NOVAC CO.,LTD.

Business Details

Serving regional development bureaus of the Ministry of Land, Infrastructure, Transport and Tourism, local governments, and expressway companies as key customers, the company undertakes social infrastructure construction works including roads, bridges, rivers, dams, shield tunneling, water supply/sewerage, and land development. Orders are secured 100% through competitive bidding. The company maintains a 100% prime contractor ratio, a level far exceeding the national average. In FY2026 (ending April 2026), revenue expanded 17.2% year on year, but the operating margin declined due to rising costs, among other factors.

Recent Overview

Revenue expanded, but the operating margin declined from 10.9% to 8.4% due to rising costs

In the Civil Engineering Works Business for FY2026 (ending April 2026), revenue expanded to ¥10,816 million (up 17.2% year on year), while operating profit decreased to ¥906 million (down 9.9% year on year). Elevated construction material prices and rising labor costs pushed up costs, causing the operating margin to decline 2.5 points from 10.9% in the prior period to 8.4%. Orders received saw only a slight increase to ¥11,145 million (up 2.3% year on year), while the backlog at period-end continued to build up to ¥16,213 million (up 2.1% year on year). Revenue for the Civil Engineering Works Business is forecast at ¥13,000 million (up 20.2% year on year) for FY2027 (ending April 2027), projecting substantial revenue growth.

Key Products

Growth Drivers

• Continued steady growth in public construction investment based on the National Resilience Plan
• Expanding demand for disaster recovery works and levee reinforcement works due to an increase in natural disasters such as typhoons and heavy rainfall
• Increased order intake for road network development projects as measures against a Nankai Trough earthquake
• Acquisition of large-scale, high-margin projects through maintenance of a 100% prime contractor ratio
• Nationwide construction capability built on a high proportion of employees holding chief engineer qualifications (approximately twice the national average of about 25%)
• Improved visibility of revenue for subsequent periods through the buildup of a period-end backlog of ¥16,213 million (underpinning the FY2027 (ending April 2027) forecast of ¥13,000 million)

Risks

• Cost increase risk from persistently high construction material prices (materialized this period as a 2.5-point decline in operating margin)
• Increased costs to address tight labor supply-demand conditions and the overtime work cap regulations
• Intensifying order competition due to 100% competitive bidding, exerting downward pressure on order unit prices
• Risk of fluctuations in public investment budgets stemming from US tariff policy and geopolitical risks
• Difficulty securing engineers and construction personnel amid the declining birthrate and aging population
• Risk of revenue and profit timing mismatches across periods due to fluctuations in the commencement timing and progress of large-scale projects