| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥5964.8B | ¥5716.9B | +4.3% |
| Operating Income | ¥762.3B | ¥690.5B | +10.4% |
| Ordinary Income | ¥765.1B | ¥705.0B | +8.5% |
| Net Income | ¥440.5B | ¥470.1B | -6.3% |
| ROE | 13.0% | 13.2% | - |
For the fiscal year ended March 2026, Revenue was ¥5964.8B (YoY +¥247.9B, +4.3%), Operating Income was ¥762.3B (YoY +¥71.8B, +10.4%), Ordinary Income was ¥765.1B (YoY +¥60.1B, +8.5%), and Net Income was ¥440.5B (YoY -¥29.6B, -6.3%). At the operating level, the company achieved steady top-line growth and double-digit operating income growth, with an operating margin improving to 12.8% (+0.7pt YoY). However, deterioration in non-recurring items (smaller special gains and larger special losses) led to a decline in final profit. Special gains totaled ¥51.2B (including ¥43.7B gain on sale of marketable securities), down from ¥95.7B a year earlier, while special losses were ¥126.8B (impairment ¥28.3B, valuation loss on investment securities ¥12.7B, etc.), up from ¥59.3B, resulting in Profit Before Tax of ¥689.5B (prior year ¥741.5B). ROE was 13.0%. Operating Cash Flow (OCF) was ¥814.5B (YoY +27.8%), generating 1.85x of Net Income, and Free Cash Flow (FCF) was ¥505.3B. The company repurchased ¥559.3B of treasury stock, producing a Total Return Ratio of approximately 146% relative to Net Income and demonstrating an aggressive shareholder return stance.
Revenue of ¥5964.8B (YoY +4.3%) was supported by Regional IT Solutions at ¥1842.4B (+3.8%) achieving both scale and stable growth, and Offering Service at ¥1605.7B (+10.3%) driving high growth. Industrial IT was ¥1334.0B (+4.1%) and Business Process Management (BPM) was ¥440.9B (+3.4%) both performing steadily. Financial IT decreased slightly to ¥987.3B (-1.5%), suggesting cyclical investment adjustments in the financial sector and competitive pressure. Segment composition ratios were: Regional IT Solutions 30.9%, Offering Service 26.9%, Industrial IT 22.4%, indicating continued diversification. Contract liabilities increased to ¥378.4B from ¥279.4B (YoY +¥99.0B), reflecting accumulation of orders and advances that serve as a leading indicator supporting future revenue recognition. Gross margin improved to 28.2% (+0.2pt YoY), supported by a higher proportion of high value-added projects and disciplined project profitability management.
Operating Income of ¥762.3B (YoY +10.4%) was driven by revenue growth, gross margin improvement, and efficient SG&A control. SG&A ratio improved to 15.4% from 15.9% (-0.5pt), enabling operating leverage. Segment Operating Income: Regional IT Solutions ¥233.3B (+8.1%) as the largest contributor; Industrial IT ¥225.1B (+16.4%) with double-digit growth; BPM ¥64.0B (+20.1%) with margin 14.5% sustaining high profitability. Offering Service reported ¥104.4B (+5.1%), where margin expansion lagged revenue growth and its 6.5% margin dilutes overall corporate profitability. Ordinary Income of ¥765.1B (+8.5%) reflected non-operating income of ¥26.1B (dividend income ¥9.7B, foreign exchange gains ¥4.3B, etc.) less non-operating expenses of ¥23.3B (interest expense ¥6.0B, equity-method loss ¥7.5B, etc.), keeping it broadly in line with Operating Income. Net Income of ¥440.5B (-6.3%) was arrived at after subtracting income taxes ¥203.6B (effective tax rate 29.5%) and Net Income attributable to non-controlling interests ¥19.7B from Profit Before Tax ¥689.5B. Temporary factors—reduction in special gains to ¥51.2B (mainly gain on sale of investment securities ¥43.7B) and increase in special losses to ¥126.8B (impairment ¥28.3B, valuation loss on investment securities ¥12.7B)—pressured final profit. In conclusion, operating performance showed revenue and margin improvement, but deterioration in special items led to lower Net Income.
Regional IT Solutions: Revenue ¥1842.4B (YoY +3.8%), Operating Income ¥233.3B (+8.1%), margin 12.7% — the core business combining scale, profitability, and stable growth. Industrial IT: Revenue ¥1333.96B (+4.1%), Operating Income ¥225.1B (+16.4%), margin 16.9% — the highest-margin segment, driven by accumulation of high value-added projects for manufacturers. Business Process Management: Revenue ¥440.9B (+3.4%), Operating Income ¥64.0B (+20.1%), margin 14.5% — significant profit growth capturing outsourcing and efficiency demand. Financial IT: Revenue ¥987.3B (-1.5%), Operating Income ¥127.3B (+3.3%), margin 12.9% — revenue down but margin improved, sustaining profitability. Offering Service: Revenue ¥1605.7B (+10.3%) with high growth, but Operating Income ¥104.4B (+5.1%) and margin 6.5%; realizing scale benefits, price adjustments, and mix improvement remain the next challenges. Other: Revenue ¥104.0B (+2.7%), Operating Income ¥9.4B (+7.2%), margin 9.0% — small but stable.
Profitability: ROE was 13.0%. Operating margin improved to 12.8% from 12.1% (+0.7pt), supported by gross margin 28.2% (prior year 28.0%) improvement and SG&A efficiency at 15.4% (prior year 15.9%). Net margin declined to 7.4% from 8.2% (-0.8pt) due to deterioration in special items, while operating-level profitability shows an improving trend. DuPont decomposition: ROE 13.0% = Net Margin 7.4% × Asset Turnover 1.082 × Financial Leverage 1.63x, where moderate leverage and high turnover support ROE. ROA was 8.5% (prior year 8.4%), indicating stable asset efficiency.
Cash Quality: OCF was ¥814.5B, 1.85x Net Income, and OCF/Operating Income was 1.07x, indicating very strong cash backing of earnings. OCF/EBITDA was 0.87x, slightly below the benchmark 0.9x, suggesting timing effects in collections and advance receipts. Accrual ratio was -3.9%, a low level indicating high earnings quality. Capital expenditure was ¥201.3B versus depreciation ¥178.7B, giving Capex/Depreciation 1.13x and signaling continued growth investment.
Investment Efficiency: Asset turnover was a healthy 1.082x. Days Sales Outstanding (DSO) was 88 days, relatively long, but accumulation of contract liabilities ¥378.4B offsets cash constraints. Inventory days were 4.7 days, very short reflecting SI/service characteristics. Fixed asset turnover was 2.33x, indicating high efficiency with good utilization of data centers and development sites.
Financial Soundness: Equity Ratio was 61.2%, Debt/Equity was 0.14x, and Debt/EBITDA was 0.37x — very low leverage and ample financial capacity. Current ratio was 179.8% and quick ratio 176.5%, indicating strong short-term liquidity. Cash and deposits ¥872.4B plus short-term marketable securities ¥102.3B give liquidity of ¥974.7B, well above short-term borrowings of ¥213.3B. Interest coverage was 126.6x (OCF / interest paid), indicating very high interest resilience.
OCF was ¥814.5B (YoY +27.8%), generating 1.85x Net Income with very strong cash coverage of earnings. From OCF subtotal ¥1,018.3B, changes in working capital contributed: decrease in trade receivables +¥74.2B (improved collections), increase in trade payables +¥7.8B, while inventory increase -¥6.7B was a minor outflow. After taxes paid -¥214.6B, OCF of ¥814.5B was secured. Investing Cash Flow was -¥309.2B, driven by capital expenditure -¥201.3B (data centers and development environment) and intangible asset acquisitions -¥78.8B (software, etc.). Proceeds from sale/redemption of marketable securities ¥53.8B and acquisition of investment securities -¥48.1B resulted in a small net cash outflow on securities. FCF was ¥505.3B, comfortably covering dividends ¥163.8B and capex ¥201.3B; FCF coverage (FCF / dividends) was 3.08x, indicating ample cushion. Financing Cash Flow was -¥783.6B, driven by treasury stock purchases -¥559.3B and dividends -¥170.9B (¥163.8B to parent company shareholders, ¥16.4B to non-controlling interests). Long-term borrowings +¥107.0B less repayments -¥130.7B produced net repayment -¥23.7B. Cash decreased from opening balance ¥1,212.9B to closing ¥937.3B (-¥275.5B), but ample liquidity was maintained and financial flexibility remains high due to low leverage and strong CFO generation.
Operating Income of ¥762.3B accounts for 12.8% of total Revenue, representing a high margin level and strong recurring nature. Non-operating income ¥26.1B comprised dividend income ¥9.7B, interest income ¥6.0B, foreign exchange gains ¥4.3B, etc., representing 0.4% of Revenue and low dependence on such items. One-off factors: special gains ¥51.2B (gain on sale of investment securities ¥43.7B, gain on sale of fixed assets ¥7.2B) were markedly lower than the prior year’s gain on sale of investment securities ¥85.6B, while special losses ¥126.8B (impairment ¥28.3B, valuation loss on investment securities ¥12.7B, etc.) doubled from ¥59.3B. The deterioration in these one-off items pressured Profit Before Tax and was the main cause of the Net Income decline. OCF of ¥814.5B reached 1.85x Net Income, accrual ratio -3.9% is low, confirming very strong cash backing of earnings. OCF/EBITDA at 0.87x is slightly below the 0.9x benchmark, suggesting timing impacts in receivables collection, but together with the accumulation of contract liabilities the overall position is healthy. Equity-method investment loss was -¥7.5B whereas prior year had +¥8.3B, reflecting associate performance variability. Operating profitability has improved steadily; excluding one-off items, the quality of earnings is assessed as high.
For FY2027 (year ending March 2027), the company forecasts Revenue ¥6200.0B (YoY +3.9%), Operating Income ¥810.0B (+6.3%), Ordinary Income ¥810.0B (+5.9%), Net Income attributable to owners of the parent ¥570.0B, and EPS ¥271.7. Progress versus current fiscal results (Revenue ¥5964.8B, Operating Income ¥762.3B) is 96.2% for Revenue and 94.1% for Operating Income, indicating smooth momentum. Revenue growth of +3.9% is slightly slower than current year +4.3%, while Operating Income growth +6.3% indicates continued operating leverage and expected margin improvement. Net Income is forecast to increase significantly by +29.4% YoY, premised on normalization of this year’s one-off loss factors. Dividend forecast is ¥45 per year, implying a payout ratio of approximately 43.4%, up from prior-year actual payout ratio 39.2%, showing intent to allocate increased earnings to shareholder returns. Company guidance assumes growth in high-margin segments (Industrial IT, BPM), stable performance at Regional IT Solutions, and margin improvement at Offering Service to support steady revenue and profit growth.
Annual dividend is ¥80 (interim ¥38, year-end ¥42) with payout ratio 39.2%, within a sustainable range. Prior-year dividend was ¥34 (interim ¥34; year-end not disclosed at Q2), confirming effective dividend increase. FCF of ¥505.3B funds total dividends ¥163.8B (to parent company shareholders, including ¥6.2B employee shareholding trust and ¥3.9B executive remuneration BIP trust), comfortably covering payout with FCF coverage 3.08x. The company executed ¥559.3B of treasury stock purchases this fiscal year; combined with dividends the total shareholder return amounted to approximately ¥723.1B, producing a Total Return Ratio of about 164% relative to Net Income ¥440.5B — a high level reflecting an active return phase using the balance sheet. Treasury stock at year-end increased to -¥312.8B from -¥119.6B prior year, contributing to capital efficiency improvement and per-share value enhancement. For FY2027 the dividend forecast is ¥45 (payout ratio ~43.4% against company guidance EPS ¥271.7), an increase from the prior year and intended to reflect earnings growth in shareholder returns. Dividends are on a stable uptrend while buybacks will be used tactically to maintain/raise ROE and maximize shareholder value.
Project profit and progress risk: The company booked a provision for loss on large SI projects of ¥4.57B (prior year ¥4.87B), and project-based business inherently carries profitability management risk. Delay, scope changes, or staffing shortages may result in unexpected loss recognition and volatility in operating margin. While accumulation of high-margin projects is improving average margins, deterioration in individual project profitability can materially impact company-wide results. The build-up of contract liabilities ¥378.4B indicates strong order intake but underscores the importance of managing project progress and revenue recognition timing.
Working capital and liquidity risk: Accounts receivable ¥1441.1B (24.2% of Revenue) with DSO 88 days indicates long collection cycles, and working capital of approximately ¥1311B represents 23.8% of total assets. Customer payment delays or bad debts could impair OCF/EBITDA (currently 0.87x) and worsen liquidity metrics. Although cash and deposits ¥872.4B exceed short-term borrowings ¥213.3B, the short-term liabilities ratio is 61.3% and concentration of maturities could expose the company to refinancing cost increases or changes in funding conditions.
Volatility of special items: This fiscal year recorded special gains ¥51.2B (mainly from sale of investment securities) and special losses ¥126.8B (impairment ¥28.3B, valuation loss on investment securities ¥12.7B), netting -¥75.6B and pressuring Net Income. Investment securities held total ¥587.0B (17.4% of net assets) and market fluctuations or timing of disposals can materially change Net Income. Impairment risk rests in goodwill ¥79.7B and intangible assets ¥466.7B (software ¥162.8B, etc.) and additional impairments could occur if business conditions deteriorate or recoverability assumptions are revised.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.8% | 8.1% (3.6%–16.0%) | +4.7pt |
| Net Margin | 7.4% | 5.8% (1.2%–11.6%) | +1.5pt |
Operating margin 12.8% exceeds the industry median 8.1% by +4.7pt, positioning the company in the upper quartile. Net margin 7.4% also exceeds the median 5.8% by +1.5pt, maintaining high profitability within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 4.3% | 10.1% (1.7%–20.2%) | -5.8pt |
Revenue growth 4.3% trails the industry median 10.1% by -5.8pt, indicating the company is in a lower-growth tier within the industry. While maintaining high profitability, growth pace lags the industry average.
※ Source: Company compilation
Strong operating performance with expectation of normalization of bottom-line: Operating Income +10.4% and operating margin +0.7pt indicate improving operating profitability driven by growth in high-margin segments (Industrial IT, BPM) and strict cost control. The decline in Net Income this year is mainly attributable to deterioration in special items (impairment ¥28.3B, valuation loss on investment securities ¥12.7B, reduced sale gains), which appear largely one-off. FY2027 guidance targets Operating Income ¥810.0B (+6.3%) and Net Income ¥570.0B (+29.4%), assuming normalization of one-off items and continuation of operating strength. The rise in contract liabilities to ¥378.4B (YoY +¥99.0B) suggests robust order intake and supports revenue recognition for subsequent periods.
Financial soundness and shareholder-return focus while emphasizing capital efficiency: Equity Ratio 61.2% and Debt/EBITDA 0.37x reflect very low leverage and strong financial capacity; OCF ¥814.5B and FCF ¥505.3B demonstrate abundant cash generation. The company executed large-scale buybacks of ¥559.3B and achieved Total Return Ratio ~164%, an aggressive stance. FY2027 dividend guidance ¥45 (payout ratio ~43.4%) represents an increase, and with FCF coverage >3x the company appears positioned to sustain dividend growth. ROE 13.0% is healthy; buybacks that lift per-share value and capital efficiency are drivers of shareholder value. However, high total returns must be balanced against capital capacity, and sustainability depends on continued OCF expansion and FCF margin maintenance.
Segment profitability imbalance and room for improvement: Offering Service grew Revenue ¥1605.7B (+10.3%) but margin remains low at 6.5%, diluting overall profitability versus Regional IT Solutions 12.7%, Industrial IT 16.9%, and BPM 14.5%. Realizing scale benefits, price revisions, and shifting mix toward higher value-added projects are levers for margin expansion. Working capital management (DSO 88 days) and OCF/EBITDA 0.87x (slightly below 0.9x benchmark) indicate collection management as an area for strengthening. Short-term liabilities ratio 61.3% and maturity concentration pose refinancing risk but are mitigated by cash and deposits ¥974.7B and low leverage. Progress on these improvements could drive ROE above 15% and accelerate dividend growth.
This report is an AI-generated earnings analysis based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the firm from public financial statements and are provided for reference. Investment decisions are your responsibility; please consult a professional advisor as needed.