Quick View
| Metric | Current Period | Previous Year Period | YoY |
|---|---|---|---|
| Revenue | ¥439.6B | ¥350.6B | +25.4% |
| Operating Income | ¥55.6B | ¥43.3B | +28.4% |
| Ordinary Income | ¥54.2B | ¥42.0B | +29.0% |
| Net Income | ¥36.8B | ¥28.6B | +28.7% |
| ROE | 6.9% | 5.4% | - |
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
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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.
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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.
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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
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 12.7% | 7.1% (1.9%–16.0%) | +5.6pt |
| Net Income Margin | 8.4% | 4.4% (2.2%–10.8%) | +3.9pt |
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
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 25.4% | 4.5% (-12.6%–22.7%) | +21.0pt |
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
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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.
-
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.
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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.
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥1,025 |
| base | ¥1,063 |
| bull | ¥1,094 |
| Calculation Assumption | Value |
|---|---|
| Book Value Per Share (BPS) | ¥684 |
| Adjusted Forecast EPS | ¥190.1 |
| Cost of Equity r | 9.77% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 1.00%) |
| Residual Income Persistence Factor ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 50.3% |
| Forecast EPS Confidence Adjustment | ×1.062 (based on the industry’s historical guidance achievement rate) |
| Implied PBR / PER | 1.55x / 5.6x |
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.)
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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AI Financial Analysis
Executive Summary
FY2027 Q1 was a strong start, with sales growth, modest margin expansion and earnings growth all exceeding the company’s full-year growth assumptions. Revenue increased 25.4% year on year to ¥43.96bn. Operating income rose 28.4% to ¥5.56bn. Ordinary income increased 29.0% to ¥5.42bn. Net income increased 28.7% to ¥3.68bn. The operating margin improved 30bp year on year to 12.7%, remaining in the good range under the stated benchmark. Gross margin declined by 51bp to 23.5%, indicating that acquisition, renovation or sales-mix economics were somewhat less favorable. However, the SG&A-to-sales ratio declined by 81bp to 10.8%, more than offsetting gross-margin pressure and demonstrating positive operating leverage. Net margin expanded 22bp to 8.4%. Annualized ROE was 27.5%, supported by an 8.4% net margin, 1.751x annualized asset turnover and 1.88x financial leverage. The Q1 operating-income progress rate reached 26.5% against the full-year forecast, slightly above the 25% seasonal reference point. Revenue progress was 24.8%, broadly in line with the seasonal reference. The balance sheet remains liquid, with a 253.0% current ratio and ¥59.33bn of working capital. The company’s business model is nevertheless inventory intensive: real estate for sale and development in progress totaled ¥88.59bn, equivalent to 88.2% of total assets. This inventory concentration makes the earnings trajectory sensitive to transaction volumes, pricing, renovation costs and the pace of inventory turnover. Debt metrics remain manageable, with debt/capital of 24.1%, D/E of 0.88x and interest coverage of 37.1x. However, 52.9% of interest-bearing debt is short term, creating a meaningful refinancing and funding-liquidity consideration even though current liquidity is strong. The FY2027 forecast calls for 16.8% sales growth and 14.9% operating-income growth, below the Q1 growth rate, leaving room for execution variability across the remaining quarters. The planned ¥90 annual DPS implies a forecast dividend payout ratio of approximately 50.3%, which appears consistent with forecast earnings and retained-profit capacity.
Profitability Analysis
Annualized DuPont ROE is 27.5%, decomposed into an 8.4% net profit margin, 1.751x asset turnover and 1.88x financial leverage. This represents a high return profile for a real-estate inventory-based business, with annualized ROA implied at approximately 14.6% before the leverage effect. The principal year-on-year profitability improvement came from operating leverage rather than gross-margin expansion. Gross profit increased 22.7% to ¥10.33bn, below revenue growth of 25.4%, and gross margin narrowed to 23.5% from 24.0%. In contrast, SG&A increased 16.6% to ¥4.76bn, materially slower than revenue growth, reducing the SG&A ratio to 10.8% from 11.6%. Consequently, operating income increased faster than revenue and the operating margin rose to 12.7% from 12.4%. The 5-factor decomposition shows a tax burden of 0.677 and an interest burden of 0.977, meaning financing costs have only a limited impact on pre-tax profitability. Interest expense was ¥0.15bn, while EBIT was ¥5.56bn, producing robust 37.1x interest coverage. Net income was supported principally by operating performance; the ¥0.15bn gain on sale of fixed assets was immaterial at 0.03% of revenue. The sustainability of margin expansion depends on continued SG&A discipline and sufficient sales throughput to absorb fixed operating costs. Gross-margin compression should be monitored because it may signal higher property acquisition costs, renovation-cost inflation, competitive pricing, or a changing mix of homes sold.
Growth Assessment
Revenue growth of 25.4% to ¥43.96bn was robust and exceeded the 16.8% growth embedded in the full-year plan. Operating income growth of 28.4% also exceeded the 14.9% full-year growth assumption, while net income rose 28.7%. Q1 revenue represents 24.8% of the FY2027 sales forecast of ¥177.40bn, essentially in line with a 25% seasonal reference. Operating income represents 26.5% of the ¥21.00bn forecast, 1.5 percentage points above the seasonal reference. Ordinary income progress is 27.1% against the ¥20.00bn forecast, 2.1 percentage points ahead of the reference. Net income progress is 26.3% against the ¥14.00bn forecast, 1.3 percentage points ahead of the reference. These modestly ahead-of-plan profit progress rates are constructive, but do not by themselves establish a full-year beat because real-estate sales recognition can vary materially by timing of property completions and closings. The core business is the single reported segment, existing-home regeneration. The business is sales-dependent rather than rental-income-led, and therefore earnings durability depends on maintaining a pipeline of suitable acquisitions, renovation execution and end-demand conversion. Real estate for sale increased 9.3% year on year to ¥52.90bn, while development in progress increased 8.8% to ¥35.69bn. The expanding property base can underpin future sales, but it also raises the capital committed to assets whose monetization depends on market conditions and execution speed.
Financial Health
Liquidity is strong on reported metrics, with current assets of ¥98.11bn versus current liabilities of ¥38.78bn, producing a 253.0% current ratio. The quick ratio is also 253.0%, and working capital is ¥59.33bn. Cash and deposits were ¥7.87bn. Total equity was ¥53.54bn, equal to a 53.3% equity ratio, providing a substantial equity buffer. Total liabilities were ¥46.86bn, while D/E was 0.88x, below the 2.0x aggressive-leverage warning level. Interest-bearing debt was ¥17.00bn and debt/capital was 24.1%, both consistent with moderate balance-sheet leverage. Interest coverage of 37.1x indicates substantial capacity to service currently reported interest expense. The principal financial-structure issue is refinancing concentration: 52.9% of interest-bearing debt is short term, above the 40% quality-alert threshold. This structure is understandable for a property trading and renovation model in which debt finances working capital and inventory, but it increases reliance on bank facilities and stable credit-market access. Cash covers 0.87x of short-term debt, so debt rollover capacity and the conversion of inventory into cash remain important. Current liquidity provides meaningful protection, but its quality is closely linked to the realizable value and turnover of property inventory. No material intangible-asset concentration is evident, as intangible assets were only 0.1% of total assets.
Notable B/S Changes
Total assets: +¥71.52bn (+7.7% YoY) to ¥1,003.97bn — balance-sheet expansion is primarily associated with continued deployment into the property sales pipeline. Current liabilities: +¥66.75bn (+20.8% YoY) to ¥387.83bn — increased near-term obligations heighten the importance of inventory turnover and committed funding availability. Real estate for sale: +¥4.51bn (+9.3% YoY) to ¥528.99bn — larger completed-property inventory can support sales growth but increases exposure to selling-period and pricing risk. Development in progress: +¥2.88bn (+8.8% YoY) to ¥356.92bn — continued renovation and development investment supports future supply while extending capital tied up before sale. Total liabilities: +¥66.74bn (+16.6% YoY) to ¥468.60bn — liabilities grew faster than assets, reducing the equity ratio to 53.3% from 56.9%, although capitalization remains substantial.
Cash Flow Quality
The earnings profile is operationally strong, as operating income of ¥5.56bn was the main driver of net income of ¥3.68bn. Ordinary income of ¥5.42bn was close to operating income, confirming that below-the-line financing and other non-operating items had a limited effect on reported earnings. The interest burden was low, with pre-tax income retaining 97.7% of EBIT. The small ¥0.15bn fixed-asset disposal gain had no material bearing on the earnings conclusion. Inventory funding is the key cash-conversion consideration: real estate for sale and development in progress totaled ¥88.59bn, or 88.2% of assets. Such a high property inventory exposure is inherent to the existing-home regeneration model, but it can cause cash conversion to diverge from accounting profit when acquisitions and renovation spending precede property sales. Real estate for sale increased by ¥4.51bn year on year and development in progress increased by ¥2.88bn, indicating continued capital deployment into the sales pipeline. Cash and deposits declined by ¥0.36bn year on year to ¥7.87bn despite higher earnings, reinforcing the importance of monitoring inventory monetization and funding needs. The available operating cash flow, investing cash flow, financing cash flow and free cash flow figures are not reported in the provided financial data; accordingly, no OCF/net-income, cash-conversion or FCF-coverage conclusion is presented.
Dividend Sustainability
The FY2027 forecast annual dividend is ¥90 per share. Against forecast EPS of ¥178.93, the implied dividend payout ratio is approximately 50.3%. This is below the 60% sustainability benchmark and leaves roughly half of forecast earnings available for retention, inventory investment and balance-sheet support. Retained earnings were ¥460.95bn, representing a substantial accumulated capital base relative to the forecast dividend commitment. Q1 EPS was ¥47.01, or 26.3% of full-year forecast EPS, broadly consistent with the annual earnings plan. The company has not revised its dividend forecast. Dividend capacity should be assessed alongside property inventory funding because the business requires ongoing capital for acquisitions and renovation work. The reported liquidity position, moderate debt/capital ratio and strong interest coverage support the stated dividend level. The sustainability assessment remains contingent on maintaining property-sale volumes, gross margins and bank funding access through the remaining quarters.
Risk Assessment
Business risks include High priority — Property-market and execution risk: real estate for sale and development in progress total ¥88.59bn, or 88.2% of assets. A slowdown in homebuyer demand, longer selling periods, regional price declines or weaker renovation execution could delay sales and pressure margins., High priority — Inventory valuation risk: the 88.2% inventory ratio exceeds the 50% quality-alert threshold. The model necessarily carries properties through acquisition and renovation, but a large inventory base heightens exposure to impairment risk if expected sale prices fall or holding periods extend., Medium priority — Gross-margin risk: gross margin declined 51bp year on year to 23.5%. Higher property procurement costs, labor and construction-cost inflation, or competitive selling prices could limit the ability to sustain operating-margin gains., Medium priority — Sales timing risk: quarterly revenue and profit depend on property closings, creating potential volatility around completion schedules and transaction timing despite healthy Q1 progress..
Financial risks include High priority — Refinancing risk: 52.9% of interest-bearing debt is short term, above the 40% quality-alert threshold. The company is therefore dependent on orderly facility renewal and ongoing lender support to finance its inventory cycle., Medium priority — Inventory-funded liquidity risk: cash of ¥7.87bn covers 0.87x of short-term debt. Although the current ratio is strong at 253.0%, a substantial part of current assets is tied to property inventory rather than immediately available cash., Medium priority — Interest-rate risk: interest coverage is currently strong at 37.1x, but higher borrowing costs would affect profitability and property financing economics if debt is repriced at higher rates..
Key concerns include The inventory concentration quality alert is the central balance-sheet risk because inventory turnover and achievable sales prices directly affect cash generation, financing needs and return on capital., The refinancing-risk quality alert is material because the short-term debt mix could amplify the impact of a property-market slowdown or tighter bank credit conditions., Operating-margin expansion currently relies on SG&A leverage while gross margin is contracting; continuation of the favorable cost-ratio trend is important to sustain earnings growth., The business is concentrated in a single reported existing-home regeneration segment, limiting diversification against housing-market or renovation-cost shocks..
Investment Implications
Key takeaways include Q1 growth was strong, with revenue up 25.4%, operating income up 28.4% and net income up 28.7%., Operating margin expanded 30bp to 12.7% as SG&A efficiency more than offset a 51bp decline in gross margin., Annualized ROE of 27.5% is underpinned by strong asset turnover and moderate financial leverage., Q1 profit progress is modestly ahead of the FY2027 forecast pace, while revenue progress is broadly on the 25% seasonal reference., The company has strong reported liquidity and interest-servicing capacity, but property inventory concentration and short-term debt refinancing are the principal risk factors., The forecast ¥90 DPS implies a 50.3% dividend payout ratio, which is consistent with forecast earnings..
Metrics to watch include Gross margin and SG&A-to-sales ratio, to determine whether operating-margin expansion is repeatable., Real estate for sale and development-in-progress balances, inventory turnover and any valuation adjustments., Short-term debt ratio, debt rollover terms, cash relative to near-term borrowings and interest expense., Quarterly sales and operating-income progress versus the ¥177.40bn and ¥21.00bn FY2027 forecasts., Housing transaction demand, acquisition pricing, renovation-cost inflation and resale pricing conditions..
Regarding relative positioning, The company combines a strong annualized ROE of 27.5%, a good 12.7% operating margin, moderate debt/capital of 24.1% and very strong interest coverage. Relative to asset-light businesses, however, its risk profile is more dependent on inventory liquidity and property-market conditions because 88.2% of assets are property inventory and over half of debt is short term.