Building Business external sales were ¥629.1B (+19.0%, same on segment basis), both expanding. Affiliates Business external sales were ¥102.4B (▲2.8%), and Other Business ¥4.1B (+0.7%), both small. Civil Engineering captured public infrastructure renewal demand, while Building benefited from expanded private-sector orders. Revenue mix: Civil Engineering 50.7%, Building 42.1%, Affiliates 6.9%, with the two core businesses accounting for over 90% of total. Project mix and progress on large projects boosted revenue, but timing concentration of work-in-progress recognition led to contract assets rising to ¥676.9B at period-end (up from ¥482.2B, +40.4%), highlighting a notable increase in unbilled amounts.
[Profitability] Cost of sales was ¥1246.2B (vs. ¥1125.9B prior year, +10.7%), outpacing revenue growth and compressing gross margin to 16.6% (down 0.4pt from 17.0%). Rising materials and labor costs outpaced price pass-through, and Building Business margin at 9.5% (gross profit margin) was notably lower than Civil Engineering at 18.7%. SG&A totaled ¥118.2B (vs. ¥107.2B prior year, +10.3%), growing roughly in line with sales, so cost control was neutral. Operating Income was ¥129.3B (+5.0%), with an operating margin of 8.7% (down 0.4pt from 9.1%). Non-operating items comprised operating income equivalents of ¥3.2B (non-operating income; dividends received ¥1.2B etc.) versus non-operating expenses ¥5.4B (interest expense ¥3.6B, fees ¥0.5B etc.), net burden ▲¥2.1B. Ordinary Income came in at ¥127.2B (+3.8%). Extraordinary gains were ¥3.0B (gains on sale of investment securities ¥1.4B, gains on sale of fixed assets ¥1.6B) and extraordinary losses ¥2.0B (impairment loss ¥0.6B, loss on disposal/sale of fixed assets ¥1.2B, valuation loss on investment securities ¥0.1B), netting +¥1.0B. Profit before tax was ¥128.2B (+5.1%), and income taxes ¥34.9B (effective tax rate 27.2%, improved 5.4pt from 32.6%), resulting in Net Income attributable to owners of the parent ¥84.9B (+16.8%). In conclusion, while revenue and profits increased, profitability metrics softened (gross margin and operating margin) and cash generation weakened, posing a near-term concern.
Civil Engineering Business segment sales ¥758.5B (vs. ¥686.6B prior year, +10.5%), segment profit (gross profit) ¥141.7B (vs. ¥131.7B prior year, +7.5%), margin 18.7%. Building Business sales ¥629.1B (vs. ¥528.6B prior year, +19.0%), profit ¥59.5B (vs. ¥51.2B prior year, +16.3%), margin 9.5%. Affiliates Business sales ¥249.3B (vs. ¥256.5B prior year, ▲2.8%; external ¥102.4B, internal ¥146.8B), profit ¥44.9B (vs. ¥47.2B prior year, ▲4.8%), margin 18.0% (on external sales base 43.8%). Other Business sales ¥4.1B, profit ¥1.3B, margin 31.0%, small scale. Civil Engineering generates 57.2% of company gross profit (¥247.5B total), remaining the core high-margin business. Although Building drove revenue growth, its 9.5% margin is low, with rising materials and labor costs and insufficient price pass-through squeezing profits. Affiliates Business relies heavily on internal sales as a subcontractor for parent company projects; reduced external sales weighed on profits. Consolidated Operating Income after inter-segment eliminations was ¥129.3B, derived from segment gross profit total ¥247.3B less SG&A ¥118.2B.
[Profitability] Operating margin 8.7% (down 0.4pt from 9.1%), Net Income margin 5.7% (up 0.3pt from 5.4%), with operating-level margins pressured by Building profitability deterioration, while lower tax burden and extraordinary gains slightly improved net margin. ROE was 13.0% (double-digit maintained), ROA (on Ordinary Income basis) 9.3% (down 0.4pt from 9.7%). EBITDA was ¥140.4B (Operating Income ¥129.3B + Depreciation ¥11.1B), giving EBITDA/Revenue of 9.4%. [Cash Quality] Operating CF / Net Income was ▲2.06x (vs. +2.19x prior year, large deterioration), OCF/EBITDA ▲1.24x, indicating a significant decline in cash conversion. Free Cash Flow was ▲¥179.8B (vs. +¥151.5B prior year), with FCF margin ▲12.0%. Main drivers were working capital expansion: contract assets +¥196.5B, increase in trade receivables ▲¥210.9B, decrease in contract liabilities ▲¥86.6B, with unbilled receivables from project progress straining liquidity. [Investment Efficiency] ROE 13.0%, total asset turnover 1.05x (vs. 1.04x prior year slight increase), financial leverage 2.18x (down from 2.26x prior year). Per-share metrics: EPS ¥199.33 (vs. ¥175.92 prior year +13.3%), BPS ¥1,398.68 (vs. ¥1,237.94 prior year +13.0%). [Financial Soundness] Equity Ratio 46.0% (up 1.8pt from 44.2%), D/E ratio 0.38x (worsened from 0.24x), interest-bearing debt ¥250.4B (vs. ¥143.4B prior year +74.7%). Current ratio 187.6%, quick ratio 187.6%—liquidity quantitatively adequate, but cash of ¥93.4B versus short-term borrowings ¥151.0B leaves cash/short-term debt at 0.62x, indicating maturity mismatch risk. Debt/EBITDA 1.78x, interest coverage 35.5x (EBITDA / interest expense) show good debt tolerance.
Operating Cash Flow was ▲¥174.7B (vs. +¥159.5B prior year, deterioration of +209.5%), turning sharply negative. Starting from profit before income taxes ¥128.2B and adding back non-cash depreciation ¥11.1B, working capital expansion pressured liquidity. Major factors: increase in trade receivables and contract assets ▲¥210.9B (prior year improvement +¥22.2B), decrease in contract liabilities ▲¥86.6B (prior year increase +¥80.2B), totaling cash outflow of ▲¥297.5B. Increase in accounts payable +¥34.1B (prior year ▲¥52.2B) partially offset this, but overall working capital deterioration was pronounced. Inventories (construction in progress/outflows) improved by +¥13.1B (prior year ▲¥3.8B), so inventory burden itself was limited, but contract assets rose to ¥676.9B at year-end (vs. ¥482.2B prior year +40.4%), remaining as uncollected receivables. Corporate tax payments ▲¥46.8B also weighed on cash, and operating activities subtotal (before tax payments) was ▲¥126.1B. Investing cash flow was ▲¥5.1B: capital expenditures ▲¥12.0B (prior year ▲¥10.0B), proceeds from sale of tangible fixed assets +¥7.2B, sale of investment securities +¥1.7B, indicating restrained investment activity. As a result, Free Cash Flow was ▲¥179.8B (vs. +¥151.5B prior year). Financing cash flow was +¥52.4B (vs. ▲¥42.1B prior year), funded by net increase in short-term borrowings +¥56.0B and new long-term borrowings +¥85.0B, while repayments of long-term borrowings ▲¥43.6B, dividend payments ▲¥42.7B, and acquisition of treasury shares ▲¥1.2B were outflows. Cash and cash equivalents fell from ¥221.0B at the beginning of the period to ¥93.4B at period-end (decline of ▲¥127.6B), a substantial year-over-year decrease of ▲57.7%. Although the decline in cash generation stems from a temporary working capital expansion, normalization of OCF through contract asset collection and accelerated progress billing is essential in the coming year.
Earnings quality is centered on core operations: of Ordinary Income ¥127.2B, Operating Income of ¥129.3B accounts for the majority. Non-operating income was minor at ¥3.2B (0.2% of revenue), including dividends received ¥1.2B and foreign exchange gains ¥0.1B. Non-operating expenses were ¥5.4B (0.4% of revenue), including interest expense ¥3.6B and fees ¥0.5B, yielding a net financial burden of ▲¥2.1B. Net extraordinary items were +¥1.0B (extraordinary gains ¥3.0B - extraordinary losses ¥2.0B), limited in scale and thus one-off effects were minor. The gap between Ordinary Income and Net Income was ¥34.0B, mainly due to income taxes and related expenses of ¥34.9B; the effective tax rate improved to 27.2% from 32.6% the prior year. Comprehensive income was ¥119.1B (¥34.2B higher than Net Income ¥84.9B), with other comprehensive income components: valuation difference on available-for-sale securities +¥14.8B, actuarial gains/losses adjustment related to retirement benefits +¥11.6B, foreign currency translation adjustment ▲¥0.3B, and equity-method affiliates ▲¥0.2B. From a cash-generation perspective, the divergence between Operating CF ▲¥174.7B and Net Income ¥84.9B is substantial, with OCF/Net Income at ▲2.06x indicating weak cash backing for reported profits. Accrual (Net Income - Operating CF) is +¥259.6B, driven by increases in contract assets and trade receivables and decreases in contract liabilities. Next fiscal year, the degree of working capital resolution will directly affect earnings quality; accelerating progress billings and inspections/acceptance is key.
Company guidance for the fiscal year ending March 2027: Revenue ¥1426.0B (vs. prior year ▲¥67.7B ▲4.5%), Operating Income ¥108.0B (vs. ▲¥21.3B ▲16.5%), Ordinary Income ¥106.0B (vs. ▲¥21.2B ▲16.6%), and Net Income attributable to owners of the parent ¥78.0B (vs. ▲¥6.9B ▲8.1%), projecting lower revenue and profits. Compared to this year’s results, progress rates were Revenue 105% and Operating Income 120%, outperforming the plan, but next year the company has set a conservative plan incorporating project profitability reviews and smoothing of progress billings. Operating margin guidance is 7.6% (down 1.1pt from this year’s 8.7%), Net Income margin 5.5% (down 0.2pt from 5.7%). EPS guidance is ¥166.67 (vs. current year ¥199.33 ▲16.4%), and dividend guidance is annual ¥50.50 (vs. current year ¥120.00, a sharp cut of ▲57.9%), with payout ratio expected to fall to 30.3%. The company notes that “actual results may differ due to various factors,” and order trends, project mix, and cost management progress are key to achieving the plan. Given the high level of contract assets, the assumption of recovery progress—i.e., normalization of Operating CF—is an important premise.
Dividends were interim ¥40 and year-end ¥80, annual ¥120 (vs. prior year annual ¥22, increase of +¥98, +445.5%), implemented. Payout ratio was 40.9% (based on annual dividends total ¥34.1B against Net Income ¥84.9B), a relatively high level. This year’s Free Cash Flow was ▲¥179.8B, so dividend coverage from internal funds was insufficient and effectively financed by borrowings and cash drawdown. Nonetheless, with Debt/EBITDA 1.78x and equity of ¥654.9B, near-term pressure for dividend cuts is limited. Next year’s dividend guidance is annual ¥50.50, a significant cut of ▲57.9% from the current year, with expected payout ratio falling to 30.3%. Share buybacks were negligible during the period (▲¥0.0B), so total shareholder return is dividend-focused. Shares outstanding were 47,486 thousand (treasury shares 667 thousand), and weighted-average shares during the period were 46,798 thousand, so share count changes from treasury share transactions were minor. No explicit dividend policy is stated; this year’s high dividend (¥120) may be temporary, and going forward a stable dividend policy linked to performance is envisioned.
Working capital management risk: Contract assets at period-end ¥676.9B (vs. ¥482.2B prior year, +40.4%), increase in trade receivables and contract assets ▲¥210.9B, and decrease in contract liabilities ▲¥86.6B have substantially expanded working capital. Operating CF was ▲¥174.7B, well below Net Income ¥84.9B, showing markedly weakened cash generation. While accumulation of unbilled receivables from project progress can be temporary in the contracting industry, delayed collections or prolonged projects could strain liquidity. Cash ¥93.4B versus short-term borrowings ¥151.0B creates a heavy short-term liability load and cash/short-term debt ratio of 0.62x, requiring attention to maturity mismatch. Next fiscal year, recovery of contract assets and acceleration of progress billings to normalize Operating CF is essential; delays would necessitate additional borrowings or other financing measures.
Profitability deterioration risk: Gross margin 16.6% (down 0.4pt from 17.0%), operating margin 8.7% (down 0.4pt from 9.1%) indicate profitability weakening. Building Business margin of 9.5% is materially lower than Civil Engineering at 18.7%, with rising materials and labor costs outpacing price pass-through. Next year’s plan embeds an operating margin of 7.6% (down 1.1pt from this year), and further adverse project mix or difficulties in cost control could compress margins further. Provision for contract loss reserves is small at ¥0.5B (vs. ¥0.3B prior year +28.6%), but large-project profitability deterioration could require additional provisions. Building Business represents 42.1% of revenue; persistence of low-margin projects could press down consolidated profitability.
Reduced financial flexibility risk: Interest-bearing debt rose to ¥250.4B (vs. ¥143.4B prior year +74.7%), and D/E ratio worsened to 0.38x (vs. 0.24x prior year). Short-term borrowings ¥151.0B (vs. ¥95.0B prior year +58.9%) and long-term borrowings ¥99.4B (vs. ¥47.0B prior year +111.5%) both increased. Short-term liabilities account for 60.3% of total borrowings, increasing near-term repayment pressure and refinancing risk. Debt/EBITDA 1.78x and interest coverage 35.5x show quantitative debt tolerance, but persistent Operating CF deficits would require further borrowing or cash drawdown, reducing financial flexibility. Investment securities increased to ¥58.8B (vs. ¥37.5B prior year +56.9%), introducing valuation fluctuation risk. Cash of ¥93.4B fell from ¥221.0B prior year (▲57.7%), reducing liquidity buffer.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.7% | 5.5% (3.5%–7.2%) | +3.1pt |
| Net Income Margin | 5.7% | 3.5% (2.5%–4.4%) | +2.2pt |
Both operating margin and net margin substantially exceed industry medians, indicating a high-profitability profile among mid-to-large peers.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 10.1% | 9.8% (-2.1%–15.1%) | +0.2pt |
Revenue growth is roughly in line with the industry median; growth pace is industry-standard.
※Source: Company compilation
Whether Operating CF normalizes is the focal point: This year OCF was ▲¥174.7B with contract assets increasing +¥196.5B, worsening liquidity. Next year, recovering contract assets and accelerating progress billings is essential to normalize OCF; the degree of progress will be a watershed for stock valuation. If working capital is reduced, FCF will improve significantly, enabling dividend coverage and debt repayment; conversely, delayed collections would necessitate additional borrowing or raise dividend cut risk.
Restoring Building Business profitability is key to improving margins: Building segment margin of 9.5% is low compared with Civil Engineering at 18.7%, and with Building representing 42.1% of revenue, it depresses consolidated gross and operating margins. With continued upward pressure on materials and labor costs, achieving price pass-through and strengthening project selection to restore Building profitability would support margin recovery in coming years. The company’s conservative next-year operating margin guidance of 7.6% suggests correction is in progress.
Sustainability of high dividends depends on performance and cash flows: This year’s dividend of ¥120 (payout ratio 40.9%) is a large increase from ¥22 prior year, but next year’s guidance shows a substantial cut to ¥50.50. High dividends under FCF deficit were financed by borrowings, so future dividend levels are tied to OCF normalization and performance. With ROE 13.0% and Debt/EBITDA 1.78x and shareholders’ equity ¥654.9B, medium-to-long-term dividend sustainability is supported, but short-term policy is likely to be linked to performance volatility.
This report is an AI-generated financial analysis document based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.