NISSHIN GROUP HOLDINGS (8881) FY2026 Q3 Earnings Report

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Executive Summary

Revenue and earnings increased significantly, driven by the real estate business returning to profitability and higher earnings in the construction and real estate management businesses. Revenue was ¥560.8B (+28.0% YoY), Operating Income was ¥40.7B (+378.4%), Ordinary Income was ¥35.8B (+594.1%), and Net Income was ¥25.5B (+845.9%). SG&A expenses increased by only 4.4%, compared with revenue growth of 28.0%, indicating that strong operating leverage was the primary driver of the sharp earnings expansion.

Factors Affecting Business Performance

【Revenue】Revenue was ¥560.8B (+28.0% YoY). By segment, the real estate business expanded sharply to ¥168.1B (29.9% of total revenue, +91.7% YoY), while the construction business generated ¥285.3B (50.9% of total revenue, +4.8%) and the real estate management business generated ¥108.9B (19.4% of total revenue, +37.7%), with both also reporting higher revenue. The sharp growth of the real estate business drove overall expansion.

【Profit and Loss】The gross profit margin improved to 16.7% from 13.5% in the previous year, while the operating margin also rose significantly to 7.3% (1.9% in the previous year). By segment, the real estate business turned from a ¥9.1B loss in the previous year to a ¥5.7B profit, while the construction business expanded to ¥25.8B (+91.4%) and the real estate management business increased to ¥13.0B. At the ordinary income level, interest expense of ¥5.6B (+28.1% YoY) was incurred, weighing on Operating Income, but Ordinary Income expanded to ¥35.8B. Profit Before Tax included a ¥2.0B gain on the sale of fixed assets, and Net Income of ¥25.5B benefited from certain temporary factors. Revenue and earnings increased.

Segment Analysis

The real estate business recorded revenue of ¥168.1B (+91.7% YoY) and segment profit of ¥5.7B, turning profitable from a ¥9.1B loss in the same period of the previous year. Against the backdrop of increased real estate held for sale (¥202.0B, +34.1% YoY), progress in property handovers directly contributed to improved profitability. The construction business recorded revenue of ¥285.3B (+4.8%) and profit of ¥25.8B (+91.4%), with a profit margin of 9.0%, demonstrating the most stable earnings base among all segments. The real estate management business recorded revenue of ¥108.9B (+37.7%) and profit of ¥13.0B, achieving the highest profit margin at 11.9% and serving as a recurring-revenue business that complements fluctuations in the real estate business.

Key Financial Indicators

【Profitability】The 7.3% operating margin improved by approximately 5.3pt from 1.9% in the same period of the previous year, while the net profit margin rose from 0.7% to 4.5%. The gross profit margin also improved from 13.5% to 16.7%, although it remained below 20%.【Cash Flow Quality】Profit Before Tax of ¥37.5B included a ¥2.0B gain on the sale of fixed assets, and Net Income benefited from certain non-recurring factors.【Investment Efficiency】Annualized ROE was 4.8%, total asset turnover was approximately 0.53x, and financial leverage was approximately 2.00x, indicating that the increase in ROE depended primarily on financial leverage. BPS was ¥1,496.06 (¥1,461.63 in the previous year).【Financial Soundness】The Equity Ratio was 49.9% (51.2% in the previous year), while the current ratio remained high at approximately 365%, indicating strong short-term payment capacity. Meanwhile, interest-bearing debt expanded, with short-term borrowings increasing by +122.0% YoY and long-term borrowings by +30.0%.

Cash Flow Analysis

Because a cash flow statement has not been disclosed, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits declined to ¥492.1B from ¥543.4B in the previous year, with the main use of funds believed to be the increase in real estate held for sale to ¥202.0B (+34.1% YoY). This inventory buildup appears to have been funded by increases in short-term borrowings (+¥63.3B, +122.0%) and long-term borrowings (+¥80.6B, +30.0%). Electronically recorded obligations decreased substantially from ¥62.6B in the previous year to ¥12.4B, suggesting that changes in the settlement structure related to purchases and outsourcing may have affected cash management. Overall, the company’s funding structure indicates that investment exceeding internally generated funds during a period of business expansion was supplemented by borrowings.

Earnings Quality

Recurring earnings improvement was primarily based on the real estate business returning to profitability at the Operating Income level and higher earnings in the construction and real estate management businesses, and is therefore considered to be of high quality. However, Profit Before Tax of ¥37.5B included the temporary factor of a ¥2.0B gain on the sale of fixed assets; excluding this item, the substantive improvement was centered on the expansion of Operating Income. Non-operating income was modest at ¥1.6B and included ¥0.2B in dividend income, while non-operating expenses were ¥6.6B, primarily consisting of ¥5.6B in interest expense, with financial costs weighing on Ordinary Income. Comprehensive Income was ¥27.4B, close to Net Income of ¥25.5B. Valuation differences on securities of +¥2.7B contributed to the increase, while adjustments related to retirement benefits of -¥0.8B weighed on results, resulting in only a limited divergence between the two figures.

Earnings Forecast and Guidance

Progress against the full-year forecast was 65.2% for revenue (forecast: ¥860.0B), 74.0% for Operating Income (forecast: ¥55.0B), and 73.0% for Ordinary Income (forecast: ¥49.0B). Compared with the standard cumulative Q3 progress rate of 75%, revenue progress is somewhat behind schedule, while earnings progress is broadly in line with the plan. This divergence indicates that margin improvement is outpacing revenue growth, making it important in Q4 to balance progress in property handovers in the real estate business with the maintenance of profitability.

Shareholder Returns

The full-year dividend forecast is ¥35.00 per share. Since the Q2 dividend was ¥0, the dividend structure is centered on the year-end dividend. Based on forecast EPS of ¥70.65 and forecast full-year Net Income of ¥33.0B, the Payout Ratio is 49.5%, below the generally accepted sustainability benchmark of 60%. The Payout Ratio is calculated based solely on dividends and does not take share repurchases into account.

Risk Factors

1. Volatility of the sales-type real estate business: The real estate business turned from a ¥9.1B loss in the same period of the previous year to a ¥5.7B profit, but its quarterly performance is susceptible to fluctuations in the timing of handovers and project profitability.

2. Gross profit margin: The gross profit margin improved to 16.7% from the previous year but remained below 20%, making profitability susceptible to fluctuations in land acquisition costs, construction costs, and selling prices.

3. Increase in interest-bearing debt: Short-term borrowings increased by +122.0% YoY and long-term borrowings by +30.0%, while interest expense rose by +28.1% to ¥5.6B. Interest coverage was approximately 7.25x, ensuring sufficient debt-servicing capacity; however, trends in financial costs during the period of borrowing expansion require close monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (real_estate)

Profitability and Returns

The operating margin is slightly below the industry median, while the net profit margin is marginally above the median, placing overall profitability broadly in line with the industry average.

Growth and Capital Efficiency

The revenue growth rate is 9.5pt above the industry median but remains below the upper range of the industry IQR.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The operating margin improved by approximately 5.3pt YoY to 7.3%. The improvement was primarily driven by the real estate business returning to profitability and the restrained growth in SG&A expenses (+4.4%), resulting in earnings growth exceeding revenue growth of 28.0%.

2. The real estate management business expanded to revenue of ¥108.9B and profit of ¥13.0B (profit margin: 11.9%), strengthening its structural position as a recurring-revenue business that complements the volatility of the sales-type business.

3. Against the full-year forecast, revenue progress of 65.2% was below the standard rate of 75%, while Operating Income progress of 74.0% was broadly in line with the plan. Progress in recording revenue in Q4 and maintaining the improved profitability achieved during the current fiscal year will be the focus for meeting the full-year targets.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,269–¥1,341 at ±1% for the cost of equity, and ¥1,298–¥1,308 at ±0.1 for ω.

Notes:

• 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 (there is a timing mismatch with the full-year forecast).

(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.)

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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 discretion and responsibility, after consulting with a professional adviser as necessary.

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