| Metric | Current | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥355.9B | ¥634.7B | -43.9% |
| Operating Income | ¥121.5B | ¥151.2B | -19.7% |
| Ordinary Income | ¥118.8B | ¥158.3B | -24.9% |
| Net Income | ¥82.3B | ¥108.5B | -24.1% |
| ROE | 13.7% | 19.0% | - |
For the cumulative results to Q2 of the fiscal year ending March 2026, Revenue was ¥355.9B (YoY -¥278.8B, -43.9%), Operating Income was ¥121.5B (YoY -¥29.7B, -19.7%), Ordinary Income was ¥118.8B (YoY -¥39.5B, -24.9%), and Net Income was ¥82.3B (YoY -¥26.2B, -24.1%). The decline in Revenue materially exceeded the decline in profit, and profitability improved markedly. The sharp contraction in the Domestic Real Estate Fund Business (Revenue -60.0%) and the effective suspension of the Overseas Real Estate Fund Business (Revenue -99.1%) were principal drivers of the Revenue decline, while the high-margin Lease Fund Business grew (Revenue +18.0%, Segment Profit +24.0%), raising its share of Revenue to 48.2% (prior 22.9%). This shift in business mix improved the Operating Margin to 34.1% (prior 23.8%, +10.3pt) and Net Margin to 23.1% (prior 17.1%, +6.0pt). Progress vs. the full-year plan shows Revenue at 42.9% of plan (standard 50% -7.1pt lag), whereas Operating Income is 52.5% and Net Income 53.1%, indicating profits are front-loaded. Contract liabilities increased to ¥83.6B (end of prior period ¥64.5B, +¥19.1B), suggesting scope for Revenue recognition in H2.
[Revenue] Revenue was ¥355.9B, a substantial YoY decline of -43.9%. By segment, the Lease Fund Business achieved ¥171.4B (+18.0%), maintaining double-digit growth and increasing its share of Revenue to 48.2%. The Domestic Real Estate Fund Business recorded ¥180.9B (-60.0%), a 60% decline mainly due to timing shifts in deal closings. The Overseas Real Estate Fund Business was ¥0.3B (-99.1%), effectively halted and reducing geographic diversification. Other Businesses grew to ¥3.3B (+42.0%) albeit from a small base. Contract liabilities rose to ¥83.6B (prior period-end ¥64.5B, +¥19.1B), up 29.6%, and the buildup of advance receipts implies potential Revenue recognition in H2. Gross profit was ¥181.4B (gross margin 51.0%), down only -9.7% YoY, with the Lease Fund Business’s high margin (segment profit margin 88.2%) lifting gross margin by 16.1pt.
[Profitability] Operating Income was ¥121.5B (-19.7%), with an Operating Margin of 34.1% (prior 23.8%, +10.3pt), a material improvement. SG&A was ¥60.0B (+20.7%), rising despite lower Revenue, but SG&A as a percentage of gross profit was 33.1% (prior 24.8%), and improvements in gross profit quality absorbed the increased costs. Ordinary Income was ¥118.8B (-24.9%); non-operating profit/loss worsened to -¥2.6B (prior +¥7.1B). Interest income was ¥3.3B versus interest expense of ¥4.7B and fee expenses of ¥2.5B, with increased short-term borrowings (+¥137.7B, +69.3%) driving higher interest burden. Extraordinary losses were slight at ¥1.6B (impairment loss ¥1.1B). Profit before tax was ¥117.3B and income taxes were ¥35.0B (effective tax rate 29.8%), resulting in Net Income of ¥82.3B (-24.1%). In conclusion, despite a large Revenue decline, mix improvement limited the fall in profits, and profitability rose significantly even on a Revenue decrease.
Lease Fund Business: Revenue ¥171.4B (+18.0%), Segment Profit ¥151.2B (+24.0%), margin 88.2%. It is the largest profit contributor, accounting for 48.2% of Revenue and 83.2% of segment profit. Acceleration in structuring high-margin deals is the main driver of company-wide profitability improvement. Domestic Real Estate Fund Business: Revenue ¥180.9B (-60.0%), Segment Profit ¥30.7B (-37.7%), margin 17.0%. Revenue contracted significantly due to timing shifts in closings but profitability remained positive. Overseas Real Estate Fund Business: Revenue ¥0.3B (-99.1%), Segment Profit ¥0.3B (-99.1%). Deal supply has effectively stopped and the business scale has become minimal. Other Businesses: Revenue ¥3.3B (+42.0%), Segment Loss ¥0.8B (improvement from prior year loss ¥1.1B). This includes multiple activities such as M&A, PE, aviation, and co-ownership platforms, but overall impact is limited.
[Profitability] Operating Margin 34.1% (prior 23.8%, +10.3pt), Net Margin 23.1% (prior 17.1%, +6.0pt), both substantially improved. ROE is 13.7%, which can be decomposed as Net Margin 23.1% × Total Asset Turnover 0.254 × Financial Leverage 2.33x. The ROE level remains favorable versus historical ranges. [Cash Quality] Operating Cash Flow/Net Income is -0.08x; Operating CF was -¥6.7B versus Net Income ¥82.3B, showing a large divergence. From an Operating CF subtotal of ¥24.1B, cash tax payments -¥30.9B, contract liabilities increase +¥19.1B, trade receivables increase -¥2.9B, and trade payables decrease -¥3.4B affected cash flows, revealing weak cash conversion. [Capital Efficiency] Total Asset Turnover fell to 0.254x (prior 0.500x). Timing shifts in deals and buildup of contract liabilities drove the decline. FCF was -¥12.1B, with Investing CF at -¥5.4B (modest), while insufficient Operating CF weighed on FCF. [Solvency] Equity Ratio 42.9% (prior 45.0%, -2.1pt), Current Ratio 219.6% indicating apparent short-term liquidity. Total interest-bearing debt was ¥526.2B, Debt/EBITDA 4.28x, showing somewhat elevated leverage. Interest coverage was 26.0x (Operating Income / interest expense), indicating earnings resilience, but the short-term debt ratio of 63.9% (short-term borrowings ¥336.4B, CP ¥35.0B, bonds maturing within one year ¥10.0B, etc.) shows maturity shortening; Cash / short-term debt 0.46x highlights high refinancing sensitivity.
Operating CF was -¥6.7B, indicating very weak cash conversion versus Net Income ¥82.3B. The Operating CF subtotal was ¥24.1B (including Depreciation ¥1.4B, Goodwill amortization ¥0.2B, Equity-method loss ¥-0.5B, provisions movement ¥2.8B, etc.), from which corporate tax payments of -¥30.9B were the largest negative item. In working capital, contract liabilities +¥19.1B were an inflow, while trade receivables -¥2.9B and trade payables -¥3.4B were outflows. Investing CF was -¥5.4B, with capital expenditures -¥0.4B, intangible asset acquisitions -¥0.5B, and acquisition of investment securities -¥2.5B, all modest. Financing CF was +¥23.0B, reflecting net short-term borrowings +¥137.7B and new long-term borrowings ¥21.0B against long-term repayments -¥102.9B, dividend payments -¥54.6B, and net CP increase +¥25.0B. FCF was -¥12.1B (Operating CF -¥6.7B + Investing CF -¥5.4B), and dividend payments of ¥54.6B were not covered by FCF, resulting in borrowing-dependent funding. Cash increased from ¥143.2B at the beginning of the period to ¥154.9B at the end (+¥11.7B), but the increase was mainly due to higher short-term debt; core business cash generation remains weak.
Earnings quality is broadly recurring but the divergence from Operating CF is a concern. Non-operating income ¥5.8B equals 1.6% of Revenue, mainly interest income ¥3.3B and equity-method profit ¥0.5B. Extraordinary losses ¥1.6B (impairment ¥1.1B, disposal of fixed assets ¥0.0B) are small (1.3% of Operating Income), so one-off impacts are limited. The effective tax rate of 29.8% is within a normal range and tax adjustments appear limited. Comprehensive income was ¥83.3B versus Net Income ¥82.3B, a difference of +¥1.0B (foreign currency translation adjustment +¥0.6B, valuation difference on securities +¥0.3B), small in magnitude. From an accrual perspective, Operating CF/Net Income of -0.08x shows Net Income lacks cash backing; the buildup of contract liabilities and working capital swings create timing lags between revenue recognition and cash realization. JGAAP goodwill amortization ¥0.2B has negligible distortion effect on EBITDA (<0.1%) and does not materially affect assessment of underlying earning power.
Full-year plan: Revenue ¥828.8B (-36.1%), Operating Income ¥231.6B (-8.9%), Ordinary Income ¥228.6B (-13.7%), Net Income ¥155.1B (implied from EPS ¥185.27 and a payout ratio of 25.0%). Progress through H1 vs. plan: Revenue 42.9% (standard 50%: -7.1pt), Operating Income 52.5% (+2.5pt), Ordinary Income 52.0% (+2.0pt), Net Income 53.1% (+3.1pt). The Revenue shortfall is attributable to timing shifts in closings for Domestic Real Estate Funds and contraction in Overseas Real Estate, assuming Revenue recognition will concentrate in H2. Profit progress exceeds standard, aided by front-loading of high-margin Lease Fund deals. Contract liabilities ¥83.6B (23.5% of Revenue) suggest potential for H2 Revenue recognition, and achieving the full-year plan requires H2 Revenue of ¥485.9B (H1-to-H2 +36.5%). There were no revisions to the earnings forecast this quarter; company guidance remains unchanged.
The H1 dividend was ¥46.35 per share, implying a payout ratio of 47.9% against H1 Net Income per share ¥96.70. The full-year dividend forecast is ¥46.35 (same amount), corresponding to a payout ratio of 25.0% against full-year EPS forecast ¥185.27. The high H1 payout ratio is by design, assuming higher profits in H2 will reduce the full-year payout ratio. However, FCF was -¥12.1B and dividend payments of ¥54.6B were not covered by internally generated funds, effectively relying on borrowings. Cash balance ¥154.9B (11.1% of total assets) provides some capacity for dividends, but given the short-term debt ratio of 63.9% and a shortening maturity profile, dividend sustainability depends on H2 recovery in Operating CF and Revenue recognition progress. No share buybacks were executed; total shareholder return comprises dividends only.
Revenue volatility risk from timing shifts in deal closings: H1 Revenue progress at 42.9% is -7.1pt vs. standard, and the full-year plan assumes H2 Revenue is heavily skewed (+36.5% vs. H1). Domestic Real Estate Fund Revenue declined -60.0% and Overseas Real Estate Fund -99.1% (effectively halted), increasing deal-supply volatility. The full-year plan assumes digestion of contract liabilities ¥83.6B in H2; delays or cancellations in closings would materialize a risk of missing full-year targets.
Refinancing risk from rising dependence on short-term debt: Short-term borrowings ¥336.4B (+69.3%), CP ¥35.0B, bonds maturing within one year ¥10.0B produce a short-term debt ratio of 63.9% and a shortening maturity profile. Long-term borrowings have been compressed to ¥189.9B (-30.1%), widening the maturity mismatch. Cash / short-term debt 0.46x provides limited coverage; adverse market conditions or rising rates could hinder rollovers and pressure liquidity. Debt/EBITDA 4.28x denotes elevated leverage, and rising interest expenses could squeeze profits.
Weak Operating CF and cash conversion risk: Operating CF/Net Income -0.08x (Operating CF -¥6.7B vs. Net Income ¥82.3B) highlights a large cash-earnings gap. FCF -¥12.1B and dividend payments ¥54.6B were funded by borrowing. Continued increases in accrual ratios and adverse working capital movements (trade receivables increase, trade payables decrease) would deteriorate liquidity and constrain dividend sustainability and debt repayments. H2 recovery in Operating CF is assumed; persistent delays in Revenue recognition would exacerbate cash shortages.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 34.1% | – | – |
| Net Margin | 23.1% | – | – |
Due to limited industry comparison data, relative evaluation is not possible, but Operating Margin 34.1% and Net Margin 23.1% are extremely high on an absolute basis.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -43.9% | – | – |
Revenue growth is -43.9%, a large negative; absent industry comparison data, the relative position is unclear, but timing shifts in deal closings and business contraction are pronounced.
※ Source: Company compilation
Shift to high-margin businesses driving profitability improvement: Increased share of the Lease Fund Business (Revenue 48.2%, segment profit 83.2%) raised Operating Margin to 34.1% (YoY +10.3pt). The qualitative shift in business mix is progressing, and profit progress 52.5% suggests front-loading vs. plan. The buildup of contract liabilities ¥83.6B (prior period-end +29.6%) indicates potential for H2 Revenue recognition and assumes performance acceleration in the latter half.
Cash flow quality and short-term debt dependence as bottlenecks: Operating CF/Net Income -0.08x and FCF -¥12.1B show weak operating cash generation; dividends ¥54.6B were funded by borrowings. Short-term debt ratio 63.9% and Cash / short-term debt 0.46x indicate a shortening maturity profile and rising refinancing risk. Long-term borrowings -30.1% have increased the maturity mismatch; recovery in H2 Operating CF and extension of debt maturities are key to stabilizing liquidity. In a rising rate environment, increases in interest payments (¥4.7B) are also a concern.
This report was auto-generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are compiled by our firm based on public financial statements and are provided for reference. Investment decisions are your responsibility; consult professionals as needed before making investment choices.
---End of Report---