MIRARTH HOLDINGS,Inc. Q4 FY2025 earnings call

Overall 2025 March Fiscal Year Performance

• Total consolidated revenue: 196.523 billion yen, net profit: 8.207 billion yen, marking year-over-year growth in revenue and net profit. Operating profit was 14.364 billion yen and ordinary profit 12.427 billion yen, which declined year-over-year and missed internal plans due to higher-than-expected SG&A.
• SG&A increased by 2.8 billion yen year-over-year, driven by 0.9 billion yen in higher advertising for 500 additional units for sale, 1 billion yen in higher personnel costs from headcount increases and base pay improvements, and 1.1 billion yen in higher consumption tax related to property purchases.
• Balance sheet: Net equity increased significantly following a June 2024 public offering; borrowings increased by 18.4 billion yen, in line with growth in work-in-progress real estate for sale.

New 3-Year Mid-Term Management Plan (2026-2028 March Fiscal Years)

• Corporate Purpose & Long-Term Vision: The company maintains its purpose: "Designing a sustainable environment to create a happy future for people and the planet," established with its 2022 rebranding from Takara Leben to MIRARTH. Its 2030 long-term vision is "Be a treasure to local communities," which is being embedded across the organization.
• Strategic Roadmap: Phase 1 (previous 4-year mid-term plan) completed structural transformation, including the holding company restructuring, purpose/vision development, energy business diversification, and capital raising via public offering. Phase 2 (current mid-term plan) focuses on balanced growth investment, building a lean balance sheet, maintaining appropriate leverage, and actively investing in both real estate and expanded energy business investment. Phase 3 (post-2028) will see the results of Phase 2 investments, with a target of over 22 billion yen in operating profit.

Key Financial Targets & Governance

• Target financial metrics: Equity ratio ≥ 23%, LTV < 65%, D/E ratio < 3x, ROE ≥ 9% in Phase 2, rising to ≥ 10% in Phase 3.
• 2028 March final year net profit target: 9 billion yen (new all-time high). The company increased the dividend payout ratio target range from 30-35% to 35-40% with a no-dividend-cut policy starting from the second plan period.
• Capital allocation: Total available capital of ~60 billion yen over the 3-year plan, including 21.5 billion yen from operating cash flow, 6 billion yen from asset turnover, and 32.5 billion yen in net external financing. 10 billion yen will go to shareholder dividends, and 50 billion yen allocated to growth investment: 25 billion yen to real estate (including 5 billion yen for regional revitalization projects), 5 billion yen to hotels, and 20 billion yen to energy.

Sustainability & Human Capital Strategy

• Sustainability priorities: 15 material issues identified, with a target of net zero greenhouse gas emissions by 2050. Priorities include accelerating decarbonization, expanding renewable energy supply, advancing sustainable community development, improving employee well-being, and strengthening governance and risk management.
• Human capital is identified as a core strategic priority for value creation, with formal targets and KPIs detailed in the integrated report.

Business Segment Strategies

• Real Estate: In a market with constrained Tokyo central land supply, persistently high construction costs, and rising prices/rent, the company will strictly vet viable land parcels, diversify geographic exposure across Japan, and maintain a stable land bank. New condominium development will expand joint ventures to分散 risk and costs. Liquidation will increase short-cycle turnover and expand midsize asset sales across major cities. New detached homes and renovation/resale will be expanded as short-cycle businesses to complement longer condominium project timelines. Rental and management will be expanded for stable recurring income, with active rent re-pricing and service quality improvements. Overseas real estate entered in Phase 1 will move to a harvest/exit and selective reinvestment phase. Hotel operations will accelerate development of focused-service hotels, targeting 1 billion yen in operating profit.
• Energy: The renewable energy market is expected to grow strongly through 2030. The company will diversify generation sources beyond existing solar to add wind, biomass, and energy storage, targeting 1.7 billion yen in operating profit and 7 billion yen in EBITDA by 2028. It is accelerating PPA-based solar development and preparing for full-scale commercialization of energy storage, which is expected to be a major new business line. In Cambodia, the integrated cashew business (cashew nuts for food, cashew shell oil for fuel, and residual biomass for power generation) is progressing, with cashew nuts already receiving high market demand and R&D ongoing for fuel production.
• Asset Management: Targets AUM growth to 480 billion yen by 2028, supported by strengthened operations and internal growth of existing portfolio assets to increase fee income.

• Real Estate Business (core segment): Newly built condominiums delivered 2,339 units, with gross margin of 21.7% (0.9 percentage points above plan) due to strong contracted sales and limited discounting. Securitization/liquidation also posted higher gross profit than plan, beating initial targets, but higher-than-expected SG&A for pre-sales of future-period projects pulled down segment operating profit year-over-year. The segment targets stable operating profit of over 14 billion yen long-term.
• Energy Business: No facility sales were completed (a planned sale was canceled). Poor weather, cable theft losses, and unexpected repair costs reduced profitability this period. These are viewed as one-time costs, with no recurrence expected in future periods. The segment currently has low operating profit on a P/L basis due to high annual depreciation, but shows profitability above the real estate segment on an EBITDA (pre-depreciation) basis.
• Asset Management Business: Increased revenue and profit year-over-year, driven by successful formation of private equity funds. It hit its 300 billion yen AUM target in the 2025 March period, with targets of 480 billion yen by 2028 March and 700 billion yen by 2031 March.
• Other Business: Construction missed plan targets due to cost increases; hotel operations are on track to return to positive operating profit, supported by strong inbound demand and high occupancy rates.

• 2026 March fiscal year (first year of the new mid-term plan) guidance: 216.4 billion yen revenue, 15.5 billion yen operating profit, 12 billion yen ordinary profit, 8 billion yen net profit, which represents a slight year-over-year decrease in profit. Expected ROIC is 3.2%.
• For 2026 March, new condominium planned delivery is 2,820 units, with 48% (1,349 units) already contracted as of the start of the period, and 300 units already contracted for 2027 delivery. Completions and revenue recognition are concentrated in the second half, especially Q4, consistent with historical trends.
• Segment guidance for 2026 March: Real estate revenue and profit are projected to increase slightly; Energy is projected to return to growth, with the 2025 one-time costs (cable theft, bad weather) not included in projections; Asset management projects revenue and profit growth on the back of strengthened operations; Other businesses (led by hotels) are projected to return to positive operating profit.
• The 3-year mid-term plan holds 2026 and 2027 profit roughly flat, as energy business contributions are still growing, with 9 billion yen net profit (a new all-time high) targeted for the 2028 final year.

• External environment risks: Declining birthrate, aging population, shrinking labor force, persistent geopolitical and global economic uncertainty, and high/rising construction costs.
• Real estate market risks: Constrained supply of developable land in major urban centers, persistently elevated construction costs that pressure project margins.
• Energy business operational risks: Unplanned one-time costs from poor weather and asset theft (cable theft in 2025 hurt profitability), and PPA project development was slower than planned in the previous mid-term plan leading to missed targets. The 2025 cable theft and associated costs are classified as one-time, with no future recurrence expected, but the risk of future incidents remains.
• Other business risks: Construction business faced unexpected cost increases leading to missed 2025 profit targets.

Q: What countermeasures does the company have in place to prevent recurring cable theft at energy generation assets? / A: The full transcript of the exchange is cut off in the provided document, with only the question topic confirmed. Management was expected to outline partnerships with insurers (as referenced by a prior announcement with Mitsui Sumitomo Insurance) and operational security measures to mitigate future theft risk and associated financial losses. No further details of the answer are available in the provided transcript.