Daito Trust Q1 Operating Profit Rises 15.5% on Price Revisions as Construction Orders Fall 21%

A margin quarter for a company that barely grew

Daito Trust Construction Co., Ltd. (TSE: 1878) published consolidated first-quarter results for FY3/2027 on July 31, 2026, covering April 1 to June 30, 2026 under Japanese GAAP. Revenue rose 0.4% to ¥480,116 million — effectively flat — while operating profit rose 15.5% to ¥39,384 million and ordinary profit 13.4% to ¥39,812 million. The operating margin widened to 8.20% from 7.13%. This was a pricing and mix quarter, not a volume one.

The bottom line went the other way. Net profit attributable to owners of parent fell 1.8% to ¥23,678 million, and the company names the reason plainly: an extraordinary loss recognised on the valuation of shares in JustCo Holdings Pte. Ltd., the Singapore flexible-workspace operator in which it holds a stake. Earnings per share were ¥72.68 against ¥72.72 — essentially unchanged, and stated on a comparable basis after the five-for-one share split of October 1, 2025, which is applied retroactively to the prior year for per-share figures. Comprehensive income rose 13.2% to ¥23,268 million.

Construction earned more on less work

The Construction segment is where the margin story sits. Completed-construction revenue fell 5.3% to ¥119,846 million, yet gross profit rose 8.0% to ¥33,423 million and the gross margin widened 3.5 points to 27.9%, which the company attributes principally to the effect of price revisions. Segment operating profit rose 16.9% to ¥9,896 million, a segment margin of 8.26% against 6.69%.

The order book is the counterweight, and it is the number that matters most for the next two years. Construction orders received fell 21.1% to ¥102,645 million, and the company gives two reasons: a reaction against a year-ago quarter in which orders were concentrated ahead of the price revisions, and a changed environment from rising interest rates, with lending assessments by financial institutions taking longer. The order backlog at June 30 stood at ¥757,766 million, down 4.8%.

Two things follow from those figures. First, orders at ¥102,645 million are running below completed-construction revenue of ¥119,846 million — a book-to-bill ratio of 0.86 — so the backlog is being drawn down rather than replenished. Second, the backlog still equals roughly six quarters of construction revenue at the current rate, so the near-term revenue line is protected; the pressure, if orders do not recover, arrives later. It is also worth noting that the price revisions responsible for the margin gain are themselves a plausible part of the order decline: higher prices lift the margin on work executed and depress the volume booked.

The market backdrop is not the constraint. Housing starts in the April–May 2026 cumulative period reached 120,446 units, up 21.1%, and rental-housing starts — Daito's core market — 54,440 units, up 24.2%. The company is careful to note that these comparisons include a rebound effect, because the year-ago period was depressed by the revised Building Standards Act and the enforcement of the Building Energy Efficiency Act.

Leasing is the profit engine; development is the fastest-improving

Real estate leasing is by far the largest segment and produced revenue of ¥307,941 million, up 3.9%, with segment profit up 15.7% to ¥27,510 million — a margin of 8.93% against 8.02%. Within it, bulk-lease income — the master-lease model in which Daito takes on the whole building — rose 3.3% to ¥272,621 million, driven by an increased number of leased-back properties and firm rental demand as construction costs and house prices rose. Tenant placements reached 85,909, up 1.5%, and June rent-based occupancy rose 0.3 points year on year for residential while slipping 0.1 point for commercial.

That segment alone contributes ¥27.5 billion of the group's ¥39.4 billion operating profit — 70% — on 64% of revenue. It is the reason Daito's earnings are far more stable than its construction order book, and the reason a 21% fall in orders does not translate into an immediate profit warning.

Real estate development shows the largest percentage gain: revenue fell 10.6% to ¥29,990 million because the sales plan is weighted toward the second quarter onwards, yet segment profit rose 52.3% to ¥4,221 million as the purchase-price-allocation adjustment arising from the consolidation of Ascot Corp. in the prior year diminished. The segment margin jumped to 14.08% from 8.27%. Financial services were near-flat at ¥3,077 million of revenue, down 3.1%, with profit of ¥636 million, up 4.3%. The Other segment — LP gas supply, elderly care and childcare, and hotels — grew revenue 3.9% to ¥19,261 million but saw profit fall 30.5% to ¥1,903 million: care-facility usage rose, but capital spending on expanding facilities and recruitment costs for care staff more than absorbed it. Corporate costs and eliminations widened 12.0% to ¥4,783 million.

THE Global becomes a wholly owned subsidiary

The most consequential corporate event in the filing is a completed acquisition. Daito took listed developer THE Global Co., Ltd. — sales agency, building management, condominium development, hotels and income-property businesses — private through a tender offer, and on July 31, 2026 it became a wholly owned subsidiary.

The sequence: the tender offer ran for 30 business days from April 7 to May 22, 2026 at ¥1,280 per share, with a minimum of 4,165,600 shares and no upper limit. Tenders totalled 12,715,775 shares for ¥16,276 million, settled on May 28, giving Daito a 44.92% voting stake. SBI Holdings, the target's parent and largest shareholder with 14,705,000 shares or 51.95%, had agreed on April 6 not to tender, to vote for the share consolidation, and to sell into the subsequent self-share acquisition; third-largest holder Asahi Kasei Homes, with 9.88%, agreed to tender all of its shares. An extraordinary general meeting on July 9 approved the share consolidation, effective July 30; the self-share acquisition was executed on July 31, at which point Daito's holding reached 100%. The deemed acquisition date is July 1, 2026, so none of the target's results are in this quarter.

The rationale is stated in unusually concrete terms. Daito's medium-term plan (FY2024–FY2026) makes expansion of real-estate development a priority, and the two companies had collaborated on rental-apartment development since around 2020. Daito says the combination should let it reach the plan's ¥100 billion property-investment target in the development segment and make development one of the group's pillars by 2030, while enabling the target to achieve ¥10 billion of operating profit early. The named value-creation levers are stronger development and land-sourcing capability in central Tokyo, cost efficiency from coordinating construction functions inside the group, wider revenue opportunities from integrated property operations and diversified exit strategies, and early post-merger integration drawing on the existing collaboration and the target's prior experience under Ascot.

One caveat for modelling: the acquisition cost, transaction expenses, resulting goodwill, and the assets and liabilities assumed are all disclosed as not yet determined. The ¥16,276 million tender consideration is only the portion paid to tendering shareholders and does not include the self-share acquisition that removed SBI's 51.95%.

A balance sheet financed by short-term borrowing

Total assets rose 1.5% to ¥1,387,599 million, an increase of ¥20,096 million with a clear composition: cash and deposits fell ¥25,054 million, while real estate for sale rose ¥16,939 million, real estate for sale in process ¥16,236 million and investment securities ¥10,065 million. That is capital moving out of cash and into development inventory — consistent with a segment whose sales are weighted to later quarters.

Liabilities rose 2.4% to ¥891,923 million, and the funding source is explicit: short-term borrowings increased ¥61,303 million, more than offsetting a ¥23,366 million drawdown of the bonus provision and an ¥18,098 million reduction in income taxes payable. Net assets fell 0.2% to ¥495,676 million as the ¥23,678 million earned was outweighed by ¥26,742 million of dividends paid. The equity ratio eased 0.7 points to 35.8% and book value per share to ¥1,523.67 from ¥1,534.24.

Guidance held, with a demanding second half implied

Daito left the forecast published on April 30, 2026 unchanged. For FY3/2027 it guides revenue of ¥2,050,000 million, up 3.3%, operating profit of ¥142,000 million, up 5.0%, ordinary profit of ¥140,000 million, up 0.6%, and net profit of ¥108,000 million, up 9.1%, for EPS of ¥326.00. The interim plan is revenue of ¥990,000 million, up 3.2%, operating profit of ¥70,000 million, up 0.9%, and net profit of ¥61,000 million, up 22.3%.

The first quarter delivered 23.4% of guided revenue, 27.7% of guided operating profit and 21.9% of guided net profit. The operating-profit share running well ahead of a straight-line quarter is the interesting one: full-year guidance embeds an operating margin of 6.93% against the 8.20% just posted, so the plan does not assume this quarter's profitability persists. Whether that is conservatism or an expectation that the construction margin gain fades as the order decline works through is the open question — and the ¥757.8 billion backlog, still six quarters deep, is what buys management the time to find out.

The dividend forecast for FY3/2027 is ¥163.00 per share, split ¥81.00 at the interim and ¥82.00 at the year-end, unchanged from the previous announcement. A year-on-year comparison of the annual total is not meaningful: FY3/2026 paid a ¥342.00 interim before the October 2025 five-for-one split and ¥82.00 at the year-end after it, and the company itself shows no annual total for that year. On guided EPS of ¥326.00 the FY3/2027 payout ratio is exactly 50%.

JapanStockPulse provides informational content only and does not constitute investment advice. Figures are taken from the company's published earnings short report and may be subject to subsequent revision.