| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥7877.1B | ¥6708.2B | +17.4% |
| Operating Income | ¥520.2B | ¥424.6B | +22.5% |
| Ordinary Income | ¥527.2B | ¥435.1B | +21.2% |
| Net Income | ¥250.6B | ¥185.2B | +35.3% |
| ROE | 7.2% | 5.7% | - |
For the fiscal year ending March 2026, the company achieved Revenue ¥7,877B (YoY +¥1,169B +17.4%), Operating Income ¥520B (YoY +¥96B +22.5%), Ordinary Income ¥527B (YoY +¥92B +21.2%), and Net Income attributable to owners of parent ¥311B (YoY +¥41B +15.5%; reported figure ¥250B is before deduction of non-controlling interests), marking the third consecutive year of revenue and profit growth. The SystemSolution segment led growth with Revenue +41.3%, and the operating margin improved to 6.6% from 6.3% a year ago (+0.3pt). Gross margin declined to 14.6% from 15.0% (-0.4pt), but SG&A ratio improved to 8.0% from 8.6% (-0.6pt), producing operating leverage. Operating Cash Flow (OCF) markedly improved to ¥332B (from ¥68B, +386%), securing Free Cash Flow (FCF) of ¥182B.
[Revenue] Revenue reached ¥7,877B (+17.4%), reflecting strong growth. By segment, SystemSolution recorded ¥2,836B (+41.3%) as the largest contributor, supported by expansion of overseas ICT projects and capturing digitalization demand. UrbanInfrastructure posted ¥2,485B (+14.1%), driven by increases in urban infrastructure development and environment-related projects. Telecommunication was stable at ¥2,557B (+1.3%), reflecting the completion of a cycle in 5G base station construction. Segment mix was SystemSolution 36.0%, UrbanInfrastructure 31.5%, Telecommunication 32.5%, raising the share of growth segments. Completed-construction receivables were ¥3,054B (from ¥2,793B, +¥261B), rising with sales expansion and increasing the importance of managing collection timing for milestone billing.
[Profitability] Cost of sales was ¥6,730B (+16.2%), with gross margin at 14.6% (down 0.4pt from 15.0%). Upward pressure on labor and material costs pushed the cost ratio up, but a higher mix of high-value-added projects partially offset the impact. SG&A was ¥627B (+8.0%), significantly below the sales growth rate, and SG&A ratio improved to 8.0% from 8.6% (-0.6pt). Strict cost control and restraint on fixed-cost increases generated operating leverage, leading to Operating Income ¥520B (+22.5%) and an Operating Margin of 6.6% (from 6.3%, +0.3pt). Non-operating income was ¥39B (including ¥11B foreign exchange gains and ¥8B dividend income) against non-operating expenses of ¥32B (including ¥13B interest expense), netting +¥7B contribution. Extraordinary items included ¥23B gain on sale of investment securities and ¥7B gain on sale of fixed assets, offset by ¥35B impairment losses and ¥10B valuation losses on investment securities, netting a -¥14B drag. Profit before tax was ¥514B, income taxes were ¥204B (effective tax rate 39.7%), resulting in Net Income attributable to owners of parent of ¥311B (+15.5%).
Telecommunication posted Revenue ¥2,557B (+1.3%), Operating Income ¥233B (+10.5%), and margin 9.1% (from 8.4%, +0.7pt), achieving margin improvement amid slowing growth. Absorbing the end of the 5G base station construction cycle, an increased mix of maintenance & operations services and progress on price pass-through contributed to margin gains. UrbanInfrastructure delivered Revenue ¥2,485B (+14.1%), Operating Income ¥165B (+27.7%), and margin 6.6% (from 5.9%, +0.7pt), with expansion of urban infrastructure and environmental projects and efficiency in schedule management improving profitability. SystemSolution achieved Revenue ¥2,836B (+41.3%), Operating Income ¥122B (+44.7%), and margin 4.3% (from 4.2%, +0.1pt), combining high growth with a slight margin improvement. Expansion of overseas ICT projects and capturing digitalization demand drove growth, but its margin is the lowest among the three segments; cost control with scale and higher-value-added mix remain future challenges.
[Profitability] Operating Margin was 6.6% (from 6.3%, +0.3pt), continuing a three-year improving trend. Gross Margin was 14.6% (from 15.0%, -0.4pt), while SG&A ratio improved to 8.0% (from 8.6%, -0.6pt), yielding operating leverage. Net Margin was 3.9% (flat from 3.9%), ROE was 7.2% (from 6.7%, +0.5pt), indicating improved return on equity. [Cash Quality] OCF was ¥332B, giving coverage of Net Income (¥250B) at 1.33x, favorable, but OCF/EBITDA remained at 0.51x, and the increase in completed-construction receivables (accounts receivable-type increase -¥268B) absorbed cash. Strengthening working capital collection is the top priority. [Investment Efficiency] Total asset turnover improved to 1.18x (from 1.07x), reflecting asset efficiency gains from revenue growth. Capital expenditures were ¥96B and depreciation ¥128B, with CapEx/Depreciation at 0.75x, indicating mainly renewal investments without excessive asset burden. [Financial Soundness] Equity Ratio was 50.2% (from 50.9%, -0.7pt), remaining high and stable; D/E ratio rose to 0.99x (from 0.83x) but stays within a conservative range. Debt/EBITDA was 1.81x and Interest Coverage was 38.7x, keeping leverage and interest-bearing capacity within investment-grade ranges. Current Ratio and Quick Ratio were both 195.9%, indicating ample liquidity and strong short-term debt-servicing capacity. Long-term borrowings increased by +¥389B while short-term borrowings decreased by -¥309B, lengthening maturities and lowering refinancing risk.
OCF improved substantially to ¥332B (from ¥68B, +386%). Operating cash flow subtotal (before working capital changes) was ¥526B, a level that includes non-cash expenses such as Depreciation ¥128B and Goodwill Amortization ¥33B. In working capital, the increase in trade receivables of -¥268B (increase in completed-construction receivables) was the largest cash drain, and a decrease in accounts payable of -¥6B also contributed, making collection cycle improvement a challenge. Meanwhile, advances received on uncompleted contracts increased by +¥55B, partially offsetting cash absorption. After income taxes paid of -¥193B, OCF was ¥332B. Investing Cash Flow was -¥150B, including CapEx -¥96B, intangible asset acquisitions -¥32B, and M&A-related expenditures -¥65B. FCF was ¥182B (OCF ¥332B + Investing CF -¥150B), comfortably covering dividend payments of ¥134B. Financing Cash Flow was -¥165B; funding included long-term borrowing proceeds +¥419B, while repayments and distributions included short-term borrowing repayments -¥58B, long-term borrowing repayments -¥281B, bond redemptions -¥104B, dividend payments -¥134B, and share buybacks -¥70B. Cash and deposits increased slightly to ¥417B (from ¥400B, +¥17B), and total shareholder returns (dividends + share buybacks ~¥204B) slightly exceeded FCF.
Earnings quality is high: Ordinary Income ¥527B versus Operating Income ¥520B, with non-operating items net +¥7B, indicating core-earnings-driven structure. Extraordinary items were net -¥14B, with one-off gains such as ¥23B gain on sale of investment securities and ¥7B gain on sale of fixed assets, offset by ¥35B impairment losses and ¥10B valuation losses on investment securities. The impairment losses reflect asset selection progress, and further impairment risk should be monitored. Comprehensive income was ¥407B, exceeding Net Income ¥250B by +¥157B, aided by Other Comprehensive Income of ¥97B (including ¥67B actuarial gains related to retirement benefits and ¥33B valuation differences on securities). The large positive actuarial adjustment reflects improvements in interest and asset markets, and defined benefit plan assets increased by ¥118B (+43.3%), contributing to equity stability. On an accrual basis, OCF ¥332B covers Net Income ¥250B at 1.33x, but the increase in completed-construction receivables causes cash absorption and OCF/EBITDA at 0.51x remains weak; collection strengthening is the top priority.
Full Year guidance is Revenue ¥7,500B (YoY -4.8%), Operating Income ¥560B (+7.7%), Ordinary Income ¥545B (+3.4%), and Net Income ¥355B (+41.7%), a conservative outlook featuring lower sales but higher profits. First-half results were Revenue ¥7,877B and Operating Income ¥520B, equating to progress rates of 105.0% for Revenue and 92.9% for Operating Income against the full-year guidance, meaning results have already substantially exceeded the company’s full-year forecasts. The company’s conservative guidance likely incorporates lower visibility on large second-half projects and cost variability risks. Operating Margin is expected to improve to 7.5% (from actual 6.6%, +0.9pt), indicating a shift toward margin-focused management. The high growth in Net Income forecast (+41.7%) likely assumes tax rate improvements and reduced extraordinary losses. EPS forecast is ¥174.82 (from actual ¥151.13, +¥23.69), and dividend forecast is ¥40 (from actual ¥68, -¥28), implying a dividend cut but a rebalancing on a full-year basis.
Annual dividend is ¥68 (interim ¥33, year-end ¥35), a substantial increase of +¥37 from ¥31 a year earlier. Payout Ratio is 48.8% (based on Net Income ¥250B), within a sustainable range. Total dividends amounted to approximately ¥134B, covered 0.74x by FCF ¥182B. Share buybacks of ¥70B were conducted, bringing Total Return Ratio to approximately 81.6% (dividends ¥134B + buybacks ¥70B = ¥204B ÷ Net Income ¥250B), slightly exceeding FCF. Full-year dividend guidance of ¥40 signals a dividend cut, but given first-half payout of ¥68, a reduction in the second half is anticipated. Treasury shares amounted to 1.5B shares (estimated as a typographical error of 0.15B shares given acquisition amount -¥70B), demonstrating an active shareholder return stance. Given cash and deposits of ¥417B and OCF ¥332B, dividend sustainability is high, but continuing total returns including buybacks will require either stronger cash generation or a slower return pace.
Increased working capital burden risk: Completed-construction receivables are ¥3,054B (+¥261B YoY), representing 38.8% of Revenue and remaining high. OCF/EBITDA at 0.51x is below industry medians, and prolonged collection cycles for milestone billing or concentration of large projects have manifested cash-flow strain. While the accumulation of advances received on uncompleted contracts (+¥55B) partially offsets this, strengthening collections and enforcing timely billing are critical.
Rising cost ratios and declining gross margin risk: Gross margin at 14.6% (from 15.0%, -0.4pt) indicates continued pressure from rising labor and material costs. By segment, SystemSolution’s margin at 4.3% is the lowest; failure to tighten cost control with scale and increase high-value-added project mix could prolong gross margin deterioration and hinder ROE improvement. The full-year guidance expects Operating Margin of 7.5% improvement, but effective price pass-through and schedule management will be key.
Sustainability of segment growth risk: SystemSolution delivered high growth (+41.3%) but has high dependence on large overseas ICT projects; concentration and completion cycles could produce growth pullbacks or revenue volatility from schedule delays. The conservative full-year sales guidance (-4.8%) likely embeds second-half project execution uncertainty, so monitoring backlog and contract liabilities is necessary.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.6% | 5.5% (3.5%–7.2%) | +1.1pt |
| Net Margin | 3.2% | 3.5% (2.5%–4.4%) | -0.3pt |
Operating Margin exceeds the industry median by 1.1pt, aided by cost efficiencies and a higher share of high-value-added projects. Net Margin trails the median by 0.3pt, affected by the high effective tax rate of 39.7%.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 17.4% | 9.8% (-2.1%–15.1%) | +7.5pt |
Revenue growth outperforms the industry median by 7.5pt, driven by SystemSolution’s high growth and steady performance in UrbanInfrastructure, ranking the company among the higher-growth businesses in the sector.
※ Source: Company compilation
Trend of improving Operating Margin and challenges in cash conversion: Operating Margin improved to 6.6% (from 6.3%, +0.3pt), continuing a three-year improving trend. SG&A ratio improvement (8.0%, from 8.6%, -0.6pt) generated operating leverage, and the company projects further improvement to 7.5% for the full year. Conversely, OCF/EBITDA at 0.51x is weak, and the increase in completed-construction receivables (38.8% of Revenue) is absorbing cash. Strengthening collections and timely milestone billing are essential to sustain margin improvements and expand shareholder-return capacity.
Diversified segment portfolio and growth: Telecommunication is the profit pillar (Operating Income ¥233B, margin 9.1%), SystemSolution is the growth driver (Revenue +41.3%), and UrbanInfrastructure is a stable earnings source (Revenue +14.1%, margin 6.6%). The diversified portfolio across telecom infrastructure × urban infrastructure × ICT enhances cyclic resilience. Although the full-year guidance is conservative with lower sales and higher profits, the shift toward margin-focused management suggests potential for long-term profitability improvement.
Financial soundness and active shareholder returns: Equity Ratio 50.2%, Debt/EBITDA 1.81x, and Interest Coverage 38.7x indicate financial soundness within investment-grade ranges. Annual dividend is ¥68 (Payout Ratio 48.8%) and share buybacks of ¥70B were executed, with Total Return Ratio around 81.6%, reflecting an active return policy. FCF ¥182B sufficiently covers dividends, but total returns slightly exceed FCF and will require stronger cash generation to continue. The increase in long-term borrowings (+¥389B) and reduction in short-term borrowings (-¥309B) lengthened maturities and reduced refinancing risk.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.