TOKAI LEASE CO.,LTD.

Business Details

Tokai Lease Co., Ltd. Group is a single-segment company engaged in the leasing and sale of temporary buildings, unit houses, and associated fixtures and fittings. Consolidated subsidiary Tokai House Co., Ltd. manufactures components, while Nippon Cabinet Co., Ltd. supplies fixtures and fittings, and the company leases and sells these to end users under a vertically integrated model. As an operating lease company providing total services including manufacturing, transportation, construction, and repair, it captures demand from both public and private sectors. Over 90% of revenue is domestic, and there is no dependence on any single customer accounting for more than 10% of sales.

Recent Overview

Revenue rose slightly, but profit fell sharply due to a rising cost ratio and a surge in interest expense

In FY2026 (ending March 2026), revenue increased to ¥18,856 million (up 2.5% year on year), but gross profit declined as the cost-of-sales ratio, including personnel expenses, rose 1.6 points year on year. In addition, interest expense surged 90.1 points year on year to ¥228 million, causing ordinary profit to fall sharply to ¥1,074 million (down 29.6% year on year) and profit attributable to owners of parent to fall to ¥723 million (down 32.4% year on year). The shortfall in mid-period orders and mid-period completions for public-sector demand projects relative to plan also had an impact. Borrowings increased by ¥3,204 million year on year, and the cash flow to interest-bearing debt ratio deteriorated to 24.4 years (from 14.0 years in the prior period). For FY2027 (ending March 2027), the company forecasts a substantial recovery with revenue of ¥20,690 million and operating profit of ¥1,570 million.

Key Products

Growth Drivers

• Expected revenue growth from solid demand for temporary buildings and securing a certain level of orders for public-sector demand projects
• Promotion of order-taking activities that place integrated emphasis on inventory status, delivery timing, and profitability of leasing assets
• Establishment of a stable product supply system through maximum utilization of reused products
• Improved customer satisfaction through enhanced product quality and thorough safety and health management
• Strengthening of logistics and supply capabilities through utilization of the Hirakata distribution center cum head office site of consolidated subsidiary Nippon Cabinet Co., Ltd.

Risks

• Issues concerning deficiencies in practical experience requirements for construction management engineer skill examinations (ongoing response to the Ministry of Land, Infrastructure, Transport and Tourism; restoring trust remains a challenge)
• Expanding interest expense burden due to increased borrowings (interest expense of ¥228 million in FY2026, ending March 2026, up approximately 90% year on year) and a sharp decline in the interest coverage ratio (3.1x)
• Profit pressure from a rising cost-of-sales ratio, including personnel expenses (up 1.6 points year on year)
• Risk of rising costs for outsourced construction work and freight, as well as risk of soaring oil prices and difficulty procuring related materials due to the situation in the Middle East
• Risk of economic deterioration due to prolonged effects of U.S. tariff policy, domestic price increases, and chronic labor shortages
• Risk of failing to meet plans for mid-period orders and mid-period completions of public-sector demand projects (this shortfall also occurred in FY2026, ending March 2026)