Mid-term plan and long-term targets revised upward—targeting revenue of JPY 60B and operating income of JPY 15B by FY2030. Expansion of Dengi Academy and new financial strategy unveiled, presenting the full picture of growth investments

Summary

In FY26/3, revenue reached JPY 46,371M (+7.7%) and operating income JPY 11,821M (+29.6%), with all metrics hitting record highs. President Shimada noted during the briefing that the elevated margins in the prior fiscal year were driven by completion of high-profitability projects, and characterized the expected OPM decline in the current fiscal year (25.5% → 24.3%) as a normalization to more typical levels. The company revised upward its final-year mid-term plan targets (FY27) to revenue of JPY 52B and operating income of JPY 13B, while newly disclosing a financial strategy (cash allocation framework) through FY2030. In addition to raising the shareholder return policy to a payout ratio of 40%+ or DOE of 7%+, the company earmarked JPY 38–43B for growth investments, clearly signaling an aggressive stance toward M&A and human capital investment.

Key Points (Earnings Highlights and Growth Actions)

• Business Strategy and Market Outlook
  • Tokyo metropolitan redevelopment projects expected to continue through approximately 2030, with multiple projects already in the inquiry pipeline
  • Labor shortages identified as the single largest bottleneck to growth; recruitment, training, and subcontractor support positioned as top priorities
  • Targeting inclusion under the revised TOPIX framework (October 2026), with 92 IR meetings conducted (13x vs. FY22)
• Current Business Progress and Drivers
  • HVAC Instrumentation segment profit rose +22.3%, primarily driven by better-than-expected profitability on new construction projects
  • Industrial Systems segment profit surged +102.5%, reflecting improved project economics through DX adoption
  • Orders received reached a record JPY 54B (+23.4%), factoring in available construction capacity; per-project value increasing due to rising construction costs
  • New maintenance contract wins came in at +65.8% vs. internal budget
• Strategic Initiatives and Key Inflection Points
  • Acquired approximately 1,500-tsubo construction site in Narashino, Chiba Prefecture in June 2025; planning Dengi Academy + Technology Innovation Center (targeted to begin operations in FY2029)
  • ROE target raised from 12.5% to 15%+; promoting adoption of ROIC-based management
  • Headquarters relocation to Toranomon TORANOGATE (14th floor) scheduled for H1 FY2028

Outlook and Strategy

• FY27/3 guidance calls for revenue of JPY 51,500M (+11.1%) and operating income of JPY 12,500M (+5.7%), both expected to set new record highs. Middle East geopolitical risks and compliance costs related to the Subcontract Act are already factored in
• Final-year mid-term plan targets (FY27) revised upward to orders received of JPY 54.5B, revenue of JPY 52B, operating income of JPY 13B, and OPM of 25%
• Long-term management targets (FY2030) revised upward to revenue of JPY 60B and operating income of JPY 15B. CAGR (FY24–FY30): revenue +5.7%, operating income +8.7%
• Against JPY 48B in operating cash flow generation and JPY 22B in distributable funds through FY2030, the company plans to allocate JPY 38–43B for growth investments + JPY 7B for base infrastructure capex + JPY 20–25B for shareholder returns. A flexible JPY 50B envelope encompasses M&A, the Shin-Narashino complex, DX investment, and human capital investment
• The president stated he would strive to deliver upward revisions exceeding current guidance, referencing room for margin improvement at the project level
• Overseas IR roadshow planned in Singapore in late June, responding to rising foreign investor ownership

Positive Factors

• Backlog of JPY 33,476M (+29.5%) at a record-high level, providing strong revenue visibility
• OPM of 25.5% ranks among the highest in the construction industry; ROE of 19.6% is also an industry leader
• Existing building project revenue mix at 58.8%, with the recurring revenue base expanding. System renewal demand on a 15-year cycle post-construction underpins stable order flow
• FY2025 new graduate and mid-career hires totaled 78 (including 13 women); headcount increased from 903 to 954 on a net basis. Targeting a 1,100-person workforce by end of FY2030
• Dengi Academy graduates are highly rated on-site; national certification holders also growing (e.g., +11 Class 1 Telecommunications Construction Management Engineers)
• FMR LLC (Fidelity affiliate) increased its stake to 9.45%, underscoring sustained interest from foreign institutional investors

Concerns and Risks

• Current-year OPM guided at 24.3% (−1.2pt). The president acknowledged that margins are approaching their upper bound and further improvement will be limited
• Labor shortages remain the key bottleneck, with construction capacity effectively capping orders and revenue. Generational transition at subcontractors is an additional challenge
• Middle East geopolitical risk is assessed as having no earnings impact at present, though pass-through risk to construction material and energy prices persists
• Incremental compliance costs related to the Construction Industry Act and Subcontract Act are embedded in current-year guidance and may represent an ongoing burden
• M&A benefits within the JPY 38–43B growth investment envelope are not reflected in targets. Execution progress and timeline to monetization will be key focus areas going forward
• FY2030 performance targets are set on an organic growth basis; M&A upside is additive. Plan credibility is contingent on investment execution

Performance Highlights

FY26/3 delivered revenue of JPY 46,371M (+7.7%), operating income of JPY 11,821M (+29.6%), and net income of JPY 8,442M (+31.6%), with all metrics setting record highs. Gross profit margin improved markedly from 43.3% to 47.4% (+4.1pt), while OPM reached 25.5% (+4.3pt). ROE stood at 19.6% (+2.3pt), an elevated level.

Segment Performance

• Orders Received: JPY 54,001M (+23.4% YoY)
• Backlog: JPY 33,476M (+29.5% YoY)
• Gross Profit Margin: 47.4% (+4.1pt YoY)
• OPM: 25.5% (+4.3pt YoY)
• ROE: 19.6% (+2.3pt YoY)
• Headcount (Non-Consolidated): 954 (+51 YoY)
• IR Meetings: 92 (+42 YoY)
• New Maintenance Contract Wins: +65.8% vs. Budget
• FY27/3 Dividend Forecast (Post-4:1 Split): JPY 56 (+JPY 16 vs. Prior Year on Post-Split Basis)