Makoto Construction CO,Ltd

Business Details

The company handles the planning, design, construction, and sales of Spec Homes on an integrated basis, centered on Sakai City, Osaka Prefecture, with Tondabayashi City, Takaishi City, Matsubara City, and other areas as key markets. It has a system in place to complete everything in-house, from gathering information on land for development to land acquisition, development applications, design, construction management, and after-sales service. Under the management philosophy of "providing better homes at lower prices," the company offers high-quality, low-priced homes to first-time buyers, and this is the core segment accounting for approximately 97% of Group revenue.

Recent Overview

Both revenue and profit declined year on year, but operating profit improved substantially, indicating an improving profit structure

External customer revenue in the Spec Home Business for FY2026 (ending March 2026) was ¥3,054 million (down approximately 3.9% from ¥3,178 million in the prior period), a decline in revenue. Weak demand from first-time buyers due to rising interest rates and persistently high construction costs continued. On the other hand, consolidated operating profit improved substantially to ¥41 million (up 106.0% from ¥20 million in the prior period). This was driven by the completion of the runoff in sales of low-margin properties and a reduction in SG&A expenses (from ¥437 million to ¥401 million). For FY2027 (ending March 2027), the company plans revenue of ¥3,535 million (up 12.9% year on year) and ordinary profit of ¥105 million (up 183.8% year on year), backed by planned acquisition of well-located properties in Sakai City and Tondabayashi City.

Key Products

Growth Drivers

• Increase in units sold and improved profit margins through the aggressive acquisition of well-located, high-margin properties in Sakai City and Tondabayashi City
• Improved profitability as the runoff in sales of low-margin properties is completed and prices are passed through for higher value-added properties
• Promotion of differentiated sales through value-added features such as earthquake resistance and vibration control
• Maintaining cost competitiveness through an integrated system with the in-house design company (Makoto Design Studio) and sales subsidiaries (Makoto Home Service and Makoto Corporation)
• Strengthening information gathering on development land for both mid-size and small-scale development properties
• Expanding the customer base through product development targeting second-time buyers and affluent customers

Risks

• Continued weak demand from first-time buyers due to declining purchase intent amid rising mortgage interest rates
• Margin pressure from persistently high land acquisition prices and rising construction costs (lumber, building materials, labor, energy)
• Risk of rising energy prices due to uncertainty in US trade policy and heightened tensions in the Middle East
• Intensifying competition for development land acquisition and rising land prices amid heightened competition with industry peers
• Operating cash flow for FY2026 (ending March 2026) was an outflow of ¥235 million, with increased inventory (¥270 million) putting pressure on cash flow
• Cash and cash equivalents at period-end declined substantially to ¥700 million (from ¥1,465 million in the prior period), heightening liquidity risk
• Risk of increased demand for building materials and higher costs due to tightening regulations such as mandatory energy conservation standards