First Corporation (1430): FY2026 May Earnings Deep Dive Report – Record Profits and Smooth Start to "First VISION 2031"

First Corporation (1430) reported its financial results for the fiscal year ending May 2026, demonstrating a strong start to its mid-to-long-term vision "First VISION 2031." While net sales decreased, the company achieved record-high profits , highlighting significant improvements in profitability and a commitment to shareholder returns, which bodes well for its future growth strategy.

1. FY2026 May Performance Highlights and Key KPIs

For the fiscal year ending May 2026, net sales decreased by 15.7% year-on-year to 36.4 billion yen , primarily due to a reactionary decline in real estate sales and joint venture income. However, operating profit increased by 12.3% to 2.8 billion yen, and net profit attributable to parent company shareholders rose by 12.8% to 1.8 billion yen , both marking record highs. This achievement was largely driven by an improved gross profit margin on completed construction work and an increased gross profit margin on real estate sales. Key KPIs show that order backlog at the end of the period stood at 28.3 billion yen (down 20.7% year-on-year) . This reduction is attributed to the smooth progress and completion of construction projects during the current period. The company plans for new orders of 35.0 billion yen for the next fiscal year (up 73.8% year-on-year) . The gross profit margin on completed construction work significantly improved from 8.0% to 11.5% , and ROE remained high at 18.0% . Dividends were also increased to 48 yen per share annually (up 6 yen) , enhancing shareholder returns.

2. Unique Business Model and Market Environment

First Corporation operates within a market characterized by solid, yet polarizing, condominium demand in the Tokyo metropolitan area and a deepening labor shortage in the construction industry . The increasing scarcity value of skilled labor and construction capacity serves as a key source of the company's competitive advantage. The company's strength lies in its unique integrated business model, encompassing "land acquisition," "construction," and "condominium sales." This model allows the company to secure up to three revenue opportunities from a single project. The synergy between "construction capability" and "land information" is a core competitive advantage, enabling the company to strengthen its specialized order-taking through build-to-order (造注方式) and joint venture expansions.

3. Progress of Mid-to-Long-Term Vision "First VISION 2031"

First Corporation has set an ambitious mid-to-long-term vision, "First VISION 2031," aiming for net sales of 100 billion yen and an operating profit margin of 8% or more by May 2031. This vision is structured in two phases: Phase 1 (Foundation Building) and Phase 2 (Evolution & Leap). The fiscal year ending May 2026 marked the successful first year of this vision. The company has made a smooth start in its initial year, leading to an upward revision of the operating profit forecast for May 2028 from 3.5 billion yen to 4.1 billion yen . This revision reflects the company's confidence in achieving both profitability improvements and growth investments. A planned 100 billion yen investment in human capital further underscores its strong commitment to long-term growth.

4. Trends in Sales and Profitability and Structural Changes

The historical performance trends are as follows: This chart clearly illustrates the trends in net sales, operating profit, and their respective margins over the past several periods. While net sales decreased in May 2026 after a significant increase in May 2025, it is crucial to note that operating profit has steadily increased, and the operating profit margin has significantly improved from 6.0% to 8.0% . Notably, completed construction work reached a record high of 27.2 billion yen, and the gross profit margin on completed construction work substantially improved from 8.0% to 11.5%. This demonstrates the company's success in selecting highly profitable projects and implementing efficient construction management , indicating a management strategy focused on profit quality rather than merely pursuing sales volume .

5. Segment Analysis: Construction Business Surge

The Construction Business segment achieved net sales of 27.2 billion yen (up 20.2% year-on-year) and segment profit of 3.0 billion yen (up 74.5% year-on-year) in May 2026, marking a record high profit. The segment profit margin also significantly improved to 11.2%, indicating success in both price pass-through and operational efficiency . The order environment remains robust, ensuring a steady pipeline for future periods. This performance is a testament to the strong condominium construction demand in the Tokyo metropolitan area and the company's highly regarded construction capabilities.

6. Order Backlog and Future Revenue Visibility

Although the order backlog at the end of the period decreased to 28.3 billion yen, this was due to the smooth progress and completion of construction projects in May 2026. The company plans for new orders of 35.0 billion yen for the next fiscal year (May 2027) , actively accumulating new orders with a planned order digestion ratio of 20%. First Corporation aims to expand its construction capacity based on the progress of ongoing projects, targeting 35.0 billion yen in new orders for the fiscal year ending May 2027 . The specific project pipeline is detailed below: This slide presents a list of major ongoing construction projects , detailing each property's name, number of units, floors, and scheduled delivery date. Crucially, the progress of these projects creates future construction capacity . As projects are completed and handed over, the company can progressively accept new orders, forming a foundation for sustained growth. This concrete project list provides investors with transparency into the company's operational activities and assurance that future revenue streams are steadily secured.

7. Segment Analysis: Strategic Development of Real Estate Business

The Real Estate Business segment reported net sales of 8.1 billion yen (down 48.1% year-on-year) and segment profit of 1.1 billion yen (down 49.0% year-on-year) in May 2026, with both sales and profit decreasing due to the absence of large-scale projects from the previous period. However, the segment profit margin improved to 12.6% from 10.8% in the prior year, indicating a focus on higher-profitability projects. The acquisition of real estate for sale is progressing smoothly, ensuring a robust pipeline for future periods. The company is particularly focused on aggressive investment in development land supply projects , accumulating inventory and preparing materials for subsequent periods. Despite potential profit pressure from rising interest rates, the strategy prioritizes sustainable growth through continued proactive investment.

8. Financial Health and Shareholder Returns

First Corporation maintains a solid financial foundation. This slide presents key financial health indicators for the company: the trend of the equity ratio and ROE, along with the cost of equity (CAPM) . The equity ratio remains healthy at 34.5%, and net assets have steadily increased. Notably, ROE is maintained at a very high level of 18.0% . This clearly demonstrates the company's effective capital utilization in creating shareholder value. Furthermore, with the cost of equity estimated at around 6-7%, ROE significantly exceeding this figure underscores the company's high capital efficiency and strong capability in creating corporate value . The company's increase in annual dividends to 48 yen also reflects a proactive stance on shareholder returns in line with profit growth.

9. Key Strategies for Growth and Human Capital Investment

To achieve its mid-to-long-term vision, First Corporation is advancing the following four strategic pillars:

1. Strengthening Human Capital and Organizational Foundation: To support future business expansion, the company continues to recruit and develop talent, aiming to achieve a 300-employee structure . New graduate and mid-career hiring are being promoted, with the number of employees (non-consolidated) increasing to 179, exceeding the plan. Efforts are also underway to improve qualification acquisition rates and reduce employee turnover.
2. Expanding Build-to-Order (造注方式) and Joint Ventures: The company is promoting the acquisition of build-to-order and joint venture projects to diversify revenue opportunities and improve profit margins.
3. Enhancing Productivity through DX Promotion: By acquiring DX certification and expanding the utilization of digital technologies, the company aims to improve operational efficiency, productivity, and quality.
4. Building a Growth Foundation Leveraging Construction Capability and Land Information: The company is promoting the acquisition of specialized orders and land information gathering, further strengthening its unique business model to enhance competitive advantage.

These strategies are crucial for the company's sustainable growth and profitability improvement. Particularly, aggressive investment in human capital is key to overcoming the labor shortage challenge in the construction industry and securing long-term competitiveness.

Conclusion

In the fiscal year ending May 2026, First Corporation, despite a decrease in net sales, achieved record-high profits and maintained high profitability and ROE . This outcome is a result of its unique business model and efficient management strategies, marking a smooth start to its mid-to-long-term vision "First VISION 2031." Against the backdrop of robust condominium demand in the Tokyo metropolitan area and structural challenges in the construction industry, the company's business model, leveraging "construction capability x land information," is expected to continue demonstrating strong competitive advantages . With aggressive human capital investment, DX promotion, and the expansion of build-to-order and joint venture projects, First Corporation is poised for sustained growth and enhanced corporate value. Its future developments warrant close attention.