| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥434.2B | ¥337.2B | +28.8% |
| Operating Income / Operating Profit | ¥68.1B | ¥40.2B | +69.5% |
| Ordinary Income | ¥63.6B | ¥35.5B | +79.2% |
| Net Income / Net Profit | ¥43.6B | ¥24.3B | +79.2% |
| ROE | 12.9% | 8.2% | - |
FY2026 Q2 results delivered revenue of ¥434.2B (YoY +¥97.0B +28.8%), Operating Income of ¥68.1B (YoY +¥27.9B +69.5%), Ordinary Income of ¥63.6B (YoY +¥28.1B +79.2%), and Net Income of ¥43.6B (YoY +¥19.3B +79.2%), achieving both top-line growth and profit expansion driven by margin improvement. Operating margin improved to 15.7% from 11.9% in the prior-year period (+3.8pt); gross margin expanded to 22.4% from 18.3% (+4.1pt), supported by improved profitability in the core Renovation Condominium Business and higher margins in the Advisory Business. SG&A was ¥29.2B (YoY +¥7.7B +35.9%), rising faster than revenue but SG&A ratio increased only slightly to 6.7% from 6.4% (+0.3pt), indicating effective operating leverage. Non-operating items included derivative valuation gains of ¥3.8B which boosted Ordinary Income, while interest expense increased to ¥7.7B (prior ¥5.7B), a +34.9% increase in interest burden.
[Revenue] Revenue reached ¥434.2B (YoY +28.8%), a significant increase. By segment, the Renovation Condominium Business generated ¥410.7B (+25.1%), accounting for 94.6% of total revenue; higher unit sales and ASP increases contributed to revenue growth. The Advisory Business expanded rapidly to ¥15.9B (+79.2%), and as a high-margin business with a 73.7% margin it lifted consolidated profitability. The Investment Business grew to ¥13.8B (+223.0%) from ¥4.3B a year earlier. Contract-derived revenue from customers totaled ¥407.3B, representing 93.8% of revenue; other revenue (lease income, securitization schemes, etc.) was ¥26.9B. Merchandise for sale (inventory for sale) at period end was ¥1,232.4B, up ¥182.1B from ¥1,050.3B a year earlier, indicating continued aggressive inventory deployment.
[Profitability] Gross profit was ¥97.3B (prior ¥61.7B, +57.7%), with gross margin at 22.4% versus 18.3% a year earlier (+4.1pt). Improvements in purchasing terms, pricing power, and high-margin contributions from Advisory were primary drivers of gross margin expansion. SG&A was ¥29.2B (prior ¥21.5B, +35.9%), outpacing revenue growth of +28.8%, but SG&A ratio was 6.7% (prior 6.4%, +0.3pt), and Operating Income rose significantly to ¥68.1B (+69.5%). Non-operating income was ¥4.4B, including dividend income ¥0.3B and derivative valuation gains ¥3.8B (prior ¥2.1B). Non-operating expenses were ¥8.9B, mainly interest expense ¥7.7B (prior ¥5.7B, +34.9%) and payment fees ¥1.2B. Ordinary Income was ¥63.6B (+79.2%), and Net Income was ¥43.6B (+79.2%) after corporate taxes of ¥20.0B (prior ¥11.2B); net margin improved to 10.0% (prior 7.2%, +2.8pt). Comprehensive income was ¥45.0B, slightly above Net Income due to deferred hedge gains of ¥1.5B. In conclusion, revenue growth coupled with substantial margin improvement resulted in revenue and profit increases.
The Renovation Condominium Business reported revenue ¥410.7B (prior ¥328.4B, +25.1%) and Operating Income ¥59.2B (prior ¥36.9B, +60.5%); margin improved to 14.4% from 11.2% (+3.2pt). The business maintained high profitability while expanding scale. The Advisory Business recorded revenue ¥15.9B (prior ¥8.9B, +79.2%) and Operating Income ¥11.7B (prior ¥5.2B, +127.1%); margin expanded to 73.7% from 58.2% (+15.5pt), becoming a high-profit business accounting for 17.2% of consolidated Operating Income. The Investment Business posted revenue ¥13.8B (prior ¥4.3B, +223.0%) and Operating Income ¥1.5B (prior ¥1.5B, +1.6%); while revenue expanded rapidly, margin fell to 10.9% from 34.9% a year earlier, suggesting reduced profitability due to changes in project mix. Adjustments totaled -¥4.4B (prior -¥3.4B), representing unallocated corporate expenses across segments.
[Profitability] Operating margin was 15.7%, up +3.8pt from 11.9% a year earlier, reflecting gross margin improvement and SG&A control. Net margin expanded to 10.0% (prior 7.2%, +2.8pt), and ROE was 12.9%. Interest coverage was 8.9x (Operating Income ¥68.1B ÷ interest expense ¥7.7B), indicating sufficient capacity to absorb interest burden. [Cash Quality] Operating Cash Flow (OCF) was -¥138.2B; OCF / Net Income ratio was -3.17x relative to Net Income ¥43.6B, showing a large divergence. The primary cause was an increase in inventory for sale of ¥182.1B (reflected as -¥182.2B in OCF), from aggressive mid-period purchases and development that worsened working capital. OCF/EBITDA ratio was -2.02x (OCF -¥138.2B ÷ EBITDA ¥68.6B), and accrual ratio was 13.3% (increase in working capital ¥182.2B ÷ total assets ¥1,361.0B), indicating delayed cash realization of earnings. [Investment Efficiency] Total asset turnover was 0.319x, low due to inventory buildup. CapEx / Depreciation ratio was 0.56x (CapEx ¥0.3B ÷ Depreciation ¥0.5B), indicating conservative investment. [Financial Soundness] Equity Ratio was 24.8% (prior 25.6%, -0.8pt), D/E ratio was 3.03x, and Debt/Capital ratio was 72.5%, reflecting high leverage. Debt/EBITDA was 13.0x (interest-bearing debt ¥897.3B ÷ EBITDA ¥68.6B), high, but current ratio was 920.9%, securing short-term liquidity. LTV (interest-bearing debt ¥897.3B ÷ total assets ¥1,361.0B) was 65.9%; Cash / Short-term Debt ratio was 4.97x.
OCF was -¥138.2B (prior -¥50.7B, -172.7%), a significant negative, showing a pronounced divergence from Net Income ¥43.6B. The main driver was an increase in inventory for sale of ¥182.2B due to aggressive mid-period purchases and development, which strained working capital. OCF subtotal (before working capital changes) was -¥117.9B; after adjusting for derivative valuation gain ¥3.8B and inventory increases, etc., the result was the reported figure. Corporate tax payments were ¥13.4B, rising with profit growth. Investing Cash Flow was -¥2.1B, minor, mainly CapEx ¥0.3B and acquisition of investment securities ¥1.2B. Free Cash Flow (FCF) was -¥140.3B (OCF -¥138.2B + Investing CF -¥2.1B), a large negative, indicating dependence on external financing to meet inventory-driven funding needs. Financing Cash Flow was +¥155.6B: long-term borrowings raised ¥348.2B, repayments of long-term borrowings ¥193.6B, short-term borrowings increased ¥8.7B, and dividends paid ¥7.5B, resulting in net cash raised of +¥155.6B, which financed inventory buildup. Period-end cash and deposits were ¥49.4B (prior ¥34.0B, +¥15.3B); despite large negative FCF, liquidity was maintained through financing.
Assessing earnings quality, Operating Income ¥68.1B vs OCF -¥138.2B yields OCF/EBITDA -2.02x and accrual ratio 13.3%, indicating delayed cash conversion and low earnings quality. The primary cause is an increase in inventory for sale of ¥182.2B; aggressive mid-period purchases and development materially worsened operating working capital. Inventory deployment appears to be strategic and aligned with full-year plans, so downstream inventory drawdown in H2 could improve OCF, but currently cash is materially tied up. Non-operating income ¥4.4B included derivative valuation gains ¥3.8B, a temporary factor that boosted Ordinary Income. Deferred hedge gains of ¥1.5B contributed positively to comprehensive income, making Comprehensive Income ¥45.0B slightly above Net Income ¥43.6B. The difference between Ordinary Income ¥63.6B and Net Income ¥43.6B is corporate tax expense ¥20.0B, implying a tax rate of 31.5%, a reasonable level. Earnings are skewed toward accruals and cash generation depends on H2 inventory digestion; hence earnings quality warrants cautious assessment.
Full-year guidance is unchanged: Revenue ¥891.7B (YoY +28.9%), Operating Income ¥104.5B (YoY +42.9%), Ordinary Income ¥87.7B (YoY +42.5%), Net Income ¥60.3B. At the end of Q2, progress against full-year plan was: Revenue 48.7%, Operating Income 65.2%, Ordinary Income 72.5%, Net Income 72.3%, indicating profits are progressing well ahead of plan. While revenue progress is roughly half (standard), profit metrics are roughly 70% progressed, reflecting front-loaded margin improvement and concentration of high-margin projects in H1. H2 is planned at Revenue ¥457.5B (H1 vs H2 +5.3%), Operating Income ¥36.4B (H1 vs H2 -46.5%), implying lower margins in H2 versus H1. High inventory level (period-end ¥1,232.4B) means H2 inventory digestion pace and margin maintenance are key to achieving full-year targets. No revisions to guidance were made; the company expects to achieve the plan.
Q2 dividend was ¥25.5 per share (prior year ¥15.0, +70.0%), paid as the interim dividend. Full-year dividend forecast remains ¥25.5, implying a payout ratio of approximately 14.9% relative to full-year Net Income forecast ¥60.3B (annual dividend ¥25.5 ÷ full-year EPS forecast ¥167.62). At the end of Q2, payout ratio on a year-to-date basis was approximately 19.9% (dividend ¥25.5 ÷ this period EPS ¥128.11 × 2), a sustainable level within earnings. However, FCF is -¥140.3B, and FCF coverage of dividends (dividends paid ¥7.5B) is -18.7x, negative, indicating dividend funding relies on external borrowings and opening cash. H2 inventory digestion and OCF recovery are prerequisites for dividend sustainability. No buyback was announced; shareholder returns are concentrated on dividends.
Inventory Turnover Risk: Inventory for sale ¥1,232.4B accounts for 90.6% of total assets, and delayed inventory turnover would worsen OCF and gross margin. Period-end inventory rose ¥182.1B year-over-year; if H2 sales pace falls short of plan, interest burden and liquidity will be pressured. Inventory-to-revenue ratio is 2.8x (period-end inventory ¥1,232.4B ÷ H1 revenue ¥434.2B), implying average inventory digestion could take 2.8 quarters.
High Leverage: With D/E ratio 3.03x, Debt/EBITDA 13.0x, and Debt/Capital 72.5%, leverage is high; interest rate increases or deterioration in credit conditions would raise interest payments and refinancing costs. Interest expense has already risen to ¥7.7B (prior ¥5.7B, +34.9%), and substantial long-term borrowings of ¥881.6B are likely variable-rate, increasing interest sensitivity. Interest coverage is 8.9x and currently manageable, but it could decline sharply if Operating Income weakens.
Market Cycle Risk: The Renovation Condominium Business accounts for 94.6% of revenue and is highly sensitive to used condominium market conditions, mortgage interest rates, and financial institutions’ lending standards. In a price adjustment or rate-up scenario, selling prices and sales velocity could decline, worsening gross margin and inventory turnover. Industry-specific policy risks such as changes to mortgage tax credits, tax rules, or tighter financial regulation also exist.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 15.7% | – | – |
| Net Margin | 10.0% | – | – |
Operating margin 15.7% and Net margin 10.0% lack sufficient peer comparison data but represent marked improvement versus the company’s own prior-year performance (Operating margin 11.9%, Net margin 7.2%).
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 28.8% | – | – |
Revenue growth of 28.8% is high within the real estate sector and reflects an aggressive business expansion backed by inventory deployment.
※ Source: Company compilation
Structural change in margin improvement: Operating margin improved to 15.7% from 11.9% (+3.8pt) and gross margin expanded to 22.4% from 18.3% (+4.1pt). High-margin Advisory Business (73.7%) lifted consolidated margins, and the Renovation Condominium Business also improved to 14.4% (prior 11.2%, +3.2pt). Gross margin expansion stems from better procurement terms and improved pricing power, suggesting potential sustainability, though market and competitive risks remain.
Inventory buildup and cash flow structure: Inventory for sale ¥1,232.4B comprises 90.6% of total assets, and OCF was -¥138.2B, a large negative showing a clear divergence between profit and cash. Period-end inventory increased ¥182.1B YoY; H2 inventory digestion pace will be key to full-year performance and cash generation. Profit progress is front-loaded (profit progress >70%), reflecting concentration of high-margin projects in H1 and implying lower margins in H2. The business structure assumes maintenance of inventory turnover and funding conditions.
This report was auto-generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial data. Investment decisions are your responsibility; consult a professional advisor as needed.