ASAHI KOGYOSHA (1975) FY2026 Q3 Earnings Report

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Executive Summary

The Company achieved substantial profit growth exceeding its revenue growth rate, primarily due to improved profitability in the Facilities Construction Business. Revenue was ¥68.57B (+9.4% YoY), while Operating Income was ¥6.40B (+58.1%), Ordinary Income was ¥6.70B (+51.3%), and Net Income attributable to owners of the parent was ¥4.87B (+46.4%). The gross margin improved to 19.0% (15.1% in the prior-year period), while the operating margin rose to 9.3% (6.5% in the prior-year period). Improved project profitability in the core Facilities Construction Business was the primary driver of company-wide profit growth. In addition, a gain on the sale of investment securities of ¥0.56B boosted net income.

Factors Behind Performance Changes

【Revenue】Revenue was ¥68.57B (+9.4% YoY). The Facilities Construction Business led revenue growth, recording ¥64.65B (94.3% of total, +10.1% YoY), while the Equipment Manufacturing and Sales Business declined to ¥3.92B (5.7% of total, ▲1.2% YoY).

【Profit and Loss】Operating Income was ¥6.40B (+58.1% YoY), with the ¥5.89B increase in revenue resulting in a ¥2.35B increase in Operating Income. The segment profit margin of the Facilities Construction Business improved from 7.4% in the year-ago period to 10.0%, making it the primary contributor to profit growth. The Equipment Manufacturing and Sales Business continued to report a segment loss of ¥0.08B, although the loss narrowed from ¥0.29B in the prior year. Ordinary Income was ¥6.70B after adding non-operating income, including dividends received of ¥0.30B. Profit before tax was ¥7.17B, reflecting special income of ¥0.56B, consisting of a gain on the sale of investment securities of ¥0.56B. Net Income was ¥4.87B (+46.4% YoY). The Company achieved both revenue and profit growth, and the substantial outperformance of Operating Income growth relative to revenue growth indicates high-quality earnings growth. However, final profit also benefited from a temporary special gain.

Segment Analysis

The Facilities Construction Business recorded Revenue of ¥64.65B (+10.1% YoY), segment profit of ¥6.48B (+49.4% YoY), and a profit margin of 10.0% (up +264bp from 7.4% in the prior year), representing significant improvement in both revenue and profit growth. The Equipment Manufacturing and Sales Business recorded Revenue of ¥3.92B (▲1.2% YoY) and a segment loss of ¥0.08B (improved from a loss of ¥0.29B in the prior year). Although the loss narrowed, the business has not yet returned to profitability. The growth in company-wide profit is almost entirely dependent on improved profitability in the Facilities Construction Business, while restoring earnings in the Equipment Manufacturing and Sales Business remains a challenge for diversification going forward.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 9.3% (6.5% in the prior year), the Net Income margin to 7.1% (5.3% in the prior year), and the gross margin to 19.0% (15.1% in the prior year). Annualized ROE was 14.3%, decomposed into a Net Income margin of 7.1%, total asset turnover of 1.13x, and financial leverage of 1.79x. 【Cash Earnings Quality】Profit before tax of ¥7.17B includes a gain on the sale of investment securities of ¥0.56B, indicating that non-recurring factors, in addition to recurring improvements in project profitability, boosted final profit. 【Investment Efficiency】EPS was ¥188.79 (+46.2% YoY), and BPS was ¥1,747.76 (¥1,631.80 in the prior year). 【Financial Soundness】The Equity Ratio was 55.8% (52.0% in the prior year), the D/E ratio was 0.79x, and interest coverage was 128.0x, indicating a robust financial base.

Cash Flow Analysis

Because the cash flow statement is not included in the disclosed data, funding trends are analyzed based on changes in the balance sheet. Cash and deposits declined by ¥8.01B YoY to ¥10.53B, while investment securities increased by ¥4.65B to ¥14.49B and property, plant and equipment increased by ¥2.71B to ¥11.22B, indicating a shift in asset allocation from cash to investment securities and property, plant and equipment. On the liabilities side, long-term borrowings increased by ¥3.42B to ¥3.61B, while short-term borrowings declined by ¥1.07B to ¥2.23B, indicating a lengthening of the maturity structure of funding. The current ratio remained high at 180.7%, providing sufficient short-term liquidity despite changes in the asset composition.

Earnings Quality

Both recurring and temporary factors contributed to profit growth during the period. The improvement in the Facilities Construction Business segment profit margin from 7.4% to 10.0% represents a structural improvement in project profitability and can be regarded as an enhancement in recurring earnings power. On the other hand, profit before tax of ¥7.17B includes a gain on the sale of investment securities of ¥0.56B, a non-recurring factor dependent on market conditions and opportunities for sale. Dividends received of ¥0.30B accounted for 77.3% of non-operating income of ¥0.39B, and stable earnings contributions from the ¥14.49B of investment securities held also constitute part of Ordinary Income. Comprehensive Income was ¥6.60B (¥2.45B in the prior year), significantly exceeding Net Income of ¥4.87B. The difference was attributable to a ¥1.66B increase in valuation differences on securities, with the expansion of unrealized gains not reflected in Net Income serving as a factor supporting Comprehensive Income.

Earnings Forecast and Guidance

The full-year company forecast is Revenue of ¥103.00B (+12.0% YoY), Operating Income of ¥10.00B (+38.0%), and Ordinary Income of ¥10.30B (+35.8%). The Q3 year-to-date progress rates were 66.6% for Revenue, 64.0% for Operating Income, 65.0% for Ordinary Income, and 60.8% for Net Income (48.66/80.00), all below the quarterly progress benchmark of 75%. To achieve the full-year targets, Q4 Revenue of ¥34.43B and Operating Income of ¥3.60B will be required, implying a profit margin of approximately 10.5%, above the Q3 year-to-date Operating Income margin of 9.3%. The progress of projects and the concentration of completion timing in the Facilities Construction Business are expected to determine whether the Q4 plan is achieved.

Shareholder Returns

The Q2 dividend was ¥50.00 per share, while the full-year forecast dividend is ¥135.00 (only the interim result is compared because the prior-year full-year result was not disclosed). The forecast Payout Ratio based on forecast full-year EPS of ¥310.05 is 43.5%. Subtracting the interim dividend of ¥50.00 from the full-year dividend forecast of ¥135.00 implies an expected year-end dividend of ¥85.00. A capital structure comprising an Equity Ratio of 55.8% and a D/E ratio of 0.79x provides a reasonable degree of financial capacity relative to the forecast Payout Ratio of 43.5%. It should be noted that forecast full-year Net Income of ¥8.00B includes the ¥0.56B gain on the sale of investment securities recognized during the Q3 year-to-date period, meaning that non-recurring factors contribute to part of the funding source for dividends.

Risk Factors

1. Concentration of earnings in the Facilities Construction Business: This business accounts for 94.3% of consolidated Revenue and virtually all segment profit. Changes in project profitability, completion timing, and customers’ capital investment trends directly affect consolidated performance.

2. Q4 concentration required to achieve the full-year plan: The full-year progress rate for Operating Income is only 64.0%, requiring Q4 Operating Income of ¥3.60B (equivalent to a profit margin of approximately 10.5%). This requires an increase from the Q3 year-to-date profit margin of 9.3%.

3. Continued losses and work-in-progress inventory levels in the Equipment Manufacturing and Sales Business: The business continues to report a segment loss of ¥0.08B, and Revenue is down ▲1.2% YoY. Work-in-progress inventory of ¥1.83B is high relative to the business’s work-in-progress inventory ratio, requiring close monitoring of its impact on inventory turnover and profitability.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Comparison data for the Company’s Operating Income margin and Net Income margin against industry medians is limited, but the absolute levels are within a favorable range.

Growth and Capital Efficiency

Revenue growth of 9.4% trails Operating Income growth of +58.1%, indicating that profit growth is leading revenue growth and that attention should be paid to the quality of growth.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Facilities Construction Business segment profit margin improved from 7.4% in the year-ago period to 10.0%, leading the increase in the company-wide Operating Income margin to 9.3%. It will be possible to determine in future quarters whether this profitability improvement is recurring.

2. Progress toward the full-year Operating Income forecast was 64.0%, below the standard quarterly progress level. The achievement of the required Q4 Operating Income of ¥3.60B will be the key focus for determining whether the full-year plan is achieved.

3. Profit before tax includes a gain on the sale of investment securities of ¥0.56B, and temporary factors contributed to the +46.4% growth in Net Income. Evaluating earnings power based on Operating Income and Ordinary Income will be useful for assessing the sustainability of performance.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥2,208–¥2,337 at ±1% for the cost of equity, and ¥2,259–¥2,291 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these are not forecasts of the market stock price or recommendations of any specific investment action, and do not predict or guarantee future stock prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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 discretion and responsibility, after consulting with a professional as necessary.

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