MAEDA KOSEN CO.,LTD. FY2026 FY Earnings Report

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Executive Summary

Although the Company secured 11.4% revenue growth, selling, general and administrative expenses grew faster than revenue, leaving operating income essentially flat. This earnings report warrants attention to the quality of growth in both revenue and profit. Revenue was ¥713.9B (¥641.1B in the previous year, +11.4%), operating income was ¥120.3B (same as above, +0.1%), ordinary income was ¥128.9B (¥122.6B, +5.2%), and net income was ¥95.7B (¥94.9B, +0.9%). The primary driver of revenue growth was expanding demand in the Infrastructure segment. While non-operating income, including foreign exchange gains, contributed to the increase in ordinary income, the operating margin, which represents core earnings power, contracted from 18.8% in the previous year to 16.9%.

Factors Driving Earnings Changes

【Revenue】Revenue of ¥713.9B increased 11.4% year on year. By segment, Infrastructure led the overall performance with revenue of ¥468.0B (65.6% of total, +28.6%), while TechnicalService slowed to ¥246.0B (34.4% of total, -11.3%). Strong demand related to public-sector projects and disaster prevention in Infrastructure was the primary driver of revenue growth.

【Profitability】Gross profit was ¥265.4B, with a gross margin of 37.2% (37.1% in the previous year), remaining broadly flat. However, SG&A expenses increased substantially to ¥145.1B (+23.3%), expanding at a pace exceeding revenue growth. As a result, the operating margin contracted by -190bp to 16.9%, from 18.8% in the previous year. Segment profit was ¥88.5B for Infrastructure (+20.4%, 18.9% margin) and ¥47.0B for TechnicalService (-21.7%, 19.1% margin). The decline in TechnicalService profit was one factor behind the overall stagnation in operating income. Ordinary income increased 5.2% to ¥128.9B, supported by ¥1.21B in total non-operating income, including ¥650M in foreign exchange gains. Net income was ¥95.7B (+0.9%), benefiting from ¥660M in extraordinary income, consisting of gains on the sale of investment securities. Overall, despite higher revenue and profit, the contraction in core profitability was offset by non-operating and extraordinary factors, making this an earnings report characterized by revenue growth accompanied by margin contraction.

Segment Analysis

Infrastructure continued to deliver higher revenue and profit, with revenue of ¥468.0B (+28.6%) and operating income of ¥88.5B (+20.4%), making it the core business and accounting for 65.6% of total Company revenue. Although its margin declined from the previous year to 18.9%, profit growth was secured through the revenue increase. In contrast, TechnicalService posted lower revenue and profit, with revenue of ¥246.0B (-11.3%) and operating income of ¥47.0B (-21.7%), apparently affected by weakening demand from the industrial and automotive sectors. Company-wide expenses (adjustments) increased to ¥1.53B (¥1.34B in the previous year), reducing Company-wide operating income as they were deducted from the combined profit of the two segments.

Key Financial Indicators

【Profitability】The operating margin of 16.9% and net profit margin of 13.4% (14.8% in the previous year) both contracted as the SG&A ratio rose to 20.3% (18.4% in the previous year), despite the gross margin remaining stable at 37.2% (37.1% in the previous year). 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥109.5B, or 1.14 times net income of ¥95.7B, indicating sound cash conversion. However, OCF declined -18.4% year on year, as increases in inventories (-¥7.0B) and trade receivables (-¥6.5B) placed pressure on working capital. 【Capital Efficiency】ROE of 12.6% contracted from 14.5% in the previous year, reflecting the decline in the net profit margin. The increase in the equity ratio to 80.3% (78.6% in the previous year) and growth in net assets also expanded the denominator. 【Financial Soundness】Cash and deposits totaled ¥261.9B, while interest-bearing debt was minimal, with long-term borrowings of ¥180M. The high equity ratio of 80.3% indicates a stable financial foundation.

Cash Flow Analysis

OCF was ¥109.5B, remaining above net income of ¥95.7B, but declined from the previous year's result of approximately ¥132.8B (down -18.4% year on year). The primary reasons for the decline were the accumulation of working capital, including an increase in inventories (-¥7.0B) and an increase in trade receivables (-¥6.5B). The expansion of inventory and collections associated with revenue growth slowed cash conversion. Investing CF was -¥36.8B, with capital expenditures of ¥48.8B representing the primary use of funds. CapEx exceeded depreciation and amortization of ¥36.3B, indicating an active investment stance. Financing CF was -¥41.9B, with dividend payments and share repurchases of ¥940M serving as the primary sources of cash outflow. Free CF (OCF + investing CF) was ¥72.6B, comfortably exceeding the combined amount of dividends and share repurchases, and no concerns have arisen regarding financial capacity.

Quality of Earnings

Ordinary income of ¥128.9B exceeded operating income of ¥120.3B. However, foreign exchange gains of ¥6.5B represented the primary contributor to the ¥12.1B difference in non-operating income, and should be distinguished from the Company's underlying earnings power. Net income of ¥95.7B included ¥6.6B in extraordinary income (¥6.6B in gains on the sale of investment securities), which was also a temporary factor. Of pre-tax income of ¥135.6B, the combined non-recurring contribution from non-operating and extraordinary factors amounted to approximately ¥1.9B, supplementing the limited growth in core operating income (+0.1%) at the net income level. Comprehensive income was ¥103.1B, exceeding net income of ¥95.7B, primarily due to foreign currency translation adjustments of +¥9.2B. However, valuation differences on securities contributed -¥2.7B, and the divergence between comprehensive income and net income was attributable to foreign exchange factors.

Earnings Forecasts and Guidance

For the next fiscal year, the Company has announced forecasts of revenue of ¥735.0B (+3.0%), operating income of ¥125.0B (+3.9%), and ordinary income of ¥129.0B (+0.1%). Compared with current-period actual revenue of ¥713.9B and operating income of ¥120.3B, the plan anticipates modest increases in both metrics and appears to be a conservative forecast premised on a recovery from the margin contraction caused by the increase in SG&A expenses during the current period. The limited +0.1% growth forecast for ordinary income may be interpreted as incorporating the possibility that non-recurring factors, such as foreign exchange gains that contributed during the current period, will reverse in the next fiscal year. Forecast EPS is ¥143.96, a marginal increase from current-period actual EPS of ¥142.66, while the Company plans to increase the dividend to ¥32.00 from ¥30.00 in the current period.

Shareholder Returns

The payout ratio for the current period was 21.0%. The annual dividend totaled ¥30, comprising an interim dividend of ¥14 and a year-end dividend of ¥16, representing an increase from the previous year (interim comparison unavailable; annual actual amount shown). The Company plans to increase the dividend to ¥32 in the next fiscal year, a level that appears reasonable relative to its cash-generation capacity from a payout-ratio perspective. Share repurchases totaled ¥940M, and the Total Return Ratio, including dividends, remained at approximately 31%, representing shareholder returns that preserve capacity for retained earnings and investment. In light of the financial foundation of cash and deposits of ¥261.9B and free CF of ¥72.6B, there are no concerns regarding dividend sustainability.

Risk Factors

1. Concentration of performance between segments: Infrastructure accounts for 65.6% of revenue, while TechnicalService has slowed, with revenue down -11.3% and operating income down -21.7%, increasing the Company's dependence on trends in public investment and disaster-prevention budgets.

2. Slower cash conversion due to working-capital accumulation: OCF declined -18.4% year on year as inventories (-¥7.0B) and trade receivables (-¥6.5B) increased. If revenue growth continues, whether this trend persists will be a key monitoring point.

3. Dependence on non-recurring factors: Foreign exchange gains of ¥6.5B and gains on the sale of investment securities of ¥6.6B supported ordinary income and net income. If these factors reverse, they could affect the pace of profit growth in the next fiscal year.

Industry Benchmark (Reference; Company Analysis)

Profitability and Returns

Profitability is substantially above the industry median and ranks among the higher levels within the manufacturing sector.

Growth and Capital Efficiency

The growth rate also substantially exceeds the industry median, with demand for Infrastructure generating revenue growth above the industry average.

※Source: Company analysis

Key Earnings Takeaways

1. Although revenue and profit increased, the operating margin contracted by -190bp from the previous year, with SG&A expense growth (+23.3%) exceeding revenue growth (+11.4%). The degree to which cost discipline recovers will structurally determine the margin trend from the next fiscal year onward.

2. OCF declined -18.4% year on year, as the accumulation of working capital, including inventories and trade receivables, slowed cash conversion. Improving inventory and collection management during periods of revenue growth will be a key factor in assessing future cash flow quality.

3. Ordinary income and net income included contributions from non-recurring factors such as foreign exchange gains and gains on the sale of investment securities, creating a gap with core operating income (+0.1%). From the next fiscal year onward, whether these non-recurring factors reverse will be a key point in assessing the underlying pace of profit growth.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson type; explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,226–¥1,299 at cost of equity ±1%, and ¥1,259–¥1,266 at ω±0.1.

Note:

• Amortization of goodwill of ¥1.1/share is added back to earnings (to reflect a non-cash expense and enhance comparability with IFRS companies).

(Calculation model: residual income model / Interest rate reference month: 2026-07 / This figure does not predict or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with professionals as necessary.

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