| Indicator | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1169.2B | ¥947.6B | +23.4% |
| Operating Income / Operating Profit | ¥185.0B | ¥145.5B | +27.2% |
| Ordinary Income | ¥163.9B | ¥137.5B | +19.2% |
| Net Income / Net Profit | ¥84.5B | ¥69.1B | +22.3% |
| ROE | 10.4% | 9.4% | - |
For the fiscal year ended March 2026, Eslead achieved revenue of ¥1169.2B (YoY +¥221.6B, +23.4%), Operating Income of ¥185.0B (YoY +¥39.5B, +27.2%), Ordinary Income of ¥163.9B (YoY +¥26.4B, +19.2%), and Net Income of ¥84.5B (YoY +¥15.4B, +22.3%), representing year-on-year increases in both revenue and profit. Operating margin improved by 0.4pt to 15.8% (prior year 15.4%), while gross margin was maintained at 25.2% (prior year 25.2%). However, interest expense increased sharply to ¥23.5B (prior year ¥10.0B), causing the growth in Ordinary Income to lag Operating Income. Increased borrowings to build inventory pushed up finance costs, constraining Net Income margin to 7.2%. The core Real Estate Sales segment drove consolidated performance, with revenue of ¥883.6B (+32.3%).
[Revenue] Revenue was ¥1169.2B (+23.4%), achieving double-digit growth. The Real Estate Sales business recorded ¥883.6B (prior year ¥668.0B, +32.3%) primarily due to higher condominium units sold and improved selling prices. Other businesses (real estate leasing & management, power, construction & renovation, etc.) totaled ¥303.3B (prior year ¥290.6B, +4.4%), with rental income and management fees contributing. Gross margin improved 0.1pt to 25.2% (prior year 25.1%), reflecting price optimization and cost management. Cost of sales was ¥874.9B (+23.8%), rising in line with revenue; a valuation loss on inventory for sale of ¥2.1B (none in prior year) was a partial drag.
[Profitability] Operating Income was ¥185.0B (+27.2%), outpacing revenue growth, with SG&A ratio improving 0.5pt to 9.3% (prior year 9.8%). SG&A increased to ¥109.3B (+17.9%) with higher revenue, but efficiency gains on a sales basis delivered operating leverage. Non-operating results deteriorated as interest expense doubled to ¥23.5B (prior year ¥10.0B). This was driven by an increase in long-term borrowings to ¥1,314.8B (prior year ¥1,015.6B, +29.5%) to fund inventory build-up, raising finance costs. Ordinary Income was ¥163.9B (+19.2%), lagging Operating Income growth. Net Income settled at ¥84.5B (+22.3%) after income taxes and others of ¥52.2B (effective tax rate 31.9%), representing a solid finish and overall revenue and profit growth.
Segment profit for the Real Estate Sales business was ¥132.8B (prior year ¥114.5B, +16.0%), with a sales profit margin of 15.0% (prior year 17.1%), slightly down. The main reason was higher interest burden associated with increased inventory. Other businesses recorded segment profit of ¥59.4B (prior year ¥53.6B, +10.8%), with a margin of 16.4% (prior year 13.9%), reflecting stable income from real estate management & leasing and a higher proportion of profitable stock businesses. Corporate expenses were ¥27.5B (prior year ¥26.8B), broadly flat, indicating efficiency improvements in corporate functions. The Real Estate Sales segment accounts for over 70% of consolidated Operating Income, maintaining its position as the core segment.
[Profitability] Operating margin of 15.8% (prior year 15.4%) improved by 0.4pt, confirming strengthened profitability together with a gross margin of 25.2%. ROE was 10.4%, underpinned by the structure: Net Income margin 7.2% × Total Asset Turnover 0.44 × Financial Leverage 3.29x. Net Income margin was roughly flat vs prior year (7.3%) due to higher interest burden, while improvements in asset turnover (prior year 0.42) and leverage supported ROE. [Cash Quality] Operating Cash Flow (OCF)/Net Income was -3.54x, a large negative, mainly due to increased working capital from inventory growth (inventory change -¥540.8B). Interest coverage stood at 7.9x (EBIT ¥185.0B ÷ interest expense ¥23.5B), still solid but significantly down from 14.6x in the prior year. [Investment Efficiency] Total Asset Turnover improved to 0.44x (prior year 0.42x), aided by revenue expansion. [Financial Soundness] Equity Ratio was 30.4% (prior year 32.4%), declining while D/E ratio rose to 2.29x (prior year 2.09x). Current ratio was 484%, indicating very ample short-term liquidity; cash was ¥174.0B versus short-term borrowings of ¥26.6B, suggesting minimal short-term payment risk.
Operating Cash Flow was -¥395.3B (prior year -¥354.4B), a substantial negative, primarily due to inventory increase of -¥540.8B (inventory for sale +¥279.1B, properties under development +¥259.5B). Strategic investment to build the development pipeline absorbed cash, leaving operating CF subtotal at -¥321.8B, significantly below pre-tax profit of ¥163.9B. Investing CF was -¥10.9B, mainly capital expenditures ¥3.1B and intangible asset acquisitions ¥0.5B. Free Cash Flow was -¥406.3B, largely negative, while financing CF was +¥264.0B, with net increase in long-term borrowings of ¥299.2B as the main funding source. After dividend payments of ¥31.6B and net reduction in short-term borrowings of ¥13.5B, external financing maintained liquidity. Cash and deposits declined ¥138.4B to ¥174.0B (prior year ¥312.4B); although liquidity remains ample, continued inventory growth warrants attention to future funding needs.
With Ordinary Income of ¥163.9B versus Operating Income of ¥185.0B, non-operating items worsened by -¥21.1B. Breakdown: non-operating expenses ¥27.0B (interest expense ¥23.5B, fees paid ¥3.4B) far exceeded non-operating income ¥5.9B, and rising finance costs compressed profit margins at the ordinary level. Extraordinary items were minor at -¥0.3B (loss on disposal of fixed assets ¥0.3B), so one-off factors did not materially affect Net Income. Comprehensive income was ¥112.5B, ¥28.0B above Net Income of ¥84.5B, mainly due to an increase in valuation difference on available-for-sale securities of ¥0.8B. The large divergence between Operating CF -¥395.3B and Net Income ¥84.5B (OCF/Net Income -3.54x) indicates revenue recognition has not been converted to cash due to inventory build-up, leaving cash conversion a challenge. Accrual ratio was 18.9% (on a sales basis, prior year), and accelerating inventory turnover and delivery progress are essential to improve earnings quality.
For the fiscal year ending March 2027, the company forecasts Revenue ¥1,300.0B (+11.2%), Operating Income ¥205.0B (+10.8%), Ordinary Income ¥176.0B (+7.3%), and Net Income ¥86.0B (+1.7%). The company expects double-digit growth at the operating level, but momentum beyond ordinary income is conservative, factoring in continued interest burden. Revenue progress rate is 89.9% (current period ¥1,169.2B ÷ full-year forecast ¥1,300.0B), and Operating Income progress rate is 90.2%, already at a high level, suggesting limited upside in H2. Net Income progress rate is 98.3%, indicating the company has nearly achieved its full-year Net Income forecast and has a high probability of meeting the full-year targets. Operating margin is projected to remain 15.8% (on a full-year forecast basis), assuming continued fixed-cost absorption from higher revenue, but risks include interest rate rises and slower inventory turnover.
The dividend is set at annual ¥240 (interim ¥105, year-end ¥135), with payout ratio 33.2% (annual dividend ¥240 ÷ EPS ¥724.06). This represents a substantial increase from prior year dividend ¥85 (annualized) and indicates a stronger shareholder return stance. Dividend yield is roughly 4.5% versus BPS ¥5,285. Share buybacks were minimal at ¥0.0B, so total return ratio is roughly in line with the payout ratio. Forecast dividend for next year is ¥120, a decrease from this year, which appears intended to prioritize sustainability on an annual basis. Sustainability of dividends is constrained by FCF being -¥406.3B, meaning internal funds do not cover returns and payouts rely on financing CF (borrowing). Nonetheless, total dividends of ¥31.6B represent 37.4% of Net Income ¥84.5B, indicating capacity on a profit basis; if inventory turnover improves and OCF recovers, return capacity would expand.
Inventory buildup and market fluctuation risk: Inventory for sale ¥1115.2B and properties under development ¥1166.1B sum to inventory ¥2281.3B (85.0% of total assets). In a downturn in real estate markets or weakening demand, impairment or valuation loss risk could materialize. The company recorded valuation losses of ¥2.1B this period, and the large inventory scale increases sensitivity to price adjustments. Prolonged inventory turnover days will deteriorate capital efficiency and, combined with interest burdens, squeeze profitability.
Risk of higher finance costs from rising interest rates: Long-term borrowings rose to ¥1,314.8B (+29.5%), and interest expense doubled to ¥23.5B (prior year ¥10.0B). With a D/E ratio of 2.29x and Debt/EBITDA of 7.0x, leverage is high; rising interest rates could push up refinancing costs and directly hit margins. Interest coverage is 7.9x and still solid, but the downward trend from 14.6x in the prior year could erode financial flexibility if it continues.
Liquidity risk from persistent negative Operating CF: Operating CF of -¥395.3B marks the second consecutive year of large negative OCF, as inventory buildup impedes cash generation. With FCF at -¥406.3B and dividends of ¥31.6B funded by external financing (financing CF ¥264.0B), dependency on borrowing raises concerns about limits to funding and the ability to sustain returns or investments if financial conditions change. OCF/Net Income -3.54x and OCF/EBITDA -2.07x show very low cash conversion; without improved inventory turnover, sustainable growth is difficult.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 15.8% | 10.7% (6.8%–17.9%) | +5.2pt |
| Net Margin | 7.2% | 5.8% (2.5%–11.9%) | +1.4pt |
Both operating margin and net margin exceed industry medians, placing profitability at an upper level within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 23.4% | 12.8% (4.2%–29.2%) | +10.6pt |
Revenue growth rate exceeds the industry median by 10.6pt, positioning growth pace in the upper group within the industry.
※ Source: Company compilation
Tug-of-war between strengthened earnings power and interest burden: Operating margin 15.8% (improved +0.4pt) and maintained gross margin 25.2% indicate steadily strengthened operating profitability. While revenue expansion in Real Estate Sales and fixed-cost absorption progressed, the sharp rise in interest expense to ¥23.5B (prior year ¥10.0B) constrained growth in Ordinary Income. Interest coverage is 7.9x and still solid, but continued decline from 14.6x last year would warrant attention to financial flexibility in a rising-rate environment.
Inventory buildup and capital efficiency challenges: Inventory has grown large to ¥2,281.3B (85.0% of total assets), and with Operating CF -¥395.3B and FCF -¥406.3B for two consecutive years, recovery of cash-generating ability is difficult without turnover improvement. OCF/EBITDA -2.07x and OCF/Net Income -3.54x reflect extremely low cash conversion; inventory turnover days, delivery progress, and contract rates will determine future capital efficiency and borrowing capacity. Next-year guidance assumes continued revenue and profit growth, but Net Income growth of only +1.7% is conservative and control over interest costs and inventory turnover will be required.
Dividend sustainability and industry positioning: Payout ratio of 33.2% indicates sufficient return capacity on a profit basis, but negative FCF means returns are funded by financing CF (borrowings). Total dividend amount ¥31.6B equals 37.4% of Net Income ¥84.5B; if inventory turnover-driven OCF improvement occurs, internal funding for returns could expand. Within the industry, Operating Margin 15.8% (median 10.7%), Net Margin 7.2% (median 5.8%), and Revenue Growth 23.4% (median 12.8%) place the company in an upper peer group. Optimizing leverage and accelerating inventory turnover are key to balancing profitability and capital efficiency.
This report is an earnings analysis document automatically 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 company based on public financial statements. Investment decisions should be made at your own responsibility, and if necessary, after consulting a professional advisor.