URBANET CORPORATION CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥14.23B
• Operating Income: ¥2.65B
• Net Income: ¥-200M
• EPS: ¥46.23

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: A solid headline rebound in FY2026 Q1 driven by a large step-up in project deliveries, but with notable P/L classification anomalies and leverage still elevated, warranting caution on sustainability. Revenue surged to 142.34 (up 697.1% YoY), while operating income rose 4.1% YoY to 26.47, indicating strong volume but less operating leverage than the top-line spike implies. Net income increased 2.7% YoY to 16.53, yielding a net margin of 11.6%. Operating margin is approximately 18.6% (26.47/142.34), while the reported gross margin of 3.6% appears unusually low relative to operating margin, suggesting classification differences common in real estate development accounting. Ordinary income was 24.20 (+2.2% YoY), but profit before tax is shown as -2.62, which does not reconcile with net income of 16.53 and suggests missing extraordinary items or presentation inconsistencies; we treat this as a data limitation rather than performance deterioration. Interest expense was modest at 0.92 with strong interest coverage of 28.9x, indicating ample buffer at the operating level. Balance sheet strength on liquidity is evident (current ratio 465.8%) as cash and deposits stand at 138.87, comfortably exceeding short-term loans of 34.08. However, structural leverage remains high: D/E is 2.29x and net debt is estimated at 215.31 (interest-bearing debt 354.18 minus cash 138.87), implying net D/E around 1.1x. Equity ratio is roughly 30.4% (194.32/638.38), acceptable for a developer but leaves less room if market conditions tighten. DuPont-based ROE is 8.5% (NPM 11.6% × asset turnover 0.223 × leverage 3.29x), adequate but largely reliant on leverage rather than capital efficiency. ROIC at 4.9% is below the 5% warning threshold, pointing to capital intensity and low asset turnover in the current mix of projects. Margin progression YoY is not meaningfully comparable due to an unusually low base and the project-driven revenue surge; mechanically, operating margin likely compressed year-on-year by a large number of basis points given revenue outpaced operating income growth, but this reflects timing effects rather than underlying price pressure. Earnings quality assessment is constrained by the absence of operating cash flow data; we cannot confirm cash conversion against net income, which is critical in this sector. The effective tax rate shown (23.7%) does not square with the negative PBT line, reinforcing that special items may be involved. Forward-looking, the quarter suggests a healthy pace of settlements, but sustainability hinges on land pipeline, presales, funding costs, and construction cost trends; with leverage elevated, disciplined capital rotation and cash generation will be key. Overall, a good operational quarter on deliveries with healthy coverage of interest, but watch cash flow confirmation and ongoing balance-sheet risk.

Profitability Analysis

ROE decomposition (DuPont): ROE 8.5% = Net Profit Margin 11.6% × Asset Turnover 0.223 × Financial Leverage 3.29x. The largest driver of change vs prior year is likely asset turnover (given revenue +697% YoY) rather than margin, but operating income grew only +4.1%, implying margin normalisation/compression as large projects closed. Business reason: project timing—significant handovers inflate sales while cost and SG&A absorption, as well as mix (bulk sales vs retail), cap operating leverage. Sustainability: asset turnover at this level is unlikely to be sustained every quarter due to lumpy closings; margins are inherently volatile by project mix. Operating margin this quarter is about 1,860 bps; reported gross margin at 360 bps is inconsistent with operating margin, likely due to cost classification (e.g., land acquisition and construction costs recognized differently), a common feature in developers. SG&A growth vs revenue is not available, but implied operating leverage was weak vs top-line growth—flagging that expense or COGS rose sharply with deliveries. Given ROIC at 4.9% (<5% threshold), returns are being supported by leverage rather than high capital efficiency, which limits ROE resilience if leverage is reduced.

Growth Assessment

Top-line growth was extraordinary (+697% YoY) on concentrated project deliveries. Operating income rose modestly (+4.1% YoY), indicating that the growth was volume-driven with lower incremental profitability. Net income growth (+2.7% YoY) trails revenue massively, underscoring mix and timing effects typical of the development cycle. The non-operating line was small (income 0.08; expense 1.39), with interest expense the main item; hence core earnings are still driven by operations. Given the developer model, this quarter’s revenue level is unlikely to recur every quarter; sustainability will depend on contracted backlog, land bank, and sales progress. With ROIC at 4.9%, reinvestment discipline and recycling of capital will be essential to sustain growth without over-leveraging. Outlook hinges on: (1) funding cost trajectory amid rate volatility, (2) construction cost inflation and subcontractor availability, (3) absorption rates for investment apartments/condos, and (4) stable lender appetite for long-term loans. Absent OCF data and backlog disclosure, we cannot validate the run-rate; near-term growth visibility remains moderate.

Financial Health

Liquidity is strong: current assets 553.64 vs current liabilities 118.86 give a current ratio of 465.8% and ample cash (138.87) relative to short-term loans (34.08). Solvency is tighter: total liabilities 444.06 vs equity 194.32; D/E is 2.29x—above our 2.0x warning threshold (explicit warning). Equity ratio is ~30.4%. Interest-bearing debt totals ~354.18 (ST 34.08 + LT 320.10); estimated net debt is ~215.31 after netting cash, implying net D/E ~1.11x. Maturity profile skews long-term (LT loans 320.10), reducing immediate rollover risk, and current assets comfortably exceed short-term debt—low near-term maturity mismatch risk. No off-balance sheet obligations are disclosed in the data; however, developers can have performance guarantees or purchase commitments not captured here (data limitation). Overall, liquidity headroom is high, but structural leverage remains a key constraint.

Cash Flow Quality

OCF is unreported; we cannot compute OCF/net income and thus cannot confirm earnings quality—this is a material limitation for a project-based developer. With high deliveries, working capital typically releases cash (inventory to cash), but without inventory/receivable details or OCF, this remains unverified. FCF sustainability for dividends and capex cannot be assessed due to missing OCF and capex data. Interest coverage (28.9x) supports the view that cash generation should be adequate in a high-delivery quarter, but the durability depends on project timing. No direct signs of working capital manipulation can be assessed given lack of period-to-period WC data and cash flow statements.

Dividend Sustainability

The calculated payout ratio is 50.0%, which sits within a generally sustainable range (<60%) if cash conversion is healthy. However, absent OCF and FCF data, we cannot confirm dividend coverage. Balance sheet leverage (D/E 2.29x) suggests limited room to raise payout without stronger cash generation or reduced investment pace. Policy outlook is likely stable-to-cautious: maintaining dividends near a 40–50% payout appears feasible in strong delivery years, but flexibility may be needed in weaker settlement periods.

Risk Assessment

Business Risks:

• Project timing risk leading to lumpy revenue and profit recognition.
• Demand risk for investment apartments/condos amid macro or regulatory shifts.
• Construction cost inflation and contractor capacity constraints compressing margins.
• Land acquisition and pipeline replenishment risk impacting future deliveries.
• Pricing and mix risk (bulk vs retail sales) affecting margins.

Financial Risks:

• High leverage: D/E 2.29x; equity ratio ~30%.
• Refinancing and interest rate risk given 354.18 of interest-bearing debt.
• Cash flow volatility due to settlement timing; OCF unreported this quarter.
• Potential covenant or collateral constraints (not disclosed).

Key Concerns:

• P/L inconsistencies (ordinary income positive, PBT negative) suggest undisclosed extraordinary items or presentation differences.
• ROIC at 4.9% below the <5% warning threshold indicates limited capital efficiency.
• Sustainability of exceptional revenue level is uncertain without backlog disclosure.

Investment Implications

Key Takeaways:

• Headline recovery with revenue +697% YoY and operating income +4.1% YoY driven by handover timing.
• Operating margin ~18.6% and net margin 11.6%, but margin quality obscured by classification anomalies.
• Liquidity robust (current ratio 465.8%; cash 138.87), yet structural leverage high (D/E 2.29x).
• ROE 8.5% is acceptable but relies on leverage and timing; ROIC 4.9% is a concern.
• Earnings quality unverified due to missing OCF; confirmation in the Q1 cash flow statement or Q2 disclosure is important.

Metrics to Watch:

• Operating cash flow and FCF versus dividends and interest.
• Backlog/contracted sales and land bank size and turnover.
• Gross margin by project and changes in cost of sales mix.
• Net debt, interest coverage, and average funding cost.
• Inventory levels and turnover (work-in-process and completed units).

Relative Positioning: Within domestic mid-cap developers, Urbanet shows strong liquidity and acceptable ROE but higher-than-ideal leverage and sub-5% ROIC, positioning it as operationally capable in high-delivery quarters but more exposed to cycle and funding conditions than peers with lower leverage and higher recurring margins.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis