| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥4761.2B | ¥4739.5B | +0.5% |
| Operating Income / Operating Profit | ¥546.0B | ¥413.9B | +31.9% |
| Ordinary Income | ¥581.6B | ¥444.3B | +30.9% |
| Net Income | ¥328.9B | ¥259.4B | +26.8% |
| ROE | 9.4% | 8.3% | - |
For the fiscal year ended March 2026, Revenue was ¥4,761.2B (YoY +¥21.7B +0.5%), Operating Income was ¥546.0B (YoY +¥132.1B +31.9%), Ordinary Income was ¥581.6B (YoY +¥137.3B +30.9%), and Net Income attributable to owners of parent was ¥328.9B (YoY +¥69.5B +26.8%). While revenue was nearly flat, a substantial improvement in construction profitability drove the operating margin up to 11.5% (from 8.7% last year, +2.7pt), delivering double-digit profit growth. Completed-contract gross margin improved to 17.9% (from 14.5%, +3.4pt), with price pass-through and effective cost control boosting profitability. The core Equipment Construction Business segment led results with Operating Income of ¥512.2B (+34.8%), accounting for 96.3% of consolidated revenue and forming the earnings core. On the other hand, Operating Cash Flow was limited to ¥123.3B as working capital expanded due to an increase in completed contract receivables (+¥139.4B) and a decrease in advance receipts (-¥24.0B), leaving Free Cash Flow at ▲¥58.1B and indicating challenges in cash generation.
[Revenue] Revenue of ¥4,761.2B (YoY +0.5%) was essentially flat. Completed-contract revenue was ¥4,575.2B (+0.7%), a slight increase, underpinned by the core Equipment Construction Business segment at ¥4,585.7B (+0.7%). Other businesses declined to ¥255.4B (▲3.2%), with sluggish performance in construction-related equipment sales, real estate, and renewable energy. External conditions remain characterized by labor shortages and sustained high materials prices, but order terms revision and efficiency gains in construction operations improved project mix; while top-line growth was limited, the company prioritized profitability improvement.
[Profitability] Operating Income was ¥546.0B (YoY +31.9%), with Operating Margin improving materially to 11.5% (prior year 8.7%, +2.7pt). Gross profit expanded to ¥870.7B with gross margin widening to 18.3% (prior year 14.9%, +3.4pt), driven by the rise in completed-contract gross margin to 17.9% (prior year 14.5%). Price pass-through and cost control were effective. Provisions for construction losses increased to ¥47.8B (prior year ¥27.6B) but the greater weight of high-margin projects drove overall results. SG&A rose to ¥324.7B (+10.8%), but the SG&A ratio only edged up to 6.8% (prior year 6.2%, +0.6pt), reflecting operating leverage. Non-operating income of ¥48.2B (dividends received ¥11.0B, investment partnership gains ¥17.2B, equity in earnings of affiliates ¥4.9B, etc.) supported Ordinary Income of ¥581.6B (+30.9%). Extraordinary items netted to ▲¥10.3B (extraordinary gains ¥10.6B, extraordinary losses ¥20.9B): gains on sales of investment securities ¥10.4B offset impairment losses ¥7.3B and valuation losses on investment securities ¥9.8B, leaving only a small divergence from Ordinarly Income. After deducting income taxes of ¥168.3B (effective tax rate 29.5%), Net Income attributable to owners of parent was ¥328.9B (+26.8%), improving the net margin to 6.9% (prior year 5.5%, +1.4pt). In summary, the results show slight revenue growth but significant profit growth.
The Equipment Construction Business segment (96.3% of revenue) posted Revenue of ¥4,585.7B (YoY +0.7%), Operating Income of ¥512.2B (YoY +34.8%), and a margin of 11.2% (prior year 8.3%, +2.8pt), reflecting a marked improvement in profitability. Improved profitability in electrical work and HVAC/plumbing construction contributed, with wage and material cost increases absorbed through price pass-through and enhanced project progress management raising margins. Other segments (5.4% of revenue) recorded Revenue of ¥255.4B (▲3.2%), Operating Income of ¥32.9B (+8.3%), and a margin of 12.9% (prior year 11.5%, +1.4pt). Declines in construction-related equipment sales weighed on revenue, but efficiencies in real estate and renewable energy businesses improved margins. The Equipment Construction Business accounted for 93.8% of consolidated operating income, indicating that project mix shifts significantly impact consolidated results.
[Profitability] Operating Margin 11.5% (prior year 8.7%), Net Margin 6.9% (prior year 5.5%) — material improvements. ROE 9.4% (prior year 9.6%) remained roughly in line, with equity buildup expanding the denominator. ROA 11.5% (Ordinary Income / Total Assets) is at a high level, indicating good asset efficiency. EBITDA was ¥615.2B (Operating Income ¥546.0B + Depreciation ¥69.2B), with an EBITDA margin of 12.9%, showing solid cash-generation capacity.
[Cash Quality] Operating Cash Flow (OCF) ¥123.3B is only 0.37x of Net Income ¥328.9B, reflecting delays in converting profits into cash due to working capital expansion (completed contract receivables +¥139.4B, advance receipts ▲¥24.0B). The accrual ratio (Net Income - OCF) / Total Assets = 3.9%, which is low; the gap between accounting profits and cash receipts is relatively small but sensitive to period-end progress and billing timing. OCF/EBITDA = 0.20x is low, indicating the need to normalize working capital.
[Investment Efficiency] Capital Expenditure ¥48.4B, Depreciation ¥69.2B, giving CapEx/Depreciation = 0.70x, indicating restrained investment, focused on renewals rather than expansion. Total Asset Turnover 0.91x (prior year 0.97x) dipped slightly; accelerating revenue growth is necessary to maintain asset efficiency.
[Financial Soundness] Equity Ratio 67.2% (prior year 63.9%) is high, Current Ratio 203.3%, Quick Ratio 202.9% — short-term liquidity is solid. D/E ratio 0.31x (interest-bearing debt ¥252.1B / Net Assets ¥3,516.4B), Debt/EBITDA = 0.41x — very low leverage and high financial resilience. Net cash was ¥267.3B (cash ¥519.4B - interest-bearing debt ¥252.1B), so net debt is zero and solvency is sound. However, short-term borrowings of ¥163.4B and long-term borrowings of ¥88.8B (short-term debt ratio 65%) imply somewhat high short-term liability concentration, necessitating careful refinancing management.
OCF was ¥123.3B (YoY +42.5%) but remained only 0.37x of Net Income ¥328.9B, indicating low cash conversion efficiency. Starting from profit before tax of ¥571.3B and adding back depreciation ¥69.2B, the subtotal OCF was ¥270.6B, but working capital changes substantially reduced this. Increases in completed contract receivables and trade receivables (▲¥135.6B), decreases in trade payables (▲¥167.6B), and a decrease in advance receipts (YoY ▲¥24.0B) were the main drivers, reflecting mismatches in project progress and billing timing at period end. Payments of income taxes ¥152.3B were also deducted, resulting in final OCF of ¥123.3B. Investing Cash Flow was ▲¥181.4B, driven by CapEx ¥48.4B and acquisition of investment securities ¥104.7B. M&A-related outlays (acquisition of subsidiary shares ¥5.0B) were also included, reflecting portfolio expansion. Financing Cash Flow was ▲¥143.1B, mainly due to repayment of long-term borrowings ¥9.8B and dividend payments ¥116.8B. Free Cash Flow (OCF + Investing CF) was ▲¥58.1B and did not cover dividend payments, reducing cash and cash equivalents to ¥505.5B (prior year ¥705.2B). Cash at period end was ¥519.4B, giving a cash/short-term liabilities ratio of 3.5x against short-term liabilities ¥1,467.1B, indicating ample buffer, but normalizing working capital and expanding OCF are key priorities for next fiscal year.
Operating Income ¥546.0B constitutes the core of earnings, with recurring core business profits forming the bulk. Of Non-operating Income ¥48.2B (1.0% of revenue), ¥11.0B were dividends received, ¥17.2B were investment partnership gains, and ¥4.9B were equity in earnings of affiliates — indicating a base of recurring income. Non-operating expenses ¥12.6B (interest expense ¥6.5B, etc.) were modest, and Ordinary Income ¥581.6B reflects core business strength. Extraordinary items netting to ▲¥10.3B (extraordinary gains ¥10.6B, extraordinary losses ¥20.9B) were limited and did not materially distort results. The accrual ratio of 3.9% is within acceptable range, though OCF materially lagging Net Income suggests delayed cash conversion. Comprehensive income was ¥500.0B (¥496.3B attributable to owners of parent), substantially exceeding Net Income ¥328.9B, driven mainly by valuation gains on available-for-sale securities ¥68.5B and actuarial gains related to retirement benefits ¥24.5B. Unrealized gains on securities and increases in pension assets boosted net assets, indicating stronger capital accumulation on a comprehensive income basis. Accounting profit quality is high and one-off distortions are limited.
Guidance for the fiscal year ending March 2027: Revenue ¥5,000.0B (YoY +5.0%), Operating Income ¥555.0B (YoY +1.6%), Ordinary Income ¥590.0B (YoY +1.4%), Net Income attributable to owners of parent ¥405.0B (EPS forecast ¥572.56). Full-year progress rates are high at Revenue 95.2% and Operating Income 98.4%, indicating results are already near guidance. Next fiscal year is expected to be growth in both revenue and profit, but the modest Operating Income growth of +1.6% suggests a conservative stance, likely incorporating a normalization after this year’s high-margin projects and cautious cost assumptions. Operating margin guidance is 11.1% (this year 11.5%, ▲0.4pt), implying the need to maintain gross margin and control SG&A. With EPS forecast ¥572.56 and dividend guidance of ¥110 (annual ¥220), the payout ratio is about 38%, assuming similar shareholder returns. No disclosures on order backlog or order intake progress were provided, so no progress evaluation is made; the key question is whether the profitability improvement trend can be sustained into the next fiscal year.
Annual dividend is ¥220 (interim ¥90, year-end ¥130), with a payout ratio of 34.3% (total dividends ¥116.9B / Net Income attributable to owners of parent ¥328.9B), a healthy level. With Free Cash Flow of ▲¥58.1B versus dividends of ¥116.9B, FCF coverage is ▲0.50x and thus insufficient, but ample cash ¥519.4B and low leverage support continued dividends. Share buybacks were minimal (CF impact ▲¥0.0B), so returns are dividend-centric. Next fiscal year dividend guidance is annual ¥220 (interim ¥110, year-end ¥110), implying a payout ratio of about 38% (based on EPS forecast ¥572.56) and maintaining current levels. Total return ratio is effectively synonymous with the payout ratio given limited buybacks. Dividend sustainability depends on normalizing working capital and expanding OCF. Net cash was ¥267.3B with net debt zero, so financial capacity is ample, but improving OCF and advance receipts levels are prerequisites for stable dividends.
Working capital management risk: Completed contract receivables increased by ¥139.4B YoY while advance receipts decreased by ▲¥24.0B, expanding working capital. Results are sensitive to period-end progress and billing timing; continued collection delays or deterioration in advance terms could further pressure OCF. OCF of ¥123.3B is only 0.37x of Net Income ¥328.9B, highlighting weak cash generation. Improving working capital / revenue ratios and shortening collection cycles are urgent.
Short-term liability concentration risk: Short-term borrowings ¥163.4B and long-term borrowings ¥88.8B result in a short-term liability ratio of 65%, creating potential maturity mismatch risk. In a rising interest rate environment, refinancing costs could increase, raising interest expenses. Although cash/short-term liabilities ratio is 3.5x and liquidity is ample, the reduction in long-term borrowings (from ¥167.8B to ¥88.8B) increases short-term dependence; transparency of refinancing plans and interest-rate risk hedging are important.
Profitability fluctuation risk: Provisions for construction losses increased to ¥47.8B (prior year ¥27.6B, +73.5%), indicating heightened provisioning against underperforming projects. With labor and materials costs remaining elevated, post-contract additional costs or schedule delays could erode margins. Although completed-contract gross margin improved to 17.9% (prior year 14.5%), a reversal from high-margin projects or intensified price competition could make maintaining operating margins difficult.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 11.5% | 5.5% (3.5%–7.2%) | +5.9pt |
| Net Margin | 6.9% | 3.5% (2.5%–4.4%) | +3.4pt |
Profitability substantially exceeds industry medians, suggesting top-tier performance in construction profitability management and price pass-through effectiveness.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 0.5% | 9.8% (-2.1%–15.1%) | -9.3pt |
Revenue growth lags the industry median, indicating a strategy that prioritizes profitability over top-line expansion.
※ Source: Company aggregation
The key point is a marked improvement in Operating Margin to 11.5% (prior year 8.7%, +2.7pt) despite flat revenue, primarily driven by an increase in completed-contract gross margin to 17.9% (prior year 14.5%). Effective price pass-through and cost control improved profitability, and ROE 9.4% / Operating Margin 11.5% substantially exceed industry medians. However, OCF of ¥123.3B (0.37x of Net Income) indicates low cash conversion efficiency, and working capital expansion (completed contract receivables +¥139.4B, advance receipts ▲¥24.0B) has delayed cash realization of profits. Financial position is solid (Equity Ratio 67.2%, Debt/EBITDA 0.41x), but a short-term debt ratio of 65% increases short-term dependence and refinancing risk in a rising rate environment.
The increase in provisions for construction losses to ¥47.8B (prior year ¥27.6B, +73.5%) can be interpreted as strengthening reserves against underperforming projects and reflects a conservative accounting stance. Guidance for next fiscal year is conservative with Operating Income ¥555.0B (+1.6%), likely incorporating a normalization after this year’s high-margin projects and conservative cost assumptions. Payout Ratio 34.3% (forecast 38%) is healthy, but FCF coverage of ▲0.50x is insufficient, making working capital normalization and OCF expansion critical for dividend sustainability. High concentration in the Equipment Construction Business (96.3% of revenue) means project-mix shifts can significantly affect future results.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings bulletin data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm from public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed before making investment decisions.