| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2143.7B | ¥1965.2B | +9.1% |
| Operating Income / Operating Profit | ¥176.5B | ¥143.6B | +22.9% |
| Ordinary Income | ¥141.8B | ¥124.3B | +14.1% |
| Net Income / Net Profit | ¥28.6B | ¥53.4B | -46.4% |
| ROE | 3.2% | 6.0% | - |
For the fiscal year ended March 2026, Revenue was ¥2143.7B (YoY +¥178.5B, +9.1%), Operating Income was ¥176.5B (YoY +¥32.9B, +22.9%), Ordinary Income was ¥141.8B (YoY +¥17.5B, +14.1%), and Net Income attributable to owners of the parent was ¥28.6B (YoY -¥24.8B, -46.4%). Progress on real estate project deliveries and cost control in the Real Estate Business achieved a second consecutive period of operating profit growth, but final profit declined significantly due to Special Losses of ¥55.8B centered on an impairment loss of ¥47.5B in the Energy Business and an increase in the effective tax rate to 48.6%. Operating margin improved by +93bp to 8.2% (prior year 7.3%), clearly demonstrating enhanced operating-stage profitability.
[Revenue] Revenue was ¥2143.7B (+9.1%), showing steady growth. The core Real Estate Business accounted for ¥1924.5B (+7.8%), representing 89.8% of the total, driven by increased condominium delivery volumes. The Energy Business was ¥114.7B (+15.6%), Asset Management Business ¥12.3B (+5.5%), and Other Businesses ¥92.3B (+33.3%), each recording revenue increases. Contract-derived revenue from customers was ¥2076.8B (+10.8%), and other income (primarily rental income) was ¥66.9B (-26.3%), indicating a shift of revenue composition toward sales.
[Profitability] Gross profit was ¥456.6B (gross margin 21.3%, -20bp from 21.5% in the prior year), with a slight decline in gross margin due to sales mix effects. SG&A was ¥280.1B (SG&A ratio 13.1%, roughly flat), restrained to a +0.2% increase relative to revenue growth of +9.1%, resulting in Operating Income of ¥176.5B (+22.9%) and Operating Margin improving substantially to 8.2% (+93bp). Non-operating items were a net expense as interest expense of ¥41.9B (YoY +38.8%) contributed to non-operating expenses of ¥47.7B outweighing non-operating income of ¥13.0B, yielding Ordinary Income of ¥141.8B (+14.1%) and Ordinary Income margin 6.6% (+29bp). Extraordinary items comprised Special Losses of ¥55.8B, including an impairment loss of ¥47.5B in the Energy Business, which far exceeded Special Gains of ¥11.2B, reducing Income before Income Taxes to ¥94.5B (-16.6%). After deducting Income Taxes of ¥45.9B (effective tax rate 48.6%, up +21.9pt from 26.7%), Net Income attributable to owners of the parent was ¥28.6B (-46.4%). In summary, the company delivered revenue and operating profit growth, but final profit declined due to special losses and a higher tax rate.
The Real Estate Business showed stable growth as the core segment with Revenue ¥1924.5B (+7.8%), Operating Income ¥155.5B (+18.4%), and Operating Margin 8.1% (improved +73bp from 7.4%). Progress in new condominium deliveries and SG&A restraint contributed to margin improvement. The Energy Business recorded Revenue ¥114.7B (+15.6%), Operating Income ¥16.2B (+45.9%), and Operating Margin 14.1% (improved +301bp from 11.1%), maintaining high profitability with expanding renewable energy feed-in revenue. However, an impairment loss of ¥47.5B was recorded and asset profitability was re-evaluated. The Asset Management Business had Revenue ¥12.3B (+5.5%), Operating Income ¥2.4B (-9.7%), and Operating Margin 19.7%, retaining high margins though profit slightly decreased. Other Businesses (construction, hotel operations, etc.) posted Revenue ¥92.3B (+33.3%) and Operating Income ¥2.3B (+261.8%), a large profit increase; while small in scale, contribution to growth increased.
[Profitability] Operating Margin 8.2% (prior year 7.3%, +93bp) and Ordinary Income Margin 6.6% (prior year 6.3%, +29bp) indicate improved operating-stage profitability. However, Net Income Margin declined sharply to 2.2% (prior year 4.2%, -196bp) due to special losses and the high tax rate. ROE was 3.2% (prior year 6.0%), and ROA (on Ordinary Income) was 3.6% (prior year 3.5%), with profitability metrics down due to compressed net income. [Cash Quality] Operating Cash Flow (OCF) was ¥56.0B, 1.96x of Net Income ¥28.6B, and OCF margin was 2.6%, indicating minimal cash generation. OCF/EBITDA was 0.23x (EBITDA ¥243.1B), at a low level; increases in Accounts Receivable of ¥92.3B, Inventories of ¥85.7B, and decrease in Accounts Payable of ¥28.3B significantly compressed operating cash flow from an operating subtotal of ¥125.5B. [Investment Efficiency] Capital expenditures were ¥318.4B (14.9% of revenue), continuing large-scale investment, resulting in Free Cash Flow of -¥263.3B. Total Asset Turnover was 0.511x (prior year 0.528x), with inventory and receivables build-up reducing capital efficiency. [Financial Soundness] Equity Ratio was 21.5% (prior year 23.9%, -2.4pt), and D/E was 3.66x (prior year 3.18x), highlighting high leverage. Interest-bearing debt rose to ¥2669.7B (prior year ¥2329.7B, +14.6%), and Debt/EBITDA was 9.05x, indicating high indebtedness. Current Ratio was 179.2% (prior year 160.6%), showing short-term liquidity is healthy, and cash of ¥590.3B covers 67.1% of short-term interest-bearing debt of ¥879.0B. Interest expense of ¥41.9B yields interest coverage (EBITDA / interest expense) of 5.79x, indicating resilience to interest payments.
OCF was ¥56.0B (YoY -28.9%), resulting from an operating subtotal of ¥125.5B less working capital increases, Income Taxes paid of ¥29.6B, and interest paid of ¥43.9B. Major working capital headwinds were an increase in Accounts Receivable of ¥92.3B (concentration of delivery timing), Inventories up ¥85.7B (build-up of property for sale), and decrease in Accounts Payable of ¥28.3B; Advance receipts also decreased ¥27.6B. Investing Cash Flow was -¥319.2B, nearly all attributed to capital expenditures of ¥318.4B (real estate development, energy facilities, etc.). Financing Cash Flow was +¥371.8B, with long-term borrowings raised of ¥1028.8B far exceeding repayments of ¥654.6B, resulting in a net increase of ¥374.2B. Short-term borrowings also rose by a net ¥42.3B, while dividends paid of ¥38.0B and bond redemptions of ¥10.6B were executed. Free Cash Flow was -¥263.3B, indicating that dividends and investments were effectively funded by increased borrowings. Cash and cash equivalents increased ¥108.7B from ¥470.1B at the beginning of the period to ¥578.8B at the end of the period, securing near-term liquidity, but improvement in inventory and receivables turnover and cash conversion remains a challenge.
Earnings quality this period is solid at the operating stage due to recurring project deliveries and cost control, but final profit was heavily influenced by one-off factors. Special Losses of ¥55.8B (including impairment loss ¥47.5B) compressed pre-tax profit by 59%, and Special Gains of ¥11.2B (including ¥4.1B gain on sales of investment securities) were insufficient to offset this. Non-operating results are dominated by recurring interest burden; 88% of non-operating expenses of ¥47.7B was interest expense of ¥41.9B, indicating that increased financial costs associated with expanding leverage are structurally pressuring profits. Non-operating income was minor at ¥13.0B (¥2.1B dividend income, ¥2.1B foreign exchange gains, etc.), representing 0.6% of Revenue. Of pre-tax profit ¥94.5B, income taxes of ¥45.9B (effective tax rate 48.6%) further compressed final profit; the substantial rise from 26.7% in the prior year is a key factor. Accrual quality is maintained at a minimum level with OCF / Net Income = 1.96x, but OCF/EBITDA = 0.23x is low and working capital expansion weakens earnings quality. Comprehensive income was ¥46.8B versus Net Income ¥28.6B, a difference of +¥18.2B; factors for comprehensive income were limited (foreign currency translation adjustments -¥1.6B, valuation difference on available-for-sale securities -¥0.6B), with the difference primarily due to non-controlling interests. The -79.8% gap between Ordinary Income ¥141.8B and Net Income ¥28.6B reflects the large impact of special losses and the high tax rate, highlighting the divergence between operating-stage profitability and final profit.
The company plans for the next fiscal year (FY ending March 2027): Revenue ¥2287.0B (+6.7%), Operating Income ¥150.0B (-15.0%), Ordinary Income ¥121.0B (-14.7%), and EPS ¥58.83. The plan assumes a contraction in Operating Margin from 8.2% to 6.6% (-160bp), reflecting conservative assumptions on rising construction costs, increased interest burden, and project mix. Progress against the current period Operating Income of ¥176.5B indicates first-half results equate to 117.7% of plan, implying the annual plan assumes significant profit decline in the second half. Dividend forecast is ¥11.00 (half of the current period ¥21.00), signaling a priority on alignment with cash generation. Revenue benefits from an existing delivery pipeline due to inventory build-up (property for sale ¥713.97B + work-in-progress ¥967.02B), but conservative margin assumptions leave upside if actual results exceed assumptions. Lack of disclosure on order backlog means inventory digestion and market conditions are key to achieving the plan.
This period’s dividend was ¥5 interim and ¥16 year-end, annualizing to ¥21, with total dividends of approximately ¥38.0B. The payout ratio relative to Net Income attributable to owners of the parent ¥28.6B is approximately 133% (dividends paid ¥40.7B / net income basis), and coverage of dividend ¥21 versus EPS ¥35.01 is 59.9%. With Free Cash Flow at -¥263.3B, dividends have effectively been funded by increased borrowings, and sustainability at current levels requires normalization of working capital and improved cash generation. Next period dividend guidance of ¥11 implies a halving, lowering payout ratio relative to forecast EPS ¥58.83 to 18.7%. No share buybacks are planned, and Total Return Ratio is equivalent to the payout ratio. The policy to adjust the payout to realistic levels is consistent with prioritizing financial soundness and cash balance. Outstanding shares are 140.30 million (including 4.32 million treasury shares), and weighted average shares outstanding during the period were 135.95 million.
High leverage risk: With D/E 3.66x and Debt/EBITDA 9.05x, indebtedness is high and interest rate increases would pressure profits through higher interest expense. Interest expense increased to ¥41.9B (YoY +38.8%) this period, indicating high sensitivity to interest rate changes. Deterioration in refinancing terms or higher funding costs would impact both financial soundness and dividend capacity.
Fragility of cash conversion: OCF/EBITDA 0.23x and Free Cash Flow -¥263.3B indicate weak cash generation, with working capital expansion (Accounts Receivable +¥92.3B, Inventories +¥85.7B) pressuring OCF. Continued declines in inventory turnover and longer receivable collection periods would increase external funding dependence and constrain financial flexibility.
Asset risk in the Energy Business: An impairment loss of ¥47.5B was recorded, re-evaluating asset profitability in the Energy Business. While the business maintains a high Operating Margin of 14.1%, long-term power price volatility, equipment deterioration, and regulatory changes could trigger additional impairments or profitability deterioration. The Energy Business’ asset base is ¥1067.6B (25.4% of total assets), indicating significant potential impact.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.2% | 10.7% (6.8%–17.9%) | -2.4pt |
| Net Income Margin | 1.3% | 5.8% (2.5%–11.9%) | -4.5pt |
Operating Margin is 2.4pt below the industry median, and Net Income Margin is 4.5pt below. Excluding the impact of special losses, operating margin is on an improving trend, but the company’s profitability sits at or below the lower half of the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 9.1% | 12.8% (4.2%–29.2%) | -3.7pt |
Revenue growth is 3.7pt below the industry median, placing the company at a mid-level growth pace within the industry.
※Source: Company compilation
Divergence between operating-stage profitability improvement and final profit: Operating Margin improved to 8.2% (+93bp), reflecting steady operating-stage earnings power, but Special Losses of ¥47.5B and an effective tax rate of 48.6% drove a large decline in Net Income. The Energy Business impairment appears to be a one-off associated with revaluation of assets; monitoring recurrence prevention and sustaining operating-stage profitability is important.
Increasing leverage and challenges in cash generation: With D/E 3.66x and Debt/EBITDA 9.05x, leverage is high and Free Cash Flow is significantly negative at -¥263.3B. Working capital expansion (Accounts Receivable +¥92.3B, Inventories +¥85.7B) is pressuring cash conversion; improving inventory turnover and receivables collections is urgent. Amid rising interest burden (Interest expense ¥41.9B, +38.8%), reducing Debt/EBITDA and improving OCF/EBITDA will be key to restoring financial soundness in subsequent periods.
Conservatism of next-period guidance and revision to dividend policy: Next period assumes Revenue +6.7% but Operating Income -15.0% and Operating Margin narrowing to 6.6%, reflecting conservative assumptions for cost inflation and interest burden. Dividend is planned to be halved to ¥11, prioritizing alignment with cash generation; this demonstrates a management stance focused on financial discipline. Better-than-plan outcomes remain possible if inventory digestion and project mix improve, so ongoing monitoring of progress and market conditions is important.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; please consult a professional as needed before making investment decisions.