KI-STAR REAL ESTATE CO.,LTD FY2027 Q1 Earnings Report

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Executive Summary

The Company reported higher revenue and profits, with a substantial increase in earnings, driven by overlapping revenue growth and improved profitability in the Subdivision Housing Business and the Apartment and Income-Producing Real Estate Business. Revenue was ¥102.72B (+21.5% YoY), Operating Income was ¥8.37B (+85.7%), Ordinary Income was ¥7.60B (+93.2%), and Net Income attributable to the consolidated current period was ¥5.17B (+94.9%). The improvement in gross margin absorbed the increase in SG&A expenses, with the Operating Income margin expanding to 8.1%, which was the primary driver of the earnings increase.

Factors Affecting Performance

【Revenue】Revenue was ¥102.72B, up +21.5% YoY. The Subdivision Housing Business accounted for the core of Company-wide revenue growth, with revenue of ¥93.52B (+17.0%), while the Apartment and Income-Producing Real Estate Business expanded substantially to ¥5.96B (+262.9%). The Other Business remained at ¥3.27B (+4.6%).

【Profit and Loss】Operating Income was ¥8.37B (+85.7%), Ordinary Income was ¥7.60B (+93.2%), and Net Income attributable to owners of the parent was ¥4.81B (+100.5%). The gross margin improved to 16.1% from the same period of the previous year, and profit margins improved at a pace exceeding the increase in the SG&A ratio to 8.0%. In non-operating items, interest expenses of ¥1.20B exceeded interest income of ¥0.23B, acting as a restraint on Ordinary Income. Although a gain on negative goodwill of ¥0.12B arising from the acquisition of a subsidiary was recorded as extraordinary income, its ratio to Profit Before Tax of ¥7.66B was limited, and the earnings increase was attributable to improvements in the core business. Both revenue and earnings increased.

Segment Analysis

The Subdivision Housing Business recorded revenue of ¥93.52B (+17.0%), segment profit of ¥8.89B (+65.9%), and a profit margin of 9.5%, improving from the previous year and serving as the core contributor to Company-wide profit. The Apartment and Income-Producing Real Estate Business recorded revenue of ¥5.96B (+262.9%), segment profit of ¥0.56B (+830.0%), and a profit margin of 9.4%; although small in scale, it is experiencing significant growth. It should be noted that the segment classification was changed from the current period, and the Apartment and Income-Producing Real Estate Business, which was previously included in “Other,” has been designated as a reportable segment.

Key Financial Metrics

【Profitability】The Operating Income margin was 8.1%, while the Net Income margin, based on income attributable to owners of the parent, was approximately 4.7%, representing a substantial improvement from approximately 5.3% and 2.8%, respectively, in the same period of the previous year. 【Cash Flow Quality】Cash and deposits were ¥43.37B, down 43.0% YoY, against a backdrop of increased investment in the combined ¥279.65B of real estate for sale and real estate for sale in progress, equivalent to 76.1% of total assets. 【Investment Efficiency】Annualized ROE was 24.5%, reflecting a structure in which the total asset turnover ratio and financial leverage compensate for the low Net Income margin. 【Financial Soundness】The Equity Ratio was 23.0%, while interest-bearing debt was approximately ¥190.4B. Dependence on short-term funding was high, with short-term borrowings of ¥125.30B and current portion of long-term borrowings of ¥39.94B.

Cash Flow Analysis

Although the cash flow statement was not directly disclosed, funding trends can be inferred from changes in the balance sheet. Cash and deposits decreased by ¥32.66B, from ¥76.03B in the same period of the previous year to ¥43.37B, while real estate for sale in progress increased by ¥32.21B (+25.4%). This relationship indicates that funds were actively invested in the development and inventory of housing and real estate. Meanwhile, short-term borrowings increased by ¥8.49B, and long-term borrowings due within one year increased by ¥12.37B, suggesting that inventory investment was also financed with short-term funds. Long-term borrowings themselves decreased by ¥5.76B, indicating a shortening of the funding structure.

Earnings Quality

Most of the earnings growth in the current period resulted from improvements at the operating level, and earnings quality can generally be considered high. The gain on negative goodwill of ¥0.12B recorded as extraordinary income was a temporary factor associated with the conversion of a subsidiary into a consolidated subsidiary. Its ratio to Profit Before Tax of ¥7.66B was small, at approximately 1.5%, and does not materially alter the substance of the earnings increase. In non-operating items, interest expenses increased 52.7% to ¥1.20B from ¥0.78B in the same period of the previous year and substantially exceeded interest income of ¥0.23B. Accordingly, the increase in interest burden warrants attention as a factor affecting future Ordinary Income. Improvement in the gross margin and control of the SG&A ratio supported the improvement in the bottom line. From an accrual perspective, the business structure depends on the realization of future revenue and profits through the accumulation of inventory, including real estate for sale and real estate for sale in progress.

Earnings Forecast and Guidance

The full-year plan calls for Revenue of ¥460.00B (+16.8% YoY), Operating Income of ¥34.50B (+27.8%), and Ordinary Income of ¥31.50B (+26.2%). Q1 progress rates were 22.3% for Revenue and 24.3% for Operating Income. Although revenue progress was slightly below the standard 25%, Operating Income progress exceeded it. The Q1 Operating Income margin of 8.1% exceeded the assumed profit margin under the full-year plan, indicating that profitability as of the beginning of the fiscal year is progressing favorably relative to the plan. Both the earnings forecast and the dividend forecast have been revised.

Shareholder Returns

The full-year dividend forecast is ¥150 per share. The forecast Payout Ratio against full-year forecast EPS of ¥621.65 is approximately 24.1%, based solely on dividends. The Company conducted a stock split effective April 1, 2026, at a ratio of 1 share to 2 shares. Accordingly, the dividend of ¥100 paid in the same period of the previous year is a pre-split figure and should be interpreted with caution. The dividend forecast has been revised, and future dividend levels will be influenced by the extent to which the full-year earnings plan is achieved.

Risk Factors

1. High inventory ratio: The combined balance of real estate for sale and real estate for sale in progress is ¥279.65B, accounting for 76.1% of total assets. If housing demand slows, selling prices decline, or inventory remains unsold, both the gross margin and cash recovery could be affected simultaneously.

2. Dependence on short-term funding and leverage: Short-term liabilities, comprising short-term borrowings of ¥125.30B and the current portion of long-term borrowings of ¥39.94B, are substantial. Compared with cash and deposits of ¥43.37B, the cash-to-short-term liabilities ratio is approximately 0.35x. Together with an Equity Ratio of 23.0%, this indicates high sensitivity to changes in refinancing conditions.

3. Increase in interest burden: Interest expenses were ¥1.197B, up 52.7% from ¥0.784B in the same period of the previous year. Interest-bearing debt was approximately ¥190.4B, and rising interest rates or widening funding spreads could reduce Ordinary Income.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Company’s Operating Income margin and Net Income margin exceed the industry median, placing its profitability in a relatively favorable position within the industry.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median, demonstrating high growth within the industry.

※Source: Compiled by the Company

Key Points to Note in the Results

1. The Operating Income margin expanded from 5.3% in the same period of the previous year to 8.1%, indicating a structure in which gross margin improvement absorbed the increase in SG&A expenses. Segment profit margins improved in both the Subdivision Housing Business and the Apartment and Income-Producing Real Estate Business. Whether this improvement will continue throughout the full year is a key point to monitor in the results.

2. Revenue in the Apartment and Income-Producing Real Estate Business expanded sharply by +262.9% YoY. Together with its reclassification as a reportable segment, this suggests a shift in the center of gravity of the business portfolio. The sustainability of sales turnover and profit margins in this business should be confirmed in future results.

3. Cash and deposits declined 43.0% YoY in response to the accumulation of inventory, including real estate for sale and real estate for sale in progress, while short-term borrowings and the current portion of long-term borrowings increased. The progress toward a shorter-term funding structure should be monitored as a structural change evident in the financial results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,891–¥4,129 at Cost of Equity ±1%, and ¥3,973–¥4,060 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from 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 using only 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 responsibility, after consulting with a professional as necessary.

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