| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥3324.7B | ¥3135.5B | +6.0% |
| Operating Income | ¥491.5B | ¥420.7B | +16.8% |
| Ordinary Income | ¥469.3B | ¥409.1B | +14.7% |
| Net Income | ¥170.0B | ¥188.2B | -9.7% |
| ROE | 4.9% | 6.0% | - |
The fiscal year ending March 2026 closed with Revenue of ¥3,324.7B (YoY +189.2B, +6.0%), Operating Income of ¥491.5B (YoY +70.8B, +16.8%), Ordinary Income of ¥469.3B (YoY +60.2B, +14.7%), and Net income attributable to owners of the parent of ¥335.8B (YoY +147.6B, +18.9%), representing significant top-line and bottom-line growth. Operating margin improved to 14.8% (up +1.4pt from 13.4% a year ago) and net margin improved to 10.1% (up +1.1pt from 9.0%), indicating enhanced profitability. Recovery in transport demand, contribution from high-margin real estate projects, and increased occupancy in leisure & services drove the earnings increase, resulting in performance materially above the full-year company guidance (Revenue ¥3,218B, Operating Income ¥424B). ROE improved to 9.6% (from 9.2%), aided by improved capital efficiency from a reduction in treasury stock and better profit margins. Conversely, interest expense increased to ¥35.8B (from ¥22.5B), raising concerns over higher interest burden. Free Cash Flow was negative ¥26.5B, reflecting robust growth investment (Investing CF -¥429.9B), while Operating Cash Flow remained strong at ¥403.4B, exceeding net income.
[Revenue] Revenue was ¥3,324.7B (YoY +189.2B, +6.0%), marking the third consecutive year of revenue growth. By segment: Transport ¥951.7B (+6.6%), Real Estate ¥1,311.2B (+5.7%), Retail ¥570.5B (+1.6%), Leisure & Services ¥439.2B (+11.4%), Other ¥50.9B (+10.4%) — all segments achieved revenue growth. Transport benefited from recovery in both rail and bus ridership; Real Estate was driven by high occupancy in rentals and progress in property sales recognition. Leisure & Services grew +11.4% due to higher hotel occupancy and recovery in tourism demand. Retail lagged with only +1.6% due to sluggish department store and store operations, the lowest single-digit growth among segments.
[Profitability] Operating Income was ¥491.5B (+16.8%), significantly outpacing revenue growth, confirming positive operating leverage. Operating margin improved to 14.8% (up +1.4pt from 13.4%), reflecting absorption of fixed costs and effects of pricing strategy. By segment, Real Estate contributed Operating Income of ¥260.6B (+16.7%, margin 19.9%), Transport ¥139.8B (+13.4%, margin 14.7%), Leisure & Services ¥67.6B (+37.5%, margin 15.4%). Retail posted a slight decline to ¥28.2B (▲1.0%, margin 4.9%) with remaining low-margin structure. Non-operating items netted a loss of ▲¥22.2B (dividend income received ¥10.2B vs. interest expense ¥35.8B), with interest burden compressing Ordinary Income. Extraordinary items were a net +¥5.2B (gain on sale of fixed assets ¥7.0B, impairment losses ¥9.9B, etc.), a small positive. After deducting corporate tax etc. of ¥127.0B, Net income attributable to owners of the parent was ¥335.8B (YoY +18.9%), closing in a revenue- and profit-increasing position.
Transport: Revenue ¥951.7B (+6.6%), Operating Income ¥139.8B (+13.4%), margin 14.7%. Recovery in rail and bus usage and improved fare mix boosted margin through fixed-cost absorption.
Real Estate: Revenue ¥1,311.2B (+5.7%), Operating Income ¥260.6B (+16.7%), margin 19.9%, maintaining high profitability. High rental occupancy and progress in property handovers contributed, making this the core business accounting for 53.0% of consolidated Operating Income.
Retail: Revenue ¥570.5B (+1.6%), Operating Income ¥28.2B (▲1.0%), margin 4.9%, reflecting low profitability. Competitive pressure in department store and store operations compressed margins.
Leisure & Services: Revenue ¥439.2B (+11.4%), Operating Income ¥67.6B (+37.5%), margin 15.4%, a substantial profit increase. Improved hotel occupancy and recovery in tourism demand were notable, producing the highest increase rate among segments.
Other: Revenue ¥50.9B (+10.4%), Operating Income ¥1.8B (+157.4%), margin 3.4%, small scale but returned to profitability.
[Profitability] Operating margin 14.8% (up +1.4pt from 13.4%), Net margin 10.1% (up +1.1pt from 9.0%), ROE 9.6% (up +0.4pt from 9.2%) — comprehensive improvement in profitability. DuPont decomposition: Net margin 10.1% × Total Asset Turnover 0.366 × Financial Leverage 2.60x. Margin improvement was the primary driver, supported by demand recovery and pricing in Transport, Real Estate, and Leisure. EBITDA margin is 22.0% (EBITDA 732.96B / Revenue 3,324.7B), providing substantial cushion to fund growth investments.
[Cash Quality] Operating Cash Flow of ¥403.4B exceeds Net income of ¥335.8B (OCF/NI = 1.20x), indicating good cash backing for profits. However, OCF/EBITDA is 0.55x, low, suggesting room to improve conversion of EBITDA (including depreciation of 241.4B) into cash. Free Cash Flow was negative ¥26.5B, mainly due to Investing CF of ▲¥429.9B (acquisitions of tangible and intangible fixed assets ▲527.6B). Accrual ratio is ▲0.7%, low, indicating limited accounting estimate dependence.
[Investment Efficiency] Total Asset Turnover 0.366x, Tangible Fixed Asset Turnover 0.589x, reflecting asset-intensive operations. CapEx / Depreciation is 2.19x, indicating an aggressive investment stance with mid-term recovery assumed.
[Financial Soundness] Equity Ratio 38.4% (up +1.8pt from 36.6%), Current Ratio 139.8% — short-term payment ability broadly sound. Debt/EBITDA is 3.86x, a moderate-to-high level, but Interest Coverage is 13.74x (Operating Income / Interest Paid), showing resilience for interest payments. Cash / Short-term Liabilities is low at 0.20x, so dependence on short-term borrowing rollover is a concern. Treasury stock decreased to ▲199.17B (from ▲390.38B, a 49.0% reduction), reflecting a focus on capital efficiency.
Operating Cash Flow was ¥403.4B (YoY ▲8.3%), exceeding Net income ¥335.8B by 20.1%, indicating strong cash backing of profits. However, it declined from ¥440.1B the prior year, pressured by increases in working capital (inventories ▲47.5B, trade receivables ▲15.4B, trade payables ▲23.9B). Operating CF subtotal (before working capital changes) was solid at ¥566.6B, but cash was absorbed by corporate tax payments ▲¥140.5B and interest payments ▲¥33.4B. Investing CF was ▲¥429.9B, primarily due to acquisitions of tangible and intangible fixed assets ▲527.6B. Construction cooperation receipts ¥6.7B and proceeds from sale of tangible fixed assets ¥3.3B partially offset this, reflecting robust growth investment. As a result, Free Cash Flow was ▲¥26.5B. Financing CF was positive ¥35.7B, driven mainly by net increase in long-term borrowings (borrowings ¥691.8B − repayments ¥356.9B). Meanwhile, bond redemptions ▲¥200B and share buybacks ▲¥24.1B were executed to balance capital policy. Cash and cash equivalents increased by ¥9.2B to ¥147.0B, but Cash / Short-term Liabilities remains thin at 0.20x, continuing a structure dependent on rollover of short-term borrowings of ¥744.6B. OCF/EBITDA 0.55x is low; improving cash conversion, including depreciation, remains a challenge.
Core earnings are Operating Income ¥491.5B, representing 14.8% of Revenue and indicating high dependence on core operations. Non-operating income totaled ¥26.6B (dividend income ¥10.2B, interest income ¥0.4B, equity-method investment income ¥0.5B, etc.), modest at 0.8% of Revenue, while non-operating expenses totaled ¥48.8B (interest expense ¥35.8B, etc.), resulting in net non-operating loss of ▲¥22.2B. Extraordinary items were special gains ¥39.8B (gain on sale of fixed assets ¥7.0B, construction cooperation receipts ¥10.5B, etc.) and special losses ¥34.6B (impairment losses ¥9.9B, loss on retirement of fixed assets ¥6.1B, business structure reform costs ¥6.4B, valuation losses on investment securities ¥3.3B, etc.), netting a modest +¥5.2B. Temporary factors were limited; improvement in recurring earning power was the main driver of profit growth. Comprehensive income was ¥414.9B; the excess of ¥244.9B over net income ¥170.0B was contributed by valuation differences on securities +¥41.4B and actuarial gains/losses related adjustments +¥26.5B. While Operating CF exceeds Net income and accrual ratio is low at ▲0.7%, OCF/EBITDA at 0.55x points to weak cash conversion efficiency, driven by working capital absorption. The gap between Ordinary Income ¥469.3B and Net income ¥335.8B is consistent with corporate taxes ¥127.0B and non-controlling interests ¥11.7B, and there is no concern over earnings quality.
Against the full-year forecast (Revenue ¥3,218.0B, Operating Income ¥424.0B, Ordinary Income ¥381.0B, Net income attributable to owners of the parent ¥290.0B), actuals beat on all items: Revenue ¥3,324.7B (progress 103.3%), Operating Income ¥491.5B (115.9%), Ordinary Income ¥469.3B (123.2%), Net income ¥335.8B (115.8%). Upside amounts were Operating Income +¥67.5B (+15.9%), Ordinary Income +¥88.3B (+23.2%), Net income +¥45.8B (+15.8%). Transport demand recovery exceeded assumptions, high-margin Real Estate rental and sales projects contributed, and Leisure & Services occupancy improved beyond expectations. Company guidance was somewhat conservative, and core business recovery showed sustainability. For next fiscal year and beyond, focus will be on moderating conservatism in guidance and sustaining the growth trend.
A year-end dividend of ¥100 was paid, resulting in a payout ratio of 31.8% (dividends ¥4,064百万円 / Net income ¥12,702百万円), a reasonable level. The prior year also maintained ¥100 dividend, continuing a stable dividend policy. Additionally, ¥24.1B of share buybacks were executed, reducing treasury stock to ▲199.17B (from ▲390.38B). Total return amount combining dividends and buybacks was ¥64.6B, giving a Total Return Ratio of 19.2%, modest; however, coverage versus Free Cash Flow (▲¥26.5B) is negative at ▲2.44x, indicating this year’s returns were funded by external financing or balance sheet utilization. Retained earnings increased to ¥2,379.0B (up +11.2%), strengthening internal reserves and future return capacity. Sustainability going forward depends on improving Operating Cash Flow/EBITDA and returning Free Cash Flow to positive territory.
Interest rate rise and refinancing cost risk: Of interest-bearing debt 2,827.8B, interest expense increased to ¥35.8B (up +58.8% from ¥22.5B). If interest rates rise at the time of refinancing for long-term borrowings of ¥2,083.3B and corporate bonds of ¥900B (¥100B current portion), increased interest payments could compress Ordinary Income. While Interest Coverage at 13.74x provides room, a refinancing strategy aligned with medium- to long-term interest-rate environment is important.
Short-term funding and liquidity risk: Cash and deposits ¥147.6B versus short-term borrowings ¥744.6B and short-term corporate bonds ¥100B, Cash / Short-term Liabilities 0.20x — thin liquidity. Although Current Ratio 139.8% is in a healthy range, short-term liabilities ratio 26.3% indicates high rollover dependence; changes in bank lending stance or market deterioration could tighten funding. Liquidatable assets such as investment securities ¥637.1B are ample, but concentrating management of short-term maturities is a challenge.
Persistent working capital cash absorption risk: Operating CF decreased YoY by ▲8.3%, with inventories ▲47.5B, trade receivables ▲15.4B, and trade payables ▲23.9B increasing, pressuring cash. OCF/EBITDA at 0.55x is low; if working capital investment continues in a demand recovery phase, Free Cash Flow turning positive may be delayed, limiting dividend funding and smoothing of CapEx.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 14.8% | 6.3% (3.7%–8.5%) | +8.5pt |
| Net Margin | 5.1% | 2.7% (1.6%–4.7%) | +2.4pt |
Profitability substantially exceeds industry median, with a favorable business mix of high-margin Real Estate and Leisure.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 6.0% | 5.0% (-0.4%–9.4%) | +1.0pt |
Growth slightly outperforms the median, supported by balanced recoveries in Transport, Real Estate, and Leisure.
※ Source: Company compilation
Operating margin improvement to 14.8% (up +1.4pt from 13.4%) is evident. If recovery in Transport demand, contributions from high-margin Real Estate projects, and rising Leisure occupancy persist, the revenue base strengthening should continue. ROE of 9.6% is mid-industry but on an upward trend; combined with reduced treasury stock improving capital efficiency, there is substantial mid-term upside for return improvement.
Free Cash Flow is negative ¥26.5B but reflects growth investment; CapEx/Depreciation at 2.19x indicates an aggressive posture that should strengthen competitiveness mid-term. However, OCF/EBITDA at 0.55x is low; continued working capital absorption would delay improvement in cash generation. Improving working capital turnover and OCF/EBITDA will be key to sustaining dividends going forward.
The combination of short-term liabilities ratio 26.3% and Cash / Short-term Liabilities 0.20x embodies dual risks of higher refinancing costs and funding pressure in a rising-rate environment. Interest Coverage of 13.74x provides cushion, but under moderate-to-high leverage (Debt/EBITDA 3.86x), monitoring resilience to financial environment changes is necessary. Strengthening earnings in Real Estate and Leisure could create options for deleveraging.
This report is an AI-generated earnings analysis derived from 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 public financial statements. Investment decisions are your responsibility; please consult a professional advisor as necessary.