Quick View
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥23.71B | ¥23.46B | +1.0% |
| Operating Income | ¥0.63B | ¥0.67B | −4.6% |
| Ordinary Income | ¥0.72B | ¥0.75B | −3.4% |
| Net Income | ¥0.44B | ¥0.44B | +1.2% |
| ROE | 1.7% | 1.7% | - |
Executive Summary
The first quarter resulted in higher revenue but lower earnings, with the inability of revenue growth to absorb rising costs being the defining feature. Revenue was ¥23.71B (¥23.46B in the previous year, YoY +1.0%), Operating Income was ¥0.63B (¥0.67B in the previous year, YoY -4.6%), and Ordinary Income was ¥0.72B (¥0.75B in the previous year, YoY -3.4%). Meanwhile, Net Income was ¥0.44B, maintaining the same level as the previous year, as fluctuations in non-operating income and the tax burden partially offset the decline at the operating level. The Operating Income margin deteriorated to 2.7% from the previous year, and the decline in cost absorption capacity—with a Selling, General and Administrative Expense ratio of 13.0% against a gross profit margin of 15.7%—was the primary cause of the deterioration in profitability.
Factors Affecting Performance
【Revenue】Revenue was ¥23.71B, representing a modest year-on-year increase of +1.0%. By segment, DetachedHouse (detached housing-related) generated ¥20.29B, accounting for 85.6% of total revenue, while LargeScaleProperties (large-scale development) generated ¥3.44B, accounting for 14.4%. The profit margin of LargeScaleProperties was relatively high at 9.6%, exceeding DetachedHouse's 4.2%.
【Profit and Loss】Cost of sales was ¥19.98B, and against a gross profit margin of 15.7%, SG&A expenses were ¥3.09B (SG&A expense ratio of 13.0%), up from 11.8% in the previous year, absorbing the increase in gross profit. As a result, Operating Income declined to ¥0.63B (YoY -4.6%), while Ordinary Income declined to ¥0.72B (YoY -3.4%). Extraordinary income was ¥0.01B versus extraordinary losses of ¥0.02B (including losses on disposal of fixed assets), temporarily exerting a negative impact; however, Net Income increased slightly by +1.2% year on year to ¥0.44B. This was attributable to non-operating income (including dividend income of ¥0.02B) and fluctuations in the tax burden, resulting in a divergence between performance at the operating level and the bottom line. In summary, the results represent higher revenue but lower earnings.
Segment Analysis
DetachedHouse (detached housing-related) recorded Revenue of ¥20.29B (composition ratio: 85.6%), Operating Income of ¥0.86B, and a profit margin of 4.2%. LargeScaleProperties (large-scale development-related) recorded Revenue of ¥3.44B (composition ratio: 14.4%), Operating Income of ¥0.33B, and a profit margin of 9.6%. The overall Operating Income margin of 2.7% was lower than the simple sum of the segment margins (4.2%~9.6%), suggesting the impact of headquarters expenses and other costs after intersegment allocation. An increase in the composition ratio of the highly profitable LargeScaleProperties segment is attracting attention as an avenue for improving the company-wide profit margin.
Key Financial Indicators
【Profitability】The Operating Income margin of 2.7% and Net Income margin of 1.9% were both low, and SG&A expenses absorbed most of gross profit, with an SG&A expense ratio of 13.0% against a gross profit margin of 15.7%. 【Cash Flow Quality】Accounts receivable from completed construction contracts amounted to ¥15.15B, representing 31% of total assets, and the gap between revenue recognition and cash collection is a factor affecting earnings quality. Comprehensive Income was ¥0.54B, ¥0.10B above Net Income of ¥0.44B, primarily due to an increase in valuation difference on securities. 【Investment Efficiency】ROE was 1.7%. In the DuPont decomposition of a Net Income margin of 1.9%, total asset turnover of 0.49x, and financial leverage of 1.84x, the low Net Income margin was the greatest constraint. 【Financial Soundness】The Equity Ratio was 54.5% (55.4% in the previous year), while cash and deposits of ¥12.67B substantially exceeded interest-bearing debt of ¥0.85B, indicating a net cash structure. The current ratio was 172.6%, demonstrating sound short-term payment capacity.
Cash Flow Analysis
As actual amounts from the statement of cash flows are not included in the disclosed data, funding trends are assessed based on changes in the balance sheet. Cash and deposits were ¥12.67B, a slight decrease from ¥13.12B in the previous year, while accounts receivable from completed construction contracts increased to ¥15.15B (¥13.93B in the previous year), and costs on uncompleted construction contracts also expanded to ¥3.83B (¥2.89B in the previous year). These increases suggest the immobilization of funds in operating activities, and whether Net Income of ¥0.44B translates directly into cash generation at a similar level will depend on future collection trends. Interest-bearing debt was small at ¥0.85B, limiting funding pressure from a financing perspective.
Earnings Quality
Net Income increased by +1.2% year on year to ¥0.44B, while Operating Income declined by 4.6%, and this divergence in direction is a key consideration in assessing earnings quality. Non-operating income of ¥0.11B (including dividend income of ¥0.02B) represented a significant proportion relative to Operating Income of ¥0.63B, indicating that income from sources other than the core business supported final earnings. Extraordinary items consisted of income of ¥0.01B versus losses of ¥0.02B, a slight negative impact whose effect as a temporary factor was limited. Comprehensive Income of ¥0.54B exceeded Net Income by ¥0.10B, supported by a ¥0.11B increase in valuation difference on securities; however, this is a valuation factor associated with market fluctuations and must be distinguished from recurring earnings generated by business activities.
Earnings Forecasts and Guidance
The full-year forecast calls for Revenue of ¥98.50B (YoY +6.7%), Operating Income of ¥2.10B (YoY -17.1%), and Ordinary Income of ¥2.60B (YoY -8.8%). Q1 progress rates were 24.1% for Revenue, 30.2% for Operating Income, 27.9% for Ordinary Income, and 27.8% for Net Income, with Operating Income and Net Income exceeding the simple progress benchmark of 25%. However, the full-year forecast itself assumes a 17.1% year-on-year decline in Operating Income, indicating that the company expects profitability to deteriorate over the full year. The strong Q1 progress must be evaluated in light of its consistency with a plan that assumes lower profitability in the second half of the year.
Shareholder Returns
The full-year dividend forecast is ¥26.00 per share (an increase from ¥12 in the previous year). Based on the full-year EPS forecast of ¥68.97, the Payout Ratio is approximately 37.7%, below 60% and consistent with earnings. As the disclosed data do not include any share repurchases, this report evaluates only the Payout Ratio and does not discuss the Total Return Ratio.
Risk Factors
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Low-profitability structure risk: The gross profit margin of 15.7% and Operating Income margin of 2.7% are both low, making Operating Income highly susceptible to fluctuations in material costs, personnel expenses, and outsourcing expenses. While Revenue increased by 1.0%, Operating Income decreased by 4.6%, confirming a deterioration in operating leverage.
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Collection risk related to accounts receivable from completed construction contracts: Accounts receivable from completed construction contracts amounted to ¥15.15B, representing 31% of total assets and increasing from ¥13.93B in the previous year. Any delays in customer payments or construction settlements could place pressure on Operating Cash Flow.
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Risk of concentrated maturities of short-term liabilities: Current liabilities were ¥20.07B, accounting for 90.7% of total liabilities, indicating relatively high reliance on short-term liabilities, including short-term borrowings of ¥0.67B. Since cash and deposits of ¥12.67B exceed short-term liabilities, immediate liquidity risk is limited; however, refinancing trends will become a focus if funding needs expand.
Industry Benchmark (Reference; Compiled by the Company)
Industry Benchmark (trading)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 2.7% | – | – |
| Net Income Margin | 1.9% | 7.4% (6.8%–7.9%) | −5.5pt |
| The Net Income margin is 5.5pt below the industry median, placing the company toward the lower end of the industry. |
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | 1.0% | 3.8% (0.9%–6.4%) | −2.8pt |
| The Revenue growth rate also falls below the industry median, making the company relatively less competitive in terms of growth. |
※Source: Compiled by the Company
Key Points from the Financial Results
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While Revenue increased, the Operating Income margin declined to 2.7%, making the maintenance and improvement of the gross profit margin and greater SG&A efficiency key areas of focus. The higher-revenue, lower-earnings structure indicates a condition requiring monitoring from a cost management perspective.
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Accounts receivable from completed construction contracts increased to ¥15.15B, accounting for 31% of total assets. Trends in the collection cycle will be an important indicator for assessing Operating Cash Flow quality.
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The company's full-year forecast assumes a 17.1% year-on-year decline in Operating Income. Although the Q1 progress rate exceeds the simple benchmark, continued monitoring is required in light of its consistency with the outlook for deteriorating full-year profitability.
This report is an automatically generated earnings analysis document created by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investors should make investment decisions at their own responsibility and consult a professional as necessary.
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AI Financial Analysis
Executive Summary
FY2026 Q1 performance was mixed: modest sales growth and a substantial gross-margin recovery were offset by sharply higher SG&A, leaving operating and ordinary profit lower, while net income edged higher on a smaller extraordinary loss. Revenue increased 1.0% YoY to ¥23.705bn. Gross profit rose 8.6% YoY to ¥3.726bn. The gross margin expanded by approximately 110bp to 15.7% from 14.6% in the prior-year quarter. This improvement indicates that pricing, product mix, procurement conditions, or project profitability improved at the gross-profit level. However, SG&A expenses increased 11.8% YoY to ¥3.092bn, far outpacing revenue growth. Consequently, operating income fell 4.6% YoY to ¥634m. The operating margin compressed by approximately 20bp to 2.7% from 2.8%. Ordinary income declined 3.4% YoY to ¥725m, although net non-operating income improved modestly to ¥91m from ¥86m. Net income rose 1.2% YoY to ¥444m. The divergence between lower operating profit and higher net income was principally supported by extraordinary items: the net extraordinary loss narrowed to ¥11m from ¥32m in the prior-year quarter. Therefore, the net-income increase was not fully reflective of underlying operating momentum. Comprehensive income increased 13.1% YoY to ¥539m, aided by a ¥110m valuation gain on securities recognized in other comprehensive income. The annualized reported ROE was 6.7%, below the 8% benchmark generally associated with stronger capital efficiency. Balance-sheet liquidity remains sound, with a 172.6% current ratio, a 165.6% quick ratio, and cash of ¥12.667bn. Interest-bearing debt is limited at ¥848m and is fully covered many times over by cash, despite a year-on-year increase in borrowings. Full-year guidance implies a stronger second-half weighting for sales, while Q1 operating-profit progress is ahead of the standard quarterly pace despite the company forecasting a full-year operating-profit decline. The central forward issue is whether gross-margin gains can persist while management restrains the SG&A growth that eroded Q1 operating leverage.
Profitability Analysis
The annualized DuPont ROE of 6.7% is composed of a 1.9% net profit margin, annualized asset turnover of 1.951x, and financial leverage of 1.84x. The principal constraint on shareholder returns is the low net margin, rather than weak asset utilization. The 1.9% net margin remains below the 3% concern threshold and reflects the structurally thin profitability of the company’s construction-related distribution and project activities. Asset turnover is relatively solid, indicating that the asset base supports a meaningful revenue volume. Financial leverage contributes to ROE but is not excessive when assessed using interest-bearing borrowings: interest-bearing debt of ¥848m represents only about 3.2% of total equity. Gross-margin performance was the key positive change in Q1, with margin expanding approximately 110bp YoY to 15.7%. Gross profit increased ¥296m despite only a ¥243m increase in revenue. Conversely, SG&A rose ¥327m, exceeding the gross-profit increase and causing operating income to decline by ¥31m. This unfavorable operating-leverage outcome is the most material earnings issue in the quarter. The quality alert for low operating efficiency is warranted: the EBIT margin of 2.7% is below the 5% benchmark, leaving earnings sensitive to modest cost inflation, discounting, or project-level losses. The low gross-margin alert is also valid at 15.7%, although the strong year-on-year improvement provides constructive context; the margin remains thin but is trending positively. The effective tax rate was 37.8%, producing a tax burden of 0.622, and continues to weigh on conversion of pre-tax profit into net income. Interest burden was favorable at 1.126 because net non-operating income exceeded interest expense, while interest coverage was exceptionally strong at 158.5x. Given the JGAAP basis, the increase in goodwill and intangible assets should be monitored because future amortization and any impairment could affect operating-profit comparability, although goodwill is presently immaterial at 1.4% of equity.
Growth Assessment
Q1 revenue growth of 1.0% YoY was modest relative to the full-year sales-growth forecast of 6.7%. Q1 sales represent 24.1% of the ¥98.5bn full-year revenue forecast, slightly below the standard 25% quarterly progress rate but not by more than 10 percentage points. This implies that delivery and revenue recognition are expected to be moderately weighted toward later quarters. Q1 operating income represents 30.2% of the ¥2.1bn full-year forecast, 5.2 percentage points ahead of the standard 25% pace. Ordinary income progress was also ahead of pace at 27.9% of the ¥2.6bn forecast. Net income reached 27.8% of the ¥1.6bn full-year forecast. The profit progress rates are notable because the company forecasts full-year operating income to decline 17.1% YoY and ordinary income to decline 8.8% YoY. This configuration suggests that management’s outlook embeds either later-period margin pressure, higher costs, conservative assumptions, or a normalization from the first-quarter margin recovery. Revenue sustainability will depend on the conversion of its construction-related project pipeline into sales without sacrificing margin. Construction receivables increased 8.5% YoY to ¥15.150bn, consistent with higher activity or timing of billing and collection. Costs on uncompleted construction contracts rose 32.3% YoY to ¥3.827bn, indicating a larger volume of work in progress and potentially supporting future revenue recognition. Advances received on uncompleted construction contracts increased 46.0% YoY to ¥1.577bn, providing some project-funding support. However, the increased work in progress raises execution requirements, as cost overruns or delayed completion could pressure future margins. The Q1 gross-margin expansion is encouraging, but sustained earnings growth requires SG&A growth to normalize materially below the 11.8% Q1 rate.
Financial Health
Liquidity is healthy. Current assets of ¥34.629bn exceed current liabilities of ¥20.066bn, resulting in working capital of ¥14.563bn and a current ratio of 172.6%. The quick ratio of 165.6% confirms that liquidity does not depend heavily on inventory liquidation. Cash and deposits totaled ¥12.667bn, equal to 26.1% of total assets and substantially exceeding interest-bearing debt of ¥848m. Cash covered short-term loans by 19.05x. Interest-bearing debt represented only 3.1% of capital, indicating a conservative debt-funded capital structure. The stated debt-to-equity ratio of 0.84x should be interpreted alongside the more direct interest-bearing debt measure, under which borrowings are only approximately 0.03x equity; the broader ratio evidently captures liabilities beyond loans. Current liabilities are primarily supported by current assets, and the maturity profile does not create a material balance-sheet mismatch given the substantial cash position. Nevertheless, the refinancing-risk quality alert requires monitoring because 78.4% of interest-bearing debt is short-term. The root cause is the ¥665m short-term loan balance relative to total borrowings of ¥848m. The practical impact is currently limited by ¥12.667bn of cash, but continued reliance on short-dated facilities would increase exposure to changes in bank lending conditions or interest rates if borrowings expand. Short-term loans increased ¥450m, or 209.3% YoY, while long-term loans rose ¥82m, or 81.2% YoY. Goodwill increased ¥166m, or 80.2% YoY, to ¥373m, and intangible assets rose ¥157m, or 32.2% YoY, to ¥644m. These increases are small relative to the balance sheet: goodwill equals 0.8% of assets and 1.4% of equity, while total intangible assets equal 1.3% of assets. Accordingly, present M&A-related balance-sheet risk is low, but the earnings contribution and amortization profile of the acquired or newly recognized assets should be tracked.
Notable B/S Changes
Short-term loans: +¥4.50bn (+209.3%) to ¥6.65bn - borrowings increased materially, although cash of ¥12.667bn provides substantial coverage; monitor the short-term funding mix. Long-term loans: +¥0.82bn (+81.2%) to ¥1.83bn - debt increased from a low base, but total interest-bearing debt remains modest relative to equity and cash. Goodwill: +¥1.66bn (+80.2%) to ¥3.73bn - increase in acquired or recognized business value; current exposure is low at 1.4% of equity, but future amortization and impairment should be monitored. Intangible assets: +¥1.57bn (+32.2%) to ¥6.44bn - asset-base expansion remains modest at 1.3% of total assets, with future earnings effects dependent on amortization and asset performance. Costs on uncompleted construction contracts: +¥9.35bn (+32.3%) to ¥38.27bn - greater work in progress may support future revenue but increases execution, cost-control, and cash-conversion requirements.
Cash Flow Quality
Cash-flow quality cannot be assessed from operating cash flow, free cash flow, or investing and financing cash-flow figures in the reported information. Accordingly, no OCF-to-net-income or free-cash-flow coverage conclusion is drawn. Balance-sheet working-capital movements nevertheless warrant attention. Construction receivables increased by ¥1.217bn YoY to ¥15.150bn, while costs on uncompleted construction contracts increased by ¥935m to ¥3.827bn. These movements can be consistent with an expanding construction-project workload, but they also increase the importance of collection discipline, project completion, and cost control. Notes and accounts payable related to construction contracts increased by ¥777m YoY to ¥10.401bn, partially offsetting the funding requirement from receivables and work in progress. Advances received on uncompleted contracts increased by ¥497m YoY to ¥1.577bn, providing further operating funding support. Cash declined by ¥457m YoY to ¥12.667bn but remains more than adequate relative to debt and current liabilities. The rise in short-term loans alongside lower cash suggests that treasury and working-capital movements should be monitored closely, even though liquidity ratios remain robust. There is no basis in the available data to identify cash-conversion deterioration or working-capital manipulation. The smaller net extraordinary loss supported reported net-income growth, meaning cash realization of earnings will be particularly important in subsequent reporting periods.
Dividend Sustainability
The full-year dividend forecast is ¥26 per share. Based on forecast EPS of ¥68.97, the implied dividend payout ratio is approximately 37.7%. This is below the 60% sustainability benchmark and leaves a meaningful earnings retention buffer. The forecast dividend requirement is approximately ¥604m based on 23.232m average shares, compared with forecast net income of ¥1.6bn. The company also has substantial cash of ¥12.667bn and very limited interest-bearing debt of ¥848m, supporting financial flexibility. Q1 EPS was ¥19.13, equivalent to 27.7% of the full-year EPS forecast, broadly consistent with the 27.8% net-income progress rate. Dividend sustainability is therefore supported by forecast earnings coverage and a strong liquidity position. The main sensitivity is operating-margin preservation, because the 2.7% EBIT margin provides a limited buffer against further SG&A inflation or construction-project margin pressure. No total return ratio is calculated because share buyback information is not provided.
Risk Assessment
Business risks include Margin risk: the 15.7% gross margin remains below the 20% quality benchmark despite improving by about 110bp YoY; pricing pressure, material-cost inflation, or adverse project mix could quickly affect profit., Operating-cost risk: SG&A rose 11.8% YoY against 1.0% revenue growth, causing a decline in operating income; sustained cost growth would weaken operating leverage further., Construction execution and collection risk: construction receivables of ¥15.150bn and costs on uncompleted contracts of ¥3.827bn make profitability sensitive to project delays, cost overruns, customer credit quality, and collection timing., Industry-specific demand risk: residential, renovation, and construction-related demand can be affected by housing starts, construction labor shortages, material prices, and interest-rate-sensitive end-market activity., Asset-value risk: goodwill and intangible assets increased to ¥373m and ¥644m, respectively; while currently modest, underperformance of the related businesses could create future JGAAP amortization or impairment pressure..
Financial risks include Refinancing-risk alert: 78.4% of borrowings are short-term, driven by ¥665m of short-term loans. Liquidity materially mitigates this risk because cash covers short-term loans by 19.05x., Low profitability buffer: the 2.7% EBIT margin and 1.9% net margin leave earnings exposed to relatively small changes in gross margin or fixed-cost absorption., Tax-conversion risk: the 37.8% effective tax rate and 0.622 tax burden reduce conversion of pre-tax profit into net income..
Key concerns include Whether the Q1 gross-margin recovery can be sustained through the fiscal year., Whether SG&A growth moderates sufficiently to restore positive operating leverage., Whether higher work in progress and receivables convert into timely collections and profitable project completion., Whether the full-year forecast for a 17.1% operating-profit decline reflects conservatism or anticipated second-half margin and cost pressure..
Investment Implications
Key takeaways include Q1 gross-profit performance was favorable, with gross profit up 8.6% YoY and gross margin up about 110bp to 15.7%., Operating profitability weakened because SG&A increased 11.8% YoY, substantially faster than 1.0% sales growth., Net-income growth of 1.2% YoY was supported by a smaller extraordinary loss and should not be viewed as a full indicator of underlying operating improvement., Liquidity and balance-sheet solvency are strong, with ¥12.667bn cash, a 172.6% current ratio, and only ¥848m of interest-bearing debt., Annualized ROE of 6.7% remains below the 8% efficiency benchmark, reinforcing the importance of sustainable margin improvement..
Metrics to watch include Gross margin and operating margin, particularly whether the 15.7% gross margin can be retained and the 2.7% EBIT margin can improve., SG&A growth relative to revenue growth., Construction receivables, costs on uncompleted contracts, advances received, and related collection and project-execution trends., Progress toward full-year sales guidance of ¥98.5bn and operating-income guidance of ¥2.1bn., Short-term loan balance and the proportion of debt funded through short-dated facilities., Goodwill and intangible-asset growth, associated amortization, and any impairment indicators..
Regarding relative positioning, The company combines strong liquidity, low interest-bearing leverage, and solid annualized asset turnover with low-margin operating characteristics. Relative financial resilience is high, but relative earnings efficiency is constrained by a sub-5% EBIT margin, a sub-3% net margin, and annualized ROE below the 8% benchmark.