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| Metric | Current Period | Previous-Year Period | YoY |
|---|---|---|---|
| Revenue | ¥352.8B | ¥371.1B | −4.9% |
| Operating Income | ¥20.4B | ¥25.2B | −19.2% |
| Ordinary Income | ¥17.1B | ¥23.8B | −27.9% |
| Net Income | ¥11.2B | ¥16.0B | −30.4% |
| ROE (annualized) | 7.6% | 11.0% | - |
Executive Summary
FY2027 Q1 resulted in lower revenue and lower profit, as a sharp deterioration in the profitability of the core subdivision housing business weighed on overall performance. Revenue was ¥352.8B (-4.9% YoY), Operating Income was ¥20.4B (-19.2%), Ordinary Income was ¥17.1B (-27.9%), and Net Income was ¥11.2B (-30.4%). The decline in profit exceeded the decrease in revenue as a result of higher SG&A expenses combined with increased interest expenses. Although higher revenue and profit in the housing distribution, rental and management businesses partially offset the decline in subdivision housing, the Company as a whole posted lower revenue and lower profit.
Factors Affecting Performance
【Revenue】Revenue decreased 4.9% YoY to ¥352.8B. The primary factor was a 44.1% YoY decline in subdivision housing to ¥78.3B, which was partially offset by higher revenue in housing distribution (¥103.6B, +52.6%), land utilization (¥82.4B, +5.4%), and rental and management (¥88.9B, +7.7%). Construction-related revenue decreased 9.9% to ¥5.3B, and although the business remains small in scale, its profitability continues to deteriorate.
【Profit and Loss】Operating Income was ¥20.4B (-19.2%), and the Operating Income margin declined to 5.8% from 6.8% in the previous-year period. Segment profit in subdivision housing deteriorated to ¥2.1B (-78.0%), with the margin declining to 2.7%, making it the largest factor pressuring the Company-wide profit margin. Ordinary Income was ¥17.1B (-27.9%), while interest expenses increased 40.1% YoY to ¥5.2B, further weighing on the decline in Operating Income. Net Income was ¥11.2B (-30.4%), and extraordinary income and losses were nearly zero, indicating a limited impact from one-time factors. The results can be characterized as lower revenue and lower profit.
Segment Analysis
Rental and management was the largest profit-contributing business, with segment profit of ¥10.7B (+5.7%) and a margin of 12.0%. Housing distribution grew substantially, with segment profit of ¥5.1B (+126.3%), and its profit margin is also trending upward. In contrast, subdivision housing saw segment profit plunge to ¥2.1B (-78.0%), with the margin falling to 2.7%, making it the primary factor weighing on Company-wide profit. Land utilization was broadly flat, with segment profit of ¥6.9B (-2.7%), while construction-related operations recorded a segment loss of ¥0.2B, representing a wider loss than in the previous-year period. Across the overall business portfolio, stable earnings from rental and management are mitigating the volatility risk of subdivision housing.
Key Financial Indicators
【Profitability】The Operating Income margin was 5.8% and the Net Income margin was 3.2%, both down from the previous-year period (6.8% and 4.3%, respectively). The gross margin was 15.0%, slightly below 15.1% in the previous-year period, as deterioration in the profitability of subdivision housing pressured the Company-wide gross margin.【Cash Flow Quality】Comprehensive income was ¥12.8B, exceeding Net Income of ¥11.2B, with a ¥1.6B valuation difference on securities being the primary reason for the difference.【Investment Efficiency】ROE (annualized) was 7.6%, a level supported by financial leverage.【Financial Soundness】The Equity Ratio was 30.1%, remaining broadly at the same level as 30.2% in the previous-year period. Total assets were ¥1960.1B and net assets were ¥590.0B, both increasing moderately from the previous year.
Cash Flow Analysis
As detailed disclosure of the cash flow statement is not available in this financial report, funding trends are assessed based on balance sheet movements. Cash and deposits were ¥214.2B, slightly down from ¥217.0B in the previous-year period. Long-term borrowings increased to ¥759.1B from ¥750.7B in the previous-year period, indicating that funding related to the holding of real estate development and rental assets remains ongoing. Real estate for sale was ¥345.8B, down from ¥359.5B in the previous-year period, indicating progress in the disposal of subdivision housing inventory while the pace of new investment remained moderate. Retained earnings increased to ¥484.7B from ¥479.3B in the previous-year period, indicating that the accumulation of internal reserves is continuing.
Earnings Quality
Current-period profit was primarily generated by recurring operating results, while extraordinary income and extraordinary losses were both negligible (¥0.0B each); therefore, the impact of one-time factors on profit was limited. Non-operating expenses were ¥5.3B, nearly all of which comprised interest expenses, and their 40.1% YoY increase reflects a capital structure with high reliance on interest-bearing debt. This can be regarded as a structural factor that continuously pressures recurring earnings power. Non-operating income was small at ¥2.1B and comprised various items, including dividend income and subsidy income, although the amount of each item was limited. Comprehensive income of ¥12.8B slightly exceeded Net Income of ¥11.2B, primarily due to valuation differences on securities; therefore, the divergence between the two does not materially distort the underlying earnings power of the business.
Earnings Forecast and Guidance
The full-year forecast is Revenue of ¥1450.0B (+4.8% YoY), Operating Income of ¥91.0B (+9.7%), and Ordinary Income of ¥70.0B (+0.1%). The Q1 cumulative progress rates were 24.3% for Revenue, 22.4% for Operating Income, and 24.5% for Ordinary Income, with Operating Income slightly below the 25% level implied by even quarterly progress. The earnings forecast was revised during the quarter, and recovery in subdivision housing deliveries and improved profitability in subsequent quarters will be necessary to achieve the full-year plan. The real estate business is characterized by fluctuations in quarterly progress depending on the composition of property deliveries in each quarter.
Shareholder Returns
The full-year forecast for the annual dividend is ¥32.00 per share, with no revision to the dividend forecast during the quarter. The forecast Payout Ratio based on full-year forecast EPS of ¥128.61 is approximately 24.9%, calculated solely on the basis of dividends. Retained earnings of ¥484.7B provide capital support for dividend payments; however, under a capital structure with interest-bearing debt of ¥1173.2B, the dividend level will depend on the achievement of the full-year earnings plan.
Risk Factors
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Deterioration in the profitability of the subdivision housing business: Revenue declined 44.1% YoY, while segment profit decreased 78.0%, with the profit margin falling to 2.7%. Company-wide profit is highly sensitive to housing demand, the timing of property deliveries, and fluctuations in construction costs.
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Reliance on interest-bearing debt and rising interest expense: Interest expenses increased 40.1% YoY to ¥5.2B. The Company has a high reliance on interest-bearing debt, centered on long-term borrowings of ¥759.1B, and an environment of rising interest rates would have a significant impact on Ordinary Income.
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Expansion of losses in the construction-related business: Construction-related operations recorded a segment loss of ¥0.2B, widening from the ¥0.1B loss in the previous-year period. If improvements in order profitability and fixed-cost burdens are delayed, the business could erode profits generated by other operations.
Industry Benchmark (Reference; Compiled by the Company)
Industry Benchmark (real_estate)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income margin | 5.8% | 7.1% (1.9%–16.0%) | −1.3pt |
| Net Income margin | 3.2% | 4.4% (2.2%–10.8%) | −1.3pt |
Profitability is below the industry median for both metrics.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth rate (YoY) | −4.9% | 4.5% (-12.6%–22.7%) | −9.3pt |
Revenue growth is significantly below the industry median and is near the lower bound of the IQR.
Source: Compiled by the Company
Key Points from the Financial Results
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The rental and management business, with a profit margin of 12.0%, is the largest contributor to total segment profit, while growth in housing distribution is also mitigating the weakness in subdivision housing. Diversification of the business portfolio is contributing to the stabilization of Company-wide performance.
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The decline in the subdivision housing profit margin to 2.7% and the Company-wide gross margin of 15.0% represent profitability challenges in achieving the full-year profit growth plan. The Q1 Operating Income progress rate of 22.4% was below the 25% level implied by even progress, making delivery and profitability trends in subsequent quarters areas of focus.
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Due to a change in the allocation method for system-related expenses, segment profit for the current period and the previous-year period was prepared using the revised measurement method. This point should be taken into account when evaluating trends in profit margins by segment.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear (bearish) | ¥1,558 |
| base (base case) | ¥1,580 |
| bull (bullish) | ¥1,598 |
| Calculation Assumption | Value |
|---|---|
| Book value per share (BPS) | ¥1,650 |
| Adjusted forecast EPS | ¥136.7 |
| Cost of equity r | 9.77% (10-year JGB 2.77% + equity risk premium 6.00% + size premium 1.00%) |
| Persistence coefficient of residual income ω / explicit forecast period | 0.62 / 5 years |
| Assumed Payout Ratio | 24.9% |
| Forecast EPS confidence adjustment | ×1.062 (based on the historical guidance achievement rate of companies in the same industry) |
| Implied PBR / PER | 0.96x / 11.6x |
Sensitivity: ¥1,536–¥1,626 at ±1% for the cost of equity, and ¥1,578–¥1,582 at ±0.1 for ω.
Notes:
- Net Income is substantially compressed relative to Operating Income due to tax burden, acquisition-related expenses, and non-controlling interests, among other factors (Net Income ÷ Operating Income 51%). This figure reflects that compression at face value, and if the factors are temporary, normalized earnings power may be higher than this.
- Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
- Net assets as of the quarter-end are used; therefore, there is a timing gap relative to the full-year forecast.
- Because net assets include non-controlling interests, the theoretical value may be calculated somewhat on the high side.
(Calculation model: Residual income model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices)
This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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 discretion and responsibility, after consulting a professional where necessary.
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