MIYAJI ENGINEERING GROUP (3431) FY2026 Q3 Earnings Report

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Executive Summary

Cumulative results for Q3 resulted in a significant decline in both revenue and profit, primarily due to a reaction from the strong performance in the previous year and deterioration in construction profitability. Revenue was ¥409.2B (¥539.3B in the previous year, YoY -24.1%), Operating Income was ¥33.9B (¥74.4B, YoY -54.5%), Ordinary Income was ¥36.7B (¥76.8B, YoY -52.2%), and Net Income attributable to the owners of the parent was ¥25.9B (¥52.1B, YoY -50.3%). Operating Income declined more sharply than the rate of revenue contraction, suggesting a deterioration in operating leverage due to downward rigidity in fixed costs and SG&A expenses.

Factors Affecting Performance

【Revenue】Revenue was ¥409.2B, representing a 24.1% year-on-year decline. By segment, Miyaji Engineering recorded ¥293.8B (71.8% of total), while M.M. Bridge recorded ¥119.2B (29.1%); both segments experienced revenue declines from the previous year (approximately -6.6% and -47.2%, respectively), with the decline at M.M. Bridge particularly pronounced. Fluctuations based on progress are considered the primary cause, reflecting the dispersion of construction completion and handover timing.

【Profit and Loss】Operating Income was ¥33.9B (YoY -54.5%), and the Operating Margin declined significantly to 8.3% from the previous year’s estimated 13.8%. Segment profit was ¥28.9B for Miyaji Engineering (9.8% margin) and ¥5.3B for M.M. Bridge (4.5% margin), with deteriorating profitability at the latter weighing on the overall margin. Ordinary Income was ¥36.7B (YoY -52.2%), supported by non-operating income including ¥2.4B in dividend income. A gain on the sale of investment securities of ¥1.9B was recorded as extraordinary income, resulting in Net Income attributable to owners of the parent of ¥24.2B (YoY -34.7%); the extraordinary gain mitigated the rate of decline relative to the Ordinary Income stage. Overall, the results represent a decline in both revenue and profit.

Segment Analysis

Miyaji Engineering generated revenue of ¥293.8B and Operating Income of ¥28.9B (9.8% margin), maintaining its position as the core segment responsible for the majority of consolidated profit. M.M. Bridge generated revenue of ¥119.2B and Operating Income of ¥5.3B (4.5% margin), with its profit level shrinking substantially from the previous year. The consolidated margin of 8.3% is broadly consistent with the combined segment margin of 8.4%; however, adjustments for corporate expenses and other items (△¥30.8B) reduced final consolidated Operating Income.

Key Financial Indicators

【Profitability】The Operating Margin was 8.3%, while the Net Profit Margin, based on income attributable to owners of the parent, was 5.9%; both declined from the previous year, indicating that cost reductions failed to keep pace with the decline in revenue, resulting in margin deterioration.【Cash Flow Quality】Although the disclosure classification of Operating Cash Flow and Investing Cash Flow is not available, cash and deposits amounted to ¥69.1B, a significant decrease from the previous year. Together with the high level of accounts receivable for completed construction contracts—which, although down year-on-year, remains large relative to the revenue scale—changes in working capital may have affected cash management.【Investment Efficiency】Annualized ROE was 7.1%, a level reflecting declines in both asset efficiency and profitability when asset turnover and financial leverage are taken into account.【Financial Soundness】The Equity Ratio remained high at 62.6%. Current assets of ¥524.6B exceeded current liabilities of ¥240.7B, indicating sound liquidity; however, short-term borrowings were reduced substantially to ¥6.0B from ¥75.0B in the previous year.

Cash Flow Analysis

The disclosure classification of cash flow statement items is limited in these results; accordingly, cash trends are inferred from changes in the balance sheet. Cash and deposits were ¥69.1B, a decrease of ¥95.9B (-58.1%) from ¥165.0B in the same period of the previous year, while short-term borrowings were substantially reduced from ¥75.0B to ¥6.0B. These results suggest that cash balances may have been affected by cash outflows from financing activities, such as debt repayments, or by changes in working capital, including accounts receivable for completed construction contracts. On the investment side, investment securities increased to ¥82.6B from the previous year, suggesting that a portion of surplus funds was allocated to securities investments. Since interest-bearing debt is limited and interest expense is also modest, there is little direct concern regarding financial soundness itself; however, the magnitude of the decline in cash balances warrants monitoring of cash management trends.

Quality of Earnings

In addition to recurring earnings, the Company recorded a ¥1.9B gain on the sale of investment securities as extraordinary income during the period, which should be distinguished as a temporary factor. Non-operating income was ¥3.3B, of which dividend income accounted for ¥2.4B and has a stable nature. However, because Operating Income itself declined substantially from the previous year, the relative contribution of non-operating and extraordinary items to Ordinary Income and Net Income has increased. Comprehensive Income was ¥3.45B, exceeding Net Income attributable to owners of the parent of ¥24.2B; the primary reason was a ¥9.8B increase in valuation difference on securities. This divergence resulted from changes in the market value of equity holdings and differs in nature from recurring profit generated by business activities.

Earnings Forecast and Guidance

The full-year Company forecasts call for revenue of ¥580.0B (YoY -22.4%), Operating Income of ¥47.0B (YoY -48.7%), and Ordinary Income of ¥48.0B (YoY -49.4%), indicating that the trend of lower revenue and profit is expected to continue, as in the first half. Cumulative Q3 revenue of ¥409.2B represents 70.6% progress against the full-year forecast, while Operating Income of ¥33.9B represents 72.1%. Although the progress rates appear broadly in line with the plan when considering seasonality comparable to the previous year, achieving the full-year forecast will depend on the realization of improved profitability in the second half.

Shareholder Returns

The Company plans to pay an interim dividend of ¥85 and a forecast year-end dividend of ¥55, for an annual dividend of ¥97.5. Based on cumulative Q3 Net Income attributable to owners of the parent of ¥24.2B and the Company’s full-year Net Income forecast of ¥30.0B, the Payout Ratio relative to the annual total dividend is expected to be high compared with the earnings level, warranting attention to the balance between retained earnings and cash on hand. No record of share repurchases was disclosed, indicating that shareholder returns are centered on dividends.

Risk Factors

1. Order Intake and Construction Profitability Risk: While revenue declined 24.1% year on year, M.M. Bridge’s margin fell to 4.5%; the status of construction progress and profitability management will have a direct impact on future earnings.

2. Cash Management and Liquidity Risk: Cash and deposits declined 58.1% year on year to ¥69.1B. Although the current ratio was 217.9%, within a sound range, continued monitoring of cash management is useful in light of the level of accounts receivable for completed construction contracts and trends in the reduction of short-term borrowings.

3. Consistency Between Dividends and Earnings: Against the planned annual dividend of ¥97.5, the full-year Net Income forecast is only ¥30.0B, requiring monitoring of the balance between the dividend level and earnings level.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability is slightly below the industry median but remains within the interquartile range.

Growth and Capital Efficiency

Revenue growth is substantially below the industry median and is also outside the interquartile range.

※Source: Compiled by the Company

Key Takeaways from the Results

1. Both revenue and Operating Income declined substantially year on year, with the decline in the M.M. Bridge segment’s margin, in particular, weighing on consolidated profitability.

2. While cash and deposits declined 58.1% from the previous year, short-term borrowings were substantially reduced; changes in the funding structure and trends in the cash position will require monitoring.

3. Against the planned annual dividend of ¥97.5, the full-year Net Income forecast is ¥30.0B; the relationship between the dividend level and earnings level should be monitored continuously in future earnings disclosures.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,649–¥1,739 at Cost of Equity ±1%; ¥1,689–¥1,696 at ω±0.1.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the quarter-end are used (there is a timing gap relative to the full-year forecast).
• Because 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 solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast 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 responsibility, after consulting with a professional as necessary.

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