Iida Group Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥685.03B
• Operating Income: ¥39.52B
• Net Income: ¥24.16B
• EPS: ¥90.18

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: A mixed FY2026 Q2—profitability improved modestly despite flat revenue, but cash flow quality weakened materially due to heavy inventory build. Revenue was 6,850.27 (−0.3% YoY), operating income rose to 395.24 (+4.2% YoY), and net income increased to 249.18 (+5.3% YoY). Gross profit was 1,225.98 with a gross margin of 17.9%. Operating margin improved to about 5.8% (395.24 / 6,850.27). Net margin printed 3.6% (in line with calculated 3.64%). Using reported growth rates to infer prior-period margins, operating margin expanded roughly 25 bps YoY (from ~5.5% to ~5.8%), while net margin expanded about 19 bps (from ~3.45% to ~3.64%). SG&A was 839.52, implying an SG&A ratio of about 12.3%; with revenue flat, the OI uplift indicates operating leverage and/or product mix helped. ROE was 2.5% (DuPont: NPM 3.6% × Asset Turnover 0.363 × Leverage 1.90x), highlighting subdued capital efficiency. ROIC was 2.7%—below the 5% warning threshold—suggesting returns remain well under the cost of capital. Cash flow quality was weak: operating cash flow was −923.46 versus net income of 249.18 (OCF/NI −3.71x), and free cash flow was −1,156.29, likely driven by inventory increases (inventories stand at 9,061.09). The balance sheet remains solid on equity ratio (52.5%) and D/E of 0.90x, but current ratio is unreported and interest coverage not calculable. Goodwill is sizable at 2,201.96, introducing potential impairment risk if demand softens. Dividends look stretched near-term with a calculated payout ratio of 101.3% and negative FCF (FCF coverage −4.58x). Forward-looking, modest margin gains are encouraging, but sustained improvement hinges on selling down inventory, stabilizing housing demand, and controlling land acquisition cadence. Near-term risks include housing market sensitivity (rates, affordability), construction cost inflation, and potential working-capital strain if sales velocity slows. Overall, the quarter delivered better profitability but at the cost of cash conversion, leaving execution on inventory normalization as the key swing factor for 2H.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.5% = Net Profit Margin 3.6% × Asset Turnover 0.363 × Financial Leverage 1.90x. The most notable change versus last year is margin: operating income grew +4.2% against −0.3% revenue, implying operating margin expanded about 25 bps (to ~5.8%). Business drivers likely include product mix (higher-margin units), disciplined SG&A, and possibly better pricing in delivered homes. Asset turnover remains low at 0.363, reflecting the inventory-heavy nature of the business and slower velocity amid a flat topline. Leverage at 1.90x is moderate and relatively stable for a developer. The margin expansion appears partly sustainable if cost control and mix hold; however, it is vulnerable to sales pace, selling prices, and build cost inflation. Watch for any drift where SG&A growth outpaces revenue—this quarter, SG&A was contained enough to support OI growth despite flat revenue, but lack of YoY SG&A detail is a limitation.

Growth Assessment

Top-line growth was essentially flat (−0.3% YoY), but profit growth outpaced revenue (OI +4.2%, NI +5.3%), indicating operating leverage and/or favorable mix. Gross margin of 17.9% supports the improved operating margin (~5.8%). Equity-method income was minor (1.74) and not a driver. Revenue sustainability depends on unit deliveries, ASP trends, and cancellation rates; data are not disclosed here, limiting visibility. The backlog and order intake trajectory (unreported) will be crucial to assess 2H momentum. Forward outlook: if inventory conversion accelerates into peak selling quarters and costs remain contained, the company can sustain incremental margin gains; conversely, slower sell-through could compress margins via discounting and elevate holding costs. Given ROIC at 2.7%, deploying additional capital into land/inventory needs careful hurdle discipline to avoid value dilution.

Financial Health

Liquidity: Current ratio is not calculable from disclosed items; no explicit warning triggered. Cash & equivalents were 3,671.18 at quarter-end, but operating cash was sharply negative due to working capital. Inventories are large at 9,061.09, and accounts receivable are modest at 108.08, typical for a build-to-sell model but highlighting dependence on sales conversion for liquidity. Solvency: Equity ratio is strong at 52.5%; D/E is 0.90x, within conservative bounds (<1.5x). Interest-bearing debt details and interest coverage are unreported, creating uncertainty around near-term debt service capacity (though equity buffer is solid). Maturity mismatch: With current liabilities not disclosed, we cannot quantify short-term funding reliance; nonetheless, the model suggests potential mismatch risk if significant short-term borrowings fund inventories during slower sales periods. Off-balance sheet: None disclosed in the provided data.

Cash Flow Quality

OCF/Net Income was −3.71x, flagging poor earnings quality this quarter. Likely driver is inventory build (inventories 9,061.09), consistent with land acquisition and construction WIP expansion—common seasonality in homebuilders but still a risk if sell-through lags. Free cash flow was −1,156.29, insufficient to cover dividends and any growth capex. No explicit signs of working-capital manipulation are visible, but the magnitude of OCF volatility necessitates monitoring of land acquisition cadence, days inventory outstanding, and pre-sales. Sustainability: For dividends and debt service to be secure, OCF must revert to positive via inventory conversion in 2H.

Dividend Sustainability

Calculated payout ratio is 101.3%, above the <60% benchmark for comfort. FCF coverage of dividends was −4.58x, indicating dividends were not covered by internally generated cash this period. With the balance sheet equity ratio at 52.5% and D/E at 0.90x, the company has capacity to bridge shortfalls temporarily; however, sustaining current dividends hinges on normalizing OCF through inventory sell-down. Policy outlook: Without disclosure of the annual DPS plan or guidance, we assume management targets stable dividends; near-term flexibility may be needed if working-capital outflows persist.

Risk Assessment

Business Risks:

• Housing demand sensitivity to mortgage rates, affordability, and consumer sentiment in Japan
• Construction cost inflation (materials, labor) pressuring gross margin
• Sales velocity risk leading to higher inventory carrying costs and potential discounting
• Goodwill impairment risk (2,201.96) if acquired subsidiaries underperform
• Project execution and zoning/permit timing impacting deliveries and revenue recognition

Financial Risks:

• Negative OCF (−923.46) and FCF (−1,156.29) increasing reliance on external funding
• Potential maturity mismatch if short-term debt funds large inventories (current liabilities unreported)
• Interest rate exposure on floating-rate borrowings (interest expense and coverage unreported)
• Low ROIC (2.7%) indicating risk of value dilution from incremental investment

Key Concerns:

• OCF/NI at −3.71x indicates weak cash conversion
• Inventory level (9,061.09) relative to revenue heightens liquidity sensitivity
• Dividend coverage is weak (payout 101.3%, FCF coverage −4.58x)
• Lack of disclosure on interest-bearing debt structure and interest coverage
• Equity-method income is immaterial; little cushion from non-core earnings

Investment Implications

Key Takeaways:

• Profitability improved with ~25 bps operating margin expansion despite flat revenue
• ROE remains low at 2.5% due to modest margins and low asset turnover
• Cash conversion deteriorated sharply as inventories rose, producing negative OCF and FCF
• Balance sheet equity ratio (52.5%) and D/E (0.90x) provide solvency comfort, but liquidity depends on sell-through
• Dividend coverage is strained this quarter; normalization of OCF is critical in 2H

Metrics to Watch:

• Inventory turnover and days inventory outstanding
• Pre-sales backlog, unit deliveries, and ASP trends
• Gross margin per unit and construction cost indices
• Operating cash flow and working-capital changes (land acquisition cadence)
• Debt maturity profile and interest coverage (once disclosed)

Relative Positioning: Within Japanese homebuilders, the company shows resilient operating profitability but below-peer capital efficiency (ROIC 2.7%, ROE 2.5%) and heightened sensitivity to inventory cycles; solvency is solid, but near-term liquidity hinges on inventory conversion.

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