| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥3143.7B | ¥2342.9B | +34.2% |
| Operating Income | ¥159.2B | ¥117.9B | +35.0% |
| Equity-method investment income (loss) | - | - | - |
| Ordinary Income | ¥167.1B | ¥123.3B | +35.5% |
| Net Income | ¥122.1B | ¥84.2B | +45.1% |
| ROE | 14.9% | 11.9% | - |
For the nine months ended July 2026 (Q3 cumulative), the company reported Revenue ¥3143.7B (YoY +¥800.8B +34.2%), Operating Income ¥159.2B (YoY +¥41.3B +35.0%), Ordinary Income ¥167.1B (YoY +¥43.8B +35.5%), and Net Income attributable to owners of the parent ¥122.1B (YoY +¥37.8B +45.1%), achieving substantial top- and bottom-line growth across all profit metrics. Revenue expanded sharply—approximately +89%—driven by progress on large public-sector projects, Operating Margin modestly improved to 5.1% (prior 5.0%), and capital efficiency remained high with ROE of 14.9%. Progress toward FY forecasts stands above plan at 103.4% for Operating Income, 102.5% for Ordinary Income, and 105.9% for Net Income, indicating significant upside potential. Special gains of ¥10.6B (gain on sale of investment securities) lifted the bottom line, while Accounts Receivable increased by 46.1% and DSO extended to 118 days, lengthening collection periods and posing challenges for cash conversion of profits.
Revenue expanded to ¥3143.7B (YoY +34.2%). By segment, Public-related Business recorded ¥1415.3B (+89.3%), nearly doubling and becoming the core business representing 45.0% of total revenue. Wins and concentrated delivery for GIGA School Initiative-related and municipal large-scale IT infrastructure projects drove the increase. Information-related Business progressed steadily at ¥1269.7B (+11.7%), Office-related Business was ¥455.2B (-0.2%) essentially flat, and Other Businesses amounted to ¥51.2B (+7.1%). Changes in project mix reduced Gross Profit Margin to 15.1% (from 17.5% prior, -2.4pt), with margin compression attributable to a higher share of hardware in large public projects and intensified pricing competition.
Cost of sales amounted to ¥2669.5B, producing Gross Profit of ¥474.2B (Gross Margin 15.1%). SG&A totaled ¥315.0B (SG&A ratio 10.0%, improved -2.4pt from 12.4%) and was contained relative to revenue growth, generating operating leverage. Operating Income was ¥159.2B (Operating Margin 5.1%), up +35.0% YoY. Non-operating income included Dividend income ¥3.4B, Interest income ¥1.4B, Equity-method investment income ¥1.6B, totaling Non-operating income ¥9.0B. After deducting Non-operating expenses ¥1.1B (including Interest expense ¥0.7B and Foreign exchange losses ¥0.9B), Ordinary Income was ¥167.1B (+35.5%). Adding Special gains ¥10.6B (gain on sale of investment securities) yielded Profit before income taxes ¥177.7B; after Income taxes of ¥55.5B (effective tax rate 31.3%), Net Income attributable to owners of the parent was ¥122.1B (+45.1%). In conclusion, the company achieved revenue and profit growth; excluding special gains, the core business growth trend remains clear.
Public-related Business: Revenue ¥1415.3B (YoY +89.3%), Operating Income ¥107.7B (+67.0%), Operating Margin 7.6%, and the primary profit contributor across the company. Concentrated delivery for GIGA School Initiative and digitalization projects significantly boosted results. Information-related Business: Revenue ¥1269.7B (+11.7%) with Operating Income ¥28.6B (-1.4%), a slight decline and Operating Margin of 2.2%, indicating continued low profitability and suggesting challenges in price competition and project cost management. Office-related Business: Revenue ¥455.2B (-0.2%), Operating Income ¥22.3B (-0.3%), Operating Margin 4.9%, essentially unchanged. Other Businesses: Revenue ¥51.2B (+7.1%) but Operating Income ¥0.1B (-96.5%), with a marked deterioration in profitability. Concentration of projects in Public-related Business supports consolidated profit growth, while improving margins in other segments remains a medium-term challenge.
Profitability: Operating Margin 5.1% (prior 5.0%, +0.1pt), Net Margin 3.9% (prior 3.6%, +0.3pt) with modest improvements. Gross Margin 15.1% (prior 17.5%) declined due to larger public projects, but a substantial improvement in SG&A ratio to 10.0% (prior 12.4%) supported Operating Margin. ROE 14.9% is composed of Net Margin 3.9% × Total Asset Turnover 1.46 × Financial Leverage 2.62; improvements in Net Margin and turnover contributed to YoY ROE increase. Cash Quality: Accounts Receivable ¥1017.2B (YoY +46.1%), Inventories ¥62.2B (-56.5%) indicating inventory compression, but Accounts Receivable DSO at 118 days signals prolonged collection and a risk to cash conversion of profits. Work-in-progress ¥15.5B accounts for about one-quarter of inventory, and cash flows will vary with progress on unbilled projects. Contract liabilities ¥156.5B reflect advance receipts and future revenue realization. Investment Efficiency: Total Asset Turnover improved to 1.46x (prior 1.34x). Interest income ¥1.4B and Dividend income ¥3.4B show limited investment income. Gain on sale of investment securities ¥10.6B is a one-off. Financial Soundness: Equity Ratio 38.2% (prior 40.4%, -2.2pt), Interest-bearing debt ¥36.8B, Cash and deposits ¥379.2B, resulting in Net Cash ¥342.4B and a very robust financial base. Current Ratio 140.4% and Interest Coverage 234x indicate solid short-term liquidity and interest payment capacity.
Detailed Operating Cash Flow (OCF) data were not disclosed, but balance sheet movements allow inference. Accounts Receivable increased significantly by +¥320.9B YoY, extending DSO to 118 days, and this expansion of receivables associated with revenue growth suppresses OCF generation. Inventories decreased by -¥81.0B, improving inventory efficiency, but a high proportion of work-in-progress means cash generation is sensitive to timing of project acceptance. Accounts Payable increased by +¥242.1B, partially offsetting working capital needs by expanding payables with procurement scale. Contract liabilities ¥156.5B contribute to short-term cash inflows as advances, but revenue recognition and cost occurrence will depend on fulfillment progress. Gain on sale of investment securities ¥10.6B provided cash from investing activities but is non-recurring. Cash and deposits increased by +¥120.5B YoY to ¥379.2B, leaving ample liquidity after funding receivables growth and investment activities. Short-term borrowings rose by +¥17.1B to meet working capital needs. Overall, normalization of receivables collection and smoothing of project acceptance would improve cash conversion of profits.
Core earnings are Operating Income ¥159.2B (Operating Margin on Revenue 5.1%). Non-operating income ¥9.0B (0.3% of Revenue) is primarily recurring financial income such as Dividend income ¥3.4B, Interest income ¥1.4B, and Equity-method investment income ¥1.6B, so non-operating contribution is limited. Special gains ¥10.6B (gain on sale of investment securities) represent about 6.0% of Profit before income taxes ¥177.7B and are one-off; excluding this, pro forma Profit before income taxes is equivalent to Ordinary Income ¥167.1B. The gap between Ordinary Income ¥167.1B and Net Income ¥122.1B is mainly Income taxes ¥55.5B (effective tax rate 31.3%), with limited impact from special items. Comprehensive Income ¥141.6B exceeded Net Income by ¥19.5B, aided by Other comprehensive income: Net change in valuation of available-for-sale securities ¥14.4B, Foreign currency translation adjustments ¥3.8B, and Remeasurements of defined benefit plans ¥1.0B. The divergence between Operating Income and Net Income is within tax burden and the one-off gain, and earnings quality is generally sound; however, DSO of 118 days and high work-in-progress ratio present a risk that OCF may trail Net Income, making working capital normalization key to improving earnings quality.
Full Year (FY) forecasts: Revenue ¥4210.0B (YoY +24.9%), Operating Income ¥154.0B (+26.5%), Ordinary Income ¥163.0B (+24.2%), Net Income ¥115.0B (EPS forecast ¥233.22). Progress through Q3 cumulative is Revenue 74.7% (roughly in line with standard Q3 progress of 75%), Operating Income 103.4%, Ordinary Income 102.5%, Net Income 105.9%, meaning profit metrics have already exceeded full-year plans. Concentration of large public projects and improved SG&A efficiency explain the stronger-than-expected progress; depending on Q4 project progress, further upside is possible. However, Special gains ¥10.6B are transient, and sustained upside in full-year Net Income depends on continued core business profit growth. The company revised guidance this quarter; current plans may be conservative.
Year-end dividend forecast is 72.00円 (amount after 1-for-5 stock split effective January 21, 2026; pre-split amount would be 360.00円). Dividend Payout Ratio relative to forecast EPS ¥233.22 is approximately 30.9%, a sustainable level. With Cash and deposits ¥379.2B and Interest-bearing debt ¥36.8B producing Net Cash ¥342.4B, the company has ample liquidity to sustain dividends. Dividend forecast was revised this quarter, clarifying shareholder return policy in light of the stock split. No buyback disclosure was confirmed, so Total Return Ratio assessment is based solely on Dividend Payout Ratio.
Accounts Receivable collection risk: Accounts Receivable ¥1017.2B (YoY +46.1%) and DSO 118 days indicate extended collection periods. Lengthening acceptance/payment schedules for public projects and concentration of projects increase receivables management burden and may impact liquidity. Synchronizing progress on Contract liabilities ¥156.5B with receivables collection is a key challenge.
Gross margin decline and project-mix concentration risk: Gross Margin fell to 15.1% (from 17.5%, -2.4pt) as the share of large public projects rose, increasing hardware mix and intensifying price competition, which compresses profitability. Increased dependence on public projects raises the risk that changes in project mix could further depress gross margins.
Short-term liabilities concentration and maturity mismatch risk: Current liabilities total ¥1203.8B with short-term borrowings ¥36.8B and concentrated working-capital related liabilities such as Accounts Payable ¥749.9B and Contract liabilities ¥156.5B. If receivables collection delays materialize, short-term funding needs could surge temporarily, creating refinancing or additional funding timing risk. Although cash ¥379.2B provides strong liquidity, prolonged working capital normalization delays would undermine capital efficiency.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.1% | 3.2% (1.7%–4.9%) | +1.9pt |
| Net Margin | 3.9% | 2.7% (1.3%–6.0%) | +1.2pt |
Both Operating Margin and Net Margin exceed industry medians, placing the company in the upper range of profitability within the trading/wholesale segment.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 34.2% | 5.0% (-5.0%–7.8%) | +29.2pt |
Revenue growth substantially outperforms the industry median, driven by rapid expansion in public-related projects and ranking among the top performers in the peer group.
※ Source: Company compilation
Concentration of large public projects has already pushed Revenue and Operating Income past full-year forecasts, and depending on Q4 project progress there is potential for further upside. Operating Margin 5.1% is +1.9pt above industry median, supported by improvements in SG&A efficiency. However, the downtrend in Gross Margin to 15.1% (from 17.5%) could persist depending on project mix; managing profitability in public projects and improving margins in Information-related Business (currently 2.2%) are essential for strengthening the long-term earnings base.
The sharp increase in Accounts Receivable (YoY +46.1%) and extended DSO of 118 days indicate a structural challenge in cash conversion of profits. Monitoring progress in fulfilling Contract liabilities ¥156.5B and stabilizing receivables collection or improving order/acceptance/payment cycle management will be key. Cash ¥379.2B and a Dividend Payout Ratio of 30.9% imply limited short-term financial risk, but improving working capital efficiency will be critical for enhancing capital productivity.
The company implemented a stock split (1 share → 5 shares, effective January 21, 2026) and the year-end dividend forecast of 72円 (post-split) signals continued shareholder returns. ROE of 14.9% indicates high capital efficiency and, combined with a healthy project pipeline in public IT and education ICT and conservative full-year planning, momentum appears positive. Nevertheless, the special gain of ¥10.6B (gain on sale of investment securities) is non-recurring, and future profit growth will depend on core gross margin improvements and better profitability in the Information-related segment.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.