Keio Corporation FY2027 Q1 Earnings Report

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Executive Summary

The quarter recorded higher revenue but lower profit, as growth in the Real Estate and Hotel Businesses secured revenue growth, while increased costs in the Transportation and Lifestyle Services Businesses weighed on earnings. Revenue was ¥1,231.6B (¥1,137.4B in the same period of the previous year, YoY+8.3%), Operating Income was ¥161.8B (¥166.7B, YoY-2.9%), and Ordinary Income was ¥161.6B (¥168.1B, YoY-3.8%). Net Income (Net Income Attributable to Owners of the Parent) was ¥117.1B (¥119.8B, YoY-2.2%), representing a smaller decline than Operating Income. The primary driver of revenue growth was a +44.2% increase in operating revenue in the Real Estate Business, while the primary causes of profit decline were declines of -15.9% in Operating Income in the Transportation Business and -35.3% in the Lifestyle Services Business.

Factors Affecting Performance

【Revenue】Revenue was ¥1,231.6B, up YoY+8.3%. The Real Estate Business was the main growth driver, with operating revenue increasing substantially to ¥333.6B (YoY+44.2%). The Hotel Business also remained firm at ¥160.1B (YoY+3.2%), as did the Transportation Business at ¥345.1B (YoY+3.2%). Meanwhile, the Construction and Equipment Business was somewhat sluggish at ¥122.2B (YoY-15.5%), as was the Lifestyle Services Business at ¥347.5B (YoY-0.4%).

【Profit and Loss】Operating Income was ¥161.8B, down YoY-2.9%. Segment profit contributions from the Real Estate Business, which increased to ¥58.0B (YoY+20.8%), and the Hotel Business, which increased to ¥39.7B (YoY+1.0%), were offset by declines in the Transportation Business to ¥52.0B (YoY-15.9%), the Lifestyle Services Business to ¥9.4B (YoY-35.3%), and the Construction and Equipment Business to ¥1.6B (YoY-34.0%), which weighed on overall earnings. Ordinary Income was ¥161.6B (YoY-3.8%), with interest expense increasing to ¥13.1B (¥11.2B in the previous year), slightly widening the decline in Operating Income. Extraordinary income and losses represented a net gain of +¥7.3B (extraordinary income of ¥10.3B and extraordinary losses of ¥3.0B), a temporary positive factor, but its scale was limited. Consequently, Profit Before Tax of ¥168.9B (YoY-0.1%) remained almost flat year on year. Net Income after deducting income taxes and other taxes of ¥51.5B was ¥117.1B, down YoY-2.2%. In summary, the Company recorded higher revenue but lower profit. Although the quality of revenue growth was supported by contributions from the Real Estate and Hotel Businesses, increased costs in the Transportation and Lifestyle Services Businesses remain bottlenecks.

Segment Analysis

Among the five segments, the Real Estate and Hotel Businesses recorded higher profit, while the Transportation, Construction and Equipment, and Lifestyle Services Businesses recorded lower profit, resulting in a clear divergence in performance. The Real Estate Business posted segment profit of ¥58.0B, the largest contribution to total profit, with a profit margin of 17.4% and the highest growth rate at YoY+20.8%; it achieved both higher revenue (+44.2%) and higher profit. The Hotel Business maintained the highest profit margin among the five segments at 24.8%, while profit of ¥39.7B was almost flat at YoY+1.0%. Although the Transportation Business recorded higher revenue (+3.2%), its profit margin declined from 18.5% to 15.1%, and profit decreased to ¥52.0B, down YoY-15.9%. This indicates that cost increases exceeded revenue growth. The Lifestyle Services Business saw its profit margin decline from 4.2% to 2.7%, with profit of ¥9.4B down YoY-35.3%, the largest decline among the segments. The Construction and Equipment Business also saw its profit margin decline from 1.7% to 1.3%, with profit of ¥1.6B down YoY-34.0%. Overall, while the asset-intensive Real Estate and Hotel Businesses supported earnings, all three of the Transportation, Lifestyle Services, and Construction and Equipment Businesses showed a common decline in profit margins due to higher costs.

Key Financial Indicators

【Profitability】The Operating Margin was 13.1%, down 1.5pt from 14.7% in the previous year, while the Net Profit Margin (based on Net Income Attributable to Owners of the Parent) was also 9.5%, down 1.0pt from 10.5% in the previous year. ROE was 2.6%; it should be noted that this figure is based on quarterly profit. The SG&A ratio was 12.5%, improving by 0.47pt from 12.97% in the previous year, indicating that control over SG&A expenses itself is progressing.【Cash Flow Quality】Comprehensive Income of ¥172.8B exceeded Net Income of ¥117.1B by ¥55.7B. The primary reason for the divergence was a positive valuation adjustment of ¥57.8B on securities. This divergence resulted from changes in the market value of held shares rather than business earnings and should be considered separately from recurring earnings power.【Investment Efficiency】Total Assets were ¥11,716.7B, with fixed assets of ¥889.9B accounting for 76.0% of Total Assets, indicating an asset-intensive structure. Current Assets were ¥281.8B, down 11.0% from the end of the previous fiscal year.【Financial Soundness】The Equity Ratio was 38.8%, improving 1.8pt from 37.0% at the end of the previous fiscal year. The Current Ratio was 96.5%, slightly below 100%, making short-term liquidity conditions a monitoring point. The Interest Coverage Ratio was 12.4x, calculated by dividing Operating Income of ¥161.8B by interest expense of ¥13.1B, indicating sufficient capacity to absorb interest costs.

Cash Flow Analysis

Individual line items in the cash flow statement were outside the scope of disclosure, but cash trends can be assessed from changes in the balance sheet. Cash and Deposits were ¥335.5B, down ¥142.4B (-29.8%) from ¥477.9B at the end of the previous fiscal year. Accounts Receivable and Notes Receivable were ¥470.9B, down ¥299.9B (-38.9%) from ¥770.9B at the end of the previous fiscal year, indicating progress in collections. At the same time, Accounts Payable and Notes Payable were ¥183.9B, down ¥68.2B (-27.1%) from ¥252.1B at the end of the previous fiscal year, indicating a simultaneous contraction in purchase and construction-related liabilities. Inventories were ¥549.4B, down ¥93.5B (-14.5%) from ¥642.8B at the end of the previous fiscal year. Meanwhile, Commercial Paper was ¥299.6B, up ¥199.8B from ¥99.9B at the end of the previous fiscal year, indicating that a portion of short-term funding was shifted to Commercial Paper. Long-term Borrowings were ¥1,695.8B, down ¥36.0B from ¥1,731.8B at the end of the previous fiscal year, while Bonds Outstanding of ¥1,750.0B remained flat. Overall, compression of working capital and a shift toward Commercial Paper financing progressed simultaneously, and the decline in cash may have resulted from funding needs such as investments and debt repayments.

Quality of Earnings

In terms of the recurring earnings structure, dividend income of ¥11.6B, the main component of non-operating income of ¥14.7B, contributed as a stable source of earnings. Meanwhile, non-operating expenses were primarily interest expense, which increased to ¥13.1B from ¥11.2B in the previous year, indicating an increasing trend in financial costs. Extraordinary income and losses amounted to a net gain of +¥7.3B (extraordinary income of ¥10.3B and extraordinary losses of ¥3.0B), primarily due to temporary factors such as losses on the disposal of fixed assets, and had a limited impact on Profit Before Tax of ¥168.9B. The ¥55.7B divergence between Comprehensive Income of ¥172.8B and Net Income of ¥117.1B was mainly attributable to a ¥57.8B increase in valuation differences on securities due to the expansion of unrealized gains on investment securities; this item should be evaluated separately from business earnings. In terms of working capital, both Accounts Receivable and Accounts Payable declined substantially, suggesting from an accrual perspective that changes in collection and payment cycles may have affected the pace at which earnings were converted into cash. Overall, despite the headwind of higher interest expense, the stability of non-operating income and limited scale of extraordinary income and losses indicate no significant distortion in earnings quality.

Earnings Forecast and Guidance

Progress in Q1 against the Full-Year plan was 24.4% for Revenue (actual ¥1,231.6B / plan ¥5,040.0B), 31.7% for Operating Income (¥161.8B / ¥510.0B), and 33.8% for Ordinary Income (¥161.6B / ¥478.0B). While Revenue progress was slightly below a simple proportional benchmark of 25.0%, Operating Income and Ordinary Income progressed faster than the simple proportional benchmark, indicating that profit progress is leading. The Full-Year forecasts call for declines of YoY-2.5% in Operating Income and YoY-6.6% in Ordinary Income, respectively, and the Q1 declines of YoY-2.9% and -3.8% are consistent with this declining earnings trend. No revisions to the earnings forecast had been made as of the end of the quarter.

Shareholder Returns

The annual dividend forecast is ¥22.00 per share, representing a Payout Ratio of 29.6% against forecast EPS of ¥74.28. A simple comparison with the previous fiscal year’s actual dividend of ¥55 is not possible because a 5-for-1 stock split was conducted effective April 1, 2026. No revision to the dividend forecast had been made as of the end of the quarter. Treasury stock was ¥55.2B, down 63.1% from ¥149.6B at the end of the previous fiscal year, suggesting capital policy actions such as the cancellation or disposal of treasury stock.

Risk Factors

1. Short-term liquidity: The Current Ratio was 96.5%, below 100%, with Current Liabilities of ¥292.0B slightly exceeding Current Assets of ¥281.8B. Short-term Borrowings were ¥1,067.9B compared with Cash and Deposits of ¥335.5B, making monitoring of refinancing trends important from a funding-structure perspective.

2. Declining profitability in the Transportation segment: Although the Transportation Business recorded higher revenue (YoY+3.2%), Operating Income declined YoY-15.9%, and the segment profit margin fell from 18.5% to 15.1%. Cost increases exceeded revenue growth, making the trend in profitability a key focus.

3. Volatility in the Lifestyle Services and Construction and Equipment segments: Operating Income declined YoY-35.3% in the Lifestyle Services Business and YoY-34.0% in the Construction and Equipment Business, with both segments recording lower profit margins than in the previous year. This suggests a structure in which profit fluctuates substantially relative to business scale.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Margin and Net Profit Margin substantially exceeded the industry median, placing profitability at a relatively high level within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate also exceeded the industry median and upper quartile, placing top-line growth among the relatively stronger levels within the industry.

※Source: Compiled by the Company

Key Earnings Highlights

1. The top line grew faster than the industry average, driven by substantial revenue growth in the Real Estate Business (YoY+44.2%), while Operating Income declined YoY-2.9% overall due to lower profit in the Transportation, Lifestyle Services, and Construction and Equipment segments. The relatively increasing dependence on the asset-intensive Real Estate and Hotel Businesses within the business portfolio is noteworthy as a change in the earnings structure.

2. Q1 profit progress against the Full-Year plan was 31.7% for Operating Income and 33.8% for Ordinary Income, exceeding Revenue progress of 24.4%. Cost trends from Q2 onward and profitability improvement in the Transportation Business could become factors affecting Full-Year results.

3. While the Current Ratio of 96.5% and reliance on short-term Borrowings were confirmed, the Interest Coverage Ratio was 12.4x, indicating sufficient capacity to absorb interest costs. The 63.1% decline in treasury stock is observable as a capital policy development.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥780–¥827 at ±1% for the Cost of Equity, and ¥802–¥803 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).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast 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 does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional as necessary.

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