NCN (7057) Q1 FY2027 Earnings Report: Outlook Driven by Growing Order Backlog and Rapid Expansion in Environmental Design

1. NCN's Business Structure and Market Uniqueness

NCN Co., Ltd. (Securities Code: 7057) is a platform company that solves challenges in the wooden construction industry through a systematic approach, guided by its mission to "popularize safe and secure wooden structures in Japan" and "create a mechanism to provide homes with lasting asset value."

The company's core business revolves around the supply of its proprietary seismic wooden construction system, "SE Kōhō," and its structural calculation services. To address long-standing issues in Japanese wooden housing—such as "lack of transparency in seismic resistance (due to the exemption of structural calculations under Article 4 of the Building Standards Act)" and "low resale value of used homes"—the company provides an integrated solution. This includes conducting structural calculations for every building , utilizing high-strength engineered wood and SE hardware , and digitizing construction history and performance warranties (e.g., BIM).

Currently, the company maintains a network of 635 registered construction partners nationwide and has diversified its business into large-scale wooden construction (non-residential), environmental design (energy-saving calculations, etc.), and the DX sector.

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2. Q1 FY2027 Consolidated Financial Highlights

In the first quarter (1Q) of the fiscal year ending March 2027, consolidated net sales exceeded those of the same period last year. However, profit levels reflected seasonal factors and upfront investments, consistent with the previous year.

• Net Sales : 1,812 million yen (up 23 million yen / +1.3% YoY)
• Gross Profit : 505 million yen (up 23 million yen / +4.9% YoY)
• SG&A Expenses : 547 million yen (up 22 million yen YoY)
• Operating Profit : -41 million yen (essentially flat/slightly improved from -42 million yen in the same period last year)
• Ordinary Profit : -46 million yen (improved by 22 million yen from -69 million yen in the same period last year)
• Net Profit Attributable to Owners of Parent : -37 million yen (improved by 22 million yen from -60 million yen in the same period last year)

With the increase in net sales and gross profit, the deficit at the ordinary profit and net profit levels has narrowed compared to the same period last year.

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3. Trends by Business Segment and Overview

The company's sales structure is broadly divided into the "Wooden Seismic Design Business" and "Others," encompassing four primary fields.

[Significance and Background of the Slide Above]

This slide is the most critical data point, providing an overview of NCN's latest business portfolio composition and growth rates by segment. While the core Housing segment (1,167 million yen in sales, +2.3% YoY) forms a stable foundation, the Large-scale Wooden Construction segment (478 million yen in sales, -10.3% YoY) experienced a temporary decline. Conversely, the Environmental Design segment (110 million yen in sales, +26.9% YoY) , which benefits from national policy tailwinds, and the DX/Other segment (55 million yen in sales, +109.5% YoY) , which is advancing BIM deployment, are showing rapid growth. These figures clearly illustrate the shift from a single-source housing material supplier to a diversified wooden construction solutions provider.

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4. Deep Dive by Segment

(1) Housing Segment: Strong Leading Indicators and Accumulation of Order Backlog

In the housing segment, the number of structural calculations performed , a leading indicator for future sales, grew significantly to 258 units (+22.9% YoY) . Driven by stricter building permit requirements, market demand for structural calculations remains extremely robust.

However, the number of SE Kōhō shipments , which directly correlates with net sales, was 197 units (-5.3% YoY) , falling below the same period last year.

[Significance and Background of the Slide Above]

This slide is important because it logically explains that the year-on-year decline in SE Kōhō shipments in 1Q is "not due to a decline in demand, but rather to delays in building permit applications and extended project timelines caused by external factors such as the Naphtha shock." The lead time from structural calculation order to SE Kōhō shipment has extended by approximately 35 days, from 120 days to about 155 days , causing a delay in shipment and revenue recognition. As a result, the unshipped order backlog has increased to 518 units . This is a record high, serving as strong evidence that demand remains firm and supporting the outlook for revenue contributions from the second quarter onward.

(2) Large-scale Wooden Construction (Non-residential) Segment: Temporary Slump Due to Project Timing

Sales in the large-scale wooden construction segment were 478 million yen (-10.3% YoY) . Although the number of SE Kōhō shipments increased to 33 units (+10.0% YoY) , the decline in revenue was primarily due to a higher proportion of projects with lower average unit prices compared to the same period last year, as well as the project cycle timing at the subsidiary, Suiho Co., Ltd. Nevertheless, the project pipeline remains strong, leveraging technical advantages such as the need for wooden large-scale buildings to achieve a decarbonized society and the sales of non-combustible wood "Moese."

(3) Environmental Design and DX Segments: The Second Pillar Driving High Growth

The Environmental Design segment, which handles energy-saving calculations and BELS application support, showed significant growth with 110 million yen in sales (+26.9% YoY) and 1,160 units of energy-saving calculations (+19.6% YoY) .

[Significance and Background of the Slide Above]

This slide demonstrates that the Environmental Design segment is following a steady growth curve across all areas: detached houses, multi-family housing, and renovations. Strengthened environmental regulations, such as the mandatory energy-saving compliance for buildings scheduled for 2025, are acting as a tailwind, and partnerships with major developers and housing sales companies are yielding results. The segment maintains an upward trend in both sales and calculation volume, establishing itself as a new high-profit source for the company.

Furthermore, in the DX and Other segment , the company achieved more than double the growth compared to the same period last year, with 55 million yen in sales (+109.5% YoY) , driven by the provision of BIM data creation/storage services (KINO BIM) and high-quality architectural space simulations (MAKE ViZ).

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5. Group Synergy and Mid-to-Long-Term Growth Strategy

NCN is building an ecosystem through collaboration with various group companies (9 companies in the NCN Group) rather than relying on standalone operations.

• MUJI HOUSE Co., Ltd. (Joint venture with Ryohin Keikaku): Expansion of "MUJI Houses," and entry into apartment renovations and store construction.
• Suiho Co., Ltd. : Construction of large-scale wooden buildings and supply of advanced special processing technology.
• N&S Development Co., Ltd. : Development and construction support for subscription-based second homes like "SANU Apartment" in joint venture with Sanu Inc.

By combining the strengths of the 635-company nationwide registered construction partner network with these group companies, NCN is enhancing its value as a "Wooden Construction Platform" that provides end-to-end support in digital assistance, structural design, energy-saving design, and material supply.

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6. Summary and Future Focus

Key takeaways from the Q1 FY2027 earnings report are as follows:

1. Overall Performance : Q1 consolidated net sales reached 1,812 million yen , an increase year-on-year, with improvements seen across various profit levels.
2. Housing Segment Potential : Although SE Kōhō shipments temporarily stalled in 1Q due to extended lead times (approx. 155 days) caused by permit application delays, the leading indicator of structural calculation shipments surged by +22.9% . The accumulated order backlog (518 units) is expected to contribute to revenue from 2Q onward.
3. Contribution of Diversified Businesses : The Environmental Design segment (+26.9% in sales) and DX segment (+109.5% in sales) have grown significantly, proving that the growth model capturing the trends of national policy and legal revisions (mandatory energy-saving, review of Article 4 exemptions) is functioning effectively.

Moving forward, the smooth transition of the accumulated order backlog into shipments and the progress in securing projects in the non-residential, environmental design, and DX sectors will be the key points to monitor for future performance.