Keihanshin Building Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

For Q1 of the fiscal year ending March 2027, the Company recorded increases in both revenue and income, with improved operating profit margins and increased investment income particularly driving growth at the ordinary income level. Revenue was ¥51.0B (+1.7% YoY), Operating Income was ¥16.3B (+10.2%), Ordinary Income was ¥17.4B (+12.6%), and Net Income attributable to owners of the parent was ¥12.1B (+12.5%), all exceeding the same period of the previous year. The Operating Income margin improved to 31.9% from 29.5% in the same period of the previous year, supported by an increase in the gross profit margin and control of SG&A expenses. The fact that growth in Ordinary Income exceeded growth in Operating Income was attributable to an increase in non-operating income, including dividend income of ¥2.6B.

Factors Affecting Results

【Revenue】The Company operates as a single segment, the Land and Building Leasing Business, and does not disclose a breakdown by business. Revenue increased to ¥51.0B, up +1.7% YoY, apparently reflecting stable rental income. No significant factors causing major fluctuations have been identified.

【Profit and Loss】Operating Income of ¥16.3B (+10.2%) was primarily attributable to a decrease in cost of sales to ¥30.1B (▲1.0% YoY), which improved the gross profit margin to 41.0% from 39.5% in the previous year. SG&A expenses also decreased to ¥4.6B (▲7.6%), reducing the SG&A ratio to 9.1% from 10.0% in the previous year. Ordinary Income of ¥17.4B (+12.6%) was boosted not only by growth in Operating Income but also by an increase in non-operating income of ¥3.5B, including dividend income of ¥2.6B. Meanwhile, interest expenses increased from ¥0.7B in the previous year to ¥1.2B, resulting in a higher interest burden. Extraordinary income and losses were virtually absent, consisting only of extraordinary income of ¥0.04B, and the impact of temporary factors was limited. Net Income attributable to owners of the parent of ¥12.1B (+12.5%) was broadly consistent with the growth in Ordinary Income, while the effective tax rate was approximately at a normal level of 30.8% versus 30.3% in the previous year. Overall, the Company achieved increases in both revenue and income.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 31.9% from 29.5% in the same period of the previous year, while the Net Income margin improved to 23.7% from 21.4%, reflecting cost efficiencies and the resilience of rental income.【Cash Flow Quality】Comprehensive Income was ¥40.2B, substantially exceeding Net Income of ¥12.1B. The difference of ¥28.1B was attributable to increases in market-linked other comprehensive income, including +¥17.3B in valuation difference on investment securities, +¥9.0B in land revaluation difference, and +¥1.7B in foreign currency translation adjustments; these items differ in nature from realized income.【Investment Efficiency】ROE (based on quarterly actual results, before annualization) was 1.4%. Given the level of revenue and income relative to total assets of ¥1860.3B, asset efficiency was limited, reflecting the structural characteristics of the asset-intensive real estate leasing business.【Financial Soundness】The Equity Ratio improved to 45.4% from 43.8% in the previous year. Interest-bearing debt was ¥845.8B (short-term borrowings of ¥83.3B, long-term borrowings of ¥262.5B, and bonds of ¥500.0B), approximately equivalent to equity of ¥844.6B. The current ratio was 107.9% and interest coverage was 13.35x, indicating a certain level of resilience to interest payment obligations.

Cash Flow Analysis

Cash and deposits decreased by ▲¥60.2B (▲35.6% YoY) to ¥108.9B, while investment securities increased by +12.2% YoY to ¥412.3B, and property, plant and equipment increased by +1.2% to ¥1299.1B. On the liabilities side, short-term borrowings increased to ¥83.3B (¥70.4B in the previous year, +18.4%), while long-term borrowings decreased to ¥262.5B (¥283.8B in the previous year, ▲7.5%), and bonds remained flat at ¥500.0B. These movements suggest that, while repayments of long-term borrowings proceeded, there was a partial shift toward short-term funding, with cash being reduced and funds allocated to investment securities and fixed assets. On-hand liquidity remained at a certain level, with a current ratio of 107.9% and cash to short-term borrowings of 1.31x; however, the decline in cash balances warrants monitoring as a funding trend.

Quality of Earnings

Extraordinary income and losses were virtually absent, consisting only of extraordinary income of ¥0.04B, and the correlation between Ordinary Income and Net Income was high. However, it should be noted that a portion of Ordinary Income of ¥17.4B was generated by investment-related income that differs from the underlying earnings power of the leasing business, represented by Operating Income of ¥16.3B, including dividend income of ¥2.6B (5.2% of Revenue) and gains on operation of investment business partnerships of ¥0.5B. Comprehensive Income of ¥40.2B substantially exceeded Net Income of ¥12.1B, and most of the ¥28.1B difference consisted of market-linked valuation items, such as +¥17.3B in valuation difference on investment securities and +¥9.0B in changes in land revaluation difference. These items differ in nature from realized income for the current period and contain a substantial accrual component. Accordingly, the sustainability of earnings should be evaluated by distinguishing recurring earnings from the leasing business from highly market-sensitive items such as dividend income and securities valuations.

Earnings Forecast and Guidance

Progress against the Full-Year plan was 24.9% for Revenue (51.0/205.0B), 29.6% for Operating Income (16.3/55.0B), 38.6% for Ordinary Income (17.4/45.0B), and 17.2% for Net Income (12.1/70.0B). Operating Income and Ordinary Income are progressing at a pace exceeding the quarterly benchmark of 25%, while Net Income is below that benchmark, possibly reflecting the incorporation of tax burdens and expense recognition in the second half. In particular, the high progress rate for Ordinary Income was largely attributable to the contribution of non-operating income, including dividend income, recorded in Q1, and may normalize over the full year. The Company revised its earnings forecast during the quarter. The Full-Year plan calls for Revenue of +1.2% YoY, Operating Income of ▲2.6%, and Ordinary Income of ▲19.7%, indicating an expected decline in income at the ordinary income level. The difference in direction between the increase in Q1 actual results and the Full-Year plan requires monitoring.

Shareholder Returns

The Full-Year dividend forecast is ¥15 per share (based on the post-stock-split basis), equivalent to an annual dividend of ¥60.00 on a pre-stock-split basis. There was no revision to the dividend forecast during the quarter. The Payout Ratio against forecast EPS of ¥73.37 is approximately 20.4%, calculated as ¥15/¥73.37, remaining at a conservative level. Treasury shares held totaled only approximately 2.3% of issued shares of 97,622 thousand shares (2,218 thousand shares), and no large-scale share repurchase during the current period has been identified.

Risk Factors

1. Rental Market Risk: The Company operates as a single segment, the Land and Building Leasing Business, and its business structure is such that fluctuations in rental levels and occupancy rates are directly reflected in results. While specific sensitivities are not disclosed in the materials and therefore cannot be quantified, the structural dependence of most earnings on a single business is a factor requiring attention.

2. Interest Rate Increase Risk: Interest expenses increased +69.4% from ¥0.7B in the same period of the previous year to ¥1.2B. Total interest-bearing debt was ¥845.8B (bonds of ¥500.0B, long-term borrowings of ¥262.5B, and short-term borrowings of ¥83.3B), approximately equivalent to equity of ¥844.6B. Accordingly, the interest payment burden could increase further in a rising interest rate environment. However, interest coverage was 13.35x, indicating a certain level of resilience at present.

3. Market Sensitivity of Investment Securities: Investment securities amounted to ¥412.3B, representing 22.2% of total assets, and increased +12.2% YoY. Fluctuations in valuation difference ( +¥17.3B for the current period) are reflected in net assets through Comprehensive Income, making financial indicators susceptible to market movements. In addition, cash and deposits decreased ▲35.6% YoY (▲¥60.2B), making the trend in the liquidity buffer another point requiring monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (real_estate)

Profitability and Return

Both the Operating Income margin and Net Income margin substantially exceeded the industry median, positioning the Company among the more profitable companies in the industry.

Growth and Capital Efficiency

The Revenue growth rate was slightly below the industry median, suggesting a structure in which the Company has an advantage in profitability rather than growth.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The Operating Income margin of 31.9% improved from 29.5% in the same period of the previous year and substantially exceeded the industry median of 7.1% (see INDUSTRY_BENCHMARK). Structural improvements in profitability through gross margin improvement and SG&A expense control have been confirmed.

2. The background to the growth in Ordinary Income (+12.6%) exceeding the growth in Operating Income (+10.2%) was an increase in investment income, including dividend income. Meanwhile, the Full-Year plan projects Ordinary Income of ▲19.7% YoY, differing in direction from the increase in Q1 actual results; this requires monitoring.

3. While cash and deposits decreased ▲35.6% YoY (▲¥60.2B), investment securities increased +12.2%, indicating an ongoing change in capital allocation. Interest-bearing debt of ¥845.8B is comparable to the level of equity, making the trend in financial leverage an important point of focus going forward.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥839–¥889 at a ±1% change in the cost of equity, and ¥863–¥864 at a change of ±0.1 in ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the Full-Year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest rate reference month: 2026-06 / This value 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. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and after consulting a professional as necessary.

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