[Financial Analysis] Nippon Kokudo Kaihatsu (1887) Fiscal Year Ending May 2026 Financial Results Summary [Japanese GAAP] (Consolidated)

(1) Operating Results

・Net Sales: 135.207 billion yen (Year-on-year: +9.6%)
・Operating Profit: 7.15 billion yen (Year-on-year: +208.4%)
・Ordinary Profit: 6.566 billion yen (Year-on-year: +237.5%)
・Net Profit: 5.45 billion yen (Year-on-year: +308.9%)
・Operating Profit Margin: 5.4% [4Q standalone] (Year-on-year: +4.3Pt)

(2) Achievement Rate of Previous Full-Year Plan

・Net Sales: 99.4%
・Operating Profit: 119.2%
・Ordinary Profit: 117.3%
・Net Profit: 136.3%

(3) Current Consolidated Earnings Forecast

・Net Sales: 137 billion yen (Year-on-year: +1.3%)
・Operating Profit: 6.3 billion yen (Year-on-year: -11.9%)
・Ordinary Profit: 5.7 billion yen (Year-on-year: -13.2%)
・Net Profit: 4 billion yen (Year-on-year: -26.6%)

[Commentary]
In the previous fiscal year, net sales increased by 9.6% year-on-year to 135.207 billion yen, and profitability improved significantly, with operating profit up 208.4%, ordinary profit up 237.5%, and net profit up 308.9%. The operating profit margin also improved by 4.3 points year-on-year to 5.4%, highlighting a recovery in profitability where profits grew more than sales. In particular, the expansion of total profit on completed construction contracts supported the significant profit increase, marking a financial result that has recovered greatly from the low-profit state of the previous year.

Regarding the full-year plan for the previous fiscal year, while net sales fell slightly short at 99.4%, all profit items significantly exceeded the plan, with operating profit at 119.2%, ordinary profit at 117.3%, and net profit at 136.3%. Since profits exceeded expectations while net sales were almost in line with the plan, it is considered that the performance was boosted by an improvement in profit margins due to better construction profitability rather than just sales expansion.

The forecast for the current fiscal year expects a 1.3% increase in net sales to 137 billion yen, while forecasting a decrease in profits, with operating profit down 11.9%, ordinary profit down 13.2%, and net profit down 26.6%. In addition to the reaction to the significant profit improvement and plan overachievement in the previous fiscal year, the current fiscal year's plan is a cautious forecast based on the high profit level of the previous year, as extraordinary income such as 1.054 billion yen in subsidy income was also recorded in the previous year.

(4) Balance Sheet (BS)

[Financial Stability]
・Cash and Deposits: 19.919 billion yen
・Cash Ratio: 32.0%
・Current Ratio: 208.8%
・Equity Ratio: 45.1%

[Debt/Capital Structure]
・Interest-bearing Debt: 37.912 billion yen
・Net D/E Ratio: 0.3x
・Retained Earnings: 51.269 billion yen

[Stock Price/Valuation]
・Stock Price: 537 yen (as of closing price on July 15, 2026)
・Market Capitalization (excluding treasury stock): 42.85 billion yen
・Number of Shares Outstanding (excluding treasury stock): 79,797,254 shares
・Actual EPS (Earnings Per Share): 68.36 yen
・Forecast EPS (Earnings Per Share): 50.00 yen
・BPS (Book Value Per Share): 892.21 yen
・Actual PER (Price-to-Earnings Ratio): 7.9x
・Forecast PER (Price-to-Earnings Ratio): 10.7x
・PBR (Price-to-Book Ratio): 0.6x
・Actual PSR (Price-to-Sales Ratio): 0.3x
・Forecast PSR (Price-to-Sales Ratio): 0.3x
・Dividend Yield: 4.7%
・EV: 60.844 billion yen
・EV/EBITDA: 7.0x

[Profitability]
・Gross Profit: 16.314 billion yen
・Gross Profit Margin: 12.1%
・Selling, General and Administrative Expenses: 9.163 billion yen
・SG&A Ratio: 6.8%
・EBITDA: 8.718 billion yen
・EBITDA Margin: 6.4%
・Simple Actual ROE (Return on Equity): 7.9%
・Simple Forecast ROE (Return on Equity): 5.6%
・Actual ROA (Return on Assets): 3.7%
・ROIC: 4.7%

[Supplementary Notes]
・ROIC assumes an effective tax rate of 30% and surplus cash of 10%
・EV and EV/EBITDA exclude non-controlling interests
・Notes Receivable and Accounts Receivable from Completed Construction Contracts, etc.: 56.496 billion yen (+10.338 billion yen / +22.4%)
・Costs on Uncompleted Construction Contracts: 1.657 billion yen (+772 million yen / +87.2%)
・Advances Received on Uncompleted Construction Contracts: 10.809 billion yen (+1.766 billion yen / +19.5%)

[Commentary]
With an equity ratio of 45.1% and a current ratio of 208.8%, there is room for short-term solvency. The company holds 19.919 billion yen in cash and deposits, and the net D/E ratio against interest-bearing debt of 37.912 billion yen is 0.3x, so there are no major concerns regarding financial stability.

Notes receivable and accounts receivable from completed construction contracts, etc., which are important in the construction industry, increased by 10.338 billion yen from the previous fiscal year to 56.496 billion yen. Costs on uncompleted construction contracts also increased by 87.2% to 1.657 billion yen, indicating that the burden of working capital is expanding as construction projects progress. On the other hand, advances received on uncompleted construction contracts also increased by 19.5% to 10.809 billion yen, confirming an accumulation of advance payments.

In terms of profitability, while the gross profit margin improved to 12.1% and the EBITDA margin to 6.4%, ROIC remains at 4.7%. ROIC is calculated by judging the construction industry as a heavy-asset business, with an effective tax rate of 30% and a 10% deduction for surplus cash. In addition, EV and EV/EBITDA exclude non-controlling interests, and the EV/EBITDA ratio is 7.0x.

(5) Cash Flow (CF)

・Operating CF (CFO): -4.569 billion yen
・Investing CF (CFI): 456 million yen
・Financing CF (CFF): 5.256 billion yen
・FCF: -4.113 billion yen
・FCF Yield: -9.6%

[Commentary]
Operating cash flow deteriorated from a surplus of 3.793 billion yen in the previous term to a deficit of 4.569 billion yen. Although profit before tax increased to 6.495 billion yen, an increase in trade receivables of 10.278 billion yen acted as a cash outflow factor, meaning the significant increase in profit did not directly translate into an increase in cash.

Free cash flow was also -4.113 billion yen, with a FCF yield of -9.6%, so caution is required regarding the quality of earnings. While operating cash flow in the construction industry tends to fluctuate significantly depending on project progress and collection timing, the simultaneous occurrence of an increase in notes receivable and accounts receivable from completed construction contracts and the deterioration of operating cash flow makes future debt collection and the recovery of operating cash flow critical.

Meanwhile, financial cash flow turned from a deficit of 3.788 billion yen in the previous term to a surplus of 5.256 billion yen, with proceeds from long-term loans of 7.859 billion yen supplementing funds. The company paid dividends of 1.767 billion yen and continues to return value to shareholders, but with operating cash flow in the red, the improvement of cash collection from core business operations will be a key point to watch when assessing the capacity for further returns.

(6) Overview by Segment

・Civil Engineering Business
Segment Revenue: 38.031 billion yen (YoY: +2.6%)
Segment Profit: 318 million yen (Turned profitable)
Segment Profit Margin: 0.8%

[Commentary]
Revenue saw only a slight increase of 2.6% YoY, but the segment turned from a loss of 4.511 billion yen in the previous term to a profit of 318 million yen. Profitability has improved significantly more than the expansion in sales scale, and the normalization of earnings from the previous term's large deficit is the most notable point.
　　　　　
・Architectural Business
Revenue: 92.467 billion yen (YoY: +23.9%)
Segment Profit: 6.987 billion yen (YoY: +170.6%)
Segment Profit Margin: 7.6%

[Commentary]
Revenue increased significantly by 23.9% YoY, and segment profit also surged by 170.6%. With revenue of 92.467 billion yen and segment profit of 6.987 billion yen, this is the largest business supporting consolidated performance, driving the significant profit growth for the current term through both increased sales and improved profitability.

・Real Estate Business
Revenue: 2.519 billion yen (YoY: -52.3%)
Segment Profit: 507 million yen (YoY: -79.1%)
Segment Profit Margin: 20.1%

[Commentary]
Revenue decreased by 52.3% YoY and segment profit by 79.1%, representing a significant decline in both sales and profit. While real estate project performance tends to fluctuate depending on the timing of property sales, the profit margin remains high at 20.1%, indicating that the decline in profit is primarily due to a reduction in business scale rather than a decline in profitability.

・Energy Business
Revenue: 3.471 billion yen (YoY: -53.4%)
Segment Profit: 1.331 billion yen (YoY: -63.6%)
Segment Profit Margin: 38.3%

[Commentary]
Revenue decreased by 53.4% YoY and segment profit by 63.6%, representing a significant decline in both sales and profit. On the other hand, the segment profit margin is very high at 38.3%, maintaining its characteristics as a high-profit business. As the business scale shrinks, the focus is on whether it can re-expand sales while maintaining this high level of profitability.

(7) Points of Personal Concern

・Operating cash flow is negative despite significant profit improvement
[Commentary]
While operating profit improved significantly by 208.4% YoY to 7.15 billion yen and net profit by 308.9% to 5.45 billion yen, operating cash flow stands at -4.569 billion yen. Notes receivable and accounts receivable from completed construction contracts increased by 10.338 billion yen from the previous term, and the 10.278 billion yen increase in trade receivables was a major factor in the cash outflow. Although profits have recovered significantly, the fact that these profits have not been collected as cash is the point of greatest concern.

・Significant profitability improvement in the Civil Engineering Business
[Commentary]
While revenue in the Civil Engineering Business saw only a slight increase of 2.6% YoY, it turned from a segment loss of 4.511 billion yen in the previous term to a profit of 318 million yen. This is a significant profit improvement that cannot be explained by sales growth alone, indicating that earnings normalization is progressing through factors such as the reduced impact of loss-making projects from the previous term. It will be important to see if this profit can be maintained and if the 0.8% profit margin can be further improved.

・Architectural Business driving significant profit growth
[Commentary]
In the Architectural Business, revenue expanded by 23.9% YoY to 92.467 billion yen, segment profit increased by 170.6% to 6.987 billion yen, and the profit margin reached 7.6%. Compared to the consolidated operating profit of 7.15 billion yen, the profit scale of the Architectural Business is very large, making it the core business driving this term's significant profit growth. On the other hand, because performance is highly dependent on the Architectural Business, I will be watching how future construction profitability and project progress affect company-wide profits.

(8) Commentary for Beginners

① Growth Potential: 8/10
・Revenue increased by 9.6% compared to the previous year, indicating an increase in the company's overall workload.
・In particular, revenue in the Architectural Business increased by 23.9%, significantly supporting the company's growth.
・Revenue for the next year is expected to increase by 1.3%, but the momentum of growth is expected to weaken.

② Profitability: 8/10
・Profit from core business increased by 208.4% compared to the previous year, showing a significant recovery in the company's earning power.
・The Civil Engineering Business improved from a loss of 4.511 billion yen to a profit of 318 million yen.
・Profit in the Architectural Business increased by 170.6%, supporting the significant profit growth of the company as a whole.

③ Financial Safety: 7/10
・Assets available within one year are about twice the liabilities to be paid within one year, indicating a buffer in short-term payment capacity.
・Cash stands at 19.919 billion yen, and the net D/E ratio, considering debt, is 0.3x.
・The equity ratio is 45.1%, which is not a level that indicates major problems with the financial condition.

4. Capital Efficiency: 4/10
・The company generated a net profit of 5.45 billion yen, but its core business saw a cash outflow of 4.569 billion yen.
・Uncollected construction receivables increased by 10.338 billion yen, indicating that cash collection is not keeping pace with profit growth.
・Free cash flow is also negative 4.113 billion yen, so caution is required regarding the ability to convert profits into actual cash.

5. Future Potential: 7/10
・The construction segment saw sales increase by 23.9% and profits by 170.6%, serving as a major growth engine for the company.
・The civil engineering segment has recovered from a significant loss to a profit, leaving room for further profit growth in the future.
・The plan for the next fiscal year projects an 11.9% decrease in operating profit and a 26.6% decrease in net profit, so it is necessary to confirm whether the current significant profit improvement can be maintained.

6. Overall Evaluation: 6.8/10

[Key Points]
・Although profits increased significantly, cash from core business operations decreased by 4.569 billion yen.
・The civil engineering segment improved significantly from a loss of 4.511 billion yen to a profit.
・The construction segment's 23.9% sales growth and 170.6% profit growth are driving the company's overall significant profit increase.

[Summary]
Sales and profits have grown significantly, and the company's earning power has recovered substantially, particularly due to the elimination of losses in civil engineering and significant profit growth in construction. On the other hand, uncollected construction receivables have increased, and cash from core business operations has decreased significantly. To summarize these financial results simply: 'Profits have recovered significantly due to improved construction profitability, but the next challenge is whether those profits can be collected as cash.'

Source Information

・Source Document: Fiscal Year Ending May 2026 Financial Results Summary [Japanese GAAP] (Consolidated)
・Publisher: Nippon Kokudo Kaihatsu Co., Ltd.
・Publication Date: July 15, 2026
・URL: https://www.n-kokudo.co.jp/