Daiichi Kensetsu Q1 Sales Jump 27% but Profit Stalls as a New Defence Tax Bites

Sales up a quarter, profit flat

Daiichi Kensetsu Kogyo Co., Ltd. (TSE: 1799) published non-consolidated results for the three months to June 30, 2026 on August 4, 2026 under Japanese GAAP. Net sales rose 26.8% to ¥16,186 million, an increase of ¥3,423 million, driven mainly by higher construction volume on large projects carried over from the previous year. Gross profit rose only 5.5% to ¥2,745 million, so the gross margin fell to 17.0% from 20.4%. Selling, general and administrative expenses rose 11.6% to ¥1,071 million, leaving operating profit up 1.9% at ¥1,674 million and ordinary profit up 1.2% at ¥2,013 million.

Net profit fell 0.5% to ¥1,376 million, the only line to move backwards. The company attributes this to a higher tax charge following a revision of the estimated effective tax rate for the newly created defence special corporate tax. Earnings per share were ¥77.76 against ¥75.87 — higher than the profit line because the share count is lower.

Building work drives the volume; civil engineering holds

The Construction segment supplied 98% of revenue, up 27.3% to ¥15,900 million, with segment profit up 2.2% to ¥1,629 million on higher completed-work volume. Within it, building work grew 79.8% to ¥6,875 million while civil engineering added 4.2% to ¥9,025 million — so the mix shifted sharply toward the lower-margin side of the business, which is the simplest explanation for the gross-margin compression. The Real Estate segment grew revenue 4.3% to ¥286 million but saw profit fall 7.4% to ¥46 million, mostly on depreciation of rental property acquired last year.

Orders down a quarter, backlog up an eighth

Orders received fell 25.3% to ¥18,119 million. The swing is entirely in building work, where orders halved to ¥6,353 million from ¥13,301 million; civil-engineering orders grew to ¥11,480 million from ¥10,669 million. Despite that, the order backlog rose 13.4% to ¥46,316 million, with civil engineering up 27.6% to ¥17,700 million and building up 6.1% to ¥28,616 million — roughly nine months of work at the current run rate.

Balance sheet and guidance

Total assets fell 1.9% to ¥84,720 million as completed-construction receivables were collected, even though cash rose; liabilities rose 3.4% to ¥12,028 million on construction payables, and net assets fell 2.7% to ¥72,691 million after the dividend payment. The equity ratio remains exceptionally high at 85.8% against 86.5% at the March year-end.

Daiichi Kensetsu left unchanged the guidance published with its FY3/2026 results on May 13, 2026: full-year net sales of ¥69,000 million (+15.0%), operating profit of ¥5,900 million (−14.6%), ordinary profit of ¥6,300 million (−16.1%) and net profit of ¥4,300 million (−17.7%), for earnings per share of ¥242.91; the first half is guided to ¥35,000 million of sales and ¥3,100 million of operating profit. The first quarter has therefore delivered 28.4% of the full-year operating-profit target. The annual dividend forecast stays at ¥160.00, all of it paid at the year end.

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.