MEIHO ENTERPRISE CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥4.92B
• Operating Income: ¥411M
• Net Income: ¥385M
• EPS: ¥3.83

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Meiho Enterprise (TSE: 8927) reported FY2026 Q1 consolidated results under JGAAP marked by a sharp top-line contraction and compressed profitability, alongside a still-solid short-term liquidity profile. Revenue was 49.21 (100M JPY), down 31.6% YoY, reflecting significant timing effects typical of real estate developers and/or softer project closings in the quarter. Gross profit was 13.02 and the gross margin stood at 26.5%, indicating that project-level margins remained respectable despite weaker volumes. Operating income fell 44.3% YoY to 4.11, implying operating margin compression due to lower scale and additional operating costs beyond SG&A. Ordinary income declined 69.7% YoY to 1.80, suggesting heavier non-operating burdens and/or fewer non-operating gains versus the prior year. Net income dropped 70.1% YoY to 1.15, with EPS (basic) at 3.83 JPY and an effective tax rate of 35.2%. DuPont decomposition yields a quarterly ROE of 1.2%, driven by a slim 2.3% net margin, low asset turnover of 0.156 (reflecting a balance sheet heavy with inventories/cash for future deliveries), and financial leverage of 3.17x. Liquidity appears strong: the current ratio is 213.5% and working capital is 141.65, underpinned by cash and deposits of 50.93. Total assets were 315.19 with total liabilities of 195.72 and total equity of 99.31; total liabilities-to-equity stands at 1.97x. Interest-bearing loans disclosed amount to 94.99 (short-term 26.69; long-term 68.30), and operating interest coverage is 3.51x based on operating income. Dividend payout ratio (calculated) is 329.6%, pointing to potential near-term strain on coverage given the low quarterly earnings, though quarterly seasonality is a key consideration. Several line-item inconsistencies are visible between cost of sales, gross profit, ordinary income, and profit before tax; we rely on the provided aggregate metrics (e.g., gross margin, interest coverage, effective tax) and acknowledge that real estate accounting (including extraordinary items and minority interests) can cause quarter-to-quarter volatility. With revenue timing central to earnings realization, Q1 appears to be a softer delivery quarter rather than necessarily indicating a structural deterioration in underlying unit economics. Balance sheet funding capacity remains adequate for pipeline execution, but leverage and interest costs need monitoring amid a higher-rate environment. In short, Q1 shows weaker volumes and earnings, intact project-level margins, solid liquidity, and an elevated payout relative to quarterly profit, pending clearer visibility on the delivery schedule for the rest of FY2026.

Profitability Analysis

ROE_decomposition: ROE 1.2% = Net margin 2.3% x Asset turnover 0.156 x Financial leverage 3.17x. The slim net margin and low turnover (quarterly revenue vs. sizable asset base) are the primary drags, while leverage amplifies returns modestly. margin_quality: Gross margin of 26.5% suggests underlying project profitability is still healthy. Operating margin implied at ~8.4% (Operating income 4.11 / Revenue 49.21) indicates operating leverage worked against the company as SG&A and other operating costs could not flex down proportionally. The gap between gross profit (13.02) and operating income (4.11) indicates 8.91 of operating costs, exceeding disclosed SG&A (5.64), implying additional operating expenses (e.g., other operating expenses/impairments) this quarter. operating_leverage: Revenue fell 31.6% YoY while operating income fell 44.3% YoY, indicating negative operating leverage on a lower volume base. Interest coverage at 3.51x remains acceptable but has limited headroom if operating income weakens further.

Growth Assessment

revenue_sustainability: Revenue decline of 31.6% YoY is consistent with a slower delivery schedule or fewer closings in the quarter, typical for developers. Sustainability hinges on the pipeline of committed projects and timing of handovers later in FY2026. profit_quality: Despite volume pressure, gross margin at 26.5% is resilient, suggesting no evident discounting pressure at the project level. However, the step-down from operating income to ordinary income (1.80) signals higher non-operating costs (e.g., interest, other losses) and/or fewer non-operating gains, which dampens bottom-line quality. outlook: Near-term growth visibility depends on the cadence of property deliveries and sales recognition in subsequent quarters. If the company back-ends closings, revenue and profit could normalize later in the year. Monitoring contracted sales, backlog, and completion schedules will be critical to assess FY2026 run-rate recovery.

Financial Health

liquidity: Current assets 266.39 vs. current liabilities 124.74 yields a current ratio of 213.5% and working capital of 141.65, supported by cash and deposits of 50.93. The quick ratio equals the current ratio in reported data due to unreported inventories; in practice, true quick liquidity is likely lower for a developer. solvency: Total liabilities to equity is 1.97x. Interest-bearing loans disclosed total 94.99 (short 26.69; long 68.30). Financial leverage (assets/equity) is 3.17x, which is moderate for a real estate operator but requires stable cash generation and refinancing access. capital_structure: Equity stands at 99.31 (Owners' equity 99.28), with capital stock 6.14, capital surplus 20.10, and retained earnings 72.73. Cash of 50.93 provides flexibility, but the sector’s funding model inherently relies on revolving debt aligned to project cycles.

Cash Flow Quality

earnings_quality: OCF was unreported, limiting assessment of cash conversion. The combination of acceptable interest coverage (3.51x) and a 35.2% effective tax rate suggests the earnings are not excessively distorted by tax items in Q1, but non-operating items materially influenced ordinary income. FCF_analysis: Free cash flow is unreported. Given the business model, FCF can be volatile quarter to quarter, driven by land acquisition and inventory build/turnover. The Q1 earnings shortfall relative to dividends implies reliance on balance sheet liquidity and future cash inflows from project deliveries for coverage. working_capital: Current assets are high relative to current liabilities, consistent with project WIP and deposits. Without itemized inventories/receivables, we infer significant working capital tied up in projects; subsequent closings are key for cash release.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 329.6%, indicating dividends far exceed Q1 earnings. This likely reflects seasonality and non-annualized EPS; however, it flags sensitivity to the timing of profit recognition within the fiscal year. FCF_coverage: FCF coverage is not calculable due to unreported cash flows. Near-term coverage likely depends on cash on hand (50.93) and expected cash generation from scheduled project deliveries in later quarters. policy_outlook: Absent explicit guidance, we assume the company aims to maintain stability in dividends across quarters. Sustainability for FY2026 will hinge on recovery in earnings and OCF as larger projects are recognized; any sustained shortfall versus plan could pressure payout disciplines.

Risk Assessment

Business Risks:

• Delivery-timing risk causing revenue and profit volatility by quarter
• Market risk in residential/investment property demand and pricing
• Construction cost inflation impacting gross margins
• Project execution and permitting timelines
• Inventory concentration and geographic exposure

Financial Risks:

• Refinancing and interest-rate risk given reliance on loans (94.99 disclosed)
• Potential decline in interest coverage from 3.51x if operating income weakens
• Working capital absorption in periods of inventory build
• Dividend coverage risk given 329.6% payout versus Q1 earnings

Key Concerns:

• Large YoY declines in revenue (-31.6%) and net income (-70.1%) in Q1
• Ordinary income materially below operating income, indicating non-operating drags
• Data inconsistencies between certain line items (cost of sales, ordinary income vs. non-operating items, and profit before tax), complicating precision analysis
• Unreported OCF/FCF, inventories, and detailed SG&A components limit transparency

Investment Implications

Key Takeaways:

• Q1 softness appears primarily volume/timing-driven with resilient gross margins (26.5%)
• Operating deleverage and non-operating costs compressed bottom line; ROE at 1.2% for the quarter
• Liquidity is ample (current ratio 213.5%, cash 50.93), but leverage and interest costs require monitoring
• Dividend coverage is stretched on a quarterly basis (payout 329.6%), reliant on back-half earnings
• Limited disclosures (OCF/FCF, inventories) constrain full cash quality assessment

Metrics to Watch:

• Contracted sales/backlog and scheduled deliveries for FY2026
• OCF and FCF trends as projects complete
• Interest coverage and average borrowing costs
• Gross margin stability amid construction cost dynamics
• Debt maturity profile and net debt trajectory

Relative Positioning: Within domestic mid-cap real estate developers, Meiho Enterprise shows moderate leverage and strong short-term liquidity, but higher earnings volatility and weaker quarterly returns due to timing. Margin profile is respectable, yet scale and non-operating burdens weighed on Q1 profitability.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
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