KATITAS CO.,LTD FY2027 Q1 Earnings Report

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Executive Summary

The key point for the current period was that revenue and earnings increased, with the operating leverage effect from an improved SG&A ratio driving profit growth. Revenue was ¥439.6B (+25.4% YoY), Operating Income was ¥55.6B (+28.4%), Ordinary Income was ¥54.2B (+29.0%), and Net Income was ¥36.8B (+28.7%), all representing double-digit growth. Revenue expansion was supported by strengthened procurement and progress in inventory liquidation, while the decline in the gross margin was absorbed by an improved SG&A ratio. Progress against the full-year plan was also generally steady, at 24.8% for revenue and 26.5% for Operating Income.

Factors Affecting Financial Performance

【Revenue】Revenue was ¥439.6B, an increase of +25.4% YoY. The company operates the Used Housing Regeneration Business as a single reportable segment, and the primary factor behind the revenue increase was progress in sales absorption alongside expanded procurement and increases in real estate for sale and real estate under development.

【Profit and Loss】Operating Income was ¥55.6B (+28.4% YoY), Ordinary Income was ¥54.2B (+29.0%), and Net Income was ¥36.8B (+28.7%), with all three increasing. The gross margin was 23.5%, down approximately 0.5pt from the previous year, but the SG&A ratio improved by approximately 0.8pt to 10.8%, expanding the Operating Income margin to 12.7% (12.4% in the previous year). The difference between Ordinary Income and Net Income was primarily attributable to the tax burden reflected in the effective tax rate of 32.3%. Extraordinary gains, consisting of a ¥0.15B gain on the sale of fixed assets, were immaterial, and the impact of non-recurring factors was limited. Both revenue and profit expanded, resulting in higher revenue and earnings.

Segment Analysis

The Group operates the Used Housing Regeneration Business as a single reportable segment, and disclosure of other businesses has been omitted because they lack quantitative materiality. A breakdown of results by segment has not been disclosed.

Key Financial Indicators

【Profitability】The Operating Income margin was 12.7%, improving from 12.4% in the previous year, while the Net Income margin was 8.4%, a slight increase from 8.2% in the previous year. The gross margin was 23.5%, down approximately 0.5pt from the previous year, but the SG&A ratio improved to 10.8% (an improvement of approximately 0.8pt from the previous year), with cost efficiencies supporting the improvement in profitability.【Cash Quality】Non-operating income was ¥0.2B, remaining immaterial at less than 0.05% of revenue, while extraordinary gains were also small at ¥0.15B (gain on the sale of fixed assets). Accordingly, the majority of profit was generated by the core business, indicating good earnings quality.【Investment Efficiency】ROE was 6.9%, supported by slight increases in total asset turnover and financial leverage.【Financial Soundness】The Equity Ratio was 53.3%, down from 56.9% in the previous year. While the current ratio remained high, the ratio of short-term liabilities, including short-term borrowings and long-term borrowings due within one year, was high, making monitoring of the funding structure important.

Cash Flow Analysis

Although a cash flow statement has not been disclosed, changes in the balance sheet provide insight into funding trends. Real estate for sale increased to ¥528.99B (+9.3% YoY), while real estate under development increased to ¥356.92B (+8.8%), indicating an expansion in inventory and rising working capital needs associated with business growth. Cash and deposits were ¥78.7B, slightly down from ¥82.3B in the previous year, suggesting that funds may have been allocated toward inventory accumulation. Interest expense was small at ¥1.5B, and the pressure on cash from interest costs was limited at this point. While inventory accumulation supports revenue growth, it tends to absorb cash, making the speed of inventory turnover a key determinant of capital efficiency.

Earnings Quality

Current-period profit was primarily generated by the core business, indicating good earnings quality. Non-operating income was ¥0.2B and non-operating expenses were ¥1.6B, including ¥1.5B in interest expense, both relatively small amounts, limiting the impact of non-operating items on profit. Extraordinary gains were ¥0.15B, arising from a gain on the sale of fixed assets, and were extremely immaterial; there is no indication that non-recurring factors materially affected results. Net Income of ¥36.8B compared with Ordinary Income of ¥54.2B represented a difference of approximately 32%, attributable to the tax burden corresponding to an effective tax rate of 32.3%, rather than to a temporary factor. Interest costs were also small, and the distortion of profit from financial expenses was limited.

Earnings Forecast and Guidance

The Q1 progress rates against the full-year plan were 24.8% for revenue (¥439.6B/¥1,774.0B), 26.5% for Operating Income (¥55.6B/¥210.0B), and 27.1% for Ordinary Income (¥54.2B/¥200.0B). Compared with standard quarterly progress of 25%, progress was somewhat ahead on the profit side, apparently reflecting SG&A efficiency improvements and strong sales. There was no excessive front-loading of progress, and the full-year plan remains unchanged, with performance generally tracking the plan.

Shareholder Returns

The company’s full-year dividend forecast is ¥90 per share, representing an increase from the previous year’s dividend of ¥39 (actual interim dividend). There has been no revision to the dividend forecast as of the current quarter. Based on the assumed number of shares outstanding, excluding treasury stock, of 78,261 thousand shares, the estimated total annual dividend is approximately ¥7.04B, resulting in a Payout Ratio of approximately 50.3% against the full-year Net Income forecast of ¥14.0B. Given the improving trend in the Operating Income margin and conservative financial leverage, the earnings base appears generally sufficient to support this dividend level.

Risk Factors

1. Inventory liquidation risk: Real estate for sale of ¥528.99B and real estate under development of ¥356.92B account for the majority of total assets. If inventory turnover slows, both the gross margin and cash generation capacity could be affected.

2. Refinancing risk: The proportion of short-term liabilities is high, including short-term borrowings of ¥90.0B and long-term borrowings due within one year of ¥185.0B, while current liabilities have increased by +20.8% YoY. Management of the maturity profile is an important issue.

3. Gross margin decline risk: The gross margin was 23.5%, down approximately 0.5pt from the previous year. If procurement prices, renovation costs, and changes in the property mix persist, the room to offset these factors through SG&A efficiency improvements could narrow.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (real_estate)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceed the industry median, placing profitability in the upper tier of the industry.

Growth and Capital Efficiency

The revenue growth rate significantly exceeds the industry median, indicating a high growth pace within the industry.

※Source: Company analysis

Key Takeaways from the Financial Results

1. The 0.8pt improvement in the SG&A ratio against revenue growth of +25.4% expanded the Operating Income margin to 12.7%, confirming the ability to achieve both scale expansion and cost control. As the gross margin declined by 0.5pt, the sustainability of this SG&A efficiency improvement will determine future profit margin trends.

2. Real estate for sale and real estate under development together account for approximately 88% of total assets, indicating a highly inventory-dependent structure. Given the high proportion of short-term liabilities, inventory turnover speed and management of the funding structure are key areas to monitor when assessing financial stability.

3. Progress against the full-year plan was 24.8% for revenue, 26.5% for Operating Income, and 26.3% for Net Income, generally tracking the plan. Neither the earnings forecast nor the dividend forecast has been revised.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly available data using a residual income model (Ohlson type with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,033–¥1,093 at ±1% for the cost of equity, and ¥1,053–¥1,077 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / This value 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 summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available earnings data. Investment decisions should be made at your own responsibility and, where necessary, after consulting with a professional.

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