| Metric | Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥91.4B | ¥86.4B | +5.8% |
| Operating Income | ¥15.1B | ¥15.6B | -3.2% |
| Ordinary Income | ¥13.3B | ¥14.2B | -6.3% |
| Net Income | ¥9.0B | ¥9.6B | -6.4% |
| ROE | 4.3% | 4.6% | - |
For the cumulative results through Q2 of FY2026, Revenue was ¥91.4B (¥+5.0B YoY, +5.8%), Operating Income was ¥15.1B (¥-0.5B YoY, -3.2%), Ordinary Income was ¥13.3B (¥-0.9B YoY, -6.3%), and Net Income was ¥9.0B (¥-0.6B YoY, -6.4%). Although revenue increased, higher SG&A (¥10.1B → ¥11.4B) and increased interest expense (¥1.5B → ¥1.9B) pressured profits, resulting in revenue up but earnings down. Operating margin declined to 16.5% from 18.1% a year earlier (down 1.6pt), and gross margin fell to 29.0% from 29.7% (down 0.7pt). Non-operating income was minimal at ¥0.1B while non-operating expenses rose to ¥1.9B (up from ¥1.5B, +26.0%), widening the decline at the ordinary income stage.
[Revenue] Revenue was ¥91.4B, up +5.8% YoY, maintaining solid growth. Cost of sales was ¥64.9B (prior year ¥60.7B, +6.9%), growing faster than revenue, leaving gross profit at ¥26.5B (prior year ¥25.7B, +3.2%). Gross margin fell to 29.0% from 29.7% (down 0.7pt), likely pressured by higher asset operation costs and increased construction/operational expenses. In the asset-heavy business model (tangible fixed assets 87.8% of total assets), stable utilization of existing assets and contributions from new investment projects drove revenue growth, but cost inflation compressed margins at the gross profit level.
[Profitability] SG&A was ¥11.4B, up +13.2% from ¥10.1B, primarily due to higher personnel costs (salaries and allowances ¥3.0B, prior year ¥2.7B). SG&A ratio rose to 12.4% from 11.6% (up 0.8pt), and expense growth outpaced revenue growth, compressing operating income. As a result, Operating Income declined to ¥15.1B from ¥15.6B (−3.2%), and operating margin decreased to 16.5%. Non-operating interest expense increased to ¥1.9B (prior year ¥1.5B, +26.0%) affected by higher long-term borrowings (¥214.3B → ¥226.1B) and rising interest rates. Non-operating income was minimal at ¥0.1B, and Ordinary Income was ¥13.3B (prior year ¥14.2B, -6.3%). Extraordinary items were immaterial: gain on sale of fixed assets ¥0.1B and loss on retirement of fixed assets ¥0.3B. Profit before tax was ¥13.1B; after deducting income taxes of ¥4.1B (effective tax rate 31.3%), Net Income was ¥9.0B (prior year ¥9.6B, -6.4%). Net margin declined to 9.8% from 11.1% (down 1.3pt), with higher interest burden and SG&A increases as the drivers of margin contraction. In conclusion, revenue rose but higher expenses and interest cost led to revenue up/earnings down.
[Profitability] Operating margin 16.5% declined 1.6pt from 18.1% a year earlier; Net margin 9.8% declined 1.3pt from 11.1%. ROE 4.3% is explained by Net margin 9.8% × Asset turnover 0.177 × Financial leverage 2.46, and the low asset turnover inherent to the asset-heavy model (land 78.8% of total assets) structurally suppresses ROE. EBIT margin is 16.5%; after deducting interest expense ¥1.9B, the pre-interest operating rate is 14.5%, and Interest Coverage (EBIT ÷ Interest Expense) is 8.0x, remaining in a safe zone.
[Cash Quality] Operating Cash Flow (OCF) was ¥12.7B, 1.41× Net Income ¥9.0B, indicating solid cash backing of profits. Accrual ratio ((Net Income − OCF) ÷ Total Assets) is -0.7%, a low level, implying high quality of earnings. However, OCF ÷ EBITDA (EBITDA = Operating Income ¥15.1B + Depreciation ¥3.7B = ¥18.8B) is only 0.68x, and tax payments ¥5.1B plus interest payments ¥1.9B have restrained cash conversion efficiency.
[Investment Efficiency] Capital expenditures ¥13.5B were 3.6× depreciation ¥3.7B, showing continued aggressive growth investment. Asset turnover 0.177 is low due to the asset-heavy structure, and the high proportion of land and tangible fixed assets constrains improvement. ROIC (NOPAT ÷ Invested Capital) is roughly estimated at about 2.6%, potentially below the cost of capital.
[Financial Soundness] Equity Ratio 40.6% decreased 1.6pt from 42.2% but remains resilient. Interest-bearing debt ¥228.1B (short-term borrowings ¥2.0B + long-term borrowings ¥226.1B) yields Debt/EBITDA (annualized) of about 12.1x, a high leverage level. Current ratio 92.4% (current assets ¥51.6B ÷ current liabilities ¥55.9B) is below 1x, signaling short-term liquidity caution; however, cash and deposits ¥40.4B broadly cover short-term borrowings ¥2.0B and the current portion of long-term borrowings ¥30.4B.
OCF was ¥12.7B, down -10.9% from ¥14.3B a year earlier. OCF subtotal (before working capital changes) was ¥19.7B, reflecting depreciation ¥3.7B, interest expense adjustment ¥1.9B, and corporate tax payments ¥5.1B; working capital changes were roughly neutral relative to Net Income ¥9.0B. Changes in trade receivables were -¥0.0B and trade payables +¥0.3B, both immaterial, indicating limited operational working capital manipulation during the period. Investing Cash Flow was -¥15.2B, primarily due to capex -¥13.5B. Proceeds from sales of tangible fixed assets were ¥1.0B and intangible asset acquisitions were -¥0.7B, indicating continued active growth investment. Free Cash Flow (OCF + Investing CF) was negative ¥-2.5B, an investment excess where investment outpaced operating cash flow. Financing Cash Flow was +¥6.3B, composed of long-term borrowings raised ¥29.7B and repayments -¥15.3B, dividend payments -¥7.0B, share buybacks -¥1.1B, and net increase in short-term borrowings +¥0.2B, filling the investment deficit by financing. Cash and deposits increased from ¥36.4B to ¥40.4B (¥+3.7B), maintaining a certain level of liquidity.
Current period earnings are largely explained by core operations and interest costs; one-off items are minor. Extraordinary gain ¥0.1B (gain on sale of fixed assets) and extraordinary loss ¥0.3B (loss on retirement of fixed assets) result in a ¥-0.2B movement from Ordinary Income ¥13.3B to Profit before Tax ¥13.1B. Non-operating income ¥0.1B is minor relative to revenue, and interest expense ¥1.9B constitutes the entirety of non-operating expenses totaling ¥1.9B. The difference between Ordinary Income and Net Income is mainly income taxes ¥4.1B, with an effective tax rate of 31.3%, a standard level. OCF ¥12.7B is 1.41× Net Income ¥9.0B, and accrual ratio is -0.7%, indicating strong cash backing of earnings. However, OCF ÷ EBITDA 0.68x signals weaker cash conversion efficiency due to tax and interest outflows. Structural divergence factors are limited, and overall the quality of earnings is broadly stable.
Full Year guidance is Revenue ¥186.0B (YoY +5.5%), Operating Income ¥34.3B (YoY +5.0%), Ordinary Income ¥30.4B (YoY +3.1%), and Net Income ¥20.9B (YoY +2.2%). Progress against the full year plan through Q2 is: Revenue 49.1%, Operating Income 44.1%, Ordinary Income 43.7%, Net Income 42.9%. Revenue is roughly on a standard pace (50%), but profit items below operating income lag the standard pace by about 6–7pt. It is presumed that second-half contributions from ramp-up of new projects and seasonal demand will support results, but H1 SG&A increases and interest burden may have exceeded assumptions. Achieving the full year plan will depend on improved utilization/pricing and expense control in H2, making quarterly progress monitoring important.
No interim dividend was paid; zero interim dividend. Full year dividend forecast is ¥70 per share; based on shares outstanding 10,441 thousand shares (approximately 10,092 thousand shares after treasury stock deduction), total dividends amount to approximately ¥7.1B. Payout ratio against full year Net Income forecast ¥20.9B is about 34%, a sustainable level. In the cumulative Q2 period, share buybacks of ¥1.1B were conducted, increasing treasury stock from -¥3.8B prior year to -¥4.8B (¥1.1B increase). Total return in H1 (dividend ¥0 + buybacks ¥1.1B) relative to Net Income ¥9.0B is about 12%, but the company plans shareholder returns centered on dividends for the full year. OCF ¥12.7B vs Free CF -¥2.5B indicates investment excess, but given borrowing capacity via long-term debt and cash balance ¥40.4B, the feasibility of the full year dividend ¥70 is judged to be high.
Interest Rate Risk: With interest-bearing debt ¥228.1B and interest expense ¥1.9B, the average interest rate is about 1.7%. If interest rates increase by 0.5pt, interest expense would rise by approximately ¥1.1B annually, reducing Ordinary Income by about 3.7%. Under Debt/EBITDA 12.1x high leverage, interest sensitivity is high and deterioration of refinancing conditions could further reduce margins. Interest Coverage 8.0x remains in a safe zone, but sustained increases in interest rates warrant close attention.
Liquidity Risk: Current ratio 92.4% indicates short-term liquidity below 1x, with current liabilities ¥55.9B vs current assets ¥51.6B, a shortfall of about ¥4.3B. Cash ¥40.4B broadly covers short-term borrowings ¥2.0B and the current portion of long-term borrowings ¥30.4B, but with OCF at an annual level of approximately ¥20–25B, maintaining both ongoing investment and repayment schedules requires securing borrowing capacity. Net working capital -¥4.3B and high working capital efficiency are positives, but liquidity buffers are limited.
Asset Turnover & Profitability Risk: Asset turnover 0.177 reflects the asset-heavy structure (land 78.8%, tangible fixed assets 87.8%); downward deviations in utilization or pricing could further lower asset turnover. If the declining trend in operating margin (18.1% → 16.5%) continues, ROIC around 2.6% could remain below the cost of capital, increasing the risk of shareholder value erosion. If SG&A growth +13.2% continues to outpace revenue growth +5.8%, this reverse operating leverage may structurally deteriorate profitability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 16.5% | – | – |
| Net Margin | 9.8% | – | – |
Operating margin 16.5% and net margin 9.8% suggest favorable profitability within the real estate industry, but the lack of peer comparison data limits relative positioning.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 5.8% | – | – |
Revenue growth 5.8% indicates a solid pace, but relative positioning within the industry is constrained by limited peer comparison data.
※ Source: Company compilation
Persistence of revenue up/earnings down and margin decline: Revenue grew +5.8% but SG&A +13.2% and interest expense +26.0% pressured profits, driving operating margin from 18.1% to 16.5% (down 1.6pt). If SG&A growth continues to outpace revenue growth, reverse operating leverage persists; urgent priorities are cost control, price pass-through, and utilization optimization. Given the expectation of a continued rising rate environment, further increases in interest expense would intensify downward pressure on Ordinary Income and raise the risk of further Net margin declines. Since full year guidance depends on H2 improvement, quarterly monitoring of progress and margin trends is important.
High leverage and liquidity metrics are warning signals: Debt/EBITDA 12.1x and current ratio 92.4% place credit and liquidity indicators in a cautionary area. With interest-bearing debt ¥228.1B and OCF ¥12.7B, adding investing CF -¥15.2B yields Free CF -¥2.5B (investment excess). Long-term borrowing has funded continued financing, but in a rising rate environment financing costs could worsen and pressure both earnings and cash. Interest Coverage 8.0x currently provides a buffer, but continued declines in operating margin would erode coverage and tighten financial constraints. Cash ¥40.4B offers some buffer, but balancing repayment, investment, and dividends requires attention.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions are your responsibility; consult professionals as needed before making investment decisions.