YURTEC CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

The Company started the current fiscal year with an improvement in its operating margin from 3.8% in the previous year to 5.5%, and profit growth exceeding revenue growth. Revenue was ¥572.7B (¥560.0B in the same period last year, YoY+2.3%), while operating income was ¥31.5B (up +48.1%). Ordinary income was ¥38.1B (up +111.9%), also supported by a ¥4.0B foreign exchange gain, and net income attributable to shareholders of the parent increased substantially to ¥21.1B (up +152.4%). Improved profitability in the core Facilities Construction Business was the primary driver of profit growth, enabling the Company to maintain a high growth rate even after absorbing an extraordinary loss of ¥5.2B from impairment losses on investment securities.

Factors Affecting Results

【Revenue】Revenue was ¥572.7B, representing a year-on-year increase of +2.3%. The core Facilities Construction Business accounted for the majority at ¥563.7B (93.4% of total, YoY+2.1%), while Other Businesses remained at ¥39.9B (up +2.0%). Although the revenue growth rate was moderate, both businesses maintained levels above the previous year.

【Profit and Loss】Operating income was ¥31.5B (YoY+48.1%). The gross margin was 16.1% (improved from the previous year), while the SG&A ratio was 10.6%, indicating operating leverage as gross profit growth exceeded SG&A growth. Ordinary income increased by +111.9% to ¥38.1B, also exceeding operating income growth due in part to the ¥4.0B contribution from foreign exchange gains. As an extraordinary loss of ¥5.2B from impairment losses on investment securities was recorded as a temporary factor, profit before tax of ¥32.8B was ¥5.3B below ordinary income. Nevertheless, even after an effective tax rate of 35.7%, net income rose substantially to ¥21.1B (up +152.4%). The key feature of the current period was that both revenue and profit increased, with the profit growth rate substantially exceeding the revenue growth rate.

Segment Analysis

The Facilities Construction Business generated revenue of ¥563.7B (YoY+2.1%, 93.4% of total), operating income of ¥30.0B (up +56.3%), and an operating margin of 5.3%, driving overall profit growth at a pace exceeding revenue growth. Other Businesses (including leasing, security, real estate, manufacturing, waste treatment, and electric power businesses) generated revenue of ¥39.9B (up +2.0%), operating income of ¥1.8B (down -20.6%), and a profit margin of 4.5%, representing a decline in profit in contrast to the core business. The Company has a high degree of dependence on the Facilities Construction Business for both revenue and profit (approximately 94% on a profit basis), making order trends and profitability in this business key determinants of overall performance.

Key Financial Metrics

【Profitability】The operating margin was 5.5%, improving from approximately 3.8% in the previous year, with a gross margin of 16.1% and an SG&A ratio of 10.6%. The net profit margin was 3.7% (based on net income attributable to shareholders of the parent), with the divergence between net income and ordinary income primarily attributable to the recognition of an extraordinary loss and the effective tax rate of 35.7%.【Cash Flow Quality】Notes and accounts receivable—completed construction contracts decreased by 19.0% year on year to ¥673.9B, indicating progress in billing and collection, while advances received on construction contracts in progress increased by 60.2% to ¥92.6B, strengthening the advance-payment structure. Costs on construction contracts in progress increased by 142.0% to ¥28.7B, indicating increased investment in ongoing projects.【Investment Efficiency】ROE was 1.4% (Q1, non-annualized), decomposed into a net profit margin of 3.7% × total asset turnover of 26.2% (same period) × financial leverage of approximately 1.42x. The improvement in the current period was primarily attributable to higher profitability, while the contributions from asset efficiency and leverage were limited.【Financial Soundness】The equity ratio was 70.6%, up 2.8pt from 67.8% in the previous year. Against total assets of ¥2,189.8B, cash and deposits were ¥407.8B and long-term borrowings were ¥60.4B, indicating that the Company maintained a conservative financial structure.

Cash Flow Analysis

As a cash flow statement has not been disclosed, funding trends are assessed based on changes in the balance sheet. Notes and accounts receivable—completed construction contracts decreased by ¥158.2B, or 19.0%, year on year to ¥673.9B, indicating that progress in billing and collection contributed to the compression of working capital. Meanwhile, advances received on construction contracts in progress increased by ¥34.8B, or 60.2%, to ¥92.6B, strengthening funding secured through advance payments. Costs on construction contracts in progress increased by ¥17.0B, or 142.0%, to ¥28.7B, indicating an accumulation of upfront investment in ongoing projects. Cash and deposits were ¥407.8B, a decrease of ¥13.2B year on year, while short-term securities increased by ¥55.0B, or 106%, to ¥106.9B, consistent with a portion of surplus funds being shifted to securities investments. Total assets decreased by ¥99.7B, or 4.4%, year on year, indicating an improving trend in asset efficiency, primarily through the reduction of receivables.

Quality of Earnings

Recurring earnings consisted of operating income of ¥31.5B and non-operating income of ¥6.8B, including a ¥4.0B foreign exchange gain. Non-operating income remained at approximately 1.2% of revenue, indicating a high degree of dependence on operating income in the earnings structure. Meanwhile, the extraordinary loss of ¥5.3B, including ¥5.2B in impairment losses on investment securities, was a temporary item attributable to market conditions. The primary causes of the divergence of approximately -45% between ordinary income of ¥38.1B and net income of ¥21.1B were the recognition of this extraordinary loss and the tax burden represented by the effective tax rate of 35.7%. The ¥4.0B foreign exchange gain was also a non-recurring, market-linked factor, and it should be noted that the substantial increase in ordinary income (YoY+111.9%) included a one-time boost. The increase in operating income (+48.1%) resulted from an improved gross margin and control of SG&A expenses, representing relatively more sustainable improvement factors.

Earnings Forecast and Guidance

Progress against the full-year plan (revenue of ¥2,730.0B, operating income of ¥189.0B, ordinary income of ¥195.0B, YoY+8.2%/+4.8%/+3.2%) was 21.0% for revenue, 16.7% for operating income, 19.6% for ordinary income, and 16.0% for net income. Although all indicators were below a simple 25% benchmark, the construction industry tends to be weighted toward the second half due to seasonality in construction progress, and this pace of progress is not unusual. As of Q1, no revisions had been made to the earnings forecast or dividend forecast. The improvement in gross margin and qualitative improvement in working capital (an increase in advances received on construction contracts in progress and a reduction in notes and accounts receivable—completed construction contracts) are observed as supporting factors for achieving the full-year plan.

Shareholder Returns

The annual dividend forecast is ¥39.00, representing an expected increase of ¥3 from the previous fiscal year’s actual dividend of ¥36. The payout ratio against the company plan-based EPS of ¥192.2 is approximately 20.3%, a relatively conservative level. Given the strong financial base represented by cash and deposits of ¥407.8B and an equity ratio of 70.6%, the Company is observed to have substantial capacity to secure funds for dividends. As of Q1, there had been no revision to the dividend forecast.

Risk Factors

1. Segment concentration risk: The Facilities Construction Business accounts for 93.4% of revenue and approximately 94% of operating income, creating a structure in which order trends and deterioration in profitability in this business can directly affect overall performance.

2. Construction profitability volatility risk: The provision for construction losses increased to ¥2.7B (¥2.4B in the previous year, +13.3%). If labor and material costs fluctuate or project delays occur, the gross margin, already at the low level of 16.1%, could face further pressure.

3. Risk of recurrence of extraordinary gains and losses: The Company recorded an extraordinary loss of ¥5.2B from impairment losses on investment securities during the current period, and similar impairment losses could arise in subsequent quarters due to market fluctuations. The ¥4.0B foreign exchange gain was also market-linked and may contribute to volatility in ordinary income.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The operating margin exceeds the industry median, while the net profit margin remains at approximately the same level due to the impact of the extraordinary loss.

Growth and Capital Efficiency

The revenue growth rate is below the industry median, indicating a relatively moderate pace of revenue growth.

※Source: Compiled by the Company

Key Points from the Results

1. The operating margin improved from the previous year and reached a level above the industry median. However, the substantial increases in ordinary income and net income also reflected the effects of foreign exchange gains and the tax burden structure. The key focus going forward will be the extent to which improvement at the operating level—higher gross margin and SG&A control—can be sustained.

2. Notes and accounts receivable—completed construction contracts have been compressed while advances received on construction contracts in progress have increased, indicating an improvement in the quality of working capital. This is observed as a structural change in terms of funding management.

3. The dividend forecast represents an increase of ¥3 from the previous fiscal year’s actual dividend. Given the conservative payout ratio of approximately 20.3% and the strong equity ratio of 70.6%, the Company is observed to have relatively substantial capacity to secure funds for dividends.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on 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: ¥2,181–¥2,310 at cost of equity ±1%, and ¥2,244–¥2,244 at ω±0.1.

Notes:

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

(Calculation model: Residual income model / Interest rate reference month: 2026-06 / This value does not predict 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 summary 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, and you should consult a professional as necessary.

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