| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥265.3B | ¥246.0B | +7.9% |
| Operating Income | ¥38.2B | ¥31.8B | +20.3% |
| Ordinary Income | ¥39.2B | ¥32.7B | +20.0% |
| Net Income | ¥25.4B | ¥20.5B | +23.7% |
| ROE | 12.2% | 11.1% | - |
For the fiscal year ended March 2026, the company achieved Revenue of ¥265.3B (vs prior year +¥19.3B +7.9%), Operating Income of ¥38.2B (vs prior year +¥6.4B +20.3%), Ordinary Income of ¥39.2B (vs prior year +¥6.5B +20.0%), and Net Income of ¥25.4B (vs prior year +¥4.9B +23.7%), recording both top-line and bottom-line growth. Operating margin improved by 1.5pt to 14.4% (prior year 12.9%), and ROE remained in double digits at 12.2%. By segment, Industrial Technology Solutions (ITS) drove performance with Revenue ¥137.5B (+13.6%) and Operating Income ¥23.1B (+22.7%, margin 16.8%), while Future Social Solutions (FSS) also posted high growth with Revenue ¥50.9B (+11.3%) and Operating Income ¥7.4B (+60.8%, margin 14.6%). Customer Business Integration (CBI) recorded Revenue ¥77.7B (-2.9%) and Operating Income ¥7.7B (-7.7%, margin 9.9%), a decline YoY; however, even after consolidating two companies via M&A (goodwill recorded ¥4.3B), it maintained a high-single-digit margin. Progress vs full-year guidance (Revenue ¥290.0B, Operating Income ¥42.0B) was 91.5% for Revenue and 90.9% for Operating Income, about 9–10% below the standard pace, suggesting timing delays in acceptance and billing of some projects. Cash flow: Operating Cash Flow was ¥20.4B (YoY -13.9%) versus Net Income ¥25.4B, giving Operating CF/Net Income of 0.80x and indicating weakened conversion efficiency. The primary cause was expansion of working capital due to an aggregate increase of ¥111B in trade receivables and contract assets; nevertheless, cash of ¥82.0B and a current ratio of 276.7% were maintained at high levels, indicating very strong financial health.
【Revenue】 Revenue ¥265.3B (+7.9%) was driven by Industrial Technology Solutions (ITS) at ¥137.5B (weight 51.8%, +13.6%), where wins of high-value-added projects leveraging specialized technologies such as IoT, AI, and GNSS contributed materially. Future Social Solutions (FSS) ¥50.9B (weight 19.2%, +11.3%) achieved double-digit growth through expansion in environmental and living infrastructure projects. Conversely, Customer Business Integration (CBI) ¥77.7B (weight 29.3%, -2.9%) declined YoY and partially offset overall growth. The progress ratio against the full-year forecast of ¥290.0B was 91.5%, below the standard (100% at year-end), implying that acceptance and billing timing for certain projects slipped past fiscal year-end into the next fiscal year. Geographically, domestic sales account for over 90%, with overseas sales limited.
【Profitability】 Cost of sales was ¥189.1B (as a percentage of Revenue 71.3%, prior year 72.5%), yielding Gross Profit ¥76.2B and a Gross Margin of 28.7% (prior year 27.5%, +1.2pt). The primary driver of gross margin improvement was a higher mix of high-value-added solutions in ITS and FSS. Selling, General & Administrative expenses were ¥38.0B (as a percentage of Revenue 14.3%, prior year 14.6%, -0.3pt), with growth restrained relative to Revenue, enabling operating leverage on fixed costs. R&D expense was ¥2.8B (as a percentage of Revenue 1.0%), up ¥0.7B YoY but still at a modest level. Operating Income ¥38.2B (Operating Margin 14.4%, prior year 12.9%, +1.5pt) was driven by gross margin improvement and a reduction in SG&A ratio, delivering double-digit operating profit growth. Non-operating income totaled ¥1.4B (dividends received ¥0.6B, interest income ¥0.3B, investment partnership gains ¥0.2B, etc.) versus non-operating expenses ¥0.4B (interest expense ¥0.2B, etc.), resulting in net non-operating income of +¥1.0B and Ordinary Income ¥39.2B (+20.0%). Extraordinary items comprised Extraordinary Gains ¥0.4B (gain on sale of investment securities) and Extraordinary Losses ¥2.4B, netting -¥1.9B, leading to Profit Before Tax ¥39.7B (+21.4%). After corporate taxes of ¥10.9B (effective tax rate 27.4%), Net Income was ¥25.4B (+23.7%). The gap between Ordinary Income and Net Income is mainly attributable to the Extraordinary Losses ¥2.4B and tax expenses; the majority of profit growth stems from core operations. In conclusion, the results confirm revenue and profit growth, expanded operating margin, and strengthened recurring earnings capacity.
Future Social Solutions (FSS) posted Revenue ¥50.9B (+11.3%), Operating Income ¥7.4B (+60.8%), and margin 14.6% (prior year 10.1%, +4.5pt), indicating advancement in high profitability. The margin improvement was mainly driven by wins of high-value-added projects in environmental and living infrastructure areas. Industrial Technology Solutions (ITS) had Revenue ¥137.5B (+13.6%), Operating Income ¥23.1B (+22.7%), and margin 16.8% (prior year 15.6%, +1.2pt), maintaining the highest margin and accounting for 60.5% of consolidated Operating Income—establishing it as the core business. Order growth leveraging specialized technologies (IoT, AI, GNSS) and improved product mix contributed. Customer Business Integration (CBI) recorded Revenue ¥77.7B (-2.9%), Operating Income ¥7.7B (-7.7%), and margin 9.9% (prior year 10.4%, -0.5pt), reflecting decline. During the period, two companies—Soft Distribution Center Co., Ltd. and System Factory Kagoshima Co., Ltd.—were newly consolidated, with goodwill recorded ¥4.3B; integration benefits are expected to materialize from the next fiscal year. Among segments, ITS is the principal profit source, FSS is progressing on both growth and profitability, while CBI is in a holding pattern pending reacceleration.
【Profitability】Operating margin 14.4% (prior year 12.9%, +1.5pt), Net Margin 9.6% (prior year 8.3%, +1.3pt), Gross Margin 28.7% (prior year 27.5%, +1.2pt) — profitability improved at each level. ROE was 12.2% (prior year 11.1%), remaining in double digits and positioned mid-range within the favorable band (10–15%). 【Cash Quality】Operating CF ¥20.4B vs Net Income ¥25.4B gives Operating CF/Net Income 0.80x (prior year 1.16x), indicating deteriorated conversion efficiency. The main cause is an expansion of working capital due to an aggregate increase of ¥111B in trade receivables and contract assets: project-type revenue acceptance and billing concentrated at year-end caused cash realization to slip into the next fiscal year. DSO (days sales outstanding) is approximately 95 days, relatively long. Free Cash Flow was ¥12.4B (YoY -47.7%), remaining positive but reduced; normalization of working capital is a key challenge next fiscal year. 【Investment Efficiency】Total asset turnover was 0.94x (prior year 0.98x), slightly lower; financial leverage 1.36x (prior year 1.36x) was unchanged, so ROE improvement was driven by higher net margin. R&D expense at 1.0% of Revenue is modest, leaving room to invest for medium- to long-term technology accumulation. 【Financial Soundness】Equity Ratio 73.5% (prior year 73.6%) remained high, with a Current Ratio of 276.7% and cash ¥82.0B (29.1% of total assets), ensuring extremely ample liquidity. Interest-bearing debt was ¥16.6B (short-term borrowings ¥15.7B, long-term borrowings ¥0.9B), with Debt/EBITDA 0.41x and Interest Coverage 190x—low leverage and very strong capacity to meet obligations.
Operating CF was ¥20.4B (YoY -¥5.3B, -13.9%). From Profit Before Tax ¥39.7B, adding non-cash expenses such as Depreciation ¥2.2B resulted in a subtotal of ¥31.2B, against which increases in trade receivables -¥11.1B and contract assets increased by ¥2.7B YoY (aggregate working capital increase in trade receivables and contract assets approx. ¥111B), and tax payments -¥11.5B were major deductors. Concentration of order acceptance, project acceptance, and billing at year-end relative to Revenue growth delayed cash collection into the next fiscal year, resulting in Operating CF/Net Income 0.80x and reduced conversion efficiency. Investing CF was -¥8.1B, primarily due to capital expenditures -¥1.7B and acquisition of subsidiary shares -¥6.6B (M&A in the CBI area). Free CF remained positive at ¥12.4B but decreased YoY by -47.7%. Financing CF was -¥6.3B; dividend payments -¥8.6B were partly offset by net increase in short-term borrowings ¥2.7B and long-term borrowings procurement ¥1.0B and repayments -¥1.2B, resulting in a net decrease. Cash balance at year-end was ¥82.0B (beginning ¥75.9B), building the cash position with no liquidity concerns. Normalization of working capital (bringing project milestones forward, shortening billing and collection cycles) is key to improving cash generation next fiscal year.
Operating Income ¥38.2B is the core of earnings; non-operating income ¥1.4B (dividends received ¥0.6B, interest received ¥0.3B, investment partnership gains ¥0.2B, etc.) accounts for only ~0.5% of Revenue, indicating low dependency and that recurring core-operating earnings predominate. Extraordinary items netted -¥1.9B (Extraordinary Gains ¥0.4B, Extraordinary Losses ¥2.4B), which compressed profit temporarily but represented about 4.8% of Profit Before Tax and were limited in scale. The gap between Ordinary Income ¥39.2B and Net Income ¥25.4B is explained by Extraordinary Losses -¥1.9B and corporate taxes ¥10.9B (effective tax rate 27.4%), and there is no structural distortion in profit growth originating from core operations. From an accrual quality perspective, Net Income ¥25.4B vs Operating CF ¥20.4B implies an accrual difference of about ¥5.0B (approximately 20% of Net Income), driven by increases in trade receivables and contract assets. Operating CF/Net Income 0.80x is below the industry median (~1.0x), and the working capital increase is constraining cash generation. Goodwill amortization ¥0.2B (vs EBITDA 0.6%) is minor, so distortions relative to IFRS-reporting companies are limited. Sustainability of earnings is assessed as at least mid-level and above, given operating margin improvement and core-driven profit growth; improving cash conversion efficiency is the next step to enhance quality.
Full-year guidance was Revenue ¥290.0B (+9.3%), Operating Income ¥42.0B (+10.0%), Ordinary Income ¥43.0B (+9.6%). Actuals were Revenue ¥265.3B (progress 91.5%), Operating Income ¥38.2B (90.9%), and Ordinary Income ¥39.2B (91.2%), roughly 9–10% below standard year-end progress (100%). Net Income progress versus forecast EPS of ¥208.81 (implied average shares outstanding estimated approx. 30.0 million) was about 84.7% with actual Net Income ¥25.4B, further depressed by Extraordinary Losses -¥1.9B. Shortfalls were attributable to CBI decline (-2.9%) weighing on consolidated Revenue and timing delays in acceptance and billing for some projects beyond year-end. The aggregate ¥111B increase in trade receivables and contract assets supports the view that cash realization for booked orders has been delayed. For subsequent periods, normalization of working capital, realization of M&A integration benefits in CBI, and continuation of high-value-added projects in ITS and FSS will be key to achieving guidance.
Annual dividend is ¥60 (interim ¥15, year-end ¥45), with Payout Ratio 35.2% (Net Income ¥25.4B, average shares 14.4 million) within an appropriate range. The dividend was maintained from the prior year (prior annualized dividend ¥60, payout ratio 35.2%), with no increase. Total dividends amounted to ¥7.9B vs Free CF ¥12.4B, giving FCF coverage 1.57x and indicating high dividend sustainability. With cash ¥82.0B and interest-bearing debt ¥16.6B, the company is close to a net-cash position and retains ample financial capacity. No buyback disclosure was made; shareholder returns remain dividend-centric. Based on full-year guidance EPS ¥208.81, a dividend of ¥10 (forecast dividend) implies a payout ratio of ~4.8%, which is extremely low relative to actuals (reported EPS ¥200.40 and dividend ¥60 imply payout ratio 29.9%), suggesting a possible misstatement in the forecast data. Considering next fiscal year performance and working capital normalization, stable dividends in the 30–35% payout range are expected.
Deterioration of cash conversion efficiency due to working capital expansion: An aggregate increase of ¥111B in trade receivables and contract assets led to Operating CF/Net Income of 0.80x and reduced conversion efficiency. With DSO around 95 days and project-type revenue acceptance and billing concentrated at year-end, structural factors exist. Failure to normalize working capital (reviewing project milestone conditions, strengthening billing and collection management) could result in continued weakness in cash generation and capital efficiency.
Segment concentration and demand volatility risk: ITS accounts for 51.8% of Revenue and 60.5% of Operating Income, making performance sensitive to demand cycles for specialized technologies (IoT, AI, GNSS, etc.) and capital spending trends of customer industries (manufacturing, infrastructure). CBI is in a plateau with Revenue down -2.9%; delays in M&A integration effects or continued low workforce utilization could impede company-wide growth.
Talent acquisition and wage inflation pressuring gross margin: Talent supply-demand tightness in the IT & communications sector is driving up recruiting costs and labor expenses. A high share of labor costs is presumed within Cost of Sales ¥189.1B; failure to attract and retain skilled engineers could reduce project quality and weaken pricing power, compressing gross margins. R&D investment at 1.0% of Revenue is modest, raising concerns about maintaining technological advantage over the medium to long term.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 14.4% | 8.1% (3.6%–16.0%) | +6.3pt |
| Net Margin | 9.6% | 5.8% (1.2%–11.6%) | +3.7pt |
Profitability clearly exceeds the industry median, reflecting successful deployment of high-value-added solutions leveraging specialized technologies.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 7.9% | 10.1% (1.7%–20.2%) | -2.2pt |
Growth rate is slightly below the industry median, with CBI’s Revenue decline suppressing consolidated growth.
※Source: Company compilation
The company has established a high-profitability profile with Operating Margin 14.4% (industry median +6.3pt) and ROE 12.2%. High-value-added projects in ITS and FSS drove gross margin improvement. ITS margin was 16.8% and FSS margin 14.6% (YoY +4.5pt), maintaining high double-digit profitability; order expansion leveraging specialized technologies (IoT, AI, GNSS) is a structural strength.
The balance sheet remains extremely healthy with Cash ¥82.0B, Equity Ratio 73.5%, and Debt/EBITDA 0.41x, leaving capacity after executing M&A. Two companies were newly consolidated in CBI, but goodwill ¥4.3B (2.1% of net assets) is modest and impairment risk is limited. Sufficient resources are secured for future growth investments (M&A, R&D enhancement, talent acquisition).
Working capital expansion (aggregate increase of ¥111B in trade receivables and contract assets) reduced cash conversion efficiency to Operating CF/Net Income 0.80x and highlighted a long collection period with DSO ~95 days. The shortfall vs full-year guidance (Revenue progress 91.5%, Operating Income 90.9%) appears attributable to timing delays in acceptance and billing for project-type revenues; normalization of working capital (revising project milestone conditions, strengthening billing and collection management) is key to next-year cash generation and achievement of targets.
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 public financial statements. Investment decisions are your own responsibility; please consult a professional advisor as necessary.