FJ NEXT HOLDINGS (8935) FY2026 Q3 Earnings Report

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Executive Summary

In addition to higher revenue centered on the Real Estate Development Business, operating leverage resulting from the restrained growth in SG&A expenses led to increases in both revenue and earnings, with Operating Income and Net Income each rising by approximately 30%. Revenue was ¥916.2B (¥781.9B in the previous year, +17.2%), Operating Income was ¥75.2B (¥57.6B in the previous year, +30.4%), Ordinary Income was ¥74.8B (¥57.5B in the previous year, +30.1%), and Net Income attributable to owners of the parent was ¥50.8B (¥39.0B in the previous year, +30.2%). Profit growth exceeding the 17.2% revenue growth rate was attributable to the increases in the cost of sales and SG&A expenses remaining below the increase in revenue.

Factors Affecting Business Performance

【Revenue】 The primary driver of revenue growth was the expansion of used condominium sales in the Real Estate Development Business. Used condominium revenue was ¥656.2B (¥524.9B in the previous year, +25.0%), becoming the central growth driver of the development business, while new condominium revenue declined to ¥102.8B (¥119.9B in the previous year, △14.3%), indicating a continued shift toward used properties in the product mix. External revenue from the Construction Business grew to ¥65.7B (¥47.2B in the previous year, +39.1%), becoming the second-largest contributor to revenue growth after the development business. The Real Estate Management Business (¥31.6B, +0.7%) and the Ryokan Business (¥9.4B, +1.0%) were broadly flat, indicating that revenue growth during the period was highly dependent on sales- and construction-related activities.

【Profit and Loss】 Although the gross profit margin was nearly flat at 18.1% (18.0% in the previous year), SG&A expenses of ¥90.3B (up +8.6% year on year) grew at a pace below the 17.2% revenue growth rate, resulting in an improvement in the Operating Income margin to 8.2% (7.4% in the previous year). By segment, the Real Estate Development Business segment profit margin improved significantly to 7.6% (6.9% in the previous year), while the Construction Business improved to 9.3% (2.9% in the previous year), leading the increase in company-wide earnings. Meanwhile, segment profit in the Real Estate Management Business was ¥8.3B (△4.7% year on year), and the Ryokan Business recorded a loss of ¥0.6B, indicating room for improvement in the profit contribution of non-core businesses. The divergence between Ordinary Income and Net Income was attributable to the normal tax burden from income taxes and other taxes (effective tax rate: 32.1%), with no temporary factors identified. In conclusion, the Company achieved higher revenue and earnings.

Segment Analysis

The Real Estate Development Business recorded revenue of ¥809.1B (+16.7% year on year) and segment profit of ¥61.2B (+28.3% year on year), making it the core business and accounting for 81.4% of total segment profit. The Construction Business recorded revenue of ¥65.7B and segment profit of ¥6.1B, with its profit margin improving significantly from 2.9% in the previous year to 9.3%, providing an additional contribution to earnings growth. The Real Estate Management Business recorded revenue of ¥31.6B and segment profit of ¥8.3B (△4.7% year on year), representing a slight decline in earnings. The Ryokan Business recorded revenue of ¥9.4B and a segment loss of ¥0.6B, with the loss widening from △¥0.3B in the previous year. Overall, the majority of revenue growth and the primary driver of earnings growth were concentrated in the Real Estate Development Business.

Key Financial Metrics

【Profitability】 The Operating Income margin was 8.2%, improving from 7.4% in the same period of the previous year, while the Net Income margin was 5.5%, above 5.0% in the same period of the previous year. The gross profit margin was nearly flat at 18.1% (18.0% in the previous year), resulting in higher revenue and earnings without deterioration in the cost ratio.【Cash Flow Quality】 Comprehensive Income was ¥51.0B, close to Net Income of ¥50.8B. The impact of valuation items such as the valuation difference on securities and adjustments related to retirement benefits was limited, and the divergence between Net Income and Comprehensive Income was small.【Investment Efficiency】 Annualized ROE was 8.9%, decomposed into a Net Income margin of 5.5%, total asset turnover of 1.169 times, and financial leverage of 1.37 times. ROE was secured through a combination of asset turnover and profitability without reliance on high leverage.【Financial Soundness】 The Equity Ratio rose to 72.9% (69.1% in the previous year), and current assets of ¥912.1B significantly exceeded current liabilities of ¥112.1B. Against long-term borrowings of ¥120.0B, interest expense was only ¥1.1B, indicating a low burden and a conservative financial foundation.

Cash Flow Analysis

Because the cash flow statement has not been disclosed, fund movements are assessed based on changes in the balance sheet. Cash and deposits were ¥184.9B, down ¥59.7B from ¥244.7B in the same period of the previous year. The ¥106.8B (+24.7%) increase in real estate for sale under development represented a significant use of funds. Meanwhile, real estate for sale declined by ¥55.7B (△34.0%), indicating progress in the sale and delivery of completed inventory. Long-term borrowings due within one year declined by ¥48.5B (△74.6%), reducing short-term repayment obligations. Overall, investment in inventory under development was a factor behind the decline in cash, and the progress of future sales and deliveries will be key to cash recovery.

Earnings Quality

The earnings increase during the period was characterized by Operating Income, Ordinary Income, and Net Income all growing at similar rates of approximately +30%. No impact from temporary factors such as extraordinary gains or losses was identified, and the improvement can be assessed as resulting from recurring business activities. Non-operating income was ¥0.7B and non-operating expenses were ¥1.1B, both relatively small, leaving Ordinary Income at a level approximately equivalent to Operating Income less interest expense of ¥1.1B. Comprehensive Income was ¥51.0B, close to Net Income of ¥50.8B, and the impact of accrual-related factors such as the valuation difference on securities (+¥0.4B) and adjustments related to retirement benefits (△¥0.2B) was limited. Accordingly, the earnings for the period are considered to reflect a substantive improvement in profitability based on the Company’s core sales and construction activities.

Earnings Forecasts and Guidance

The full-year Company forecasts are revenue of ¥1,390.0B (YoY+23.6%), Operating Income of ¥135.0B (YoY+42.3%), and Ordinary Income of ¥135.0B (YoY+42.7%). The Q3 cumulative progress rates were 65.9% for revenue, 55.7% for Operating Income, and 55.4% for Ordinary Income, all below the standard progress benchmark of 75%. In particular, Operating Income progress was 19.3pt below the benchmark, and the concentration of property deliveries and sales recognition in Q4 will determine whether the full-year forecasts are achieved. Progress in completing and delivering ¥540.1B of real estate for sale under development will be a key point to monitor.

Shareholder Returns

The Q2 dividend was ¥28.00 per share, and the full-year dividend forecast is ¥62.00 per share. The forecast Payout Ratio against forecast full-year EPS of ¥274.86 is approximately 22.6%, remaining below the benchmark of a Payout Ratio under 60%. Based on the difference between the Q2 dividend and the full-year forecast, the year-end dividend is expected to be approximately ¥34.00 per share. Retained earnings of ¥712.5B and net assets of ¥761.5B are substantial, indicating that sufficient internal reserves have been accumulated to fund dividends. No data regarding share repurchases has been disclosed.

Risk Factors

1. Real Estate Inventory Risk: The combined ¥648.5B of real estate for sale of ¥108.4B and real estate for sale under development of ¥540.1B accounts for 62.1% of total assets. If sales stagnate or development is delayed, concerns regarding delays in cash recovery and inventory valuation losses may increase.

2. Risk of Delayed Full-Year Progress: The progress rate against the full-year Operating Income forecast is 55.7%, 19.3pt below the standard progress benchmark of 75%. The concentration of property deliveries and sales recognition in Q4 creates a structure in which the year’s results are significantly affected by fourth-quarter progress.

3. Gross Profit Margin Level: The gross profit margin was 18.1%, in line with the same period of the previous year. Although the Operating Income margin improved, the profit cushion would be relatively limited if land acquisition costs, construction costs, or promotional expenses increase.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Return

Both the Operating Income margin and Net Income margin exceeded the industry median, with the Net Income margin ranking among the higher-performing group within the industry.

Growth and Capital Efficiency

The revenue growth rate was slightly below the industry median and was close to the lower bound of the IQR in the industry growth distribution.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Operating Income increased 30.4% against a 17.2% increase in revenue, confirming profit growth exceeding the revenue growth rate. The primary factor was operating leverage resulting from keeping SG&A expense growth below the revenue growth rate. A key characteristic was the increase in earnings without deterioration in the cost ratio.

2. The Real Estate Development Business accounted for 81.4% of segment profit, and the expansion of used condominium sales led growth. Meanwhile, new condominium revenue declined, indicating an ongoing shift in the product mix.

3. Real estate inventory, consisting of real estate for sale and real estate for sale under development, accounted for 62.1% of total assets, while progress against the full-year Operating Income forecast remained at 55.7%. Progress in deliveries and sales recognition in Q4 will be a key point for assessing full-year performance.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,445–¥2,591 at ±1% for the cost of equity, and ¥2,512–¥2,523 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).

(Calculation model: Residual Income Model (Ohlson-type, with an explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is a financial results analysis document automatically generated by AI based on XBRL financial results summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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