| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥859.6B | ¥660.6B | +30.1% |
| Operating Income / Operating Profit | ¥212.1B | ¥176.0B | +20.5% |
| Profit Before Tax | ¥201.4B | ¥168.0B | +19.9% |
| Net Income / Net Profit | ¥138.1B | ¥122.3B | +12.9% |
| ROE | 12.4% | 11.9% | - |
The FY2026 Q2 cumulative results recorded Revenue ¥859.6B (YoY +¥199.0B +30.1%), Operating Income ¥212.1B (YoY +¥36.1B +20.5%), Ordinary Income ¥201.4B (YoY +¥32.7B +19.4%), and Net Income attributable to owners of the parent ¥138.1B (YoY +¥15.8B +12.9%), achieving revenue and profit growth across all four key metrics. The large increase in Revenue was mainly driven by the Revitalization segment, which doubled to ¥562.5B (+93.2% YoY) and accounted for 65.4% of consolidated sales. Operating margin remained high at 24.7% (down -0.9pt from 25.6% in the prior-year period), and SG&A ratio improved to 11.0% (from 12.7% in the prior-year period, -1.7pt), reflecting positive operating leverage from higher sales. Net profit margin was 16.1% (down -2.4pt from 18.5% in the prior-year period), weighed down by higher financial expenses (¥11.2B → ¥14.5B) and increased corporate taxes (¥45.7B → ¥63.3B). Progress toward the full-year plan (Revenue ¥1,229.9B, Operating Income ¥246.1B, Net Income ¥151.6B) through the first half stands at 70% for Revenue, 86% for Operating Income, and 91% for Net Income, indicating substantial front-loading and potential upside depending on timing of deliveries in the second half.
[Revenue] Revenue of ¥859.6B (YoY +30.1%) was mainly driven by the Revitalization segment at ¥562.5B (+93.2%), which doubled and was the largest contributor. That segment accounted for 65.4% of sales, likely due to a concentration of large asset sale closings. By contrast, Real Estate Development declined significantly to ¥125.3B (-38.2%) due to the absence of large projects that boosted the prior-year period. Real Estate Leasing recorded ¥48.3B (+12.9%), Fund and Consulting ¥47.5B (-5.7%), Real Estate Management ¥36.8B (-0.1%), and Hotel ¥39.1B (+6.5%), with non-development segments broadly stable to modestly varied, leaving the overall revenue structure heavily dependent on the Revitalization segment. Cost of sales was ¥553.7B (cost ratio 64.4%), resulting in gross profit ¥305.8B (gross margin 35.6%, down -3.7pt from 39.3% in the prior-year period). The gross margin decline likely reflects that some large Revitalization deals were relatively low-margin and a lower proportion of high-margin Development revenues.
[Profitability] From gross profit ¥305.8B, SG&A ¥94.4B was deducted, producing Operating Income ¥212.1B (Operating margin 24.7%). Improvement in SG&A ratio to 11.0% (from 12.7%) delivered operating leverage; Operating Income rose +20.5% while trailing Revenue growth (+30.1%), yet still achieving double-digit profit growth. Non-operating items included Financial Income ¥3.7B (prior ¥3.3B) and Financial Expenses ¥14.5B (prior ¥11.2B), resulting in net financial cost of -¥10.7B (prior -¥8.0B). The increase in Financial Expenses reflects higher interest burden due to elevated interest-bearing debt and rising interest-rate environment. After Other Income ¥1.0B and Other Expenses ¥0.2B, Ordinary Income was ¥201.4B (+19.4%). Deducting Corporate Taxes and Others ¥63.3B (effective tax rate 31.4%, up +4.2pt from 27.2%) yielded Net Income ¥138.1B (+12.9%). The divergence between Operating Income growth (+20.5%) and Net Income growth (+12.9%) is mainly attributable to increased Financial Expenses and higher tax burden. In conclusion, revenue and operating profit were boosted by large asset sales in the Revitalization segment, but non-operating costs and taxes constrained Net Income growth relative to operating performance.
The Revitalization segment posted Revenue ¥562.5B (YoY +93.2%), Operating Income ¥118.6B (YoY +113.8%), and Operating margin 21.1%, accounting for 56% of consolidated operating profit and acting as the core segment. Concentration of large asset sale closings led to significant improvement in both absolute profit and margins. Real Estate Leasing recorded Revenue ¥48.3B (+12.9%), Operating Income ¥28.7B (+24.5%), and Operating margin 59.4%, maintaining extremely high margins and functioning as a stable earnings source. Fund and Consulting posted Revenue ¥47.5B (-5.7%), Operating Income ¥31.7B (-10.6%), and Operating margin 66.7%, the highest margin but experienced declines as deal origination cycled. Real Estate Development showed Revenue ¥125.3B (-38.2%), Operating Income ¥32.8B (-44.1%), and Operating margin 26.2%, a marked decline due to the absence of large projects in the prior-year period. Real Estate Management posted Revenue ¥36.8B (-0.1%), Operating Income ¥5.6B (-14.3%), and Operating margin 15.2%, with slight declines. Hotel recorded Revenue ¥39.1B (+6.5%), Operating Income ¥13.8B (-9.2%), and Operating margin 35.3%; despite higher Revenue, margins fell possibly due to cost increases and occupancy fluctuations. While Leasing and Fund businesses with high margins underpin consolidated profits, timing of Revitalization deals and recovery in Development will determine future profit trends.
[Profitability] Operating margin at 24.7% (prior 25.6%) remains high; SG&A ratio improved to 11.0% (prior 12.7%) delivering operating leverage. Net margin at 16.1% (prior 18.5%) declined due to higher Financial Expenses and taxes. ROE 12.4% (annualized Net Income ¥138.1B against equity ¥1,111.9B) maintains double-digit capital efficiency. EBITDA approximates ¥219.1B (Operating Income ¥212.1B + Depreciation ¥7.0B), yielding an EBITDA margin of 25.5%, which is high. [Cash Quality] Operating Cash Flow / Net Income is 1.84x (Operating CF ¥254.2B ÷ Net Income ¥138.1B), indicating strong cash backing. The accrual ratio ((Operating CF ¥254.2B - Net Income ¥138.1B) ÷ Total Assets ¥3,096.0B) = -3.8% is conservative. FCF ¥210.6B equals 1.53x Net Income, indicating high earnings quality. [Investment Efficiency] Capex was ¥1.6B (0.2% of Revenue), minimal; investment in real estate was ¥0.2B (PurchaseOfInvestmentProperty), restrained. Total asset turnover is 0.278x (Revenue ¥859.6B ÷ Total Assets ¥3,096.0B; annualized 0.556x), standard for real estate. [Financial Soundness] Equity Ratio 35.9% (up +2.5pt from 33.4%) and current ratio approx. 623% (Current Assets ¥2,230.0B ÷ Current Liabilities ¥357.6B) indicate very strong liquidity. Interest-bearing debt totaled ¥1,765.4B (Short-term ¥207.2B + Long-term ¥1,558.2B), with Debt/Equity 1.59x and Debt/Capital 61.4%, representing moderately high leverage. Interest coverage is adequate at approximately 14.6x (Operating Income ¥212.1B ÷ Financial Expenses ¥14.5B). Cash and cash equivalents stood at ¥480.7B, covering short-term interest-bearing debt ¥207.2B by 2.3x.
Operating CF was ¥254.2B (prior ¥132.2B, +92.2%), driven by pre-tax profit ¥201.4B plus Depreciation ¥7.0B to subtotal ¥285.7B, adjusted for working capital movements (inventory decrease +¥105.7B cash in, accounts receivable increase -¥7.9B, accounts payable decrease -¥24.4B) and corporate tax payments -¥35.5B among others. Inventory reduction significantly boosted Operating CF and cash collection improved materially versus the prior period. Investing CF was -¥43.6B (prior -¥11.2B), with loan repayments received ¥37.0B and term deposit withdrawals ¥49.5B as cash inflows, offset by term deposit placements -¥10.0B, acquisitions of other financial assets -¥11.2B, and acquisitions of tangible/intangible assets and investment property totaling -¥1.8B. Investing CF remained a modest net outflow, leaving FCF at ¥254.2B - ¥43.6B = ¥210.6B, a strong positive. Financing CF was -¥125.9B (prior -¥62.2B), reflecting long-term borrowings received ¥450.9B, short-term borrowings down -¥16.6B, long-term borrowings repayments -¥491.6B, dividend payments -¥48.5B, bond redemptions -¥2.4B, etc., resulting in net debt reduction. Cash and cash equivalents rose from ¥396.0B at the beginning of the period to ¥480.7B at period-end, an increase of ¥84.7B including foreign exchange effects of ¥0.1B. Operating CF ¥254.2B converted to FCF ¥210.6B and covered dividend payments ¥48.5B comfortably, demonstrating free cash generation capacity.
Operating Income ¥212.1B vs Ordinary Income ¥201.4B shows a -¥10.7B gap, mainly due to Financial Expenses ¥14.5B. Financial Income ¥3.7B is primarily interest and dividends and is recurring. Financial Expenses ¥14.5B are mainly interest expense; relative effective interest on interest-bearing debt ¥1,765.4B is estimated at roughly 1.6% (annualized, Financial Expenses ¥14.5B × 2 ÷ average interest-bearing debt), indicating that while rates are low, the large debt base increases absolute interest outlay. Other Income ¥1.0B and Other Expenses ¥0.2B are immaterial for quality. No extraordinary items were disclosed, suggesting limited one-off impacts. Comprehensive income ¥131.1B vs Net Income ¥138.1B shows a difference of -¥7.0B, comprised of Other Comprehensive Income -¥7.0B (cash flow hedge ¥0.3B, remeasurement of defined benefit plans -¥0.1B, etc.), which has limited quality impact. Operating CF ¥254.2B greatly exceeds Net Income ¥138.1B, resulting in a negative accrual ratio and strong cash backing. The inventory reduction of ¥105.7B materially lifted Operating CF, indicating progress in asset sales. Accounts receivable increase -¥7.9B and accounts payable reduction -¥24.4B exerted some working capital headwinds, but inventory compression outweighed these, leading to overall high earnings quality. Corporate tax payments ¥35.5B represented a cash tax payment rate of 17.6% against pre-tax profit ¥201.4B; the gap from accounting Corporate Taxes ¥63.3B (effective tax rate 31.4%) is attributable to an increase in deferred taxes of ¥13.5B (deferred tax assets +¥1.1B, deferred tax liabilities -¥1.4B), possibly reflecting recognition of future deductible temporary differences.
Full-year guidance remains Revenue ¥1,229.9B (YoY +29.9%), Operating Income ¥246.1B (YoY +10.2%), Net Income ¥151.6B (YoY +2.7%). First-half progress against full-year guidance is 70% for Revenue, 86% for Operating Income, and 91% for Net Income, substantially exceeding a standard 50% first-half pace. This front-loading is primarily due to concentration of large Revitalization projects in the first half; the second-half remaining forecast is Revenue ¥370.3B (Full-year - realized ¥859.6B), Operating Income ¥34.0B, and Net Income ¥13.5B, which are modest. Unless there are significant delivery delays in H2, there is substantial upside potential and the company may consider upwardly revising guidance. Dividend guidance is unchanged at annual ¥55 per share, representing a payout ratio of 35.2% against forecast EPS ¥156.31, within a sustainable range. No interim dividend is planned; a year-end lump-sum dividend of ¥55 is assumed. Note that a stock split (effective 1 Dec 2025, 1 share → 2 shares) was implemented, and the FY2026 expected dividend ¥55 is stated on a post-split basis. There is currently no revision to forecasts, but high first-half progress raises market expectations for upside.
No interim dividend was paid this quarter; a year-end lump-sum dividend of ¥55 (post-split basis) is scheduled. Dividend payout ratio is 35.2% versus forecast EPS ¥156.31, which is appropriate relative to historical practice and industry norms. Total dividend amount is calculated as Issued shares 97,367 thousand shares - Treasury shares 362 thousand shares = 97,006 thousand shares × ¥55 = approx. ¥5,340M. First-half FCF ¥210.6B covers dividend payments ¥48.5B (prior dividend outflow) by 4.3x, supporting sustainability. No share buyback was disclosed; total return ratio equals the dividend payout ratio 35.2%. Retained earnings ¥968.3B make up 87.1% of equity ¥1,111.9B, reflecting substantial internal reserves. With an Equity Ratio of 35.9% and financial capacity intact, there is room to gradually raise payout ratio, but the current level is conservative and sustainable. The stock split aims to improve liquidity and broaden investor base, and dividend policy emphasizes stable continuation.
Concentration risk in the Revitalization segment: Revitalization accounts for 65.4% of revenue and 56% of operating income, making quarterly earnings highly sensitive to deal timing and scale. While first-half progress exceeded 70% of the full year, second-half revenue represents only 30% of full-year sales, so delays in large project deliveries or market deterioration would materially impact H2 results. Inventory (inventories) ¥1,599.7B represents 51.7% of total assets and poses valuation loss risk and reduced liquidity in adverse market conditions.
Risk of higher Financial Expenses from rising interest rates: With interest-bearing debt ¥1,765.4B and current Financial Expenses ¥14.5B (implied effective rate approx. 1.6% annualized), costs are low for now but would rise in a higher-rate environment. Although Interest Coverage of 14.6x provides buffer, a large portion of long-term debt ¥1,558.2B may be variable-rate, and future rate increases could further compress Net Profit margins. Financial Expenses have already risen +29.5% from ¥11.2B to ¥14.5B YoY.
Uncertainty around Development segment recovery after base effects: Development posted Revenue ¥125.3B (-38.2%) and Operating Income ¥32.8B (-44.1%), reflecting a base effect from large projects in the prior-year period. The segment’s operating margin of 26.2% exceeds Revitalization’s 21.1%, but without pipeline buildup or market recovery its full-year contribution may remain subdued. Construction cost inflation and land acquisition conditions can affect Development profitability and delay margin recovery.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 24.7% | – | – |
| Net Margin | 16.1% | – | – |
Operating margin 24.7% and Net margin 16.1% are high within the real estate sector, driven by high-margin Leasing and Fund businesses and maintained gross margins in Revitalization.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 30.1% | – | – |
Revenue growth 30.1% is outstanding in the industry, propelled by concentrated large Revitalization deals. Sustainability of growth depends on the pipeline and market conditions.
※ Source: Company aggregation
Front-loading of first-half progress and upside potential: Progress of Revenue 70%, Operating Income 86%, Net Income 91% significantly exceeds a typical 50% first-half pace, driven by concentration of large Revitalization deals in H1. Remaining H2 guidance is modest (Revenue ¥370.3B (30%), Operating Income ¥34.0B (14%), Net Income ¥13.5B (9%)); absent major delivery delays, there is substantial upside for upward guidance revision. Markets are likely to price in upside given accelerated progress. However, concentration in Revitalization leaves H2 earnings volatile and there is risk of negative surprises if large deals slip.
Continuity of inventory reduction and cash generation: Inventory reduction ¥105.7B materially lifted Operating CF to ¥254.2B, producing FCF ¥210.6B, which is 1.53x Net Income ¥138.1B. Improved inventory turnover indicates progress in real estate sales and boosts short-term liquidity. Nevertheless, inventory level ¥1,599.7B still represents 51.7% of total assets, leaving valuation loss and liquidity risk in downturns. Monitoring inventory turnover days, CCC trends, and sustainability of inventory compression is critical for liquidity and financial soundness.
Stable contribution from high-margin businesses and potential for portfolio diversification: Leasing (Operating margin 59.4%) and Fund & Consulting (66.7%) account for 18% of consolidated operating profit and complement the concentration in Revitalization as stable earnings sources. Leasing achieved +24.5% operating income growth and Fund remains highly profitable despite -10.6% decline. Reducing concentration in Revitalization by increasing the weight of Leasing and Fund businesses could improve earnings stability. Recovery in Development (currently -44.1% operating income decline) would also aid medium-term earnings quality by balancing segment contributions.
This report was automatically generated by AI analyzing XBRL earnings disclosure data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.