| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥1370.3B | ¥1136.0B | +20.6% |
| Operating Income | ¥261.0B | ¥213.1B | +22.5% |
| Ordinary Income | ¥171.9B | ¥173.2B | -0.8% |
| Net Income | ¥59.0B | ¥83.2B | -29.1% |
| ROE | 6.9% | 10.6% | - |
The fiscal year ended March 2026 delivered Revenue of ¥1,370.3B (YoY +¥234.3B, +20.6%) and Operating Income of ¥261.0B (YoY +¥47.9B, +22.5%), achieving double-digit top-line and operating profit growth. Ordinary Income was ¥171.9B (YoY -¥1.3B, -0.8%), a slight decrease, while Net Income attributable to owners of the parent was ¥121.9B (YoY +¥9.7B, +8.9%), an increase. Operating-stage profitability strengthened, with the operating margin improving to 19.0% (prior year 18.8%), but a sharp rise in interest expense of ¥54.4B (prior year ¥36.9B, +47.4%) and an expansion of equity-method losses of ¥42.3B (prior year ¥4.3B) pressured results at the ordinary-income stage. The Real Estate Development segment drove the increase, with Revenue +83.0% and Operating Income +46.0%, while Leasing & Property Management also maintained high margins with Revenue +10.7% and Operating Income +14.4%. Housing Sales contracted (Revenue -4.9%, Operating Income -4.6%) but maintained a profit margin of 18.1%.
[Revenue] Revenue was ¥1,370.3B (+20.6% YoY), a substantial increase. By segment, Real Estate Development expanded rapidly to ¥520.2B (+83.0%), leading the group, aided by handovers of development projects including commercial and logistics facilities and increased monetization proceeds. Housing Sales declined to ¥636.3B (-4.9%) as the company moderated sales pace amid market adjustments. Leasing & Property Management grew steadily to ¥172.6B (+10.7%) supported by higher occupancy and improved rents on held assets. Asset Management recorded ¥22.1B (+34.2%), and Other was ¥19.1B (+87.2%), both sustaining high growth. Cost of Sales was ¥960.2B, and gross margin declined to 29.9% (prior year 32.1%, -220bp), reflecting rising development project costs and a sales mix shift away from for-sale housing.
[Profitability] Operating Income was ¥261.0B (+22.5% YoY), outpacing revenue growth. Selling, general and administrative expenses were controlled at ¥149.1B (SG&A ratio 10.9%, improved -240bp from 13.3% prior year), lifting the operating margin to 19.0% (+20bp). Ordinary Income was ¥171.9B (-0.8%), mainly due to a surge in non-operating expenses to ¥97.2B (prior year ¥43.0B). The breakdown includes Interest Expense ¥54.4B (prior year ¥36.9B, +47.4%) and Equity-method Losses ¥42.3B (prior year ¥4.3B, tenfold), driven by increased long-term borrowings of ¥2,916.1B (+¥337.3B YoY) and underperformance at equity-accounted investees. Extraordinary items were minor: Extraordinary Gains ¥5.6B (gain on bargain purchase ¥0.9B, gain on sale of investment securities ¥0.2B, etc.) and Extraordinary Losses ¥0.1B. Net Income attributable to owners of the parent was ¥121.9B (+8.9%), absorbing an effective tax rate of 32.3%. In conclusion, operating-stage revenue and profit growth partly offset headwinds from interest and equity-method losses, yielding overall revenue and profit increases.
Housing Sales: Revenue ¥636.3B (-4.9% YoY), Operating Income ¥114.9B (-4.6%), margin 18.1%. Sales pace moderation in a market adjustment period led to lower revenue and profit, but profitability remained solid.
Real Estate Development: Revenue ¥520.2B (+83.0%), Operating Income ¥149.1B (+46.0%), margin 28.7%. Concentrated handovers of development projects (commercial, logistics, rental apartments) drove substantial revenue and profit growth, making this the largest segment by operating income contribution.
Leasing & Property Management: Revenue ¥172.6B (+10.7%), Operating Income ¥80.3B (+14.4%), margin 46.5%. Improved occupancy and rent levels of owned assets supported steady high-margin growth and underpinned earnings.
Asset Management: Revenue ¥22.1B (+34.2%), Operating Income ¥12.9B (+29.5%), margin 58.5%. Continued growth as a stable, high-return business.
Other: Revenue ¥19.1B (+87.2%), Operating Income ¥6.5B (+104.7%), margin 34.2%. High growth contributed by overseas equity investments, columbarium business, brokerage, etc.
[Profitability] Operating margin improved to 19.0% (prior year 18.8%, +20bp), aided by an improved segment mix. Gross margin fell to 29.9% (prior year 32.1%, -220bp) due to higher development project costs and a change in sales composition. ROE was 6.9%, roughly flat year-on-year, decomposed as Net Profit Margin 4.3% × Total Asset Turnover 0.27 × Financial Leverage 5.9x. Net profit margin is 8.9% (Net Income attributable to owners of the parent ÷ Revenue), but interest burden and equity-method losses constrained further ROE improvement.
[Cash Quality] Operating Cash Flow/Net Income was 0.85x (Operating Cash Flow ¥103.6B ÷ Net Income attributable to owners of the parent ¥121.9B), broadly acceptable, but working capital increases (Inventory -¥51.2B) dampened cash conversion. Operating Cash Flow/EBITDA (Operating Income + Depreciation) was low at 0.37x, with accumulation of in-development real estate inventory being a cash drain.
[Investment Efficiency] Total Asset Turnover was 0.27x (Revenue ¥1,370.3B ÷ Ending Total Assets ¥5,097.7B), characteristic of low turnover in a real estate development model.
[Financial Health] Equity Ratio was 16.9% (prior year 17.1%), reflecting a low-equity, high-leverage profile. D/E ratio was 4.92x (Interest-bearing Debt ¥4,234.7B ÷ Equity ¥860.0B), in a cautionary range. Current Ratio was 405% (Current Assets ¥3,721.3B ÷ Current Liabilities ¥918.9B), indicating ample short-term liquidity; Cash and Deposits ¥628.7B are 5.2x short-term borrowings ¥120.0B, limiting maturity mismatch risk. Debt/EBITDA (Interest-bearing Debt ÷ EBITDA) was 10.8x. Interest coverage was in the range 4.8–5.2x (Operating Income ¥261.0B ÷ Interest Expense ¥54.4B = 4.8x; EBITDA ¥281.2B ÷ Interest Expense ¥54.4B = 5.2x), implying neutral to somewhat weak interest-bearing capacity.
Operating Cash Flow was ¥103.6B (prior year -¥247.7B), a substantial improvement. Subtotal (before working capital changes) was ¥253.1B and robust, but increases in inventory of ¥51.2B (build-up of in-development properties), corporate tax payments ¥98.1B, and interest payments ¥54.1B were cash outflows that ultimately constrained operating cash generation. An increase in advance receipts of ¥19.5B partially supplemented cash inflow. Investing Cash Flow was -¥121.6B (prior year -¥172.9B), primarily due to acquisitions of subsidiary shares ¥107.7B (consolidation of Shiba Real Estate Co., Ltd., etc.), proceeds from sale of subsidiary shares ¥9.2B, and tangible/intangible fixed asset additions ¥13.8B. Financing Cash Flow was ¥177.5B (prior year ¥394.7B), with long-term borrowings ¥1,107.9B and short-term borrowings increase ¥248.6B as inflows, and long-term borrowings repayments ¥1,057.3B, short-term borrowings decrease ¥176.0B, and dividend payments ¥46.6B as outflows. Free Cash Flow (Operating CF + Investing CF) was -¥18.0B; dividend payments ¥46.6B were not covered by operating cash flow and depended on financing cash flow. Cash and cash equivalents rose ¥160.0B from ¥460.5B at the beginning of the period to ¥620.5B at the end.
Earnings quality is generally acceptable but structural pressure from interest expense continues. Operating Income ¥261.0B forms the core of ordinary earnings; Extraordinary Gains ¥5.6B (gain on bargain purchase ¥0.9B, gain on sale of investment securities ¥0.2B, etc.) were minor and one-off. Non-operating income ¥8.1B (0.6% of Revenue) comprised foreign exchange gains ¥3.2B, dividend income ¥1.9B, etc., and was limited. Non-operating expenses ¥97.2B (7.1% of Revenue) were dominated by Interest Expense ¥54.4B and Equity-method Losses ¥42.3B, with structural interest burden and weak performance of equity-method investees depressing ordinary income. On accrual quality, Operating CF/Net Income 0.85x is broadly acceptable, while Operating CF/EBITDA 0.37x suggests temporary cash absorption from working capital (inventory), and improving development project turnover will be key to future cash quality. The gap between Ordinary Income ¥171.9B and Net Income attributable to owners of the parent ¥121.9B is explained by tax expense and non-controlling interests; extraordinary items had minimal impact.
Full year guidance (Fiscal year ending March 2026) is Revenue ¥1,450.0B (+5.8% YoY), Operating Income ¥265.0B (+1.5%), Ordinary Income ¥200.0B (+16.3%), Net Income attributable to owners of the parent ¥140.0B (+14.8%). Progress against guidance was Revenue 94.5%, Operating Income 98.5%, Ordinary Income 85.9%, Net Income attributable to owners of the parent 87.1% — operating-stage items landed on plan, but ordinary income and net income fell short. Shortfalls were mainly due to Interest Expense ¥54.4B (substantially higher than forecast) and Equity-method Losses ¥42.3B, i.e., non-operating headwinds. Second-half (Oct–Mar) expectations require Ordinary Income ¥28.1B and Net Income attributable to owners of the parent ¥18.1B to meet the full-year guidance, but if the first-half trends in interest burden and equity-method losses persist, recovery in the second half appears difficult. Assumptions presume continued healthy operating performance in the second half, but interest rate environment and recovery at equity-method investees are key to achieving guidance.
The year-end dividend is ¥48 per share, with a Payout Ratio of 38.8% (Total Dividends ¥46.6B ÷ Net Income attributable to owners of the parent ¥121.9B), within a sustainable range. Share buybacks were minor at ¥0.7B, making total shareholder returns ¥47.3B and a Total Return Ratio of 38.8%, roughly in line with the payout ratio. Free Cash Flow was -¥18.0B, so total dividends ¥46.6B were not covered by FCF and relied on financing cash flow; however, given the nature of development investments, annual cash flow volatility is considered acceptable. Dividend sustainability depends on OCF improvements via faster inventory turnover, reduction in interest burden improving FCF, and expansion of stable revenue streams (leasing & asset management). Cash and deposits ¥628.7B amount to 13.5x the total dividend, indicating ample short-term dividend-paying ability.
Interest-sensitivity risk from high leverage: With Interest-bearing Debt ¥4,234.7B, D/E ratio 4.92x, Debt/EBITDA 10.8x, and LTV 59.6%, the company is highly leveraged; Interest Expense ¥54.4B rose sharply YoY +47.4%. The interest burden coefficient (Interest Expense ÷ Operating Income) is 0.21, meaning about 21% of operating profit is absorbed by interest, heightening EPS downside risk in a rising-rate environment. Refinance risk related to some long-term borrowings maturing this fiscal year (scheduled repayments ¥487.6B) requires continuous monitoring.
Cash-conversion risk from working capital (inventory) increases: Inventory (in-development properties) is ¥2,807.6B, 55.6% of total assets, at a high level; the period increase was ¥51.2B. Operating CF/EBITDA at 0.37x is low, and delays in sales or asset rotation of development projects would directly deteriorate operating CF and expand FCF deficits. Slower inventory turnover would constrain dividend and investment sustainability and increase reliance on external financing.
Performance risk at equity-method investees: Equity-method losses totaled ¥42.3B (prior year ¥4.3B), a tenfold increase, which reduced Ordinary Income by ¥29.1B (major headwind in the bridge from Operating Income ¥261.0B to Ordinary Income ¥171.9B). Investment in equity-method affiliates stands at ¥125.0B; if recovery of these investees is delayed, structural downward pressure on ordinary and net income may persist. Disclosure on the business content and financial health of equity-method investees is limited, leaving uncertainty.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 19.0% | 10.7% (6.8%–17.9%) | +8.4pt |
| Net Profit Margin | 4.3% | 5.8% (2.5%–11.9%) | -1.5pt |
Operating margin exceeds the industry median by +8.4pt, reflecting an improved segment mix and contributions from high-margin businesses (Leasing & AM). Net profit margin is -1.5pt below the median, with interest burden weighing on profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 20.6% | 12.8% (4.2%–29.2%) | +7.8pt |
Revenue growth outperformed the industry median by +7.8pt, driven by the expansion of the Real Estate Development segment.
※ Source: Company compilation
Improved operating profitability vs. structural non-operating headwinds: Operating Income grew +22.5% with an operating margin of 19.0% (industry median +8.4pt); Real Estate Development (margin 28.7%) and Leasing & AM (margin 46.5%) drove continued segment mix improvement. However, Interest Expense ¥54.4B (YoY +47.4%) and Equity-method Losses ¥42.3B (prior year ¥4.3B) pressured ordinary income, producing an ¥89.1B negative bridge from Operating Income ¥261.0B to Ordinary Income ¥171.9B. Given an interest burden coefficient of 0.21 and Debt/EBITDA 10.8x, the leverage profile makes the interest-rate environment and recovery of equity-method investees key to future profitability improvement.
Monitoring cash generation and dividend sustainability: Operating CF was positive ¥103.6B, but Operating CF/EBITDA at 0.37x is low, with inventory increases (in-development properties) of ¥51.2B absorbing cash. FCF was -¥18.0B and did not cover total dividends ¥46.6B, leaving dividends dependent on financing cash flow. The payout ratio of 38.8% is acceptable, but accelerating inventory turnover and reducing interest burden to improve FCF are essential for dividend sustainability. Cash and deposits ¥628.7B equal 13.5x the dividend, indicating sufficient short-term payout capacity, while medium-to-long-term progress in OCF improvement merits attention.
Ongoing management of leverage and interest-rate risk: With D/E ratio 4.92x, Debt/EBITDA 10.8x, and LTV 59.6%, leverage is high and EPS is sensitive to interest-rate increases. Refinance dynamics for scheduled long-term borrowings repayments of ¥487.6B in the fiscal year, progress on fixed-rate financing (increase in corporate bonds to ¥174.0B), and expansion of stable revenue from Leasing & AM to improve interest coverage are important monitoring items for financial health and ROE sustainability.
This report is an AI-generated earnings analysis document based on XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.