S E Corporation Q4 FY2026 earnings call

Company Overview & Core Mission

• Founded in 1967, SE Inc. is a B2B infrastructure-focused manufacturer with 7 group subsidiaries and 573 employees, listed on the Tokyo Stock Exchange Standard Market.
• The company's core mission is to contribute to the construction and reinforcement of Japan's social infrastructure using proprietary SEEE concrete prestressing technology, with core products serving disaster prevention and infrastructure renewal needs.

Core Business & Competitive Advantages

• The company holds very high domestic market share (~60%) for flagship products SEEE Ground Anchor and falling bridge prevention devices, driven by early-stage design integration with public clients, long-term technical trust, and continuous custom product improvement for on-site needs.
• Stable demand for existing core products is expected through at least 2030, driven by aging high-growth era infrastructure, increasing disaster frequency/severity, and sustained government budget for national land resilience and infrastructure renewal. The market is shifting toward higher share for repair/reinforcement work over new infrastructure construction.

Growth Strategy

• Overall strategy: Allocate profits from strong existing core businesses to develop new revenue pillars through new business R&D, under the 2030 Vision "Engineering With You."
• Mid-term plan (2023-2025) positioning: This period is focused on consolidating existing business foundations and seeding future new businesses, with next-phase growth expected after this mid-term plan.
• Key new business initiatives:
  • Zero-carbon domestic power generation business: Development of CO2-free, radiation-free power generation using 100% domestically sourced raw materials, focused on small/medium-scale disaster-resilient generation near consumption centers. Targets commercial launch around 2028, with concentrated R&D investment across the 2023-2025 and 2026-2028 mid-term plans.
  • ESCON ultra-high strength fiber-reinforced concrete: Developed to address construction labor shortages, ESCON is lightweight, durable, cuts construction工期 to 50% and labor requirements to 33% compared to conventional concrete, with 5-6x higher strength. The company is currently expanding field adoption for large-scale highway bridge renewal projects.
  • BIM/CIM support service: The company has established a Vietnamese joint venture with Hanoi University of Civil Engineering to leverage Vietnamese technical expertise, providing BIM/CIM services to small/local Japanese firms that lack in-house digital skills, in line with Japanese government mandates for digital infrastructure design.

Shareholder Return

• The company maintains a stable dividend policy targeting 3.5% or higher return on equity (DOE), which insulates dividend amounts from annual earnings volatility, to maintain stable returns during the new business investment phase.

1. Construction machinery and materials manufacturing & sales: The largest segment, accounting for ~45-50% of total revenue (part of the ~90% combined revenue share with the construction materials segment). It produces core products including SEEE cables, SEEE Ground Anchors, falling bridge prevention devices, and other civil engineering steel/concrete products, with high (~60%) domestic market share for key products. It has seen growing revenue and profit contribution driven by strong demand from national land resilience and infrastructure renewal initiatives. 2. Building materials manufacturing & sales: The second-largest segment, together with the construction machinery and materials segment accounting for ~90% of total revenue and profit. It produces metal hardware for construction temporary work and interior work, and conducts steel frame manufacturing and assembly for buildings. Its revenue share has declined slightly recently relative to the construction-focused segment, but the absolute business level remains stable, with geographic diversification and selective order acceptance reducing volatility. 3. Construction consulting: It operates primarily through a joint venture with a French construction consulting firm, focusing on ODA infrastructure projects in Asia and Africa, and has recently increased efforts to win BIM/CIM digital consulting orders. This segment is a smaller contributor to overall revenue. 4. Repair and reinforcement construction: It focuses on inspection, survey and construction services for bridge and tunnel repair and reinforcement. It is a growing small segment, with expected market expansion driven by ongoing national land resilience and highway renewal demand.

• For FY2025 March period (full year), management revised the initial published guidance: lower projected revenue than the original May 2024 forecast, due to delayed Noto Peninsula reconstruction projects after additional September 2024 heavy rains pushed reconstruction demand to future periods. Profit is projected to be higher than the original forecast, as large R&D expenses originally planned for FY2025 were shifted to the next fiscal year, lowering planned selling, general and administrative costs.
• Existing core business demand is expected to remain stable and continue through at least 2030, driven by ongoing infrastructure renewal and national land resilience policy.
• New businesses (power generation, ESCON, BIM/CIM) are not expected to contribute material earnings until after the current 2023-2025 mid-term plan, with commercial launch of the power generation business targeted for 2028.

• Annual earnings and revenue are subject to significant volatility driven by external factors: the presence/absence of very large new bridge construction projects, the timing and scale of disaster reconstruction work, project delays from labor shortages in the construction industry, and project delays from disaster-related disruptions to public works planning.
• Material cost, labor cost, and transportation cost inflation has pressured margins; while price pass-through has been largely successful to date, private-sector work in the building materials segment faces more competitive pressure that makes full price pass-through more difficult.
• The company's current PBR is 0.7-0.8x, below 1x, and low trading liquidity for the stock limits price discovery; current PBR improvement efforts are focused on increasing IR outreach to communicate the company's value to the market, with no guarantee of near-term improvement.

Q: Management confirms SEEE Ground Anchor and falling bridge prevention devices hold ~60% domestic market share. How has SE maintained this high share, and what growth potential exists for existing infrastructure-related business? / A: High market share is maintained by focusing on early-stage design integration with public clients and design consultants, building long-term trust through proven performance, and continuously adapting products to unique on-site project requirements. Management expects steady sustained demand for existing core products through at least 2030, driven by ongoing national government investment in infrastructure renewal and resilience, as aging post-war infrastructure requires continuous repair and reinforcement. The company is upgrading its sales and production systems to capture this steady demand.

Q: How is SE addressing inflation of raw material and other costs, and how successful is price pass-through to customers? / A: Price pass-through is easier for the public-works focused construction materials segment than the private-sector focused building materials segment. Management notes that proactive early efforts to pass through cost increases have been largely successful across both segments, especially for public sector clients, so cost inflation has not materially impacted profit to date. While private-sector construction work faces more intense competition that makes pass-through more challenging, the impact has remained manageable.

Q: How is SE working to reduce annual earnings volatility, given that large projects and disaster demand create large swings in performance? / A: Volatility from large projects, disaster timing, and construction delays is inherently driven by external factors that cannot be fully eliminated. SE has reduced volatility through proactive diversification: expanding across public/private, civil/building, new construction/repair, and domestic/overseas markets through targeted M&A since 2000, which has materially smoothed overall earnings performance compared to the historical single-segment business.

Q: What is the timeline and expected impact of Noto Peninsula reconstruction demand on SE's earnings? / A: The Noto Peninsula earthquake caused extremely widespread damage across coastal and mountain areas, and reconstruction planning was further delayed by heavy rains in late 2024, so demand that was originally expected for the second half of FY2025 has shifted to the second half of FY2026 and FY2027. Management expects material product demand from reconstruction in these future periods, but has not released specific volume or revenue forecasts as of the call.