| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥158.04B | ¥165.57B | -4.5% |
| Operating Income | ¥19.72B | ¥17.48B | +12.8% |
| Ordinary Income | ¥20.54B | ¥18.26B | +12.5% |
| Net Income | ¥13.81B | ¥13.29B | +3.9% |
| ROE | 3.4% | 3.3% | - |
The quarter resulted in lower revenue but higher earnings, with increases in operating income and ordinary income secured through improved profitability of completed construction projects. Revenue was ¥158.04B (-4.5% YoY), operating income was ¥19.72B (+12.8%), ordinary income was ¥20.54B (+12.5%), and net income attributable to owners of the parent was ¥13.19B (+4.2%). The primary driver of earnings growth was the improvement in the gross profit margin on completed construction projects from 15.2% to 18.1%, or +2.9pt, apparently reflecting progress in passing through higher prices and correcting construction project profitability.
【Revenue】Revenue was ¥158.04B, representing a 4.5% YoY decline. The core Engineering (Facilities Construction) segment, at ¥155.87B (-4.5%), drove company-wide revenue, while the Other segments (sales of electrical equipment, real estate, leasing, power generation, etc.) also declined to ¥10.89B (-10.2%). The decline in revenue appears to have been significantly affected by the timing of progress on construction projects.
【Profitability】Despite the decline in revenue, gross profit on completed construction projects increased to ¥28.60B (¥25.12B in the previous year, +13.8%), and the gross profit margin improved to 18.1% (15.2% in the previous year). Operating income was ¥19.72B (+12.8%), while the operating margin increased by +1.9pt to 12.5% (10.6% in the previous year). SG&A expenses were ¥8.88B (+16.1%), increasing to 5.6% of revenue (+1.0pt), but the benefit from improved gross profit more than offset this increase. Ordinary income was ¥20.54B (+12.5%), with non-operating income and expenses generating a surplus of ¥0.92B, primarily due to dividend income of ¥0.74B. Extraordinary items were minor, comprising a gain on the sale of investment securities of ¥0.02B and a loss on disposal of fixed assets of ¥0.01B. Net income attributable to owners of the parent remained at ¥13.19B (+4.2%), as income taxes and other taxes of ¥6.74B (effective tax rate: 32.8%) constrained net income growth relative to operating income growth. Overall, the results represent lower revenue but higher earnings.
The reporting segments comprise the core Engineering (Facilities Construction) segment and Other segments (sales of electrical equipment, real estate, leasing, and power generation). Engineering recorded revenue of ¥155.87B (-4.5% YoY), segment profit of ¥18.95B (+11.9%), and a profit margin of 12.2%, making it the core business and accounting for 93.5% of the combined revenue of both segments. The Other segments generated revenue of ¥10.90B (-10.2%), profit of ¥0.73B (+18.1%), and a profit margin of 6.7%. Both segments achieved higher profit despite lower revenue, indicating that improved construction project profitability in the core business drove the increase in the company-wide profit margin.
【Profitability】The operating margin was 12.5%, improving by +1.9pt from 10.6% in the previous year, while the gross profit margin on completed construction projects also increased by +2.9pt to 18.1% (15.2% in the previous year). The net profit margin (based on net income attributable to owners of the parent) expanded by +0.7pt to 8.3% (7.6% in the previous year). 【Cash Flow Quality】Accounts receivable from completed construction contracts were ¥202.99B, down -23.9% from ¥266.55B in the same period of the previous year, indicating progress in cash collections. Meanwhile, advances received on construction contracts in progress of ¥48.44B (+34.6%) exceeded costs on construction contracts in progress of ¥23.63B (+16.2%), with excess advances (approximately ¥24.8B) supporting working capital. 【Investment Efficiency】ROE was 3.4%, and EPS was ¥66.25 (¥61.91 in the previous year, +7.0%). 【Financial Soundness】The equity ratio was 67.1%, the current ratio was 205.8% (current assets of ¥360.47B / current liabilities of ¥175.19B), and interest-bearing debt was ¥11.71B (short-term debt of ¥9.77B and long-term debt of ¥1.93B), resulting in a conservative Debt/Capital ratio of 2.8%.
Cash and deposits were ¥81.30B, an increase of +4.3% from ¥77.94B in the same period of the previous year. Accounts receivable from completed construction contracts declined significantly to ¥202.99B (¥266.55B in the previous year, -23.9%), suggesting progress in the collection of construction proceeds. Costs on construction contracts in progress increased to ¥23.63B (+16.2%), but advances received on construction contracts in progress expanded at a faster pace to ¥48.44B (+34.6%), with excess advances reaching approximately ¥24.8B. Short-term borrowings increased to ¥9.77B (¥6.097B in the previous year, +60.3%), apparently reflecting increased working capital requirements. Total interest-bearing debt remained at ¥11.71B, while cash and deposits of ¥81.30B maintained surplus liquidity exceeding this amount.
Non-operating income was ¥0.92B (0.6% of revenue), of which dividend income accounted for the majority at ¥0.74B, indicating a low reliance on non-core income. Extraordinary income of ¥0.02B (gain on sale of investment securities) and extraordinary loss of ¥0.01B (loss on disposal of fixed assets) were both minor, limiting the impact of one-time factors on current-period profit. Against ordinary income of ¥20.54B, net income attributable to owners of the parent was ¥13.19B, with the primary causes of the gap being income taxes and other taxes of ¥6.74B (effective tax rate: 32.8%) and net income attributable to non-controlling interests of ¥0.62B. Comprehensive income was ¥11.56B, compared with consolidated net income, including non-controlling interests, of ¥13.81B; the difference was primarily due to deterioration in the valuation difference on other securities of -¥1.98B, with valuation-related items reflecting market fluctuations weighing on comprehensive income. The increase in operating income was largely attributable to the recurring factor of improved gross profit margins on completed construction projects, and earnings quality is generally sound.
The Q1 progress rates against the full-year company plan were 20.3% for revenue, 21.9% for operating income, 22.7% for ordinary income, and 20.3% for net income attributable to owners of the parent, all below the 25% benchmark implied by simple seasonal allocation. No revisions were made to the earnings forecast or dividend forecast during the quarter. The facilities construction industry tends to have seasonality in which inspections and handovers are concentrated in the second half of the fiscal year. In addition, given that the gross profit margin on completed construction projects has improved from the previous year, there appears to be room to catch up over the full year.
The company forecasts an annual dividend of ¥130, implying a payout ratio of approximately 39.8% based on the company’s planned EPS of ¥326.61. Given the conservative financial base, comprising net assets of ¥401.10B, cash and deposits of ¥81.30B, and interest-bearing debt of ¥11.71B, financial constraints on achieving the planned dividend appear limited. No revision was made to the dividend forecast during the quarter.
Collection risk related to accounts receivable from completed construction contracts: Accounts receivable from completed construction contracts were ¥202.99B, accounting for 34.0% of total assets. Although the balance declined by -23.9% YoY and collections progressed, the outstanding balance remains substantial, and future collection trends will affect working capital and cash generation.
Reliance on short-term financing: Short-term borrowings were ¥9.77B, up +60.3% from ¥6.097B in the same period of the previous year, and accounted for the majority of interest-bearing debt of ¥11.71B. Liquidity is ample because cash and deposits of ¥81.30B exceed this amount; however, the increase in the short-term financing ratio requires monitoring as a change in the funding structure.
Tax burden and construction profitability volatility risk: The effective tax rate was somewhat high at 32.8% (income taxes and other taxes of ¥6.74B / profit before tax of ¥20.55B), restraining net income growth (+4.2%) relative to operating income growth (+12.8%). Although the provision for losses on construction contracts decreased to ¥6.71B (¥7.35B in the previous year, -8.7%), project-by-project fluctuations in profitability could cause volatility in the gross profit margin on completed construction projects.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.5% | 4.5% (2.7%–6.6%) | +8.0pt |
| Net Profit Margin | 8.7% | 3.8% (-1.1%–4.4%) | +5.0pt |
Both the operating margin and net profit margin (Note: based on consolidated net income for the current period) substantially exceed the industry median, placing the company among the industry’s top performers.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -4.5% | 4.8% (3.4%–10.1%) | -9.3pt |
Revenue growth is below the industry median and remains on a declining trend, but the company’s profitability advantage is reflected in its profitability indicators.
※Source: Compiled by the Company
The gross profit margin on completed construction projects improved from 15.2% to 18.1% (+2.9pt), while the operating margin improved from 10.6% to 12.5% (+1.9pt), confirming a structural change enabling higher earnings despite lower revenue.
Full-year progress for both revenue and profit is below the 25% benchmark implied by seasonal allocation; however, given the industry’s second-half weighting and the trend toward improved profitability, the slower progress does not necessarily indicate a shortfall against the full-year plan.
The substantial reduction in accounts receivable from completed construction contracts (-23.9%) and increase in advances received on construction contracts in progress (+34.6%) improved working capital efficiency, confirming an enhancement in cash-generating capability.
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 period). It is not a forecast of the market stock price or a recommendation of any specific investment action.
| Scenario | Theoretical Stock Price |
|---|---|
| bear | ¥2,439 |
| base | ¥2,560 |
| bull | ¥2,648 |
| Calculation Assumption | Value |
|---|---|
| Book Value Per Share (BPS) | ¥2,015 |
| Adjusted Forecast EPS | ¥364.7 |
| Cost of Equity r | 9.15% (10-year Japanese government bond 2.65% + equity risk premium 6.00% + size premium 0.50%) |
| Residual Income Persistence Coefficient ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 39.8% |
| Forecast EPS Confidence Adjustment | ×1.117 (based on the track record of guidance achievement among companies in the same industry) |
| Implied PBR / PER |
Sensitivity: ¥2,488–¥2,635 at cost of equity ±1%, and ¥2,547–¥2,581 at ω±0.1.
Notes:
(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict or guarantee future stock prices)
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 with professionals as necessary.
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| 1.27x / 7.0x |
These are mechanically computed values based on a residual income model. They are not a forecast of market prices or a recommendation of any investment action, and do not predict or guarantee future share prices. Historical values are computed retrospectively using current guidance-achievement statistics.