JINUSHI Co.,Ltd. FY2026 Q2 Earnings Report

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Executive Summary

This quarter’s results were characterized by lower revenue but higher operating income, with growth in recurring (stock) revenue and improved profit margins resulting from a better sales mix, despite a contraction in flow (disposal) revenue. Revenue was ¥34.59B (-13.1% YoY), operating income was ¥4.42B (+8.9%), ordinary income was ¥3.26B (+2.6%), and net income was ¥2.15B (¥2.09B attributable to owners of the parent, -24.7% YoY). Although gross margin improved at the operating level, the sharp increase in interest expenses (¥1.07B, compared with ¥0.39B in the previous year) and the absence of the extraordinary gain recorded in the previous year (¥0.63B gain on liquidation of a subsidiary) offset the earnings improvement at the ordinary income and net income levels.

Factors Affecting Earnings

【Revenue】Revenue was ¥34.59B, down 13.1% YoY. The core Real Estate Investment Business, which accounted for 93.8% of revenue, declined to ¥32.46B (-15.9%) due to the contraction in recorded disposals (flow revenue). Meanwhile, the Real Estate Leasing Business generated ¥1.15B (+109.5%), the Asset Management Business generated ¥0.62B (-4.5%), and Other Businesses generated ¥0.37B (a significant increase YoY), with the expansion of recurring revenue partially offsetting the overall revenue decline.

【Profit and Loss】Operating income increased 8.9% to ¥4.42B, and the operating margin improved by +258bp YoY to 12.8%. The primary drivers of improvement were the sharp expansion of operating income in the Real Estate Leasing Business to ¥0.74B (+171.7%, 64.1% margin) and an improved mix of properties sold in the Real Estate Investment Business, which achieved a 17.1% profit margin, slightly higher than the previous year. Ordinary income, however, increased only 2.6% to ¥3.26B, as the sharp increase in interest expenses (¥1.07B, compared with ¥0.39B in the previous year) pushed non-operating expenses up to ¥1.37B, substantially reducing the benefit of higher operating income. Net income was limited to ¥2.09B attributable to owners of the parent (-24.7%), primarily due to the reversal of the previous year’s ¥0.63B extraordinary gain from the liquidation of a subsidiary. In conclusion, the company recorded higher operating income but lower final profit—not a pattern of higher revenue and lower profit, but rather a distinctive pattern of higher operating income and lower net income that falls into neither the higher-revenue/higher-profit nor lower-revenue/higher-profit categories.

Segment Analysis

By segment, the core Real Estate Investment Business recorded revenue of ¥32.46B (93.8% composition, -15.9% YoY) and operating income of ¥5.54B (+2.1% YoY, 17.1% margin), securing higher profit through an improved mix despite the smaller disposal volume. The Real Estate Leasing Business expanded sharply, with revenue of ¥1.15B (+109.5% YoY) and operating income of ¥0.74B (+171.7% YoY, 64.1% margin), increasing its presence as a pillar of recurring revenue. The Asset Management Business generated revenue of ¥0.62B (-4.5% YoY) and operating income of ¥0.26B (-18.1% YoY, 41.7% margin), with a slight decline in profit due to the timing of new fund formation. Other Businesses, including planning and brokerage, recorded revenue of ¥0.37B and operating income of ¥0.22B, both representing significant increases. Among the segments, recurring businesses (leasing and AM) have high margins, but the company’s dependence on the Investment Business exceeds 90% of revenue, representing a high degree of concentration that warrants attention.

Key Financial Indicators

【Profitability】The operating margin improved by +258bp YoY to 12.8%, while the gross margin rose to 21.0% from 19.6% in the previous year. In contrast, the net profit margin declined to 6.0% from 7.0% in the previous year. ROE remained low at 4.0%, indicating room for improvement in capital efficiency. 【Cash Quality】There was a divergence between ordinary income of ¥3.26B and net income of ¥2.09B, primarily due to the increase in interest expenses and the decrease in extraordinary gains. Non-operating income was small at ¥0.21B, or 0.6% of revenue, indicating that the core of the earnings structure remains at the operating level. 【Investment Efficiency】Total assets expanded to ¥206.64B, with ¥113.72B in real estate for sale and ¥58.19B in property, plant and equipment representing the primary sources of the increase. This has placed downward pressure on asset efficiency, or asset turnover. 【Financial Soundness】The equity ratio declined to 25.8% from 34.1% in the previous year, while long-term borrowings increased to ¥106.97B. With current assets of ¥142.59B versus current liabilities of ¥10.42B, short-term liquidity is ample and near-term funding risk is limited.

Cash Flow Analysis

Because the company does not disclose a statement of cash flows, funding trends are analyzed based on changes in the balance sheet. Real estate for sale increased substantially from the previous year to ¥113.72B, and property, plant and equipment, primarily land, also expanded, suggesting that inventory and asset acquisitions progressed as part of investment activities. This funding was likely obtained through the increase in long-term borrowings to ¥106.97B, indicating a structure in which financing activities supported investment. Cash and deposits totaled ¥26.69B, slightly down from ¥27.57B in the previous year, indicating that cash on hand was generally maintained amid the balance between investment and financing. Going forward, the timing of cash generation from the sale of accumulated inventory, namely real estate for sale, will be an important factor determining capital efficiency.

Quality of Earnings

Recurring earnings are centered on operating income, while non-operating income was modest at ¥0.21B, or 0.6% of revenue, consisting primarily of foreign exchange gains of ¥0.16B and dividend income of ¥0.01B. In contrast, most of the ¥1.37B in non-operating expenses consisted of interest expenses of ¥1.07B, and the increase in the interest burden has slowed the growth of ordinary income. Extraordinary gains were limited to ¥0.03B from gains on the sale of fixed assets. The ¥0.63B extraordinary gain from the liquidation of a subsidiary recorded in the previous year did not recur this period, and this reversal amplified the decline in net income. The gap between ordinary income of ¥3.26B and net income of ¥2.09B was primarily attributable to the effective tax rate—approximately 34.6% based on income taxes of ¥1.14B and income before taxes of ¥3.29B—and the disappearance of one-time gains. This indicates that, in contrast to the improvement in operating earnings power, as demonstrated by the higher gross and operating margins, the quality of final profit remained partly dependent on one-time factors in the previous year.

Earnings Forecast and Guidance

Progress against the full-year forecast was 34.6% for revenue (¥34.59B against the ¥100.0B plan), 36.8% for operating income (¥4.42B against the ¥12.0B plan), and 36.2% for ordinary income (¥3.26B against the ¥9.0B plan), below the simple 50% first-half progress benchmark. The company’s business model places greater emphasis on real estate disposals, or flow revenue, in the second half, and the ¥113.72B in real estate for sale accumulated during the period provides support for potential disposal revenues in the second half. There were no revisions to the earnings forecast or dividend forecast, and the company maintained its initial plans. However, changes in the interest-rate environment and real estate disposal market conditions create a certain degree of execution risk for achieving the second-half-weighted plan.

Shareholder Returns

The interim dividend was ¥65 per share, comprising an ordinary dividend of ¥60 and a commemorative dividend of ¥5. The full-year dividend forecast is ¥130, representing an expected consecutive increase from the previous year’s DPS of ¥100. Against projected full-year net income of ¥8.0B, the expected total dividend is approximately ¥2.69B, calculated using the number of shares outstanding excluding treasury shares. The implied payout ratio is approximately 33–35%, which can be viewed as a reasonable level. Treasury shares declined year over year (-60.8%), suggesting an impact from the disposal of treasury shares as restricted stock-based compensation. As only dividend data is available for the current period and actual share repurchases are not clear, the payout ratio is used.

Risk Factors

1. High leverage and interest-rate sensitivity: Long-term borrowings increased to ¥106.97B, while the equity ratio declined to 25.8% from 34.1% in the previous year. Interest expenses rose sharply to ¥1.07B from ¥0.39B in the previous year, and pressure on ordinary income may continue in a rising interest-rate environment.

2. Dependence on disposals (flow revenue) and inventory turnover risk: The Real Estate Investment Business accounts for 93.8% of revenue, and real estate for sale has accumulated to ¥113.72B. Under the second-half-weighted disposal recognition model, if changes in market conditions delay the timing of disposals, further downward pressure could emerge on progress toward the full-year plan, which currently stands at 34.6% for revenue and 36.8% for operating income.

3. Non-recurring nature of earnings: The ¥0.63B extraordinary gain from the liquidation of a subsidiary recorded in the previous year declined to only ¥0.03B this period, and this reversal directly contributed to the 24.7% decline in net income. The earnings structure remains susceptible to fluctuations in final profit depending on the presence or absence of extraordinary gains and losses.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The company’s operating margin of 12.8% can be observed as an absolute level within the industry, but its relative positioning cannot be determined because median data has not been prepared.

Growth and Capital Efficiency

The revenue growth rate was -13.1%, indicating contraction, but relative comparison is not possible because industry median data has not been prepared.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The operating margin improved to 12.8% (+258bp YoY), and the expansion of recurring revenue, as indicated by the increase in the Real Estate Leasing Business margin to 64.1%, represents an observable qualitative change in the earnings structure.

2. Real estate for sale increased to ¥113.72B, expanding the potential for disposal revenue recognition in the second half. At the same time, long-term borrowings increased to ¥106.97B, highlighting as a change in the financial structure that asset accumulation has progressed alongside the expansion of borrowings.

3. Growth slowed at the ordinary income and net income levels due to higher interest expenses and the reversal of the previous year’s extraordinary gain. The divergence between improvement at the operating level and the movement in final profit is an important point to consider when evaluating the quality of the earnings results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,964–¥3,139 at ±1% for the cost of equity, and ¥3,038–¥3,066 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model (Ohlson-type model with an explicit five-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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