| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥15088.6B | ¥14596.4B | +3.4% |
| Operating Income / Operating Profit | ¥944.4B | ¥804.5B | +17.4% |
| Ordinary Income (JGAAP) | ¥899.4B | ¥743.1B | +21.0% |
| Net Income | ¥616.2B | ¥491.0B | +25.5% |
| ROE | 6.0% | 5.0% | - |
The fiscal year ending March 2026 closed with Revenue of 1兆5,088.6B (YoY +492.2B, +3.4%), Operating Income of ¥944.4B (YoY +139.9B, +17.4%), Ordinary Income of ¥899.4B (YoY +156.3B, +21.0%), and Net Income attributable to owners of parent of ¥633.2B (YoY +125.6B, +24.8%). Group companies centered on detached-house subdivision achieved broad revenue and profit growth; Gross Profit Margin expanded to 17.8% (YoY +1.9pt) as pricing measures and cost stabilization were effective. Operating margin improved to 6.3% (YoY +0.8pt), and EPS reached ¥229.13 (YoY +26.5%), indicating steady profit growth. Conversely, Operating Cash Flow was -¥974.9B (YoY -206%) with the main drivers being inventory build-up (-¥1,389.8B) and decreases in accounts payable (-¥235.0B), leading to working capital cash consumption. Free Cash Flow was -¥1,572.7B, creating a significant divergence between profits and cash generation.
[Revenue] Revenue increased to 1兆5,088.6B (YoY +3.4%). The detached-house subdivision business remained core at 1兆2,185.8B (external revenue basis). Condominium sales rose to ¥952.9B (+6.8%), and contract construction increased to ¥835.2B (+6.5%). By segment, Tact Home Group posted Revenue of ¥2,207.4B (+17.7%)—the highest growth rate—followed by Iida Sangyo Group ¥2,939.6B (+9.7%), Toei Jutaku Group ¥2,121.2B (+5.7%), and Ernest One Group ¥2,923.0B (+3.6%). Ichiken Group recorded Revenue of ¥3,923.2B (-3.7%) but delivered a large increase in Operating Income due to margin improvement. Aidy Home declined to ¥636.8B (-20.9%) due to adjustments in number of units sold. Other segments (wood manufacturing etc.) remained steady at ¥337.4B (+1.0%). Overall, the core detached-house developers broadly contributed to revenue growth, supported by maintained selling prices and secured handovers.
[Profitability] Gross Profit expanded to ¥2,685.5B (Gross Margin 17.8%), up ¥361.8B (＋15.6% YoY). Gross Margin improved from 15.9% to +1.9pt due to pricing revisions and stabilization in material and subcontract costs. SG&A was ¥1,730.0B (SG&A ratio 11.5%), up ¥196.4B YoY, but absorbed within revenue and gross profit gains, enabling favorable operating leverage. Operating Income rose significantly to ¥944.4B (Operating Margin 6.3%, +17.4% YoY). Net financial result was -¥45.6B (Financial income ¥33.0B; Financial expenses ¥78.6B). Equity-method income was ¥0.6B and had limited impact. Ordinary Income was ¥899.4B (YoY +21.0%). No material extraordinary items were reported; impairment losses of ¥15.2B were recorded in other operating expenses. After corporate taxes of ¥283.2B (effective tax rate 31.5%), Net Income attributable to owners of parent was ¥633.2B (YoY +24.8%, Net Margin 4.2%), achieving both revenue and profit growth.
Ichiken Group contributed the largest Operating Income at ¥297.3B (YoY +45.9%), with a margin of 7.6%. Iida Sangyo Group recorded Operating Income of ¥238.3B (+26.4%), margin 8.1%. Ernest One Group Operating Income ¥195.8B (+13.0%), margin 6.7%. Toei Jutaku Group Operating Income ¥180.2B (+14.1%), margin 8.5%—the highest among peers. Tact Home Group Operating Income ¥162.6B (+46.2%), margin 7.4%—a substantial improvement. Aidy Home Operating Income ¥27.0B (+60.9%), margin 4.2%—margin improved despite revenue decline. Other segments posted an operating loss of ¥92.8B (prior year -¥44.2B), with profitability deterioration in wood manufacturing and increased corporate overheads. Consolidated Operating Income after corporate adjustments was ¥944.4B. The six core groups improved margins broadly through product mix revisions and cost control, underpinning a lift in overall profitability.
[Profitability] Operating Margin 6.3% (prior 5.5%) improved +0.8pt driven by gross margin expansion and SG&A containment. ROE 6.3% (prior 5.2%) rose +1.1pt due to higher Net Margin. EBITDA Margin 7.5% (=EBITDA ¥1,128.4B ÷ Revenue) is a stable earnings metric adding back Depreciation & Amortization of ¥184.6B.
[Cash Quality] Operating CF / Net Income -1.54x, OCF/EBITDA Margin -6.5% indicate weak cash conversion. Accrual ratio 8.0% (=Net Income - Operating CF ÷ Total Assets) is neutral but warrants attention given negative Operating CF.
[Investment Efficiency] Total Asset Turnover 0.75x (prior 0.79x) fell due to inventory increase. Days Inventory Outstanding 284 days (=Inventories ¥9,660.4B ÷ Cost of Goods Sold ¥12,403.1B × 365), Days Sales Outstanding 4 days, Days Payable Outstanding 28 days, yielding CCC of 260 days and highlighting heavy working capital.
[Financial Soundness] Equity Ratio 50.8% (prior 52.9%) slightly declined with asset growth but remains solid. D/E Ratio 0.74x (Interest-bearing debt ¥7,572.1B ÷ Equity ¥1兆215.6B), Debt/EBITDA 0.67x, Interest Coverage 12.0x (EBIT ¥944.4B ÷ Financial expenses ¥78.6B) are all in healthy ranges, indicating strong financial resilience.
Operating Cash Flow was -¥974.9B, a substantial deterioration from prior year +¥922.5B. The primary drivers were inventory increases of -¥1,389.8B (land and work-in-progress build-up) and decreases in operating liabilities of -¥235.0B (progress in accounts payable payments), causing large working capital cash outflows. Operating CF subtotal (before working capital changes) was -¥594.8B, reflecting adjustments to Pre-tax Income ¥899.4B by non-cash items such as Depreciation & Amortization ¥184.6B and Impairment Losses ¥15.2B, though other operating activity variances had sizable effects. Corporate tax payments were -¥310.6B, interest payments -¥90.5B, and lease payments -¥69.1B. Investing Cash Flow was -¥597.8B, composed of acquisitions of subsidiaries -¥153.9B (M&A), capital expenditures -¥323.9B, and net increase in time deposits -¥203.6B. Financing Cash Flow was +¥723.9B, reflecting net funding; net increase in short-term borrowings +¥834.1B was the primary source, and long-term borrowings +¥458.5B were also executed. Dividends paid were -¥276.3B and lease principal repayments -¥69.1B. Free Cash Flow (Operating CF + Investing CF) was -¥1,572.7B, and Cash and Cash Equivalents declined from ¥4,756.8B at the beginning of the period to ¥3,907.4B at period-end, a reduction of -¥849.3B. Operating CF / Net Income -1.54x and FCF / Net Income -2.49x highlight weak cash realization; although inventory buildup is a planned procurement investment, recovery in sales digestion pace is key to normalizing liquidity.
Core profits derived from operating activities; of Ordinary Income ¥899.4B, Operating Income ¥944.4B was the principal component, and one-off items were limited. Other operating income ¥46.5B and other operating expenses ¥57.5B yielded a net -¥11.1B—negligible. Impairment losses of ¥15.2B are included in other operating expenses and are temporary in nature, representing 1.6% of Operating Income and a limited impact. Financial items comprised Financial income ¥33.0B (interest/dividend income, etc.) and Financial expenses ¥78.6B (interest on borrowings, etc.), netting -¥45.6B—within ordinary bounds. Equity-method income ¥0.6B was immaterial. Total Comprehensive Income was ¥621.2B; the difference from Net Income ¥616.2B was ¥5.0B, composed of Remeasurements of defined benefit plans +¥4.5B, changes in fair value of financial assets +¥5.6B, and foreign currency translation adjustments of foreign operations -¥5.1B—minor fluctuations. Comprehensive Income Attributable to owners of parent was ¥638.5B versus Net Income ¥633.2B—a small gap. The accrual ratio 8.0% reflects Net Income materially exceeding Operating CF due to inventory increases, but this aligns with business-specific planned investment in land and WIP and is not necessarily a one-off deterioration in quality. Nevertheless, persistent negative Operating CF would raise structural concerns about earnings quality.
Full Year guidance: Revenue ¥1兆6,630.0B, Operating Income ¥1,036.0B (YoY +9.7%), Net Income attributable to owners of parent ¥659.0B (YoY +3.5%), EPS ¥237.04, Dividend ¥46.00 (normalized excluding commemorative dividend). At the half-year mark, revenue progress rate was 90.7%, operating income progress 91.2%, and net income progress 96.1%—near the initial plan. The profit growth plan assumes continued sales digestion and maintained gross margins; the inventory build-up is expected to convert into next-period handovers, providing upside for both earnings and cash. The dividend is expected to normalize to ¥46 excluding a ¥10 commemorative dividend, yielding a Payout Ratio of approximately 19.4% (=¥46 ÷ ¥237.04), a conservative level. Guidance appears achievable, but if sales conditions weaken versus plan there is risk of slower inventory turnover and margin compression.
Annual dividend is ¥100 (interim ¥55, year-end ¥45), including a ¥10 commemorative dividend. Payout Ratio is 43.6% (=¥100 ÷ EPS ¥229.13), which is an appropriate level. Forecast dividend for next fiscal year is ¥46, returning to the normalized level excluding the commemorative payout. Payout Ratio per XBRL metrics is 49.7%, maintaining a near-50% stance and demonstrating a sustained return posture. No share buybacks were conducted this period (prior year ¥9.18B executed). Total Return Ratio is calculated based on dividends only at 49.7%. However, Free Cash Flow was -¥1,572.7B and FCF coverage is -5.61x (=Total dividends ¥276.3B ÷ FCF), indicating dividends are not covered by cash flow and were financed in part by increased short-term borrowings. Cash balance of ¥3,907.4B is ample, so short-term dividend continuity is not in doubt, but sustainable returns require normalization of Operating CF and improved inventory turnover. Dividend policy targets stable payouts; next year’s forecast ¥46 based on EPS ¥237.04 implies a conservative payout ratio of approximately 19.4%, and if cash performance improves post-period, scope for enhanced returns exists.
Working Capital Efficiency Risk: Inventories ¥9,660.4B (48.1% of total assets), Days Inventory Outstanding 284 days, and CCC 260 days reflect the heavy working capital profile typical of real estate development. If sales pace falls short of plan, inventory holding periods may extend, increasing discount pressure and impairment risk. Operating CF of -¥974.9B indicates evident working capital consumption and rising dependence on short-term borrowings of ¥4,645.5B, raising concerns about higher interest burdens.
Interest Rate / Refinancing Risk: Of interest-bearing debt ¥7,572.1B, short-term borrowings ¥4,645.5B account for 61.3%, creating concentration of maturities and refinancing risk in an environment of rising rates. Financial expenses ¥78.6B (implied average rate approximately 1.04%) are currently low, but policy rate increases or spread widening could raise interest costs and affect profitability. Although Interest Coverage is a healthy 12.0x, with negative Operating CF the company may rely on new borrowings to service principal and interest, increasing refinancing exposure.
M&A Integration / Goodwill Impairment Risk: Acquisitions totaled ¥153.9B (10.2% of revenue), and Goodwill stands at ¥2,251.6B (22.0% of net assets). Delays in integration or deterioration in acquired businesses could trigger future impairment risk. Goodwill increased by ¥92.1B from prior goodwill balance ¥2,159.5B; monitoring integration progress and synergy realization is necessary. Impairment losses were ¥15.2B this period and modest, but further valuation losses could emerge in a downturn.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 6.3% | 12.2% (6.2%–17.6%) | -5.9pt |
| Operating Margin | 6.3% | 10.7% (6.8%–17.9%) | -4.4pt |
| Net Margin | 4.1% | 5.8% (2.5%–11.9%) | -1.7pt |
Profitability metrics are below industry medians, placing the company from median to somewhat lower within the real estate sector. Further cost reductions leveraging scale and maintenance of selling prices are key to improving profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.4% | 12.8% (4.2%–29.2%) | -9.4pt |
Revenue growth is well below industry median, indicating a relatively modest growth pace. If inventory build-up translates into handovers in subsequent periods, there is room for growth recovery.
※ Source: Company compilation
Profit and margin improvements have been sustained: Gross Margin +1.9pt and Operating Margin +0.8pt expansion indicate pricing measures taking hold and cost stabilization. ROE 6.3% exceeds prior year 5.2%, driven mainly by Net Margin expansion. SG&A increase of +¥196.4B was covered by gross profit expansion of +¥361.8B, enabling favorable operating leverage. Next year’s guidance also targets profit growth, suggesting the trend of margin improvement should continue.
The largest issue is the substantial negative Operating CF (-¥974.9B) and slowing inventory turnover (Days Inventory Outstanding 284 days, CCC 260 days), which pressure cash generation. Inventory increase of ¥1,746.7B reflects planned investment in land and WIP, but delayed sales digestion would heighten liquidity and interest cost risks. Rising reliance on short-term borrowings ¥4,645.5B and the cash balance decline (-¥849.3B) underscore the importance of liquidity management. Inventory digestion and normalization of Operating CF in subsequent periods will be critical to sustaining shareholder returns and corporate valuation.
M&A activity remains active at 10.2% of revenue with Goodwill of ¥2,251.6B (22.0% of net assets). Financial soundness is high (D/E 0.74x, Debt/EBITDA 0.67x), and there is scope for scale benefits and synergy creation from integration. Dividends are stable at ¥100 (Payout Ratio 43.6%), and next fiscal year is expected to normalize to ¥46 excluding the commemorative dividend. Although FCF coverage is negative in the short term, the cash balance and borrowing capacity support dividend continuity; if inventory turnover improves, mid-term potential for enhanced returns exists.
This report is an AI-generated financial analysis document produced by analyzing XBRL earnings disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference data compiled by the Company from public financial statements. Investment decisions are your responsibility; consult professional advisors as necessary.