| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥927.0B | ¥835.8B | +10.9% |
| Operating Income / Operating Profit | ¥204.5B | ¥163.1B | +25.4% |
| Ordinary Income | ¥170.9B | ¥137.6B | +24.2% |
| Net Income / Net Profit | ¥48.5B | ¥103.5B | -53.2% |
| ROE | 4.2% | 8.4% | - |
For the fiscal year ended February 2026, Revenue was ¥927.0B (YoY +¥91.3B +10.9%), Operating Income was ¥204.5B (YoY +¥41.4B +25.4%), Ordinary Income was ¥170.9B (YoY +¥33.1B +24.2%), and Net Income was ¥48.5B (YoY -¥55.0B -53.2%). Revenue increased for the third consecutive year, led by the ValueAdd segment which grew +51.3%, and Operating margin improved materially to 22.1% (YoY +2.5pt). Net Income halved year-on-year due to a reclassification of one-off items, however Net Income attributable to owners of the parent increased to ¥166.3B (+9.5%). Gross margin improved to 32.5% (+1.9pt) and SG&A ratio improved to 10.4% (-0.6pt), enhancing operating profitability. At the ordinary income level, interest expense increased to ¥43.5B (prior year ¥30.7B), which compressed margins, but pre-tax profit reached ¥245.0B due to special gains of ¥94.2B including ¥77.6B gain on sale of fixed assets. Comprehensive income was ¥195.6B, well above Net Income, contributed by OCI such as ¥20.6B valuation difference on available-for-sale securities.
Revenue: The ValueAdd segment expanded rapidly to ¥276.5B (+51.3%), accounting for 29.8% of total revenue. Asset Management was ¥44.6B (+1.2%), Hotels ¥152.6B (-3.9%), Clean Energy ¥61.9B (+0.9%), and IchigoOwners ¥397.4B (+0.7%), producing total Revenue of ¥927.0B. Cost of sales amounted to ¥625.9B (prior year ¥580.5B, +7.8%), and gross margin improved to 32.5% (prior year 30.5%, +1.9pt). SG&A was ¥96.7B (prior year ¥92.2B, +4.9%), growing less than Revenue (+10.9%), and SG&A ratio improved to 10.4% (prior year 11.0%, -0.6pt).
Profitability: Operating Income rose to ¥204.5B (+25.4%), outpacing revenue growth, and Operating margin improved to 22.1% (prior year 19.5%, +2.5pt). Non-operating income totaled ¥30.9B (foreign exchange gains ¥2.4B, derivative valuation gains ¥29.1B, etc.) while non-operating expenses were ¥64.5B (interest expense ¥43.5B, derivative valuation losses ¥1.7B, foreign exchange losses ¥3.2B, etc.), resulting in Ordinary Income of ¥170.9B (+24.2%). Interest expense increased +41.7% from ¥30.7B, and interest cost on ¥220.0B of interest-bearing debt was a compressive factor at the ordinary level. Special gains were ¥94.2B (gain on sale of fixed assets ¥77.6B, gain on sale of available-for-sale securities ¥12.6B, etc.) and special losses ¥20.1B (impairment on available-for-sale securities ¥7.9B, impairment losses ¥4.3B, etc.), lifting Pre-tax Profit to ¥245.0B. After corporate taxes of ¥76.5B (effective tax rate 31.2%) and non-controlling interests of ¥2.1B, Net Income attributable to owners of the parent was ¥166.3B (+9.5%), representing year-on-year growth on a parent-company basis. Non-controlling interests decreased materially from ¥226M last year, and changes in ownership structure impacted Net Income variance. In conclusion, operating-level performance achieved revenue and profit growth, driven by high-margin ValueAdd projects and cost efficiencies, but increased interest burden and one-off items led to compression at the ordinary level and a decline in Net Income due to temporary factors.
ValueAdd delivered Operating Income of ¥81.3B (+162.8%) with a margin of 29.4%, accounting for 39.8% of total segment Operating Income. IchigoOwners posted Operating Income of ¥37.6B (+13.1%) with a margin of 9.5%, and with Revenue of ¥397.4B (42.9% of total) it remains the largest segment and forms the core revenue base. Hotels recorded Operating Income of ¥45.9B (-17.2%) with a high margin of 30.1% but was down, suggesting adjustments in occupancy and ADR. Clean Energy achieved Operating Income of ¥16.5B (-4.5%) with a margin of 26.6%. Asset Management had Operating Income of ¥22.8B (-12.7%) with the highest margin of 51.1% though it was down. Segment assets expanded with ValueAdd at ¥1,940.0B and Hotels at ¥1,006.2B, becoming the portfolio pillars. Special gains included ¥49.6B asset sale gains in ValueAdd and ¥26.4B asset sale gains in Hotels, and realized sale proceeds boosted segment business profit (Operating Income + asset sale gains).
Profitability: Operating margin 22.1% (prior year 19.5%, +2.5pt), gross margin 32.5% (prior year +1.9pt), SG&A ratio 10.4% (prior year -0.6pt) show improvement at the operating level. ROE was 4.2% (prior-year ROA on ordinary basis 4.1%); leverage effect on Net Income is limited, but on a parent-company Net Income basis ROE equates to approximately 14.2% calculated as Net Profit Margin 17.9% × Total Asset Turnover 0.213 × Leverage 3.73x. Cash Quality: Operating Cash Flow (OCF) was -¥218.6B (improved from -¥284.5B), mainly due to an increase in inventory for sale of real estate of -¥329.1B. OCF/Net Income was -4.5x (on parent-company basis -1.3x), Free Cash Flow was -¥71.3B indicating weak cash generation. EBITDA (adding back depreciation ¥46.8B) was ¥251.3B, and OCF/EBITDA was -0.87x, indicating a temporary deterioration in cash conversion. Investment Efficiency: Total Asset Turnover was 0.213x (Revenue ¥927.0B ÷ Total Assets ¥4,358.2B), slowed by increased real estate inventory. Inventory for sale of real estate was ¥1,769.0B (prior year ¥1,439.9B, +22.8%), representing 40.6% of total assets, so inventory efficiency is a challenge. Financial Soundness: Equity Ratio was 26.8% (prior year 27.3%, -0.5pt), interest-bearing debt approximately ¥2,200B (long-term borrowings ¥2,136.0B, bonds ¥99.7B, short-term borrowings ¥64.2B), with Debt/Equity 2.73x (long-term D/E 1.83x) indicating high leverage. Meanwhile, current ratio was 375.2%, cash and deposits ¥420.6B, and Cash/short-term liabilities (quick current liabilities ¥628.5B) was 0.67x, indicating short-term resilience. Interest coverage measured as OCF subtotal / interest paid was -2.2x (negative), but EBITDA / interest paid was 5.8x, indicating maintained interest-paying capacity on a profit basis.
OCF was -¥218.6B: OCF subtotal (before working capital changes) was -¥95.0B, while an increase in inventory for sale of real estate of -¥329.1B was the main driver of cash outflow. Changes in working capital were minor: accounts receivable change +¥1.9B, prepaid expenses +¥3.0B, accounts payable -¥1.8B, deposits received +¥1.7B, and corporate tax payments -¥83.8B were additional outflows. Investing Cash Flow was +¥147.3B, as proceeds from sale of fixed assets ¥216.3B exceeded capital expenditures of -¥101.8B, producing net inflow. Free Cash Flow was -¥71.3B, and total shareholder returns of ¥143.1B (dividends ¥44.7B and share buybacks ¥98.4B) were not covered by internally generated cash. Financing Cash Flow was +¥97.1B as long-term borrowings proceeds ¥822.4B exceeded repayments of -¥475.5B, enabling financing of inventory investment and shareholder returns. Cash and deposits decreased slightly from opening balance ¥425.8B to closing ¥420.6B; adjusting for a decrease of -¥31.4B due to consolidation exclusions, cash remained broadly flat.
Of Ordinary Income ¥170.9B, Operating Income ¥204.5B represents core earnings, while non-operating items netted -¥33.6B (non-operating income ¥30.9B − non-operating expenses ¥64.5B) reducing results. Interest expense ¥43.5B (4.7% of Revenue) indicates persistent interest burden, and net derivative valuation gains of +¥27.4B (¥29.1B gains − ¥1.7B losses) supported non-operating income but are volatile. Special gains ¥94.2B (gain on sale of fixed assets ¥77.6B, gain on sale of available-for-sale securities ¥12.6B, etc.) are one-off and distinct from recurring earnings. Special losses ¥20.1B (available-for-sale securities valuation losses ¥7.9B, impairment losses ¥4.3B, etc.) are also one-off. Pre-tax Profit ¥245.0B is decomposed as Ordinary Income ¥170.9B + Net Special Gains ¥74.1B. Comprehensive Income ¥195.6B exceeded Net Income ¥48.5B, including valuation difference on available-for-sale securities ¥20.6B, deferred hedge gains/losses ¥4.1B, and OCI attributable to equity-method affiliates ¥2.4B. From an accrual perspective, OCF was -¥218.6B versus Net Income attributable to owners of the parent of ¥166.3B, indicating a negative divergence driven by inventory build. Earnings quality shows improvement at the operating level but high dependence on one-off items, and the pace of inventory monetization will determine sustainability of earnings.
Against the full-year forecast, Operating Income target was ¥206.0B versus actual ¥204.5B, achieving 99.3% (slightly below). Ordinary Income target was ¥149.0B versus actual ¥170.9B, achieving 114.7% (outperformance) driven by derivative valuation gains and sale-related one-offs. Net Income attributable to owners of the parent target was ¥180.0B versus actual ¥166.3B, achieving 92.4% (shortfall) due to movements in non-controlling interests and final one-off items. The small miss on Operating Income may reflect weakness in Hotels and Asset Management, and ValueAdd’s outperformance alone could not fully meet the plan. The Ordinary Income beat was driven by timing of special gains and volatility in non-operating items; the Net Income shortfall likely reflects tax burden and adjustments in equity-method results.
Year-end dividend was ¥11.5 per share, and payout ratio on Net Income attributable to owners of the parent was approximately 28.8% (dividends total ¥44.7B ÷ Net Income attributable to owners of the parent ¥166.3B), a sustainable level. Share buybacks of ¥98.4B were executed, and total return ratio (dividends + buybacks) was approximately 86.0% ((¥44.7B + ¥98.4B) ÷ ¥166.3B), a high level. Dividend policy DOE was 4.2% (dividends total ¥44.7B ÷ shareholders’ equity ¥1,167.5B), consistent with a payout ratio of 30.1% (based on Net Income ¥48.5B). However, Free Cash Flow was -¥71.3B and dividends and buybacks were not covered by internally generated cash; inventory monetization and OCF turning positive are key to sustaining returns. Cash and deposits of ¥420.6B provide ample liquidity, but monitoring inventory turnover progress and interest burden is necessary.
Inventory turnover risk: Inventory for sale of real estate ¥1,769.0B (40.6% of total assets) is high; delays in sales execution could deteriorate OCF and defer profit recognition. Inventory/Revenue ratio is 1.91x (¥1,769.0B ÷ ¥927.0B), implying roughly two years of inventory; market fluctuations or intensified competition could pressure sale prices and timing.
Interest burden risk: Interest-bearing debt approximately ¥2,200B and interest expense ¥43.5B (up +41.7% from prior year ¥30.7B) mean rising interest rates would further pressure Ordinary Income. Debt/EBITDA 8.8x (interest-bearing debt ¥2,200B ÷ EBITDA ¥251.3B) is high and EBITDA/interest paid 5.8x indicates limited safety margin. Most borrowings are long-term, so maturity risk is low, but refinancing spread widening or higher rates would hurt profitability.
Segment concentration risk: ValueAdd accounts for 39.8% of Operating Income, so performance depends on acquiring and selling high-margin projects and timing of disposals. Hotels are on a downtrend; prolonged weak occupancy or ADR recovery would reduce recurring earnings. Clean Energy shows slight decline and faces insolation variability and regulatory risk. Asset Management’s decline suggests potential slowdown in AUM growth or fee pressure; diversification and income stability across segments are challenges.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 22.1% | 10.7% (6.8%–17.9%) | +11.4pt |
| Net Profit Margin | 5.2% | 5.8% (2.5%–11.9%) | -0.6pt |
Operating margin outperformed the industry median of 10.7% by +11.4pt, driven by high-margin ValueAdd and Asset Management businesses, indicating top-tier operating profitability within the industry. Net profit margin was 5.2%, -0.6pt below the median, reflecting interest burden and one-off volatility and limiting the translation of operating superiority to bottom-line.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 10.9% | 12.8% (4.2%–29.2%) | -1.9pt |
Revenue growth of 10.9% is -1.9pt below the industry median 12.8%, representing a mid-ranked growth pace. Rapid expansion in ValueAdd is offset by Hotels’ decline and IchigoOwners’ flat performance, which constrained aggregate growth.
※ Source: Company aggregation
Operating-level profitability is industry-leading, achieving Operating margin 22.1% (industry median +11.4pt), driven by high-margin ValueAdd projects and Asset Management. Gross margin improved +1.9pt and SG&A ratio decreased -0.6pt, demonstrating operating leverage and the business model’s competitive advantage. However, Net profit margin 5.2% is around the industry median, and increased interest expense (interest paid +41.7%) compresses Ordinary Income, showing the structure where operating strength does not fully translate to Net Income.
Negative OCF from inventory build (-¥218.6B) and high leverage (Debt/EBITDA 8.8x, D/E 2.73x) are principal concerns. Inventory for sale of real estate ¥1,769.0B (40.6% of total assets) progress on sales will determine cash generation and sustainability of returns. Free Cash Flow -¥71.3B versus total returns ¥143.1B indicates internal cash shortfall; improving inventory turnover and restoring positive OCF are urgent. Most debt is long-term (long-term borrowings ¥2,136.0B) so maturity risk is low and current ratio 375% suggests ample liquidity, but rising rates and refinancing spread widening could further erode profitability.
Net Income attributable to owners of the parent ¥166.3B (+9.5%) secured year-on-year growth and dividend payout ratio 28.8% indicates sustainable returns, but total return ratio 86.0% shows FCF coverage shortfall. Until inventory sales progress and OCF normalizes, a policy prioritizing dividend maintenance with tactical share buybacks is a pragmatic return approach. High operating profitability and asset substance (goodwill/total assets 0.1%) are positives, but inventory-driven cash generation and interest-rate sensitivity are short-term valuation discount factors.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information aggregated by our firm based on publicly disclosed financial statements. Investment decisions should be made at your own responsibility, and, if necessary, after consulting a professional advisor.