NISSHIN GROUP HOLDINGS Company,Limited FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥35.98B
• Operating Income: ¥3.08B
• Net Income: ¥2.07B
• EPS: ¥44.30

Income Statement

Balance Sheet

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

FY2026 Q2 was a strong profitability inflection for Nisshin Group Holdings, with substantial margin recovery driving a sharp rebound in earnings. Revenue rose 33.6% YoY to 359.85, reflecting a robust handover/delivery schedule and improved sales momentum. Operating income surged 547.6% YoY to 30.81, taking operating margin to 8.6%. Ordinary income jumped 834.3% to 28.14 despite higher non-operating expenses, supported by better core profit. Net income increased 50.7% to 20.69, implying a net margin of 5.8%. Gross margin printed at 18.0%, indicating healthy project-level profitability relative to SG&A. Using the reported YoY growth, we estimate prior-year operating margin at ~1.8%, implying operating margin expansion of roughly +679 bps YoY to 8.6%. Net margin likely expanded by about +65 bps YoY (from ~5.1% to 5.8%), with non-operating costs and a normalized 31.1% effective tax rate tempering the flow-through. Interest coverage improved to 8.60x (30.81/3.58), evidencing better earnings headroom against financing costs. Balance sheet liquidity is very strong: current ratio at 338% and cash/deposits at 521.57 support ongoing operations and land acquisition flexibility. Leverage is moderate with D/E at 0.97x and ample unused current assets versus short-term loans (84.84). ROE is modest at 2.9% per DuPont (NPM 5.8% × AT 0.259 × leverage 1.97x), constrained by low asset turnover inherent in development cycles and still-low capital efficiency (ROIC 3.7%). Earnings quality cannot be fully assessed due to unreported operating cash flow; thus, sustainability relies on continued delivery cadence and margin discipline. Forward-looking, the step-up in operating margin suggests improved pricing/mix and SG&A leverage, but revenue and cash flows will remain lumpy given the development model. The main watchpoints are gross margin durability amid cost inflation, sales pace/backlog to secure FY-end deliveries, and interest expense trajectory.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.9% = Net Profit Margin 5.8% × Asset Turnover 0.259 × Financial Leverage 1.97x. The biggest driver of change YoY is the profit margin component, inferred from operating income growth (+547.6% YoY) far outpacing revenue growth (+33.6% YoY), which lifted operating margin to ~8.6% from an estimated ~1.8% a year ago. Business drivers likely include stronger project mix/pricing, better absorption of fixed SG&A on higher deliveries, and potentially more disciplined land acquisition/COGS control reducing cost overruns. Asset turnover remains structurally low at 0.259, typical for developers carrying sizable work-in-progress and land bank; this likely changed little YoY. Financial leverage at 1.97x appears stable-to-moderate; no indication of a leverage-driven ROE swing. Sustainability: the margin uplift is partly cyclical/lumpy (delivery timing) but can be partially sustained if cost controls and pricing hold; however, it is vulnerable to construction cost inflation and sales pace. Watch for any adverse trend where SG&A growth would exceed revenue growth; in this period, operating leverage is positive as SG&A (33.86) was held well below gross profit (64.68), enabling strong operating profit.

Growth Assessment

Revenue growth of +33.6% YoY to 359.85 is strong, likely driven by an increased volume of completed unit handovers and potentially improved ASP mix. Operating income growth of +547.6% YoY indicates significant operating leverage, suggesting better gross-to-SG&A spread and/or favorable project margins. Net income growth of +50.7% lagged operating income due to higher non-operating expenses (notably interest expense of 3.58) and a normalized tax rate. Sustainability is moderate: growth in this business is inherently lumpy and tied to delivery schedules and contracted backlog; without order/backlog disclosure, visibility remains limited. The current 18.0% gross margin is healthy but sensitive to input cost inflation and pricing discipline. With ROIC at 3.7% (<5% benchmark), capital efficiency remains a headwind to long-term value creation unless asset turns improve or margins structurally rise. Near-term outlook depends on land pipeline, sales progress, and construction timelines; continued interest coverage at ~8.6x provides some buffer if rates or costs rise.

Financial Health

Liquidity is strong: current ratio 337.9% (>1.5 benchmark) and cash/deposits at 521.57 provide ample near-term coverage. No warning on current ratio (<1.0) or D/E (>2.0): D/E stands at 0.97x, within conservative bounds. Maturity profile appears balanced: short-term loans of 84.84 are well covered by current assets of 1,226.96, reducing near-term refinancing pressure; noncurrent loans of 300.48 spread obligations over time. Total liabilities of 684.92 vs total equity of 703.70 indicate a stable capital base. Interest coverage of 8.60x is strong (>5x benchmark), suggesting manageable financing risk. No off-balance sheet obligations were reported in the provided data; absence of disclosure does not imply absence of such commitments (e.g., guarantees) common in real estate projects.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and free cash flow cannot be assessed; we cannot confirm cash earnings conversion. Given the development model, working capital swings (land acquisition, construction in progress, and inventory build/handovers) can cause OCF volatility; without inventory and receivable details, we cannot identify timing effects or potential working capital management tactics. Interest expense (3.58) is well covered by operating profit, which supports cash interest service, but full FCF sustainability for dividends and capex cannot be determined from available data. No clear signs of working capital manipulation can be inferred due to data gaps.

Dividend Sustainability

A calculated payout ratio of 52.2% sits within the <60% benchmark for sustainability, but DPS/total dividends were unreported, limiting precision. With OCF and FCF unreported, coverage from free cash flow cannot be assessed; reliance is on accounting earnings, which are lumpy in this sector. Balance sheet liquidity (cash 521.57, strong current ratio) provides a near-term cushion for dividends. Policy outlook is uncertain without management guidance; maintaining dividends at a ~50% payout would likely depend on stable delivery volumes and margin retention through FY-end.

Risk Assessment

Business Risks:

• Delivery timing risk leading to lumpy revenue and earnings recognition
• Residential market demand softness affecting sales pace and pricing
• Construction cost inflation compressing gross margins
• Land acquisition competition and price escalation impacting project IRRs
• Project cancellation/deferral risk and associated inventory holding costs

Financial Risks:

• Refinancing and interest rate risk given 385.3 of loans (short-term 84.84, long-term 300.48)
• Potential working capital spikes tied to land purchases and construction progress
• Cash flow volatility due to handover timing with unreported OCF data
• Asset turnover constraints (AT 0.259) limiting ROE/ROIC unless margins structurally improve

Key Concerns:

• Low ROIC at 3.7% (<5% warning), signaling weak capital efficiency
• Earnings visibility limited by lack of backlog/order disclosure in the provided data
• Sensitivity to mortgage rates and buyer affordability in Japan

Investment Implications

Key Takeaways:

• Strong margin-led earnings rebound: operating margin ~8.6% and interest coverage 8.6x
• Revenue +33.6% YoY underpinned by robust deliveries; profitability outpaced top-line
• Net margin improvement more modest due to financing costs and normalized tax
• Balance sheet liquidity is ample; leverage moderate at D/E 0.97x
• Capital efficiency remains weak with ROIC 3.7%, capping ROE at 2.9%

Metrics to Watch:

• Contracted sales and backlog to gauge delivery pipeline
• Project-level gross margins and cost inflation trends
• Operating cash flow and free cash flow vs dividends
• Debt mix (fixed vs floating) and average interest cost
• Inventory/land bank turnover and asset turnover trajectory
• ROIC progression toward >5–8% range

Relative Positioning: Within Japan’s mid-tier residential developers, Nisshin shows stronger near-term margin recovery and liquidity than many peers but lags on capital efficiency (ROIC 3.7%) and sustained ROE, leaving medium-term returns dependent on maintaining margins and improving asset turns.

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