DAI-DAN CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

While improved construction profitability resulted in higher revenue and income at the operating and ordinary income levels, the increase in the effective tax rate weighed on net income. Revenue was ¥616.0B (+2.4% YoY), Operating Income was ¥109.3B (+12.7%), and Ordinary Income was ¥112.9B (+12.2%), with profit growth outpacing revenue growth. Meanwhile, Net Income attributable to owners of the parent declined to ¥65.7B (¥68.9B in the previous year, -4.6%). The primary driver of profit growth was the improvement in the gross profit margin on completed construction contracts (26.7%, +2.4pt from 24.3% in the previous year), while the primary driver of the decline in net income was the increase in the effective tax rate (41.5%, +10.3pt from 31.2% in the previous year).

Factors Behind Performance Changes

【Revenue】The Company operates in a single segment, the equipment construction business, and does not disclose a segment breakdown. Revenue from completed construction contracts was ¥616.0B (+2.4% YoY), securing moderate revenue growth. Advances received on uncompleted construction contracts increased to ¥187.9B, up +76.5% from the end of the previous fiscal year, suggesting improved order and billing conditions.

【Profit and Loss】Gross profit on completed construction contracts was ¥164.5B, and the gross profit margin improved to 26.7% (+2.4pt from 24.3% in the previous year). Improved construction profitability was the primary driver of profit growth. SG&A expenses increased to ¥55.2B (SG&A ratio: 9.0%, +0.8pt from 8.2% in the previous year), but the improvement in gross profit more than offset this increase, resulting in Operating Income of ¥109.3B (Operating Income margin: 17.7%, +1.6pt from 16.1% in the previous year). Non-operating income and expenses totaled a net gain of +¥3.6B, mainly due to dividend income of ¥1.5B and foreign exchange gains of ¥0.8B, bringing Ordinary Income to ¥112.9B (+12.2%). Special income and expenses consisted only of special income of ¥0.03B, with virtually no temporary factors. Against Profit Before Tax of ¥113.0B, income taxes and other taxes of ¥46.9B were recorded. As a result, the effective tax rate rose to 41.5% (+10.3pt from 31.2% in the previous year), and Net Income attributable to owners of the parent declined to ¥65.7B (-4.6%). The overall picture is one of higher revenue and income at the operating and ordinary income levels, but lower net income due to the increased tax burden, indicating a clear improvement in the profitability of the core business.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 17.7% from 16.1% in the previous year, a +1.6pt improvement, and the gross profit margin on completed construction contracts also rose to 26.7% from 24.3%. In contrast, the Net Income margin attributable to owners of the parent declined to 10.7% from 11.5% in the previous year, a -0.8pt decrease, with the increased tax burden weighing on profitability indicators. 【Cash Quality】Accounts receivable from completed construction contracts declined by -21.5% to ¥613.8B from ¥782.2B in the previous year, while advances received on uncompleted construction contracts increased by +76.5% to ¥187.9B from ¥106.5B in the previous year, indicating progress in reducing working capital through improved billing and advance payment terms. 【Investment Efficiency】ROE was 5.0%; against a Net Income margin of 10.7%, total asset turnover remained at approximately 0.27 times, indicating that substantial cash holdings are suppressing capital efficiency. 【Financial Soundness】The Equity Ratio improved to 61.0% from approximately 56.2% in the previous year. With cash and deposits of ¥825.8B against interest-bearing debt of ¥33.4B, the Company has a net cash position, while its current ratio of 211% indicates ample liquidity.

Cash Flow Analysis

As the Company does not disclose a cash flow statement, cash trends are analyzed based on changes in the balance sheet. Accounts receivable from completed construction contracts declined by 21.5% to ¥613.8B from ¥782.2B in the previous year, while advances received on uncompleted construction contracts increased by 76.5% to ¥187.9B from ¥106.5B in the previous year. The movements in both items suggest cash generation resulting from progress in progress-based billing and improved advance payment terms. Cash and deposits stood at ¥825.8B, virtually unchanged from ¥832.0B in the previous year (-0.8%), maintaining a high cash balance. Interest-bearing debt, totaling short- and long-term debt, was small at ¥33.4B, suggesting that the improvement in working capital is being allocated primarily to future construction funding and capacity for shareholder returns.

Quality of Earnings

Special income and expenses consisted only of special income of ¥0.03B, with no special losses recorded; therefore, temporary factors had virtually no impact on profit. Non-operating income was primarily composed of dividend income of ¥1.5B and foreign exchange gains of ¥0.8B, which are relatively recurring in nature. Comprehensive income was ¥71.4B, including ¥70.7B attributable to owners of the parent. The difference of approximately +¥5.0B from Net Income attributable to owners of the parent of ¥65.7B was attributable to other comprehensive income items, including valuation difference on securities of +¥5.6B, foreign currency translation adjustments of +¥1.8B, and adjustments related to retirement benefits of -¥2.1B; these represent fluctuations separate from the recurring earning power of the business. From an accrual perspective, the increase in advances received on uncompleted construction contracts indicates revenue recognition accompanied by cash collection ahead of construction progress, suggesting that the quality of earnings is sound.

Earnings Forecasts and Guidance

Progress in Q1 against the Full Year plan was 23.2% for Revenue (plan: ¥2,650.0B), 30.4% for Operating Income (plan: ¥360.0B), 30.9% for Ordinary Income (plan: ¥365.0B), and 24.1% for Net Income attributable to owners of the parent (plan: ¥273.0B). Operating Income and Ordinary Income are progressing somewhat ahead of schedule, exceeding the simple 25% progress rate, while Net Income is tracking broadly in line with the plan due to the impact of the increased tax burden. As of the current quarter, there have been no revisions to the earnings forecast or dividend forecast. Expected construction orders are ¥3,250B, securing coverage of approximately 1.23 times against the revenue plan of ¥2,650B.

Shareholder Returns

The Payout Ratio calculated from Full Year forecast EPS of ¥211.42 and forecast DPS of ¥85.00 is approximately 40.2%, a sustainable level considering the Company’s capacity for shareholder returns supported by cash and deposits of ¥825.8B. In addition, a 3-for-1 stock split of common shares was conducted effective January 1, 2026. On a hypothetical basis reflecting the impact of the split, the interim dividend would be ¥27.33, the year-end dividend would be ¥56.00, and the total annual dividend would be ¥83.33. Compared with the previous year’s annual dividend of ¥82, the Company continues to be on a dividend growth trajectory on a split-adjusted basis.

Risk Factors

1. Risk of an upside surprise in the tax burden: The effective tax rate rose to 41.5% from 31.2% in the previous year, an increase of +10.3pt, and was the primary factor that caused Net Income attributable to owners of the parent to decline by -4.6% despite higher Operating Income and Ordinary Income. If the tax rate remains elevated, it may constrain Full Year EPS.

2. Risk of fluctuations in construction profitability and the order environment: The gross profit margin on completed construction contracts improved to 26.7%, but profitability may fluctuate due to changes in material prices and labor costs, as well as construction delays. Expected construction orders of ¥3,250B represent only approximately 1.23 times the revenue plan, making the continued accumulation of orders a prerequisite for securing revenue in the latter half of the fiscal year.

3. Changes in the working capital structure: Advances received on uncompleted construction contracts increased to ¥187.9B, up 76.5%, changing the composition of current liabilities. Since advances represent cash collection ahead of construction progress, the effective liquidity risk is limited; however, management of potential drawdowns will be required if construction progress is delayed.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin are substantially above the industry median, placing profitability at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate is slightly below the industry median, indicating relatively moderate top-line growth.

※Source: Company aggregation

Key Takeaways from the Results

1. The improvement in the gross profit margin on completed construction contracts to 26.7% (+2.4pt from 24.3% in the previous year), together with the increase in the Operating Income margin to 17.7% (+1.6pt), indicates structural improvement in construction profitability and confirms a profitability level substantially above the industry median (4.5%).

2. The 21.5% decline in accounts receivable from completed construction contracts and the 76.5% increase in advances received on uncompleted construction contracts indicate reduced working capital requirements due to improved billing and advance payment terms, supporting the quality of earnings from the perspective of cash generation capacity.

3. The decline in Net Income attributable to owners of the parent (-4.6%) was primarily attributable to the increase in the effective tax rate (41.5%, compared with 31.2% in the previous year). This factor, which has a temporary nature distinct from the higher Operating Income and Ordinary Income, warrants attention when assessing tax rate trends for the Full Year.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,403–¥1,486 at ±1% for the cost of equity, and ¥1,433–¥1,460 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference from the Full Year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value does not predict or guarantee the future share price)

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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. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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