Iida Group Holdings (3291) FY2027 Q1 Earnings Report

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Executive Summary

The Company delivered higher revenue and higher profit, accompanied by improved margins, resulting in a strong start supported by operating leverage. Revenue was ¥3,805.2B (¥3,260.6B in the previous year, +16.7%), Operating Income was ¥257.4B (¥142.0B, +81.3%), Profit Before Tax was ¥231.7B (+98.7%), and Net Income attributable to owners of the parent on a consolidated basis was ¥151.7B (¥80.2B in the previous year, +89.2%). Improved gross margin and restrained growth in SG&A expenses drove the expansion in profit, while broadly double-digit revenue growth was confirmed across the segments against a backdrop of solid housing demand.

Factors Affecting Performance

【Revenue】Revenue increased 16.7% year on year to ¥3,805.2B. By segment, the Ichiken Group at ¥1,029.2B (+19.3%), the Iida Sangyo Group at ¥769.9B (+21.4%), the Earnest One Group at ¥739.0B (+16.3%), and the Toei Housing Group at ¥577.5B (+15.1%) all recorded double-digit revenue growth and drove the overall result. The Tact Home Group grew at a relatively slower pace, with revenue of ¥431.9B (+6.5%).

【Profit and Loss】Gross profit was ¥705.4B, with a gross margin of 18.5% (+79bp year on year), while the SG&A ratio declined to 11.7% from 13.5% in the previous year. The restrained growth in SG&A expenses relative to revenue growth resulted in positive operating leverage. Operating Income was ¥257.4B (+81.3%), with a margin of 6.8% versus 4.4% in the previous year. After absorbing financial expenses of ¥29.7B, Profit Before Tax was ¥231.7B and consolidated Net Income was ¥149.3B. By segment, Tact Home recorded a decline in profit to ¥25.9B (-6.7%), while businesses outside the other segments also recorded a loss of ¥27.4B, indicating variability in profitability despite overall revenue and profit growth. In conclusion, the Company achieved higher revenue and higher profit.

Segment Analysis

Five of the six reported segments recorded higher profit. The Ichiken Group posted the largest increase in profit, with Operating Income of ¥72.8B (+32.7%) and a margin of 7.1%. The Iida Sangyo Group recorded ¥69.0B (+51.4%), with both its margin and profit growth rate at high levels. The Earnest One Group at ¥56.1B (+31.7%, margin of 7.6%) and the Toei Housing Group at ¥53.0B (+29.7%, margin of 9.2%) also performed steadily. ID Home recorded a substantial increase in profit to ¥8.6B (+525.4%), although this was partly attributable to a low-base effect. Meanwhile, the Tact Home Group was the only segment to report lower profit, at ¥25.9B (-6.7%, margin of 6.0%), and the profitability gap between segments is widening. Businesses outside the reported segments recorded a loss of ¥27.4B, with the loss expanding year on year, and were a factor depressing overall profit.

Key Financial Indicators

【Profitability】The Operating Income margin improved by +242bp to 6.8% from 4.4% in the previous year, while the Net Income margin also increased to 3.9% from 2.3%. The improvement in gross margin associated with revenue growth (18.5%, +79bp) and the decline in the SG&A ratio (11.7%) contributed to the improvement.【Cash Flow Quality】Inventories stood at ¥1,305.3B, accounting for 50.2% of total assets, and increased by +¥644.9B during the period. Meanwhile, accounts payable declined by -¥139.4B, indicating that working capital moved in a direction that absorbed cash.【Investment Efficiency】ROE was 1.5% (before simple annualization based on quarterly profit), while the total asset turnover ratio remained low. The inventory-dependent business model is therefore a bottleneck for capital efficiency.【Financial Soundness】The Equity Ratio was 49.9%, slightly down from 50.8% in the previous year. Interest-bearing debt comprised ¥5,112.9B of short-term debt and ¥3,086.1B of long-term debt, indicating relatively high dependence on short-term funding. However, liquidity remains ample, with current assets of ¥1,500.10B against current liabilities of ¥663.12B.

Cash Flow Analysis

Although the cash flow statement has not been directly disclosed, the movement of funds can be inferred from changes in the balance sheet. Despite the growth in Operating Income, the increase in working capital appears to have absorbed cash. Inventories increased by +¥644.9B and contract assets increased by +¥27.1B, while accounts payable declined by -¥139.4B and income taxes payable declined by -¥105.9B. These working capital movements represent a combination likely to put pressure on Operating Cash Flow. The situation appears to have been partially bridged by an increase in short-term borrowings (+¥467.5B), while cash and deposits decreased from ¥366.65B to ¥410.27B. Capital expenditures appear to have been limited, given the small change in property, plant and equipment (+¥4.97B). The primary use of funds is therefore considered to have been inventory investment, including land acquisition.

Quality of Earnings

The increase in profit for the current quarter was primarily attributable to recurring improvement in core operating earnings, with limited effects from extraordinary items and temporary factors. Non-operating income and expenses were limited in scale, comprising financial income of ¥2.6B, financial expenses of ¥29.7B, and share of profit or loss of investments accounted for using the equity method of ¥1.3B. The gap between Operating Income and Profit Before Tax was therefore primarily attributable to financial expenses. Income taxes were ¥82.4B, representing an effective tax rate of approximately 35.6%; the relatively heavy tax burden reduced Profit Before Tax of ¥231.7B to Net Income of ¥149.3B. Total comprehensive income was ¥155.2B, including ¥158.3B attributable to owners of the parent. The difference from Net Income of ¥149.3B was primarily attributable to other comprehensive income, including foreign currency translation adjustments of +¥4.9B related to foreign operations. The divergence from Net Income was small, indicating good earnings quality.

Earnings Outlook and Guidance

Progress against the full-year plan—Revenue of ¥16,630B, Operating Income of ¥1,036.0B, and Net Income of ¥659.0B—was 22.9% for Revenue, 24.9% for Operating Income, and 22.7% for consolidated Net Income. These figures are broadly in line with the standard quarterly run rate of 25%. Operating Income progress exceeded Revenue progress, suggesting that margin improvement may continue for the full year. The Company has made no revisions to either its earnings forecast or dividend forecast and has maintained its initial plan.

Shareholder Returns

The Company’s forecast annual dividend is ¥92 per share. At the end of Q2 of the fiscal year ending March 2026, a dividend including an ordinary dividend of ¥45 and a commemorative dividend of ¥10 for participation in the “Expo 2025 Osaka, Kansai, Japan” is scheduled to be paid. Against the previous-year dividend of ¥55, the current-period forecast of ¥92 represents a planned dividend increase. Based on the Company’s forecast Net Income attributable to owners of the parent of ¥659.0B and the number of shares outstanding after deducting treasury shares (approximately 0.2763B shares), the Payout Ratio is approximately 39%. There are no significant concerns regarding sustainability, as the dividend plan is accompanied by earnings growth.

Risk Factors

1. Inventory Level and Working Capital Efficiency Risk: Inventories stood at ¥1,305.3B, accounting for 50.2% of total assets, and increased by +¥644.9B from the previous year. Due to the inventory-dependent business structure, any slowdown in the pace of inventory sales could tie up funds in working capital and put pressure on cash flow.

2. Dependence on Short-Term Funding Risk: Short-term interest-bearing debt of ¥5,112.9B exceeded long-term interest-bearing debt of ¥3,086.1B, indicating a high degree of dependence on short-term funding in line with the development and sales cycle. During periods of rising interest rates, the risks of higher refinancing costs and maturity mismatches may increase relatively.

3. Intersegment Profitability Gap Risk: The Tact Home Group was the only segment to record lower profit, with Operating Income of ¥25.9B (-6.7%), while businesses outside the reported segments recorded a loss of ¥27.4B. Segment margins range widely from 5.1% to 9.2%, requiring monitoring of the impact of changes in the business mix on overall profitability.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Return

The Company’s margins are slightly below the industry median but remain within the industry IQR range, with no significant underperformance.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median, placing the Company among the industry’s high-growth group.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. In addition to revenue growth, the Operating Income margin improved by +242bp from 4.4% in the previous year to 6.8%. The emergence of positive operating leverage through higher gross margins and a lower SG&A ratio is noteworthy from the perspective of earnings quality.

2. Progress against the full-year plan was broadly on a standard trajectory, at 22.9% for Revenue and 24.9% for Operating Income. No revisions were made to the earnings forecast or dividend forecast.

3. Inventories accounted for 50.2% of total assets and increased by +¥644.9B during the period. In addition, the funding structure in which short-term interest-bearing debt exceeds long-term debt is a key point to monitor in assessing future working capital efficiency and refinancing trends.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥3,352–¥3,547 at ±1% for the cost of equity, and ¥3,439–¥3,453 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used; there is a timing difference relative to the full-year forecast.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not predict or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings report 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 discretion and responsibility, after consulting a professional advisor as necessary.

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AI Financial Analysis

Executive Summary

FY2027 Q1 was a strong earnings recovery quarter, led by higher unit sales and broad-based operating-margin improvement across the core house-building subsidiaries. Revenue increased 16.7% YoY to ¥380.5bn. Operating income rose 81.3% YoY to ¥25.7bn, materially outpacing revenue growth. Net income attributable to owners of the parent increased 89.2% YoY to ¥15.2bn, and basic EPS rose to ¥54.91 from ¥29.02. Gross profit increased 22.0% YoY to ¥70.5bn. The gross margin improved by approximately 80bp YoY to 18.5%, indicating improved pricing and/or construction-cost absorption. Operating margin expanded by approximately 242bp YoY to 6.8%, from 4.4% in the prior-year quarter. This operating leverage was supported by SG&A increasing only 1.8% YoY, far below the 16.7% revenue increase. The improvement was also assisted by a substantial reduction in unallocated head-office and consolidation-adjustment costs, which narrowed to ¥0.6bn from ¥51.3bn. Finance costs declined 9.0% YoY to ¥3.0bn despite higher borrowings, limiting below-the-line pressure. The effective tax rate was 35.6%, leaving the tax burden at 0.655 and moderating the conversion of pre-tax profit into net income. Q1 revenue represents 22.9% of the full-year forecast, slightly below the 25% seasonal reference level. Operating income progress is 24.8% and attributable-profit progress is 23.2%, both broadly consistent with the annual plan considering the quarter's typical seasonality. The balance sheet remains equity-funded to a meaningful extent, with a 49.9% equity ratio, but its liquidity is substantially tied to land and housing inventory. Inventories reached ¥1,030.5bn, or 50.2% of total assets, and inventory days of 303 plus a 282-day cash conversion cycle remain the central financial risk. The FY dividend forecast of ¥92 per share implies a 38.8% payout ratio against forecast EPS of ¥237.04, providing a moderate earnings buffer.

Profitability Analysis

Annualized DuPont ROE is 5.9%, decomposed into a 4.0% net profit margin, 0.742x asset turnover, and 2.00x financial leverage. The most material improvement versus the prior-year quarter is the earnings-margin recovery: operating margin rose to 6.8% from 4.4%, while gross margin increased to 18.5% from 17.7%. Revenue growth of 16.7% generated a 22.0% increase in gross profit, whereas SG&A rose only 1.8%, demonstrating favorable operating leverage. The resulting 81.3% increase in operating income was substantially faster than the top-line increase. The net margin rose to 4.0% from approximately 2.5% in the prior-year quarter, although it remains below the 5% level generally associated with stronger profitability. The annualized ROE of 5.9% is below the 8% benchmark and reflects low asset turnover for an inventory-intensive residential developer as well as a still-modest net margin. Financial leverage at 2.00x contributes to ROE but is not excessive given the 49.9% equity ratio. The interest burden of 0.900 shows that finance costs still absorb roughly 10% of EBIT, although the burden improved from the prior year as finance costs fell. The tax burden of 0.655 is somewhat below a normal 0.70 benchmark, reflecting the 35.6% effective tax rate. The profitability recovery appears operationally broad-based rather than dependent on equity-method income, which was only ¥0.1bn. Margin sustainability will depend on continued sales pricing, land-cost discipline, construction-cost control, and the pace at which high inventory is converted into delivered homes.

Growth Assessment

Growth was broad across the six reportable homebuilding groups. The core business by operating-income contribution was Hajime Construction Group, which generated revenue of ¥102.9bn, up 19.3% YoY, and operating income of ¥7.3bn, up 32.7% YoY; its segment margin improved to 7.1% from 6.4%. Iida Sangyo Group delivered revenue growth of 21.4% to ¥77.0bn and operating-income growth of 51.4% to ¥6.9bn, with margin expanding to 9.0% from 7.2%. Toei Housing Group recorded revenue of ¥57.7bn, up 15.1%, and operating income of ¥5.3bn, up 29.7%, producing the highest major-segment margin at 9.2%. Tact Home Group grew revenue 6.5% to ¥43.2bn, but operating income declined 6.7% to ¥2.6bn and margin contracted to 6.0% from 6.8%, making it the principal operating outlier. Arnest One Group increased revenue 16.3% to ¥73.9bn and operating income 31.7% to ¥5.6bn, with margin improving to 7.6%. ID Home increased revenue 22.5% to ¥17.0bn and operating income to ¥0.9bn from ¥0.1bn, lifting margin to 5.1%. The Other segment's revenue rose 6.1% to ¥8.7bn, while its operating loss widened to ¥2.7bn. Consolidated growth quality is enhanced by the fact that the adjustment loss narrowed sharply, but this source of improvement should not be extrapolated at the same rate. Full-year company guidance calls for revenue of ¥1,663.0bn, operating income of ¥103.6bn, and attributable profit of ¥65.5bn; Q1 progress is broadly near the normal seasonal run rate. The outlook therefore requires sustained delivery volumes and margins rather than a major acceleration from the Q1 pace.

Financial Health

Financial health is supported by current assets of ¥1,500.1bn against current liabilities of ¥663.1bn, equivalent to a current ratio of 2.26x and therefore no near-term current-ratio warning. Cash and deposits were ¥410.3bn, providing a significant liquidity reserve. However, inventories accounted for ¥1,030.5bn, or 68.7% of current assets and 50.2% of total assets, meaning liquidity depends heavily on property sales and inventory monetization. Bonds and borrowings totaled ¥819.9bn, comprising ¥511.3bn current and ¥308.6bn non-current. Current borrowings increased ¥46.7bn from fiscal year-end and non-current borrowings increased ¥15.9bn, while cash declined ¥26.4bn, indicating greater reliance on debt funding during the quarter. Debt represented approximately 40.0% of total assets, which is within a manageable range for a property developer but requires disciplined inventory turnover. The reported debt-to-equity ratio is 1.00x, below the 2.0x aggressive-leverage warning threshold. Annualized EBIT-to-finance-cost coverage is approximately 8.7x, indicating that current operating profit covers financing costs adequately. There is no apparent maturity mismatch at the aggregate current-ratio level, but the ¥511.3bn of current borrowings should be assessed alongside the long duration of inventory conversion. Recognized lease liabilities total ¥259.2bn, including ¥73.9bn current and ¥185.3bn non-current, and form an additional fixed financing obligation. Goodwill was ¥227.8bn, equal to 22.3% of equity and 11.1% of assets; this is below the 30% goodwill-to-equity caution threshold, although it remains material to book value. Accounts receivable declined 28.8% YoY to ¥10.5bn, which reduces receivables exposure but does not offset the inventory concentration.

Notable B/S Changes

Accounts receivable: -¥4.2bn (-28.8% YoY) to ¥10.5bn - lower trade receivables reduce customer-credit exposure, although liquidity remains predominantly concentrated in inventories. Inventories: +¥64.5bn (+6.7% from fiscal year-end) to ¥1,030.5bn - additional land/home inventory investment increased the need for timely project completion and sales conversion. Current bonds and borrowings: +¥46.7bn (+10.1% from fiscal year-end) to ¥511.3bn - increased short-term financing partly coincided with inventory growth and lower cash. Non-current bonds and borrowings: +¥15.9bn (+5.4% from fiscal year-end) to ¥308.6bn - longer-term debt also increased, raising total funding but providing some maturity diversification. Cash and deposits: -¥26.4bn (-6.0% from fiscal year-end) to ¥410.3bn - liquidity remains substantial, but the decline alongside higher debt warrants monitoring. Goodwill: +¥2.7bn (+1.2% from fiscal year-end) to ¥227.8bn - goodwill remains material at 22.3% of equity, though below the standard caution threshold.

Cash Flow Quality

The balance-sheet movements point to working-capital absorption during Q1. Inventory increased ¥64.5bn from fiscal year-end to ¥1,030.5bn, while cash and deposits decreased ¥26.4bn to ¥410.3bn. At the same time, total bonds and borrowings increased ¥62.7bn, suggesting that inventory investment and operating funding needs were partly debt financed. The reported inventory-days quality alert of 303 days is materially above both the 90-day and 60-day alert thresholds. For a residential developer, a substantial land bank and work-in-process balance is structurally normal because projects require land acquisition, construction, and delivery lead times; nevertheless, 303 days signals that capital is committed for an extended period. The 282-day cash conversion cycle is also above the 120-day alert threshold and reinforces the funding-duration risk. The root cause is the combination of a very large inventory base with relatively limited trade payables of ¥81.9bn and low trade receivables of ¥10.5bn. The immediate impact is heightened sensitivity of liquidity, borrowing needs, and returns to selling velocity, completed-unit deliveries, and property prices. Contract assets increased to ¥7.7bn from ¥5.0bn, while contract liabilities increased to ¥11.6bn from ¥9.8bn, indicating some customer-related project activity but not altering the central inventory funding profile. Cash-flow quality should be judged conservatively until inventory growth is demonstrably converted into cash receipts and debt reduction.

Dividend Sustainability

The full-year dividend forecast is ¥92 per share. Against forecast EPS of ¥237.04, the implied dividend payout ratio is 38.8%. This is below the 60% sustainability benchmark and leaves a reasonable earnings-retention buffer for land acquisition, construction activity, and debt servicing. Q1 attributable EPS of ¥54.91 represents 23.2% of the full-year EPS forecast, broadly consistent with the first-quarter progression of the earnings plan. The forecast dividend level should therefore be supported if management achieves its current full-year profit target. Dividend resilience is nevertheless linked to inventory monetization because the business requires large ongoing working-capital investment. The previous interim dividend included a ¥10 commemorative payment alongside a ¥45 ordinary dividend, so investors should distinguish ordinary recurring distributions from event-related payments when comparing periods. The company reported no dividend revision with Q1 results.

Risk Assessment

Business risks include Residential property cycle risk: demand for detached houses is sensitive to mortgage rates, household affordability, consumer confidence, and regional housing-market conditions., Inventory valuation and sales-velocity risk: inventories of ¥1,030.5bn equal 50.2% of total assets; slower sales, discounting, or adverse land-price movements could pressure margins and asset values., Construction-cost and subcontractor availability risk: the Q1 gross-margin recovery could reverse if materials, labor, or logistics costs rise faster than selling prices., Segment execution risk: Tact Home Group's operating income fell 6.7% YoY despite revenue growth, indicating that profitability recovery is not uniform across all subsidiaries., Competitive pricing risk: the 18.5% gross margin remains below the 20% quality-alert threshold, leaving limited protection against price competition or input-cost inflation..

Financial risks include Working-capital duration risk: inventory days of 303 and a cash conversion cycle of 282 days require sustained access to financing and reliable property disposals., Refinancing risk: current bonds and borrowings of ¥511.3bn are significant, although the 2.26x current ratio and approximately 8.7x annualized interest coverage provide meaningful mitigation., Debt-funded inventory growth risk: borrowings increased by ¥62.7bn during Q1 while cash fell by ¥26.4bn and inventory rose by ¥64.5bn., Goodwill retention risk: goodwill of ¥227.8bn is manageable at 22.3% of equity but remains exposed to impairment if acquired operations underperform..

Key concerns include High inventory days alert: 303 days exceeds both stated warning thresholds. This is structurally influenced by development lead times, but its scale raises the impact of a housing-market slowdown on liquidity and margins., Long cash conversion cycle alert: 282 days exceeds the 120-day threshold. The cycle reflects capital tied up in land and homes before delivery, increasing dependence on debt and sales execution., Low gross margin alert: the 18.5% gross margin is below 20%. It improved by approximately 80bp YoY, but the remaining margin cushion is modest for an inventory-heavy developer., The sharp reduction in consolidated adjustment costs supported operating-income growth; this is favorable but may be less repeatable than gross-margin and subsidiary-level operating improvement..

Investment Implications

Key takeaways include Q1 earnings recovered strongly, with revenue up 16.7%, operating income up 81.3%, and attributable profit up 89.2% YoY., Operating-margin expansion to 6.8% was driven by gross-margin recovery, tightly controlled SG&A, and sharply reduced unallocated corporate costs., All principal reportable segments except Tact Home achieved operating-profit growth, with Toei Housing and Iida Sangyo posting particularly strong segment margins., Balance-sheet capitalization is solid at a 49.9% equity ratio, but inventory concentration and long cash conversion remain the defining constraints on capital efficiency., The FY dividend forecast implies a moderate 38.8% payout ratio based on forecast EPS..

Metrics to watch include Inventory balance, inventory days, completed-home sales velocity, and any inventory write-downs, Cash and deposits relative to short-term bonds and borrowings, Gross margin and operating margin, particularly amid construction-cost and pricing movements, Tact Home Group's margin recovery and the loss trajectory in the Other segment, Progress toward full-year guidance: 22.9% for revenue, 24.8% for operating income, and 23.2% for attributable profit at Q1, Finance costs and annualized interest coverage as borrowing levels evolve.

Regarding relative positioning, The company combines broad domestic detached-house development scale, a recovering consolidated margin profile, and a near-50% equity ratio. Relative to an asset-light business, its returns remain constrained by the capital intensity of its land and housing inventory, as reflected in annualized ROE of 5.9% and the 282-day cash conversion cycle.