| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥55768.6B | ¥54348.2B | +2.6% |
| Operating Income / Operating Profit | ¥6148.8B | ¥5462.8B | +12.6% |
| Ordinary Income | ¥5719.7B | ¥5159.9B | +10.9% |
| Net Income / Net Profit | ¥2181.4B | ¥2501.7B | -12.8% |
| ROE | 7.2% | 9.2% | - |
For the fiscal year ended March 2026, Daiwa House Industry recorded Revenue of ¥55768.6B (YoY +¥1420.4B +2.6%), Operating Income of ¥6148.8B (YoY +¥686.0B +12.6%), Ordinary Income of ¥5719.7B (YoY +¥559.8B +10.9%), and Net Income attributable to owners of the parent of ¥2181.4B (YoY -¥320.3B -12.8%). While top-line and operating profit increased, Net Income declined due to Special Losses of ¥358.0B (including impairment losses of ¥306.0B). Profitability improved with an Operating Margin of 11.0% (up +0.9ppt from 10.1% prior year) and Gross Margin of 22.3% (up +2.0ppt from 20.3%), driven by Detached Housing (Operating Income +123.0%) and Commercial Facilities (+11.4%). Logistics & Business Facilities experienced YoY declines in both Revenue and Operating Income (-20.0%), creating a divergence among segments. ROE fell to 7.2% (prior year 12.9%) due to lower Net Income, while financial soundness was maintained with an Equity Ratio of 35.9% (prior year 37.1%).
[Revenue] Revenue was ¥55768.6B (YoY +2.6%), achieving the third consecutive year of revenue growth. By segment, Detached Housing: ¥13423.0B (+17.3%) recorded the highest growth rate; Commercial Facilities: ¥12902.0B (+5.1%), Rental Housing: ¥14293.0B (+3.9%), Condominiums: ¥2796.0B (+3.8%), and Environmental Energy: ¥1331.0B (+1.5%) contributed to the increase. In contrast, Logistics & Business Facilities: ¥11898.0B (-13.1%) saw a substantial decline, affected by the pullback after large projects in the prior year. Gross Margin expanded to 22.3% (prior year 20.3%, +2.0ppt), aided by price pass-through and improved project mix.
[Profitability] Operating Income of ¥6148.8B (+12.6%) significantly outpaced revenue growth, reflecting operating leverage. By segment, Detached Housing Operating Income ¥1557.0B (+123.0%, margin 11.6%) expanded rapidly; Commercial Facilities ¥1624.0B (+11.4%, margin 12.6%) was the largest profit contributor. Rental Housing ¥1411.0B (+8.6%, margin 9.9%) and Environmental Energy ¥138.0B (+11.4%, margin 10.4%) also maintained profit growth, while Condominiums ¥60.0B (-45.1%, margin 2.1%) and Logistics & Business Facilities ¥1276.0B (-20.0%, margin 10.7%) were in decline, reflecting a polarized portfolio. SG&A rose to ¥6269.0B (SG&A ratio 11.2%, up +1.0ppt from 10.2%), but gross margin expansion absorbed the increase. Ordinary Income of ¥5719.7B (+10.9%) was burdened by non-operating expenses of ¥-429.0B (principally interest expense ¥443.0B), yet Ordinary Income Margin improved to 10.3% (prior year 9.5%, +0.8ppt). Special Losses of ¥358.0B (including impairment losses ¥306.0B) pressured the conversion from Ordinary Income to Net Income, resulting in Net Income of ¥2181.4B (-12.8%). Pre-tax income was ¥5424.0B with an effective tax rate of 33.7% and tax expense of ¥1830.0B. Thus, the company ended with higher revenue and operating profit but lower Net Income.
Detached Housing posted Operating Income of ¥1557.0B (YoY +123.0%), margin 11.6%, driven by strong sales of higher-priced products and cost efficiency. Commercial Facilities delivered Operating Income ¥1625.0B (+11.4%), margin 12.6%, maintaining top-level performance among core segments. Rental Housing Operating Income ¥1411.0B (+8.6%), margin 9.9%, and Environmental Energy ¥138.0B (+11.4%), margin 10.4%, remained firm. Conversely, Logistics & Business Facilities Operating Income ¥1276.0B (-20.0%), margin 10.7%, turned lower due to the prior-year large-project tailwind and softer market conditions. Condominiums Operating Income ¥60.0B (-45.1%), margin 2.1%, became notably low-margin amid challenging sales conditions. Other segments Operating Income ¥42.0B (+48.0%), margin 7.5%, improved.
[Profitability] Operating Margin 11.0% (prior year 10.1%, +0.9ppt) and Gross Margin 22.3% (prior year 20.3%, +2.0ppt) indicate improved profitability. ROE 7.2% (prior year 12.9%) declined due to lower Net Income, while ROA (Ordinary Income basis) 6.8% (prior year 7.3%) suggests asset efficiency remains in a healthy range. [Cash Quality] Operating Cash Flow (OCF) ¥1893.0B versus Net Income ¥2181.4B yields OCF/Net Income 0.87x and OCF/EBITDA 0.50x, indicating weak cash generation. Accumulation of working capital (Construction in Progress Expenditure +¥191.0B, Inventory for Sale +¥1970.0B equivalent) pressured cash. [Investment Efficiency] Total Asset Turnover 0.66x (prior year 0.77x) declined as assets expanded from front-loaded capital expenditures of ¥4938.0B (3.5x depreciation ¥1403.0B). [Financial Soundness] Equity Ratio 35.9% (prior year 38.5%), Debt/Equity 66.6% (prior year 59.8%) show increased leverage, but current ratio 176.7% and quick ratio 175.8% indicate ample short-term liquidity. Cash and deposits ¥4344.0B and short-term borrowings ¥7579.0B yield Cash/Short-term Liabilities 0.57x, tight but buffered by advances received for construction in progress ¥2437.0B.
Operating Cash Flow was ¥1893.0B (prior year ¥4206.0B, -55.0%), where increases in working capital weighed despite higher operating profit. Operating CF subtotal of ¥3840.0B was offset by inventory increases of -¥5006.0B (accumulation of inventory for sale), increased trade receivables -¥54.0B, increased trade payables +¥47.0B, resulting in a significant working capital drain; corporate tax payments -¥1633.0B were also a burden. Investing CF was -¥7261.0B, driven by acquisitions of tangible and intangible assets -¥4938.0B (mainly commercial facilities, logistics facilities, detached housing exhibition sites), acquisition of available-for-sale securities -¥234.0B, and business acquisitions -¥272.0B, producing Free Cash Flow (FCF) of -¥5368.0B. Financing CF was +¥6311.0B, comprising net increase in short-term borrowings +¥5839.0B (ending balance of ¥7579.0B), net increase in long-term borrowings +¥338.0B, bond redemptions -¥750.0B, and dividend payments -¥939.0B. The rise in short-term funding dependence increases maturity management and interest-rate risk. Cash and deposits at period-end were ¥4344.0B (YoY +¥1012.0B), preserving liquidity, but short-term liabilities ratio 38.6% is high and improving working capital turnover is necessary.
Ordinary Income ¥5719.7B is the core of operating earnings, with non-operating income ¥289.0B (dividends received ¥54.0B, interest received ¥48.0B, etc.) versus non-operating expenses ¥718.0B (primarily interest expense ¥443.0B), resulting in a net non-operating deficit of ¥-429.0B. Extraordinary items were Special Income ¥63.0B (gain on sale of fixed assets ¥28.0B, gain on sale of investment securities ¥19.0B) versus Special Losses ¥358.0B (impairment losses ¥306.0B, loss on disposal of fixed assets ¥22.0B, etc.), netting a negative ¥295.0B and impairing the conversion from Ordinary Income to Net Income as a temporary factor. The fact that OCF is below Net Income (OCF/Net Income 0.87x) suggests delays in cash realization of accruals, influenced by accumulation of inventory for sale and project progress timing. Goodwill amortization ¥105.0B (about 1.4% of EBITDA) is minor, so distortions in profit comparisons with IFRS peers are limited. Comprehensive Income ¥3885.0B (attributable to owners of the parent ¥3807.0B) exceeded Net Income ¥2181.4B due to Other Comprehensive Income of +¥1626.0B (foreign currency translation adjustments +¥120.0B, valuation difference on available-for-sale securities +¥190.0B, deferred hedges -¥31.0B, etc.), indicating shareholder value increase beyond Net Income.
For the fiscal year ending March 2027, management forecasts Revenue ¥58000.0B (YoY +4.0%), Operating Income ¥4000.0B (YoY -34.9%), Ordinary Income ¥3420.0B (YoY -40.2%), and EPS ¥183.26. The scenario assumes a material normalization with Operating Margin 6.9% (down -4.1ppt from 11.0%), reflecting the likely one-off nature of FY2026 high-margin projects (Detached Housing and Commercial Facilities), continued SG&A pressure, and rising interest costs. Dividend guidance is a year-end dividend of ¥90 (pre-stock-split, equivalent to annual ¥176), maintaining a stable dividend policy. Assumptions behind the initial plan likely include normalization of inventory turnover, digestion pace of backlog, and segment-level margin adjustments. Progress rate on an Operating Income basis is 153.7% (¥6149.0B / ¥4000.0B), meaning current-year results substantially exceeded the forecast. Upcoming quarterly progress and order trends will be key to achieving the plan.
Annual dividend for the period totaled ¥175 (Q2-end ¥75, year-end ¥100; composed of ordinary dividend ¥165 + 70th anniversary commemorative dividend ¥10), representing a Payout Ratio of 29.2% (based on Net Income ¥2181.4B), which is within a sustainable range. Total Return Ratio is nearly the same as the Payout Ratio because share buybacks were minimal at ¥0.1B, indicating a dividend-centric return policy. Total dividends amounted to ¥939.0B (on issued shares basis) versus FCF of -¥5368.0B, yielding a dividend-to-FCF coverage of -5.71x and insufficient coverage; however, dividends were covered by Operating CF this period (OCF ¥1893.0B > dividends ¥939.0B), and total cash outflows (investment + dividends) were financed through external funding. DOE was about 3.9% (dividends ¥939.0B against retained earnings ¥23871.0B), maintaining a level commensurate with shareholder capital cost. Forecasted dividend for FY2027 is ¥43 year-end (post-stock-split basis), equivalent to annual ¥88 (pre-split: year-end ¥90, annual ¥176), implying maintenance of the dividend payout range even during Net Income normalization.
Inventory & Working Capital Risk: The build-up of inventory for sale ¥7603.0B (up +¥1970.0B YoY) and Construction in Progress Expenditure ¥740.0B (+¥191.0B) indicates that delays in project progress or market softness could prolong cash lock-up, force discounting, and further weaken cash generation. Low cash conversion (OCF/Net Income 0.87x, OCF/EBITDA 0.50x) makes improving working capital management urgent.
Short-term Funding Dependence Risk: Short-term borrowings surged to ¥7579.0B (YoY +345.1%), expanding short-term liabilities ratio to 38.6% and Cash/Short-term Liabilities to 0.57x, increasing maturity mismatch. In a rising-rate environment, further increases in interest payments (current interest expense ¥443.0B, YoY +7%) and deteriorating refinancing terms could pressure profits and cash flows. Debt/EBITDA 2.60x remains within tolerable range, but continued OCF weakness could delay deleveraging and negatively affect credit rating and funding costs.
Polarization of Segment Profitability Risk: While Detached Housing and Commercial Facilities show high margins, Logistics & Business Facilities (Operating Income -20.0%) and Condominiums (margin 2.1%) are low-margin, and FY2027 normalization expectations could lower overall portfolio margins. The increase in Provision for Contract Losses ¥25.0B (prior year ¥18.9B, +32.4%) suggests cost overruns or delays under fixed-price contracts and raises the risk that future project margin deterioration could trigger further impairment losses (current period impairment ¥306.0B).
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 11.0% | 5.5% (3.5%–7.2%) | +5.5pt |
| Net Margin | 3.9% | 3.5% (2.5%–4.4%) | +0.4pt |
Operating Margin 11.0% exceeds the industry median 5.5% by +5.5ppt, maintaining top-tier profitability within construction. Net Margin 3.9% slightly exceeds the median 3.5% but does not demonstrate as strong an advantage as at the operating level due to Special Losses.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.6% | 9.8% (-2.1%–15.1%) | -7.3pt |
Revenue growth of 2.6% trails the industry median 9.8% by -7.3ppt, leaving growth momentum relatively weak within the industry. Declines in Logistics & Business Facilities revenue and delays in securing new large projects weighed on competitive growth performance.
※ Source: Company compilation
Profitability & Industry Positioning: Operating Margin 11.0% (industry median +5.5ppt) and Gross Margin 22.3% (YoY +2.0ppt) kept the company among the industry leaders in profitability, but FY2027 anticipates a normalization with Operating Income -34.9%. The high-margin cycle in Detached Housing and Commercial Facilities is expected to wind down, while rising SG&A ratio (11.2% vs prior 10.2%) and higher interest costs (interest expense ¥443.0B, YoY +7%) are shifting the structure to press margins. Segment polarization (Detached +123% vs Logistics -20%, Condominiums margin 2.1%) is advancing, making portfolio stability a medium-term priority.
Cash Generation and Funding: OCF/Net Income 0.87x and OCF/EBITDA 0.50x indicate weak cash conversion, with inventory for sale accumulation +¥1970.0B and Construction in Progress Expenditure +¥191.0B pressuring working capital. FCF of -¥5368.0B was financed by a sharp increase in short-term borrowings (+345%), resulting in tight liquidity management with short-term liabilities ratio 38.6% and Cash/Short-term Liabilities 0.57x. Normalizing inventory turnover and cash realization timing for large projects will be key to CF improvement and deleveraging from FY2027 onward.
M&A / Asset Soundness and Growth Investment: Goodwill ¥1599.0B (5.3% of net assets, 0.21x of EBITDA) is modest; goodwill amortization ¥105.0B (1.4% of EBITDA) causes limited profit distortion. Capital expenditures ¥4938.0B (3.5x depreciation) are heavily front-loaded toward growth investments, with accumulation in commercial and logistics assets evident. Continued impairment losses ¥306.0B and a 32% increase in Provision for Contract Losses highlight challenges in project profitability management; monitoring the balance between large-project profitability and asset soundness is crucial. While maintaining a Payout Ratio of 29.2% and stable returns, accelerating Revenue Growth beyond the current 2.6% (trailing industry median by -7.3ppt) will be a watershed for medium- to long-term evaluation.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement disclosure data. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the Company from publicly available financial statement data. Investment decisions are your responsibility; please consult professional advisors as appropriate before making any investment decisions.