CTI Engineering (9621) FY2026 Q1 Earnings Report

Quick View

Executive Summary

This was a results period in which profit growth outpaced revenue growth, achieving both higher revenue and profit as well as improved profitability. Revenue was ¥31.98B (+6.2% YoY), Operating Income was ¥6.57B (+12.1%), Ordinary Income was ¥6.62B (+13.3%), and Net Income was ¥4.47B (+14.9%). Improved gross margin and the overseas business’ return to profitability supported profit growth.

Factors Affecting Performance

【Revenue】Revenue was ¥31.98B, up +6.2% YoY. The Domestic Construction Consulting Business generated ¥23.56B (+4.0%), while the Overseas Construction Consulting Business generated ¥8.43B (+12.7%). Both businesses contributed to revenue growth, with the overseas business growing faster than the domestic business.

【Profit and Loss】Operating Income was ¥6.57B (+12.1%), exceeding the revenue growth rate by 5.9pt. Gross profit margin improved to 36.7% (35.1% in the previous year), absorbing the +9.5% increase in SG&A expenses. Domestic segment profit was ¥6.53B (+10.8%, 27.7% margin), making it the primary source of earnings, while the overseas segment turned from a loss in the previous year to a profit of ¥0.05B. Ordinary Income was ¥6.62B (+13.3%), and Net Income was ¥4.47B (+14.9%). Although an extraordinary loss of ¥0.07B, including an impairment loss of ¥0.06B, was recorded, its impact on profit before tax was limited. Both revenue and profit increased.

Segment Analysis

The Domestic Construction Consulting Business generated Revenue of ¥23.56B (+4.0% YoY) and segment profit of ¥6.53B (+10.8%), with a profit margin of 27.7%, making it the core contributor to Company-wide profit. The Overseas Construction Consulting Business generated Revenue of ¥8.43B (+12.7%) and segment profit of ¥0.05B, returning to profitability from a loss in the same period of the previous year. The overseas business’ profit margin remained at 0.5%, and the approximately 27pt gap versus the domestic business is substantial. Company-wide earnings stability therefore remains heavily dependent on the highly profitable domestic business.

Key Financial Indicators

【Profitability】Operating margin of 20.5% and Net Income margin of 14.0% both improved from the same period of the previous year, primarily due to the increase in gross profit margin to 36.7% (35.1% in the previous year). 【Cash Quality】Compared with Ordinary Income of ¥6.62B, Net Income was ¥4.47B; the difference was primarily attributable to income taxes of ¥2.07B, resulting in an effective tax rate of approximately 31.6%. 【Investment Efficiency】Annualized ROE was 26.2%, driven mainly by the high Net Income margin and asset turnover. 【Financial Soundness】The Equity Ratio was high at 63.7%, although it declined from 69.1% in the same period of the previous year. Short-term borrowings increased sharply to ¥7.38B from ¥1.38B in the previous year and accounted for the majority of interest-bearing debt, which warrants attention.

Cash Flow Analysis

As individual line items in the cash flow statement were not disclosed, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits increased to ¥16.59B from ¥15.99B in the same period of the previous year, indicating continued accumulation of funds through business activities. Meanwhile, short-term borrowings increased significantly from ¥1.38B to ¥7.38B, suggesting that the funding structure is becoming more dependent on short-term borrowings. Retained earnings accumulated to ¥55.58B, indicating continued retention of Net Income. Total assets expanded to ¥107.27B, with growth in current assets leading the overall expansion of assets.

Quality of Earnings

Ordinary Income was ¥6.62B compared with Operating Income of ¥6.57B, with non-operating income and expenses contributing a net positive of only ¥0.05B. Items such as dividend income of ¥0.09B were the main contributors and were not the primary drivers of profit growth. The decline from Ordinary Income to profit before tax of ¥6.54B was attributable to an extraordinary loss of ¥0.07B, including an impairment loss of ¥0.06B; its impact on profit before tax was limited to approximately 1.1%. Net Income of ¥4.47B was approximately 30% lower than Ordinary Income, primarily due to the ¥2.07B income tax burden. Since both extraordinary income and expenses and non-operating income and expenses were limited in scale, current-period profit was primarily supported by core operating activities, and earnings quality appears sound.

Earnings Forecast and Guidance

The Full-Year plan calls for Revenue of ¥105.00B (+3.9% YoY), Operating Income of ¥10.50B (+14.9%), and Ordinary Income of ¥10.50B (+12.3%). Q1 progress rates were 30.5% for Revenue, 62.6% for Operating Income, and 63.0% for Ordinary Income, with progress in Operating Income and Ordinary Income substantially exceeding the standard 25%. The Q1 Operating margin of 20.5% was significantly above the assumed margin of 10.0% under the Full-Year plan, suggesting quarterly variation attributable to the timing of project progress and cost recognition. Neither the earnings forecast nor the dividend forecast has been revised.

Shareholder Returns

The Full-Year dividend forecast is ¥78.00 per share. Based on forecast Full-Year EPS of ¥256.05, the Payout Ratio is approximately 30.5%, suggesting a policy of retaining the majority of earnings. Against the backdrop of accumulated Retained Earnings of ¥55.58B and Cash and Deposits of ¥16.59B, the Company has ample resources for dividends. Treasury shares increased as a deduction compared with the same period of the previous year, and capital policies, including changes in the number of shares, remain subject to ongoing monitoring. The Payout Ratio in this section is based solely on dividends; the Total Return Ratio, including share buybacks, has not been calculated.

Risk Factors

1. Increased dependence on short-term borrowings: Short-term borrowings were ¥7.38B, up sharply from ¥1.38B in the same period of the previous year, and accounted for nearly all interest-bearing debt. Cash and Deposits of ¥16.59B and a current ratio of 229.3% provide a buffer, but sensitivity to changes in refinancing terms and the interest-rate environment has increased compared with the past.

2. Reproducibility of quarterly profit progress: The Q1 Operating Income progress rate of 62.6% was substantially above the assumed profit margin under the Full-Year plan, suggesting possible seasonality arising from the timing of project orders and acceptance. Confirmation is necessary while considering the possibility that profit margins may normalize in subsequent quarters.

3. Profitability gap in the overseas business: The Overseas Construction Consulting Business returned to profitability from a loss in the same period of the previous year, but its segment profit margin remained at 0.5%, representing a substantial gap versus the domestic business’ 27.7%. The sustainability of the return to profitability and continued improvement in profitability will be key areas of focus.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability substantially exceeds the industry median and ranks at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate was below the industry median, indicating a relatively moderate growth pace within the industry.

※Source: Compiled by the Company

Key Takeaways from the Results

1. Revenue increased 6.2%, while Operating Income increased 12.1% and Net Income increased 14.9%, achieving profit growth exceeding revenue growth. The improvement in gross margin (+approximately 1.6pt) is a structural feature that is raising operating leverage.

2. The Domestic Construction Consulting Business supports Company-wide profit with a 27.7% profit margin, while the overseas business returned to profitability from a loss in the previous year. The profitability gap between the two businesses remains substantial, and the sustainability of profitability improvement in the overseas business will be an area to monitor.

3. The Q1 progress rate against the Full-Year Operating Income plan was high at 62.6%, but the maturity profile of interest-bearing debt has shortened due to a sharp increase in short-term borrowings (+434.6% YoY), making this a monitoring item from a capital policy perspective.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,536–¥2,685 at ±1% for the cost of equity, and ¥2,606–¥2,612 at ±0.1 for ω.

Notes:

• Since Net Income progress against the Full-Year forecast (64%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies whose progress is ahead of schedule tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the end of the quarter are used (there is a timing gap relative to the Full-Year forecast).
• Since Net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest-rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)

---

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 responsibility, after consulting with a professional as necessary.

---End of Report---