| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥1548.8B | ¥1376.8B | +12.5% |
| Operating Income | ¥151.3B | ¥113.5B | +33.3% |
| Ordinary Income | ¥158.8B | ¥119.8B | +32.6% |
| Net Income | ¥124.9B | ¥95.5B | +30.7% |
| ROE | 15.1% | 13.8% | - |
The fiscal year ended March 2025 closed with Revenue of ¥1548.8B (YoY +¥172.0B, +12.5%), Operating Income of ¥151.3B (YoY +¥37.8B, +33.3%), Ordinary Income of ¥158.8B (YoY +¥39.0B, +32.6%), and Net Income of ¥124.9B (YoY +¥29.4B, +30.7%), achieving top-line and bottom-line growth. Gross profit margin on completed-contracts improved by 1.6pt to 17.6% (prior 16.0%), and operating margin rose 1.5pt to 9.8% (prior 8.2%). Rigorous cost control and appropriate pass-through of price increases succeeded, creating a virtuous cycle where margin improvement outpaced revenue growth. ROE improved to 15.1% (prior 14.3%), primarily driven by expansion in net profit margin. Operating Cash Flow (OCF) declined to ¥116.2B (prior ¥142.4B, -18.4%) mainly due to an increase in completed-contracts accounts receivable and a decrease in advance received, reflecting a build-up in working capital; however, core business profitability remained at a high level. Financial soundness is very strong with an Equity Ratio of 61.1% and a Debt/EBITDA ratio of 0.16x, maintaining a low-leverage structure. The full-year plan is conservatively set at Revenue ¥1600.0B (YoY +3.3%), Operating Income ¥160.0B (YoY +5.8%), and Net Income ¥128.0B (YoY +2.5%), with progress rates at a high level: Revenue 96.8%, Operating Income 94.6%, Ordinary Income 96.2%, Net Income 97.6%.
[Revenue] Completed-contract revenue was ¥1548.8B (prior ¥1376.8B, +12.5%), achieving double-digit growth. Strong order intake centered on building facilities construction and steady project progress contributed. The company operates a single-segment equipment construction business and does not disclose sales composition by region or business, but robust domestic construction demand and appropriate project pricing likely supported revenue expansion. Completed-contracts accounts receivable increased by ¥59.4B from ¥603.4B at the end of the prior year to ¥662.8B (+9.8%), suggesting receivables growth accompanying revenue expansion. Order backlog and order intake are not disclosed, but advances received on uncompleted contracts decreased by ¥4.0B from ¥30.2B to ¥26.2B (-13.1%), reflecting progress in project completion during the period.
[Profitability] Gross profit on completed contracts was ¥271.9B (prior ¥220.0B, +23.6%), exceeding revenue growth, and gross margin improved 1.6pt to 17.6% (prior 16.0%). Rigorous cost management and appropriate price pass-through widened margins despite elevated material and labor costs. SG&A expenses increased to ¥120.6B (prior ¥106.6B, +13.2%), slightly above the revenue growth rate of +12.5%, enabling operating leverage to take effect. Consequently, Operating Income rose to ¥151.3B (prior ¥113.5B, +33.3%), with an operating margin of 9.8% (prior 8.2%), up 1.5pt. Non-operating income totaled ¥8.2B, mainly dividends received ¥6.0B and interest income ¥1.2B, while non-operating expenses were minor at ¥0.6B, resulting in Ordinary Income of ¥158.8B (prior ¥119.8B, +32.6%). Extraordinary gains totaled ¥11.0B, primarily gains on sales of investment securities ¥10.6B; extraordinary losses were ¥1.1B including impairment on investment securities ¥1.0B, producing profit before tax of ¥168.8B (prior ¥139.2B, +21.2%). Income taxes were ¥47.2B (effective tax rate 28.0%), and Net Income reached ¥124.9B (prior ¥95.5B, +30.7%).
[Profitability] Operating margin 9.8% (prior 8.2%) and Net Profit Margin 8.1% (prior 6.9%) show multi-level margin improvement. Expansion of the gross margin on completed contracts to 17.6% (prior 16.0%) was the main driver, with cost control and price pass-through contributing. ROE improved to 15.1% (prior 14.3%); a DuPont decomposition shows Net Profit Margin 8.1% × Total Asset Turnover 1.21 × Financial Leverage 1.55 = 15.2%, with improvement in Net Profit Margin being the primary driver. ROA slightly declined to 9.7% (prior 10.1%), partly due to an increase in total assets (e.g., accumulation of investment securities), while core operating profitability remains high.
[Cash Quality] The Operating Cash Flow to Net Income ratio is 0.93x (OCF ¥116.2B / Net Income ¥124.9B), generally favorable, but OCF/EBITDA is relatively low at 0.73x (EBITDA = Operating Income ¥151.3B + Depreciation ¥7.0B = ¥158.3B), indicating working capital build-up delayed cash conversion. The accrual ratio is 3.6% ((Net Income ¥124.9B - OCF ¥116.2B) / Total Assets ¥1353.9B × 100 = 0.6%) and is sound.
[Investment Efficiency] Total asset turnover is 1.21x (Revenue ¥1548.8B / Average Total Assets ¥1273.0B), roughly in line with the prior year. Fixed asset turnover is very high at 43.5x (Revenue ¥1548.8B / Tangible fixed assets ¥26.1B + Intangible fixed assets ¥15.8B), reflecting a light equipment model in the construction business. Capex to depreciation is conservative at ¥5.6B / ¥7.0B = 0.80x.
[Financial Soundness] Equity Ratio increased to 61.1% (prior 58.6%), further strengthening the financial base. Current ratio is 201.6% (Current Assets ¥998.1B / Current Liabilities ¥495.0B), and the quick ratio is similar, indicating very high short-term payment capacity. Interest-bearing debt comprises Short-term borrowings ¥22.5B + Long-term borrowings ¥2.7B + Securitized long-term borrowings ¥1.7B = ¥26.9B. Net interest-bearing debt is a net cash position: Cash ¥233.4B + Short-term securities ¥40.0B - Interest-bearing debt ¥26.9B = ¥246.5B net cash. Debt/EBITDA ratio is 0.17x, and interest coverage is 3905.3x ((Operating Income ¥151.3B + Dividend & Interest received ¥7.2B) / Interest paid ¥0.04B), indicating negligible interest burden.
Operating Cash Flow was ¥116.2B (prior ¥142.4B, -18.4%), and the subtotal of operating cash flow before working capital changes was ¥167.8B, consistent with profit before tax ¥168.8B. Major working capital movements were an increase in completed-contracts accounts receivable -¥37.6B, decrease in advances received -¥3.8B, increase in accounts payable +¥4.6B, and increase in accrued taxes +¥3.3B; the build-up of completed-contracts accounts receivable and the decrease in advances received pressured OCF. Corporate tax payments were ¥58.8B. Although operating cash generation reflects high core profitability, normalization of working capital is a future challenge. Investing Cash Flow was a small positive ¥2.0B: proceeds from sale of investment securities ¥14.8B (consistent with extraordinary gain on sale of investment securities ¥10.6B) and redemption proceeds ¥3.0B exceeded capital expenditures ¥5.6B. Meanwhile, acquisition of investment securities ¥5.5B and acquisition of intangible fixed assets ¥3.4B were executed. Free Cash Flow was ¥118.2B (OCF ¥116.2B + Investing CF ¥2.0B) and ample, covering dividend payments ¥40.8B and no share buybacks ¥0.0B, leaving ¥67.5B surplus. Financing Cash Flow was -¥51.7B, mainly driven by net reduction in short-term borrowings ¥14.0B, net increase in long-term borrowings ¥3.6B, and dividend payments ¥40.8B. Cash and cash equivalents increased by ¥67.5B from ¥201.2B at the beginning of the period to ¥268.7B at period-end, further improving liquidity.
Core recurring earnings are supported by expansion in gross profit on completed contracts, yielding Operating Income ¥151.3B, up ¥37.8B YoY (+33.3%). Within non-operating income ¥8.2B, dividends received ¥6.0B and interest received ¥1.2B are central and relatively persistent as financial income. Extraordinary income of ¥11.0B (mainly gains on sale of investment securities ¥10.6B) was recorded but represents 6.5% of profit before tax ¥168.8B, indicating limited dependence on one-off items. The prior year also included extraordinary income of ¥20.5B (mainly gains on sale of investment securities ¥20.5B), so tactical sales of financial assets have contributed to earnings but core business profitability remains the main engine of profit growth. OCF ¥116.2B / Net Income ¥124.9B = 0.93x is generally healthy, and the accrual ratio of 0.6% is within a sound range. However, the OCF/EBITDA ratio of 0.73x is somewhat weak, and the year-end increase in completed-contracts accounts receivable delaying cash conversion is a factor to monitor when assessing earnings quality. Comprehensive income was ¥171.5B, ¥46.6B higher than Net Income ¥124.9B, mainly due to an increase in valuation difference on available-for-sale securities of ¥48.8B. Unrealized gains from market valuation increases in investment securities enhance financial capacity but carry price fluctuation risk.
The full-year plan forecasts Revenue ¥1600.0B (YoY +3.3%), Operating Income ¥160.0B (YoY +5.8%), Ordinary Income ¥165.0B (YoY +3.9%), and Net Income ¥128.0B (YoY +2.5%), representing conservative top- and bottom-line growth. Progress against the period results is very high: Revenue 96.8%, Operating Income 94.6%, Ordinary Income 96.2%, Net Income 97.6%, outpacing initial forecasts. Full-year EPS forecast ¥281.64 versus period EPS ¥267.76 shows a progress rate of 95.1%. The dividend forecast ¥60.00 is lower than the period actual ¥110.00 (year-end ¥70 + interim ¥40), likely reflecting an adjustment for a stock split. The forecast operating margin is 10.0% (Operating Income ¥160.0B / Revenue ¥1600.0B), slightly up from the current period 9.8%; this is achievable if gross margin is maintained and SG&A remains controlled. Ordinary Income assumes an increase in non-operating income, targeting an ordinary income margin of 10.3%, but exposure to volatility in financial income should be noted. Net profit margin is assumed to slightly decline to 8.0% (Net Income ¥128.0B / Revenue ¥1600.0B) from 8.1%, reflecting a conservative assumption accounting for the absence of extraordinary gains.
The company paid year-end ¥70 + interim ¥40 for an annual dividend of ¥110, with a payout ratio of 37.8% (Total dividends ¥40.8B / Net Income ¥124.9B × adjustment). Consolidated total dividends are reported as ¥36.4B (section note), and based on an average number of shares during the period of 45.39B shares, dividends per share would be ¥80.2, so the difference from the actual ¥110 per share may reflect stock split adjustments. Free Cash Flow of ¥118.2B covers total dividends ¥40.8B by 2.9x, indicating ample cushion and high sustainability of dividends. No share buybacks were executed (¥0.0B), so the Total Return Ratio equals the payout ratio at 37.8%. The full-year dividend forecast of ¥60 is a reduction from actual ¥110 but appears to be a post-stock-split adjusted level rather than a substantive cut. With net interest-bearing debt at negative ¥246.5B (net cash) and an Equity Ratio of 61.1%, financial capacity is extremely strong, leaving ample room for dividend increases or share repurchases.
Risk of fluctuation in gross margin on completed contracts: Gross margin improved to 17.6% (+1.6pt) this period, but a renewed rise in material prices, surging labor costs, or tightening subcontractor costs could make continued rigorous cost control and price pass-through difficult, pressuring gross margins. Provision for construction loss reserves decreased to ¥1.2B (prior ¥2.0B, -39.5%), but if unprofitable projects emerge, additional provisioning may be required.
Working capital build-up and collections risk: Completed-contracts accounts receivable increased to ¥662.8B (prior ¥603.4B, +9.8%), while advances received on uncompleted contracts decreased to ¥26.2B (prior ¥30.2B, -13.1%). If receivable collections are delayed while advances decline, OCF generation could deteriorate and working capital burden rise. Current period OCF was ¥116.2B, down -18.4% YoY, and delayed normalization of working capital could pressure liquidity.
Market price fluctuation risk of investment securities: Investment securities increased significantly to ¥295.7B (prior ¥224.4B, +31.8%), comprising 21.8% of total assets. Valuation differences on available-for-sale securities expanded to ¥143.6B (prior ¥94.9B, +51.3%), lifting comprehensive income, but adverse market movements could reduce valuation differences and shrink deferred tax liabilities, thereby impacting net assets and comprehensive income. Deferred tax liabilities increased to ¥24.1B (prior ¥14.5B, +66.2%), so tax impacts at valuation reversal should be monitored.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.8% | 5.5% (3.5%–7.2%) | +4.2pt |
| Net Profit Margin | 8.1% | 3.5% (2.5%–4.4%) | +4.6pt |
The company's profitability substantially exceeds the industry median, achieving high margins within the construction sector through rigorous cost control and price pass-through.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 12.5% | 9.8% (-2.1%–15.1%) | +2.6pt |
Revenue growth outperforms the industry median, supported by a solid order environment and steady project progress, providing relative advantage.
※ Source: Company compilation
Improvement of 1.6pt in gross margin on completed contracts to 17.6% (prior 16.0%) and 1.5pt increase in operating margin to 9.8% (prior 8.2%) have established a high profitability level within the construction industry. The success of cost control and appropriate price pass-through, along with ROE improvement to 15.1% (prior 14.3%), is notable as a sign of sustainably improving profitability. The full-year plan anticipates operating margin of 10.0%, assuming maintenance of high margins.
OCF of ¥116.2B is 0.93x of Net Income ¥124.9B and generally favorable, but working capital accumulation—an increase in completed-contracts accounts receivable ¥59.4B and a decrease in advances received ¥4.0B—delayed cash conversion. If working capital normalizes, there is potential to improve cash conversion. Free Cash Flow of ¥118.2B substantially exceeds dividends ¥40.8B, expanding financial flexibility.
With a net cash position of negative interest-bearing debt ¥246.5B and a strong Equity Ratio of 61.1%, shareholder returns are sustainable, with a payout ratio of 37.8% and FCF coverage of 2.9x. Investment securities of ¥295.7B (21.8% of total assets) have increased unrealized gains and boosted comprehensive income, but monitoring price volatility risk is important.
This report is an AI-generated earnings analysis based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional advisor as necessary.