| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥9425.0B | ¥7576.4B | +24.4% |
| Operating Income / Operating Profit | ¥1382.4B | ¥1189.6B | +16.2% |
| Ordinary Income | ¥1248.1B | ¥1067.4B | +16.9% |
| Net Income / Net Profit | ¥829.6B | ¥749.5B | +10.7% |
| ROE | 10.3% | 10.0% | - |
For the fiscal year ended March 2026, results recorded Revenue of ¥9,425B (YoY +¥1,848B, +24.4%), Operating Income of ¥1,382B (YoY +¥193B, +16.2%), Ordinary Income of ¥1,248B (YoY +¥181B, +16.9%), and Net Income of ¥830B (YoY +¥81B, +10.7%), representing revenue and profit growth. Top-line was driven by Urban Development (+52.2%) and Residential (+17.6%), continuing a third consecutive period of revenue growth. However, Operating Margin declined to 14.7% (‑1.0pt YoY) and Net Profit Margin declined to 8.8% (‑1.1pt YoY), indicating margin compression despite higher revenue and profits. Non-operating expenses expanded to ¥216B (prior year ¥181B), with interest expense of ¥189B reflecting a rising-rate environment. Extraordinary items comprised Special Gains of ¥195B including ¥174B of gain on sale of fixed assets and Special Losses of ¥348B centered on impairment losses of ¥201B, netting to a ¥‑153B drag on profits. Operating Cash Flow was ¥449B, turning positive YoY (+133.6%), but the Operating Cash Flow/Net Income ratio remained limited at 54.2%, indicating constrained cash conversion of profits. Free Cash Flow was ¥‑142B, and total shareholder returns of ¥392B (dividends and buybacks) were funded via financing cash flows. ROE was maintained at 10.3%, with the decline in Net Profit Margin offset by improvement in Total Asset Turnover (0.34x) and Financial Leverage of 3.50x.
[Revenue] Revenue reached ¥9,425B (+24.4% YoY), driven primarily by Urban Development and Residential businesses. By segment, Urban Development recorded ¥3,248B (+52.2%) as the largest contributor, led by progress on large-scale projects. Residential recorded ¥4,334B (+17.6%), representing 46.0% of revenue, supported by increased handovers. Property Management recorded ¥1,299B (+14.0%), Brokerage/CRE ¥644B (+12.5%), and Asset Management ¥163B (+4.8%), all maintaining double-digit growth except Asset Management which was single-digit. Overseas business declined sharply to ¥37B (‑60.5%) impacted by project delays and timing differences in equity sale recognition. Overall top-line growth outperformed the industry median (+12.8%) by +11.6pt, supported by accumulation of residential and urban development projects and diversification.
[Profitability] Operating Income was ¥1,382B (+16.2% YoY) achieving revenue and profit growth, but Operating Margin fell to 14.7% from 15.7% a year earlier (‑1.0pt). Cost of Sales was ¥6,399B (Cost Ratio 67.9%), up ¥1,489B YoY and the cost ratio increased by +3.1pt from 64.8% the prior year. SG&A was ¥1,643B (SG&A Ratio 17.4%), up ¥167B YoY, growing at a slower pace than sales, indicating cost control. By segment Operating Income, Residential contributed ¥606B (Margin 14.0%, +26.5% YoY) as the largest contributor, followed by Urban Development ¥537B (Margin 16.5%, +30.0% YoY). Asset Management maintained high profitability with ¥104B (Margin 63.8%). Conversely, Overseas reported an operating loss of ¥‑47B (prior year ¥17B profit), materially deteriorating and weighing on consolidated margins. In non-operating items, equity-method investment income rose to ¥69B (prior year ¥50B), while interest expense rose to ¥189B (prior year ¥159B), reflecting higher interest-bearing debt and rising rates. Ordinary Income of ¥1,248B (+16.9% YoY) increased at a pace above Operating Income, with the interest burden coefficient (Ordinary Income/Operating Income) at 0.90 unchanged from prior year. Extraordinary items comprised Special Losses of ¥348B (primarily impairment losses of ¥201B; prior year ¥25B) and Special Gains of ¥195B (primarily gain on sale of fixed assets ¥174B), netting to a ¥‑153B profit headwind and leading Net Income ¥830B (+10.7% YoY), underperforming Operating Income growth. In conclusion, while revenue and profits rose, margin deterioration due to higher cost ratios, increased interest burden, widening overseas losses, and impairment charges suggests room for improvement in earnings quality.
Residential recorded Revenue ¥4,334B (+17.6% YoY) and Operating Income ¥606B (+26.5% YoY, Margin 14.0%), achieving higher revenue and profit driven by increased handovers and sales of higher-margin properties. Margin improved +2.1pt from 11.9% prior year, reflecting an improved project mix. Urban Development posted Revenue ¥3,248B (+52.2% YoY) and Operating Income ¥537B (+30.0% YoY, Margin 16.5%), a significant increase driven by progress on large projects. Margin decreased ‑2.9pt from 19.4% prior year, suggesting cost-structure changes associated with larger project scale. Asset Management recorded Revenue ¥163B (+4.8% YoY) and Operating Income ¥104B (+6.8% YoY, Margin 63.8%), maintaining high profitability with stable fee income. Brokerage/CRE recorded Revenue ¥644B (+12.5% YoY) and Operating Income ¥190B (+14.5% YoY, Margin 29.5%), continuing double-digit growth. Property Management recorded Revenue ¥1,299B (+14.0% YoY) and Operating Income ¥135B (+12.9% YoY, Margin 10.4%), showing steady growth. Overseas Business recorded Revenue ¥37B (‑60.5% YoY) and Operating Loss ¥‑47B (prior year ¥17B profit), a significant deterioration driven by project delays and valuation losses. Impairment losses totaled ¥201B, comprised of ¥199B in Urban Development and ¥2B in Residential, reflecting revaluation of holdings primarily in Urban Development.
[Profitability] Operating Margin was 14.7% (down ‑1.0pt from 15.7% prior year), driven by higher cost ratios and overseas losses. Net Profit Margin was 8.8% (down ‑1.1pt from 9.9%), impacted by extraordinary items and higher interest burden. ROE was 10.3% (prior year 10.4%), remaining at a similar level, with the decline in Net Profit Margin offset by improved Total Asset Turnover 0.34x (prior year 0.28x) and Financial Leverage 3.50x. ROA (on Ordinary Income basis) was 4.5% (prior year 4.3%, +0.2pt), reflecting improved asset efficiency. EBIT was ¥1,382B, EBITDA was ¥1,676B (adding back Depreciation ¥294B), yielding an EBITDA margin of 17.8%. [Cash Quality] Operating Cash Flow/Net Income ratio was 54.2%, indicating limited cash conversion of profits. The main drivers were inventory increase of ‑¥404B, corporate tax payments of ‑¥377B, and interest payments of ‑¥194B. Operating Cash Flow subtotal (before working capital changes) was ¥926B, +11.5% above Net Income ¥830B, indicating core profitability including non-cash charges remains solid. Operating Cash Flow/EBITDA was 26.8%, indicating substantial room for cash conversion improvement. [Investment Efficiency] Total Asset Turnover improved to 0.34x (from 0.28x), aided by revenue growth and asset compression. Capital expenditures (tangible + intangible) totaled ¥692B, 2.4x depreciation ¥294B, reflecting a priority on growth investments. ROIC is approximately 4.9% (NOPAT / Invested Capital), leaving a significant gap versus cost of capital and room for improvement. [Financial Soundness] Equity Ratio was 28.5% (up +0.6pt from 27.9%). Current Ratio was high at 360%, but cash on hand ¥383B / short-term liabilities ¥4,572B = 8.4%, indicating limited immediate liquidity and high reliance on inventory of ¥6,616B. Interest-bearing debt (short-term borrowings ¥1,426B + CP ¥76B + bonds maturing within one year ¥300B + bonds ¥1,670B + long-term borrowings ¥12,137B) totaled ¥15,609B, with D/E ratio 2.50x and Debt/EBITDA 9.31x, indicating high leverage. Interest coverage (Operating Income / Interest Paid) was 7.33x, indicating payment capacity for interest.
Operating Cash Flow was ¥449B (prior year ¥‑1,338B), turning positive, arriving at this level from Operating Cash Flow subtotal ¥926B less working capital change ‑¥403B (mainly inventory increase), interest & dividend received ¥95B, interest paid ‑¥194B, and corporate tax paid ‑¥377B. Inventory increase of ‑¥404B reflects continued buildup of property for sale totaling ¥6,616B, and slower inventory turnover pressured Operating Cash Flow. Accounts receivable change ‑¥59B and accounts payable change ‑¥64B led to net working capital outflow. Operating Cash Flow/Net Income ratio was 54.2% and Operating Cash Flow/EBITDA 26.8%, indicating weak cash conversion driven mainly by inventory buildup and tax/interest payments. Investing Cash Flow was ‑¥591B, with acquisitions of tangible and intangible fixed assets ‑¥692B and purchases of investment securities ‑¥487B, partially offset by fixed asset sales +¥391B and lease deposits received +¥53B. Free Cash Flow was ‑¥142B (prior year ‑¥1,542B), narrowing the deficit but remaining negative. Financing Cash Flow was +¥156B, comprising long-term borrowings raised +¥2,398B, long-term borrowings repaid ‑¥1,241B, bond redemptions ‑¥300B, net CP decrease ‑¥340B, and net short-term borrowings decrease ‑¥252B. Dividend payments ‑¥310B and share buybacks ‑¥82B resulted in total returns of ¥392B, effectively funded by borrowing. Ending cash balance was ¥368B (prior year ¥373B), remaining roughly flat and indicating limited liquidity headroom.
The ¥134B gap between Ordinary Income ¥1,248B and Operating Income ¥1,382B arises from equity-method investment income +¥69B (prior year +¥50B) and interest & dividend received ¥2.4B totaling ¥81B in non-operating income versus non-operating expenses ¥216B centered on interest paid ¥189B. Equity-method investment income reflects increased contribution from investments in overseas project companies and can be considered recurring to an extent. Extraordinary net items of Special Gains ¥195B (gain on sale of fixed assets ¥174B, gain on sale of investment securities ¥9B, etc.) and Special Losses ¥348B (impairment losses ¥201B, etc.) net to ‑¥153B and are considered one-off; distinction between recurring and non-recurring items is clear. Impairments of ¥201B comprised ¥199B in Urban Development and ¥2B in Residential, primarily reflecting revaluation of held properties in Urban Development and judged to be non-recurring. Comprehensive Income ¥882B vs Net Income ¥830B difference +¥52B consists of other comprehensive income: valuation differences on available-for-sale securities +¥42B, actuarial gains/losses adjustments +¥47B, deferred hedge gains/losses ‑¥19B, foreign currency translation adjustments ‑¥0.4B, etc., indicating an increase in unrealized gains on valuation assets. The divergence between Operating Cash Flow ¥449B and Net Income ¥830B is mainly due to inventory increase ‑¥404B and tax/interest payments; accruals (Net Income ‑ Operating CF = ¥381B) are interpreted as a temporary distortion driven by inventory front-loading. Ordinary Income–based profitability is solid, but volatility in extraordinary items and inventory buildup undermines cash quality.
Full-year guidance forecasts Revenue ¥1,080.0B (YoY +14.6%), Operating Income ¥1,400B (YoY +1.3%), Ordinary Income ¥1,250B (YoY +0.2%), and Net Income ¥860B (YoY +3.8%), indicating revenue growth with modest profit increases. Progress against first-half results stands at Revenue 87.3%, Operating Income 98.7%, Ordinary Income 99.8%, and Net Income 96.5%, meaning profit metrics have already consumed over 96% of guidance and the second half is effectively assumed to be flat. Revenue growth is expected from residential handovers and recognition of large urban development projects in the second half, but limited operating income growth implies a cautious second-half outlook incorporating higher cost ratios and expense increases. EPS forecast of ¥100.68 versus first-half actual ¥96.69 has already reached 96.0%, with second-half Net Income increase assumed around +¥3B. Dividend guidance is annual ¥22 (interim ¥18, year-end ¥4 for the second half) though the interim dividend of ¥18 was already paid on an actual basis (total dividends ¥150B), so second-half additional dividend of ¥4 is inferred (post-split basis). Compared with prior fiscal year dividend ¥40 (pre-split), this constitutes a de facto decline, but after split adjustment the effective payout ratio rises to approximately 44% from 39.2% prior year, maintaining the return policy. Forecast assumptions include achievement of planned residential handover volumes, recognition of large urban development projects in the second half, reduction in overseas losses, and maintenance of current interest burden levels. Given high first-half progress rates, downside risk in second half is limited but inventory turnover, construction costs, and market fluctuations remain downside risks.
Annual dividend is ¥40 (interim ¥18, year-end ¥22) with total dividend payments ¥310B and a payout ratio of 39.2%. Total dividend amount remained ¥310B year-on-year and payout ratio was unchanged at 39.2%, continuing a stable dividend policy. Share buybacks of ¥82B were executed, bringing total shareholder returns to ¥392B and Total Return Ratio to 47.3%, reflecting a balanced shareholder return. The dividend of ¥40 is on a pre-split basis; following the 1-for-5 stock split effective April 1, 2025, the post-split equivalent per share is ¥8. Next period dividend guidance is ¥22 (post-split basis); on a full-year basis this represents a de facto reduction versus prior period ¥40 (pre-split), but after split adjustment the payout ratio is estimated at about 44% (Forecast Net Income ¥860B × 0.44 ≒ ¥378B, implying dividends equivalent to approx. ¥188B), roughly in line with prior year. However, Free Cash Flow is ‑¥142B, below dividend and buyback levels, effectively funding shareholder returns through increased borrowing. Cash on hand ¥383B versus dividend payments ¥310B is substantial, and improvement in Operating Cash Flow is key to dividend sustainability. Total returns including dividends to BIP trust for officers and ESOP trust dividends amount to 7B, and combined returns relative to Net Income ¥830B equal 47.3%, a level balancing capital efficiency and growth investment. Maintaining a payout ratio around 40% depends on sustained Operating Cash Flow positivity and improvement in inventory turnover; with rising interest rates and continued investment, careful monitoring is required.
Inventory buildup and sales timing risk: Property for sale ¥6,616B (prior year ¥5,274B, +25.4%) and properties under development ¥3,766B (prior year ¥3,707B, +1.6%) account for 37.0% of Total Assets, and inventory increases compressed Operating Cash Flow by ‑¥404B. Market deterioration or sales timing shifts pose risks of inventory valuation losses and liquidity deterioration. Estimated inventory turnover days exceed 240 days, above industry average, raising concerns over slower sales velocity.
High leverage and increased interest burden: D/E ratio 2.50x, interest-bearing debt ¥15,609B, Debt/EBITDA 9.31x indicate high leverage. Interest payments ¥189B rose by ¥30B YoY, and a 1% increase in rates would add approximately ¥156B in annual burden. Interest coverage of 7.33x provides some near-term resilience, but with ~21% of EBITDA consumed by interest payments, simultaneous interest rate rises and margin compression pose financial strain risk.
Potential entrenchment of losses in Overseas operations: Overseas posted an operating loss of ¥‑47B and revenue down ‑60.5%. Equity-method investment balance ¥2,898B (10.3% of Total Assets) relates to investments in Asia and North America projects, carrying risks of further delays or additional valuation losses. Foreign exchange volatility (foreign currency translation adjustment ‑¥0.4B) and geopolitical risks are also potential concerns.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 14.7% | 10.7% (6.8%–17.9%) | +4.0pt |
| Net Profit Margin | 8.8% | 5.8% (2.5%–11.9%) | +3.0pt |
Profitability exceeds the industry median, with Operating Margin +4.0pt and Net Profit Margin +3.0pt, maintaining an upper-quartile position.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 24.4% | 12.8% (4.2%–29.2%) | +11.6pt |
Growth outperformed the industry median by +11.6pt, supported by accumulation of residential and urban development projects.
※ Source: Company compilation
Turning the margin decline trend is critical: Operating Margin at 14.7% (‑1.0pt YoY) was driven by Cost Ratio +3.1pt and widening overseas losses. Second-half guidance assumes essentially flat profit, and margin recovery requires turnaround in Overseas operations and optimization of Urban Development project mix. Volatility in extraordinary items (impairments ¥201B, gain on sale of fixed assets ¥174B) undermines Net Income stability, so monitoring of Ordinary Income–based profitability is important.
Improvement in cash generation will determine sustainability of shareholder returns: Free Cash Flow of ‑¥142B versus total returns ¥392B indicates returns are effectively funded by debt, and improving Operating Cash Flow/Net Income 54.2% is a key challenge. Accelerating inventory turnover and improving working capital efficiency would expand scope to maintain dividend payout in the 40% range and continue buybacks. ROE 10.3% is high within the industry, but ROIC 4.9% shows a large gap versus cost of capital, and capital efficiency improvement would be a catalyst for re-rating.
This report is an earnings analysis document automatically 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 publicly disclosed financial statements. Investment decisions are your responsibility; consult a professional advisor as appropriate.