| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥1626.8B | ¥1502.6B | +8.3% |
| Operating Income | ¥128.2B | ¥89.0B | +44.1% |
| Ordinary Income | ¥130.1B | ¥90.6B | +43.7% |
| Net Income | ¥80.5B | ¥58.9B | +36.8% |
| ROE | 13.0% | 10.8% | - |
For FY2026, Revenue was ¥1626.8B (YoY +¥124.2B +8.3%), Operating Income ¥128.2B (YoY +¥39.2B +44.1%), Ordinary Income ¥130.1B (YoY +¥39.5B +43.7%), and Net Income Attributable to Parent Company Shareholders ¥91.3B (YoY +¥23.8B +35.2%), showing robust top- and bottom-line growth. Gross margin improved to 20.1% (YoY +193bp) and operating margin to 7.9% (YoY +196bp), driven by qualitative improvements in project mix and progressed cost control. ROE improved to 14.7% (prior year 12.9%), and capital efficiency strengthened while maintaining financial soundness (Equity Ratio 65.1%), preserving substantial capacity for shareholder returns.
Revenue of ¥1626.8B was an increase of ¥124.2B (+8.3% YoY). Gross margin improved to 20.1% from 17.2% a year earlier (+193bp), reflecting both higher contract unit prices and cost reductions. Cost of sales ratio declined to 79.9% from 82.8% (-285bp), benefiting from improved construction efficiency and optimized materials procurement. The company operates as a single-segment entity and does not disclose segmental breakdowns, but recovery in demand for commercial facilities and event-related projects and progress on large-scale projects appear to be the primary drivers of revenue growth.
Profitability: Gross profit was ¥327.7B (gross margin 20.1%), and after SG&A of ¥199.5B, Operating Income was ¥128.2B (operating margin 7.9%). SG&A ratio remained flat at 12.3% (prior year 12.3%), indicating cost containment against revenue expansion and effective operating leverage. Non-operating income totaled ¥2.3B (including dividend income ¥0.7B and insurance proceeds ¥0.2B), and non-operating expenses were ¥0.3B (foreign exchange losses ¥0.3B), resulting in Ordinary Income of ¥130.1B (ordinary income margin 8.0%). Extraordinary items included gains on sales of investment securities ¥0.6B as positive factors, and impairment losses ¥1.9B and loss on disposal of fixed assets ¥0.1B as negative factors, netting to approximately -¥1.4B. Profit before income taxes was ¥128.8B, from which income taxes ¥37.4B (effective tax rate 29.0%) were deducted, resulting in Net Income ¥80.5B and Net Income Attributable to Parent Company Shareholders ¥91.3B (minority interest loss added ¥10.8B). In conclusion, the company delivered revenue and profit growth simultaneously, with improvements in core profitability flowing through to bottom-line results.
Profitability: Operating margin 7.9% improved by +196bp from 5.9% a year earlier, driven by a substantial improvement in gross margin to 20.1% (prior year 17.2%). ROE was 14.7% (prior year 12.9%), a healthy level, explained by a combination of net profit margin 5.6% (prior year 4.5%), total asset turnover 1.71x, and financial leverage 1.54x.
Cash Quality: Operating Cash Flow/Net Income was 1.19x, indicating good cash realization of profits, but OCF/EBITDA was 0.78x, below industry standard (target ≥0.9x), suggesting room for improvement in cash conversion due to working capital fluctuations. DSO (days sales outstanding) was 86 days, extended, and given the project-based nature of the business, stronger receivables management is desirable.
Investment Efficiency: Capex/Depreciation was 0.95x, at a maintenance-investment level, indicating generally appropriate asset renewal.
Financial Soundness: Equity Ratio 65.1% (prior year 53.0%) and D/E 0.54x indicate a very robust financial base. Current ratio 276.8% and quick ratio 273.1% show very high short-term liquidity, with total cash and short-term securities ¥375.5B far exceeding current liabilities ¥286.6B.
Operating Cash Flow was ¥108.7B (YoY +548.7%) with operating cash subtotal ¥139.7B, adjusted for changes in working capital (receivables decrease of -¥151.3B was positive, payables decrease of -¥182.0B was negative) and tax payments ¥32.7B. Receivables and payables both decreased significantly simultaneously, which appears to reflect normalization of working capital due to project acceptance progress and payment settlements at period end. Investing Cash Flow was -¥10.0B, restrained mainly by capex ¥10.2B. Purchases of securities ¥0.6B and sales ¥2.5B generated net investing funds used for fixed asset renewal. Free Cash Flow was ¥98.7B, stable and sufficient to cover dividends ¥35.7B and share buybacks. Financing Cash Flow was -¥36.6B, mainly driven by dividends ¥35.6B, with negligible change in interest-bearing debt. Cash and cash equivalents at period end were ¥375.5B, up from ¥312.2B a year earlier, strengthening effective liquidity.
The bulk of profits originated from Operating Income ¥128.2B (operating margin 7.9%). Non-operating income ¥2.3B (0.14% of sales) was primarily dividend and insurance income and within recurring range. Extraordinary items were net approximately -¥1.4B and minor; the impairment loss ¥1.9B was a temporary factor, and gains on sales of investment securities ¥0.6B were small, limiting impact on earnings quality. The difference between Ordinary Income ¥130.1B and Net Income ¥80.5B is mainly explained by income taxes ¥37.4B, showing no structural distortion. Operating Cash Flow/Net Income 1.19x and accrual ratio -1.8% are in healthy ranges, indicating generally sound cash realization. Conversely, OCF/EBITDA 0.78x below the 0.9x target indicates room for improvement in cash conversion due to working capital volatility. Comprehensive income ¥112.8B exceeded Net Income ¥80.5B, aided by unrealized gains such as valuation differences on available-for-sale securities ¥10.5B and actuarial gains/losses adjustments ¥10.7B.
Full Year guidance projects Revenue ¥1680.0B (YoY +3.3%), Operating Income ¥134.0B (YoY +4.5%), Ordinary Income ¥136.0B (YoY +4.5%), and Net Income Attributable to Parent Company Shareholders ¥92.5B (EPS forecast ¥82.89). Versus current results, guidance assumes Revenue +¥53.2B and Operating Income +¥5.8B, a modest increase within a conservative range reflecting maintained and gradually improving margins. Given the current gross margin 20.1% and operating margin 7.9%, the probability of achieving guidance is high, and upside exists if demand remains firm. Progress rates are Revenue 96.8%, Operating Income 95.7%, Ordinary Income 95.7%, reflecting a plan that incorporates incremental additions in the remaining period.
Year-end dividend is ¥42 per share (Payout Ratio 51.3%), with total dividends ¥35.7B against Net Income Attributable to Parent Company Shareholders ¥91.3B (Total Return Ratio 39.1%). Payout Ratio 52.8% (XBRL reported value) is within a sustainable range, and FCF coverage is 2.77x (Free Cash Flow ¥98.7B / Dividends ¥35.7B), indicating ample coverage. DOE 6.8% aligns with improved capital efficiency while accumulating retained earnings. The next fiscal year EPS forecast ¥82.89 vs. dividend guidance ¥22.00 implies a full-year payout ratio 26.5%, which appears conservative but leaves room for a year-end uplift. No share buyback disclosure; shareholder returns are dividend-centric.
Project profitability volatility: Deterioration in profitability of large projects or progress delays may reduce gross margin. Although gross margin improved to 20.1% (YoY +193bp) this period, project-based business inherently leads to annual margin variability depending on project mix. Improved bid accuracy at contract award and strengthened construction management are prerequisites for sustained margins.
Prolonged receivables collection period: DSO 86 days is extended and stems from timing mismatches between project completion and acceptance; persistent delays in collection would expand working capital and impair cash conversion. This period saw a temporary improvement with receivables decreasing ¥151.3B, but OCF/EBITDA 0.78x remains below industry standard, necessitating stronger collection management.
Wage and subcontract cost inflation: If labor and subcontract costs rise due to capacity constraints and labor shortages, cost of sales may increase and compress gross margin. While gross margin improved substantially this period, future wage inflation and material price volatility will test the company’s ability to pass through costs and improve productivity.
Revenue & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.9% | 8.1% (3.6%–16.0%) | -0.2pt |
| Net Profit Margin | 4.9% | 5.8% (1.2%–11.6%) | -0.9pt |
| Profitability is broadly in line with the industry median; operating margin is -0.2pt and net profit margin -0.9pt below the median but within the IQR, positioning the company as standard within peers. |
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.3% | 10.1% (1.7%–20.2%) | -1.8pt |
| Revenue growth of 8.3% is -1.8pt below the industry median 10.1% but falls within the IQR, indicating a standard growth pace. |
※ Source: Company compilation
Structural improvement in gross margin and sustainability of margins: Gross margin 20.1% (YoY +193bp) and operating margin 7.9% (YoY +196bp) show marked improvement in profitability, driven by qualitative improvements in project mix and cost control. Guidance for next fiscal year is for modest profit growth and conservative, but if this margin level is maintained, stable earnings growth is expected. However, due to the project-based nature of the business, margin volatility by project remains a risk; continuous improvement in bid accuracy and construction management is key.
Expansion of financial soundness and shareholder return capacity: Equity Ratio 65.1%, D/E 0.54x, and current ratio 276.8% indicate an extremely robust financial base, and FCF coverage 2.77x supports dividend sustainability. ROE 14.7% reflects good capital efficiency; the balance between retained earnings accumulation and shareholder returns is appropriate. Next fiscal year’s payout appears conservative, but upside for dividend increases exists if results beat expectations.
Room to improve cash conversion: Operating Cash Flow/Net Income 1.19x indicates good cash realization but OCF/EBITDA 0.78x is below industry standard (target ≥0.9x). DSO 86 days highlights receivables management issues, and optimizing working capital is key to strengthening cash generation. The significant simultaneous reduction in receivables and payables this period seems to be a year-end normalization; continued improvement in working capital management is desirable.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; please consult a professional advisor as necessary.