| Metric | Current Period | Prior-Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥986.2B | ¥1266.7B | -22.1% |
| Operating Income / Operating Profit | ¥126.5B | ¥237.1B | -46.7% |
| Ordinary Income | ¥92.5B | ¥205.9B | -55.1% |
| Net Income | ¥59.1B | ¥145.9B | -59.5% |
| ROE | 1.0% | 2.4% | - |
FY2026 Q1 results showed Revenue of ¥986.2B (YoY -¥280.5B -22.1%), Operating Income of ¥126.5B (YoY -¥110.6B -46.7%), Ordinary Income of ¥92.5B (YoY -¥113.4B -55.1%), and Net income attributable to owners of parent of ¥59.1B (YoY -¥86.8B -59.5%), representing significant declines across all stages. The main drivers were a large decrease in housing business deliveries and increased interest expense, with Operating Margin down to 12.8% (from 18.7% a year earlier, -5.9pt) and Net Margin to 6.0% (from 11.5%, -5.5pt), substantially reducing profitability. Meanwhile, the core Office/Building Business recorded Revenue growth of +41.2% YoY and maintained an Operating Margin of 20.5%, providing a support role. Full Year guidance was left unchanged, but Q1 progress ratios are low at Revenue 18.8%, Operating Income 12.6%, and Net Income 9.4%, reflecting an assumption that housing deliveries will be concentrated in H2.
[Revenue] The Revenue decline to ¥986.2B (YoY -22.1%) was mainly attributable to a substantial decrease in the Housing Business by segment. The Building Business (commercial real estate) expanded steadily to ¥529.1B (+41.2%), accounting for 53.7% of total and continuing to grow as the core business. Stable expansion of rental income and completion contributions from development projects drove the Revenue increase. Conversely, the Housing Business fell sharply to ¥250.9B (-64.9%), with reduced condominium delivery volumes and timing shifts significantly depressing Revenue. The Asset Services Business grew to ¥152.9B (+25.8%), but even including Other Businesses, the Housing shortfall could not be offset. Revenue composition was Building Business 53.7%, Housing Business 25.4%, Asset Services Business 15.5%, Other 5.4%, increasing dependency on the Building Business.
[Profitability] Operating Income declined to ¥126.5B (-46.7%), a reduction exceeding the Revenue decline. Operating Income from the Building Business was ¥108.3B (+15.2%, margin 20.5%) maintaining high profitability, but the Housing Business fell to ¥28.4B (-80.6%, margin 11.3%) and Asset Services to ¥20.4B (-17.0%, margin 13.4%), compressing overall profits. SG&A was ¥113.4B, raising the SG&A-to-Revenue ratio to 11.5% (from 10.4% a year earlier, +1.1pt), reversing operating leverage. Non-operating income totaled ¥19.5B (dividend income ¥11.0B, foreign exchange gains ¥3.4B, etc.), but non-operating expenses expanded to ¥53.4B due to interest expense ¥41.1B (from ¥27.0B a year earlier, +52.0%) and foreign exchange losses ¥16.2B, worsening Ordinary Income to ¥92.5B (-55.1%). The increase in interest expense was associated with an increase in long-term borrowings (YoY +¥784.0B), and interest expense represented a high 32.5% of Operating Income. Extraordinary gains totaled ¥5.0B (including gains on sale of investment securities ¥4.8B) against extraordinary losses of ¥0.8B (impairment losses ¥0.2B, loss on retirement of fixed assets ¥0.6B), yielding a net extraordinary gain of ¥4.2B with minor impact. Pre-tax income of ¥96.7B less income taxes and other of ¥37.6B (effective tax rate 38.9%) resulted in Net income attributable to owners of parent of ¥59.1B (-59.5%). In conclusion, decreased Housing deliveries and increased interest burden led to declines in both Revenue and profit.
The Building Business (commercial real estate) posted Revenue of ¥529.1B (YoY +41.2%), Operating Income of ¥108.3B (+15.2%), and a margin of 20.5%, serving as the group profit core. Stable occupancy of rental offices and commercial facilities and contributions from new properties drove Revenue and profit expansion while maintaining high profitability. The Housing Business recorded Revenue of ¥250.9B (-64.9%), Operating Income of ¥28.4B (-80.6%), and margin of 11.3%, a substantial decline due to a large reduction in condominium deliveries, timing shifts, and property mix effects. The Asset Services Business secured Revenue of ¥152.9B (+25.8%) but Operating Income declined to ¥20.4B (-17.0%, margin 13.4%), indicating deteriorating profitability. Other Businesses posted Revenue of ¥53.2B (-4.5%), Operating Income ¥3.5B (-49.1%, margin 6.6%) and were small-scale but also reported declines. Profit composition before adjustments was Building Business 85.6%, Housing Business 22.5%, Asset Services Business 16.1%, Other 2.8%, indicating extremely high dependence on the Building Business.
[Profitability] Operating Margin fell sharply to 12.8% (from 18.7% a year earlier, -5.9pt), driven by a rise in SG&A ratio (11.5%, from 10.4%, +1.1pt) and shifts in Revenue composition. Ordinary Income margin was 9.4% (from 16.3%, -6.9pt), with interest expense of ¥41.1B reaching 32.5% of Operating Income, indicating a heavy interest burden. Net Margin was 6.0% (from 11.5%, -5.5pt), and a high effective tax rate of 38.9% further pressured margins. ROE was 1.0% (annualized ≈4.0%), showing weak capital efficiency. [Cash Quality] Interest coverage, calculated as Operating Income ÷ Interest Expense, was 3.08x, placing profit generation capacity against interest burden near a borderline level. Non-operating income of ¥19.5B represented 2.0% of Revenue, supported by dividend income and FX gains, but non-operating expenses of ¥53.4B (5.4% of Revenue) outweighed them and materially reduced profits at the ordinary level. [Investment Efficiency] Total asset turnover was approximately 0.165x on an annualized basis (estimated from the quarterly result), reflecting the asset-intensive business model typical of real estate developers. [Financial Soundness] Equity Ratio was 25.3% (from 26.6%, -1.3pt), with Net Assets of ¥603.6B against Total Assets of ¥2.39T, maintaining a stable capital base. D/E ratio was Interest-Bearing Debt ¥1,116.8B ÷ Net Assets ¥603.6B = 1.85x, Current Ratio was Current Assets ¥840.0B ÷ Current Liabilities ¥227.0B = 370%, indicating very strong short-term liquidity. Long-term borrowings were ¥1,051.7B (YoY +8.1%), corporate bonds ¥295.0B, and LTV (Interest-Bearing Debt ÷ Total Assets) was about 46.8%, a moderate level.
In non-operating accounts, income of ¥19.5B (dividend income ¥11.0B, interest income ¥2.1B, FX gains ¥3.4B, etc.) was outweighed by non-operating expenses of ¥53.4B including interest expense ¥41.1B and FX losses ¥16.2B, causing a reduction of -¥34.0B (-26.9%) from Operating Income ¥126.5B to Ordinary Income ¥92.5B. The rise in interest expense was associated with an increase in long-term borrowings of YoY +¥784.0B, and higher funding costs in a rising-rate environment are compressing earnings. Extraordinary items included a temporary gain on sale of investment securities ¥4.8B, but after subtracting loss on retirement of fixed assets ¥0.6B and impairment losses ¥0.2B, the net was a modest ¥4.2B. Pre-tax income of ¥96.7B less corporate taxes etc. ¥37.6B (effective tax rate 38.9%) produced Net income attributable to owners of parent of ¥59.1B. Comprehensive income was ¥123.6B, exceeding Net income, with Other Comprehensive Income of ¥64.5B (foreign currency translation adjustments ¥28.8B, valuation difference on available-for-sale securities ¥30.5B, share of other comprehensive income of investments accounted for using equity method ¥5.9B, etc.) reinforcing equity. Cash and deposits decreased by ¥348.0B YoY to ¥117.49B, but with short-term borrowings of ¥70.86B, cash coverage was 1.66x, securing sufficient short-term liquidity.
Earnings are mainly derived from recurring business activities, and distortions from one-off factors are limited. Extraordinary gains of ¥5.0B (including gains on sale of investment securities ¥4.8B) accounted for 5.2% of pre-tax income ¥96.7B, and extraordinary losses of ¥0.8B were minor, indicating no major distortion in the earnings structure. Non-operating income of ¥19.5B was 2.0% of Revenue and is composed primarily of dividend income ¥11.0B, FX gains ¥3.4B, and interest income ¥2.1B, items that can occur on a continuing basis. Conversely, non-operating expenses of ¥53.4B (5.4% of Revenue) were largely interest expense ¥41.1B and FX losses ¥16.2B, making interest and FX volatility structural pressures on profit. The decline from Ordinary Income ¥92.5B to Net Income ¥59.1B (-36.1%) was mainly due to a high effective tax rate of 38.9%. The divergence between Operating Income and Net Income (Operating ¥126.5B → Net ¥59.1B, -53.3%) is attributable to structural factors of interest expense and taxes, meaning external environment impacts exceeded the decline in core business profitability. The fact that Comprehensive Income ¥123.6B exceeds Net Income ¥59.1B shows valuation-type gains such as securities valuation differences and foreign currency translation adjustments serve as a capital cushion, but do not substitute for cash generation.
Full Year guidance remains Revenue ¥5,240.0B, Operating Income ¥1,000.0B (YoY +4.4%), Ordinary Income ¥805.0B (+3.0%), and Net income attributable to owners of parent ¥630.0B. Q1 progress ratios were low across the board: Revenue 18.8% (vs. standard 25%, -6.2pt), Operating Income 12.6% (-12.4pt), Net Income 9.4% (-15.6pt). This low progress is based on a plan that housing deliveries will be concentrated in H2, with large condominium projects expected to be recorded from Q2 onward. Q1 Operating Income of ¥126.5B represents 12.6% of the full-year Operating Income forecast of ¥1,000.0B; if the Building Business rental income contributes stably through the year and Housing recovers in H2, full-year targets remain achievable. Dividend forecast is annual ¥61.0 per share (interim and year-end each ¥30.5), with forecast EPS ¥303.44 indicating a Payout Ratio of about 20%, set conservatively.
Year-end dividend forecast is ¥61.0 per share for the full year, implying a Payout Ratio of about 20% against forecast EPS ¥303.44. Q1 EPS of ¥27.54, annualized, is approximately ¥110, which is conservative relative to the full-year EPS forecast of ¥303.44. Dividend policy appears to target stable dividends mindful of a floor while linked to earnings. No share buyback or disclosure on Total Return Ratio was provided; shareholder returns are implemented via dividends only. The decision to maintain the dividend forecast despite low Q1 profit progress reflects an expectation that H2 housing deliveries and stable rental business income will secure sufficient dividend funding. Even under high leverage and increased interest burden, the conservative 20% Payout Ratio helps preserve dividend sustainability.
Housing delivery timing risk: Q1 saw Housing Revenue decline sharply YoY -64.9% and Operating Income fell -80.6%. The full-year plan assumes deliveries concentrated in H2, but construction delays or weak sales would crystallize the risk of missing Revenue and profit targets. Inventories include ¥310.4B of properties for sale and ¥77.9B of construction in progress (WIP); slower turnover could lead to impairment risk.
Interest rate risk: With long-term borrowings of ¥1,051.7B and corporate bonds ¥295.0B, interest expense increased to ¥41.1B (YoY +52.0%). Interest expense as a percentage of Operating Income stands at a high 32.5%, and Interest Coverage is 3.08x, near a borderline level. Additional interest rate increases would further raise interest burden and materially compress Net Income.
Building Business concentration risk: The Building Business accounts for 85.6% of Operating Income, so deterioration in office market conditions or rising vacancy rates would have a large impact on overall earnings. Tangible fixed assets total ¥1,093.0B, of which land is ¥701.2B and buildings etc. ¥505.2B, meaning a majority of assets are rental properties; market downturns could manifest as both NOI declines and asset value impairments.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.8% | – | – |
| Net Margin | 6.0% | – | – |
Industry comparison data are limited, but a double-digit Operating Margin for a real estate developer is an appropriate level.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -22.1% | – | – |
Q1 showed a large Revenue decline due to timing shifts in housing deliveries, but recovery is expected over the full year.
※ Source: Company compilation
Q1 experienced a large decline in Revenue and profit due to reduced Housing deliveries and increased interest burden, but the core Building Business delivered Revenue +41.2% YoY and maintained a 20.5% margin, demonstrating resilience of the revenue base. Full-year guidance was left unchanged; although progress ratios are low, achievement appears possible if Housing deliveries concentrate in H2 and rental income contributes stably, making H2 booking trends the focal point.
Interest burden increased with interest expense rising to ¥41.1B (YoY +52.0%), reaching 32.5% of Operating Income. Interest Coverage is 3.08x, near a borderline level, so changes in the interest environment would meaningfully affect earnings. Conversely, D/E ratio of 1.85x, Current Ratio 370%, and LTV 46.8% indicate moderate financial safety and limited short-term liquidity risk. The increase in long-term borrowings signals ongoing development investment that should expand future rental income, but it carries time-to-stabilize and higher interest costs.
Dividends are conservatively set at ¥61 per share (Payout Ratio approx. 20%), providing resilience to profit volatility. ROE at 1.0% (annualized ≈4.0%) is low, reflecting the nature of real estate development where project income realization takes time; improvement is expected with H2 housing deliveries and expansion of rental asset operation. High dependence on the Building Business makes monitoring office market conditions and vacancy rates critical to assessing earnings stability.
This report is an AI-generated financial analysis document based on XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on publicly available financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.