Agratio urban design Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.25B
• Operating Income: ¥1.48B
• Net Income: ¥624M
• EPS: ¥152.05

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

Agre Urban Design Co., Ltd. (3467) delivered solid FY2026 Q2 results with revenue of ¥16.25bn, up 20.5% YoY, and operating income of ¥1.48bn, up 36.7% YoY, indicating both top-line momentum and margin expansion. Net income rose 40.1% YoY to ¥0.87bn, translating to EPS of ¥152.05, underscoring improved profitability per share despite limited disclosure on share count. The DuPont decomposition points to an ROE of 11.57%, driven by a 5.38% net margin, 0.474x asset turnover, and 4.54x financial leverage; this is a respectable level for a residential developer with balance-sheet intensity. Operating margin of roughly 9.1% versus a 14.3% gross margin implies SG&A discipline, with SG&A estimated at ~5.2% of sales, supporting operating leverage as volumes scaled. Ordinary income of ¥1.28bn versus interest expense of ¥0.146bn yields a strong interest coverage of ~10x, suggesting headroom against rate and refinancing risks at current profitability. Liquidity metrics look healthy on the reported figures, with a current ratio of 171% and working capital of ~¥13.53bn, though inventory balances are not disclosed in XBRL and therefore not observable here. On the cash side, operating cash flow was negative at -¥2.45bn, likely reflecting working capital outflows typical of land acquisition and project buildup cycles in real estate development. Financing cash flow of +¥1.87bn indicates reliance on external funding to bridge development cash needs in the period. The equity base stands at ¥7.55bn against total assets of ¥34.30bn, implying a computed equity ratio of ~22% (despite the equity ratio field showing 0% due to non-disclosure), consistent with moderate-to-elevated leverage for the business model. The reported effective tax rate field shows 0.0%, but using available non-zero data (income tax expense of ¥0.292bn) versus pre-tax profit (approximated by ordinary income of ¥1.282bn) implies an effective rate of ~22–23%, which is more realistic. Cash and equivalents show as 0 in the extract, which likely reflects non-disclosure rather than an actual zero balance; thus liquidity interpretation should emphasize current assets and short-term obligations. Dividend per share is reported as ¥0.00 with a payout ratio of 0%, suggesting a stance toward internal retention amid ongoing growth investment, though formal dividend policy is not detailed here. Overall, profitability is improving and ROE is in the low teens, but free cash flow conversion is weak this half due to development cycle dynamics. The outlook hinges on sales velocity, land pipeline discipline, and funding conditions, particularly as interest costs could trend upward. Data limitations (notably inventories, cash, and share counts) constrain precision; conclusions focus on the disclosed non-zero items and computed relationships.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 5.38% × Asset turnover 0.474 × Financial leverage 4.54 = ROE 11.57%. Operating margin stands at ~9.1% (¥1,478m / ¥16,248m), up faster than revenue (+36.7% OI vs +20.5% sales), evidencing positive operating leverage. Gross margin is 14.3%, placing the implied SG&A burden at ~5.2% of sales (¥851m), which is efficient for a project-based developer and indicates cost control or scale benefits. EBITDA of ~¥1,490m implies an EBITDA margin of ~9.2%, closely tracking operating margin given low reported D&A (¥12m), consistent with a relatively asset-light PP&E base but asset-heavy inventory (not disclosed). Interest coverage is strong at ~10.1x (OI/interest), providing cushion against rate volatility. Ordinary income (¥1,282m) below operating income suggests non-operating costs (interest) outweigh non-operating gains, as expected in a leveraged development model. Margin quality appears supported by pricing/ mix and SG&A discipline; sustainability will hinge on sales mix, construction cost inflation pass-through, and land acquisition terms.

Growth Assessment

Revenue growth of +20.5% YoY to ¥16.25bn indicates robust demand and/or higher project deliveries in the period. Operating income growth of +36.7% and net income growth of +40.1% outpaced sales, reflecting margin expansion from operating leverage and cost discipline. EPS of ¥152.05 benefits from profit growth, though share count details are not disclosed; per-share gains are assumed to mirror net income momentum. The improvement in operating margin to ~9% alongside a 14.3% gross margin suggests better SG&A efficiency or project mix with higher gross profitability. Sustainability depends on the pipeline (land bank, permits) and sales velocity; negative OCF likely reflects active investment in work-in-progress that should convert to cash on completions/closings in subsequent periods. Asset turnover of 0.474x is typical for developers and will improve only as inventory turns accelerate; maintaining growth without overextending the balance sheet is key. Outlook considerations include housing demand sensitivity to mortgage rates, construction cost trends, and competitive land markets; strong interest coverage provides some buffer, but sustained growth requires disciplined capital recycling.

Financial Health

Total assets are ¥34.30bn; total equity is ¥7.55bn, implying assets/equity of 4.54x and a computed equity ratio of ~22% (the 0% shown is an undisclosed placeholder). Total liabilities are ¥26.06bn, yielding a debt-to-equity metric of 3.45x (all liabilities to equity), indicative of a moderately high but sector-typical leverage profile. Current assets are ¥32.50bn and current liabilities are ¥18.97bn, producing a current ratio of ~171% and working capital of ~¥13.53bn; quick ratio also reads 171% because inventories are not disclosed in the dataset. Interest expense of ¥146m versus operating income of ¥1,478m gives ~10x interest coverage, suggesting manageable solvency risk at present earnings levels. The liability structure likely includes substantial interest-bearing debt and advances, although breakdowns are not provided; refinancing needs and borrowing costs remain key watchpoints. Equity growth capacity exists given 11.57% ROE, but retention is necessary to support the asset base without over-leveraging.

Cash Flow Quality

Operating cash flow of -¥2.45bn contrasts with net income of ¥0.87bn (OCF/NI = -2.81), indicating significant working capital outflows consistent with development activity (e.g., land purchases, construction WIP), though inventories are not disclosed here. D&A is minimal (¥12m), so accruals from non-cash charges are limited; earnings quality hinges on conversion of inventory into cash via settlements rather than depreciation add-backs. Investing cash flow is reported as 0 (undisclosed), and free cash flow is shown as 0 in the metrics; given negative OCF and lack of capex disclosure, true FCF is likely negative this half. Financing CF of +¥1.87bn implies reliance on debt/equity financing to fund the working capital cycle. Working capital management (turns of real estate for sale, receivables and payables timing, advances from customers) will be the primary driver of cash conversion. Overall, earnings are credible within a project delivery cycle, but cash flow quality this period is weak until inventory is monetized.

Dividend Sustainability

DPS is reported at ¥0.00 with a payout ratio of 0%, indicating retention of earnings, likely to fund pipeline and working capital needs. Given negative OCF in the half and reliance on financing inflows, cash-based dividend capacity is constrained near term, even though accounting earnings are growing. With ROE at ~11.6% and sector-typical leverage, internal reinvestment may offer acceptable returns if execution remains strong. FCF coverage is shown as 0.00x due to undisclosed investing CF and negative OCF; hence dividend sustainability assessment hinges on future cash conversion from project deliveries. Policy outlook likely prioritizes balance sheet flexibility and growth investment; any shift toward regular dividends would depend on stabilization of OCF and visibility on completions.

Risk Assessment

Business Risks:

• Cyclical housing demand sensitivity to mortgage rates and consumer sentiment
• Land acquisition and permitting risks affecting pipeline and margins
• Construction cost inflation and subcontractor availability impacting gross margins
• Sales velocity and settlement timing risk leading to revenue recognition volatility
• Project concentration risk if a limited number of developments drive results
• Competitive pressure for prime sites compressing future margins

Financial Risks:

• Negative operating cash flow and reliance on financing during buildup phases
• Refinancing and interest rate risk given leverage (assets/equity 4.54x; liabilities/equity 3.45x)
• Liquidity risk if inventory monetization lags expectations (inventories not disclosed)
• Covenant headroom uncertainty without detailed debt disclosures
• Potential tax cash outflows (implied effective tax rate ~22–23%) affecting free cash

Key Concerns:

• Sustained negative OCF would pressure funding needs and increase financial risk
• Margin resilience amid construction cost volatility and pricing power tests
• Visibility on inventory balances, backlog/contracted sales, and cash position is limited due to disclosure gaps

Investment Implications

Key Takeaways:

• Strong H1 earnings momentum: revenue +20.5% YoY, operating income +36.7%, net income +40.1%
• ROE of 11.57% supported by improved margins and typical sector leverage
• Operating margin ~9.1% with SG&A at ~5.2% of sales indicates operating leverage
• Interest coverage ~10x provides cushion, but funding costs remain a key variable
• OCF materially negative (-¥2.45bn), implying working capital build and dependence on financing
• Computed equity ratio ~22% despite non-disclosure; leverage is moderate-to-elevated for the model
• Dividend on hold (DPS ¥0), consistent with reinvestment and cash conservation

Metrics to Watch:

• Contracted sales/backlog and cancellations
• Inventory/real estate for sale balances and land bank (acquisition vs. sales)
• Gross margin per project and SG&A ratio sustainability
• Operating cash flow and free cash flow conversion, including advances received
• Interest-bearing debt levels, average borrowing cost, and maturity profile
• Asset turnover and ROE trajectory
• Dividend policy signals and capital allocation (buybacks vs. debt reduction)

Relative Positioning: Within Japanese residential developers, profitability (low-teens ROE, ~9% operating margin) appears competitive, while cash flow volatility this half is elevated; leverage is in the typical range, with interest coverage stronger than many peers, but disclosure gaps limit precise peer benchmarking.

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
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