| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥508.6B | ¥420.8B | +20.9% |
| Operating Income | ¥151.1B | ¥132.0B | +14.5% |
| Ordinary Income | ¥129.8B | ¥116.5B | +11.4% |
| Net Income | ¥106.4B | ¥92.5B | +15.0% |
| ROE | 8.4% | 7.8% | - |
For the fiscal year ended March 2026, Revenue was ¥508.6B (YoY +¥87.8B +20.9%), Operating Income was ¥151.1B (YoY +¥19.1B +14.5%), Ordinary Income was ¥129.8B (YoY +¥13.3B +11.4%), and Net Income was ¥106.4B (YoY +¥13.9B +15.0%), delivering year-over-year revenue and profit growth. The Building Business led results with Revenue of ¥462.9B (+21.7%) and Operating Income of ¥146.6B (+12.7%), while the Asset Management Business complemented overall profitability with Revenue of ¥46.2B (+13.3%) and Operating Income of ¥27.4B (+16.2%), maintaining a high margin of 59.3%. Operating margin was 29.7% (down -1.7pt from 31.4% a year earlier) and gross profit margin was 41.9% (down -3.4pt from 45.3%) as construction cost increases compressed gross margins, but absolute profit levels remained among historical highs. Special gains of ¥32.5B (including ¥26.9B gain on sale of investment securities) boosted profit before tax; under an effective tax rate of 30.6%, Net Income achieved double-digit growth. EPS165.63円 (from 141.55円, +17.0%) and BPS1,918.61円 (from 1,767.08円, +8.6%) both improved. Dividends were annual ¥98 (interim ¥36, year-end ¥62), with a payout ratio of 60.8%, representing strong shareholder returns. Operating Cash Flow was ¥148.5B (YoY -7.5%), securing 1.4x Net Income, but aggressive capital expenditure of ¥207.8B resulted in Free Cash Flow of -¥116.2B, and ¥108.0B was raised in financing activities to maintain liquidity. Total assets expanded to ¥4,518.4B (YoY +¥323.0B) and total equity to ¥1,267.6B (YoY +¥87.6B), leaving the Equity Ratio at 28.1% unchanged. Interest-bearing debt stood at ¥2,304.6B (long-term borrowings ¥2,066.7B, corporate bonds ¥228.9B, short-term ¥0.8B, including ¥3,026.9B due within one year) and leverage remained elevated. The next fiscal year plan forecasts Revenue of ¥638.0B (+25.5%), Operating Income of ¥158.0B (+4.6%), and Ordinary Income of ¥130.0B (+0.2%), expecting top-line growth to continue while profit growth is modestly constrained by higher interest expenses.
[Revenue] ¥508.6B (YoY +¥87.8B +20.9%). By segment, the Building Business accounted for ¥462.9B (91.0% share, YoY +¥81.9B +21.7%) as the core driver, and the Asset Management Business recorded ¥46.2B (9.0% share, YoY +¥5.4B +13.3%) achieving double-digit revenue growth. The Building Business increase was driven by expanded rental income from newly operational office and retail properties and progress on sales of properties for sale. The Asset Management Business benefitted from increased asset management fees from Heiwa Real Estate REIT and growing brokerage fees from housing services. Top-line growth was supported by occupancy and leasing performance at new properties, and inventory build-up (properties for sale ¥558.2B, YoY +¥260.0B) preparing future revenue.
[Profitability] Cost of sales was ¥295.4B (58.1% of revenue, YoY +¥68.3B +30.1%), and construction cost inflation compressed gross margin to 41.9% (down -3.4pt from 45.3%). Gross profit was ¥213.2B (YoY +¥19.5B +10.1%). SG&A was ¥62.1B (12.2% of revenue, YoY +¥3.6B +6.0%), with major components including salaries and allowances ¥17.6B and outsourced expenses ¥9.96B. SG&A growth lagged revenue growth significantly, producing operating leverage. Operating Income was ¥151.1B (YoY +¥19.1B +14.5%), with operating margin of 29.7% (down -1.7pt from 31.4%). Non-operating income was ¥7.4B (including dividends received ¥6.4B) while non-operating expenses were ¥28.7B (interest expense ¥25.1B, up +32.8% from ¥18.9B), reflecting rising interest burden. Ordinary Income was ¥129.8B (YoY +¥13.3B +11.4%), with an ordinary margin of 25.5% (down -2.2pt from 27.7%). Special gains totaled ¥32.5B (gain on sale of investment securities ¥26.9B, subsidies ¥0.9B, gain on sale of fixed assets ¥0.4B) and special losses were ¥3.3B (loss on disposal/sale of fixed assets ¥0.1B, impairment ¥0.1B), resulting in profit before tax of ¥159.0B (from ¥124.3B, +27.9%). Income taxes were ¥48.6B (effective tax rate 30.6%, up +7.5pt from 23.1%), yielding Net Income of ¥106.4B (YoY +¥13.9B +15.0%). In conclusion, robust revenue growth in the Building Business and high margins in Asset Management drove higher revenue and profit, but margin contraction from gross margin deterioration and higher interest expense narrowed profitability. The contribution of special gains temporarily lifted profit before tax, so sustainability on an ordinary basis will be key for future growth.
The Building Business (Revenue ¥462.9B, Operating Income ¥146.6B, margin 31.7%) is the primary segment, accounting for 91.0% of revenue. Year-on-year, revenue rose +21.7% and Operating Income +12.7%, though margin declined -1.5pt from 33.2% the prior year. Construction cost increases and initial leasing costs for new operations compressed gross margins, yet successful ramp-up of new properties contributed to absolute profit growth. The Asset Management Business (Revenue ¥46.2B, Operating Income ¥27.4B, margin 59.3%) maintained high profitability despite a 9.0% revenue share. It achieved revenue +13.3% and Operating Income +16.2% YoY, improving margin +1.6pt from 57.7% as AUM expansion of Heiwa Real Estate REIT increased management fees and brokerage transactions grew. The margin gap between segments is 27.6pt, and the company-level Operating margin of 29.7% reflects the scale of the Building Business combined with the high margins of Asset Management. High concentration in the Building Business means development cycles and market fluctuations directly affect consolidated results, while expansion in Asset Management supports revenue stability and margin improvement.
[Profitability] Operating margin 29.7%, Net margin 20.9%, Gross profit margin 41.9% — all decreased YoY (Operating -1.7pt, Net -0.1pt, Gross -3.4pt) but remain at high absolute levels indicating sustained earning power. ROE 8.4% (from 7.9%, +0.5pt) shows improved return on equity, reflecting Net Income ¥106.4B divided by equity ¥1,267.6B. SG&A ratio 12.2% declined -1.7pt from 13.9%, indicating effective cost control and operating leverage from revenue growth. [Cash Quality] Operating CF / Net Income ratio 139.6%, with Operating CF ¥148.5B exceeding Net Income ¥106.4B by 38.2%. Operating CF / EBITDA ratio 71.0% (EBITDA computed from Operating CF subtotal ¥213.3B / depreciation ¥58.2B) indicates healthy cash conversion, though inventory increases and advances received limit improvement. Accrual ratio -0.8% indicates cash backing of profits is sound. [Investment Efficiency] Total asset turnover 0.113x (from 0.100x) slightly increased. Financial leverage 3.56x (Total assets ¥4,518.4B / Equity ¥1,267.6B) indicates high use of debt, ROA 2.4% (Net Income / ending total assets). While explicit invested capital and NOPAT for ROIC are not provided, assuming invested capital = interest-bearing debt ¥2,304.6B + equity ¥1,267.6B = ¥3,572.2B against Operating Income ¥151.1B yields an indicative ROIC of around 4.2%, implying capital efficiency that relies on leverage. [Financial Soundness] Equity Ratio 28.1% (unchanged from prior year), D/E 1.82x (interest-bearing debt ¥2,304.6B / equity ¥1,267.6B) indicates high debt dependence. Current ratio 222.5% (current assets ¥933.7B / current liabilities ¥419.7B) shows solid short-term liquidity; cash and deposits ¥199.3B + short-term investment securities ¥111.8B = liquidity assets ¥311.1B cover 74.1% of current liabilities ¥419.7B. Interest-bearing debt composition includes long-term borrowings ¥2,066.7B, corporate bonds ¥228.9B, and current portion of long-term debt ¥3,026.9B; fixed asset to long-term funds ratio 118.2% (fixed assets ¥3,581.8B / (equity ¥1,267.6B + fixed liabilities ¥2,831.0B)) exceeds 100% indicating reliance of fixed assets on liabilities. Interest expense ¥25.1B vs. EBIT ¥151.1B gives interest coverage of 6.0x — moderate headroom for interest burden.
Operating CF was ¥148.5B (from ¥160.5B, -7.5%). From an Operating CF subtotal of ¥213.3B (from ¥208.3B), working capital changes of -¥64.8B led to net operating cash of ¥148.5B after corporate tax payments ¥47.0B, interest & dividend receipts ¥7.1B, and interest payments ¥24.9B. Working capital changes comprised increase in inventories -¥11.2B (build-up of properties for sale), decrease in trade receivables +¥1.8B, increase in trade payables +¥4.8B, increase in advances received +¥10.5B, and increase in custody deposits +¥6.8B — inventory accumulation was a cash outflow partially offset by higher advances received. Investing CF was -¥264.7B (from -¥248.4B), led by capital expenditures -¥207.8B, acquisition of short-term investment securities -¥70.0B and sales/redemptions +¥37.6B, acquisition of investment securities -¥22.1B and sales +¥27.0B, reflecting a priority on growth investments net. Free Cash Flow was -¥116.2B (from -¥87.9B), widening the deficit. Financing CF was +¥108.0B (from +¥77.2B), composed of long-term borrowings raised ¥389.7B less repayments ¥190.5B yielding net borrowings +¥199.2B, bond redemptions -¥42.6B, dividend payments -¥60.5B, and share buybacks -¥17.6B. Financing CF covered the FCF deficit, and cash and cash equivalents fell from ¥252.4B at the beginning of the period to ¥244.3B at year-end (-¥8.2B), while liquidity assets (cash + short-term investment securities) remained at ¥311.1B covering 74.1% of current liabilities, leaving short-term liquidity comfortable. While Operating CF / Net Income ratio 139.6% indicates good cash backing of profits, achieving FCF positivity in the investment recovery phase and deleveraging from borrowing dependence are key to mid-term financial stability.
Ordinary Income ¥129.8B is the core of recurring earnings; non-operating income ¥7.4B (dividends received ¥6.4B, interest received ¥0.8B, etc.) is limited at 1.5% of revenue. Non-operating expenses ¥28.7B (mostly interest expense ¥25.1B) increased in the rising interest rate environment, reducing Ordinary Income by ¥21.3B from Operating Income. Special gains ¥32.5B (gain on sale of investment securities ¥26.9B, subsidies ¥0.9B, gain on sale of fixed assets ¥0.4B) are one-off and represent 20.4% of profit before tax of ¥159.0B. Special losses ¥3.3B (loss on disposal/sale of fixed assets ¥0.1B, impairment ¥0.1B) were minor. Of Net Income ¥106.4B, recurring (ordinary) profit-based Net Income is estimated at approximately ¥74B (ordinary profit before tax ¥129.8B less an apportioned tax) indicating material dependence on one-off gains. Operating CF ¥148.5B / Net Income ¥106.4B = 1.40x shows strong cash backing, and the accrual ratio (Net Income − Operating CF)/Total assets = -0.8% indicates high earnings quality. However, Operating CF subtotal ¥213.3B vs. Operating CF ¥148.5B shows working capital changes caused -¥64.8B cash outflow; inventory build-up and advances received affected cash efficiency. Goodwill amortization ¥0.6B is trivial (0.4% of Operating Income) with limited impact. Deferred tax liabilities increased to ¥99.5B (from ¥73.7B, +¥25.8B), reflecting valuation differences on investment securities ¥52.6B and land revaluation impacts. Comprehensive income ¥165.5B (Net Income ¥106.4B + valuation difference on available-for-sale securities ¥52.6B + deferred hedge profit/loss ¥2.6B − land revaluation ¥0B) differs from Net Income by ¥59.1B, indicating significant mark-to-market effects. It is necessary to separate the stability of ordinary earnings from one-off gains; going forward, sustained growth in Operating Income and Ordinary Income will be the primary indicators of earnings quality.
Next fiscal year (FY2027) plan forecasts Revenue ¥638.0B (YoY +¥129.4B +25.5%), Operating Income ¥158.0B (YoY +¥6.9B +4.6%), Ordinary Income ¥130.0B (YoY +¥0.2B +0.2%), and Net Income attributable to owners of parent ¥115.0B (YoY +¥8.6B +8.1%). Top-line is expected to deliver double-digit growth driven by newly operational properties from aggressive investment and expansion of Asset Management, while Operating Income growth is constrained by higher interest expenses (continued increase in interest payments) and conservative gross margin assumptions. Ordinary Income is expected to be almost flat as rising non-operating expenses offset operating improvements. Net Income is planned to increase 8.1% assuming the prior year’s special gains of ¥32.5B do not recur. Year-end dividend is revised from ¥61 to ¥62, with annual dividend implied at ¥44 (including interim dividend on a pre-2025 July stock-split basis), and with forecast EPS174.06円 the payout ratio is about 25%, a significant decline from 60.8% this period. This reflects split-adjusted base and reduction of special dividend. From a progress perspective, comparison with full-year actuals is excluded, but inventory levels (properties for sale ¥558.2B) and construction in progress ¥336.2B underpin next year’s revenue plan. Achievement depends on stability of interest rate environment, leasing progress, and containment of construction cost inflation.
Annual dividend was ¥98 (interim ¥36, year-end ¥62), adjusted from prior year total ¥145 (interim ¥36, year-end ¥109) due to the 1-for-2 stock split effective July 1, 2025; year-end dividend composition was ordinary dividend ¥47 and special dividend ¥15, down from prior year ordinary ¥79 and special ¥30. Payout ratio was 60.8% (¥98 on EPS165.63円), maintained at a high level and unchanged from prior year 60.8%. Total shareholder return was dividend ¥60.5B + share buybacks ¥17.6B = total return ¥78.1B / Net Income ¥106.4B = 73.4%, exceeding the payout ratio. Sustainability of dividends: Free Cash Flow -¥116.2B vs. dividend + buybacks ¥78.1B indicates a 67% shortfall — returns were not covered by internally generated cash this period. Returns were maintained via net borrowing increase ¥199.2B and asset replacement (gain on sale of investment securities ¥26.9B). Medium-term prerequisites for dividend sustainability are: (1) strengthening cash generation via improving Operating CF / EBITDA ratio, (2) achieving FCF positivity through investment recovery, and (3) growth in Ordinary Income independent of one-off gains. Next period plan implies payout ratio around 25% (post-split adjustment), reflecting reduced special dividends and prioritization of growth investments. Dividend policy remains stable ordinary dividends plus performance-linked special dividends, with flexibility to adjust according to business cycle and investment recovery progress.
High leverage and interest rate sensitivity: D/E 1.82x and interest-bearing debt ¥2,304.6B with interest payments ¥25.1B (up +32.8% from ¥18.9B) show rising interest burden. There is refinancing and spread expansion risk on long-term borrowings and bonds; a 1% rise in interest rates is estimated to increase annual interest payments by about ¥23B. Interest coverage of 6.0x provides some cushion, but ordinary income could be pressured in a rising rate environment.
Gross margin compression and construction cost inflation: Gross profit margin 41.9% (down -3.4pt from 45.3%) and operating margin 29.7% (down -1.7pt from 31.4%) indicate margin contraction. Continued construction cost increases and material price inflation pose margin risk for future development projects. A 1pt decline in gross margin could reduce Operating Income by approximately ¥5B.
Inventory & investment recovery risk and business concentration: Properties for sale ¥558.2B (YoY +¥260.0B +87.2%) show rapid inventory build-up, posing risk of valuation losses and capital tie-up if turnover slows or market deteriorates. With the Building Business accounting for 91.0% of revenue, delays in development cycles or leasing underperformance would directly impact consolidated results. Disclosure of backlog and contract liabilities is limited, reducing transparency of future revenue visibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 29.7% | 10.7% (6.8%–17.9%) | +19.1pt |
| Net Margin | 20.9% | 5.8% (2.5%–11.9%) | +15.1pt |
Profitability ranks high within the industry, with Operating and Net margins well above median. The high margin of the Asset Management Business (59.3%) lifts the company average.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 20.9% | 12.8% (4.2%–29.2%) | +8.1pt |
Revenue growth outpaces the industry median by 8.1pt, driven by new property operations and aggressive investment, maintaining relatively high growth within the sector.
※ Source: Company compilation
Combining high profitability and growth investment: Maintaining industry-leading profitability with Operating margin 29.7% and Net margin 20.9% while continuing aggressive investment (CapEx ¥207.8B, 3.6x depreciation ¥58.2B). Inventory (properties for sale ¥558.2B) and construction in progress ¥336.2B are sources for future revenue and profit, but timing of investment recovery, leasing assumptions, and ability to absorb construction cost inflation are critical to sustaining growth. Next year’s plan targets +25.5% revenue growth but only +4.6% Operating Income, highlighting structural pressures from margin compression and rising interest expense.
Managing leverage and interest sensitivity: Interest-bearing debt ¥2,304.6B, D/E 1.82x, and interest payments ¥25.1B (YoY +32.8%) show increasing interest burden under high leverage. Interest coverage 6.0x provides moderate cushion, but rising rates could compress Ordinary Income. Free Cash Flow -¥116.2B reflects investment priority, and dividend + buybacks ¥78.1B were funded by net borrowing +¥199.2B and asset sales. Medium-term financial stability metrics will include improving Operating CF / EBITDA (currently 71.0%) and deleveraging (Debt/EBITDA reduction).
Dependence on special gains and sustainability of core earnings: Special gains ¥32.5B (20.4% of profit before tax) materially contributed to Net Income ¥106.4B, implying recurring ordinary profit around ¥74B. Future periods should assume the non-recurrence of one-offs; sustainable performance will depend on achieving Operating Income ¥158.0B and Ordinary Income ¥130.0B. Payout ratio is planned to fall from 60.8% to about 25% (post-split adjustment), reflecting reduced special dividends and prioritization of growth investments. Expansion and margin of the Asset Management Business (59.3%) are key to stabilizing consolidated earnings and improving margins.
This report was auto-generated by AI analyzing XBRL earnings announcement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.