Meiwa Estate Company Limited FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥58.99B
• Operating Income: ¥7.71B
• Net Income: ¥1.64B
• EPS: ¥205.97

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Meiwa Estate (TSE: 8869) delivered a strong FY2026 Q2 performance under JGAAP, with revenue of ¥58.99bn (+69.4% YoY) and operating income of ¥7.71bn (+185.0% YoY), highlighting robust project deliveries and strong operating leverage. Gross profit of ¥8.14bn implies a gross margin of 13.8%, consistent with condominium developer economics where COGS is driven by land and construction costs. The operating margin was notably high at approximately 13.1%, indicating tight SG&A control and favorable mix/timing of completions. Net income was ¥4.83bn (+193.7% YoY) with EPS of ¥205.97, reflecting improved profitability and scale benefits. DuPont analysis shows ROE of 12.76% driven by an 8.19% net margin, asset turnover of 0.417x, and financial leverage of 3.73x; leverage remains a meaningful ROE driver alongside margin expansion. Interest coverage is strong at 15.4x, suggesting ample buffer against rising interest costs despite a reported interest expense of ¥0.50bn. Liquidity appears solid with a current ratio of 207.5% and working capital of ¥72.6bn, although the quick ratio mirrors the current ratio due to inventories being unreported in the XBRL (zeros reflect non-disclosure, not actual zeros). Operating cash flow was negative ¥21.59bn, which is typical intra-year for developers due to land acquisition and work-in-progress build; financing cash inflow of ¥8.88bn likely supported project funding. The OCF/Net Income ratio of -4.47 and reported FCF of zero indicate a timing mismatch between earnings recognition and cash movements rather than structural earnings quality issues. The reported effective tax rate metric of 0.0% conflicts with a disclosed income tax expense of ¥0.68bn; based on available items, the effective tax rate appears low but clearly non-zero, suggesting mix and potential extraordinary/minority impacts. Balance sheet strength is underpinned by ¥141.35bn in assets and ¥37.85bn in equity, with a reported debt-to-equity ratio of 3.12x consistent with the asset-heavy, leverage-utilizing real estate model. Equity ratio was reported as 0.0% in the dataset but should be treated as undisclosed; equity is clearly present. Dividend data show DPS and payout as zero in the feed, which we interpret as unreported rather than no dividend declaration; policy assessment therefore relies on historical tendencies rather than current disclosure. Overall, profitability momentum is strong, underpinned by favorable delivery timing, controlled expenses, and manageable financing costs. Cash flow volatility and leverage are inherent to the business model, requiring continued monitoring of presales, land bank turnover, and interest rate sensitivity. Given the data gaps (notably inventories, cash, investing flows, and share count), conclusions focus on the reported non-zero items and industry patterns. Near-term outlook hinges on the conversion of pipeline to revenue, the cadence of handovers in H2, and maintenance of margins amid cost inflation.

Profitability Analysis

ROE of 12.76% decomposes into a net margin of 8.19%, asset turnover of 0.417x, and financial leverage of 3.73x, indicating profitability is supported by both margin expansion and leverage, while turnover remains moderate given the asset-intensive nature of real estate development. Gross margin of 13.8% and operating income of ¥7.71bn suggest SG&A remained tightly managed relative to sales, delivering high operating leverage as volumes scaled. YoY operating income growth of +185% materially outpaced revenue growth (+69.4%), confirming substantial positive operating leverage in the period. EBITDA of ¥7.82bn and an EBITDA margin of 13.3% underscore healthy underlying profitability given low depreciation (¥0.11bn), typical for developers whose capital base is largely inventory rather than PPE. Interest expense of ¥0.50bn against EBIT/EBITDA yields robust coverage of 15.4x, minimizing near-term earnings sensitivity to rate changes. Margin quality appears supported by a favorable mix of handovers and potentially disciplined land acquisition pricing; however, sustainability will depend on future project mix and construction cost dynamics. Ordinary income of ¥6.99bn below operating income implies non-operating headwinds (e.g., higher net interest or other losses), but the gap is modest and does not detract from the strong core operating performance.

Growth Assessment

Revenue grew 69.4% YoY to ¥58.99bn, indicating strong unit deliveries and/or higher ASPs, likely reflecting a favorable handover schedule in H1. Operating income growth of 185% YoY demonstrates substantial scale benefits and cost discipline, though such growth rates are unlikely to be linear given project timing. Net income growth of 193.7% YoY further confirms improved profitability, aided by operating leverage and controlled financing costs. Sustainability hinges on the presales pipeline, remaining backlog, and scheduled completions in H2 and FY2027; timing effects are material in this sector. Asset turnover of 0.417x suggests efficient utilization relative to the capital base for a developer, but further acceleration would require faster inventory cycles (not disclosed) and consistent land-to-delivery cadence. Given negative OCF from working capital build, future revenue growth is contingent on continued access to funding and successful sell-through of ongoing projects. Outlook is constructive near term if the company maintains margin discipline and execution on handovers; however, normalization of margins is plausible as cost inflation and interest rates evolve. The absence of disclosed investing cash flows and inventory detail limits precision in assessing growth capex and land bank replenishment; we assume reinvestment continues via operating working capital and debt funding.

Financial Health

Liquidity is strong on reported figures: current assets of ¥140.11bn and current liabilities of ¥67.51bn yield a current ratio of 207.5% and working capital of ¥72.6bn. The quick ratio matches the current ratio due to non-disclosure of inventories; actual quick liquidity is likely lower given real estate inventory composition. Total assets are ¥141.35bn and total liabilities ¥118.12bn, implying tangible equity of ¥37.85bn, though the equity ratio was reported as 0.0% in the dataset and should be treated as undisclosed. Debt-to-equity of 3.12x indicates a leveraged balance sheet, standard for the sector, and consistent with the DuPont financial leverage of 3.73x. Interest coverage of 15.4x suggests ample buffer against rate increases in the short term, but absolute interest expense (¥0.50bn in H1) could rise if funding scales with the land bank. Financing cash inflow of ¥8.88bn helped fund working capital, indicating continued lender support. Solvency remains adequate given profitability and coverage; however, reliance on short-term funding channels is typical and should be monitored alongside presales and inventory turnover.

Cash Flow Quality

Operating cash flow was negative ¥21.59bn despite strong profitability, yielding an OCF/Net Income ratio of -4.47, indicative of heavy working capital outflows linked to land acquisition, construction progress, and receivables timing around handovers. Free cash flow is reported as zero in the dataset; we treat this as non-disclosed rather than an actual zero, but directionally FCF is likely negative given the OCF deficit and typical investment needs in development. Depreciation is modest at ¥0.11bn, so earnings are not materially boosted by non-cash items; the gap between earnings and cash is primarily working capital driven. Financing inflow of ¥8.88bn partially offset the OCF shortfall, consistent with project financing norms. With inventories undisclosed, we infer significant inventory build or WIP accumulation as the key driver of negative OCF. Cash and equivalents are undisclosed; thus, we cannot evaluate immediate liquidity buffers or net debt precisely. Overall, earnings quality from an accrual standpoint appears reasonable given strong operating profitability, but cash conversion is inherently volatile and highly timing-dependent in this model.

Dividend Sustainability

Dividend data show DPS and payout ratio as zero in the feed, which should be interpreted as undisclosed rather than no dividend payment. Without confirmed DPS or total dividend outlay, we cannot compute a reliable payout ratio or FCF coverage for FY2026 H1. On earnings capacity, interim EPS of ¥205.97 suggests headroom for distributions if policy permits, but negative OCF and likely negative FCF in the period imply cash dividends would be funded by balance-sheet liquidity or financing until working capital normalizes. Historically, developers often align dividends with full-year results and delivery timing; sustainability depends on the cadence of cash inflows from settlements and presales. In absence of current policy disclosure, we assume a conservative stance: dividends should be calibrated to maintain leverage and liquidity, especially given ongoing land procurement needs and rate uncertainty.

Risk Assessment

Business Risks:

• Project timing risk: revenue and profit concentration around handover schedules can cause volatility.
• Market demand risk: slower condo sales or weaker presales could lengthen inventory turns and pressure margins.
• Cost inflation: construction and material cost increases may compress gross margins if not passed through.
• Land acquisition risk: overpaying for land or misjudging location demand can impair project IRRs.
• Regulatory and zoning changes: potential delays or cost overruns due to permitting and code changes.
• Execution risk in pipeline delivery, including subcontractor performance and supply chain disruptions.

Financial Risks:

• Leverage risk with debt-to-equity of 3.12x and financial leverage of 3.73x, exposing equity to funding conditions.
• Interest rate risk: higher base rates could raise financing costs and reduce coverage.
• Liquidity risk from negative OCF (¥21.59bn) and timing of cash settlements versus expenditures.
• Refinancing risk if credit conditions tighten, given reliance on bank lines and project financing.
• Valuation risk on inventory/WIP (undisclosed), including impairment potential in a downturn.

Key Concerns:

• Sustainability of high operating margins given cost pressures and mix effects.
• Magnitude and composition of inventories and land bank are undisclosed, limiting visibility on future deliveries.
• Discrepancy in reported effective tax rate (0.0%) versus actual tax expense (¥0.68bn), complicating bottom-line forecasting.
• Dependence on continued financing inflows to bridge working capital outlays.

Investment Implications

Key Takeaways:

• Strong H1 performance with revenue +69.4% YoY and operating income +185% YoY, driving ROE of 12.76%.
• Healthy margins (GPM 13.8%, EBITDA margin 13.3%) and robust interest coverage of 15.4x indicate solid core profitability.
• Negative OCF of ¥21.59bn underscores working capital intensity and timing effects typical of developers.
• Leverage is material (D/E 3.12x), but current ratio of 207.5% suggests near-term liquidity is adequate on reported data.
• Several key line items (inventories, cash, investing CF, DPS) are undisclosed, constraining precision in valuation and policy analysis.

Metrics to Watch:

• Presales, backlog, and scheduled handovers for H2 and FY2027.
• Inventory and land bank levels and turnover (when disclosed).
• Gross margin trajectory versus construction cost inflation.
• Net debt, funding mix, and interest cost trends as rates evolve.
• OCF recovery and FCF after settlements of current pipeline.
• Tax rate normalization and any extraordinary or minority interest impacts.

Relative Positioning: Within Japanese residential developers, Meiwa Estate’s H1 shows above-peer operating leverage and coverage strength, but visibility is limited by undisclosed inventory and cash data; sustainability versus peers will hinge on backlog quality and cost control through the next delivery cycles.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis