DAISUE CONSTRUCTION CO.,LTD. Q3 FY2026 earnings call

• Company Overview & History

  • Headquartered in Chuo-ku, Osaka, with 4.3 billion yen in capital stock, 683 consolidated employees, and 6 offices across major Japanese metropolitan areas.
  • Founded in 1937, rebranded to Daisue Construction in 1970, entered into a capital and business alliance with Misawa Homes in 2018, and listed on the TSE Prime Market in 2022 following exchange market restructuring.
  • Launched the mid-to-long term management plan "Road to 100th anniversary ～Challenge for Leap Forward" in April 2024, ahead of its 100th founding anniversary in 2037.

• Core Business Strengths and Track Record

  • Condominium construction: Top-tier construction track record centered on the 3 major Japanese metropolitan areas, with ongoing stable relationships with all major developer groups including the "Major Seven" large real estate developers. High-rise condominium construction volume has grown in recent years.
  • General construction: Delivers projects across all segments including offices, hotels, logistics warehouses, factories, medical/welfare facilities, and public works; has strengthened focus on fast-growing refrigerated/frozen logistics warehouse demand. Participated in high-profile large projects including the Czech National Pavilion for Osaka-Kansai Expo 2025, the Tokyo Olympic Umi no Mori Water Venue, current reconstruction of Mitsubishi UFJ Financial Group's Tokyo main building, and the Osaka IR project.
  • Renewal/regeneration construction: Provides end-to-end services from existing building assessment to repair, seismic retrofitting, extension, and occupancy conversion to support long building lifespans and sustainable development. Uses specialized refininng architecture construction methods for high-quality regeneration projects.

• Corporate Transformation and Strategic Priorities

  • Shifted from a long-standing "defensive" corporate culture to an "offensive" growth-focused culture following current CEO Murao's appointment in 2020, driven by the strategic decision to pursue TSE Prime Market listing despite not initially meeting the quantitative thresholds.
  • Three core mid-to-long term strategic pillars:
    1. Strengthen core construction business: Prioritize high-rise condominiums, refrigerated/frozen logistics warehouses, and regenerative construction
    2. Expand high-profit portfolio: Acquired Kojimagumi and Kawanishi Civil Engineering in November 2023 to revive the company's civil engineering business segment
    3. Next-generation management base: Invest heavily in talent acquisition and development to support diverse talent participation

• Operational Initiatives

  • Brand building and talent recruitment: Launched memorable, region-focused TV commercials to improve company name recognition (often misread by stakeholders) and support talent recruitment; commercials have already driven recognition in the Kansai region, with national broadcast starting in January 2026. Implemented an average 16.7% base pay increase in April 2025, and raised starting salaries to match major industry peers to address construction industry-wide labor shortages.
  • Sustainability: Set 18 management KPIs across environment, social, and governance categories focused on climate change action, work-life balance promotion, and governance strengthening; will continue to disclose progress against these targets.
  • Osaka-Kansai Expo 2025: Completed construction of the large-scale timber Czech Pavilion, aligning with the company's growing focus on timber construction. Secured naming rights to the pavilion's central multi-purpose hall (named "Daisue Hall") and completed multiple PR events leveraging the space, driving significant improvements in brand recognition.
  • Digital transformation: Entered into a global partnership with FPT Software Japan (the Japanese arm of Vietnam's largest IT firm) to co-develop construction DX systems, co-exhibit at industry exhibitions, and market the developed solutions to other construction firms.
  • Shareholder return: Introduced DOE (Dividend on Equity) as a new performance metric starting in the 2025 March fiscal year, with a core policy of maintaining a total payout ratio of 50% or higher and a DOE of 4.0% or higher.

The transcript does not provide separate absolute financial results or revenue contribution percentages for individual product/operating segments. It only notes that the company operates a core general construction business covering condominiums, offices, hotels, logistics warehouses (including growing refrigerated/frozen warehouses), civil engineering, and renewal/renovation, with 4 consolidated group subsidiaries: Daisue Techno Service Co., Ltd. (real estate management, human resources services, insurance agency), Yasuragi Co., Ltd. (home-visit nursing care), Kojimagumi Co., Ltd. (specialized rock-splitting technology), and Kawanishi Civil Engineering Co., Ltd. (public civil engineering works). From fiscal 2022 March to September 2025, total order backlog and net sales have grown steadily driven by larger average project size, and operating profit has improved sequentially from the prior period.

• For the 2026 March fiscal year (full year), the company guides: 136.0 billion yen in order value, 101.0 billion yen in net sales, and 5.1 billion yen in operating profit. This represents a 5-year acceleration of the original mid-term plan target of 100.0 billion yen+ net sales and 5.0 billion yen+ operating profit (originally targeted for 2031 March fiscal year), which the company now expects to achieve in 2026 March fiscal year.
• The 2026 March fiscal year full year dividend guidance has been raised from the initial forecast by 66 yen, to an annual dividend of 174 yen per share.
• The company is currently reviewing its mid-term plan quantitative targets in light of stronger-than-expected performance, with PBR already reaching ~1.6x as of the end of December 2025 (exceeding the original target of over 1x PBR). The updated targets will be disclosed no later than the full year earnings announcement.
• The company maintains that its current operating structure ensures sufficient profit is secured at the time of order intake, with full price pass-through of earlier construction material cost increases now complete, creating a stable foundation for ongoing profitability.

• The construction industry faces persistent structural labor shortages and declining industry popularity, creating ongoing headwinds for talent recruitment, even with the company's aggressive compensation and recruitment initiatives.
• Two to three years ago, the company faced material plan misses due to rapid spikes in construction material and input prices, though this issue has been resolved via full price pass-through to clients as of 2026.
• Large-scale major development projects such as Osaka's subcenter redevelopment have not yet been finalized, so their impact on future order activity remains uncertain.

Q: What is the rationale for the slightly self-deprecating tone of Daisue Construction's new TV CM, and what are its goals?

A: The company name Daisue is often misread (many misread it as Daimatsu or Osue), so the memorable tone is designed to help the market learn the correct name and pronunciation, especially since the company is based in Osaka. A core secondary goal is supporting talent recruitment, so I established a public relations department when I became CEO to prioritize these outreach efforts. The CM has already driven improved recognition in Kansai, where it has aired, and will go to national broadcast in January.

Q: Why did you choose to pursue TSE Prime Market listing in 2021 when the company did not initially meet the market's quantitative thresholds (10 billion yen+ circulating market cap, 200 million yen+ average daily trading value), and what internal changes did this drive?

A: We saw Prime Market listing as a way to earn greater corporate credit trust, and it was a necessary step to attract younger new talent to the firm, even though it was a big challenge. This decision actually forced us to implement all the necessary reforms to meet the requirements, and it ended up becoming a major catalyst for growth, as it allowed us to roll out bolder strategies and policy changes that we would not have otherwise implemented.

Q: Why is the company able to achieve its original 2031 mid-term targets 5 years ahead of schedule?

A: The primary driver is all the reforms and initiatives we implemented to meet Prime Market listing requirements, which have now become our core growth engines. In addition, we have deliberately shifted from our historical defensive culture to an offensive growth culture, with targeted new initiatives like focusing on fast-growing refrigerated/frozen logistics warehouses and actively pursuing larger-scale projects that we had not competed for historically. These initiatives have all delivered results and driven our accelerated growth.

Q: What is the current state of selective order intake and gross margin conditions for new orders?

A: Two to three years ago, we had some underperformance due to rapid spikes in material and construction input prices, but now price pass-through is fully complete. We now have a fully established system where we only start construction after securing sufficient margin at the order stage, so profitability is stable.

Q: When will the updated mid-term plan be disclosed to investors?

A: We expect to disclose the updated plan no later than the full year earnings announcement.

Q: What initiatives do you have for talent recruitment beyond TV commercials?

A: The construction industry as a whole is facing severe labor shortages, so we have worked hard to improve compensation: we implemented a 16.7% average base salary increase in April 2025, and we raised starting salaries for new graduates to match the level of major general contractors, which is a core part of our recruitment strategy.

Q: What led to your award of the Czech Pavilion contract for Osaka-Kansai Expo, and what impact has this project had on your brand recognition?

A: Our predecessors worked on a pavilion for the 1970 Osaka Expo, so as an Osaka-based company, we had a strong desire to participate in this Expo as well. The project also aligned perfectly with our new strategic focus on expanding large-scale timber construction, so we were very happy to take on the project. It has received a lot of media coverage, and it has been a very meaningful boost to our brand recognition; it is also a very memorable project that will go down in our company's history.

Q: Do you have any plans for additional M&A or adding new group companies going forward?

A: We previously acquired Kojimagumi and Kawanishi Civil Engineering to revive our civil engineering business, which I had a personal goal of bringing back after we shrank that business over a decade ago. That acquisition successfully revived our civil engineering segment. In the current environment, talent is hard to source, but we need to continue expanding our business, so we plan to actively pursue additional M&A opportunities going forward.

Q: What is your participation status and outlook for Osaka subcenter redevelopment and the Osaka IR project after Expo?

A: For subcenter redevelopment, the project plans are still not finalized, but if the development moves forward, it will create a very significant increase in order activity in the Kansai region, and we plan to actively pursue participation. For Osaka IR, construction is already underway, and we are leading construction of Block C as part of a joint venture with multiple other construction firms. It is a very large-scale project, with a massive number of piling machines active on site, and we are currently working steadily toward the targeted 2031 opening.

Q: What was the biggest driver of your shift from a defensive to offensive corporate culture?

A: Part of it is my personal management style, but the biggest catalyst was the market restructuring that required us to choose whether to pursue Prime Market listing, which required us to become a company worthy of Prime listing. I also believe that standing still and only focusing on defense is not a viable strategy for long-term corporate survival; the mission of any company is to keep growing and generating profits, so that drove the shift.

Q: Why is condominium order growth so strong right now? Is it driven by more projects, larger projects, front-loaded ordering, or stronger inbound inquiry?

A: All of the factors you mentioned contribute to the current strong performance. The biggest change is that the average size per condominium project has increased significantly in recent years. We have also had some front-loaded ordering, and clients are now adjusting their ordering schedules to align with our construction capacity, so we expect to continue to secure stable order volume going forward.