| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥145.7B | ¥305.3B | -52.3% |
| Operating Income / Operating Profit | ¥17.3B | ¥29.5B | -41.3% |
| Ordinary Income | ¥13.1B | ¥24.7B | -47.0% |
| Net Income / Net Profit | ¥9.0B | ¥18.1B | -50.2% |
| ROE | 1.7% | 3.5% | - |
For the Q1 results of the fiscal year ending March 2026, Revenue was ¥145.7B (YoY ▲¥159.6B ▲52.3%), Operating Income was ¥17.3B (YoY ▲¥12.2B ▲41.3%), Ordinary Income was ¥13.1B (YoY ▲¥11.6B ▲47.0%), and Quarterly Net Income attributable to owners of the parent was ¥9.0B (YoY ▲¥9.3B ▲50.2%), representing a sharp decline in both sales and profits. The primary cause was timing shifts in sale transactions (flow income) within the Real Estate Investment Business; revenue in that business fell from ¥298.3B to ¥136.2B, a ▲54.3% decline. Conversely, gross margin improved to 20.8% (prior 13.7%) (+7.1pt), and operating margin rose to 11.9% (prior 9.7%) (+2.2pt), indicating improved profitability despite lower revenue. Progress against the full-year plan (Revenue ¥1,000.0B, Operating Income ¥120.0B, Ordinary Income ¥90.0B, Net Income ¥80.0B) is lagging: Revenue 14.6%, Operating Income 14.4%, Net Income 11.0%, all well below standard progress (25%), highlighting a plan structure that assumes concentrated closing of sale transactions in the latter half of the year. Total assets expanded to ¥2,038.0B (prior ¥1,463.5B) (+39.3%), driven by increases in inventories for sale ¥1,120.2B (55.0% of total assets) and tangible fixed assets ¥612.5B (30.1%), while interest-bearing debt rose to ¥1,103.0B (prior ¥757.4B) (+45.6%), lifting the D/E ratio to 2.92x (prior 2.01x).
Revenue: Revenue was ¥145.7B (prior ¥305.3B, ▲52.3%), a large decline. The main cause was shrinkage of flow income (sales) in the Real Estate Investment Business from ¥294.5B to ¥129.5B, reflecting closing delays due to timing shifts. By segment, the Real Estate Investment Business recorded Revenue of ¥136.2B (prior ¥298.3B, ▲54.3%), accounting for 93.5% of total revenue and showing a large decline. Real Estate Leasing Business grew to ¥4.2B (prior ¥2.7B, +56.9%), Asset Management Business declined to ¥3.2B (prior ¥4.3B, ▲25.3%), and Other Businesses surged to ¥2.1B (prior ¥0.03B, +6,833%). Stock revenues (leasing + management fees) totaled only ¥10.8B, representing 7.4% of total and indicating continued dependence on sales. Cost of sales was ¥115.4B (prior ¥263.6B, ▲56.2%), falling more than sales, improving cost ratio to 79.2% (prior 86.3%) (▲7.1pt), and gross profit was ¥30.3B (prior ¥41.7B, ▲27.3%) with gross margin up to 20.8% (prior 13.7%) (+7.1pt).
Profitability: Selling, general and administrative expenses rose to ¥13.0B (prior ¥12.2B, +6.2%), pushing SG&A ratio to 8.9% (prior 4.0%) (+4.9pt), but gross margin improvement absorbed this, yielding Operating Income of ¥17.3B (prior ¥29.5B, ▲41.3%) and Operating Margin of 11.9% (prior 9.7%) (+2.2pt). Non-operating income totaled ¥1.1B, including dividend income ¥0.1B and foreign exchange gains ¥0.9B. Non-operating expenses were ¥5.3B (prior ¥4.9B), led by interest expense ¥3.8B (prior ¥1.7B, +121.1%) and foreign exchange losses ¥2.3B (prior ¥2.3B), with interest burden up ¥2.1B. Ordinary Income was ¥13.1B (prior ¥24.7B, ▲47.0%), with Ordinary Margin improving to 9.0% (prior 8.1%) (+0.9pt). Extraordinary gains included only fixed asset sale gains ¥0.3B, so one-off effects were minor. Profit before tax was ¥13.4B (prior ¥26.4B, ▲49.2%); after deducting income taxes of ¥4.4B (effective tax rate 32.6%), Quarterly Net Income attributable to owners of the parent was ¥9.0B (prior ¥18.1B, ▲50.2%), and Net Margin improved to 6.2% (prior 5.9%) (+0.3pt). In conclusion, despite revenue decline due to timing shifts in sale deals, improved deal mix boosted gross and operating margins; while growth in profits was not maintained, profitability remained firm.
Real Estate Investment Business: Revenue ¥136.2B (prior ¥298.3B, ▲54.3%), Operating Income ¥22.8B (prior ¥34.7B, ▲34.5%), Operating Margin 16.7% (prior 11.6%), showing a +5.1pt margin improvement despite revenue decline. Flow income (sales) fell sharply to ¥129.5B (prior ¥294.5B, ▲56.0%), while stock income (rental from held properties) expanded to ¥6.7B (prior ¥3.8B, +76.3%), indicating progress in building stable revenue. Real Estate Leasing Business: Revenue ¥4.2B (prior ¥2.7B, +56.9%), Operating Income ¥2.6B (prior ¥1.6B, +67.5%), Margin 62.8% (prior 58.4%), increasing contribution as a high-margin stock business. Asset Management Business: Revenue ¥3.2B (prior ¥4.3B, ▲25.3%), Operating Income ¥1.5B (prior ¥2.7B, ▲44.0%), Margin 46.4% (prior 62.0%), with fee business volatility reducing profit. Other Businesses: Revenue ¥2.1B (prior ¥0.03B, +6,833%), Operating Income ¥1.3B (prior ¥0.03B, +4,333%), Margin 63.9%, but still small in scale. Corporate/Intersegment adjustments were ▲¥10.9B (prior ▲¥9.5B), reflecting higher management costs. Overall, the Real Estate Investment Business accounts for 84.8% of operating income, maintaining concentration risk.
Profitability: ROE declined to 1.7% (prior 7.2%); DuPont decomposition shows Net Margin 6.2% × Total Asset Turnover 0.07 × Financial Leverage 3.92, with the steep deterioration in Total Asset Turnover (prior 0.42) being the main driver. Operating Margin improved to 11.9% (prior 9.7%) (+2.2pt), Ordinary Margin to 9.0% (prior 8.1%) (+0.9pt), and Net Margin to 6.2% (prior 5.9%) (+0.3pt), indicating improved profitability at each stage. ROIC (EBIT ÷ Invested Capital) is 0.8%, well below capital cost, highlighting poor capital efficiency. Cash Quality: Interest Coverage Ratio (EBIT ÷ Interest Expense) worsened to 4.53x (prior 17.04x), falling below the benchmark of 5x. Cash and deposits (equivalent to Operating Cash Flow availability) were ¥233.7B (prior ¥275.7B) down ▲15.2%, indicating reduced cash-generating capability. Investment Efficiency: Total Asset Turnover fell to 0.07x (prior 0.42x), with the denominator burdened by inventories for sale ¥1,120.2B and fixed assets (land-centric) ¥612.5B. Inventory turnover-days equivalent (Inventories for sale ÷ Revenue × 365 days) is approximately 2,804 days, extremely prolonged, making future sales execution the top priority. Financial soundness: Equity Ratio declined to 25.5% (prior 35.5%) (▲10.0pt), D/E ratio rose to 2.92x (prior 2.01x), and Debt/Capital (interest-bearing debt ÷ total assets) worsened to 54.1% (prior 51.8%). Current ratio is robust at 1,609.9% (prior 1,266.7%), but the build-up of interest-bearing debt ¥1,103.0B (prior ¥757.4B, +45.6%) reduces resilience to rising interest rates.
No explicit disclosure of operating cash flow was provided, but cash and deposits fell to ¥233.7B (prior ¥275.7B, ▲¥42.0B). The build-up of inventories for sale (¥1,120.2B, prior ¥792.9B, +¥327.3B) and increase in tangible fixed assets (¥612.5B, prior ¥315.7B, +¥296.8B) suggest large outflows to working capital and investments. Accounts receivable decreased to ¥2.3B (prior ¥6.7B), indicating good collections, while payments on account ¥7.4B and prepaid expenses ¥3.5B indicate ongoing working capital deployment. Interest-bearing debt increased to ¥1,103.0B (prior ¥757.4B, +¥345.6B), with long-term borrowings at ¥1,088.0B (prior ¥742.4B, +¥345.6B) forming the bulk of financing. Investing cash flow centered on land acquisitions (¥592.4B, prior ¥294.9B, +¥297.5B) adding fixed assets. Interest payments rose to ¥3.8B (prior ¥1.7B, +¥2.1B), highlighting higher interest burden. Financing cash flow appears to have been used to fund investments and inventory build-up via long-term borrowings, and share repurchases (¥27.4B, prior ¥16.8B) were also executed. Free Cash Flow remains negative, and inventory turnover through executed sales is key to cash generation.
Earnings quality is characterized by high variability due to reliance on property sales (flow). The recurring profit ratio (Gross Profit ÷ Revenue) improved to 20.8%, but remains highly dependent on deal mix. Non-operating income was minor at ¥1.1B (0.8% of Revenue), mainly dividend income ¥0.1B and FX gains ¥0.9B; non-operating expenses ¥5.3B (3.6% of Revenue) were centered on interest expense ¥3.8B and FX losses ¥2.3B, indicating that interest rate and FX movements materially affect recurring profits. Extraordinary items were limited to fixed asset sale gains ¥0.3B, so one-off effects were small. The difference between profit before tax ¥13.4B and net income ¥9.0B (income taxes ¥4.4B, effective tax rate 32.6%) is reasonable. Comprehensive income was ¥9.8B (Net Income ¥9.0B), with Other Comprehensive Income ¥0.7B (Translation adjustments ¥0.2B, Valuation difference on available-for-sale securities ¥0.4B, OCI attributable to equity-method affiliates ¥0.1B), so divergence from net income is small and accrual quality appears stable. Note that gross margin improvement was mainly due to better profitability of sale deals, and its sustainability over quarterly periods will vary with deal mix.
The full-year plan (FY ending Dec 2026) remains unchanged: Revenue ¥1,000.0B (vs prior year +31.0%), Operating Income ¥120.0B (+39.5%), Ordinary Income ¥90.0B (+25.1%), and Net Income attributable to owners of the parent ¥80.0B. Q1 progress rates were Revenue 14.6%, Operating Income 14.4%, Ordinary Income 14.5%, Net Income 11.0%, all more than 10pt below standard Q1 progress (25%), reflecting an assumption of concentrated sale closings in the latter half. Inventories for sale ¥1,120.2B (55.0% of total assets) represent a large sales resource and indicate substantial latent disposal capacity, but achieving the plan depends critically on sale execution from Q2 onward. Risks include timing and pricing impacts from interest rate increases and investor demand shifts; if progress continues to lag, a downward revision to the full-year plan may be required in the second half.
No Q1 dividend was paid. Full-year dividend guidance is ¥65 per share (ordinary dividend ¥55 + 25th-anniversary commemorative dividend ¥10), with an interim dividend of ¥50 (ordinary ¥45 + commemorative ¥5) and a year-end dividend of ¥15 (ordinary ¥10 + commemorative ¥5). The payout ratio relative to full-year EPS forecast ¥386.62 is approximately 16.8%, a conservative level providing earnings coverage. Treasury stock purchases increased to ¥27.4B (prior ¥16.8B), with an additional acquisition of approximately ¥10.6B during the period. Combined total return (dividends plus buybacks) is higher than dividend payout alone, but under high leverage (D/E 2.92x), balancing shareholder returns with financial soundness is important, and return policies may be reconsidered if the plan is not met. The prior-year same-period dividend was also ¥50, indicating a continued stable dividend policy.
Timing risk of sale transactions: High concentration in the Real Estate Investment Business (93.5% of revenue) and flow income declined to ¥129.5B (YoY ▲56.0%). Inventories for sale ¥1,120.2B provide a thick pipeline, but timing shifts in closings can cause large quarter-to-quarter volatility in revenue and profit. Delays due to rising interest rates or reduced investor demand could make achieving the full-year plan difficult.
Interest rate risk: Interest-bearing debt increased to ¥1,103.0B (prior ¥757.4B, +45.6%), and interest expense doubled to ¥3.8B (prior ¥1.7B, +121.1%). The Interest Coverage Ratio of 4.53x is below the benchmark 5x, so rising rates could further increase interest burdens and compress profits. If refinancing spreads widen on long-term borrowings of ¥1,088.0B, capital costs may rise and profitability could deteriorate materially.
Inventory turnover deterioration risk: Inventories for sale account for 55.0% of total assets, and inventory turnover-days are about 2,804 days, extremely prolonged. Fixed assets (land-centric) also increased to ¥612.5B (prior ¥315.7B, +94.0%), raising asset illiquidity. If property market conditions worsen and cap rates rise (lowering sale prices), inventory valuation losses or impairments could materialize, hindering cash generation and worsening financial health.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 11.9% | – | – |
| Net Margin | 6.2% | – | – |
Industry benchmark data are provided as reference; median data are insufficient, making relative comparisons difficult.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -52.3% | – | – |
Revenue growth is sharply negative due to timing shifts in sale transactions; assessing growth relative to the industry requires observing results in the latter half of the year.
※Source: Company compilation
Improvement trend in gross margin and operating margin: Despite steep revenue decline, gross margin improved to 20.8% (prior 13.7%, +7.1pt) and operating margin to 11.9% (prior 9.7%, +2.2pt), confirming improved deal mix quality. The Real Estate Investment Business margin rose to 16.7% (prior 11.6%, +5.1pt), and continued improvement in sale deal profitability will be a key focus in upcoming results. Building stock revenues (rental and management) is also progressing and could help mid-to-long-term profitability.
Inventory build-up and the key to achieving full-year plan: Inventories for sale ¥1,120.2B (55.0% of total assets) and fixed assets (land-centric) ¥612.5B have depressed Total Asset Turnover to 0.07x (prior 0.42x) and ROE to 1.7% (prior 7.2%). Q1 progress toward the full-year Revenue target of ¥1,000.0B was only 14.6%, so executing sales in the second half is essential. Closing progress from Q2 onward is the most important determinant of plan achievement; continued delays increase the risk of revising the full-year plan.
High leverage and rising interest burden: D/E ratio rose to 2.92x (prior 2.01x), interest expense doubled to ¥3.8B (prior ¥1.7B, +121.1%), and Interest Coverage Ratio fell to 4.53x, below the 5x benchmark. Rising interest costs and refinancing terms on long-term borrowings ¥1,088.0B will materially affect future profitability. Improving inventory turnover to reduce interest-bearing debt and restoring the Equity Ratio are prerequisites for improving financial soundness.
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 compiled by our firm from publicly disclosed financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.