Open House Group Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥1.34T
• Operating Income: ¥145.93B
• Net Income: ¥104.30B
• EPS: ¥875.20

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: Strong quarter with double-digit operating profit growth and solid ROE, tempered by weak operating cash conversion. Revenue rose 3.1% YoY to 13,364.68, while operating income grew 22.5% YoY to 1,459.33, driving operating margin to approximately 10.9%. Net income increased 8.3% YoY to 1,006.70, with net margin at 7.5%. We estimate operating margin expanded by roughly 170 bps YoY (from ~9.2% to ~10.9%) on operating leverage and cost discipline. Net margin expansion was more modest at about 37 bps, reflecting a higher non-operating drag (interest burden) offsetting improved core profitability. Gross profit reached 2,431.67 (gross margin 18.2%), indicating resilient unit economics despite only modest top-line growth. EBITDA was 1,479.86, translating to an 11.1% margin and interest coverage of 18.9x, underscoring comfortable servicing capacity. DuPont ROE printed at 18.7% (Net margin 7.5% × Asset turnover 0.947 × Leverage 2.62x), an attractive level versus domestic developers. Cash flow quality was weak: OCF of 295.30 equates to an OCF/NI of 0.29x, likely reflecting working capital build (land procurement and inventory cycle), which bears watching. Free cash flow was positive at 184.23 but did not fully cover total shareholder returns given buybacks of 249.99. The balance sheet shows ample liquidity (current ratio 318.6%) and manageable leverage (D/E 1.62x), with cash (4,218.98) exceeding short-term loans (1,904.28). Non-operating income was modest (44.50) and outweighed by non-operating expenses (108.92), primarily net interest, limiting ordinary income growth to 16.0% YoY. ROIC is strong at 14.0%, well above the 7–8% benchmark, indicating effective capital deployment. Reported XBRL operating margin/ROA figures appear misclassified; we rely on calculated margins based on disclosed financials. Forward-looking, sustained profitability hinges on maintaining gross margins and inventory turns while normalizing OCF; funding capacity remains adequate for growth, but shareholder returns may need to pace with FCF if working capital stays elevated.

Profitability Analysis

ROE decomposition: 18.7% = Net Profit Margin (7.5%) × Asset Turnover (0.947x) × Financial Leverage (2.62x). The largest driver of YoY improvement appears to be margin expansion, as operating income grew 22.5% against 3.1% revenue growth, implying stronger operating leverage and controlled SG&A. Estimated operating margin improved ~170 bps YoY (from ~9.2% to ~10.9%), while net margin rose ~37 bps as higher interest expense and other non-operating costs partially offset operational gains. Business drivers include improved sales mix/pricing in core housing segments and tighter expense discipline (SG&A at ~7.3% of revenue), amid stable construction cost environment. Asset turnover at 0.947x remains high for a developer, reflecting Open House’s high-velocity model; we do not have prior-year turnover, but revenue growth lagging asset growth would be a risk to this component. The leverage component (2.62x) contributes materially but is not excessive for the sector; interest coverage at 18.9x indicates prudent risk at current rates. Sustainability: operating margin gains are partially sustainable if pricing power and cycle conditions hold; however, net margin faces headwinds from interest costs if rates normalize higher. Flags: revenue growth (3.1%) trails operating income growth (22.5%), suggesting healthy operating leverage; no evidence of SG&A growth outpacing revenue (detail not disclosed), but continued monitoring is warranted given limited SG&A granularity.

Growth Assessment

Top-line growth was modest at 3.1% YoY, but operating profit expanded 22.5% on better margins, indicating positive operating leverage. Non-operating items were a net drag, with interest expense (77.05) outweighing interest income (21.00) and other gains, limiting ordinary income growth to 16.0%. Net income growth of 8.3% lagged operating profit due to the higher non-operating burden and a 28.0% effective tax rate. Near-term revenue sustainability depends on maintaining sales velocity in urban detached housing/condo inventory and land bank execution; backlog metrics were not disclosed. Margin quality looks sound: gross margin of 18.2% and EBITDA margin of 11.1% support earnings resilience, but are sensitive to land acquisition costs and construction input prices. ROIC of 14.0% underscores efficient capital deployment and supports reinvestment-led growth. Outlook: expect steadier revenue with focus on profitability; main swing factors are housing demand, mortgage rates, and land availability. Given weak OCF/NI this period, growth may require continued working capital funding; balance sheet liquidity is adequate to support this. Non-operating volatility should remain manageable absent a sharp rate move.

Financial Health

Liquidity is strong: Current ratio 318.6% and Quick ratio 318.6% (limited receivables/inventory disclosure) indicate ample short-term coverage. Cash and deposits (4,218.98) exceed short-term loans (1,904.28) by ~2.2x, reducing near-term refinancing risk. Solvency: Debt-to-Equity is 1.62x, slightly above a conservative 1.5x benchmark but within typical ranges for developers; warn threshold at D/E > 2.0 is not breached. Total liabilities are 8,731.67 against equity of 5,388.34; long-term loans (4,445.46) dominate debt structure, aligning maturities with asset duration. Maturity mismatch risk appears low given high current assets (13,128.14) versus current liabilities (4,121.18); working capital is robust at 9,006.96. Interest coverage at 18.94x is strong, indicating healthy buffer against borrowing cost fluctuations. Off-balance sheet obligations were not disclosed; given sector norms (e.g., purchase commitments, JVs), potential exposures may exist but are not quantifiable from available data.

Cash Flow Quality

OCF of 295.30 versus net income of 1,006.70 yields an OCF/NI of 0.29x, which is a potential earnings quality concern (<0.8 benchmark). The shortfall is likely driven by working capital build (land acquisitions and inventory increases typical at fiscal year-end for developers); specific inventory/receivable data were not disclosed. Free cash flow was positive at 184.23 after capex of 31.06, indicating that despite weak OCF conversion, investment outflows were modest. Financing CF was a small outflow (-29.59) while share repurchases totaled 249.99, implying shareholder returns exceeded FCF in the period. No signs of aggressive working capital manipulation are evident from disclosed line items, but absent inventory/AR details limits verification. Sustained dividend and buyback capacity will require normalization of OCF or incremental debt capacity; current liquidity offers cushion near term.

Dividend Sustainability

The calculated payout ratio is 19.9%, indicating low distribution intensity relative to earnings, though reported XBRL payout (0.2%) seems misclassified; dividend amounts were not disclosed. FCF coverage ratio of 0.92x suggests dividends were nearly covered by free cash flow; however, when including buybacks (249.99), total shareholder returns exceeded FCF. Given strong ROE (18.7%) and ROIC (14.0%), the company retains ample earnings for reinvestment while maintaining capacity for dividends. Sustainability depends on OCF normalization and maintaining current leverage; at D/E 1.62x and strong interest coverage, there is room, but management may need to pace buybacks to internal cash generation if working capital remains elevated.

Risk Assessment

Business Risks:

• Housing demand sensitivity to mortgage rates and macro conditions in key urban markets
• Land acquisition cost inflation compressing gross margins
• Construction material and subcontractor cost volatility
• Execution risk in inventory turnover and project cycle times
• Regulatory/zoning changes affecting development timelines and approvals

Financial Risks:

• Weak cash conversion (OCF/NI 0.29x) indicating reliance on external funding for growth
• Moderate leverage (D/E 1.62x) with exposure to interest rate increases via floating-rate debt
• Non-operating drag from net interest (interest expense 77.05 > interest income 21.00)
• Potential maturity mismatch if working capital inflates and sales velocity slows

Key Concerns:

• Sustainability of margin expansion if land and construction costs rise
• Dependence on continued high asset turnover to support ROE
• Shareholder returns (buybacks) exceeding FCF in the period
• Limited disclosure of inventories and receivables obscures working capital dynamics

Investment Implications

Key Takeaways:

• Core profitability improved materially: operating income +22.5% on +3.1% revenue
• Operating margin expanded to ~10.9%, net margin to ~7.5%; estimated +170 bps and +37 bps YoY, respectively
• ROE at 18.7% and ROIC at 14.0% indicate efficient capital deployment
• Cash conversion weak (OCF/NI 0.29x); FCF positive but below total shareholder returns due to buybacks
• Balance sheet liquidity is ample; leverage is moderate for the sector with strong interest coverage

Metrics to Watch:

• OCF/Net income and working capital movements (inventory days, land bank turnover)
• Gross margin and ASP versus land/construction cost trends
• SG&A ratio and operating leverage sustainability
• Debt mix (fixed vs floating) and interest coverage under rate scenarios
• Sales velocity/cancellation rates and backlog (if disclosed)

Relative Positioning: Versus domestic housing developers, Open House continues to exhibit higher asset turnover and superior ROE, with moderate leverage and robust liquidity; the primary differentiator is strong operating leverage, while the main relative weakness is volatile cash conversion tied to working capital.

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