EJ Holdings Inc.

Business Details

E・J Holdings is a pure holding company overseeing 14 consolidated subsidiaries, operating a general construction consulting business primarily serving central government ministries and local governments as key clients. The business is composed of two segments: construction consulting operations (including planning, design, diagnosis, management, client-support services, and compensation consulting) and survey operations (including surveying and geological investigation). Approximately 23% of net sales come from central government ministries and approximately 48% from local governments, with the majority of net sales dependent on domestic public works projects. In FY2026 (ending May 2026), net sales reached ¥46,586 million (109.1% of the prior period), achieving revenue growth, although this slightly fell short of the initial full-year plan.

Recent Overview

Achieved higher sales and profit, but operating margin declined due to rising personnel expenses and cost ratios, falling short of the initial plan

In FY2026 (ending May 2026), the company achieved higher sales and profit, with net sales of ¥46,586 million (up 9.1% year on year) and operating income of ¥4,669 million (up 4.2% year on year). However, selling, general and administrative expenses expanded to ¥11,035 million (from ¥9,770 million in the prior period) due to rising personnel expenses from improved treatment at group companies, higher cost ratios from revised order prices with partner companies, increased R&D expenses (¥234 million), and increased goodwill amortization (¥391 million), causing the operating margin to decline to 10.0% (from 10.5% in the prior period). Both net sales and operating income fell short of the initial full-year plan. On the other hand, factors such as the reduction of cross-shareholdings (gain on sale of investment securities of ¥293 million) contributed positively, allowing net income to be maintained at roughly the same level as the initial plan. During the period, the company issued new shares (2,300,000 shares) through a public offering and third-party allotment, increasing both common stock and capital surplus by ¥1,569 million each. For FY2027 (ending May 2027), the company forecasts net sales of ¥49,000 million (up 5.2% year on year) and operating income of ¥5,300 million (up 13.5% year on year), and plans to improve production efficiency through process innovation utilizing DX.

Key Products

Growth Drivers

• Stable securing of public works budgets driven by the promotion of disaster prevention, disaster mitigation, and national resilience (the FY2025 budget of the Ministry of Land, Infrastructure, Transport and Tourism remained at the same level as the previous year), along with the rollout of various measures based on the National Resilience Implementation Medium-Term Plan
• Continued prioritized budget allocation to fields related to the group's business areas amid growing demand for addressing diverse social challenges, including aging infrastructure, GX, DX promotion, and regional revitalization
• Diversification of the business portfolio through significant expansion of survey operations (orders received of ¥10,242 million and order backlog of ¥4,213 million in FY2026 (ending May 2026))
• Promotion of core business expansion, full-scale overseas business development, value chain strengthening, and sustainability management under the Sixth Medium-Term Management Plan, "E・J-Plan 2027" (final-year target for FY2028 (ending May 2028): net sales of ¥50.0 billion and operating income of ¥5.9 billion)
• Shift toward management conscious of capital costs and share price (continuation of progressive dividends targeting a DOE of 3.0% or higher, and improved capital efficiency through reduction of cross-shareholdings)
• Continuation of a relatively favorable order environment, with orders received for FY2027 (ending May 2027) expected to reach ¥49.0 billion (107.0% of the prior period)

Risks

• Risk that business performance is significantly affected by reductions in public works budgets or policy changes, given that the majority of orders come from public-sector demand
• A seasonal structure in which net sales are concentrated in the fourth quarter (fiscal year-end), meaning achievement of full-year results depends on order fulfillment in the second half (first-half earnings forecasts are not disclosed)
• Continued upward pressure on cost ratios from rising personnel expenses (due to improved treatment and wage increases) and revised order prices with partner companies, expected to persist into the next fiscal period and beyond, making margin improvement difficult
• Increased pressure on selling, general and administrative expenses from rising goodwill amortization expenses (¥391 million in FY2026 (ending May 2026), versus ¥300 million in the prior period)
• Expanding cost burden from increased R&D expenses (for promoting product innovation), which rose to ¥234 million in FY2026 (ending May 2026) from ¥105 million in the prior period
• Risk of goodwill impairment at subsidiaries (in the prior period, goodwill impairment of ¥74 million was recorded for Nichiei Planning Co., Ltd.; current goodwill balance stands at ¥2,817 million)
• Geopolitical risk and foreign exchange risk in overseas operations (overseas sales are limited at ¥356 million, but risk may expand as overseas business activities gain momentum)
• Dilutive impact from a public offering of new shares (2,300,000 shares), which contributed to a decline in earnings per share from ¥204.06 to ¥189.35