| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥2268.4B | ¥1566.4B | +44.8% |
| Operating Income | ¥311.7B | ¥318.2B | -2.0% |
| Ordinary Income | ¥269.9B | ¥280.1B | -3.6% |
| Net Income | ¥186.1B | ¥173.8B | +7.0% |
| ROE | 2.0% | 1.9% | - |
For the quarter ended March 2026 (Q1), Revenue was 2,268.4B yen (YoY +702.0B +44.8%), Operating Income was ¥311.7B (YoY -6.5B -2.0%), Ordinary Income was ¥269.9B (YoY -10.2B -3.6%), and Net Income attributable to owners of the parent was ¥186.1B (YoY +12.3B +7.0%). Large property recognition in the Real Estate Business drove substantial top-line growth; however, Operating Margin contracted to 13.7% (prior 20.3%), down 6.6 pts, making this a quarter of notable margin compression relative to the expanded top line. Net Income remained resilient at +7.0% YoY due to special gains (gain on sale of investment securities ¥24.9B) and lower income taxes. Progress vs. full-year guidance (Operating Income ¥2,100B, Ordinary Income ¥1,850B) was 14.8% for Operating Income and 14.6% for Ordinary Income, below the standard 25% Q1 benchmark; however, timing of Real Estate property recognition tends to be back-loaded, which makes this progress rate acceptable.
[Revenue] The Real Estate Business expanded significantly to ¥1,897.5B (YoY +44.6%), accounting for 83.6% of consolidated revenue and leading the revenue increase. Hotel & Ryokan Business recorded ¥167.5B (YoY +13.5%), continuing steady recovery. Other Businesses doubled to ¥191.6B (YoY +100.0%), reflecting expansion in building construction contracting, design supervision, childcare education, bowling equipment, and food for elderly care facilities. Segment revenue mix: Real Estate 83.6%, Other 8.4%, Hotel & Ryokan 7.4%, Insurance 0.5%. Cost of sales was ¥1,601.1B (prior ¥1,020.7B), resulting in a gross margin of 29.4% (prior 34.8%), down 5.4 pts, suggesting mix change and lower-margin projects.
[Profitability] Operating Income of ¥311.7B decreased slightly YoY (-2.0%) despite higher revenue. Operating margin of 13.7% fell 6.6 pts from 20.3%, driven by higher SG&A of ¥355.6B (15.7% of revenue, prior 14.5%) and lower gross margin. By segment, Real Estate margin declined to 20.3% (prior 25.0%), down 4.7 pts; Other Businesses swung to an operating loss of ¥48.1B (prior operating profit ¥7.4B), pressuring consolidated profitability. Hotel & Ryokan margin was broadly stable at 12.2% (prior 12.5%). Corporate expenses increased to ¥52.9B (prior ¥48.3B). Non-operating expenses were ¥79.7B (prior ¥52.3B), mainly interest expenses of ¥66.2B (prior ¥43.1B), up +53.6%, compressing Ordinary Income to ¥269.9B (-3.6%). Net special items were +¥4.7B (special gains ¥26.4B, special losses ¥21.7B), a small positive. Income taxes were ¥88.5B (effective tax rate 32.2%), yielding Net Income attributable to owners of the parent of ¥186.1B (+7.0%). Conclusion: higher revenue but lower profit, driven by rising financial costs and declining gross margin.
Real Estate Business Operating Income was ¥385.3B (prior ¥333.8B, +15.4%), securing higher profit but with a lower margin of 20.3% (prior 25.0%). Insurance Business profit was ¥5.0B (YoY +33.9%), maintaining high profitability with a 42.0% margin. Hotel & Ryokan Business profit was ¥20.5B (YoY +10.8%), margin 12.2% (prior 12.5%), showing steady recovery. Other Businesses recorded an operating loss of ¥48.1B (prior operating profit ¥7.4B), a significant deterioration due to start-up costs for construction, design supervision, and new businesses, which pressured consolidated profit. Adjustments (corporate expenses and intersegment eliminations) were -¥51.0B (prior -¥45.3B), increasing.
[Profitability] Operating margin 13.7% (prior 20.3%), down 6.6 pts; gross margin 29.4% (prior 34.8%), down 5.4 pts, indicating deterioration in profitability. ROE (Net Income ÷ average shareholders’ equity) is 2.0%, low and flat vs. prior 2.0%. Net profit margin 8.2% (prior 11.1%), down 2.9 pts. Interest coverage (Operating Income ÷ interest expense) is 4.7x (prior 7.4x), declining and reflecting increased interest burden. [Cash Quality] Non-operating income was ¥37.8B (prior ¥14.3B), contributed by equity in earnings of affiliates ¥5.5B, dividend income ¥2.8B, foreign exchange gains ¥0.7B, etc. Non-operating expenses were ¥79.7B, primarily interest expense ¥66.2B, accounting for 21.2% of Operating Income and pressuring profitability. [Investment Efficiency] Total asset turnover annualized was 0.26x (current period revenue ÷ ending total assets ×4), indicating low asset efficiency. Total asset ROA annualized was 2.1% (Net Income ÷ total assets ×4). Goodwill ¥1,172B (12.5% of equity), intangible asset ratio 7.0% (intangible assets ¥2,495B ÷ total assets) remain within reasonable bounds. [Financial Soundness] Equity Ratio 26.5% (prior 26.8%), slightly down. Interest-bearing debt ¥1,582.3B (short-term borrowings ¥186.5B, short-term corporate bonds ¥139.7B, long-term borrowings ¥1,395.9B, corporate bonds ¥509.1B) with D/E 2.77x (prior 2.81x), Debt/Capital 62.7%, indicating high leverage. Current ratio 170.0% (prior 139.9%), quick ratio 169.3% (prior 139.2%), showing healthy short-term liquidity.
With Operating Income ¥311.7B and interest expense ¥66.2B (21.2% of Operating Income), interest burden is substantial and requires close inspection of cash generation quality. Cash and deposits were ¥2,306.9B (prior ¥1,310.8B, +76.0%), suggesting front-loaded funding via corporate bonds (total bonds ¥569.1B, prior +¥104.9B). Properties held for sale decreased to ¥3,200.2B (prior ¥3,743.2B, -14.5%), indicating progress in property recognition. Working capital (current assets ¥8,016.9B - current liabilities ¥4,715.6B) increased to ¥3,301.3B (prior ¥1,958.2B), driven mainly by increased cash. Trading securities for business purposes increased to ¥1,494.1B (prior ¥782.8B, +90.8%), also boosting current assets. Maturity composition of interest-bearing debt: short-term ¥326.2B, long-term ¥1,905.0B; cash ¥2,307B covers 70.7% of short-term interest-bearing debt, mitigating maturity mismatch risk. Interest coverage 4.7x is acceptable but down from 7.4x, and further pressure could occur depending on the interest rate environment.
Operating Income ¥311.7B vs Ordinary Income ¥269.9B shows net non-operating drain of -¥41.9B (non-operating expenses ¥79.7B - non-operating income ¥37.8B), pressuring profit. Non-operating expenses are dominated by recurring interest expense ¥66.2B. Non-operating income includes equity in earnings of affiliates ¥5.5B and dividend income ¥2.8B, which are relatively recurring. Net special items were +¥4.7B (special gains ¥26.4B, special losses ¥21.7B), primarily gain on sale of investment securities ¥24.9B and impairment losses ¥15.6B. Comprehensive income was ¥221.8B (Net Income ¥186.1B); the difference +¥35.7B was driven by other comprehensive income: foreign currency translation adjustments ¥27.7B, valuation difference on available-for-sale securities ¥5.1B, retirement benefit adjustments ¥2.5B, indicating upward revaluation of asset values beyond Net Income. On accruals, income taxes payable decreased from ¥172.6B to ¥17.3B (-¥155.3B), reflecting mid-period tax payments which positively impacted working capital. Earnings quality is relatively recurring and special items are limited, but rising interest burden is a structural risk to monitor.
Full-year forecast unchanged: Operating Income ¥2,100B (prior ¥1,868B, +12.4%), Ordinary Income ¥1,850B (prior ¥1,730B, +6.9%), Net Income ¥1,210B (prior ¥1,179B, +2.6%). Q1 progress rates are Operating Income 14.8%, Ordinary Income 14.6%, Net Income 15.4%, below the standard 25% Q1 benchmark; however, property recognition in Real Estate tends to be back-loaded, so full-year achievement depends on second-half sale execution. Full-year implied Operating Margin is 9.3% (assuming annual revenue ¥2,258.0B), lower than Q1 actual 13.7%, making second-half mix and cost control critical. Dividend forecast unchanged at annual ¥33.5 per share (prior ¥28.5, +17.5%); payout ratio based on full-year EPS forecast ¥159.41 is 21.0%, conservative.
At the end of Q1, no interim dividend has been paid; the full-year dividend forecast is ¥33.5 per share (prior ¥28.5, +17.5%), indicating a planned increase. With full-year EPS forecast ¥159.41, payout ratio is 21.0%, conservative with sufficient dividend capacity. Current period Net Income ¥186.1B and outstanding shares at period-end 75.90 million shares (excluding treasury stock) imply an EPS-equivalent of ¥24.51 for the quarter; to reach full-year EPS forecast ¥159.41, the remaining three quarters must generate ¥134.9 per share of earnings, assuming back-loaded performance. No share buybacks disclosed; shareholder returns are dividend-focused. Retained earnings ¥586.39B (prior ¥593.94B) provide ample dividend funding, and cash and deposits ¥2,306.9B support dividend payment ability. No disclosure of total return ratio, but payout ratio 21.0% suggests a preference for internal reserves.
Performance volatility from back-loaded property recognition in Real Estate: Q1 progress (Operating Income) 14.8% assumes back-loading, but delays in sales timing or market deterioration could lead to full-year shortfall. Inventory turnover and market sensitivity of Properties held for sale ¥3,200.2B (9.0% of total assets) are key to performance.
High leverage and interest rate sensitivity: D/E 2.77x, interest-bearing debt ¥1,582.3B, interest expense ¥66.2B (YoY +53.6%) show rapidly rising interest burden. Interest coverage declined to 4.7x (prior 7.4x), increasing the risk of profit compression in a rising-rate environment. Refinancing costs for bonds and borrowings may rise.
Earnings drag from loss-making segment (Other Businesses): Other Businesses posted an operating loss of ¥48.1B (prior operating profit ¥7.4B), materially worsening consolidated profitability. If profitability improvement in construction, design supervision, and new businesses is delayed, consolidated margins may remain impaired despite a strong Real Estate Business.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 13.7% | – | – |
| Net Margin | 8.2% | – | – |
Limited industry comparison data makes relative assessment difficult, but the company’s Operating Margin 13.7% (prior 20.3%) shows a large YoY decline and highlights the need to improve profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 44.8% | – | – |
Revenue growth 44.8% is substantial, indicating high growth, but declining margins leave questions about the quality of growth.
※ Source: Company compilation
Trade-off of strong revenue growth vs margin deterioration: Revenue +44.8% contrasted with Operating Margin down to 13.7% (prior 20.3%), a 6.6 pt decline, highlighting margin compression with top-line expansion. Key monitoring items are improvement in Real Estate revenue mix, remediation of the loss-making segment, and SG&A control — these are essential for margin recovery and meeting full-year profit targets.
Rising interest burden and room to improve capital efficiency: Interest expense ¥66.2B (YoY +53.6%) accounts for 21.2% of Operating Income; interest coverage fell to 4.7x (prior 7.4x). With D/E 2.77x and interest-bearing debt ¥1,582.3B, sensitivity to interest rates is high. Increased cash deposits ¥2,307B help liquidity but ROE 2.0% and total asset turnover 0.26x indicate low capital efficiency; accelerating asset sales and portfolio optimization are investment themes to improve efficiency.
Back-loaded full-year plan and progress in property recognition: Q1 progress 14.8% (Operating Income) is below the usual 25% Q1 benchmark but consistent with back-loaded Real Estate recognition. Remaining execution in the last three quarters is essential to meet full-year targets. Properties held for sale ¥320.0B (YoY -14.5%) suggests recognition progress, but monitoring market conditions and sale timing is important.
This report is an AI-generated financial analysis document created by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmark data are reference information compiled by our firm from public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.