These are mechanically computed values based on a residual income model. They are not a forecast of market prices or a recommendation of any investment action, and do not predict or guarantee future share prices. Historical values are computed retrospectively using current guidance-achievement statistics.
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥914.6B | ¥968.4B | -5.6% |
| Operating Income | ¥68.2B | ¥85.7B | -20.4% |
| Profit Before Tax | ¥66.5B | ¥85.2B | -22.0% |
| Net Income | ¥45.0B | ¥58.4B | -22.9% |
| ROE | 2.5% | 3.2% | - |
For Q1 of the fiscal year ending March 2027, revenue and earnings declined, primarily due to a drop in hardware and software sales and front-loaded selling, general and administrative expenses. Revenue was ¥914.6B (¥968.4B in the same period of the previous year, YoY-5.6%), Operating Income was ¥68.2B (¥85.7B, YoY-20.4%), and Profit Before Tax was ¥66.5B (¥85.2B, YoY-22.0%). Net Income attributable to owners of the parent was ¥44.8B (¥58.3B, YoY-23.1%), and basic EPS was ¥46.42 (¥59.42, YoY-21.9%). The gross margin improved to 26.7% (24.6% in the previous year), but SG&A expenses increased to 19.4% (16.5%), causing the operating margin to decline to 7.5% (8.9%).
【Revenue】Overall revenue declined due to changes in the segment mix. Revenue composition was 34.1% for System Services, 31.5% for Outsourcing, 15.2% for Support Services, 9.6% for Software, and 7.0% for Hardware. While Outsourcing expanded to ¥288.4B (YoY+24.5%) and System Services grew to ¥311.8B (same period: +3.6%), Hardware declined significantly to ¥63.6B (same period: -57.5%) and Software to ¥88.1B (same period: -24.0%), which were the primary causes of the overall 5.6% revenue decline.
【Profit and Loss】As cost of sales declined more than revenue (-8.2%), the gross margin improved by +2.1pt. However, SG&A expenses increased to ¥177.0B (YoY+11.0%), placing pressure on Operating Income. By segment, Outsourcing contributed to earnings growth with profit of ¥73.9B (YoY+76.0%), while System Services generated ¥114.4B (same period: +7.8%). In contrast, Software declined sharply to ¥1.6B (same period: -84.7%) and Hardware to ¥9.6B (same period: -65.0%), while adjustments for corporate expenses and other items also increased. Financial expenses increased to ¥4.2B (¥3.1B in the previous year), and equity-method investment income decreased to ¥1.6B (¥7.8B in the previous year), resulting in a larger decline in Profit Before Tax than in Operating Income. As both revenue and profit were below the previous year, the conclusion is that the Company recorded lower revenue and lower earnings.
Recurring Outsourcing and System Services drove earnings growth, while the discrete Software and Hardware businesses are undergoing an adjustment phase. Outsourcing grew to revenue of ¥288.4B (YoY+24.5%) and segment profit of ¥73.9B (same period: +76.0%), with its profit margin improving significantly to 25.6% (18.1% in the previous year). System Services also remained solid, with revenue of ¥311.8B (same period: +3.6%) and profit of ¥114.4B (same period: +7.8%), maintaining a profit margin of 36.7% (35.3% in the previous year). Meanwhile, Software declined sharply to revenue of ¥88.1B (same period: -24.0%) and profit of ¥1.6B (same period: -84.7%), reducing its profit margin to 1.9% (9.2% in the previous year). Hardware also contracted to revenue of ¥63.6B (same period: -57.5%) and profit of ¥9.6B (same period: -65.0%). Support Services were somewhat weak, with revenue of ¥139.1B (same period: -2.3%) and profit of ¥39.4B (same period: -11.6%). Overall, the profit mix is shifting toward the highly recurring Outsourcing and System Services businesses, while the contraction of Software and Hardware is limiting growth in company-wide profit.
【Profitability】The operating margin declined to 7.5% (8.9% in the previous year), and the net profit margin (based on income attributable to owners of the parent) declined to 4.9% (6.0% in the previous year). In contrast, the gross margin improved to 26.7% (24.6% in the previous year), supported by the decline in cost of sales.【Cash Quality】Operating Cash Flow (OCF) was ¥145.2B, more than three times Net Income attributable to owners of the parent of ¥44.8B, indicating strong cash generation relative to profit.【Investment Efficiency】ROE was 2.5% (based on quarterly results), while total asset turnover remained low, indicating room for improvement in asset efficiency.【Financial Soundness】The Equity Ratio improved to 48.6% (47.0% in the previous year). The Company held ¥470.4B in cash and cash equivalents against interest-bearing debt of ¥729.5B, and EBIT-based financial expense coverage was approximately 16.1x, indicating ample debt-servicing capacity.
OCF was ¥145.2B, down YoY-33.1% from ¥217.0B in the same period of the previous year, but remained above Net Income attributable to owners of the parent of ¥44.8B. Contributing factors included a ¥300.2B cash inflow from the collection of trade receivables and an increase of ¥115.7B in contract liabilities, both of which indicate an improvement in the advance-payment and collection cycle. Offsetting factors included an increase in inventories of -¥59.0B and a decrease in trade payables of -¥105.6B, while corporate income tax payments of -¥39.4B also reduced OCF. Investing Cash Flow was -¥41.0B, including capital expenditures of ¥3.9B, and Financing Cash Flow was -¥104.8B, primarily due to dividend payments of ¥67.0B. Free Cash Flow was ¥104.2B (= OCF ¥145.2B + Investing Cash Flow -¥41.0B), a level sufficient to cover dividend payments. Cash and cash equivalents were ¥470.4B, remaining almost flat from ¥47,043 million at the beginning of the period (-¥0.05B), indicating that cash generated from operating activities broadly offset the cash outflow from financing activities.
The income statement for the quarter was generally generated by recurring business activities, and no significant temporary items corresponding to extraordinary gains or losses were identified. Among non-operating items, financial expenses of ¥4.2B exceeded financial income of ¥2.6B, reducing Profit Before Tax on a net basis. In addition, equity-method investment income declined to ¥1.6B (¥7.8B in the previous year), widening the difference between Profit Before Tax and Operating Income. OCF of ¥145.2B was substantially higher than Net Income attributable to owners of the parent of ¥44.8B, indicating that earnings were supported by cash generation. However, part of this difference resulted from an increase of ¥115.7B in contract liabilities, representing accumulated advance payments; this factor may reverse as revenue is recognized in the future and should be considered when assessing earnings quality. Comprehensive income was ¥47.7B (¥47.4B attributable to owners of the parent), and the difference from Net Income of ¥44.8B was small at +¥2.6B, indicating limited effects from valuation differences on other securities and foreign currency translation adjustments.
Progress against the full-year Company forecast was 19.5% for Revenue (¥914.6B/¥4700.0B), 14.1% for Operating Income (¥68.2B/¥484.0B), and 13.9% for Net Income (¥44.8B/¥322.0B; the Company forecast is based on income attributable to owners of the parent). All were below the 25% benchmark for equal quarterly allocation. The full-year Operating Income forecast anticipates growth of YoY+13.6%, which differs in direction from the Q1 operating decline of -20.4%. The increase in contract liabilities of +¥115.7B from the beginning of the period suggests room for revenue recognition in the second half of the fiscal year. Progress in executing projects, particularly in Outsourcing and System Services, will therefore be the key to achieving the full-year plan. No revisions were made to the earnings or dividend forecasts during the quarter.
The Company’s full-year dividend forecast is ¥140.00. Based on the previous fiscal year’s actual dividend of ¥60 (estimated to represent part of the combined interim and year-end dividends, based on the same-period data for the previous year), the Payout Ratio against the full-year EPS forecast of ¥333.41 is approximately 42.0%. Dividend payments during the quarter were ¥67.0B (¥58.4B in the same period of the previous year), within the range of Free Cash Flow of ¥104.2B, indicating that the dividend burden is not excessive relative to cash generation. Share repurchases were ¥0.0B in the current quarter (¥19.4B in the same period of the previous year), and shareholder returns are currently centered on dividends. No revision was made to the dividend forecast during the quarter.
Deceleration in the Product Businesses: Hardware revenue declined substantially to ¥63.6B (YoY-57.5%), while Software revenue fell to ¥88.1B (same period: -24.0%). Segment profits declined to ¥9.6B (same period: -65.0%) and ¥1.6B (same period: -84.7%), respectively. If the contraction of the discrete businesses continues, continued downward pressure on company-wide profit is possible.
Declining Operating Leverage Due to Front-Loaded Expenses: SG&A expenses were ¥177.0B, increasing YoY+11.0%, significantly faster than the -5.6% decline in revenue, and pushing the operating margin down to 7.5% (8.9% in the previous year). If revenue growth fails to keep pace with expense growth, profitability may remain under pressure.
Reliance on Short-Term Interest-Bearing Debt: Of interest-bearing debt of ¥729.5B, current liabilities (short-term borrowings of ¥391.8B and current lease liabilities of ¥76.0B) totaled ¥467.8B, representing a majority. Cash and cash equivalents of ¥470.4B represented only 31.7% of current liabilities of ¥1483.7B. The financial structure therefore has a relatively high need for refinancing short-term funding.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.5% | 8.1% (2.3%–15.9%) | -0.6pt |
| Net Profit Margin | 4.9% | 5.9% (1.6%–10.7%) | -1.0pt |
Both the operating margin and net profit margin are slightly below the industry median.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -5.6% | 9.3% (0.4%–16.9%) | -14.9pt |
The revenue growth rate is substantially below both the industry median and the lower bound of the IQR, indicating that the Company is underperforming on growth relative to its industry peers.
※Source: Compiled by the Company
The gross margin improved by +2.1pt to 26.7% (24.6% in the previous year), with the change in mix caused by the expansion of Outsourcing and contraction of Hardware appearing to be a structural factor. Whether this gross-margin improvement can continue at a pace exceeding the increase in SG&A expenses will determine the future trend in the operating margin.
Contract liabilities accumulated to ¥473.5B (+¥115.7B from the beginning of the period, +32.4%). The increase in advance payments indicates room for revenue recognition from the second half onward, while the full-year progress rates (Revenue 19.5%, Operating Income 14.1%) remain below the benchmark for equal quarterly allocation. The pace of project execution under the plan’s second-half-weighted assumptions is a key point of focus in the financial results.
OCF exceeded three times Net Income attributable to owners of the parent, and Free Cash Flow of ¥104.2B was sufficient to cover dividend payments. However, OCF itself was down -33.1% year on year. Cash generation remains intact, but it is worth monitoring quarterly volatility in cash flow, including the effects of changes in working capital (increased inventories and decreased trade payables).
This is a mechanically calculated reference range based solely on publicly available data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥2,295 |
| base | ¥2,373 |
| bull | ¥2,470 |
| Calculation Assumption | Value |
|---|---|
| Book Value per Share (BPS) | ¥1,831 |
| Adjusted Forecast EPS | ¥349.6 |
| Cost of Equity r | 9.27% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 0.50%) |
| Residual Income Persistence Parameter ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 42.0% |
| Forecast EPS Confidence Adjustment | ×1.049 (based on the industry’s historical guidance achievement rate) |
| implied PBR / PER |
Sensitivity: ¥2,307–¥2,443 at ±1% for the cost of equity, and ¥2,360–¥2,394 at ±0.1 for ω.
Note:
(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not predict or guarantee the future share price.)
This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with professionals as necessary.
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| 1.30x / 6.8x |