Daiwa House Industry Co., Ltd. :DWAHY-US: Earnings Analysis: Q4, 2017 By the Numbers : July 3, 2017

Daiwa House Industry Co., Ltd. reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of Daiwa House Industry Co., Ltd. – Toll Brothers, Inc., Sekisui House, Ltd. Sponsored ADR and Lennar Corporation Class B (TOL-US, SKHSY-US and LEN.B-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 8,790.25 million, Net Earnings of USD 524.72 million.
  • Gross margins widened from 18.62% to 20.72% compared to the same period last year, operating (EBITDA) margins now 11.58% from 9.26%.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 8790.25 7450.4 8795.93 7399.09 8241.39
Revenue Growth (%YOY) 6.66 27.93 27.1 30.08 17.4
Earnings (mil) 524.72 420.66 549.89 368.45 -138.7
Earnings Growth (%YOY) 478.3 90.11 32.67 6.23 -151.78
Net Margin (%) 5.97 5.65 6.25 4.98 -1.68
EPS 0.79 0.63 0.83 0.56 -0.21
Return on Equity (%) 4.64 3.69 4.64 3.33 -1.35
Return on Assets (%) 6.82 5.42 6.91 4.9 -1.99

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Market Share Versus Profits

Revenues History
Earnings History

DWAHY-US‘s change in revenue this period compared to the same period last year of 6.66% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that DWAHY-US is holding onto its market share. Also, for comparison purposes, revenues changed by 17.98% and earnings by 24.74% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 18.62% to 20.72% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 9.26% to 11.58% compared to the same period last year. For comparison, gross margins were 20.15% and EBITDA margins were 9.59% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

DWAHY-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 35.13, compared to last year’s level of 33.07 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 7.67% to 10.00% and (2) one-time items. The company’s pretax margins are now 8.50% compared to -2.26% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Daiwa House Industry Co., Ltd. engages in the provision of construction and real estate services. It operates through the following segments: Single-family Houses, Rental Housing, Condominiums, Existing Home Business, Commercial Facilities, Business and Corporate Facilities, and Other Businesses. The Single-family Houses segment sells single-family residences including house and lot packages. The Rental Housing segment comprises of rental housing development, construction, management, and operation as well as real estate agency services. The Condominiums segment develops, sells, and manages condominiums. The Existing Home Business segment offers renovation and real estate agency services. The Commercial Facilities segment develops, constructs, and manages commercial facilities. The Business and Corporate Facilities segment engages in the development and construction of logistics, manufacturing, medical, and nursing-care facilities as well as the operation of temporary facilities. The Other Businesses segment includes construction support, health and leisure, city hotels, and overseas businesses. The company was founded by Nobuo Ishibashi on March 4, 1947 and is headquartered in Osaka, Japan.

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