Grandy House Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.04B
• Operating Income: ¥717M
• Net Income: ¥78M
• EPS: ¥11.03

Income Statement

Balance Sheet

Cash Flow Statement

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

Grandy House Co., Ltd. (TSE: 8999) reported FY2026 Q2 consolidated results showing resilient profitability despite a modest revenue contraction. Revenue declined 3.5% YoY to ¥26.043bn, but operating income rose 65.3% YoY to ¥0.717bn, indicating notable margin recovery. Gross profit was ¥3.599bn with a gross margin of 13.8%, suggesting improved pricing/mix or cost containment in a softer top-line environment. Operating margin expanded to approximately 2.8%, highlighting SG&A discipline and operating leverage. Ordinary income of ¥0.533bn trailed operating income due to financing costs and non-operating items, consistent with an interest burden of ¥0.192bn. Net income surged 308.9% YoY to ¥0.317bn, with net margin at 1.22%, reflecting both margin improvement and easier YoY comps. On a DuPont basis, ROE is calculated at 1.30% (net margin 1.22%, asset turnover 0.382x, financial leverage 2.79x), indicating low overall profitability, constrained by modest margins for the period. Cash generation was strong relative to earnings: operating cash flow (OCF) was ¥3.984bn, implying an OCF/Net income ratio of 12.6x, likely driven by favorable working capital movements. The balance sheet shows total assets of ¥68.219bn and total liabilities of ¥43.904bn, implying an equity base of ¥24.453bn and a D/E ratio of 1.80x. Liquidity appears robust with a current ratio of 203.5% and a quick ratio of 202.4%, supporting near-term obligations. Interest coverage is adequate at 3.7x (EBIT basis), though monitoring is warranted given the interest cost relative to operating profit. While the disclosed “Equity Ratio” is 0.0% in the dataset, simple calculation implies an equity ratio around the mid-30% range using the reported balance sheet totals. Dividend information for the term is unreported (DPS and payout shown as 0), so dividend capacity cannot be directly inferred this quarter. Free cash flow is not derivable due to missing investing cash flow and capex data (FCF shown as 0 in the dataset). Overall, results show improved operating execution and cash conversion, balanced against modest profitability and a leverage profile typical for a residential developer. Data limitations (e.g., unreported equity ratio, DPS, capex, and cash balance) necessitate cautious interpretation, but the available non-zero metrics point to improving earnings quality in the half. Outlook hinges on demand trends, land acquisition discipline, and interest cost management in a normalizing rate environment in Japan.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 0.0122
• asset_turnover: 0.382
• financial_leverage: 2.79
• calculated_ROE: 0.013 margin_quality: Gross margin of 13.8% and operating margin of ~2.8% indicate improved cost control and/or better mix despite revenue decline. Ordinary margin (~2.0%) reflects financing costs pulling down pre-tax profitability. Net margin at 1.22% remains thin, typical of volume-driven detached housing developers, but the YoY improvement is meaningful. operating_leverage: Revenue fell 3.5% YoY while operating income rose 65.3% YoY, evidencing positive operating leverage from SG&A discipline and improved gross spread. Depreciation is modest (¥151m), so incremental margin gains are largely from operating cost control rather than heavy fixed-cost absorption. other_notes: Interest expense of ¥192m is significant relative to EBIT (coverage 3.7x), capping ordinary profit. Effective tax burden appears modest given reported income tax of ¥64m versus profits, though precise ETR cannot be confirmed due to classification differences between ordinary and pre-tax profit.

Growth Assessment

revenue_sustainability: Top-line contracted 3.5% YoY to ¥26.0bn, suggesting softer deliveries or ASP/unit mix. Sustainability depends on order backlog, land bank turnover, and housing demand in core regions; these datapoints are not disclosed in the dataset. profit_quality: Operating profit expansion despite lower revenue implies better project-level economics and SG&A restraint. OCF significantly exceeds net income (12.6x), indicating strong near-term cash realization; however, in residential development, cash flows can be volatile due to land purchases and delivery timing. outlook: With improved margins and positive OCF, the near-term trajectory is constructive if order intake and delivery schedules hold. Key external variables include mortgage rate trends in Japan, construction material costs, and policy incentives for energy-efficient housing. Absent disclosed guidance, we view earnings momentum as improving but sensitive to sales pace and financing costs.

Financial Health

liquidity: Current assets ¥54.009bn vs current liabilities ¥26.542bn yields a current ratio of 203.5% and quick ratio of 202.4%, indicating strong short-term liquidity. Working capital stands at ¥27.467bn, providing a cushion for project execution. solvency: Total liabilities ¥43.904bn vs equity ¥24.453bn implies D/E of ~1.80x. Interest coverage is 3.7x (EBIT/interest), adequate but not high, and sensitive to profit swings. Implied equity ratio based on balance sheet totals is roughly 35.8%, despite the dataset’s unreported value. capital_structure: Leverage is typical for a developer with inventory/land funding needs. The mix likely includes project financing; refinancing risk and interest-rate sensitivity should be monitored as rates normalize. notes_on_data: Reported 'Equity Ratio' at 0.0% and 'Cash & Equivalents' at 0 reflect unreported fields; assessments rely on available non-zero totals.

Cash Flow Quality

earnings_quality: OCF of ¥3.984bn versus net income of ¥0.317bn (OCF/NI 12.6x) suggests robust cash conversion in the half, likely from working capital inflows (e.g., lower inventories or higher advances). FCF_analysis: Investing CF and capex are unreported (0 in dataset). Therefore, true FCF cannot be determined for the period. Given business model, land acquisition typically consumes OCF via inventory increases rather than investing CF, adding timing volatility to FCF. working_capital: High working capital base (¥27.467bn) underscores reliance on inventory/land turnover. The unusually small reported inventories (¥0.289bn) likely reflect classification differences in XBRL mapping for developer inventories; cash flow conclusions should emphasize aggregate OCF rather than inventory balance alone. sustainability: The positive OCF may not be linear quarter-to-quarter; sustaining cash generation depends on steady sales completions, disciplined land purchases, and construction cycle timing.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as 0 in the dataset (unreported). With net income at ¥0.317bn for the half, payout capacity cannot be quantified this period. FCF_coverage: FCF is unreported; thus, coverage metrics cannot be computed. Historically for developers, FCF can be volatile due to land banking needs. policy_outlook: No dividend policy details are provided in the dataset. Future distributions will hinge on profitability stability, leverage tolerance (D/E ~1.80x), and cash generation after land acquisition requirements.

Risk Assessment

Business Risks:

• Demand cyclicality in detached housing amid macro changes and consumer confidence shifts
• Interest rate sensitivity affecting mortgage affordability and buyer conversion
• Construction cost inflation and subcontractor capacity constraints impacting gross margins
• Land acquisition and entitlement risks affecting pipeline and cycle time
• Geographic concentration risk in core operating regions
• Regulatory and environmental compliance for housing standards and energy efficiency
• Project timing risk leading to revenue and cash flow lumpiness

Financial Risks:

• Leverage at ~1.80x D/E with interest coverage of 3.7x, exposing earnings to rate increases
• Refinancing risk on project and corporate borrowings in a normalizing rate environment
• Working capital intensity and potential inventory build tying up cash
• Valuation risk on land/unsold units if market slows
• Potential mismatch between accounting profits and cash inflows due to delivery timing

Key Concerns:

• Sustaining margin gains if sales volumes soften further
• Managing interest costs to protect ordinary income
• Maintaining positive OCF while funding land pipeline
• Visibility on dividend policy and capital allocation

Investment Implications

Key Takeaways:

• Operating margin recovery despite a 3.5% YoY revenue decline signals improved execution
• Net income up 309% YoY with OCF/NI at 12.6x indicates strong cash realization this half
• Leverage is moderate-to-elevated for the sector (D/E ~1.80x) with adequate 3.7x interest coverage
• Liquidity is strong (current ratio ~2.0x), supporting near-term commitments
• Overall ROE remains low at 1.30%, constrained by thin net margins
• Data gaps (DPS, cash balance, investing CF) limit full assessment of FCF and dividends

Metrics to Watch:

• Orders received and backlog conversion
• Gross margin per unit and SG&A ratio
• Interest coverage and effective borrowing rates
• OCF sustainability and land acquisition outflows
• Equity ratio and net debt trajectory
• Housing starts and mortgage rate trends in key regions

Relative Positioning: Within Japan’s residential developers, Grandy House shows improving mid-term profitability and solid liquidity, with leverage and interest burden that are manageable but require monitoring; sustained performance will depend on maintaining sales pace and disciplined land banking.

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
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis