AZUMA HOUSE (3293) FY2026 Q3 Earnings Report

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Executive Summary

For the nine months ended Q3 of the fiscal year ending March 2026, the Company posted lower revenue and lower earnings. The primary cause of the decline in profit margins was that adjustments to the cost structure failed to keep pace with the decline in revenue. Revenue was ¥7.90B (-21.5% YoY), Operating Income was ¥0.65B (-34.8%), Ordinary Income was ¥0.58B (-38.1%), and Net Income attributable to owners of the parent was ¥0.37B (-41.9%). The main driver of the revenue decline was a decrease in sales revenue from the Real Estate and Construction Business, which accounts for the largest share of segment revenue; this business swung to an Ordinary Loss.

Factors Affecting Performance

【Revenue】Revenue was ¥7.90B, down 21.5% from ¥10.05B in the same period of the previous year. By segment, the Real Estate and Construction Business declined significantly to ¥4.06B (-32.9% YoY), becoming the primary cause of the overall revenue decline. Meanwhile, the Real Estate Leasing Business maintained revenue growth at ¥2.95B (+3.1%), and the Hotel Business at ¥0.57B (+3.0%), indicating that the leasing-centered earnings base remains relatively stable. The Asset Utilization Business declined to ¥0.28B (-47.7%).

【Profit and Loss】Operating Income was ¥0.65B (-34.8% YoY), while Ordinary Income was ¥0.58B (-38.1%), with earnings declining at a faster pace than the revenue decline rate (-21.5%). While the gross margin was maintained at 38.4%, SG&A expenses were ¥2.38B, nearly unchanged from ¥2.42B in the previous year. The insufficient adjustment of expenses in response to the decline in revenue led to a deterioration in profit margins. By segment, the Real Estate and Construction Business recorded an Ordinary Loss of ¥0.04B, deteriorating from a profit of ¥0.28B in the previous year, and this was a factor weighing down overall Ordinary Income. Interest expense increased to ¥0.15B from ¥0.13B in the previous year, widening the gap between Ordinary Income and Net Income. Extraordinary losses were limited to a ¥0.01B loss on disposal of fixed assets, and the impact of one-time factors was limited. In conclusion, the Company experienced lower revenue and lower earnings, with the decline in earnings exceeding the revenue decline rate, reflecting the fixed-cost nature of SG&A expenses and the increase in interest burden.

Segment Analysis

Segment profit, based on Ordinary Income, was ¥0.04B negative for the Real Estate and Construction Business (previous year: +¥0.28B), which swung into the red and contributed most significantly to the decline in overall Ordinary Income. The Real Estate Leasing Business maintained earnings growth at ¥0.88B (+2.9% YoY), retaining a high profit margin of 29.8%. The Hotel Business recorded ¥0.04B (-44.2%), while the Asset Utilization Business recorded ¥0.003B (-92.1%); both reported lower earnings. Within the business portfolio, the Real Estate Leasing Business continues to function stably as the earnings pillar, while fluctuations in the Real Estate and Construction Business and the Asset Utilization Business influence overall performance significantly.

Key Financial Metrics

【Profitability】The Operating Margin was 8.3%, down 1.7pt from 10.0% in the previous year, while the Net Profit Margin also declined to 4.7% from 6.4% in the previous year. ROE remained at 2.9% on an annualized basis, affected by both a decline in asset turnover and deteriorating profit margins. 【Cash Flow Quality】Comprehensive Income was ¥0.37B, nearly equal to Net Income attributable to owners of the parent of ¥0.37B, with no significant divergence arising from Other Comprehensive Income items. 【Investment Efficiency】Net Assets were ¥17.16B against Total Assets of ¥32.37B, resulting in an Equity Ratio of 53.0%. Fixed assets totaled ¥23.19B and accounted for most of the assets; land accounted for ¥14.86B of Property, Plant and Equipment totaling ¥22.59B, indicating limited liquidity in the asset composition. 【Financial Soundness】Current Assets of ¥9.17B against Current Liabilities of ¥4.09B resulted in a favorable Current Ratio exceeding 224%. While Cash and Deposits totaled ¥4.52B, Short-Term Borrowings increased to ¥0.67B from ¥0.26B in the previous year, indicating a change in the funding composition.

Cash Flow Analysis

As individual figures from the Statement of Cash Flows have not been disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and Deposits were ¥4.52B, nearly unchanged from ¥4.55B in the same period of the previous year, with no significant change in available financial resources. Meanwhile, Short-Term Borrowings increased from ¥0.26B to ¥0.67B, suggesting that working capital or a portion of existing borrowings may have been financed through short-term funding. Long-Term Borrowings were ¥10.24B, nearly unchanged from ¥10.33B in the previous year, and total non-current liabilities also remained broadly flat. Current Assets of ¥9.17B significantly exceeded Current Liabilities of ¥4.09B, providing ample short-term payment capacity. Interest expense increased to ¥0.15B from ¥0.13B in the previous year, and the impact of the interest burden on funding costs will require monitoring in future cash management.

Quality of Earnings

The primary cause of the divergence between Ordinary Income and Net Income was income tax expense (income taxes of ¥0.20B, with an effective tax rate of approximately 35%), while the impact of one-time extraordinary gains and losses was limited. Extraordinary losses consisted solely of a ¥0.01B loss on disposal of fixed assets; compared with extraordinary losses of ¥0.07B in the previous year, including a ¥0.01B impairment loss, the scale of one-time factors has declined. Of ¥0.09B in non-operating income, recurring dividend income and interest income were small. Most of the ¥0.16B in non-operating expenses consisted of financial expenses, including ¥0.15B in interest expense, resulting in a structure in which borrowing costs are directly deducted from operating profit in determining Ordinary Income. Comprehensive Income of ¥0.37B was nearly equal to Net Income, with no accrual-like divergence arising from valuation differences on available-for-sale securities or similar items. Accordingly, the quality of earnings for the period can be considered relatively straightforward in composition.

Earnings Forecast and Guidance

The full-year earnings forecast calls for Revenue of ¥11.43B (-13.9% YoY), Operating Income of ¥0.98B (-20.4%), and Ordinary Income of ¥0.90B (-21.9%). Revenue of ¥7.90B for the nine-month period represents 69.1% progress against the full-year forecast. Operating Income totaled ¥0.65B, representing 66.5% progress against the full-year forecast, and the plan anticipates a certain buildup in revenue and earnings toward the second half of the fiscal year. Although the earnings forecast was revised during the current quarter, the dividend forecast was not revised. The cumulative decline in earnings (Operating Income: -34.8%) exceeds the decline projected for the full year (-20.4%), making the pace of recovery in the second half of the fiscal year the key to achieving the plan.

Shareholder Returns

The Company plans to pay an interim dividend of ¥17.5 and a projected year-end dividend of ¥17.5, for an annual dividend of ¥35.0, which is expected to remain unchanged from the previous year's annual dividend (interim dividend: ¥17.5). Based on projected EPS of ¥74.53, the Payout Ratio is approximately 47.0%. No information regarding share repurchases has been disclosed, so the Total Return Ratio cannot be assessed. Maintaining the dividend despite a significant year-on-year decline in Net Income reflects a dividend policy based on retained earnings and the cash balance (Cash and Deposits of ¥4.52B).

Risk Factors

1. Risk of fluctuations in real estate sales revenue: Revenue from the Real Estate and Construction Business declined significantly by -32.9% YoY, and its Ordinary Income/Loss swung from a profit to a loss (¥0.04B negative). The Company's structure is such that sales trends in this business directly affect overall performance.

2. Change in funding composition: Short-Term Borrowings increased by approximately 159% from ¥0.26B to ¥0.67B, while Long-Term Borrowings remained flat, indicating increased reliance on short-term funding. Interest expense also increased to ¥0.15B from ¥0.13B in the previous year.

3. Deterioration in operating leverage due to the fixed-cost nature of expenses: While revenue declined by 21.5%, SG&A expenses remained nearly flat at ¥2.38B compared with ¥2.42B in the previous year. The delayed conversion of expenses to a more variable structure caused the Operating Margin to decline to 8.3% from 10.0% in the previous year.

Industry Benchmark (For Reference; Based on Company Research)

Profitability and Returns

Profitability metrics are slightly above the industry median.

Growth and Capital Efficiency

The Revenue Growth Rate is significantly below the industry median, positioning the Company within the industry as one experiencing a decline in revenue.

※Source: Company research

Key Points from the Financial Results

1. Operating Income (-34.8%) and Ordinary Income (-38.1%) declined at a faster pace than the revenue decline rate (-21.5%), confirming from the data that the fixed-cost nature of SG&A expenses is a structural factor behind the deterioration in profit margins.

2. By segment, the Real Estate Leasing Business (Ordinary Income of ¥0.88B, profit margin of 29.8%) remains a stable source of earnings, while the Real Estate and Construction Business has swung to an Ordinary Loss. This indicates a structure in which fluctuations in profitability among businesses significantly affect overall performance.

3. Short-Term Borrowings increased by approximately 159% YoY, confirming a change in the funding composition. The annual dividend is expected to remain unchanged at ¥35.0, resulting in a Payout Ratio of approximately 47.0% based on projected full-year EPS.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,690–¥1,785 at ±1% for the Cost of Equity, and ¥1,725–¥1,744 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).
• As Net Assets include Non-Controlling Interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-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 discretion and responsibility, after consulting with a professional as necessary.

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