| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥10861.8B | ¥10549.8B | +3.0% |
| Operating Income / Operating Profit | ¥1031.9B | ¥1034.8B | -0.3% |
| Ordinary Income | ¥1161.3B | ¥1077.2B | +7.8% |
| Net Income | ¥484.7B | ¥399.5B | +21.3% |
| ROE | 5.1% | 4.6% | - |
For the fiscal year ended March 2026, Revenue was ¥10861.8B (YoY +¥312.0B, +3.0%), Operating Income was ¥1031.9B (YoY -¥2.9B, -0.3%), Ordinary Income was ¥1161.3B (YoY +¥84.1B, +7.8%), and Net Income attributable to owners of the parent was ¥484.7B (YoY +¥85.2B, +21.3%). The result was higher revenue, broadly flat operating profit, and materially higher ordinary and net income. Revenue exceeded prior year across all segments: Lifestyle Services, Hotels & Resorts, Real Estate, and Transportation. Operating profit was slightly down due to cost increases such as power and personnel expenses, but a large increase in equity-method investment income to ¥239.2B (prior year ¥117.6B) boosted Ordinary Income. The increase in equity-method income includes ¥66.5B of negative goodwill arising from the acquisition of Tokyu Real Estate Investment Corporation. At the Net Income level, a reduced tax burden (effective tax rate 18.5%) also contributed, resulting in a substantial YoY increase of +21.3%.
【Revenue】 Revenue of ¥10861.8B (YoY +3.0%) reflected growth in all four segments. By segment: Real Estate ¥2127.4B (+4.2%), Lifestyle Services ¥5115.2B (+0.8%), Hotels & Resorts ¥1387.9B (+9.9%), Transportation ¥2231.3B (+2.9%). Hotels & Resorts achieved double-digit growth driven by higher occupancy and inbound demand recovery; Transportation benefited from passenger recovery. Lifestyle Services was supported by resilience in department stores and chain stores; Real Estate was aided by higher rental income and progress in condominium sales.
【Profitability】 Operating Income of ¥1031.9B (YoY -0.3%) remained essentially flat despite higher revenue. SG&A was ¥2382.8B (as a percentage of revenue 21.9%, prior year 21.9%) with a stable ratio, but increases in power, personnel, and depreciation/amortization of ¥885.5B (prior year ¥865.3B) compressed margins. By segment, Lifestyle Services improved to Operating Income ¥218.7B (+13.0%), while Real Estate declined to ¥435.9B (-9.9%) and Transportation declined to ¥273.4B (-5.7%), reflecting the impact of rising costs. Ordinary Income of ¥1161.3B (+7.8%) was lifted by a large increase in equity-method investment income to ¥239.2B (prior year ¥117.6B, +103.4%), which includes ¥66.5B of negative goodwill related to the acquisition of Tokyu Real Estate Investment Corporation. Non-operating income totaled ¥318.0B, including dividend income ¥17.0B; non-operating expenses totaled ¥188.6B, including interest expense ¥118.3B. Extraordinary items netted to -¥69.7B (extraordinary gains ¥60.2B, extraordinary losses ¥129.9B), including impairment losses ¥61.4B and loss on disposal of fixed assets ¥20.2B. Corporate taxes and other amounted to ¥201.5B (effective tax rate 18.5%, prior year 23.1%), and Net Income was ¥484.7B (+21.3%). In summary: higher revenue, flat operating profit, and materially higher ordinary and net income.
Transportation: Revenue ¥2231.3B (+2.9%), Operating Income ¥273.4B (-5.7%), Operating Margin 12.3%. Passenger demand recovery supported revenue but higher power and personnel costs reduced profits. Real Estate: Revenue ¥2127.4B (+4.2%), Operating Income ¥435.9B (-9.9%), Operating Margin 20.5%. Rental income remained firm, but rising costs in for-sale housing and market conditions reduced margins. Lifestyle Services: Revenue ¥5115.2B (+0.8%), Operating Income ¥218.7B (+13.0%), Operating Margin 4.3%. Efficiency improvements and gross margin recovery at department stores and chain stores drove a +13.0% profit increase despite low margins. Hotels & Resorts: Revenue ¥1387.9B (+9.9%), Operating Income ¥97.1B (+46.0%), Operating Margin 7.0%. A robust recovery in inbound demand and higher occupancy led to a large +46.0% increase in profit. Overall, Real Estate remains the largest contributor to Operating Income (¥435.9B) with a high-margin profile; Hotels & Resorts show margin recovery; Lifestyle Services delivers low-margin volume with efficiency gains; Transportation is a stable income source but was impacted by rising costs.
Profitability: Operating Margin was 9.5%, down 0.3ppt from 9.8% due to higher power, personnel, and depreciation. Net Margin was 4.5%, up 0.7ppt from 3.8%, aided by higher equity-method income and lower tax burden. ROE improved slightly to 5.1% (prior year 4.6%) but remains low versus the 3-year average. ROA (on Ordinary Income basis) was 4.1% (prior year 4.0%). Cash Quality: Operating Cash Flow (OCF) / Net Income ratio was 147%, indicating strong cash backing of earnings. Accrual ratio was -140% (OCF ¥1,277.5B ÷ Net Income ¥484.7B - 1), showing cash generation exceeding accounting profit. Depreciation & amortization ¥885.5B equals 85.8% of Operating Income, indicating significant fixed cost burden. Investment Efficiency: Total asset turnover was 0.372x (Revenue ¥10861.8B ÷ average total assets approx. ¥2.91T), down from 0.391x, reflecting temporary slowdown due to ahead-of-curve capital deployment. ROIC was 4.9% (NOPAT ¥1,031.9B × 0.815 ÷ invested capital approx. ¥1.71T), near estimated WACC with room for improvement. Financial Soundness: Equity Ratio was 32.8% (prior year 32.3%) slight improvement, but interest-bearing debt was ¥8587.3B (short-term ¥3246.8B, long-term ¥5340.5B), D/E ratio 2.05x, and Debt/EBITDA 4.48x (interest-bearing debt ¥8587.3B ÷ EBITDA ¥1917.4B), indicating elevated leverage. Interest coverage was 8.72x (EBIT ¥1031.9B ÷ interest expense ¥118.3B), and EBITDA interest coverage was 16.21x, showing sufficient interest-paying capacity. Current ratio was 73.8% (current assets ¥5666.8B ÷ current liabilities ¥7677.8B), quick ratio 72.5%, both below 100% and signaling short-term liquidity caution. Cash and deposits ¥835.2B represent 25.7% of short-term interest-bearing debt, indicating maturity mismatch risk.
OCF was ¥1277.5B (prior year ¥1551.0B, -17.6%). Starting from Operating Income ¥1031.9B plus depreciation ¥885.5B for an OCF subtotal of ¥1539.5B, deterioration in working capital (inventory increase -¥502.7B, trade receivables increase -¥105.9B, trade payables increase +¥178.7B), corporate tax payments ¥243.1B, and adjustment for equity-method income -¥239.2B resulted in the reported OCF. OCF/Net Income ratio was 147%, indicating strong cash backing. Investing CF was -¥1749.8B (prior year -¥1140.1B), a significant increase driven mainly by tangible fixed asset acquisitions -¥1593.2B as the company continues growth and renewal investments. Free Cash Flow was -¥472.4B (OCF ¥1277.5B + Investing CF -¥1749.8B), negative as investment cash significantly exceeded OCF. Financing CF was +¥683.9B, with bond issuance ¥507.6B and long-term borrowings ¥976.1B financing the FCF deficit; dividends paid -¥155.7B and share buybacks -¥100.1B were executed, leaving year-end cash at ¥835.2B (prior year ¥621.3B, +34.4%). In working capital, the inventory increase -¥502.7B was the largest cash strain, reflecting higher development project inventory. Contract liabilities increased ¥13.0B, showing buildup of advance receipts and supporting order backlog stability. Interest and dividend received totaled ¥94.5B; interest paid was -¥113.5B, and while interest burden continues, interest coverage of 16.21x provides capacity. Cash conversion (OCF/EBITDA) was 66.6% (¥1277.5B ÷ ¥1917.4B), constrained by working capital needs and interest/tax payments.
Earnings quality is high at the operating level, driven by recurring transportation revenue, real estate rentals, retail sales, and hotel revenue. Non-operating income ¥318.0B (2.9% of revenue) includes equity-method investment income ¥239.2B, of which ¥66.5B of negative goodwill from the Tokyu Real Estate Investment Corporation acquisition is a one-off. Dividend income ¥17.0B and interest income ¥8.9B are stable sources of recurring income, and other non-operating income ¥52.9B is within acceptable range. Non-operating expenses ¥188.6B include interest expense ¥118.3B, consistent with interest-bearing debt of ¥8587.3B. Extraordinary items netted -¥69.7B (extraordinary gains ¥60.2B, extraordinary losses ¥129.9B), including impairment losses ¥61.4B and loss on disposal of fixed assets ¥20.2B as one-off items. Accrual ratio of -140% is favorable, with OCF ¥1277.5B substantially exceeding Net Income ¥484.7B. The gap between Ordinary Income ¥1161.3B and Net Income ¥484.7B is about -58.3%, primarily due to corporate taxes and others ¥201.5B, net extraordinary items -¥69.7B, and non-controlling interests ¥19.4B, which is consistent. Comprehensive Income ¥1082.3B vs Net Income ¥484.7B difference of ¥597.6B is due to other comprehensive income items totaling ¥192.2B (pension-related adjustments ¥126.5B, valuation difference on securities ¥37.1B, share of OCI of equity-method affiliates ¥31.8B, etc.), complementing the quality of Net Income. Overall, excluding the ¥66.5B one-off within equity-method income, operating activities are centered on recurring revenue with good quality and sufficient cash backing.
For the fiscal year ending March 2027, management forecasts Revenue ¥11400.0B (YoY +¥538.2B, +5.0%), Operating Income ¥1100.0B (YoY +¥68.1B, +6.6%), Ordinary Income ¥1114.0B (YoY -¥47.3B, -4.1%), and Net Income attributable to owners of the parent ¥900.0B (YoY +¥415.3B, +85.7%). The plan assumes continued growth across all segments; Operating Income is expected to increase due to price pass-through, further hotel occupancy recovery, and timing management of real estate deliveries. Planned Operating Margin is about 9.6%, a slight improvement. The projected decline in Ordinary Income reflects the conservative assumption that the one-off equity-method gain (negative goodwill ¥66.5B) recorded this period will not recur. The large projected increase in Net Income assumes a rebound from this period’s extraordinary losses (e.g., impairment ¥61.4B). Dividend guidance is ¥16 per share annually, a large decline from prior year ¥30 (annual), but an interim dividend of ¥14 has already been paid, making a ¥2 year-end dividend consistent with the ¥16 annual guidance. The full-year payout ratio is approximately 17.8% (forecast dividend ¥16 ÷ forecast EPS ¥158.15). Key drivers for achieving the plan are timing of real estate deliveries, effectiveness of price pass-through in rail and retail, sustained hotel occupancy, and the earnings trajectory of equity-method affiliates.
Annual dividend was ¥30 (interim ¥14, year-end ¥16) with a payout ratio of 17.8% (dividend ¥30 ÷ EPS ¥152.25 adjusted by average shares outstanding 572 million ÷ issued shares 625 million) remaining conservative. Total dividends amounted to ¥155.7B, equivalent to 12.2% of OCF ¥1277.5B and 32.1% of Net Income ¥484.7B. Share repurchases of ¥100.1B were executed, and combined with dividends produced a Total Return Ratio of 52.8% (total return ¥255.8B ÷ Net Income ¥484.7B). Total return ¥255.8B is within OCF ¥1277.5B but exceeds Free Cash Flow -¥472.4B; the shortfall was financed by bond issuance ¥507.6B and long-term borrowings ¥976.1B. Dividend policy appears focused on stable payouts; the FY2027 forecast dividend ¥16 (annual) is lower than prior year ¥30, but with an already paid interim dividend of ¥14, a ¥2 year-end dividend would be consistent. If large-scale investments continue, maintaining stable dividends is feasible but share buybacks will be deployed flexibly based on investment progress and leverage levels.
Liquidity / Maturity Mismatch Risk: Current ratio 73.8% and cash & deposits ¥835.2B represent only 25.7% of short-term interest-bearing debt ¥3246.8B, signaling short-term funding caution. Short-term refinancing needs, including bond redemptions of ¥200.0B within one year, are substantial. In a tightening funding environment or rising interest rate scenario, refinancing costs and securing liquidity could be challenging. Contract liabilities ¥423.3B provide some stability via advance receipts, but continued working capital deterioration (inventory -¥502.7B, receivables -¥105.9B) would pressure OCF.
Interest Rate / Leverage Risk: Interest-bearing debt ¥8587.3B, Debt/EBITDA 4.48x, and D/E 2.05x indicate elevated leverage. Interest expense ¥118.3B (prior year ¥90.5B, +30.7%) is already rising; further rate increases could increase interest burden and erode interest coverage of 8.72x. If a high proportion of debt is variable rate, short-term rate increases could immediately impact profit. Growth in long-term borrowings to ¥5340.5B (prior year ¥4809.3B, +11.0%) reflects longer-term financing of investments, but refinancing terms could raise fixed costs.
Real Estate Market & Cost Increase Risk: Real Estate Operating Income ¥435.9B (prior year ¥484.0B, -9.9%) declined, with cost inflation and market conditions in for-sale housing evident. Inventory ¥100.1B (prior year ¥93.6B) increased reflecting more development project inventory; delays in sales timing due to rate rises or softened demand could lead to valuation losses or opportunity costs. Continued construction material and labor cost inflation could further compress Real Estate margin (current 20.5%, prior 23.8%). In Transportation and Lifestyle Services, rising power and personnel costs are also suppressing Operating Margins; prolonged lag in price pass-through could result in sustained margin deterioration.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.5% | 6.3% (3.7%–8.5%) | +3.2pt |
| Net Margin | 4.5% | 2.7% (1.6%–4.7%) | +1.7pt |
Both Operating Margin and Net Margin exceed industry medians, driven by high-margin Real Estate segment.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 3.0% | 5.0% (-0.4%–9.4%) | -2.0pt |
Revenue growth lags the industry median, suggesting slight underperformance in post-COVID demand recovery.
※ Source: Company compilation
Structure and Sustainability of Equity-method Income: Equity-method investment income ¥239.2B (prior year ¥117.6B, +103.4%) accounted for 20.6% of Ordinary Income ¥1161.3B and is a significant earnings source. The ¥66.5B negative goodwill related to the Tokyu Real Estate Investment Corporation acquisition is a one-off that will not recur in subsequent periods. Monitoring the operating performance of equity-method investees (REITs, resource-related entities, etc.) is key to assessing sustainability. The FY2027 guidance of Ordinary Income ¥1114.0B (-4.1%) appears conservative, incorporating the loss of the one-off gain, but continued attention to equity-method contributors is necessary.
Downward Trend in Operating Margin and Progress on Price Pass-Through: Operating Margin declined from 9.8% to 9.5% (-0.3ppt); SG&A ratio held at 21.9% but rising power, personnel, and depreciation depressed margins. Segment-wise, Real Estate margin fell from 23.8% to 20.5% (-3.3ppt), and Transportation from 13.2% to 12.3% (-0.9ppt), signaling incomplete cost pass-through. FY2027 assumes a slight improvement to 9.6% Operating Margin, but achievement depends on the pace of price adjustments, energy cost trends, and persistence of personnel cost inflation. Quarterly trend monitoring of Operating Margin will be necessary to validate price pass-through effectiveness.
Balance Between Investment Cash Outflows and Capital Efficiency: Investing CF -¥1749.8B and Free Cash Flow -¥472.4B indicate ongoing aggressive investment exceeding OCF. Tangible fixed asset acquisitions -¥1593.2B show continued growth/renewal investment, but ROIC 4.9% is near estimated WACC, implying scope to improve capital recovery efficiency. Quantitative monitoring of project IRRs, payback periods, occupancy and revenue progress is recommended, and portfolio reshaping to remove underperforming assets and improve asset turnover should support sustainable ROIC and ROE improvement. With current ratio 73.8% and cash/short-term debt 25.7%, liquidity is tight, so balancing investments with stable OCF generation and long-term funding management is important.
This report was auto-generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to buy or sell any specific securities. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed before making investment decisions.