| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥4741.6B | ¥4434.9B | +6.9% |
| Operating Income | ¥302.1B | ¥266.6B | +13.3% |
| Ordinary Income | ¥372.2B | ¥287.4B | +29.5% |
| Net Income | ¥274.8B | ¥200.8B | +36.9% |
| ROE | 9.4% | 7.8% | - |
The Q2 results for the fiscal year ending March 2026 recorded Revenue of ¥4741.6B (YoY +¥306.7B, +6.9%), Operating Income of ¥302.1B (YoY +¥35.5B, +13.3%), Ordinary Income of ¥372.2B (YoY +¥84.8B, +29.5%), and Net Income attributable to owners of the parent of ¥274.8B (YoY +¥74.0B, +36.9%), delivering both top-line and bottom-line growth. Operating margin improved to 6.4% (YoY +0.4pt), Ordinary Income margin to 7.9% (YoY +1.4pt), and Net margin to 5.8% (YoY +1.3pt), indicating improved profitability at all stages. Equity-method investment income of ¥54.8B (YoY +¥46.9B) and special gains of ¥110.5B (gain on sales of investment securities ¥54.5B, gain on sales of fixed assets ¥45.6B, etc.) significantly boosted profits. By segment, Real Estate delivered the largest profit contribution with Operating Income of ¥116.2B (YoY +19.4%), Logistics achieved high growth with Operating Income of ¥60.8B (YoY +58.0%), while Transportation declined to Operating Income of ¥40.6B (YoY -18.6%), highlighting a growing profitability polarization across segments.
[Revenue] Revenue was ¥4741.6B, up +6.9% YoY. By segment, Leisure & Services grew the fastest at ¥542.4B (+12.3%), and Real Estate remained robust at ¥830.3B (+9.4%). Logistics was ¥1,523.5B (+3.4%), Retail/Distribution ¥738.8B (+2.8%), and Transportation ¥822.9B (+2.7%), all remaining firm. "Other" outside reportable segments rose significantly to ¥283.7B (+42.2%), contributed by consolidation of Hinomaru Holdings. Segment composition of consolidated Revenue was: Logistics 32.1%, Real Estate 17.5%, Transportation 17.4%, Retail/Distribution 15.6%, Leisure & Services 11.4%, Other 6.0%.
[Profitability] Operating Income was ¥302.1B, up +13.3% YoY, outpacing revenue growth, with an Operating margin of 6.4% (YoY +0.4pt). SG&A was contained at ¥327.0B (6.9% of Revenue), enabling operating leverage. Equity-method investment income expanded to ¥54.8B (prior year ¥7.9B), increasing non-operating income to ¥105.3B and driving Ordinary Income to ¥372.2B (+29.5%), outstripping Operating Income growth. Net special items amounted to +¥89.6B (Special gains ¥110.5B — gain on sales of investment securities ¥54.5B, gain on sales of fixed assets ¥45.6B, etc. — less Special losses ¥20.9B — impairment losses ¥3.0B, etc.), lifting profit before income taxes to ¥461.9B (YoY +49.5%). After income taxes of ¥133.3B (effective tax rate 28.9%), Net Income attributable to owners of the parent was ¥274.8B (+36.9%). In conclusion, steady revenue growth plus contributions from equity-method gains and asset sale gains resulted in revenue growth with substantial profit expansion.
Real Estate delivered Operating Income of ¥116.2B (+19.4%) with a margin of 14.0%, the largest profit contributor. Leasing and housing businesses remained solid and sustained high margins. Logistics posted Operating Income of ¥60.8B (+58.0%), the highest profit growth rate, with margins improving to 4.0% due to profitability improvements in international logistics and cost efficiencies. Leisure & Services produced Operating Income of ¥63.7B (+7.4%) with a margin of 11.7%, supported by stable hotel and travel businesses. Transportation recorded Operating Income of ¥40.6B (-18.6%), with margin falling to 4.9%; rising labor and fuel costs in rail and bus operations squeezed margins, and improving profitability remains a challenge. Retail/Distribution had Operating Income of ¥6.7B (+2.4%) with a thin margin of 0.9%. Other segments produced Operating Income of ¥25.7B (+8.8%) with a margin of 9.1%, where M&A-driven business expansion contributed to profits.
[Profitability] Operating margin 6.4% (YoY +0.4pt), Net margin 5.8% (YoY +1.3pt) — profitability improved across stages. ROE 9.4% (prior year 8.7%) indicates improved return on equity, composed with Total Asset Turnover of 0.578x (prior year 0.567x) and Financial Leverage of 2.80x (prior year 3.05x). EBITDA was ¥541.3B (Operating Income ¥302.1B + Depreciation & Amortization ¥239.2B), with an EBITDA margin of 11.4%, strengthening the cash-generation base. [Cash Quality] Operating Cash Flow (OCF)/Net Income ratio 1.20x and OCF/EBITDA ratio 0.71x, with working capital usage (inventory increase ¥110.2B, trade receivables increase ¥13.2B, trade payables decrease ¥95.9B — totaling approximately ¥220B cash outflow) restraining cash conversion. [Investment Efficiency] Capital expenditures were ¥386.7B, about 1.6x depreciation ¥239.2B, reflecting a growth investment stance. Free Cash Flow (FCF) was ¥82.7B, sufficient to cover dividends and share buybacks, though the low OCF/EBITDA ratio indicates room to improve working capital efficiency. [Financial Health] Equity Ratio 35.7% (prior year 32.7%), Current Ratio 134.7% (prior year 138.6%), Debt/EBITDA approximately 3.62x — somewhat elevated leverage — but interest coverage is solid at 9.30x (on an EBITDA/interest paid basis 16.7x), indicating resilience to interest burden. Cash and deposits of ¥468.7B are 1.05x short-term borrowings of ¥447.7B, ensuring liquidity.
Operating Cash Flow was ¥386.1B (YoY +147.3%), a large improvement, and Gross OCF (before working capital changes) was ¥485.7B, demonstrating strong cash generation. Inventory increase of ¥110.2B, trade receivables increase of ¥13.2B, and trade payables decrease of ¥95.9B — totaling about ¥220B — were cash outflows from working capital, and corporate tax payments of ¥107.7B were also deducted. OCF/Net Income ratio 1.20x is healthy, but OCF/EBITDA ratio 0.71x highlights working capital efficiency issues. Investing Cash Flow was -¥303.4B, mainly due to acquisition of tangible fixed assets ¥386.7B, partially offset by sale of investment securities ¥77.2B and asset disposals ¥87.0B. FCF remained positive at ¥82.7B. Financing Cash Flow was -¥133.2B: while long-term borrowings raised ¥301.0B and bond issuance ¥300.0B occurred, repayments of long-term borrowings ¥207.1B, bond redemptions ¥80.0B, dividend payments ¥36.3B, and share buybacks ¥40.7B were executed. Cash and cash equivalents decreased from ¥467.0B to ¥457.7B, but net financial cash flow improved by +¥8.1B due to interest and dividends received ¥39.6B less interest paid ¥31.5B.
Core recurring earnings are built on Operating Income of ¥302.1B plus non-operating income ¥105.3B (dividends received ¥16.4B, interest received ¥5.5B, equity-method investment income ¥54.8B, etc.), yielding Ordinary Income of ¥372.2B. One-off items include Special gains of ¥110.5B (gain on sales of investment securities ¥54.5B, gain on sales of fixed assets ¥45.6B, etc.) and Special losses of ¥20.9B (impairment losses ¥3.0B, loss on retirement of fixed assets ¥1.4B, etc.), with a net pre-tax positive impact of approximately ¥89.6B. After applying the effective tax rate of 28.9% to special items, the after-tax one-off uplift is roughly ¥63.7B, implying an adjusted Net Income of approximately ¥211B equivalent (¥274.8B - ¥63.7B). Equity-method investment income of ¥54.8B (prior year ¥7.9B) represents a large increase and reflects investee performance improvement. While OCF/Net Income ratio of 1.20x is healthy, the accrual ratio ((Net Income - OCF)/Total Assets) is about -0.8%, indicating working capital increases have suppressed cash conversion. The gap between Ordinary Income and Net Income is materially affected by pre-tax special gains of about ¥90B, creating approximately a 24% upward bias; therefore, evaluating core earning power requires scrutiny at the Ordinary Income level.
Full Year guidance: Revenue ¥5,100.0B (current progress 93.0% of plan), Operating Income ¥245.0B (progress 123.3%), Ordinary Income ¥245.0B (progress 152.0%), Net Income attributable to owners of the parent ¥225.0B (progress 122.1%), EPS forecast ¥296.18 (actual EPS ¥423.28, representing an upside), and dividend forecast ¥45.0. Progress rates for Operating Income, Ordinary Income, and Net Income substantially exceed 100%, ranging 20–50% above the full-year outlook. This gap appears driven by stronger-than-expected contributions from Real Estate and Logistics, a large increase in equity-method investment income (likely not incorporated in the plan), and recognition of Special gains ¥110.5B (e.g., asset sale gains). The second half likely assumes conservative factors such as the absence of recurring special gains and margin pressure in Transportation; therefore, there is upside potential, but the guidance remains unchanged at this time.
Interim dividend of ¥25.0 was paid at the end of Q2, and full-year dividend forecast is ¥45.0. The payout ratio on actual EPS ¥423.28 is 17.3%, and on forecast EPS ¥296.18 is 15.2%, reflecting a conservative stance. Total dividend payments were approximately ¥36.3B; combined with share buybacks ¥40.7B, total shareholder returns were about ¥77B, implying a Total Return Ratio of 28.0% (based on Net Income ¥274.8B). FCF of ¥82.7B covers dividends and buybacks of ¥77B with an FCF coverage ratio of 1.07x, indicating sustainability. With cash and deposits ¥468.7B and retained earnings ¥2,110.9B, dividend sustainability is high. Future enhancements to shareholder returns are conditional on improvements in invested capital efficiency (ROIC) and cash conversion.
Transportation segment profitability deterioration risk: Transportation posted Operating Income ¥40.6B (YoY -18.6%), and rising labor and fuel costs have compressed margins to 4.9% (prior year 6.1%). If fare revisions or cost efficiencies do not progress, downward pressure on consolidated profitability could intensify.
Cash generation slowdown due to working capital increases: Inventory +¥110.2B, trade receivables +¥13.2B, and trade payables -¥95.9B resulted in approximately ¥220B of cash outflow, keeping OCF/EBITDA at a low 0.71x. If inventory turnover and receivables collection do not improve, FCF generation could weaken.
Leverage and interest rate risk: Debt/EBITDA 3.62x is somewhat elevated, and interest-bearing liabilities total approximately ¥3,000B (long-term borrowings ¥1,512.1B and bonds ¥1,470.0B). In a rising rate environment, interest expense could increase by ¥32.5B, reducing interest coverage cushion of 9.30x.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.4% | 6.3% (3.7%–8.5%) | +0.1pt |
| Net Margin | 5.8% | 2.7% (1.6%–4.7%) | +3.1pt |
Profitability exceeds the industry median, particularly Net Margin which is substantially above the median.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 6.9% | 5.0% (-0.4%–9.4%) | +1.9pt |
Revenue growth outperforms the industry median, indicating relatively favorable growth.
※ Source: Company compilation
While high growth in Real Estate and Logistics is driving consolidated earnings, the ongoing deterioration in Transportation profitability (-18.6%) is a notable structural change. Polarization of profitability among segments is progressing, and progress on Transportation margin improvement measures (fare revisions, cost efficiencies, etc.) will be key to future earnings stability.
Special gains of ¥110.5B (after-tax approx. ¥63.7B) have lifted Net Income, making analysis at the Ordinary Income level important for assessing core earning power. The large increase in equity-method investment income of ¥54.8B (prior year ¥7.9B) may include non-recurring elements, so its sustainability in future periods requires monitoring.
Working capital increases (approx. ¥220B cash outflow) have led to an OCF/EBITDA ratio of 0.71x, below industry benchmarks, indicating substantial room to improve inventory and receivables turnover. Capital expenditures remain about 1.6x depreciation, maintaining a growth investment stance, but improving invested capital efficiency (ROIC) is a medium- to long-term challenge.
This report is an AI-generated financial analysis document created by analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial statements. Investment decisions should be made at your own responsibility and, where appropriate, after consulting a professional advisor.