| Metric | This Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥19847.4B | ¥18423.6B | +7.7% |
| Operating Income / Operating Profit | ¥1352.6B | ¥1188.8B | +13.8% |
| Ordinary Income | ¥1391.7B | ¥1294.5B | +7.5% |
| Net Income / Net Profit | ¥866.6B | ¥999.1B | -13.3% |
| ROE | 17.5% | 21.4% | - |
For the full year ending March 2026, Revenue was ¥19847.4B (YoY +¥1423.9B, +7.7%), Operating Income was ¥1352.6B (YoY +¥163.8B, +13.8%), Ordinary Income was ¥1391.7B (YoY +¥97.1B, +7.5%), and Net Income attributable to owners of the parent was ¥866.6B (YoY -¥132.5B, -13.3%). While substantial improvement was achieved at the operating level, Net Income declined YoY. The primary drivers were the absence of prior-year gains on sale of investment securities of ¥45.4B and an increased corporate tax burden of ¥395.5B. Diluted EPS was ¥298.96, up from ¥285.22 (+4.8%), indicating improved per-share profitability. Revenue growth continued for the third consecutive year, driven by stable income from the Real Estate Leasing Business and a strong YoY increase of +186.4% in the Real Estate Development Business. Operating margin improved to 6.8% from 6.5% (+0.3pt), reflecting control of cost of sales at 82.5% of Revenue and SG&A at 10.7%.
[Revenue] Revenue of ¥19847.4B (+7.7%) achieved growth across all segments. The Real Estate Leasing Business accounted for 61.4% of total Revenue at ¥12137.8B (+3.6%); bulk-lease business income was ¥10654.1B (+2.7%) and guarantee business income was ¥217.7B (+3.6%), forming a stable income base. Construction Business recorded ¥5735.8B (+2.6%) with modest growth, while Real Estate Development Business expanded sharply to ¥1473.0B (+186.4%). The Development Business was led by revenue from income-producing real estate of ¥698.6B (from ¥234.6B prior year, +197.7%) and investment condominium business revenue of ¥340.5B (from ¥226.7B prior year, +50.2%). Financial Services was ¥315.4B (+5.0%), and Other Businesses were ¥802.2B (+8.2%). Of total Revenue, ¥8385.4B (42.2%) arose from contracts with customers, while other revenues such as bulk-lease and guarantees of ¥11462.0B (57.8%) contributed as stock-type income.
[Profitability] Gross profit was ¥3470.5B (gross margin 17.5%, +0.4pt from 17.1% prior year). SG&A was ¥2117.9B (SG&A ratio 10.7%, flat YoY), resulting in Operating Income of ¥1352.6B (+13.8%). Non-operating income totaled ¥93.2B (including dividend income ¥2.0B and foreign exchange gains ¥14.0B) and non-operating expenses totaled ¥54.1B (interest expense ¥32.7B, commission expense ¥13.4B), yielding Ordinary Income of ¥1391.7B (+7.5%). Extraordinary gains were ¥6.1B (including gains on sale of fixed assets ¥2.2B) and extraordinary losses were ¥12.4B (impairment losses ¥5.0B, valuation losses on investment securities ¥5.3B, etc.), resulting in profit before income taxes of ¥1385.4B (+6.5%). Corporate taxes were ¥395.5B (prior year ¥363.2B, +8.9%), and Net Income attributable to owners of the parent after adjustment for non-controlling interests was ¥866.6B (-13.3%). The decline in Net Income was mainly due to the absence of prior-year special gains (investment securities sale gains ¥45.4B) and increased tax burden, while operating activities maintained a revenue- and profit-expanding trend.
Real Estate Leasing Business: Operating Income ¥855.5B (+6.5%), margin 7.0%, accounting for 63.2% of group operating income — the core business. The integrated revenue model of bulk-lease, guarantees, brokerage, and power services functioned effectively. Construction Business: Operating Income ¥451.5B (-4.2%), margin 7.9% (down 0.8pt from 8.7% prior year). Despite completed contract revenue of ¥5442.8B (+0.6%), margins softened, suggesting pressure from rising material and labor costs. Real Estate Development Business: Operating Income ¥185.3B (+259.8%), margin 12.6% (improved +7.5pt from 5.1% prior year). Concentration of large project recognition likely contributed, and the high margin aided improvement in group operating margin. Financial Services: Operating Income ¥63.9B (-4.5%), margin 20.2% — still high but slightly down. Other Businesses: Operating Income ¥131.3B (-0.5%), margin 16.4%. Consolidated Operating Income was ¥1352.6B (+13.8%). High-margin growth in Development and stable Leasing income drove group profit growth; improving Construction margins remains a future issue.
[Profitability] Operating margin 6.8% (prior 6.5%, +0.3pt), Net margin 4.4% (prior 5.4%, -1.0pt), ROE 17.5% (prior 21.5%, -4.0pt, showing some decline versus five-year levels). While operating-level margins improved, Net margin declined due to special items and increased tax burden. [Cash Quality] Operating Cash Flow (OCF) was ¥404.9B versus Net Income ¥866.6B, giving an OCF conversion of 0.47x (prior year 0.86x on OCF ¥856.1B vs Net Income ¥999.1B) — a marked decline. EBITDA including depreciation ¥194.5B totaled ¥1547.1B, with OCF/EBITDA ratio 0.26x; working capital increases (inventory for sale +¥481.98B, etc.) hampered cash realization. [Investment Efficiency] Total asset turnover was 1.45x (down from 1.51x), with total assets of ¥13675.0B against Revenue ¥19847.4B. ROA (on Ordinary Income) was 10.7% (down 0.5pt from 11.2%). [Financial Soundness] Equity Ratio was 36.3% (down from 38.4%, -2.1pt), D/E ratio 1.75x (up from 1.16x), interest-bearing debt ¥1839.3B (from ¥1137.2B, +61.7%), indicating higher leverage, though Debt/EBITDA 1.19x remains in a healthy range.
OCF was ¥404.9B (from ¥856.1B prior year, -52.7%), a significant contraction. Profit before tax ¥1385.4B plus depreciation ¥194.5B, goodwill amortization ¥12.2B, etc., produced an operating subtotal before working capital changes of ¥872.2B (down from ¥1164.4B, -25.1%). Working capital absorbed cash: increase in inventory for sale -¥481.98B (from -¥77.1B prior year, a -525% deterioration), increase in receivables -¥124.4B, increase in payables +¥27.9B. Corporate tax paid was -¥455.4B (from -¥320.6B, +42.1%), further increasing cash outflows. Investing CF was -¥417.0B (improved from -¥465.1B), including capital expenditures -¥236.6B (from -¥174.5B, +35.6%) and intangible asset acquisitions -¥70.7B. Free Cash Flow was -¥12.1B (from +¥391.1B, -103.1%), turning negative. Financing CF was +¥372.2B (from -¥458.4B, a material improvement), with long-term borrowings raised ¥1961.3B against repayments -¥897.8B for a net +¥1063.5B in funding. Dividends paid -¥512.0B (from -¥378.9B, +35.1%) and share buybacks -¥269.7B were executed. Cash and cash equivalents at period-end were ¥2581.2B (from ¥2235.7B, +15.4%). Inventory build-up and shareholder returns were funded by borrowings, exposing weakness in OCF generation.
The gap between Ordinary Income ¥1391.7B and Net Income ¥866.6B was mainly due to tax burden (corporate taxes ¥395.5B, effective tax rate 28.6%) and net impact of special items (-¥6.3B). Of non-operating income ¥93.2B, dividend income ¥2.0B, foreign exchange gains ¥14.0B, and equity-method investment income ¥5.7B were minor components, representing less than 0.5% of Revenue and indicating low dependence and a solid recurring earnings base. Extraordinary gains ¥6.1B (gains on sale of fixed assets ¥2.2B, etc.) and extraordinary losses ¥12.4B (impairment losses ¥5.0B, valuation losses on investment securities ¥5.3B, etc.) were both one-off factors; the prior year included gains on sale of investment securities ¥45.4B that boosted Net Income, and the absence of such gains contributed to this year’s decline. Comprehensive income was ¥1033.8B while Net Income was ¥866.6B; the ¥167.2B difference was driven by other comprehensive income items such as actuarial gains/losses adjustments ¥30.5B and foreign currency translation adjustments ¥12.9B. OCF ¥404.9B lagging Net Income ¥866.6B (OCF/Net Income 0.47x) suggests deterioration in accrual quality, with inventory increases and working capital expansion impeding cash realization.
Full-year guidance (Revenue ¥25000.0B, Operating Income ¥1420.0B, Ordinary Income ¥1400.0B, Net Income attributable to owners of the parent ¥1080.0B, EPS ¥326.00) versus actual results: Revenue ¥19847.4B (progress 96.8%), Operating Income ¥1352.6B (95.2%), Ordinary Income ¥1391.7B (99.4%), Net Income attributable to owners of the parent ¥866.6B (80.2%). Revenue and Ordinary Income are broadly on plan, but Operating Income missed by -¥67.4B (-4.7%) and Net Income missed by -¥213.4B (-19.8%). The Operating Income shortfall was driven by Construction segment margin deterioration and higher SG&A; the Net Income shortfall was due to the absence of prior-year special gains and higher tax burden. Dividend guidance ¥81 (combined with interim results ¥342 after stock split adjustment) remains on plan. Key to achieving full-year targets will be successful cost pass-through in Construction and continued recognition of Development projects.
Annual dividend per share was ¥287 (interim ¥342, year-end ¥82, all amounts adjusted for stock split) maintained at the prior-year level of ¥287. The payout ratio (company-disclosed) was 50.0%; total dividends paid of ¥514.2B versus Net Income ¥866.6B implies an effective payout of 59.3% by calculation. Share buybacks amounted to -¥269.7B in Financing CF, up significantly from -¥0.4B prior year. Total returns (dividends + buybacks) were ¥783.9B, implying a Total Return Ratio of 90.4% relative to Net Income, up materially from prior-year dividends only of ¥474.0B (payout ratio 47.4%). With Free Cash Flow at -¥12.1B, total shareholder returns could not be covered by internal funds alone and were financed by increased long-term borrowings (+¥1259.3B). Cash and deposits of ¥2750.4B (from ¥2358.9B, +16.6%) provide liquidity, but sustainability of dividend and buyback levels depends on recovery in OCF generation. The company signals a stable dividend policy, but next year’s cash generation recovery is critical.
Expansion of working capital needs and weak OCF generation: OCF ¥404.9B (YoY -52.7%), OCF/Net Income 0.47x — low level. Inventory for sale increase -¥481.98B is the primary cause, introducing inventory valuation and slower turnover risks under adverse market conditions. Free Cash Flow turned negative at -¥12.1B, and the large total shareholder return of ¥783.9B cannot be covered by internal funds, increasing reliance on borrowings (long-term borrowings +¥1259.3B). Normalization of inventory turnover and improvement in cash collection are prerequisites for sustainable shareholder returns.
Margin deterioration in Construction segment and worsening cost environment: Construction Operating Income ¥451.5B (-4.2%), margin 7.9% (down 0.8pt from 8.7%). Rising materials and labor costs with delayed pass-through are implied, and profits fell despite slight increase in completed contract revenue. Progress in contract price revisions and cost containment will affect group margins, as Construction represents 28.9% of Revenue and delayed margin recovery could pressure overall operating profit.
Increased interest-bearing debt and interest rate risk: Interest-bearing debt ¥1839.3B (YoY +61.7%), D/E ratio 1.75x (from 1.16x) shows greater borrowing dependence. Debt/EBITDA 1.19x and Interest Coverage 41.4x remain healthy, but rising interest rates could increase financial costs. Interest expense ¥32.7B (from ¥6.1B prior year, +436.1%) has already risen significantly, and future rate movements could weigh on Ordinary Income.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.8% | 10.7% (6.8%–17.9%) | -3.8pt |
| Net Margin | 4.4% | 5.8% (2.5%–11.9%) | -1.4pt |
Both Operating and Net margins are below industry medians, indicating relatively low profitability within the real estate sector. A high share of Construction revenue and variability in Development projects are factors suppressing margins.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 7.7% | 12.8% (4.2%–29.2%) | -5.1pt |
Revenue growth is 5.1pt below the industry median; within a sector where many companies are high-growth, the company’s stock-focused rental and management model emphasizes stability over growth.
※ Source: Company compilation
High-margin growth in Development and stable Leasing revenues drove group profit growth: Real Estate Development posted Operating Income +259.8% and margin 12.6%, contributing to overall operating margin improvement. However, Development revenue recognition is timing-sensitive and sustainability depends on continued project recognition. Leasing contributed Operating Income ¥855.5B (+6.5%), representing 63.2% of group operating profit, with bulk-lease and guarantee stock income forming a stable base. This structure partially offsets margin weakness in Construction; portfolio balance going forward should be monitored.
Deterioration in cash flow quality and sustainability of shareholder returns: OCF ¥404.9B (YoY -52.7%) and OCF/Net Income 0.47x show material decline. Inventory for sale increase -¥481.98B was the main driver, and Free Cash Flow turned negative at -¥12.1B. Dividends ¥512.0B and buybacks ¥269.7B totaling ¥783.9B were funded by long-term borrowings +¥1259.3B. While D/E ratio 1.75x and Debt/EBITDA 1.19x are within healthy ranges, the company must focus on normalizing inventory turnover and improving OCF to sustain high dividends and buybacks. Interest rate increases could raise financing costs.
Correcting Construction margins and progress toward forecast attainment: Results missed full-year targets by Operating Income -4.7% and Net Income -19.8%, driven by Construction margin deterioration and higher tax burden. To meet next year’s targets, progress in cost pass-through, contract price adjustments, and continued recognition of Development projects will be critical. If OCF improvement and Construction margin recovery are confirmed, ROE (17.5% down from 21.5%) could reverse and the sustainability of total returns could improve, leaving room for relative profitability gains within the sector.
This report is an AI-generated earnings analysis document created by analyzing 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 public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.