COSMOS INITIA Co.,Ltd. Q2 FY2026 earnings call

• Strategic Planning

  • The ongoing Medium-Term Management Plan 2026 (originally a 5-year plan) remains unchanged, with the company continuing to target achieving all goals one year early, by the end of the current fiscal year.
  • A new 10-year long-term management strategy and the next 3-year medium-term plan are under development, with publication scheduled for May 2026. Key focus areas for the new strategy include: creating new businesses and strengthening existing businesses via "Next GOOD" innovation; building a robust financial and earnings base; enhancing human capital and technology utilization; improving corporate value and expanding stakeholder returns.

• Shareholder Return

  • The full-year 2026 dividend per share forecast remains unchanged at 38 yen, including an 11 yen interim dividend. The company will continue to actively expand shareholder returns via consistent dividend increases alongside earnings growth.

• Operational Highlights by Segment

  • Residential: New condominium contracts are 76.9% complete (in line with historical averages), completed inventory has declined year-over-year, and gross margin remains at a high level. The first Vietnamese development project TTAVIO has achieved ~90% sales for its first tower, with second tower pre-sales launched. Both new-build and renovation condominium brands have been rebranded, with renovation shifting to central Tokyo, high-price segments, achieving improved gross margin; the business has set a 30% target for energy efficiency certification, extended equipment warranties to 15 years, and launched a new customer service app.
  • Solution: The MID POINT shared office brand has opened two new locations, with 3 more planned; the second nears shared residence has launched leasing; the 8th Cerelage co-investment real estate offering has launched; a new asset management subsidiary has been established to expand this business line.
  • Accommodation: MIMARU, the company's flagship apartment hotel brand, maintains a strategy of prioritizing average rate growth over occupancy. A temporary dip in occupancy from July earthquake-related reports recovered by August, and the business maintains a high overall occupancy level, with over 90% of guests from overseas. MIMARU Tokyo Ginza EAST won 2nd place in the 2025 Traveler's Choice Best of the Best Hotels Japan ranking, marking 7 consecutive years of selection. The business targets 3,000 operating rooms by 2030: 250 rooms across 4 properties are confirmed to open, 530 additional rooms are secured, including a 130-room property (the brand's largest to date) planned for Osaka's Toganocho. Expansion will prioritize Tokyo and Osaka (high demand growth areas), with regional expansion also under consideration, using both managed and owned development models.
  • Construction: The business has completed a range of office interior and renovation projects, with 5 projects winning the A' Design Award.

• Sustainability and Digital Initiatives

  • The company focuses sustainability efforts on three core areas: creating new real estate value, building urban environments that support healthy youth development, and creating inclusive workplaces. Key ongoing initiatives include a new dog-friendly accommodation facility Ruff-Laugh opening in Spring 2026, the Next Generation Challenge program investing 2% of net income in youth and environmental projects, and workplace initiatives to promote diversity and skills development.
  • Digital transformation: The core system migration to a new platform has been completed, a company-wide generative AI infrastructure has been deployed, and the business will continue to invest in digital capabilities and talent to drive process efficiency.

1. Residential Business: 2026年3月期第2四半期 revenue of 20.6 billion yen, year-over-year revenue growth, year-over-year operating profit decline, driven by lower sales share of higher-margin new condominiums. Full-year 2026 guidance: revenue of 53.5 billion yen (year-over-year growth), operating profit of 1.5 billion yen (year-over-year growth), with growth supported by increased renovation condominium sales and handovers of Australian development projects.
2. Solution Business: 2026年3月期第2四半期 revenue of 22.8 billion yen, operating profit of 1.13 billion yen, year-over-year revenue and profit decline driven by lower revenue and profitability from income-generating real estate sales. Full-year 2026 guidance: revenue growth year-over-year, operating profit of 3.6 billion yen (year-over-year decline), with lower profitability driven by falling share of new development sales and rising construction costs. The rental management sub-segment maintains high occupancy (below 3%) with rising rents despite declining contracted units.
3. Accommodation Business: 2026年3月期第2四半期 revenue of 18.0 billion yen, operating profit of 6.65 billion yen, year-over-year revenue and profit growth driven by rising average daily rates and occupancy for MIMARU apartment hotels, plus higher revenue and improved profitability from hotel property sales. Full-year 2026 guidance: revenue of 28.8 billion yen, operating profit of 8.9 billion yen, year-over-year revenue and profit growth.
4. Construction Business: 2026年3月期第2四半期 revenue of 3.5 billion yen, operating loss of 0.23 billion yen, year-over-year revenue and profit decline driven by lower orders. Full-year 2026 guidance: revenue of 11.0 billion yen, operating profit of 0.2 billion yen, year-over-year revenue and profit growth.

• Full-year 2026 consolidated financial guidance remains unchanged from the May 2025 announcement: revenue of 152.0 billion yen, operating profit of 11.0 billion yen, ordinary profit of 9.6 billion yen, net income attributable to parent shareholders of 6.5 billion yen.
• Progress against full-year guidance is on track: 42.7% of full-year revenue and 59.9% of full-year operating profit have been achieved in the first half.
• The company maintains its target of achieving the Medium-Term Management Plan 2026's final year financial goals one year ahead of schedule, by the end of the current 2026 fiscal year.

• Residential Business: Rising interest rates may reduce buyer demand, rising construction costs may compress profitability. In Australia, rising construction costs, stricter permitting, and widespread small construction company failures have increased completion risk for large new projects, requiring cautious assessment of new projects despite solid Sydney area housing demand.
• Solution Business: Requires ongoing monitoring of interest rate and construction cost movements, similar to the residential segment.
• Accommodation Business: Labor shortages may increase operating costs; a global economic slowdown driven by US high tariff policy and exchange rate fluctuations could reduce inbound demand. Chinese travel restrictions have caused some booking cancellations, and there is risk of market disruption if competitor hotels cut prices significantly, though current direct impact is limited.
• Construction Business: Requires ongoing monitoring of raw material prices and labor cost movements.

Q: What impact has China's travel advisory for Japan had on MIMARU's performance? / A: Cosmos Inishia confirms a small decline in new bookings and some cancellations from China. Combined Chinese and Hong Kong guests only account for ~10% of total MIMARU guests, so direct impact is currently limited. Growing inbound demand from North America, Europe and Australia is expected to offset cancellations. The main risk is potential market price disruption if China-dependent competitors cut rates sharply, and the company will continue monitoring future developments.

Q: What is the expansion progress for MIMARU toward the 2030 3,000-room target? / A: Expansion is progressing on track: a 130-room property in Osaka's Toganocho is confirmed to open, with ~400 additional rooms already secured for future openings. Beyond physical expansion, the company is also investing in guest experience, including expanding the same-day luggage delivery service to make travel more convenient for inbound tourists. New projects will be announced as soon as they can be disclosed.

Q: How will Cosmos Inishia differentiate MIMARU amid growing competition in the apartment hotel segment? / A: The company acknowledges that growing new entry into the segment is likely. Cosmos Inishia was an early entrant in the Japanese apartment hotel market, and the MIMARU brand already has strong brand recognition among international travelers. It has also established a solid foothold with significant market share in key markets Tokyo, Osaka and Kyoto, and will leverage these existing strengths to continue expanding the business and strengthening the brand.

Q: Will the company maintain its focus on overseas real estate development, centered on Australia? / A: The company currently has ongoing development projects in Australia, Vietnam, and value-add projects in North America. The company will continue to carefully monitor changing market conditions including interest rate volatility and permitting challenges in Australia when evaluating future overseas expansion opportunities, and will proceed with new projects cautiously.