Overview

Our company (hereinafter referred to as “the company”) is a holding company primarily focused on the comprehensive construction consulting sector. Its consolidated subsidiaries mainly engage in public works projects for government agencies. Since its establishment, the company has actively pursued organizational restructuring through mergers and acquisitions, and as a Prime Market listed company, it maintains a stable capital structure and a high level of equity ratio. The company’s comprehensive construction consulting services span a wide range of areas, including planning, design, management, compensation consulting, surveying, and geotechnical investigation. Each group company contributes through its expertise in these fields. While trends in public investment and infrastructure demand tend to have medium- to long-term forecasts, the timing of orders can affect profit recognition and cash flow.

The company’s consolidated sales have increased steadily, rising from ¥30,394 million to ¥37,207 million over the past five years. There have been some periods of slight decreases in ordinary profit and net income attributable to the parent company’s shareholders, but overall, the trend is stable. Both ROE and ROA have been slightly declining, suggesting a slowdown in profitability growth. On the other hand, the equity ratio has increased from 65.2% to 68.7%, indicating an improvement in financial stability. The dividend payout ratio has increased from 5.2 times to 9.2 times, demonstrating the company’s commitment to shareholder returns.

Regarding the financial data for the submitting company (a group company), sales increased from ¥1,725 million in fiscal year 13 to ¥1,903 million in fiscal year 17. Ordinary profit grew from ¥576 million to ¥1,439 million, and net income grew from ¥559 million to ¥1,435 million. Capital increased from ¥2,000 million to ¥2,803 million, indicating steady capital formation. The dividend per share also increased from ¥503 to ¥555, with a total shareholder yield reaching 371.1%. The equity ratio ranged from 95.8% to 98.9%, maintaining an exceptionally high level. The dividend payout ratio decreased slightly from 60.8% to 60.0%, reflecting a steady approach to return policies alongside business expansion.

The company’s history began with the establishment of a pure holding company through a share transfer between Eight Consultants Inc. and Japan Technology Development Co., Ltd. in January 2007, followed by a listing on the Tokyo Stock Exchange in June of the same year. Since 2007, the company has expanded its group structure through various mergers and acquisitions, and from 2017 to 2024, it has successively acquired regional construction consulting firms and merged with them to further expand its operations both domestically and internationally. As public works are increasingly focusing on addressing aging infrastructure and investing in new projects, the company’s group is expected to experience stable demand. However, the intensified competition for orders and rising costs remain significant management challenges.

Based on the financial statements and reports, the company’s international expansion is progressing with the goal of acquiring global needs and diversifying risk. While there is the potential for revenue growth due to favorable exchange rates, fluctuations in currency exchange could impact financial numbers. Going forward, the company’s ability to balance aggressive investment and improving proposal capabilities with stabilizing order volumes and improving profit margins will be crucial. While the group has significant growth potential, it is essential to secure appropriate personnel and enhance engineering capabilities. At present, the company’s solid financial base and infrastructure demand provide a stable foundation, but differentiation strategies will determine future corporate value compared to competitors.

Performance Trends: Sales and Orders

This section organizes the trends in the company’s sales and orders based on the financial statements and reports. All values are expressed in millions of yen. Consolidated sales from fiscal year 2017 to 2021 increased from ¥30,394 million to ¥37,207 million. The growth rate has remained steady, around 2% to 3% annually, indicating that demand for construction consulting services related to public works has remained solid.

Regarding orders, the fluctuation in order values is affected by the fiscal budget for public works and the timing of bidding. According to the financial report, the company’s main clients are the Ministry of Land, Infrastructure, Transport and Tourism and local governments, and the consulting services provided by the company play an essential role in social infrastructure investments. In recent years, investment in disaster prevention and mitigation has been at a high level, with major projects involving the repair and strengthening of rivers and bridges anticipated. On the other hand, changes in the bidding environment from year to year can affect profitability, making efficient profit management a key focus. As analysts, it is important to monitor the proportion of projects engaged in price competition and the impact of rising labor costs, carefully assessing profit margins.

Between fiscal years 2022 and 2023, temporary adjustments in capital investment occurred, but the continuation of the national resilience policy and relatively stable budgets for local infrastructure longevity have supported demand. According to financial reports, the company has already expanded its order intake internationally, with consulting services growing in the ASEAN region and the Middle East. The favorable exchange rate has strengthened the company’s competitive edge, which is expected to further boost sales. However, as overseas projects involve different contract structures and labor management than in Japan, ensuring profitability may become more challenging. Securing experienced personnel will be critical in establishing stable revenue systems.

The increase in the company’s sales is largely driven by the group’s expansion. Since 2017, acquisitions of regional construction consulting firms and survey companies have visibly contributed to sales growth. Notably, the acquisition of companies with expertise in specialized areas such as bridge inspections and port surveys has expanded the service range. This capacity to handle diverse projects is a strength, but the integration costs may impact profitability. To maximize synergy, careful management of the integration process and deepening collaboration between the sales and technical departments are necessary.

On the other hand, the financial data for the submitting company (within the consolidated group) shows a gradual increase in sales from fiscal year 13 to fiscal year 17, expanding from approximately ¥1,725 million (reference value) to ¥1,903 million. Ordinary profit grew from ¥576 million to ¥1,439 million, and net income grew from ¥559 million to ¥1,435 million. This growth is likely due to the expansion of transactions with existing clients and the provision of new technical consulting services, which have led to increased unit prices. In particular, it is estimated that the company has secured profitable consulting sectors, especially as demand for repairs and strengthening in the public sector continues to rise.

Overall, the company group’s sales have been increasing, and orders have been supported by steady infrastructure-related investments. However, due to the structure of the industry, where gross profit margins can vary greatly depending on the type of project, efficient project management remains a significant challenge. As analysts, it is important to monitor the future sales growth rate, as well as the growth of sales and administrative expenses, and measures to curb personnel costs to determine whether the company can secure sustainable profitability.

Business Overview and Detailed Analysis of Key Segments

(1) Comprehensive Construction Consulting Business

The company group offers a wide range of services for public works projects commissioned by government agencies, from planning and design to construction management. The core of the business is construction consulting, which involves planning, design, and construction management for infrastructure development such as bridges, roads, and water supply and sewage systems. Additionally, the group provides internal survey services such as surveying and geotechnical investigation, offering comprehensive consulting services.

According to the financial report, the largest portion of sales within the group comes from the comprehensive construction consulting business, accounting for approximately 60% of consolidated sales. Although demand is influenced by the budget allocations of the national government and local authorities, the ongoing investments in aging infrastructure and disaster prevention continue to drive stable orders. In recent years, the prices of survey and design projects related to the long-term preservation of bridges and tunnels have been rising, suggesting further sales growth. From an analyst’s perspective, the high level of vertical integration in the business area offers a competitive advantage, and securing continuous demand from the public sector is a strength.

(2) Compensation Consulting Business

The company group’s second pillar is the compensation consulting business. The company provides specialized services for land acquisition, compensation negotiations with residents, and compensation calculation to support the smooth progress of public works. As the complexity of stakeholder coordination and the need for compliance increases in public construction projects, demand for compensation consulting services has risen.

The financial data indicates that the compensation consulting business accounts for approximately 15% to 20% of total consolidated sales. Although its profit contribution is relatively stable, the specialized expertise and know-how in compensation negotiations tend to yield higher gross profit margins compared to comprehensive construction consulting. The network of experienced technicians and former government officials is a strength, but retaining and training talent is expected to remain a challenge.

(3) Surveying Business

Surveying and geotechnical investigations, essential at the planning stage of infrastructure projects, are carried out in this segment. The group conducts terrain and geological surveys for bridges, rivers, ports, etc., which are also used for the company’s design and compensation consulting services. Recently, advanced measuring technologies, such as 3D scanning and drones, have been introduced, and the company is actively investing in IT.

Surveying services account for approximately 10% of sales, but the ability to offer a seamless service from surveying to design and construction management strengthens the company’s competitive position. Many competitors are specialized firms with more limited order intake, while the company can capture demand within its group. From an analyst’s perspective, this vertical integration model allows the company to expand revenue as a group by encompassing related areas.

Financial Analysis and Capital Structure

As a pure holding company, the company oversees and manages its group companies. The consolidated financial statements show an increase in the equity ratio from 65.2% to 68.7%, while the submitting company’s standalone equity ratio remains at a high level, ranging from 95.8% to 98.