| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥4239.2B | ¥3816.6B | +11.1% |
| Operating Income / Operating Profit | ¥477.4B | ¥324.1B | +47.3% |
| Ordinary Income | ¥506.4B | ¥349.7B | +44.8% |
| Net Income / Net Profit | ¥340.7B | ¥262.3B | +29.9% |
| ROE | 15.8% | 14.2% | - |
For the fiscal year ended March 2026, Revenue was ¥4239.2B (YoY +¥422.6B +11.1%), Operating Income was ¥477.4B (YoY +¥153.3B +47.3%), Ordinary Income was ¥506.4B (YoY +¥156.7B +44.8%), and Net Income attributable to owners of the parent was ¥340.7B (YoY +¥78.4B +29.9%), representing substantial top- and bottom-line growth. Profitability improvement in the Equipment Work (construction) business was notable: Completed contract gross profit margin rose to 25.2% (from 20.6% a year earlier, +4.6pt), and operating margin improved discontinuously to 11.3% (from 8.5%, +2.8pt). ROE was 15.8% (approximately +3pt YoY estimated from historical results), with total asset turnover of 1.11x and financial leverage of 1.78x indicating a balanced profile where improved profitability was the driver. Operating Cash Flow (OCF) recovered sharply to ¥292.8B (YoY +397.6%), but increases in trade receivables of ¥147.0B and decreases in advances on uncompleted construction pressured working capital, leaving the OCF/Net Income ratio at only 0.86x. Free Cash Flow (FCF) of ¥178.8B slightly undershot total shareholder returns of ¥194.4B (dividends + buybacks), so sustaining returns will depend on improving working capital management.
[Revenue] Revenue expanded steadily to ¥4239.2B (YoY +11.1%). The core Equipment Work business achieved double-digit growth with Revenue of ¥4154.3B (+11.2%), and completed contract revenue grew to ¥2945.0B (from ¥2742.7B last year, +7.4%). By region, Japan was ¥3331.7B (from ¥3100.8B, +7.4%), and Southeast Asia was ¥509.5B (from ¥273.4B, +86.3%), showing pronounced ASEAN market growth. Other regions contracted to ¥398.1B (from ¥442.4B, -10.0%), but overall geographic diversification and capture of higher-value projects drove the increase. The Equipment Manufacturing and Sales business also performed steadily with Revenue of ¥93.5B (+9.5%), indicating that the overall business portfolio has entered a growth mode. Contract assets decreased to ¥573.3B (from ¥605.9B, -5.4%), suggesting progress in milestone billing.
[Profitability] Gross margin improved materially to 22.1% (from 18.8%, +3.3pt). Completed contract gross profit margin surged to 25.2% (from 20.6%, +4.6pt), supported by successful price pass-through and disciplined cost control. Provision for construction losses was ¥2.5B (from ¥4.9B, -48.5%), halving year-on-year and reflecting stabilization of project profitability. Selling, general and administrative expenses (SG&A) rose to ¥459.7B (from ¥392.3B, +17.2%) in line with revenue growth, but the SG&A ratio was contained at 10.8% (from 10.3%, +0.5pt), demonstrating operating leverage. Operating margin improved to 11.3% (from 8.5%, +2.8pt), bringing profitability to the upper range in the industry. Ordinary Income benefited from non-operating income of ¥44.5B (dividends received ¥9.8B, interest received ¥6.2B, equity-method gains ¥8.2B, etc.) against non-operating expenses of ¥15.5B (interest paid ¥4.2B, etc.), contributing approximately +¥29.0B to Operating Income. Ordinary income margin rose to 11.9% (from 9.2%, +2.8pt). Extraordinary gains of ¥23.2B (gain on disposal of fixed assets ¥15.2B, gain on sales of investment securities ¥8.0B) less extraordinary losses of ¥1.3B produced a net +¥21.9B one-off, increasing profit before tax of ¥528.3B by roughly 4.1%. After income taxes of ¥148.1B (effective tax rate 28.0%), Net Income attributable to owners of the parent was ¥340.7B (YoY +29.9%), and net margin improved to 8.0% (from 6.9%, +1.2pt). In conclusion, the convergence of higher-margin Equipment Work operations and growth in Southeast Asia drove increases across revenue, margins, and absolute profit.
The core Equipment Work segment delivered Revenue of ¥4154.3B (YoY +11.2%), Operating Income of ¥467.7B (YoY +47.4%), and an operating margin of 11.3% (from 10.1%, +1.1pt), with both scale and profitability improving. Equipment Manufacturing And Sales posted Revenue of ¥93.5B (+9.5%), Operating Income of ¥9.1B (+56.6%), and an operating margin of 9.7% (from 6.2%, +3.5pt), showing substantial margin expansion. Other segments (insurance agency, etc.) recorded Revenue of ¥1.2B (+5.0%) and Operating Income of ¥0.8B (-2.4%), with a 64.0% margin—small in scale but highly profitable. The Equipment Work business accounts for 98.0% of total Revenue and 97.9% of Operating Income, indicating high business concentration. Meanwhile, margin improvement in Equipment Manufacturing And Sales is notable; both segments are in a growth-and-profit expansion phase, and portfolio-level profitability is stable.
[Profitability] Operating margin improved to 11.3% (from 8.5%, +2.8pt) and net margin to 8.0% (from 6.9%, +1.2pt), reaching record highs. ROE at 15.8% is in a strong range even versus the company’s historical results, evidencing improved capital efficiency. Completed contract gross profit margin at 25.2% (from 20.6%, +4.6pt) directly reflects improved profitability in Equipment Work. [Cash Quality] OCF/Net Income ratio is 0.86x (OCF ¥292.8B ÷ Net Income ¥340.7B), below 1x, as seasonal working capital and increases in trade receivables delay cash conversion. OCF/EBITDA ratio is 0.57x (OCF ¥292.8B ÷ (Operating Income ¥477.4B + Depreciation ¥34.4B)), indicating room to improve cash conversion efficiency. [Investment Efficiency] Total asset turnover is 1.11x (Revenue ¥4239.2B ÷ Total Assets ¥3818.2B), slightly down from 1.14x last year but stable in historical context. Investment securities increased to ¥641.7B (29.8% of equity), reflecting strategic cross-shareholdings and accumulation of investible assets. Tangible fixed assets are ¥238.4B (6.2% of total assets), light for a manufacturing profile, and capital expenditure burden is limited. [Financial Soundness] Equity ratio is 56.3% (from 55.0%, +1.3pt) and is robust. Current ratio is 181.2% (current assets ¥2640.4B ÷ current liabilities ¥1457.3B), Debt/EBITDA ratio is 0.54x (interest-bearing debt ¥274.1B ÷ EBITDA ¥511.8B), and interest coverage is 113.0x (Operating Income ¥477.4B ÷ interest paid ¥4.2B), indicating substantial financial headroom. However, interest-bearing debt is concentrated in short-term borrowings of ¥274.1B (including ¥50.0B of bonds maturing within one year), raising rollover risk and requiring precise management.
OCF improved significantly to ¥292.8B (from ¥58.9B, +397.6%), but the OCF subtotal (pre-Depreciation and working capital changes) was ¥420.0B, and increases in trade receivables of ¥147.0B (including electronic recorded monetary claims and contract assets) and decreases in advances on uncompleted construction of ¥29.9B constrained cash inflows. Increase in accounts payable of ¥11.6B was modest, resulting in a net working capital drag of about -¥165B. Corporate tax payments of ¥144.2B also weighed on cash, leaving OCF at approximately 86% of Net Income of ¥340.7B. Investing Cash Flow was -¥114.0B, mainly due to acquisitions of tangible and intangible fixed assets of -¥50.7B and purchases of investment securities of -¥85.1B. These were partly offset by proceeds from sales of tangible fixed assets of ¥31.9B and sales of investment securities of ¥10.1B. FCF was ¥178.8B (OCF ¥292.8B + Investing CF -¥114.0B), which fell short of cash returned to shareholders (dividend payments ¥126.3B + share buybacks ¥82.1B = ¥208.4B). Financing Cash Flow was -¥169.6B, and a net increase in short-term borrowings of ¥91.2B partially funded returns and bond redemptions. Ending cash balance was ¥425.4B (from ¥416.5B, +2.1%), a marginal increase, so working capital improvement is the focal point to strengthen future cash generation.
Quality of earnings is generally good, with Operating Income of ¥477.4B as the core. Non-operating income of ¥44.5B (1.0% of Revenue) comprised dividends received ¥9.8B, interest received ¥6.2B, equity-method gains ¥8.2B, etc., and boosted Ordinary Income by roughly +6.1%. Extraordinary gains of ¥23.2B (gain on disposal of fixed assets ¥15.2B, gain on sales of investment securities ¥8.0B) are one-off and should be viewed cautiously in assessing recurring earnings power. Non-operating expenses of ¥15.5B (interest paid ¥4.2B, etc.) were modest, and about 96% of Ordinary Income ¥506.4B stemmed from operating income and recurring equity-method earnings. The accrual ratio is low at 2.1% ((Net Income ¥340.7B − OCF ¥292.8B) ÷ Total Assets ¥3818.2B), indicating limited divergence between accounting profit and cash generation. Nevertheless, OCF/Net Income 0.86x and OCF/EBITDA 0.57x are somewhat weak relative to industry standards, with working capital seasonality and collection timing reducing cash conversion efficiency. Comprehensive income of ¥490.5B significantly exceeded Net Income ¥340.7B, with other comprehensive income items—valuation gains on investment securities ¥75.0B and actuarial adjustments for retirement benefits ¥27.1B—adding ¥102.1B to equity. Recurring earnings power is high, and while one-off items may reverse, the structural earnings base appears solid.
Progress against full-year guidance (Revenue ¥4400.0B, Operating Income ¥500.0B, Ordinary Income ¥520.0B, Net Income ¥367.0B) is generally within reach: Revenue 96.3%, Operating Income 95.5%, Ordinary Income 97.4%, Net Income 92.8%. Revenue is ¥160.8B (-3.7%) below forecast, Operating Income is ¥22.6B (-4.5%), Ordinary Income is ¥13.6B (-2.6%), and Net Income is ¥26.3B (-7.2%), suggesting some shortfall likely due to timing of inspections and billing for certain projects slipping into the year-end. Year-on-year, however, Revenue +11.1%, Operating Income +47.3%, Ordinary Income +44.8%, and Net Income +29.9% reflect strong growth, and the small variances versus guidance are likely timing-related. Growth in Southeast Asia ( +86.3% ) and margin improvement in higher-value projects support a high probability of achieving next year’s plan.
The annual dividend is ¥158 per share (interim ¥86, year-end ¥72; after considering a stock split, interim ¥86, year-end ¥36 totaling ¥122 equivalent), representing a payout ratio of 40.1% and a stable level. Total dividends equal ¥126.3B (on a diluted shares basis after treasury stock), implying a dividend payout ratio relative to Net Income of about 37%, which is conservative. Share buybacks totaled ¥82.1B, bringing total shareholder returns to ¥208.4B and a Total Return Ratio of about 61%. Coverage of returns by FCF (¥178.8B) is approximately 0.86x, and part of the funding was supplemented by an increase in short-term borrowings of ¥91.2B. A payout ratio of 40.1% corresponds to DOE of 6.4%, maintaining an equity-consistent level of return. If working capital normalizes and OCF recovers to Net Income levels, the sustainability of the dividend is likely to strengthen. Buybacks were implemented as a one-off capital policy measure, and continuation into future periods is undecided. The company’s stance favors stable dividends, and a Total Return Ratio around 60% is expected to be maintained.
Working capital reversal risk: Increases in trade receivables of ¥147.0B and decreases in advances on uncompleted construction of ¥29.9B have constrained OCF, leaving OCF/Net Income at 0.86x. Continued timing delays in project acceptance and billing or further erosion of advance payments could reduce cash generation and raise concerns about the sustainability of shareholder returns. Improving working capital management (shortening billing/collection cycles, securing advance payments) is a top priority.
Short-term borrowings concentration risk: Interest-bearing debt of ¥274.1B (all of which is short-term borrowings, including ¥50.0B of bonds maturing within one year) is heavily short-term, with a short-term debt ratio reaching 100%. If refinancing/rollover timing coincides with rising rates or reduced credit lines, funding and financing costs could be affected. Cash and deposits of ¥482.3B provide sufficient near-term liquidity, but conversion to longer-term funding and a clear repayment plan are desirable.
One-off profit reversal risk: Extraordinary gains of ¥23.2B (gain on disposal of fixed assets ¥15.2B, gain on sales of investment securities ¥8.0B) are non-recurring and increased profit before tax by roughly 4.1%. Similar scale extraordinary gains are unlikely next year, so evaluation based on Ordinary Income is important. If Operating Income momentum is sustained, the impact of losing one-off gains can be absorbed.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 11.3% | 5.5% (3.5%–7.2%) | +5.7pt |
| Net Margin | 8.0% | 3.5% (2.5%–4.4%) | +4.5pt |
The company’s profitability significantly exceeds the construction industry median, driven by capture of higher-value projects and disciplined margin management.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 11.1% | 9.8% (-2.1%–15.1%) | +1.2pt |
Revenue growth modestly outpaces the industry median, led by expansion in Southeast Asia.
※ Source: Company aggregation
Structural drivers: Profitability improvement in Equipment Work and rising Southeast Asia sales are lifting margins: Completed contract gross profit margin 25.2% (from 20.6%, +4.6pt) and operating margin 11.3% (from 8.5%, +2.8pt). Southeast Asia Revenue doubled to ¥509.5B (from ¥273.4B, +86.3%), strengthening geographic diversification and higher-value project mix. ROE 15.8% and industry-leading margins (Operating Margin +5.7pt, Net Margin +4.5pt relative to peers) position the company well for medium-term growth.
Working capital reversal and cash conversion improvement as the primary focus: OCF/Net Income 0.86x and OCF/EBITDA 0.57x indicate weaker cash conversion relative to peers. Increases in trade receivables ¥147.0B and decreases in advances on uncompleted construction ¥29.9B are the main drivers. FCF ¥178.8B did not fully cover shareholder returns ¥208.4B and was supplemented by increased short-term borrowings ¥91.2B. If working capital normalizes and OCF recovers to Net Income levels, sustainability of dividends and returns will be greatly enhanced. Key items to monitor include backlog and contract asset trends and actions to shorten billing/collection cycles.
This report is an AI-generated financial analysis document based on XBRL financial disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the company from public financial disclosures for reference. Investment decisions are your responsibility; please consult a professional advisor as needed.