| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥483.6B | ¥444.2B | +8.9% |
| Operating Income / Operating Profit | ¥51.6B | ¥47.7B | +8.1% |
| Ordinary Income | ¥53.6B | ¥48.8B | +9.9% |
| Net Income / Net Profit | ¥37.4B | ¥32.9B | +13.7% |
| ROE | 15.9% | 15.7% | - |
For the fiscal year ended March 2026, Revenue was ¥483.6B (YoY +¥39.4B, +8.9%), Operating Income was ¥51.6B (YoY +¥3.9B, +8.1%), Ordinary Income was ¥53.6B (YoY +¥4.8B, +9.9%), and Net Income was ¥37.4B (YoY +¥4.5B, +13.7%), resulting in year-over-year increases in both revenue and profit. Operating margin was 10.7% (prior year 10.7%), broadly flat, and gross margin declined to 20.3% (prior year 21.4%, -1.1pt); however, SG&A ratio was compressed to 9.6% (prior year 10.7%, -1.1pt), preserving margins. Special gains included a gain on sale of investment securities of ¥1.7B, which boosted final profit. Total assets were ¥315.0B (YoY +¥32.1B, +11.3%), and shareholders' equity was ¥234.4B (YoY +¥25.6B, +12.3%), indicating accumulation of equity. ROE remained strong at 15.9%. Conversely, Operating Cash Flow (OCF) was limited to ¥26.6B (YoY -¥3.0B, -10.1%), yielding a cash conversion ratio to Net Income of 0.71x, which is weak; increases in accounts receivable (+¥14.5B) and work-in-progress (+¥0.6B) highlighted working capital pressures. Free Cash Flow was -¥5.4B and did not cover dividend payments of ¥12.9B, but liquidity is stable due to cash and deposits of ¥108.7B and short-term investment securities of ¥44.1B.
【Revenue】Revenue of ¥483.6B (+8.9%) was supported by deepening projects with key clients and acquisition of new projects within the single segment (System Development). Sales to major client NTT DATA amounted to ¥80.2B (16.6% of sales), up ¥1.3B from ¥78.9B in the prior year, indicating continued concentration with large customers. By region, domestic sales account for over 90%, with limited overseas expansion. Gross margin declined to 20.3% (prior year 21.4%, -1.1pt), reflecting a change in project mix (higher proportion of higher-cost projects) and rising labor costs.
【Profitability】Operating Income of ¥51.6B (+8.1%) grew in line with revenue, indicating neutral operating leverage. SG&A was ¥46.4B (prior year ¥47.3B, -¥0.9B, -1.9%) and SG&A ratio improved to 9.6% (prior year 10.7%, -1.1pt). Non-operating income of ¥2.1B included dividend income of ¥1.1B and interest on securities of ¥0.3B; non-operating expenses were minimal at ¥0.1B, resulting in Ordinary Income of ¥53.6B (+9.9%). A special gain from sale of investment securities of ¥1.7B was recorded, lifting Income before Income Taxes to ¥55.3B (+13.3%). Income taxes were ¥16.4B (effective tax rate 29.7%, prior year 29.6%), yielding Net Income of ¥37.4B (+13.7%), a double-digit increase. In conclusion, revenue and profit grew, with a temporary contribution from special gains, while core operating profitability was maintained.
【Profitability】Operating margin remained at 10.7%, unchanged from the prior year, and Net Income margin improved to 7.7% (prior year 7.4%, +0.3pt). ROE was 15.9% (prior year 17.5%), a high level though decreased YoY due to an increase in shareholders' equity. 【Cash Quality】OCF/Net Income was 0.71x, below 1.0x, and increases in working capital (accounts receivable +¥14.5B, work-in-progress +¥0.6B) pressured cash conversion. OCF subtotal (before working capital changes) was ¥41.2B, indicating strong intrinsic cash generation relative to profit levels, but management of collection terms remains an issue. 【Investment Efficiency】Total asset turnover was 1.54x (prior year 1.57x), almost flat. Investment securities totaled ¥42.1B (prior year ¥30.8B, +37.0%), reflecting increased deployment of surplus funds. Tangible fixed assets were ¥8.0B (prior year ¥9.2B), indicating restrained capital expenditures. 【Financial Soundness】Equity Ratio was 74.4% (prior year 73.8%), extremely high; interest-bearing debt consists only of short-term borrowings of ¥3.0B, effectively near net cash. Current ratio was 325.8%, with cash and deposits of ¥108.7B providing ample liquidity and very low short-term funding risk.
OCF was ¥26.6B (prior year ¥29.6B, -10.1%), resulting in a conversion ratio to Net Income of 0.71x and raising concerns over cash quality. OCF subtotal (before working capital changes) was ¥41.2B and was solid, but increases in accounts receivable of ¥14.5B and inventories (work-in-progress) of ¥0.6B produced a working capital cash outflow of ¥15.1B. Payments of corporate taxes of ¥14.5B also contributed to cash outflows. Investing Cash Flow was -¥32.0B, driven primarily by acquisition of short-term investment securities of -¥20.9B, acquisition of investment securities of -¥14.1B, and proceeds from sales of ¥2.1B, indicating increased deployment of surplus funds. Capital expenditure was minimal at -¥0.1B, and the CapEx-to-depreciation ratio was 0.10x (depreciation ¥1.4B), signaling restrained investment. Financing Cash Flow was -¥15.4B, mainly due to dividend payments of ¥12.9B and repayment of short-term borrowings of ¥2.3B. Free Cash Flow was -¥5.4B, so dividend payments were not covered by free cash, but beginning cash of ¥132.5B decreased to ending cash of ¥131.7B (change -¥2.1B), and abundant liquidity kept funding stable.
Earnings source is primarily Operating Income of ¥51.6B from the System Development business, reflecting recurring earnings power. Non-operating income of ¥2.1B (0.4% of sales) is centered on dividend income of ¥1.1B and interest on securities of ¥0.3B, so non-core earnings are limited in scale. A special gain on sale of investment securities of ¥1.7B boosted Income before Income Taxes by approximately 3%, but is a one-off factor. The gap between Ordinary Income of ¥53.6B and Net Income of ¥37.4B is mainly due to income taxes of ¥16.4B, with a stable tax burden ratio of 29.7%. Comprehensive income of ¥37.9B is nearly identical to Net Income of ¥37.4B; Other Comprehensive Income of -¥0.9B (valuation difference on securities) is minor. From an accrual perspective, OCF/Net Income of 0.71x and OCF/EBITDA (EBITDA = Operating Income ¥51.6B + Depreciation ¥1.4B = ¥53.0B) of 0.50x indicate weak cash conversion and suggest buildup of accounts receivable and work-in-progress. Overall, earnings quality is healthy based on recurring earnings, but there is room for improvement in cash conversion.
Full-year guidance projects Revenue of ¥530.0B (YoY +9.6%), Operating Income of ¥56.0B (YoY +8.5%), Ordinary Income of ¥58.0B (YoY +8.2%), and Net Income of ¥39.2B (YoY +4.7%). Compared with current-year results (Revenue ¥483.6B, Operating Income ¥51.6B, Ordinary Income ¥53.6B, Net Income ¥37.4B), the increases are Revenue +¥46.4B, Operating Income +¥4.4B, Ordinary Income +¥4.4B, and Net Income +¥1.8B. The plan assumes maintenance of Operating margin at approximately 10.6%, requiring either improvements in gross margin or further suppression of SG&A ratio. The dividend guidance lists interim 0, which may indicate an interim dividend of 0 and a year-end dividend to be determined separately. EPS forecast is ¥82.75, roughly in line with current-period EPS of ¥82.11. The revenue and operating income forecasts assume continuation of current trends; progress in acceptance of large projects and improvement in working capital efficiency (shortening DSO) will be key to achievement.
Dividend is year-end ¥33 (interim ¥0), yielding an annual dividend of ¥33, and Payout Ratio is 37.1% (GPT analysis calculates 42.7% but XBRL data of 37.1% is adopted) which is a healthy level. Total dividend amount is ¥12.9B, equivalent to 34.5% of Net Income ¥37.4B (the difference vs. per-share payout ratio of 37.1% is due to the difference between average shares outstanding and year-end shares). Share buybacks were effectively zero (-¥0.0B), so Total Return Ratio equals the payout ratio. Free Cash Flow was -¥5.4B, so dividend payments were funded by drawing down cash, but high liquidity (cash and deposits ¥108.7B, short-term investment securities ¥44.1B) indicates a strong capacity to continue dividends. Payout Ratio of 37.1% and DOE (Dividend on Equity) of 6.5% are consistent with capital efficiency. Going forward, improvement in OCF (working capital efficiency) is expected to restore dividend coverage by Free Cash Flow.
Expansion of working capital risk: Accounts receivable increased to ¥89.3B (prior year ¥74.7B, +19.5%), and work-in-progress increased to ¥1.6B (prior year ¥1.0B, +62.3%), pressuring OCF. The rate of working capital increase relative to revenue growth is high; DSO (days sales outstanding) is about 67 days and has lengthened. Continued delays in acceptance of large projects or prolongation of collection terms could further reduce cash generation and sustain negative Free Cash Flow coverage of dividends.
Customer concentration risk: Sales to NTT DATA amount to ¥80.2B (16.6% of sales), indicating high dependence on a single customer. Any contract changes or project reductions by this customer could cause significant declines in revenue and profit. Progress in customer diversification and new client acquisition is important.
Declining gross margin trend: Gross margin declined to 20.3% (prior year 21.4%, -1.1pt), driven by rising labor costs and a change in project mix (higher proportion of higher-cost projects). If price revisions and productivity improvements do not materialize, maintaining operating margin will become difficult and structural deterioration of profitability is a risk.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.7% | 8.1% (3.6%–16.0%) | +2.6pt |
| Net Income Margin | 7.7% | 5.8% (1.2%–11.6%) | +1.9pt |
Profitability exceeds the industry median, and both operating margin and net income margin are at the upper end.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 8.9% | 10.1% (1.7%–20.2%) | -1.2pt |
Revenue growth is slightly below the industry median but within the IQR, maintaining stable growth.
※ Source: Company compilation
Combination of profitability and financial soundness: The company maintains high capital efficiency with Operating Margin 10.7% and ROE 15.9%, while possessing a very strong financial base with Equity Ratio 74.4% and effectively no net debt. Gross margin fell -1.1pt YoY, but SG&A control preserved Operating Margin; if price revisions and productivity improvements proceed, sustainability of profitability is high. Industry benchmarking also shows Operating Margin +2.6pt and Net Income Margin +1.9pt, indicating competitive advantage.
Room to improve working capital efficiency: OCF/Net Income 0.71x and Free Cash Flow -¥5.4B indicate cash generation has not kept pace with revenue growth. Accounts receivable increase of ¥14.5B and work-in-progress increase of ¥0.6B are primary causes; shortening DSO of about 67 days, accelerating acceptance cycles, and utilizing advance payments could improve working capital efficiency, restore OCF to Net Income levels, and normalize dividend coverage by Free Cash Flow. Achievement of next-year guidance (Revenue ¥530.0B, Operating Income ¥56.0B) presumes this improvement.
Dividend sustainability and expansion of surplus funds deployment: Payout Ratio 37.1% is healthy, and liquidity (cash and deposits ¥108.7B, short-term investment securities ¥44.1B) supports short-term dividend sustainability. Investment securities increased to ¥42.1B (+37.0%), confirming expansion of surplus fund deployment. Conversely, CapEx/Depreciation of 0.10x indicates restrained growth investment; strengthening technology and human capital investment will be necessary to maintain competitiveness.
This report was automatically generated by AI analyzing XBRL financial statement disclosure data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial statement data. Investment decisions are your responsibility; please consult a professional advisor as necessary.