| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥357.0B | ¥325.6B | +9.7% |
| Operating Income / Operating Profit | ¥30.4B | ¥21.7B | +39.8% |
| Ordinary Income | ¥30.7B | ¥21.6B | +41.7% |
| Net Income / Net Profit | ¥23.3B | ¥15.7B | +48.9% |
| ROE | 15.2% | 11.1% | - |
The FY2026 results delivered revenue of ¥357.0B (YoY +¥31.4B +9.7%), Operating Income of ¥30.4B (YoY +¥8.7B +39.8%), Ordinary Income of ¥30.7B (YoY +¥9.1B +41.7%), and Net Income of ¥23.3B (YoY +¥7.7B +48.9%), achieving higher sales and significantly higher profits. Operating margin improved to 8.5% (from 6.7% prior year, +1.8pt), and Net margin rose to 6.5% (from 4.8% prior year, +1.7pt), indicating profitability improved more than sales growth. Gross margin continued to improve at 14.7% (prior year 12.9%, +1.8pt), and SG&A ratio was contained at 6.2% (flat YoY), producing positive operating leverage. By segment, PublicRelated (Public-Related) was the largest profit source with Operating Income ¥19.2B and margin 17.7%, while Enterprise (Enterprise) led growth with Revenue +21.6% and Operating Income +40.0%. Operating Cash Flow was ¥25.7B (YoY +39.7%), exceeding Net Income, Free Cash Flow was ¥24.3B and ample; cash balances rose despite dividends of ¥7.3B and share buybacks of ¥8.9B. ROE improved significantly to 15.2% (prior year 11.4%), confirming improved capital efficiency.
[Revenue] Revenue ¥357.0B (+9.7%) was driven by Enterprise (¥109.0B, +21.6%) and PublicRelated (¥108.8B, +9.0%). Enterprise achieved double-digit growth through acquisition of large projects and deeper penetration of existing clients, and PublicRelated saw steady performance from high-margin public-sector projects. BroadAreaSolutions (¥57.8B, +3.7%) and Innovation (¥81.4B, +1.3%) grew modestly but maintained stable margins. Segment revenue mix: Enterprise 30.5%, PublicRelated 30.5%, Innovation 22.8%, BroadAreaSolutions 16.2%, indicating a continued two-pillar structure of Public and Enterprise. Regional revenue disclosure is not provided, but business characteristics suggest a domestic focus.
[Profitability] Operating Income ¥30.4B (+39.8%) outpaced revenue growth materially, supported by gross margin improvement (14.7%, +1.8pt) and controlled SG&A (¥22.1B, SG&A ratio 6.2% flat). Cost of sales ¥304.6B (+7.4%) grew less than revenue (+9.7%), with improved project mix and utilization contributing to lower cost ratios. SG&A composition shows depreciation ¥0.6B and goodwill amortization ¥0.0B negligible; personnel and other administrative costs were absorbed by revenue growth. Non-operating income/expense contributed minimally: non-operating income ¥0.9B (including equity-method income ¥0.3B, interest & dividends received ¥0.3B) less non-operating expenses ¥0.5B (including interest paid ¥0.2B, fees paid ¥0.1B) produced a +¥0.3B contribution. Ordinary Income ¥30.7B (+41.7%) expanded at almost the same pace as operating stage. Extraordinary items provided a temporary +¥0.9B uplift (gain on sale of investment securities ¥0.9B) less ¥0.1B loss on retirement of fixed assets (extraordinary loss), a small net one-off. Pre-tax profit ¥31.6B less income taxes ¥8.3B (effective tax rate 26.2%) resulted in Net Income ¥23.3B (+48.9%). Conclusion: higher revenue and higher profit.
Enterprise (Revenue ¥109.0B, +21.6%; Operating Income ¥14.3B, +40.0%; Margin 13.2%) achieved high growth and profit increases driven by large contract wins and deeper existing-customer penetration; it is the fastest-growing segment. PublicRelated (Revenue ¥108.8B, +9.0%; Operating Income ¥19.2B, +20.6%; Margin 17.7%) is the largest profit source, with steady high-margin public-sector projects lifting company margins. Innovation (Revenue ¥81.4B, +1.3%; Operating Income ¥11.2B, +14.7%; Margin 13.8%) grew modestly but maintained profitability; margin remained stable at 13.8%. BroadAreaSolutions (Revenue ¥57.8B, +3.7%; Operating Income ¥7.8B, +33.5%; Margin 13.5%) is smaller in scale but showed notable profit growth, with +33.5% increase. Corporate adjustments of △¥20.1B were recorded; consolidated Operating Income of ¥30.4B equals segment total Operating Income ¥52.5B less corporate costs, resulting in YoY +39.8% increase.
[Profitability] Operating margin 8.5% (prior year 6.7%, +1.8pt), Net margin 6.5% (prior year 4.8%, +1.7pt), Gross margin 14.7% (prior year 12.9%, +1.8pt) — all continue to improve. SG&A ratio 6.2% is flat YoY, demonstrating effective cost containment against revenue growth. [Investment Efficiency] ROE 15.2% (prior year 11.4%, +3.8pt) rose markedly due to improved Net margins and slight improvement in total asset turnover (1.50x, prior year 1.56x roughly flat). ROA (on Ordinary Income basis) 13.7% (prior year 10.3%, +3.4pt) also reflects improved profitability. [Cash Quality] Operating CF / Net Income 1.10x, accrual ratio -1.0% indicating good cash generation quality, though OCF/EBITDA 0.81x (below the 0.9x benchmark) shows a temporary drag on cash conversion due to increases in trade receivables and inventory buildup. [Financial Soundness] Equity Ratio 64.6% (prior year 67.2%, -2.6pt) slightly decreased due to increased investment securities and share buybacks but remains high. Current Ratio 200.8%, Quick Ratio 198.1% indicate very strong short-term payment capacity. Debt/EBITDA 0.43x and Interest Coverage 143x show minimal interest burden and robust financial health.
Operating Cash Flow was ¥25.7B (YoY +39.7%), exceeding Net Income ¥23.3B and showing OCF/NI = 1.10x, indicating strong cash generation. Operating CF subtotal (before working capital changes) was ¥31.1B; increases in trade receivables △¥7.4B and inventories △¥1.1B, offset by increase in trade payables +¥3.1B, absorbed working capital, and tax payments △¥5.7B resulted in operating CF. Decrease in contract liabilities △¥0.6B reflects reduced advances and revenue recognition progress aligned with project progress. Investing CF was △¥1.4B, small in scale, consisting mainly of capital expenditure △¥1.4B; although there were sales of investment securities +¥1.0B and purchases △¥4.6B and insurance reserve purchases △¥0.4B, no aggressive growth investments were evident. Free Cash Flow was ample at ¥24.3B. Financing CF included dividends △¥7.3B, share buybacks △¥8.9B, net increase in short-term borrowing +¥5.0B, repayment of long-term debt △¥8.9B, resulting in financing CF △¥14.4B. Cash and deposits increased to ¥69.4B (prior year ¥65.1B, +6.6%), with cash / short-term debt 7.03x and strong liquidity. Depreciation ¥1.5B versus capital expenditure ¥1.4B indicates capex within depreciation and restrained growth investment.
Earnings quality is high: Operating Income ¥30.4B is almost the same as Ordinary Income ¥30.7B, with non-operating items contributing minimally (+¥0.3B). Extraordinary gain ¥0.9B (gain on sale of investment securities) was temporary and small—about 2.8% of pre-tax profit ¥31.6B—confirming operating-led profit structure. Non-operating income ¥0.9B equals 0.2% of Revenue and includes equity-method income ¥0.3B and interest & dividends received ¥0.3B. The gap between Ordinary Income and Net Income (¥30.7B → ¥23.3B, △24.1%) is mainly due to income taxes ¥8.3B, a normal tax burden rather than one-off. On accrual quality, Operating CF ¥25.7B exceeded Net Income ¥23.3B (OCF/NI = 1.10x) and accrual ratio △1.0% indicates a healthy zone. Goodwill amortization is ¥0.0B negligible, so IFRS-related profit compression is immaterial. Overall, profits generated from recurring operating activities are being converted to cash, indicating high earnings quality.
Next fiscal year plan forecasts Revenue ¥390.0B (+9.2%), Operating Income ¥35.0B (+15.3%), Ordinary Income ¥35.0B (+14.1%), Net Income ¥24.6B (+5.4%), expecting higher sales and profits. Operating margin is assumed to improve to 9.0% (this period 8.5%, +0.5pt), premised on continued gross margin improvement and SG&A containment to drive positive operating leverage. The lower Net Income growth (+5.4%) versus Operating Income growth (+15.3%) likely incorporates low recurrence of extraordinary gains and increased tax burden. EPS forecast ¥164.30 (this period ¥155.63), annual dividend forecast ¥16.00 implying a Payout Ratio ~9.7% which is low; compared with this period’s annual dividend ¥64 (payout ratio ~44.7%), this is a large decrease and raises potential consistency concerns in disclosed data (possible assumption of interim dividend ¥12 only and year-end dividend ¥4). Progress rates: first-half Revenue ¥357.0B is 91.5% of FY plan ¥390.0B, and Operating Income ¥30.4B is 86.9% of FY plan ¥35.0B—high levels, indicating strong likelihood of plan achievement. Keys to next-year achievement are continued wins of high-margin PublicRelated projects, sustained Enterprise growth, further gross margin improvement, and containment of wage inflation.
Annual dividend ¥64 (interim ¥12, year-end ¥52) yields a payout ratio of about 44.7% (dividend total about ¥7.3B against Net Income ¥23.3B), within an appropriate range. Prior year dividend was annual ¥6 and this year’s ¥64 is a large increase, indicating an active dividend policy. With Free Cash Flow ¥24.3B versus dividends ¥7.3B, FCF coverage is 2.33x, suggesting low risk of dividend cut. Additionally, share buybacks of ¥8.9B were executed (on a financing CF basis); combined with dividends ¥7.3B, total shareholder returns were about ¥16.1B, giving a Total Return Ratio of about 69.1% (¥16.1B ÷ ¥23.3B), showing balanced returns. DOE (dividend ÷ Equity) is about 4.6%, indicating shareholder-return-conscious capital efficiency. Average shares outstanding during the period 14,992 thousand shares, treasury shares at period-end 1,644 thousand shares (about 10.1% of issued shares 16,293 thousand shares), suggesting share buybacks supported per-share value enhancement and ROE uplift. Next-year dividend forecast ¥16.00 versus this period ¥64 is a large cut; due to consistency concerns in disclosure data, confirm actual dividend policy via company materials.
Structurally low gross margin: Gross margin 14.7% improved +1.8pt YoY but remains below 20%. If pricing power is constrained or external procurement and labor cost inflation persist, margin defense will be difficult. Continued acquisition of high-margin projects and increased in-house production ratio are essential for further gross margin improvement.
High dependence on public-sector projects: PublicRelated is the largest source of segment Operating Income (¥19.2B, ~36.6% of total), so revenue is exposed to fluctuations in public-sector bidding environment and budget execution timing. Government budget cuts or procurement policy changes could directly impact performance.
High short-term debt ratio: Short-term debt ratio 71% (short-term debt ¥74.8B ÷ total debt ¥84.4B) is high and requires strict refinancing management. Although cash / short-term debt 7.03x indicates ample liquidity, the accelerated increase in short-term borrowings ¥9.86B (YoY +102.9%) requires careful repayment planning if the trend continues.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.5% | 8.1% (3.6%–16.0%) | +0.4pt |
| Net Margin | 6.5% | 5.8% (1.2%–11.6%) | +0.7pt |
Profitability slightly exceeds the industry median, confirming the effects of gross margin improvement.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 9.7% | 10.1% (1.7%–20.2%) | -0.4pt |
Revenue growth is roughly in line with the industry median, consistent with IT & telecom industry growth trends.
※ Source: Company compilation
Structural improvement in profitability trend: Gross margin 14.7% (+1.8pt), Operating margin 8.5% (+1.8pt), ROE 15.2% (+3.8pt) — all major profitability metrics improved driven by better project mix and optimized utilization. Next-year plan anticipates Operating margin rising to 9.0%, so continuation of this improving trend is expected. Continued wins of high-margin PublicRelated projects (margin 17.7%) and high Enterprise growth (+21.6%) will remain key.
Ample cash generation and coexistence with shareholder returns: Free Cash Flow ¥24.3B and cash generation exceeding Net Income ¥23.3B supported dividends ¥7.3B and share buybacks ¥8.9B achieving Total Return Ratio ~69%. Cash balance ¥69.4B and cash / short-term debt 7.03x indicate deep liquidity, supporting continued dividends and share buybacks. If receivable collection is tightened and OCF/EBITDA improves above 0.9x, further return capacity could be expected.
Short-term debt management and investment securities trends: Short-term debt ratio 71% and a YoY increase in short-term borrowings of +102.9% to ¥9.86B warrant monitoring. Thick cash reduces immediate risk, but extending loan tenor and refining repayment plans are advisable. Investment securities ¥42.2B (+46.2%) present market price fluctuation risk; other comprehensive income increase (valuation difference ¥18.99B) boosted equity but could reverse in a market downturn.
This report is an AI-generated financial analysis document produced from XBRL earnings brief 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; consult professionals as needed before acting.