FJ NEXT HOLDINGS CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The first quarter of the fiscal year ending March 2027 was characterized by higher revenue and earnings, primarily driven by an improvement in gross margin and greater efficiency in SG&A expenses, with the operating margin improving significantly from the previous year. Revenue was ¥40.24B (+27.8% year on year), Operating Income was ¥5.68B (+88.0%), Ordinary Income was ¥5.67B (+89.0%), and Net Income attributable to owners of the parent was ¥3.91B (+90.2%). The increase in revenue was driven by higher deliveries of new and pre-owned condominiums in the Real Estate Development segment. Earnings growth substantially outpaced revenue growth as the gross profit margin improved to 21.9% from 18.9% in the previous year (+3.0pt), while the SG&A ratio declined to 7.8% from 9.3% (-1.5pt).

Factors Affecting Performance

【Revenue】Revenue of ¥40.24B increased 27.8% year on year. By segment, the core Real Estate Development segment generated ¥35.74B (+28.1%), accounting for 88.8% of total company revenue and driving virtually all company-wide growth. Construction also complemented growth with double-digit expansion, generating ¥3.11B (+33.8%). Meanwhile, Real Estate Management was essentially flat at ¥1.15B (-0.2%), and Hotels remained limited at ¥0.30B (+7.9%), indicating that growth is concentrated primarily in the Real Estate Development business.

【Profit and Loss】Operating Income of ¥5.68B (+88.0%) expanded at a pace substantially exceeding revenue growth, and the operating margin improved by +4.5pt to 14.1% from 9.6% in the previous year. The improvement was attributable to a higher gross margin resulting from a lower cost ratio, as well as SG&A expenses increasing only moderately relative to revenue growth, generating positive operating leverage. Ordinary Income of ¥5.67B was broadly in line with Operating Income. As non-operating income and expenses were small at ¥0.03B and ¥0.04B, respectively, and no extraordinary gains or losses were identified, the gap from the operating level was immaterial. Net Income of ¥3.91B (+90.2%) reflects the deduction of ¥1.76B in income taxes and other taxes, representing an effective tax rate of approximately 31.0%; no significant change was observed in the tax burden ratio. As profitability has expanded on a sustained basis in addition to revenue growth, the results can be characterized as higher revenue and higher earnings.

Segment Analysis

Real Estate Development generated revenue of ¥35.74B, representing an 88.8% composition ratio, and Operating Income of ¥5.18B (+94.7%), with a 14.5% margin. It accounted for the majority of company-wide earnings, approximately 91% of total Operating Income, and served as the primary performance driver. Construction recorded revenue of ¥3.11B (+33.8%) and Operating Income of ¥0.31B (+136.2%), with a 9.9% margin, achieving higher revenue and earnings as well as improved profitability. Real Estate Management was nearly flat at ¥1.15B (-0.2%), but had the highest margin among all segments at 21.4%, functioning as a stable source of earnings; however, Operating Income declined to ¥0.25B (-13.1%). Hotels continued to post a loss, with revenue of ¥0.30B (+7.9%) and an Operating Loss of ¥0.05B, although its impact on company-wide earnings was small. Overall, the company remains highly dependent on Real Estate Development for both revenue and earnings, and the profitability trends of this business continue to determine overall company performance.

Key Financial Indicators

【Profitability】The Operating Income margin of 14.1% (9.6% in the previous year) and Net Income margin of 9.7% (6.5% in the previous year) both improved significantly year on year, reflecting simultaneous improvement in the gross margin to 21.9% from 18.9% and a decline in the SG&A ratio to 7.8% from 9.3%. 【Cash Quality】As the scale of non-operating and extraordinary gains and losses was small and the difference between Ordinary Income and Net Income was largely limited to the tax burden, most earnings can be regarded as originating from the core business. 【Investment Efficiency】ROE was 4.7%, improving from an estimated approximately 3.6% in the previous year, primarily due to the improvement in the Net Income margin. Total asset turnover remained relatively restrained at approximately 0.35x, reflecting the characteristics of the real estate industry. 【Financial Soundness】The Equity Ratio was 72.3% (71.2% in the previous year). With current assets of ¥100.65B against current liabilities of ¥16.33B, liquidity was ample. Interest expense was ¥0.04B against long-term borrowings of ¥10.65B, indicating a limited interest burden.

Cash Flow Analysis

Although a statement of cash flows was not disclosed, changes in the balance sheet provide insight into cash movements. Cash and deposits increased by ¥6.62B (+25.7%) from the end of the previous fiscal year to ¥32.36B, apparently reflecting cash collections associated with progress in property deliveries. Meanwhile, inventories, including real estate for sale, remained at a high level, creating a structure in which quarterly cash collections are susceptible to fluctuations in development progress and delivery timing. Investment securities declined from the previous year to ¥0.37B, suggesting efforts to reduce marketable assets and concentrate resources on the core business. Long-term borrowings stood at ¥10.65B, slightly lower than in the previous year, while cash holdings continued to build under a low-leverage financial structure with an Equity Ratio of 72.3%.

Quality of Earnings

The current-period earnings growth can be regarded as high-quality growth based on improved core-business margins, as non-operating income and expenses were limited to ¥0.03B and ¥0.04B, respectively, and no extraordinary gains or losses were identified. Non-operating income mainly comprised dividend income of ¥0.01B and interest income of ¥0.01B, representing less than 0.1% of revenue and therefore an immaterial amount. Ordinary Income was broadly consistent with Operating Income. The difference between Profit Before Tax of ¥5.67B and Net Income of ¥3.91B was attributable to income taxes and other taxes of ¥1.76B, representing an effective tax rate of approximately 31.0%; the tax burden remained standard, with no structural distortion observed. Comprehensive Income was ¥3.87B, slightly below Net Income of ¥3.91B. The difference was limited to valuation difference on securities of -¥0.03B and adjustments related to retirement benefits of -¥0.01B, indicating only a small divergence between Net Income and Comprehensive Income.

Earnings Forecast and Guidance

Progress against the full-year plan—Revenue of ¥152.00B, Operating Income of ¥15.00B, Ordinary Income of ¥15.00B, and Net Income of ¥10.50B—was 26.5% for Revenue, 37.9% for Operating Income, 37.8% for Ordinary Income, and 37.3% for Net Income as of Q1. Compared with the simple quarterly allocation benchmark of 25%, profit-related indicators were progressing 12–13pt ahead of schedule, reflecting accelerated earnings progress driven by gross margin improvement and SG&A efficiency. No revisions were made to either the earnings forecast or dividend forecast during the quarter, and management maintained its full-year outlook.

Shareholder Returns

The full-year dividend forecast is ¥80 per share, implying a Payout Ratio of approximately 25.0% based on the full-year EPS forecast of ¥320.59. Given cash and deposits of ¥32.36B and an Equity Ratio of 72.3%, the company has sufficient resources to fund this dividend level. As no information on share repurchases was identified in this report, shareholder returns are centered on dividends.

Risk Factors

1. Business concentration risk: The Real Estate Development segment accounts for 88.8% of revenue and more than 90% of Operating Income, creating a structure in which supply-demand and pricing trends in this business have a significant impact on company-wide performance.

2. Inventory-related risk: Inventories, including real estate for sale, remain a high proportion of total assets, making quarterly cash collections susceptible to fluctuations depending on delivery progress. The balance of real estate under development is also substantial at ¥41.59B, creating sensitivity to changes in selling prices and procurement costs.

3. Cost and interest-rate risk: Although interest expense is small at ¥0.04B and interest coverage is high, the company has long-term borrowings of ¥10.65B. Consequently, changes in construction costs or the interest-rate environment could affect the cost ratio and funding costs.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The company's Operating Income margin and Net Income margin both exceed the industry median, placing its profitability in the upper tier of the industry.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median and represents a high growth rate within the industry.

Source: Compiled by the company

Key Takeaways from the Results

1. The Operating Income margin expanded by +4.5pt to 14.1% from 9.6% in the previous year, with gross margin improvement (+3.0pt) and a decline in the SG&A ratio (-1.5pt) occurring simultaneously. Earnings growth exceeding the rate of revenue growth indicates that positive operating leverage has become evident.

2. The profit progress rate against the full-year plan was in the 37% range, substantially exceeding the revenue progress rate of 26.5%, indicating that earnings were progressing ahead of schedule. Together with the unchanged forecasts, the pace of revenue recognition and inventory liquidation in the second half will be key factors determining full-year results.

3. The company has a revenue structure highly concentrated in Real Estate Development, supported by an Equity Ratio of 72.3% and cash and deposits of ¥32.36B. Its high dependence on the highly profitable segment will remain an important structural characteristic to monitor from both profitability and sensitivity to market conditions perspectives.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed 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 to take any specific investment action.

Sensitivity: ¥2,791–¥2,958 at ±1% for the cost of equity, and ¥2,865–¥2,884 at ±0.1 for ω.

Notes:

• As Net Income progress against the full-year forecast is 37%, exceeding the standard 25%, forecast EPS has been adjusted upward within an upper limit of +10% (because companies progressing ahead of schedule tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end have been used, resulting in a timing difference relative to the full-year forecast.

(Calculation model: Residual income model / Interest-rate reference month: 2026-06 / This value does not predict or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It is not a recommendation to invest in any specific security. The industry benchmarks are reference information compiled by the company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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