KINDEN CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

The Q1 of the fiscal year ending March 2027 delivered higher revenue and earnings, with profit growth exceeding revenue growth. The most notable feature was improved profitability. Revenue, based on completed construction revenue, was ¥162.37B (+14.8% year on year), Operating Income was ¥13.60B (+89.0%), and Ordinary Income was ¥15.43B (+76.6%). Consolidated Net Income, including the portion attributable to non-controlling interests, was ¥10.06B (+132.8%), while Net Income attributable to owners of the parent was ¥9.89B (+127.6%). EPS was ¥52.18 (¥21.92 in the same period of the previous year, +138.0%). The primary driver of earnings growth was the improvement in the gross profit margin on completed construction from 19.7% to 22.7% (+3.0pt), while improved cost management and project profitability lifted the Operating Income margin from 5.1% to 8.4% (+3.3pt). Meanwhile, the Equity Ratio declined from 72.4% to 50.0%, indicating that a change in the capital structure, accompanied by a sharp increase in short-term borrowings, is progressing in parallel.

Factors Affecting Earnings

【Revenue】Completed construction revenue was ¥162.37B, representing a 14.8% year-on-year increase. As the reported segment consists solely of the construction and equipment installation business, factors driving changes by business are not disclosed. However, gross profit on completed construction increased by ¥9.00B, from ¥27.85B to ¥36.85B, and the gross profit margin improved from 19.7% to 22.7% (+3.0pt). Revenue growth and improved project profitability progressed simultaneously, indicating growth in both volume and quality.

【Profit and Loss】Operating Income was ¥13.60B (+89.0% year on year), and the Operating Income margin was 8.4% (5.1% in the same period of the previous year, +3.3pt). While revenue increased by 14.8%, SG&A expenses were ¥23.24B (¥20.65B in the same period of the previous year, +12.5%), growing at a slower pace than revenue and resulting in positive operating leverage. Non-operating income totaled ¥2.16B, primarily consisting of dividend income of ¥1.56B, exceeding non-operating expenses of ¥0.32B, including interest expenses of ¥0.18B. Consequently, Ordinary Income was ¥15.43B (+76.6%). Extraordinary items were minor, comprising extraordinary income of ¥0.01B and extraordinary losses of ¥0.06B, limiting the impact of temporary factors. After deducting income taxes and other taxes of ¥5.33B and net income attributable to non-controlling interests of ¥0.16B from Profit Before Tax of ¥15.38B, Net Income attributable to owners of the parent was ¥9.89B (+127.6%). The divergence between Ordinary Income and Net Income attributable to owners of the parent (approximately -36%) was primarily due to the burden of income taxes and other taxes, representing a structural factor. Revenue and earnings increased.

Key Financial Indicators

【Profitability】The Operating Income margin improved substantially year on year to 8.4% (5.1% in the same period of the previous year, +3.3pt), the gross profit margin on completed construction improved to 22.7% (19.7% in the same period of the previous year, +3.0pt), and the Net Income margin attributable to owners of the parent improved to 6.1% (3.1% in the same period of the previous year, +3.0pt). 【Cash Quality】Accounts receivable for completed construction declined to ¥197.90B (¥260.88B in the same period of the previous year, -24.1%), while advances received on construction in progress increased to ¥57.55B (¥46.88B in the same period of the previous year, +22.7%), indicating potential for future recognition of completed work. 【Investment Efficiency】ROE was 2.3% (quarterly basis), total asset turnover was 0.19x (quarterly), and EPS increased substantially to ¥52.18 (¥21.92 in the same period of the previous year, +138.0%). 【Financial Soundness】The Equity Ratio declined to 50.0% (72.4% in the same period of the previous year, -22.4pt), short-term borrowings surged to ¥245.42B (¥15.00B in the same period of the previous year), and the current ratio was 115.4%.

Cash Flow Analysis

As cash flow statement data has not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased to ¥74.23B (¥65.36B in the same period of the previous year, +13.6%), while short-term securities increased to ¥150.40B (¥127.19B in the same period of the previous year, +18.3%), indicating an increase in on-hand liquidity. Meanwhile, short-term borrowings surged to ¥245.42B (¥15.00B in the same period of the previous year), and the funding structure shifted substantially from equity to short-term liabilities. In terms of working capital, accounts receivable for completed construction declined by ¥62.98B to ¥197.90B (¥260.88B in the same period of the previous year), indicating progress in cash collection. At the same time, advances received on construction in progress increased by ¥10.66B to ¥57.55B (¥46.88B in the same period of the previous year), indicating potential for cash generation as construction progresses. Retained earnings declined by ¥222.61B to ¥301.75B (¥524.36B in the same period of the previous year). The resulting capital outflow through dividends and share repurchases, among other items—treasury shares were -¥12.89B (-¥8.09B in the same period of the previous year)—should be noted as a reduction in the buffer available for liquidity management.

Quality of Earnings

The majority of profit was generated by the core business, indicating good earnings quality. Of the ¥2.16B in non-operating income, dividend income of ¥1.56B was the primary component, representing only approximately 1.3% of revenue and indicating low dependence on non-operating income. Extraordinary items were also minor, comprising extraordinary income of ¥0.01B and extraordinary losses of ¥0.06B, so the extent to which temporary factors distorted earnings was limited. The divergence between Ordinary Income of ¥15.43B and Net Income attributable to owners of the parent of ¥9.89B (approximately -36%) resulted from the burden of income taxes and other taxes of ¥5.33B and represents a structural difference. Comprehensive Income was ¥9.08B, slightly below Net Income attributable to owners of the parent of ¥9.89B. This was attributable to negative accruals from valuation differences in other securities and foreign exchange, including foreign currency translation adjustments of -¥0.25B, valuation differences on securities of -¥0.46B, and adjustments related to retirement benefits of -¥0.27B. The divergence was limited, and there were no indications that the difference between Comprehensive Income and Net Income impaired earnings quality.

Earnings Forecast and Guidance

The full-year company plan calls for Revenue of ¥810.00B (+7.9% compared with the previous fiscal year), Operating Income of ¥97.00B (+7.5%), Ordinary Income of ¥96.00B (+1.6%), and Net Income attributable to owners of the parent of ¥70.00B. No revisions have been made to either the earnings forecast or the dividend forecast. Q1 progress rates were 20.0% for Revenue, 14.0% for Operating Income, 16.1% for Ordinary Income, and 14.1% for Net Income, below the 25% benchmark based on simple quarterly allocation. However, the construction industry has seasonal characteristics, with recognition of completed work concentrated in the second half of the fiscal year. Given that revenue and earnings growth continued compared with the same period of the previous year, it is difficult to assess the likelihood of achieving the full-year plan based solely on the low progress rates. The increase in advances received on construction in progress can be observed as a leading indicator of potential future recognition of completed work.

Shareholder Returns

The full-year dividend forecast is ¥120/share, double the previous fiscal year’s actual dividend of ¥60. This dividend forecast includes a special dividend of ¥50 each for the interim and year-end dividends in connection with the achievement of the medium-term management plan and growth targets. Accordingly, the ordinary and special dividend components should be understood separately. Based on 166,454 thousand shares issued less 1,972 thousand treasury shares, or approximately 164,482 thousand shares, the estimated total dividend, calculated by multiplying this figure by the forecast dividend of ¥120, is approximately ¥19.74B. The Payout Ratio against the full-year forecast Net Income attributable to owners of the parent of ¥70.00B is approximately 28.2%. Treasury shares increased from ¥8.09B in the previous year to ¥12.89B, indicating progress in share repurchases. However, no specific implementation framework or other details concerning share repurchases have been disclosed for the current period. Accordingly, the above figure is used as the Payout Ratio based solely on dividends.

Risk Factors

1. Changes in liquidity and funding structure: Short-term borrowings surged to ¥245.42B (¥15.00B in the same period of the previous year), while the Equity Ratio declined to 50.0% (72.4% in the same period of the previous year, -22.4pt). Short-term borrowings are approximately 3.3 times cash and deposits of ¥74.23B, making the refinancing trends for short-term funds a key point of focus in the financial structure.

2. Trends in construction profitability and provisions: The provision for losses on construction contracts declined to ¥7.62B (¥8.32B in the same period of the previous year, -8.4%), but the balance remains substantial. Deterioration in the profitability of individual projects due to fluctuations in material and labor costs could affect profit margins.

3. Collection status of construction-related receivables: Accounts receivable for completed construction declined to ¥197.90B (¥260.88B in the same period of the previous year, -24.1%), but the balance remains equivalent to approximately 1.2 times revenue. Continued management of the collection cycle will therefore remain important for liquidity management.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceeded the industry median, placing profitability at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate was substantially above the industry median, indicating a high rate of revenue growth within the industry.

Source: Compiled by the Company

Key Points in the Earnings Results

1. Starting with the improvement in the gross profit margin on completed construction to 22.7% (19.7% in the same period of the previous year, +3.0pt), the Operating Income margin improved to 8.4% (5.1% in the same period of the previous year, +3.3pt), exceeding the industry median of 4.5%. Whether this improvement in profitability is temporary or structural can be confirmed by monitoring gross profit margin trends from Q2 onward.

2. The Equity Ratio declined from 72.4% to 50.0%, while short-term borrowings surged from ¥15.00B to ¥245.42B, indicating a substantial shift in the capital structure toward short-term debt financing. Retained earnings also declined from ¥524.36B to ¥301.75B. The background to this change in the capital structure—including dividends, share repurchases, and the finalization of accounting treatment—warrants continued monitoring.

3. The dividend forecast is ¥120/share, double the previous fiscal year’s ¥60, and includes special dividends of ¥50 each for the interim and year-end dividends. The Payout Ratio remains at a relatively restrained level of approximately 28.2%. It is useful to understand the different characteristics of ordinary and special 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: ¥3,194–¥3,387 for ±1% in the Cost of Equity, and ¥3,272–¥3,314 for ±0.1 in ω.

Notes:

• Net assets as of the end of the quarter are used (there is a time lag relative to 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 a future share price)

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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 professionals as necessary.

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