| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥17461.5B | ¥15798.1B | +10.5% |
| Operating Income | ¥3297.3B | ¥3092.3B | +6.6% |
| Ordinary Income | ¥2730.9B | ¥2629.6B | +3.9% |
| Net Income | ¥2355.2B | ¥2068.7B | +13.9% |
| ROE | 8.2% | 7.5% | - |
For the fiscal year ended March 2026 (Full Year), Revenue was ¥17,461.5B (YoY +¥1,663.4B +10.5%), Operating Income was ¥3,297.3B (YoY +¥205.0B +6.6%), Ordinary Income was ¥2,730.9B (YoY +¥101.3B +3.9%), and Net Income was ¥2,355.2B (YoY +¥286.5B +13.9%), delivering higher revenue and profit. The operating margin improved slightly to 18.9% (prior year 18.6%), but a decline in non-operating income (Non-operating income ¥178.1B, prior ¥162.5B) and an increase in non-operating expenses (Non-operating expenses ¥744.5B, prior ¥625.2B) limited the increase at the Ordinary Income level. Conversely, Net Income rose substantially due to recognition of extraordinary gains of ¥1,095.9B, including gains on sales of investment securities of ¥981.4B. By segment, Overseas Business maintained high growth with Revenue +24.1% and Operating Income +24.6%, and the Residential Business improved profitability with Operating Income +19.3%. The Commercial Real Estate Business and Marunouchi Business accounted for Revenue of ¥9,863.6B (56.5% of the total), forming the core earnings source and providing a stable rental income base.
[Revenue] Revenue increased to ¥17,461.5B (YoY +10.5%). Segment composition ratios were: Commercial Real Estate Business 34.9% (¥6,089.9B, +14.6%), Residential Business 25.8% (¥4,505.6B, +7.7%), Marunouchi Business 21.6% (¥3,773.6B, +3.5%), Overseas Business 11.4% (¥1,994.0B, +24.1%), Design & Supervision / Real Estate Services Business 4.3% (¥745.4B, +12.6%), Investment Management Business 2.0% (¥345.0B, -9.1%). The Commercial Real Estate Business achieved double-digit revenue growth driven by expanded rental income from domestic offices and commercial facilities as well as contributions from newly completed properties. The Overseas Business recorded the highest growth rate due to progress in U.S. development projects and FX effects. Conversely, the Investment Management Business was the only declining segment, down 9.1% due to decreased asset management mandates. By region, Japan accounted for ¥15,241.9B (87.3% of total), followed by the U.S. ¥1,585.2B (9.1%), Asia ¥425.3B (2.4%), and Europe ¥209.1B (1.2%). Domestic revenue rose YoY +9.3%, and the U.S. grew +17.4%, indicating solid overseas performance as well.
[Profitability] Operating Income was ¥3,297.3B (YoY +6.6%), with an operating margin of 18.9%, a 0.3pt improvement from 18.6% in the prior year. Selling, general and administrative expenses (SG&A) were ¥1,250.3B (SG&A ratio 7.2%), growing less than revenue (+10.5%), producing positive operating leverage. Segment operating margins were: Overseas Business 28.6%, Marunouchi Business 25.8%, Commercial Real Estate Business 22.3%, Design & Supervision / Real Estate Services Business 16.9%, Residential Business 12.7%, Investment Management Business 4.2%. High margins in Overseas and Marunouchi businesses pushed up the consolidated operating margin. The Residential Business recorded Operating Income of ¥572.9B (+19.3%) and a margin of 12.7% (prior 11.4%), aided by stronger project profitability control. In contrast, the Investment Management Business saw a steep decline in Operating Income to ¥14.3B (-88.0%), reflecting a challenging fee environment. Ordinary Income was ¥2,730.9B (+3.9%), lagging Operating Income growth. Non-operating income was ¥178.1B (including dividends received ¥95.2B, interest income ¥19.0B) and was solid, but non-operating expenses rose to ¥744.5B (prior ¥625.2B), with interest expense expanding to ¥551.2B (prior ¥475.6B, +15.9%), increasing the interest burden. Net Income reached ¥2,355.2B (+13.9%) due to the recognition of extraordinary gains of ¥1,095.9B. The main component of extraordinary gains was gains on sales of investment securities of ¥981.4B, double the prior year ¥508.7B. Extraordinary losses of ¥333.3B (including impairment losses ¥131.2B and loss on retirement of fixed assets ¥90.1B) were recorded, but the large extraordinary gains outweighed losses, resulting in a 13.9% increase at the bottom line including one-off factors. In conclusion, expansion of the rental income base and high-margin overseas projects drove revenue growth; although Operating Income growth was limited, extraordinary gains led to overall higher revenue and profits.
The Commercial Real Estate Business posted Revenue ¥6,089.9B (+14.6%), Operating Income ¥1,356.8B (+8.8%), and margin 22.3%, achieving revenue growth aided by rent revisions for domestic offices and commercial facilities and contributions from newly completed properties. Margin fell 0.8pt from 23.1% the prior year, possibly due to launch costs for new properties pressuring profits. The Marunouchi Business recorded Revenue ¥3,773.6B (+3.5%), Operating Income ¥975.3B (+1.4%), and margin 25.8%, maintaining a stable rental income base in the Otemachi/Marunouchi/Yurakucho districts. Although revenue growth was limited at 3.5%, margins remained high, and this segment accounts for 29.6% of consolidated Operating Income, making it a core segment. The Residential Business achieved Revenue ¥4,505.6B (+7.7%), Operating Income ¥572.9B (+19.3%), and margin 12.7% (prior 11.4%), with improved profitability driven by better condominium sales margins and SG&A efficiency, expanding the segment’s operating margin by 1.3pt. The Overseas Business recorded high growth and high margins with Revenue ¥1,994.0B (+24.1%), Operating Income ¥571.1B (+24.6%), and margin 28.6%, supported by progress in U.S. development projects and FX effects, maintaining the highest margin among segments. The Investment Management Business saw Revenue ¥345.0B (-9.1%), Operating Income ¥14.3B (-88.0%), and margin 4.2%, a substantial profit decline. Reduced fee income led to revenue decline, and the margin plunged by 24.9pt from 29.2% the prior year, indicating the most severe profit environment within segments. The Design & Supervision / Real Estate Services Business performed steadily with Revenue ¥745.4B (+12.6%), Operating Income ¥126.1B (+17.9%), and margin 16.9%, aided by increased orders for design and supervision.
[Profitability] The operating margin improved slightly to 18.9% (prior 18.6%, +0.3pt), and the net margin remained stable at 13.5% (prior 13.1%, +0.4pt). ROE was 8.2% (prior 7.6%), improving 0.6pt year-on-year due to higher Net Income, but still below the favorable industry benchmark (10%+). ROIC (on after-tax operating income basis) is calculated as Operating Income ¥3,297.3B × (1 − effective tax rate approximately 32.6%) = ¥2,222.4B, and invested capital (interest-bearing debt ¥24,078.1B + net assets ¥26,896.9B) = ¥50,975.0B, resulting in 4.4%, indicating room to improve capital efficiency relative to cost of capital. [Cash Quality] The Operating Cash Flow / Net Income ratio is 2.16x (¥5,089.2B / ¥2,355.2B), a high level, and the accrual ratio (Net Income − Operating CF) / Total Assets is −3.2%, negative, indicating good earnings quality. Working capital changes contributed cash inflow mainly from a decrease in inventories (change in inventories +¥1,705.6B), with accounts receivable change +¥65.4B and accounts payable change −¥41.0B, resulting in net working capital cash inflow. [Investment Efficiency] Capital expenditures were ¥5,247.3B, 4.9x depreciation ¥1,080.3B, reflecting continued aggressive growth investment aimed at expanding future rental income base. Free Cash Flow was positive at ¥674.6B, indicating financial capacity to balance dividends and growth investment. [Financial Soundness] Equity Ratio improved to 33.6% (prior 32.1%, +1.5pt), and the current ratio was 192.8% (¥2,276.7B / ¥1,181.1B), indicating sufficient short-term liquidity. Interest-bearing debt was ¥24,078.1B (prior ¥23,367.9B, +3.0%), and Debt/EBITDA was 5.50x (interest-bearing debt ¥24,078.1B / EBITDA ¥4,377.6B), slightly up from 5.38x, indicating a relatively high leverage level. EBITDA interest coverage was 7.94x (EBITDA ¥4,377.6B / interest expense ¥551.2B), maintaining adequate coverage, but rising interest payments in a rising-rate environment warrant monitoring.
Operating Cash Flow (OCF) was ¥5,089.2B (prior ¥3,241.2B, +57.0%), a substantial increase, with an OCF / Net Income ratio of 2.16x, indicating strong cash conversion of earnings. OCF subtotal (before working capital changes) was ¥6,983.0B; working capital changes contributed cash inflow, notably inventories change +¥1,705.6B, accounts receivable change +¥65.4B, and accounts payable change −¥41.0B, combining for net cash inflow. Corporate taxes paid −¥1,483.5B and interest paid −¥520.8B were deducted, resulting in final OCF of ¥5,089.2B. Investing Cash Flow was −¥4,414.6B (prior −¥3,615.1B), led by capital expenditures −¥5,247.3B as the primary outflow, reflecting continued aggressive growth investment. Cash inflow from sales of securities amounted to ¥1,052.2B (proceeds from sales and maturities of securities), partially offsetting outflows, but net investing cash flow was a large outflow. Free Cash Flow turned positive to ¥674.6B (prior −¥373.9B), showing OCF growth outpacing capital expenditures. Financing Cash Flow was −¥397.8B (prior ¥128.7B); repayments of long-term borrowings −¥3,004.4B and redemption of bonds −¥1,600.0B were offset by new long-term borrowings ¥4,110.4B and bond issuances ¥2,265.4B, resulting in net outflow. Dividend payments −¥554.7B and share buybacks −¥1,300.2B were also cash outflows. Cash and cash equivalents at period-end increased to ¥2,801.3B (prior ¥2,568.8B, +9.0%), ensuring ample liquidity.
Operating Income of ¥3,297.3B versus Ordinary Income of ¥2,730.9B shows a decline of ¥566.4B, largely due to non-operating expenses. The main component of non-operating expenses ¥744.5B is interest expense ¥551.2B, indicating that interest burden structurally suppresses recurring earnings. Non-operating income ¥178.1B (including dividends received ¥95.2B, interest income ¥19.0B) contributed as stable non-operating earnings. Recognition of extraordinary gains ¥1,095.9B led to Net Income of ¥2,355.2B (¥862.6B higher than Ordinary Income), but gains on sales of investment securities ¥981.4B are one-off and should be distinguished from recurring earning power. Extraordinary losses of ¥333.3B (including impairment losses ¥131.2B and loss on retirement of fixed assets ¥90.1B) were also recorded, indicating one-off profit volatility affecting Net Income. The accrual ratio is −3.2% ((Operating CF ¥5,089.2B − Net Income ¥2,355.2B) / Total Assets ¥85,662.5B), negative, meaning Operating CF significantly exceeds Net Income and signaling good earnings quality. Comprehensive Income was ¥3,183.4B, ¥828.2B higher than Net Income ¥2,355.2B, supported by Other Comprehensive Income ¥827.6B (including valuation difference on securities ¥494.3B and actuarial gains/losses related to retirement benefits ¥366.6B). While recurring earnings at the Operating Income level remain solid, Extraordinary Income drove the bottom-line increase, and sustainable earnings growth depends on continued improvement at the Operating and Ordinary Income levels.
Full-year forecast calls for Revenue ¥20,000.0B (vs. current period +14.5%), Operating Income ¥3,700.0B (+12.2%), Ordinary Income ¥2,950.0B (+8.0%), and Net Income ¥2,350.0B (−0.2%). Progress toward Operating Income target is 89.1% (¥3,297.3B / ¥3,700.0B) and Ordinary Income progress is 92.6% (¥2,730.9B / ¥2,950.0B), indicating targets are in view. Net Income for the current period ¥2,355.2B already exceeds the full-year forecast ¥2,350.0B, largely due to extraordinary gains being realized ahead of schedule. The full-year forecast assumes double-digit growth in Revenue, Operating Income, and Ordinary Income, premised on expanded domestic rental income, progress in overseas development projects, and improved profitability in the Residential Business. However, the Investment Management Business is expected to remain challenged and contribute only limitedly to consolidated profit growth. Dividend guidance is an annual ¥24.00 (current period ¥46.00, prior ¥21.00), with a payout ratio based on Net Income of approximately 12.2% (¥24.00 / EPS forecast ¥196.27), maintaining a conservative level. Key uncertainties to achieving full-year targets include interest rate increases and cap rate movements, and fluctuations in tenant demand.
Annual dividend was ¥46.00 (interim ¥23.00, year-end ¥23.00), a substantial increase of ¥25.00 from prior ¥21.00. The payout ratio was 25.3% (¥46.00 / EPS ¥181.80), a conservative level, and FCF coverage was 1.47x (Free Cash Flow ¥674.6B / total dividends ¥459.0B; total dividends estimated from dividend payments ¥554.7B), indicating sustainability. Share buybacks of ¥1,300.2B were executed, and combined with dividends ¥554.7B the total return amounted to ¥1,854.9B, producing a Total Return Ratio of 78.7% (¥1,854.9B / Net Income ¥2,355.2B). Share buybacks increased treasury stock by −¥438.6B (prior −¥111.8B), reducing shareholders’ equity, reflecting a capital policy prioritizing shareholder returns. Full-year dividend forecast is ¥24.00, a cut from the current period ¥46.00, reflecting a conservative stance considering the one-off nature of current-period extraordinary gains. The company retains financial capacity to balance dividends and growth investments, and there remains scope for gradual dividend increases in line with profit growth.
Interest Rate Upside Risk: Against interest-bearing debt of ¥24,078.1B, interest expense is already rising to ¥551.2B (prior ¥475.6B, +15.9%). The average funding cost is approximately 2.3% (¥551.2B / ¥24,078.1B), and further interest rate increases could expand interest payments and pressure Ordinary Income. High leverage (Debt/EBITDA 5.50x) increases interest-rate sensitivity, necessitating monitoring for declines in interest coverage.
Deterioration in Investment Management Business Earnings: The Investment Management Business recorded Operating Income ¥14.3B (prior ¥119.5B, −88.0%), with margin plunging to 4.2% (prior 29.2%). If fee income declines structurally persist, the consolidated revenue mix could worsen and make it difficult to sustain consolidated operating margins.
Real Estate Valuation Risk: The company holds large real estate assets including investment securities ¥4,308.4B and tangible fixed assets ¥51,175.8B (of which land ¥24,860.6B, buildings ¥16,002.0B). Cap rate increases or market deterioration could trigger valuation losses and impairment risks. The company booked impairment losses of ¥131.2B this period, and depending on market conditions future loss expansion is possible.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 18.9% | 10.7% (6.8%–17.9%) | +8.2pt |
| Net Margin | 13.5% | 5.8% (2.5%–11.9%) | +7.7pt |
The company’s operating margin 18.9% and net margin 13.5% significantly exceed industry medians, highlighting high profitability driven by Marunouchi and high-margin overseas projects.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 10.5% | 12.8% (4.2%–29.2%) | -2.3pt |
The company’s revenue growth rate 10.5% is slightly below the industry median 12.8%, with the stability of the rental income base moderating top-line growth.
※Source: Company compilation based on public financial statements
The company maintains a high-profit structure with an operating margin of 18.9%, 8.2pt above the industry median, supported by a stable rental income base and contributions from high-margin overseas projects. Marunouchi Business (margin 25.8%) and Overseas Business (margin 28.6%) together account for 48.5% of consolidated Operating Income, and together with the Commercial Real Estate Business (margin 22.3%) the rental income base serves as a stable cash generation source. The OCF / Net Income ratio of 2.16x and accrual ratio −3.2% indicate strong cash conversion and good earnings quality.
At the bottom-line, Net Income rose substantially to ¥2,355.2B (+13.9%) due to extraordinary gains of ¥1,095.9B including gains on sales of investment securities ¥981.4B; however, this improvement is reliant on one-off factors and assessment of sustainable earning power should focus on continued improvement at the Operating and Ordinary Income levels. Interest expense has increased to ¥551.2B (+15.9%) amid rising interest rates, and leverage remains relatively high at Debt/EBITDA 5.50x, expanding interest payment pressure. Although EBITDA interest coverage is 7.94x, balancing future interest trends and earnings growth is a monitoring priority.
The full-year forecast anticipates double-digit growth for Revenue ¥20,000.0B (+14.5%) and Operating Income ¥3,700.0B (+12.2%), assuming expanded domestic rental income and progress in overseas projects. Progress to Operating Income target is 89.1% and reasonable, but the Investment Management Business’s Operating Income decline of −88.0% introduces uncertainty to sustaining consolidated profit growth due to shifts in segment earnings mix. Capital expenditures of ¥5,247.3B (4.9x depreciation) indicate aggressive growth investment and significant potential to expand the future rental income base, though Free Cash Flow volatility may increase in the short term. The company maintains a conservative dividend ¥46.00 (payout ratio 25.3%) and pursues shareholder returns with share buybacks of ¥1,300.2B, yielding a Total Return Ratio of 78.7%, reflecting a shareholder-focused capital policy.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the company based on public financial statement data. Investment decisions are your responsibility; please consult professionals as needed.