| Indicator | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2546.7B | ¥2531.4B | +0.6% |
| Operating Income / Operating Profit | ¥279.9B | ¥218.9B | +27.9% |
| Ordinary Income | ¥292.9B | ¥230.7B | +26.9% |
| Net Income / Net Profit | ¥229.9B | ¥165.4B | +39.0% |
| ROE | 18.9% | 15.6% | - |
For the fiscal year ending March 2026, Revenue was ¥2546.7B (YoY +¥15.4B +0.6%), Operating Income was ¥279.9B (YoY +¥61.0B +27.9%), Ordinary Income was ¥292.9B (YoY +¥62.2B +26.9%), and Net Income attributable to owners of parent was ¥236.9B (YoY +¥65.4B +37.7%), resulting in a significant profit increase despite flat sales. Revenue remained in the ¥2,500B range for the third consecutive year. Operating margin expanded from 8.6% to 11.0% (+2.4pt) and net margin improved from 6.8% to 9.3% (+2.5pt). The primary driver of profit growth was a substantial improvement in gross profit margin on completed contracts, rising from 18.5% to 21.8% (+3.3pt), and the provision for construction losses decreased sharply from ¥20.1B to ¥3.3B (-83.4%). However, a non-recurring gain of ¥36.3B (gain on sale of investment securities) boosted pre-tax profit, and the company’s recurring earnings power should be assessed adjusting for such one-off items.
【Revenue】 Revenue stood at ¥2546.7B (+0.6%), a slight increase. By segment, the core Architectural & Facility Business was steady at ¥2129.1B (+1.9%), accounting for 83.6% of total revenue. Environmental Systems was ¥301.1B (-3.8%) and Mechanical Systems was ¥97.7B (-10.7%), both declining and partially offsetting the Architectural & Facility growth. Real Estate was ¥26.6B (+2.4%) and Other was ¥9.1B (+22.5%), with smaller segments performing well. Completed contract revenue was ¥2519.2B (+0.4%), roughly flat, and development businesses were ¥27.5B (+1.5%), stable. Contract liabilities increased to ¥199.5B from ¥119.7B (+¥79.8B), and the rise in advance receipts is a positive leading indicator for next period’s revenue recognition.
【Profitability】 Operating Income was ¥279.9B (+27.9%), with Operating Margin improving markedly to 11.0% (from 8.6% +2.4pt). Gross profit was ¥560.7B and gross margin expanded to 22.0% (from 18.8% +3.2pt). Gross margin on completed contracts improved notably to 21.8% (from 18.5% +3.3pt), and the large reduction in the provision for construction losses (¥20.1B → ¥3.3B, -83.4%) suggests progress in margin correction. SG&A was ¥280.8B (+9.7%), and the SG&A ratio rose to 11.0% (from 10.1% +0.9pt), but the larger gross margin improvement outpaced this, expanding operating margin. Ordinary Income was ¥292.9B (+26.9%), with non-operating items contributing ¥13.0B (dividend income ¥9.2B, interest income ¥1.4B, etc.), only 0.5% of sales, indicating earnings are business-driven. A special gain of ¥36.3B (gain on sale of investment securities) expanded profit before tax to ¥326.6B (+40.6%). After corporate taxes of ¥89.7B (effective tax rate 27.5%), Net Income attributable to owners of parent was ¥236.9B (+37.7%). In conclusion, despite flat revenue, margin improvements led to higher profits, and the results include contribution from one-off gains.
The core Architectural & Facility Business recorded Revenue of ¥2129.1B (+1.9%), Segment Profit of ¥280.5B (+36.6%), and Margin of 13.2% (from 9.8% +3.4pt), a significant improvement. This core business generated the majority of the company’s Ordinary Income of ¥292.9B, and improved gross margins plus reduced construction loss provisions drove profitability. Environmental Systems posted Revenue of ¥301.1B (-3.8%), Segment Profit ¥11.5B (from ¥17.9B -36.0%), and Margin 3.8% (from 5.7% -1.9pt), a decline in both sales and profit. Mechanical Systems had Revenue ¥97.7B (-10.7%) and a Segment Loss of ¥9.2B (prior period loss ¥6.1B), widening the loss and producing a Margin of -9.4% (from -5.6% -3.8pt). Real Estate achieved Revenue ¥26.6B (+2.4%), Segment Profit ¥8.4B (from ¥9.1B -7.7%), and Margin 31.5% (from 35.0% -3.5pt), remaining high-margin but slightly down. There is significant profitability dispersion across segments; concentration in Architectural & Facility and elimination of losses in Mechanical Systems are key challenges for improving corporate earnings stability.
【Profitability】Operating Margin improved to 11.0% (from 8.6% +2.4pt), Gross Margin to 22.0% (from 18.8% +3.2pt), and Completed Contract Gross Margin to 21.8% (from 18.5% +3.3pt). ROE rose to 18.9% (from 16.3% +2.6pt), with Net Margin 9.3% (from 6.8% +2.5pt) × Total Asset Turnover 1.16 × Financial Leverage 1.81. The expansion in Net Margin primarily drove ROE improvement. ROA (on an Ordinary Income basis) increased to 13.9% (from 11.4% +2.5pt). 【Cash Quality】Operating Cash Flow to Net Income ratio fell substantially to 0.56x (from 1.80x), indicating delayed cash realization of profits. The main causes were increases in trade receivables and contract assets of ¥1073B and decrease in accounts payable of ¥375.8B, causing working capital cash outflow, partially offset by a ¥79.8B increase in contract liabilities. Free Cash Flow was ¥118.3B and FCF/OCF was 0.90x, healthy but with scope for working capital improvement. 【Investment Efficiency】Capital expenditure of ¥16.8B was 0.84x depreciation ¥20.1B, indicating conservative capex. Investment securities balance rose to ¥352.6B (from ¥313.8B +¥38.8B), and unrealized gains on securities were ¥163.3B (from ¥133.8B +¥29.5B). 【Financial Soundness】Equity Ratio was 55.3% (from 52.9% +2.4pt), Current Ratio 176.4% (from 168.7% +7.7pt), showing solidity. Total interest-bearing debt was ¥61.3B (from ¥70.6B -13.2%), Debt/EBITDA was 0.20x, and Interest Coverage was 231.8x—very conservative. Short-term debt ratio was 94.3% indicating high maturity concentration, but Cash & Deposits of ¥321.0B provided 5.55x coverage over short-term borrowings of ¥57.8B, limiting practical liquidity risk.
Operating Cash Flow was ¥131.7B, down -55.7% from ¥297.3B, and Operating CF/Net Income ratio fell to 0.56x (from 1.80x). The subtotal before working capital changes was ¥219.3B against profit before tax ¥326.6B, but working capital changes drove significant cash outflow. The main factors were increased trade receivables and contract assets of ¥1073B and decreased accounts payable of ¥375.8B, partially offset by a ¥79.8B increase in contract liabilities. Corporate tax payments of ¥92.3B were also a burden. Investing Cash Flow was -¥13.4B, light, with capital expenditure ¥16.8B and intangible asset investment ¥4.3B offset by proceeds from sale of investment securities ¥51.9B and redemptions ¥60.0B. Free Cash Flow was ¥118.3B. Financing Cash Flow was -¥160.7B, with dividend payments ¥99.6B and share buybacks ¥50.0B totaling ¥149.6B in shareholder returns exceeding FCF, resulting in a ¥40.6B decline in cash during the period. Year-end Cash & Deposits were ¥321.0B, a slight increase of +0.8% from ¥318.6B, maintaining liquidity, though working capital compression remains a priority to improve next period’s Operating CF.
Ordinary Income of ¥292.9B comprised Operating Income ¥279.9B and non-operating items +¥13.0B (dividend income ¥9.2B, interest income ¥1.4B, insurance income ¥4.2B, etc.), with non-operating income only 0.5% of sales. A special gain of ¥36.3B (gain on sale of investment securities) boosted pre-tax profit; excluding the after-tax contribution of this one-off, Net Income would broadly correspond to the low ¥210B range, implying recurring earnings power slightly below the reported ¥236.9B attributable to owners of parent. Special losses were minor at ¥2.5B (impairment loss ¥0.7B, loss on disposal of fixed assets ¥1.8B, etc.). Accrual (Net Income - Operating CF) was ¥105.2B and accrual ratio was 4.8%, within the healthy rule-of-thumb range below 5%, but Operating CF lagging Net Income indicates room to improve cash realization timing. Comprehensive Income was ¥297.4B, exceeding Net Income ¥236.9B by ¥60.5B, mainly due to unrealized gains on securities ¥29.5B and actuarial gains related to retirement benefits ¥28.0B. The divergence between Ordinary Income and Net Income reflects corporate taxes ¥89.7B and special gains/losses difference ¥33.8B; excluding tax and one-off items, core business profitability is sound.
The company’s Full Year guidance is Revenue ¥2600.0B (YoY +2.1%), Operating Income ¥295.0B (YoY +5.4%), Ordinary Income ¥300.0B (YoY +2.4%), and Net Income attributable to owners of parent ¥253.0B (YoY +6.1%). Revenue is expected to be slightly up, with Operating Margin improving to 11.3% (from 11.0% +0.3pt). This likely assumes partial continuation of the gross margin improvement and SG&A control. The accumulated contract liabilities (+¥79.8B) are a tailwind as a leading indicator for order fulfillment, while the reversal of the special gain (gain on sale of investment securities ¥36.3B) and progress in turning around Mechanical Systems losses are key to achieving targets. The Net Income target of ¥253.0B assumes addition on top of the recurring earnings level excluding this period’s one-off gains. Full year dividend forecast is ¥32.5 per share (Year-end ¥10.0 + Interim ¥22.5, post-split), with a Payout Ratio of 50.6%, maintaining a stable shareholder return policy.
Dividends paid totaled ¥112.5 (Year-end) + ¥82.5 (Interim) = ¥195 (pre-split), with a Payout Ratio of 50.6% (Total dividends ¥99.6B / Net Income attributable to owners of parent ¥236.9B). Dividend coverage relative to Free Cash Flow was 1.19x, indicating dividends were fully covered by internally generated cash. Share buybacks of ¥50.0B were executed, and combined with dividends total shareholder returns were ¥149.6B, resulting in a Total Return Ratio of 63.2%. Total return coverage relative to Free Cash Flow was 0.79x, so the company used part of its cash reserves this period. Treasury stock held was ¥89.4B (equivalent to 5.1% of shares outstanding), contributing to per-share value via acquisitions during the period. A stock split (1 share → 3 shares) will be implemented in May next fiscal year; year-end dividend forecast post-split is ¥10.0, and annual dividend forecast is ¥32.5 (post-split, maintaining payout ratio around 50%). Capex being 0.84x depreciation suggests light capital spending and limited near-term dividend burden, but if Operating CF improvement delays, the company retains flexibility to adjust total returns.
Working Capital Expansion Risk: Growth in contract assets and trade receivables has expanded working capital (trade receivables increase ¥1073B, accounts payable decrease ¥375.8B), reducing Operating CF/Net Income ratio to 0.56x. Prolonged delays in revenue collection timing or lax credit control could further deteriorate cash conversion efficiency and materialize liquidity risk. Proper rationalization of contract asset balances and stricter collection terms are necessary.
Segment Concentration & Loss-Making Business Risk: High revenue concentration in Architectural & Facility (83.6%) creates dependency on a single business. Mechanical Systems has reported losses for two consecutive periods (current period -¥9.2B, prior period -¥6.1B) and the widening deficit could increase corporate earnings volatility if structural improvements lag. Delays in withdrawing from low-margin projects or reorganizing businesses are risk factors.
Gross Margin Sustainability Risk: Completed contract gross margin improved considerably from 18.5% to 21.8% (+3.3pt) and provisions for construction losses fell from ¥20.1B to ¥3.3B, but much of the improvement stems from stabilized material prices and one-off margin corrections; a rebound in labor or raw material costs or unfavorable project mix could reverse gains. Ongoing cost control on new contracts and pricing power are key to maintaining margins.
Profitability & Returns
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 11.0% | 5.5% (3.5%–7.2%) | +5.4pt |
| Net Margin | 9.0% | 3.5% (2.5%–4.4%) | +5.5pt |
Profitability significantly exceeds industry median, placing the company among the higher margin peers in the construction sector.
Growth & Capital Efficiency
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 0.6% | 9.8% (-2.1%–15.1%) | -9.2pt |
Revenue growth lags the industry median, indicating weaker top-line expansion relative to peers, while margin improvements have enhanced profitability.
※ Source: Company compilation
Sustainability of margin improvement: Completed contract gross margin improved from 18.5% to 21.8% (+3.3pt), and Operating Margin reached 11.0%, +5.4pt above the industry median of 5.5%. The large reduction in provision for construction losses (¥20.1B → ¥3.3B) suggests margin correction progress, but if the improvements are driven by material price stabilization or one-off factors, sustainability will be the focus going forward. The increase in contract liabilities (+¥79.8B) is a positive leading indicator for order fulfillment, but continuous verification of cost control and pricing pass-through on new projects is required.
Delay in cash realization of profits and working capital management: Operating CF/Net Income ratio fell to 0.56x, and working capital was pressured by increases in trade receivables and contract assets of ¥1073B and a decrease in accounts payable of ¥375.8B. Free Cash Flow ¥118.3B versus total shareholder returns ¥149.6B indicates partial drawdown of cash reserves; improvement in Operating CF next period is key to the sustainability of shareholder returns and cash conversion efficiency. Cash & Deposits of ¥321.0B and short-term borrowings ¥57.8B (5.55x cover) limit liquidity risk, but smoothing collection of progress billings and compressing contract assets are focal points.
Imbalanced segment portfolio: Architectural & Facility (revenue share 83.6%, margin 13.2%) generates most corporate profits, while Mechanical Systems is in its second consecutive loss (-¥9.2B). Maintaining high profitability in Architectural & Facility and turning around Mechanical Systems are mid-term priorities to reduce earnings volatility and improve segment diversification. Excluding the one-off gain (gain on sale of investment securities ¥36.3B), recurring earnings approximate the low ¥210B range, and achieving the next period’s forecast ¥253.0B requires additional operating improvements.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; consult professionals as necessary before acting.