Daiwa House Industry (1925 JP) (Buy) 17/3 Q1 results
Sale of logistics facilities to private REIT in Q1
Daiwa House Industry released 17/3 Q1 results on 9 August. We had thought that its results might be hit by the disappearance of substantial gains on the sale of logistics and commercial facilities in 16/3 Q1 (¥24.5bn at the gross profit level), but in the event operating profits rose 4% y-y (and included gains on property sales of ¥12.9bn). This mainly reflected the housing business, where sales rose 13% and the gross margin improved from 19.4% to 20.5%. However, we had already expected this gross margin to improve in 17/3. Although progress with construction projects has been rapid, the amount of work at hand has not prompted us to change our outlook for housing operations in 17/3, or indeed our earnings forecasts. We retain our target price and reiterate our Buy rating amid favorable conditions.