Grandy House (8999) FY2026 FY Earnings Report

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Executive Summary

Despite a decline in revenue, the Company achieved substantial profit growth, with improved profitability being the defining feature of the current period’s performance. Revenue was ¥529.8B (-1.8% YoY), Operating Income was ¥18.9B (+56.1%), Ordinary Income was ¥14.8B (+61.7%), and Net Income attributable to owners of the parent was ¥9.2B (+88.6%). Improved profitability in the core Real Estate Sales Business and the containment of SG&A expenses were the primary drivers of profit growth.

Factors Affecting Performance

【Revenue】Revenue was ¥529.8B, down 1.8% YoY. The core Real Estate Sales Business declined to ¥497.4B (93.9% of total revenue, -2.1% YoY), serving as the main factor behind the overall revenue decline. Building Materials Sales increased to ¥27.8B (+2.6%), while Real Estate Leasing increased to ¥4.6B (+3.2%); however, their scale was small and their impact on total revenue was limited.

【Profit and Loss】Gross profit was ¥78.5B, and the gross margin improved to 14.8% from 13.6% in the previous year. SG&A expenses decreased 2.9% YoY to ¥59.5B, with cost containment also contributing to the improvement in profit margins. As a result, the Operating Income margin expanded to 3.6% from 2.2% in the previous year. By segment, Ordinary Income from the Real Estate Sales Business recovered significantly to ¥12.3B (+111.3%), while the Building Materials Sales Business swung to an Ordinary Loss of ¥0.05B. Among non-operating expenses, interest expense of ¥4.2B was a burden, limiting the Ordinary Income margin to 2.8%. Extraordinary losses were modest at ¥0.2B, and their impact on income before taxes was limited. Accordingly, the current period is classified as one of lower revenue and higher profits.

Segment Analysis

The Real Estate Sales Business generated revenue of ¥497.4B (93.9% of total revenue, -2.1% YoY) and Ordinary Income of ¥12.3B (+111.3%, 2.5% margin), representing a substantial improvement in profitability despite lower revenue. The Building Materials Sales Business increased revenue to ¥27.8B (+2.6%), but its Ordinary Income (Loss) swung to a loss of ¥0.05B from a profit of ¥0.6B in the previous year, highlighting the challenge of passing rising costs through to prices. The Real Estate Leasing Business generated revenue of ¥4.6B (+3.2%) and Ordinary Income of ¥2.5B (53.8% margin), making it highly profitable; however, its share of total revenue remained limited at 0.9%, and its contribution to consolidated performance was limited. Segment profit is calculated on an Ordinary Income basis, and it should be noted that its calculation basis differs from that of consolidated Operating Income.

Key Financial Metrics

【Profitability】The Operating Income margin improved to 3.6% from 2.2% in the previous year, the Ordinary Income margin improved to 2.8% from 1.7%, and the Net Income margin improved to 1.7% from 0.9%. The gross margin also expanded to 14.8% from 13.6%. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥18.1B, approximately 2.0 times Net Income of ¥9.2B, indicating solid cash backing for earnings. However, the previous year’s OCF of ¥86.4B included a temporary factor arising from a substantial decrease in inventories, and the decline in the current period largely reflects this reversal. 【Investment Efficiency】ROE was 3.6%, while the Equity Ratio was 36.5%, broadly unchanged from 36.2% in the previous year. Capital expenditures of ¥10.1B exceeded depreciation and amortization of ¥3.9B, representing a level above that required merely for replacement investment. 【Financial Soundness】Current assets of ¥530.5B substantially exceeded current liabilities of ¥241.6B, indicating sound short-term liquidity; however, cash and deposits of ¥99.4B were below short-term borrowings of ¥121.9B. Long-term borrowings increased to ¥103.9B, and together with bonds of ¥75.0B, the Company continues to depend on interest-bearing debt.

Cash Flow Analysis

OCF was ¥18.1B, exceeding Net Income of ¥9.2B, indicating good earnings quality. Nevertheless, the previous year’s OCF of ¥86.4B included a temporary working-capital inflow resulting from a decrease in inventories, and the substantial decline in the current period largely reflects this reversal. Investing CF was -¥20.4B, primarily reflecting capital expenditures of ¥10.1B and the acquisition of investment securities of ¥10.3B, causing free cash flow to turn negative at -¥2.3B. Financing CF was -¥6.9B, comprising a mix of ¥97.8B in proceeds from long-term borrowings and ¥93.6B in repayments, as well as ¥15.0B in bond issuance and ¥8.0B in redemptions. Consequently, cash and cash equivalents at the end of the period declined by ¥9.2B from the end of the previous period to ¥99.2B, suggesting that investment expenditures and dividends were not fully funded by internally generated cash.

Earnings Quality

OCF, which supports earnings for the current period, exceeded Net Income, indicating a small gap between accounting profit and cash generation. Meanwhile, non-operating expenses were primarily composed of interest expense of ¥4.2B, substantially exceeding non-operating income of ¥0.9B, and the structure whereby profit declines between Operating Income and Ordinary Income remains in place. Extraordinary items were modest, comprising extraordinary income of ¥0.03B and extraordinary losses of ¥0.2B. Accordingly, the increase in profit was not dependent on extraordinary factors but was attributable to improved profitability in the core business. Comprehensive Income was ¥10.8B, exceeding Net Income of ¥9.2B, primarily due to valuation differences on securities of ¥1.6B. However, the divergence between the two was modest and did not materially distort earnings quality.

Earnings Forecast and Guidance

Progress against the full-year Company plan was 91.3% for revenue (actual ¥529.8B / plan ¥580.0B), 94.6% for Operating Income (¥18.9B / ¥20.0B), and 90.0% for Ordinary Income (¥14.8B / ¥16.5B), indicating steady progress, particularly on the profit front. Meanwhile, the full-year plan for Net Income attributable to owners of the parent is ¥11.0B, anticipating a 49.7% YoY decline in profit. To reconcile this with first-half results of ¥9.2B, the plan may incorporate a decline in profit levels during the second half. The full-year plan anticipates higher revenue and profits, with revenue up +9.5% YoY and Operating Income up +5.7%; the pace of recovery in the Sales Business from the second half onward will be the key to achieving the plan.

Shareholder Returns

The annual dividend is ¥32 per share, with no interim dividend, resulting in total dividends of approximately ¥9.4B. The Payout Ratio against Net Income of ¥9.2B was 107.7%, indicating that dividends were not covered by current-period profit alone. Virtually no share repurchases were conducted, making dividends the primary means of shareholder returns. OCF of ¥18.1B exceeded total dividends, but free cash flow after investment expenditures was -¥2.3B, meaning that dividends were not covered by free cash flow. Dividend sustainability will depend on maintaining future profit levels and the collection of cash through inventory sales.

Risk Factors

1. Business concentration risk: The Real Estate Sales Business accounts for 93.9% of revenue, creating a structure in which changes in housing demand, interest rates, and land prices can readily flow through directly to overall performance.

2. High inventory and leverage risk: The combined value of real estate for sale and real estate for sale under development is ¥412.8B, accounting for 59.9% of total assets. Debt/EBITDA is at a high level relative to interest-bearing debt of ¥225.8B, and the leverage burden may rise rapidly if profitability deteriorates.

3. Interest burden and short-term funding risk: Interest expense increased 11.5% YoY to ¥4.2B, absorbing a certain proportion of Operating Income. Cash and deposits of ¥99.4B are below short-term borrowings of ¥121.9B, indicating high sensitivity to the refinancing environment.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (real_estate)

Profitability and Returns

Profitability is substantially below the industry median, placing the Company in the lower-tier group.

Growth and Capital Efficiency

The growth rate is also substantially below the industry median, with the revenue-decline trend standing out relative to peers.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Despite lower revenue, the Operating Income margin improved from 2.2% in the previous year to 3.6%, and the recovery in profitability in the Real Estate Sales Business drove consolidated profit, making this a key point in the financial results.

2. Structural constraints related to leverage and funding, including the Debt/EBITDA level and insufficient cash holdings relative to short-term borrowings, remain in place and require monitoring.

3. The Payout Ratio was 107.7%, exceeding current-period profit, while free cash flow after investment expenditures was negative. Accordingly, the trajectory of cash-generation capacity supporting dividends will be an area to monitor going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥744–¥784 at ±1% for the cost of equity, and ¥760–¥766 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥4.7 per share is added back to earnings (as a non-cash expense and for comparability with IFRS companies).
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.

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

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings release data. It does not recommend investment 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 discretion and responsibility, with consultation with a professional as necessary.

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