| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥144091.2億 | ¥137047.3億 | +5.1% |
| Operating Income / Operating Profit | ¥17062.2億 | ¥16495.7億 | +3.4% |
| Profit Before Tax | ¥15819.2億 | ¥15647.0億 | +1.1% |
| Net Income / Net Profit | ¥10826.4億 | ¥10824.4億 | +0.0% |
| ROE | 10.6% | 9.5% | - |
The fiscal period from April 1, 2025 to March 31, 2026 recorded Revenue of ¥144,091億 (YoY +¥7,044億 +5.1%), Operating Income of ¥17,062億 (YoY +¥566億 +3.4%), Ordinary Income of ¥15,407億 (YoY -¥110億 -0.7%), and Net Income attributable to owners of the parent of ¥10,370億 (YoY +¥370億 +3.7%). While operating income growth was secured, financial expenses increased by ¥705億 YoY causing a decline at the ordinary income stage; tax burdens also increased, but the bottom-line showed a small increase. The operating margin contracted slightly to 11.8% (down 0.2pt from 12.0% prior year). Increases in personnel expenses +¥1,163億, depreciation +¥689億, and goodwill impairment of ¥575億 among other investment and cost increases compressed margins.
[Revenue] Revenue was ¥144,091億 (+5.1%), a steady increase. By segment, the Integrated ICT Business had external sales of ¥61,462億, the Global Solutions Business ¥47,547億 (YoY +7.4%), the Regional Communications Business ¥25,552億 (+4.2%), and Other (Real Estate & Energy etc.) ¥9,530億 (+3.9%). Growth in Global Solutions drove consolidated revenue growth, while Regional Communications maintained stable growth.
[Profit & Loss] Operating expenses increased to ¥127,029億 (+5.4%), outpacing revenue growth. Personnel expenses were ¥32,149億 (+3.8%), depreciation ¥17,910億 (+4.0%), and goodwill impairment of ¥575億 (none in prior year) suppressed profit growth. By segment, the Integrated ICT Business Operating Income was ¥9,421億 (-7.7%), a decrease, while the Global Solutions Business was ¥4,882億 (+50.7%), a large increase contributing to consolidated operating income growth; the Regional Communications Business was ¥3,074億 (+4.0%) and remained steady, while Other recorded an operating loss of ¥16億 (prior year +¥558億) turning to red. Financial income was ¥745億 (+26.0%) versus financial expenses of ¥2,401億 (+41.6%), and the increase in financial costs was a factor in the ordinary income decline. Equity-method investment gains were ¥413億 (prior year ¥255億), an improvement. After higher corporate taxes and other burdens of ¥4,993億 (+3.5%), Profit for the Period was ¥10,826億 (+0.0%) virtually flat; Net Income attributable to owners of the parent was ¥10,370億 (+3.7%), a modest increase. In conclusion: revenue and operating profit both increased, but operating profit growth slowed; ordinary income declined due to higher financial expenses; and net income showed a small increase.
The Integrated ICT Business recorded Operating Income of ¥9,421億 (YoY -7.7%), a decline. Assets were ¥26,1078億 (from ¥11,3910億 prior year, a substantial increase) reflecting expansion from the incorporation of banking accounts. The Global Solutions Business posted Operating Income of ¥4,882億 (+50.7%), a large increase, with assets of ¥8,7198億 (+10.8%). Capture of overseas and enterprise solution demand contributed. The Regional Communications Business showed Operating Income of ¥3,074億 (+4.0%), stable growth, with assets of ¥7,2528億 (+1.8%). Other (Real Estate & Energy etc.) posted an operating loss of ¥16億 (prior year +¥558億) indicating deterioration in profitability; assets of ¥22,5167億 (+19.3%) reflect expansion in investment properties and banking-related items. At the consolidated level, growth is targeted on both Integrated ICT and Global axes, with Global compensating for the Integrated ICT profit decline.
[Profitability] ROE was 10.4% (improved +0.4pt from 10.0% prior year), indicating healthy returns. Operating margin was 11.8% (down -0.2pt from 12.0%) slightly reduced by goodwill impairment and increased costs but remains high for a telecommunications & ICT business. EBITDA margin was 24.3% (EBITDA ¥34,972億 / Revenue ¥144,091億), showing a robust earnings base. Ordinary income margin was 10.7% (down -0.7pt from 11.4%) due to higher financial expenses. Net margin was 7.5%, in a stable range. [Cash Quality] Operating Cash Flow (OCF) was ¥14,852億, 1.37x Net Income of ¥10,826億, indicating high quality, but a large YoY decline of -37.2%. OCF/EBITDA was 0.42x and working capital outflows (trade receivables -¥6,347億, inventories -¥1,367億, banking loans -¥10,099億) pressured cash conversion. Free Cash Flow (FCF) was ¥4,618億, covering dividend payments of ¥4,340億 by 1.06x, but insufficient against total shareholder returns (dividends + buybacks ¥6,389億), implying dependence on borrowings/existing funds. [Investment Efficiency] Capital expenditure was ¥23,260億 / depreciation ¥17,910億 = 1.30x, indicating proactive growth investment. Goodwill was ¥20,798億, 20.4% of equity ¥102,175億—within an acceptable range; goodwill/EBITDA = 0.59x suggests recoverability is high. [Financial Soundness] Equity Ratio was 20.8% (down from 34.0% prior year) due to balance sheet expansion from banking integration. D/E ratio was 3.57x (interest-bearing debt ¥36.5兆 / equity ¥10.2兆), indicating high leverage. Current Ratio was 0.51x (current assets ¥11.3兆 / current liabilities ¥22.3兆), requiring attention to short-term liquidity, though interest coverage (EBIT / financial expenses) was 7.1x, showing solid capacity to service interest.
Operating Cash Flow was ¥14,852億 (down -37.2% from ¥23,640億 prior year). From a subtotal of ¥20,714億 (Profit for the Period + non-cash expenses etc.), working capital changes caused approximately ¥6,000億 of outflow: trade receivables increase -¥6,347億, inventories increase -¥1,367億, and banking loans increase -¥10,099億 were the main drivers. Corporate tax payments -¥4,953億, interest payments -¥2,095億, and lease payments -¥2,781億 also expanded outflows. Investing Cash Flow was -¥10,234億 (prior year -¥19,996億), a reduced outflow. Capital expenditure was -¥22,557億 (prior year -¥21,323億) reflecting continued growth investment, while proceeds from acquisition of subsidiaries +¥14,389億 (acquisition of banking subsidiaries etc.) substantially contributed to limiting investing CF outflows. FCF was ¥4,618億 covering dividends of ¥4,340億 by 1.06x but not total shareholder returns. Financing Cash Flow was an inflow of ¥4,413億. Large-scale funding was executed with long-term borrowings +¥57,974億 and short-term borrowings +¥5,385億; long-term borrowings repayments -¥26,510億, acquisition of subsidiary interests from non-controlling interests -¥23,957億 (e.g., making NTT DOCOMO a wholly owned subsidiary), dividends -¥4,340億, and share buybacks -¥2,049億 were financed. Cash at period-end was ¥19,219億 (from ¥10,010億 at period-beginning, +¥9,209億), ample. The incorporation of banking accounts materially altered the B/S and CF structure; monitoring of working capital pressure and leverage expansion will be an ongoing requirement.
The difference between Profit for the Period of ¥10,826億 and Net Income attributable to owners of the parent ¥10,370億 (difference ¥417億) is mainly due to non-controlling interests attributable of ¥456億. The decline from Operating Income ¥17,062億 to Ordinary Income ¥15,407億 (-¥1,655億) was primarily caused by net financial costs: financial income +¥745億 versus financial expenses -¥2,401億 (of which interest paid -¥2,095億), resulting in net financial cost of -¥1,656億, partially offset by equity-method gains +¥413億. The improvement of +¥412億 from Ordinary Income to Profit Before Tax ¥15,819億 was due to other items including equity-method gains/losses. Tax and other burdens of -¥4,993億 from Profit Before Tax to Profit for the Period imply an effective tax rate of 31.6%, appropriate. Temporary items included goodwill impairment ¥575億, non-operating gain on disposal of fixed assets +¥741億, and gain on sale of investee shares +¥1,336億; however, at the ordinary income stage the earnings mainly reflect recurring core operations and financial cost structure. Comprehensive income was ¥17,677億 (¥17,191億 attributable to owners of the parent); the ¥6,851億 difference versus Profit for the Period ¥10,826億 was largely due to other comprehensive income (cash flow hedges +¥1,017億, foreign currency translation +¥2,494億, remeasurement of defined benefit plans +¥2,027億, etc.), indicating improvements from FX and pension valuations. In terms of earnings quality, operating-stage earnings are largely recurring and sustainable, but goodwill impairment and increased financial expenses are compressing margins and one-off factors and financial structure effects coexist below the ordinary income level.
Full-year forecast: Revenue ¥15兆600億 (YoY +4.5%), Operating Income ¥17,100億 (+0.2%), Net Income attributable to owners of the parent ¥9,800億 (-5.5%), EPS 12.10円 (from 12.61円 this period, -4.0%), Dividend 2.70円 (this period 5.30円, -49.1%; note this period’s annual 5.30円 is the combined interim and year-end; the full-year plan 2.70円 may be for a half-year and should be interpreted cautiously). Progress rates are Revenue 95.7%, Operating Income 99.8%, Net Income 105.8% — operating-level targets are largely achieved; the bottom-line actual result already exceeds the full-year plan by 5.8%. The projected decline in full-year net income reflects conservative assumptions factoring increased depreciation, higher interest burden, and non-controlling interests; given current results outperforming plan, downside risk is limited. The stated full-year dividend of 2.70円 could be a half-year figure; annual dividend disclosure is expected separately. The plan of revenue up, flat operating income, and down net income reflects a message of upfront costs and investments and increased financial burden conservatively incorporated.
Dividends were interim 2.65円 and year-end 2.65円 for an annual total of 5.30円, representing total dividend payments of ¥4,340億 (prior year ¥4,368億). Payout Ratio was 43.5% (based on Net Income attributable to owners of the parent ¥10,370億), a sustainable level. Dividend coverage by FCF ¥4,618億 is 1.06x and generally sufficient, but total shareholder returns including buybacks of ¥2,049億 (total ¥6,389億) were covered at 0.72x by FCF and supplemented by borrowings/existing funds. Total Return Ratio is approximately 61.6% (dividends + buybacks ¥6,389億 / Net Income attributable ¥10,370億), within an acceptable range, but FCF-based sustainability is somewhat concerning. Shares outstanding were 90.55億 shares, treasury stock 9.13億 shares, weighted average shares during period 82.26億 shares, with BPS of ¥119.47. The full-year dividend forecast of 2.70円 may represent a half-year figure; explicit annual dividend disclosure is necessary. If annualized to 5.40円 (2.70円×2), the payout ratio would be 44.6%, indicating stable continuity. Amid ongoing capital expenditure, M&A, and working capital pressure, dividends are inferred to be maintained stably while buybacks will be executed flexibly.
Working capital pressure risk: Days Sales Outstanding (DSO) is approximately 141 days (¥55,512億 / (¥144,091億 / 365)), extended, and inventories are trending upward. Although OCF remains 1.37x Net Income, OCF/EBITDA = 0.42x shows low cash conversion; the mixture of increasing receivables, device installment receivables, and banking account items complicates working capital management. Continued similar working capital outflows could prevent FCF generation from meeting dividend and investment needs and may lead to further leverage expansion.
High leverage and short-term liquidity risk: D/E ratio 3.57x and Current Ratio 0.51x indicate very high financial leverage, with short-term liabilities ¥22,3329億 (including banking deposits ¥10,9501億 and short-term borrowings ¥4,3956億) far exceeding current assets ¥11,3447億. Interest coverage of 7.1x provides resilience, but in a rising rate environment increased financial expenses (¥2,401億 this period, from ¥1,695億 prior year, +41.6%) can pressure profits. Banking deposits are generally stable liabilities but liquidity risk under stress scenarios requires attention.
Goodwill and intangible asset impairment risk: Goodwill ¥20,798億 and intangible assets ¥28,730億 total ¥49,528億, accounting for 10.6% of total assets. A goodwill impairment of ¥575億 was recorded this period; if M&A projects in Global Solutions or Integrated ICT underperform versus plan, additional impairments could occur and depress net income. Goodwill/EBITDA = 0.59x is currently healthy, but close monitoring of segment earnings is important.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 10.4% | 10.1% (2.2%–17.8%) | +0.3pt |
| Operating Margin | 11.8% | 8.1% (3.6%–16.0%) | +3.7pt |
| Net Margin | 7.5% | 5.8% (1.2%–11.6%) | +1.7pt |
Profitability exceeds the industry median across metrics, ranking the company high within the IT & communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.1% | 10.1% (1.7%–20.2%) | -5.0pt |
Revenue growth lags the median by 5.0pt, classifying the company in a lower-growth tier within the industry, reflecting mature large-scale telecom infrastructure characteristics.
※Source: Company compilation
The large Operating Income increase in the Global Solutions Business (+50.7%) drove consolidated operating profit, with overseas and enterprise SI/cloud demand as growth drivers. Conversely, the core Integrated ICT Business saw a -7.7% decline, indicating selection and rotation; segment-level profitability changes will be a key focus for resource allocation and strategic shifts.
OCF of ¥14,852億 demonstrates strong generation capacity but the YoY -37.2% decline and low cash conversion ratio of 0.42x (OCF/EBITDA) reflect temporary deterioration due to working capital outflows (trade receivables + inventories ~¥7,700億) and banking account incorporation. Extended DSO of 141 days suggests that shortening receivables cycles and stabilizing banking accounts will be key to improving FCF and reducing leverage.
The high leverage and short-term liabilities structure (D/E 3.57x, Current Ratio 0.51x) is a clear financial risk, though interest coverage of 7.1x and solid earnings generation provide resilience against increased financial costs. Dividends are expected to be stable; the Total Return Ratio of 61.6% is acceptable, but with FCF coverage at 0.72x and reliance on borrowings in constrained scenarios, dependence on financing may continue. CAPEX/depreciation ratio 1.30x indicates proactive growth investment; improvements in working capital and cash generation will determine scope for expanding shareholder returns.
This report is an AI-generated earnings analysis document produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are company-compiled reference information based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as appropriate.