| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1745.3B | ¥1573.7B | +10.9% |
| Operating Income / Operating Profit | ¥147.1B | ¥108.6B | +35.5% |
| Ordinary Income | ¥149.2B | ¥110.9B | +34.5% |
| Net Income | ¥99.6B | ¥81.0B | +23.0% |
| ROE | 10.8% | 9.5% | - |
For the fiscal year ended March 2026, Revenue was ¥1745.3B (YoY +¥171.6B, +10.9%), Operating Income was ¥147.1B (YoY +¥38.5B, +35.5%), Ordinary Income was ¥149.2B (YoY +¥38.3B, +34.5%), and Net Income attributable to owners of parent was ¥104.6B (YoY +¥23.6B, +29.1%), achieving double-digit growth across all profit lines. Completed-contract gross margin improved by 200bp from 12.0% to 14.0%, and operating margin rose by 153bp from 6.9% to 8.4%, indicating a marked qualitative improvement in profitability. The revenue and profit growth was mainly driven by steady progress in domestic engineering projects and contributions from high-margin projects; provision for construction losses decreased to ¥3.7B from ¥6.6B (↓44.2%), confirming improved project management. Operating Cash Flow (OCF) improved substantially to ¥143.9B (prior year ¥1.1B), generating Free Cash Flow of ¥92.6B, sufficient to cover dividends of ¥117 (payout ratio 60.3%). Versus the full-year company plan, Revenue achieved 99.7%, Operating Income 113.3%, Ordinary Income 112.6%, and Net Income 116.2%, with profits outperforming guidance.
[Revenue] Revenue was ¥1,745.3B, achieving double-digit growth of +10.9% YoY. Completed-contract Revenue was ¥1,745.3B, up from ¥1,573.7B (+10.9%) as core domestic engineering projects progressed steadily. Revenue to major customer ENEOS Corporation was ¥659.9B, accounting for approximately 37.8% of total Revenue. Geographically, domestic sales exceed 90%, with limited overseas operations. Trade receivables including electronic recorded monetary claims decreased from the prior year (decrease ¥11.7B), indicating both accelerated project completion and improved collections. Costs on uncompleted construction decreased to ¥7.3B from ¥8.0B (↓9.0%), and advances received for uncompleted construction increased to ¥9.0B from ¥6.1B (+47.8%), with the increase in advances supporting next-period Revenue.
[Profitability] Completed-contract Gross Profit was ¥244.9B, up from ¥189.3B (+29.4%), and gross margin improved by 200bp from 12.0% to 14.0%. Enhanced cost control and progress on high-margin projects were the main drivers of gross margin improvement. SG&A was ¥97.8B, up from ¥80.7B (+21.2%), and SG&A ratio rose 47bp from 5.1% to 5.6%, but growth in SG&A remained below Revenue growth, demonstrating operating leverage. Operating Income was ¥147.1B, up from ¥108.6B (+35.5%), and operating margin improved by 153bp from 6.9% to 8.4%, indicating substantially improved core profitability. Non-operating income was ¥3.3B (dividend income ¥2.2B, foreign exchange gains ¥0.3B, etc.), non-operating expenses were ¥1.2B (interest expense ¥1.1B, etc.), yielding a net non-operating contribution of +¥2.1B. Ordinary Income was ¥149.2B, up from ¥110.9B (+34.5%), with an ordinary income margin of 8.5%, close to operating margin, indicating minimal financial activity impact. Extraordinary gains totaled ¥1.5B (mainly gain on sale of investment securities), extraordinary losses totaled ¥0.8B (mainly loss on disposal of fixed assets), so extraordinary items had limited impact. Profit before tax was ¥150.0B, up from ¥114.8B (+30.5%); income taxes were ¥42.5B (effective tax rate 28.3%); after deducting non-controlling interests of ¥2.8B, Net Income attributable to owners of parent was ¥104.6B, up from ¥81.0B (+29.1%). In conclusion, this was a revenue- and profit-expanding result with significant profitability improvement driven by gross margin expansion and operating leverage.
The reported segment is solely Engineering, which accounts for over 90% of consolidated sales and is treated as a single segment. Other categories include temporary staffing and transportation, but they are not disclosed separately due to immateriality.
[Profitability] Operating margin 8.4% (improved +1.5pt from 6.9%), Ordinary Income margin 8.5% (improved +1.5pt from 7.0%), Net Income margin 6.0% (improved +0.9pt from 5.1%), showing improved profitability across all profit stages. Completed-contract gross margin improved by 200bp from 12.0% to 14.0%, reflecting strong cost control and improved project mix. SG&A ratio was 5.6% (up 47bp from 5.1%) but operating leverage was realized while absorbing revenue growth. [Cash Quality] OCF / Net Income multiple was 1.38x, indicating good cash backing of profits. Accrual ratio was -3.2%, within a healthy range, and the structure where OCF exceeds Net Income remains intact. [Investment Efficiency] ROE 10.8% (prior year ROA 9.8%) maintained double-digit returns on equity. Total asset turnover improved to 1.44x, reflecting both revenue growth and asset efficiency. CAPEX / Depreciation was 2.95x, indicating an expansion phase with active growth investments. [Financial Soundness] Equity Ratio was 76.4% (up 2.6pt from 73.8%), indicating a very solid financial base. Current ratio 340.8% and quick ratio 340.8% reflect very high short-term liquidity. Interest-bearing debt consists only of short-term borrowings of ¥15B, approaching net debt-free operations. Debt/EBITDA was 0.09x and interest coverage was 129x, indicating very high interest-rate resilience.
OCF was ¥143.9B, a substantial improvement from ¥1.1B in the prior year. Profit before tax was ¥150.0B; adding depreciation ¥17.6B, goodwill amortization ¥0.3B, etc., subtotaled ¥189.9B. On working capital, decrease in trade receivables provided +¥11.7B cash inflow, increase in advances received for uncompleted construction provided +¥2.9B, while decrease in accounts payable was -¥6.9B and decrease in costs on uncompleted construction provided +¥0.7B, so overall working capital movements were minor. Income tax payments were -¥47.2B, resulting in final OCF of ¥143.9B. Investing Cash Flow was -¥51.3B, mainly capital expenditures on tangible and intangible fixed assets of -¥51.9B, partly offset by proceeds from sale of investment securities of ¥2.3B. Free Cash Flow was ¥92.6B (OCF ¥143.9B + Investing CF -¥51.3B), sufficient to cover dividend payments of ¥54.5B and Financing CF of -¥70.2B. Financing Cash Flow was -¥70.2B, primarily driven by net decrease in short-term borrowings of -¥15.0B, dividend payments of -¥54.5B, and dividends to non-controlling interests of -¥0.7B. Cash and cash equivalents increased by ¥22.2B from ¥35.8B at the beginning of the period to ¥57.9B at the end, strengthening liquidity. OCF/EBITDA ratio was 0.87x, slightly below the reference value of 0.9x, likely affected by year-end working capital balance changes associated with revenue growth; nonetheless, cash generation capability is evaluated as high.
Quality of earnings is good, with operating business profit as the main driver. Non-operating income was ¥3.3B, representing 0.19% of Revenue, mainly dividend income ¥2.2B and foreign exchange gains ¥0.3B, indicating low dependence on non-operating income. Extraordinary items were limited, with extraordinary gains ¥1.5B (mainly gain on sale of investment securities) and extraordinary losses ¥0.8B (mainly loss on disposal of fixed assets), amounting to roughly 2% impact on Net Income. The ¥0.8B difference between Ordinary Income ¥149.2B and Profit before tax ¥150.0B is explained by extraordinary items, showing no structural distortion. Accrual ratio at -3.2% is in a healthy range, and with OCF at 1.38x Net Income, cash backing of profits is strong. OCF subtotal (before working capital changes) ¥189.9B is 1.27x Profit before tax ¥150.0B, and even excluding non-cash items (depreciation and goodwill amortization) the alignment between profit and cash is high. Provision for construction losses decreased to ¥3.7B from ¥6.6B (↓44.2%), suggesting reduced large-project loss risk. Comprehensive income was ¥123.7B, exceeding Net Income ¥99.6B by ¥24.1B, mainly due to valuation differences on other securities +¥11.8B and actuarial adjustments related to retirement benefits +¥4.8B, with unrealized gains supporting balance sheet solidity. JGAAP goodwill amortization of ¥0.3B is minor at 0.2% of EBITDA, so comparability with IFRS companies is minimally distorted.
Versus the company plan, full-year results were Revenue ¥1,745.3B (plan ¥1,750.0B, achievement 99.7%), Operating Income ¥147.1B (plan ¥130.0B, 113.3%), Ordinary Income ¥149.2B (plan ¥132.5B, 112.6%), and Net Income attributable to owners of parent ¥104.6B (plan ¥90.0B, 116.2%). Revenue landed broadly in line with plan, while profit lines outperformed: Operating Income +13.3%, Ordinary Income +12.6%, Net Income +16.2%, each exceeding plan by over 10%. Outperformance was driven by improvement in completed-contract gross margin (progress of higher-margin projects and cost suppression beyond plan) and SG&A efficiency. Actual EPS was ¥193.71 versus forecast ¥166.67, an upside of +16.2%. Dividend guidance of ¥58 annually was exceeded with actual dividends of ¥117 (interim ¥45, year-end ¥72), maintaining a payout ratio of 60.3%. Full-year EBITDA was approximately ¥165B (Operating Income ¥147.1B + Depreciation ¥17.6B + Goodwill amortization ¥0.3B), and OCF/EBITDA was 0.87x, slightly below the benchmark due to working capital demand from growth. While backlog is not disclosed individually, the 47.8% increase in advances received for uncompleted construction is notable as a leading indicator for next-period Revenue.
Annual dividend was ¥117 (interim ¥45, year-end ¥72), unchanged from prior year ¥117 (interim ¥35, year-end ¥82). Payout ratio was 60.3%, unchanged from prior year, reflecting a stable dividend policy. Total dividends amounted to approximately ¥54.5B, which is 58.9% of Free Cash Flow ¥92.6B, giving an FCF coverage of 1.70x and ample cushion. No share buybacks were executed; shareholder returns are dividend-centric. Dividend sustainability is very high given near net-debt-free operations (short-term borrowings only ¥15B), Debt/EBITDA 0.09x, current ratio 340.8%, cash ¥57.9B, and OCF at 1.38x Net Income. Maintaining a payout ratio in the 60% range while continuing profit and gross margin improvements could create room for dividend increases. The company has the financial base to balance growth investment and dividends, and maintaining dividend levels during an active investment phase (CAPEX / Depreciation ratio 2.95x) is not problematic.
Customer concentration risk: Revenue to major customer ENEOS Corporation was ¥659.9B, about 37.8% of total Revenue. High dependence on a single customer means that that customer’s CAPEX policy or performance swings could directly affect results. Expanding and diversifying the customer base is a medium-term priority. Geographically, domestic sales exceed 90%, increasing sensitivity to domestic economic conditions and public investment trends.
Cost-control and project risk: Although provision for construction losses decreased to ¥3.7B from ¥6.6B, risks remain that design changes, rising material prices, or schedule delays in large projects could cause losses. Completed-contract gross margin improved to 14.0%, but pressures such as labor shortages driving up labor costs, material price volatility (steel, piping, etc.), and rising subcontract costs could compress margins. Continued selection of high-margin projects and improved estimation accuracy are keys to maintaining profitability.
Financial risk: The ratio of short-term liabilities is 100%, indicating a formal concentration of refinancing. However, with cash ¥57.9B and current assets ¥882.9B against short-term borrowings ¥15B, actual liquidity risk is low. If SG&A ratio’s upward trend (5.1% → 5.6%) persists, future margins could be pressured. High CAPEX / Depreciation ratio of 2.95x is elevated; failure to smooth investments could result in FCF volatility risk.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.4% | 5.5% (3.5%–7.2%) | +2.9pt |
| Net Income Margin | 5.7% | 3.5% (2.5%–4.4%) | +2.2pt |
The company’s operating margin 8.4% and net margin 5.7% both substantially exceed industry medians, achieving top-tier profitability within the construction sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 10.9% | 9.8% (-2.1%–15.1%) | +1.0pt |
Revenue growth rate 10.9% slightly exceeds the industry median 9.8%, maintaining an average growth pace within the sector.
※ Source: Company compilation
Completed-contract gross margin improved by 200bp from 12.0% to 14.0%, and operating margin rose by 153bp from 6.9% to 8.4%. Progress on high-margin projects and enhanced cost control are pushing up profitability; whether this trend sustains is a key watch point. Provision for construction losses decreased to ¥3.7B from ¥6.6B (↓44.2%), confirming improved project management. Conversely, SG&A ratio rose from 5.1% to 5.6% (+47bp), so improving SG&A efficiency is necessary to preserve margins in the medium term.
OCF was ¥143.9B, 1.38x Net Income, and Free Cash Flow was ¥92.6B, sufficient to cover dividends of ¥117 (total dividends approx. ¥54.5B). With near net-debt-free status (short-term borrowings ¥15B only), Equity Ratio 76.4%, and current ratio 340.8%, the financial base is extremely robust. Although CAPEX / Depreciation ratio is 2.95x reflecting active growth investment, ample liquidity and OCF allow coexistence of growth investment and dividends. With a stable payout ratio of 60.3%, continued profit growth could create room for dividend increases.
Revenue to major customer ENEOS was ¥659.9B, about 37.8% of total, making customer-concentration risk a structural issue. Domestic sales exceed 90%, producing high geographic concentration and sensitivity to domestic economic and public investment trends. Attention is required to labor shortage-driven labor cost increases, material price volatility, and large-project loss risk—typical construction-sector risks. On the positive side, advances received for uncompleted construction increased to ¥9.0B from ¥6.1B (+47.8%), a leading indicator supporting next-period Revenue.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; consult a professional if necessary before making investment decisions.