| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥7507.4B | ¥7050.6B | +6.5% |
| Operating Income / Operating Profit | ¥902.6B | ¥609.8B | +48.0% |
| Ordinary Income | ¥944.9B | ¥645.5B | +46.4% |
| Net Income / Net Profit | ¥635.8B | ¥423.7B | +50.1% |
| ROE | 9.6% | 7.1% | - |
For the fiscal year ended March 2026, Revenue was ¥7507B (YoY +¥457B +6.5%), Operating Income was ¥903B (YoY +¥293B +48.0%), Ordinary Income was ¥945B (YoY +¥299B +46.4%), and Net Income attributable to owners of the parent was ¥694B (YoY +¥222B +47.0%). The gross margin on completed construction improved from 18.8% in the prior year to 23.6% (+4.8pt), and the operating margin expanded from 8.6% to 12.0% (+3.4pt). SG&A ratio increased to 11.5% (prior year 10.2%, +1.3pt), but the improvement in gross profit more than offset this, resulting in higher revenue and substantially higher profits.
[Revenue] Completed construction revenue was ¥7507B (YoY +6.5%), showing solid growth. Through project selection focused on construction profitability and penetration of price pass-through, gross profit on completed construction expanded to ¥1769B (YoY +¥441B +33.2%), and the gross profit margin on completed construction improved substantially to 23.6% (prior year 18.8%, +4.8pt). The peak of high materials and labor costs has passed and optimization of project mix contributed, improving profitability more than the top-line increase.
[Profit & Loss] Operating Income rose sharply to ¥903B (YoY +48.0%). Against an increase in gross profit on completed construction of ¥441B, SG&A was ¥866B (YoY +¥148B +20.7%), rising faster than revenue growth, but gross margin improvements absorbed this and operating margin expanded to 12.0% (prior year 8.6%, +3.4pt). Ordinary Income was ¥945B (YoY +46.4%). Non-operating income included ¥28B in dividend income and ¥13B in interest income, totaling ¥54B, and after deducting ¥12B in non-operating expenses, the net contribution was ¥42B positive. Extraordinary items comprised ¥64B in extraordinary gains (including ¥63B gain on sale of investment securities) and ¥33B in extraordinary losses (including ¥31B impairment losses), resulting in a net positive of ¥31B. Profit before income taxes was ¥976B (YoY +46.7%), and after deducting income taxes of ¥284B, Net Income attributable to owners of the parent was ¥694B (YoY +47.0%), concluding with higher revenue and substantially higher profit.
[Profitability] Operating margin 12.0% (prior year 8.6%, +3.4pt), Net Income margin 9.2% (prior year 6.0%, +3.2pt), ROE 9.6% (reference) — overall profitability improved. The largest contributor was the gross profit margin on completed construction of 23.6% (prior year 18.8%, +4.8pt), driven by improved project profitability and strict project selection. SG&A ratio rose to 11.5% (prior year 10.2%, +1.3pt) but was more than offset by gross margin improvement. [Cash Quality] Operating Cash Flow (OCF) was ¥877B, 1.26x the Net Income of ¥694B, indicating strong cash conversion. OCF/EBITDA ratio was 0.88x, slightly below the 0.9x benchmark, mainly due to timing effects from year-end changes in working capital (increase in advances received on uncompleted construction +¥94B, increases in accrued expenses, etc.), and qualitative concerns are limited. Accrual ratio stood at -2.0%, a healthy level. [Investment Efficiency] Total asset turnover was 0.82x (prior year 0.86x), slightly down due to increased capital expenditures, but ROA improved to 10.3% (prior year 7.9%, +2.4pt) reflecting higher profitability. Goodwill/EBITDA ratio was 0.14x, and Goodwill/Equity was 2.0%, indicating limited post-M&A financial burden. [Financial Soundness] Equity Ratio was 72.4% (prior year 73.0%), Debt/EBITDA 0.15x, and Interest Coverage approximately 375x, demonstrating very strong solvency. Current ratio 227%, quick ratio 227%, and Cash/Short-term Debt ratio 4.36x ensure short-term liquidity. There is a formal maturity concentration risk with a short-term borrowing ratio of 100%, but with cash and deposits of ¥653B plus short-term investment securities of ¥1272B, abundant liquidity limits refinancing risk.
OCF was ¥877B (YoY +257.2%), significantly higher and 1.26x Net Income of ¥694B. Operating cash flow before changes in working capital totaled ¥1125B, and after payments of corporate taxes of ¥287B, increase in advances received on uncompleted construction of ¥94B, decrease in trade payables of ¥93B, increase in payments on uncompleted construction of ¥41B, etc., final OCF was ¥877B. Investing Cash Flow was ▲¥599B, driven mainly by acquisition of tangible fixed assets of ¥536B (growth investments in buildings, land, machinery and equipment), acquisition of subsidiary shares of ¥190B (M&A investment), partially offset by proceeds from sale of investment securities of ¥160B. Free Cash Flow was ¥278B (OCF ¥877B - Investing CF ¥599B), covering dividend payments of ¥218B by 1.07x. Financing Cash Flow was ▲¥302B, mainly due to shareholder returns totaling ¥301B (dividends ¥218B, share buybacks ¥82B). Total shareholder returns of ¥301B slightly exceeded FCF of ¥278B, but with abundant liquidity (cash + short-term investment securities ¥1925B), the financial burden is minor. Regarding working capital manipulation risk, increases in advances received on uncompleted construction and accrued expenses push up OCF, while decreases in accounts payable and increases in payments on uncompleted construction offset this, and overall there are no signs of excessive manipulation.
Of Ordinary Income ¥945B, Operating Income of ¥903B is the main component, indicating high recurrence. Non-operating income ¥54B includes dividend income ¥28B and interest income ¥13B, all stable returns from financial asset management. Extraordinary items produced a net positive of ¥31B (¥63B gain on sale of investment securities and ¥31B impairment losses), boosting Net Income ¥694B by approximately 4.5%. Comprehensive income ¥883B exceeded Net Income ¥694B by ¥189B, comprised of valuation gains on securities ¥170B and actuarial gains related to retirement benefits ¥22B, etc. Given OCF and an accrual ratio of -2.0%, cash realization of earnings is good, and excluding one-off items (gain on sale of investment securities), recurring earnings are assessed as highly sustainable.
Full Year forecast: Revenue ¥8100B (YoY +7.9%), Operating Income ¥970B (YoY +7.5%), Ordinary Income ¥960B (YoY +1.6%), Net Income attributable to owners of the parent ¥670B (YoY +5.4%). Progress toward the full-year forecast based on current results is: Revenue 93%, Operating Income 93%, Ordinary Income 98%, Net Income 104% (approximate, based on unpublished exact full-year results), indicating profits are generally tracking the forecast. Revenue growth is expected to be +7.9%, above the current period +6.5%, confirming room for top-line expansion. Operating margin on the full-year forecast is 12.0% (same as current period), Ordinary Income margin 11.9%, and Net Income margin 8.3%, representing a plan that assumes maintenance of profitability. If the trend of improving project profitability persists, the likelihood of achieving the full-year forecast is assessed as high.
Annual dividend is ¥130 (interim ¥60, year-end ¥70), with Payout Ratio 37.4% (based on current period EPS ¥350.53), a reasonable level. Dividend sustainability is supported by Free Cash Flow ¥278B covering dividend payments ¥218B by 1.07x, and OCF covers dividends by 4.02x, ensuring adequacy. Share buybacks of ¥82B were executed, and combined with dividends ¥218B, total shareholder returns amounted to approximately ¥301B, with Total Return Ratio 43.4%. Although total returns slightly exceed FCF ¥278B, abundant liquidity (cash + short-term investment securities ¥1925B) keeps the financial burden minor. The interim and year-end dividends include a ¥5 commemorative dividend for the 80th anniversary of founding, so the baseline (ordinary) dividend is ¥120. Going forward, if investment cash flow is smoothed and OCF remains stable, there is ample room to maintain and gradually increase dividends.
Risk of deterioration in project profitability: A renewed rise in materials prices and labor costs could reduce the gross profit margin on completed construction. Although the margin improved to 23.6% this period (+4.8pt), provisions for construction loss reserves are ¥83B (YoY +14.2%) and there remains risk of margin deterioration at individual projects. Cost overruns under fixed-price contracts would directly hit operating income, so continued project selection and price pass-through are important.
Risk of rising SG&A: SG&A was ¥867B (YoY +20.7%), rising well above revenue growth of +6.5%. SG&A ratio is trending up at 11.5% (prior year 10.2%, +1.3pt), and if fixed costs such as labor and digital investments continue to rise, operating leverage may decline. A sustained divergence from the pace of revenue expansion could pressure profitability.
Liquidity risk: With a maturity concentration structure where short-term borrowings ratio is 100%, rollover risk could materialize in the event of a sudden change in financial markets. While cash + short-term investment securities ¥1925B and Cash/Short-term Debt ratio 4.36x ensure sufficient liquidity, continued dependence on refinancing short-term debt of ¥2191B entails risks of higher funding costs in a rising interest rate environment or constrained access in worsening credit conditions.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.0% | 5.5% (3.5%–7.2%) | +6.5pt |
| Net Income Margin | 8.5% | 3.5% (2.5%–4.4%) | +5.0pt |
Both operating margin and net income margin are well above the industry median, placing the company in the upper group within the industry on profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 6.5% | 9.8% (-2.1%–15.1%) | -3.4pt |
Revenue growth rate is below the industry median, but this reflects project selection focused on profitability, and can be viewed as a strategy balancing growth and profitability.
※ Source: Company compilation
Structural improvement in gross profit margin on completed construction (prior year 18.8% → current period 23.6%, +4.8pt) resulted in industry-leading profitability with Operating Margin 12.0% and ROE 9.6%. Price pass-through and disciplined project selection have been effective, and if materials and labor cost environment stabilizes, the sustainability of this profit level is high. Monitoring points include the rising trend in construction loss reserves and the outpacing growth in SG&A.
OCF ¥877B generated FCF ¥278B and established a shareholder return structure that covers dividends ¥218B by 1.07x. Total returns ¥301B including ¥82B share buybacks slightly exceed FCF, but abundant liquidity (cash + short-term investment securities ¥1925B) limits financial risk. The company maintains a strong financial base with Equity Ratio 72.4% and Debt/EBITDA 0.15x, leaving substantial scope to balance future growth investments and shareholder returns.
With M&A investment ¥190B and tangible fixed asset acquisition ¥536B, goodwill reached ¥136B (YoY +623%), intangible fixed assets ¥210B (YoY +199%), and tangible fixed assets ¥1997B (YoY +31.6%), expanding the growth base. Goodwill/EBITDA 0.14x and Goodwill/Equity 2.0% are within healthy ranges, so PMI risk is limited. Improving utilization of fixed assets and absorbing depreciation burden will be key to maintaining future profitability.
This report was automatically generated by AI 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 responsibility; consult a professional adviser as needed before making investment decisions.