| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥646.8B | ¥587.6B | +10.1% |
| Operating Income / Operating Profit | ¥66.0B | ¥59.8B | +10.4% |
| Ordinary Income | ¥69.8B | ¥62.9B | +11.0% |
| Net Income | ¥42.0B | ¥33.1B | +26.9% |
| ROE | 12.5% | 10.7% | - |
For the fiscal year ended March 2026, Revenue was ¥646.8B (vs prior year +¥59.2B +10.1%), Operating Income was ¥66.1B (vs prior year +¥6.2B +10.4%), Ordinary Income was ¥69.8B (vs prior year +¥6.9B +11.0%), and Net Income attributable to owners of the parent was ¥42.0B (vs prior year +¥8.9B +26.9%). While the IT Services Business delivered steady growth, the Digital Solutions Business achieved rapid expansion with Revenue +99.1% and Operating Income +388.1%, driving company-wide top- and bottom-line growth. Operating margin remained at 10.2%, and Net Income rose sharply YoY by +26.9% due to special gains including ¥6.4B of gains on sale of investment securities.
[Revenue] Revenue reached ¥646.8B (+10.1%), a double-digit increase. By segment, the IT Services Business recorded ¥553.6B (+2.4%) with steady growth, driven primarily by Enterprise at ¥240.1B (+8.9%). Manufacturing declined to ¥139.3B (-6.3%), but the Digital Solutions Business doubled to ¥93.1B (+99.1%), leading overall company growth. Contract assets increased to ¥11.6B (prior year ¥3.8B) and work-in-progress rose to ¥18.0B (prior year ¥3.2B), suggesting concentration in acceptance timing and accelerated project progress. By geography, domestic sales account for over 90%, with limited overseas expansion.
[Profitability] Cost of sales was ¥515.7B, yielding a gross margin of 20.3% (prior year 20.0%), a 0.3pt improvement. SG&A increased to ¥65.0B (+¥7.1B), driven by higher executive compensation ¥24.4B (prior year ¥22.2B), goodwill amortization ¥4.0B (prior year ¥3.4B), and employee benefits ¥4.0B (prior year ¥3.6B). Operating Income was ¥66.1B (+10.4%), maintaining an operating margin of 10.2%. Non-operating items contributed net +¥3.7B (interest income ¥1.8B, dividend income ¥0.9B, equity-method investment income ¥0.6B), bringing Ordinary Income to ¥69.8B (+11.0%). Extraordinary items comprised special gains ¥7.3B (mainly ¥6.4B gain on sale of investment securities) against special losses ¥1.7B (including impairment losses), yielding a net contribution of +¥5.6B. Profit before tax was ¥75.4B (+20.8%), with income taxes of ¥22.6B (effective tax rate 30.0%), resulting in Net Income attributable to owners of the parent of ¥42.0B (+26.9%). The company therefore achieved revenue and profit growth.
The IT Services Business recorded Revenue ¥553.6B (+2.4%), Operating Income ¥80.4B (+4.7%), and margin 14.5%. Within this, Enterprise had Revenue ¥240.1B (+8.9%) and Operating Income ¥33.0B (+31.9%), with margin improving significantly to 13.7%. Financial posted Revenue ¥174.3B (+1.5%) and Operating Income ¥22.1B (-7.7%), with margin declining to 12.7%. Manufacturing had Revenue ¥139.3B (-6.3%) and Operating Income ¥25.3B (-9.0%), maintaining a high margin of 18.2% despite declines. The Digital Solutions Business achieved Revenue ¥93.1B (+99.1%) and Operating Income ¥8.2B (+388.1%), with margin 8.8% and rapid growth. Excluding corporate expenses of ¥22.5B (prior year ¥18.6B), on an adjusted basis the Digital Solutions profitability contributed to overall margin improvement, partially offset by Manufacturing’s profit contraction.
[Profitability] Operating margin at 10.2% is flat YoY; Net margin improved to 6.5% (prior year 5.6%), a 0.9pt improvement. ROE of 12.5%, together with an Equity Ratio of 69.9% in the dataset, indicates favorable capital efficiency. Gross margin at 20.3% improved +0.3pt YoY. [Cash Quality] Operating Cash Flow (OCF) was ¥53.3B, 1.27x Net Income ¥42.0B, indicating strong cash conversion. OCF/Revenue was 8.2% and accrual ratio was -17.3%, confirming cash backing of earnings. [Investment Efficiency] Total asset turnover was 1.35x, and CapEx/Depreciation was 2.75x, consistent with a growth investment phase. Tangible fixed assets increased to ¥19.6B (prior year ¥10.1B), +94% YoY, reinforcing medium-term growth base. [Financial Soundness] Equity Ratio 69.9% (prior year 71.1%), Debt/Equity 0.34x, cash and deposits ¥154.8B significantly exceed interest-bearing debt ¥11.6B (short- and long-term). Current ratio 300%, Interest Coverage approx. 521x, indicating extremely high financial safety.
Operating Cash Flow was ¥53.3B (prior year ¥47.6B), +11.9%. From Profit before tax ¥75.4B and changes in working capital, the company recorded increases in trade receivables -¥3.2B, increases in trade payables +¥4.1B, tax payments -¥20.0B, etc. Inventories increased slightly by ¥0.9B, but accumulation of contract assets and work-in-progress suggests timing issues in acceptance; DSO was about 61 days. Investing Cash Flow was -¥13.2B, driven by CapEx -¥8.5B, acquisition of subsidiary shares -¥4.5B, and intangible asset acquisitions -¥1.8B. Proceeds from sale of investment securities ¥7.0B contributed cash inflow. Financing Cash Flow was -¥40.0B, driven by dividend payments -¥21.2B, share repurchases -¥15.0B, and long-term loan repayments -¥4.6B. Free Cash Flow was ¥40.1B (Operating CF + Investing CF), sufficient to cover dividends and share repurchases. Cash and deposits rose slightly to ¥154.8B (prior year ¥153.3B), indicating very healthy liquidity.
Recurring earnings are composed of Operating Income ¥66.1B and net non-operating items +¥3.7B (interest income ¥1.8B, dividend income ¥0.9B, equity-method investment income ¥0.6B), meaning 88% of Ordinary Income ¥69.8B was generated from operating activities. Non-operating income represents 0.8% of Revenue, indicating high core-business dependence and healthy quality of non-operating items. Special gains ¥7.3B (mainly ¥6.4B gain on sale of investment securities) are one-off factors; sustainability beyond the next fiscal year depends on operating performance. Operating Cash Flow ¥53.3B is 0.71x of Profit before tax ¥75.4B, with changes in working capital the main driver of the gap. Increases in contract assets and work-in-progress indicate accumulation of unaccepted work, somewhat weakening short-term cash conversion, but accrual ratio -17.3% confirms cash backing of profits. Comprehensive income ¥61.8B was +47% higher than Net Income ¥42.0B, contributed by ¥8.5B valuation differences on other securities, etc.
For the fiscal year ending March 2027, the company forecasts Revenue ¥715.0B (+10.5%), Operating Income ¥80.0B (+21.1%), Ordinary Income ¥82.0B (+17.5%), and Net Income attributable to owners of the parent ¥42.9B (+2.0%). Operating margin is expected to improve to approximately 11.2%, assuming scale effects from the Digital Solutions Business and maintained utilization in the IT Services Business. Progress toward the forecast stands at: Revenue 90.5%, Operating Income 82.5%, Ordinary Income 85.1%, Net Income 97.9%, indicating Revenue and Operating Income are weighted toward the first half, while Net Income is already close to the full-year forecast and further operating-driven profit in H2 is expected to drive Net Income. EPS forecast is ¥136.9, dividend forecast ¥35.0, implying a payout ratio of approximately 25.6% and a conservative policy.
Annual dividend is ¥64 per share (interim ¥29, year‑end ¥35), a substantial increase of ¥45 YoY. Payout ratio is 39.3% (total dividends ¥16.3B ÷ Net Income ¥42.0B), within a sustainable range. Total shareholder return including share repurchases ¥15.0B is approximately ¥31.3B, yielding a Total Return Ratio of about 74.5%. Against Free Cash Flow ¥40.1B, total shareholder returns ¥31.3B imply FCF coverage of 1.28x, which is healthy. Retained earnings ¥258.5B and cash ¥154.8B provide a strong capital base, enabling simultaneous dividends and share repurchases.
Working capital management risk: Rapid increases in contract assets ¥11.6B (prior year ¥3.8B) and work-in-progress ¥18.0B (prior year ¥3.2B) increase cash flow volatility in case of acceptance delays or project margin deterioration. If DSO around 61 days continues to lengthen, capital efficiency could worsen and maintaining Operating CF/Revenue of 8.2% may become difficult.
Segment margin disparity risk: Manufacturing margin at 18.2% versus Digital Solutions at 8.8% shows a large gap, raising concerns that Digital growth could dilute company-wide margins. Continued Manufacturing revenue decline and Financial segment profit deterioration together mean improving utilization and cost absorption are essential to maintain the company-wide operating margin of 10.2%.
Reliance on extraordinary items risk: Gain on sale of investment securities ¥6.4B accounted for 8.5% of Profit before tax, temporarily boosting Net Income. The projected Net Income growth +2.0% for next year contrasts with Operating Income growth +21.1%, and the disappearance of special gains could pressure Net Income. Monitoring impairment risk on goodwill ¥27.3B (8.2% of net assets) is also necessary.
Profitability & Returns
| Metric | Our Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.2% | 8.1% (3.6%–16.0%) | +2.1pt |
| Net Margin | 6.5% | 5.8% (1.2%–11.6%) | +0.7pt |
Both Operating Margin and Net Margin exceed industry medians, placing the company in the upper tier of profitability within the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Our Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 10.1% | 10.1% (1.7%–20.2%) | -0.0pt |
Revenue growth rate is in line with the industry median, achieving expansion consistent with industry growth trends.
※Source: Company compilation
Rapid expansion of the Digital Solutions Business and room for margin improvement: The Digital Solutions Business achieved Revenue +99.1% and Operating Income +388.1%. Although its margin of 8.8% is below the company average, there is significant upside from scale. The projected improvement to an 11.2% operating margin next year assumes margin expansion in this segment and spillover effects company-wide; sustained order intake and utilization are key.
Working capital management improvement as the next CF-generation driver: Accumulation of contract assets and work-in-progress and DSO around 61 days suggest room for improvement via optimization of acceptance timing and stronger project management. If OCF/EBITDA can be raised from roughly 0.77x, FCF generation would increase and shareholder return capacity could expand.
Sustainable growth base through both financial soundness and capital efficiency: With an Equity Ratio of 69.9% and cash ¥154.8B, the company maintains a conservative financial structure while achieving ROE 12.5%. Aggressive CapEx (+94%) is strengthening the medium-term growth base, and a balanced shareholder return policy (payout ratio 39.3%, Total Return Ratio 74.5%) appears sustainable.
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 from publicly disclosed financial statements. Investment decisions are your own responsibility; please consult a professional advisor if necessary before making investment decisions.