| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥760.2B | ¥698.7B | +8.8% |
| Operating Income / Operating Profit | ¥73.1B | ¥61.5B | +18.7% |
| Ordinary Income | ¥74.7B | ¥63.1B | +18.3% |
| Net Income / Net Profit | ¥53.5B | ¥46.0B | +16.3% |
| ROE | 21.5% | 19.0% | - |
FY2026 (Apr 2025–Mar 2026) posted Revenue ¥760.2B (YoY +¥61.5B +8.8%), Operating Income ¥73.1B (YoY +¥11.6B +18.7%), Ordinary Income ¥74.7B (YoY +¥11.6B +18.3%), and Net Income ¥53.5B (YoY +¥7.5B +16.3%) achieving double-digit profit growth. Top-line analysis shows the core Services business achieved ¥436.8B (+13.0%) with double-digit growth, SI Business expanded to ¥191.4B (+12.0%), while Hardware-centric Systems Business contracted to ¥110.6B (-9.0%); however, a mix shift toward higher value-added projects progressed. On the bottom line, Gross Margin improved to 31.8% (up +1.8pt from 30.0% prior year), and Operating Margin improved to 9.6% (up +0.8pt from 8.8%), indicating enhanced profitability. By segment, Information Solutions drove results with Revenue ¥738.8B (+8.9%) and Segment Profit ¥86.4B (Segment Profit Margin 11.7%), and Product Development & Manufacturing grew to Revenue ¥21.4B (+8.5%) and Segment Profit ¥1.5B (7.0%), expanding into positive territory. Special gains included gain on sale of investment securities ¥5.0B within Special Income ¥5.2B, but the primary driver of profit increase was strengthening of the operating base. Operating Cash Flow was ¥60.3B, 1.13x Net Income, while Free Cash Flow was ¥63.7B and total shareholder returns (dividends ¥24.3B + share buybacks ¥30.0B) resulted in a Total Return Ratio of approximately 101%, a high level. Financial soundness is strong with Current Ratio 208%, Equity Ratio 52.5%, and Debt/EBITDA 0.24x, leaving a very robust balance sheet; the balance between growth investment and shareholder returns will be a focus.
[Revenue] Revenue was ¥760.2B (YoY +8.8%) marking the third consecutive year of revenue growth. Breakdown: Services ¥436.8B (+13.0%) was the largest growth driver, where accumulation of operations and maintenance contracts centered on cloud and security services strengthened the recurring base. SI Business ¥191.4B (+12.0%) benefited from expanded orders for high value-added projects using the ultra-fast development methodology "JB Agile". Conversely, Systems Business ¥110.6B (-9.0%) saw a decline in hardware sales, reflecting a strategic shift to prioritize profitability by reducing low-margin resale deals. By segment, Information Solutions accounted for ¥738.8B (+8.9%), representing 97.1% of revenue composition, while Product Development & Manufacturing was ¥21.4B (+8.5%), representing 2.9%. Contract liabilities rose to ¥44.5B (from ¥34.9B prior year, +27.6%), suggesting short-term top-line continuity as a billings-advance indicator.
[Profitability] Operating Income was ¥73.1B (YoY +18.7%), growing at a rate materially exceeding revenue growth. Gross Profit was ¥241.9B (Gross Margin 31.8%, up +1.8pt from 30.0%) as the mix shift toward Services and high value-added SI proved effective. SG&A was ¥168.8B (SG&A ratio 22.2%, up +1.0pt from 21.2%), with increased personnel expenses (including bonuses ¥32.9B, +31.0%) and retirement benefit costs ¥2.6B as main cost drivers, although revenue growth absorbed expense increases and operating leverage improved. Non-operating items contributed net +¥1.6B (Non-operating income ¥2.4B including dividend income ¥0.6B; Non-operating expenses ¥0.8B). Ordinary Income reached ¥74.7B (YoY +18.3%). Special items included Special Income ¥5.2B (including gain on sale of investment securities ¥5.0B) and Special Loss ¥2.0B, resulting in Pre-tax Income ¥77.9B. After corporate taxes ¥24.4B (effective tax rate 31.3%), Net Income was ¥53.5B (YoY +16.3%). Comprehensive Income was ¥54.4B (YoY +22.2%), with an unrealized gain on available-for-sale securities ¥1.1B contributing to Comprehensive Income exceeding Net Income. In conclusion, the positive trend of revenue and profit growth is primarily driven by operating improvements, although there is some dependency on special gains.
Information Solutions posted Segment Revenue ¥738.8B (YoY +8.9%) and Segment Profit ¥86.4B (YoY +14.8%, Segment Profit Margin 11.7%), leading consolidated profitability. Breakdown: SI ¥191.4B (+12.0%), Services ¥436.8B (+13.0%), Systems ¥110.6B (-9.0%), with the positive mix of reduced resales and deeper recurring revenues underpinning margin improvement. Product Development & Manufacturing recorded Segment Revenue ¥21.4B (YoY +8.5%) and Segment Profit ¥1.5B (YoY +63.7%, Segment Profit Margin 7.0%), expanding into higher profitability. Proprietary product development and provision—such as cloud integration platforms—are monetizing, reflecting a shift from hardware dependence to software revenue. Corporate expenses ¥14.8B represent pure holding company G&A and rose modestly +1.4% YoY, indicating controlled central costs. Sum of segment profits ¥87.9B less corporate expenses leads to consolidated Operating Income ¥73.1B.
[Profitability] Gross Margin 31.8% improved +1.8pt from 30.0%, indicating structural profitability improvement driven by higher share of Services and high value-added SI. Operating Margin 9.6% (up +0.8pt from 8.8%) and Net Margin 7.0% (up +0.4pt from 6.6%) both trended upward. ROE 21.5% exceeded prior year 20.3%, supported by improved Net Margin and Total Asset Turnover 1.60x (prior year 1.57x).
[Cash Quality] Operating CF / Net Income ratio was 1.13x, indicating solid cash generation, but OCF/EBITDA ratio 0.76x fell below the recommended benchmark (≥0.9x), suggesting working capital increases impacted cash conversion. Days Sales Outstanding implied about 51 days (Accounts Receivable ¥107.1B ÷ ¥760.2B × 365) slightly extended from ~49 days prior year. Inventories were ¥13.9B (1.8% of sales), indicating limited inventory risk.
[Investment Efficiency] R&D investment ratio 0.5% (R&D expense ¥3.8B ÷ Revenue ¥760.2B) and CapEx/Depreciation ratio 0.04x (CapEx ¥0.25B ÷ Depreciation ¥5.9B) indicate highly restrained investment levels, implying scope to increase investment to maintain medium-term competitiveness.
[Financial Soundness] Equity Ratio 52.5%, Current Ratio 208.1%, Quick Ratio 201.0% reflect strong liquidity and safety. Debt/EBITDA 0.24x and Interest Coverage 3,654x (Operating Income ¥73.1B ÷ Interest Expense ¥0.02B) indicate minimal debt burden. Net Working Capital ¥211.5B (Current Assets ¥407.1B - Current Liabilities ¥195.6B) shows a substantial cash buffer. Long-term borrowings ¥19.0B (down -26.5% from ¥25.9B prior year) indicate very low financial leverage.
Operating CF was ¥60.3B (YoY -9.1%) declining but remained 1.13x Net Income ¥53.5B, preserving healthy cash generation. Operating CF subtotal (before working capital changes) was ¥80.1B, with working capital movements driven by Accounts Receivable increase -¥1.5B, Inventories decrease +¥1.3B, Accounts Payable increase +¥9.7B, and Contract Liabilities increase +¥9.6B. Corporate tax payments were ¥21.5B (up +82.2% from ¥11.8B prior year) reflecting higher taxable profits in the prior period. Investing CF was +¥3.4B, as sale proceeds from investment securities ¥7.1B offset CapEx ¥0.25B and intangible asset purchases ¥2.1B. Financing CF was -¥55.2B, primarily due to dividend payments ¥24.1B, share buybacks ¥30.0B, and long-term debt repayments ¥6.8B. Free Cash Flow was ¥63.7B (Operating CF ¥60.3B + Investing CF ¥3.4B), covering dividends ¥24.3B and share buybacks ¥30.0B totaling ¥54.3B, resulting in an FCF coverage ratio of 2.13x, indicating high sustainability. Cash and Deposits were ¥186.2B (up +4.7% from ¥177.8B prior year), increasing liquidity buffer. OCF/EBITDA ratio 0.76x (Operating CF ¥60.3B ÷ EBITDA approx. ¥79.0B) is below benchmark, likely affected by increases in accounts receivable/contract assets and higher corporate tax payments—factors that warrant continued monitoring.
Core earnings are underpinned by Operating Income ¥73.1B reflecting recurring business earnings. Non-operating income ¥2.4B (0.3% of sales) comprises dividend income ¥0.6B and other non-operating income ¥0.5B, and is limited in scale. Special Income included ¥5.2B (including gain on sale of investment securities ¥5.0B), representing about 6.7% of Pre-tax Income (¥5.2B ÷ ¥77.9B), indicating some one-off contribution. Accrual ratio is about -1.4% ((Net Income ¥53.5B - Operating CF ¥60.3B) ÷ Total Assets ¥473.9B), with a negative direction suggesting strong cash backing. Operating CF/Net Income 1.13x supports cash realization strength, while OCF/EBITDA 0.76x reflects working capital increases; contract liabilities increased by ¥9.6B, supporting short-term revenue continuity as an advance-billing indicator. Comprehensive Income ¥54.4B exceeded Net Income ¥53.5B due to unrealized gain on available-for-sale securities ¥1.1B. FX translation adjustments -¥0.2B and retirement benefit adjustments -¥0.0B are immaterial, indicating limited structural risk. The difference between Ordinary Income ¥74.7B and Net Income ¥53.5B aligns with corporate taxes ¥24.4B and net special items (after adjustments) (effective tax rate 31.3%). Overall, earnings growth is primarily operating-based, with the gain on sale of investment securities judged a temporary contributor.
The company plan for FY2027 (Mar 2027) targets Revenue ¥795.0B (YoY +4.6%), Operating Income ¥87.5B (YoY +19.7%), Ordinary Income ¥88.5B (YoY +18.4%), and Net Income ¥60.5B (YoY +12.9%). The plan assumes slower top-line growth but double-digit profit growth. Progress rates stand at Revenue 95.6% (¥760.2B ÷ ¥795.0B) and Operating Income 83.5% (¥73.1B ÷ ¥87.5B), indicating steady execution. The greater operating income growth versus revenue in the plan is premised on continued mix improvement toward Services and high value-added SI and on efficiency gains absorbing SG&A. Contract liabilities ¥44.5B (5.9% of sales) provide short-term revenue support, but in an environment of rising personnel and subcontract costs, maintaining Gross Margin 31.8% will require price revisions and productivity improvements. EPS forecast ¥99.63 (from actual ¥86.34, +15.4%) and dividend forecast ¥25.00 per share (post stock split base as of Apr 2025, Payout Ratio 45.2%) maintain shareholder return policy. Key factors for plan achievement are progress in price pass-through, retention of service contract renewal rates, and project management quality for large SI projects; risks include unpassed wage inflation and excess labor hours on large projects.
Dividends per share were ¥42 (Interim ¥17, Year-end ¥25), with total dividends ¥24.3B (Payout Ratio 55.8%). Share buybacks totaled ¥30.0B, increasing treasury stock to ¥104.2B (Treasury Stock Ratio 14.7%). Total shareholder returns were ¥54.3B, representing a Total Return Ratio of approximately 101% against Net Income ¥53.5B, a high level. FCF coverage for dividends only was 2.62x (FCF ¥63.7B ÷ Dividends ¥24.3B), and for total returns 1.17x (¥63.7B ÷ ¥54.3B), indicating sustainability, though maintaining this level will require optimization of allocation between growth investment and returns. Cash and Deposits ¥186.2B and net cash position (subtracting long-term borrowings ¥19.0B leaves net cash ¥167.2B) underpin return capacity. FY2027 dividend forecast ¥25 per share (post stock split base) implies Payout Ratio 45.2%, within norms; continuation of share buybacks is unannounced but a policy focus on capital efficiency is implied. Overall, payout policy is within appropriate ranges and sustainable, but maintaining high Total Return Ratio concurrently with internal investment (R&D, CapEx, M&A) is a balancing challenge.
Business Concentration Risk: Information Solutions accounts for 97.1% of Revenue and 98.3% of Segment Profit, creating high sensitivity to specific customer cohorts and industry conditions. Product Development & Manufacturing comprises only 2.9% of Revenue, offering limited diversification. Heavy dependence on large SI projects exposes the company to risks from project delays, excess man-hours, and quality issues that can materially impact single-period results. Contract Liabilities ¥44.5B (5.9% of sales) provide a short-term buffer as backlog, but if medium- to long-term project pipeline dries up, growth slowdown risk could materialize.
Personnel Cost Inflation and Price-Pass-Through Risk: Personnel costs including bonuses ¥32.9B and retirement benefit costs ¥2.6B rose sharply YoY (bonuses +31.0%), and wage inflation pressures may persist. Maintaining Gross Margin 31.8% requires price revisions and enhanced value proposition, but limited customer price tolerance could compress operating leverage. Subcontract cost increases are also possible, challenging the balance of service quality and pricing. OCF/EBITDA ratio 0.76x suggests temporary effects from working capital increases, but if persistent, could indicate structural deterioration of cash generation.
Underinvestment Risk Causing Medium-Term Competitive Decline: CapEx/Depreciation ratio 0.04x and R&D ratio 0.5% denote very low investment levels, likely prioritizing short-term profitability. In fast-evolving areas such as cloud, security, and AI, insufficient investment in talent and technical infrastructure could erode differentiation and raise customer attrition risk. The coexistence of a Total Return Ratio around 101% and suppressed investment levels indicates a trade-off; balancing returns with growth investment will determine medium-term competitiveness.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.6% | 8.1% (3.6%–16.0%) | +1.5pt |
| Net Margin | 7.0% | 5.8% (1.2%–11.6%) | +1.2pt |
Profitability exceeds industry median, driven by mix shift to Services and high value-added SI and by efficiency gains.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.8% | 10.1% (1.7%–20.2%) | -1.3pt |
Revenue growth is slightly below the median, which is assessed as a deliberate focus on margin improvement and higher-quality growth.
※Source: Company compilation
Structural shift toward Services and high value-added SI improving Gross Margin: Services ¥436.8B (+13.0%) and SI ¥191.4B (+12.0%) led growth, while hardware-focused Systems ¥110.6B (-9.0%) shrank. Gross Margin improved to 31.8% (up +1.8pt from 30.0%), indicating qualitative improvement in revenue structure, and Contract Liabilities ¥44.5B (YoY +27.6%) support reinforcement of the recurring base. Operating Margin 9.6% (up +0.8pt) exceeds industry median 8.1%, suggesting room for medium-term margin expansion.
Strong financial position and high-level total returns lift capital efficiency: Debt/EBITDA 0.24x, Interest Coverage 3,654x, Current Ratio 208% all indicate minimal financial risk and flexibility for growth investment and shareholder returns. Total Return Ratio approx. 101% including share buybacks ¥30.0B is high but FCF coverage 1.17x supports sustainability. ROE 21.5% ranks high in the industry, reflecting a capital-efficiency-focused management stance. However, CapEx/Depreciation 0.04x and R&D ratio 0.5% show pronounced investment restraint, and rebalancing toward growth investment may be required to sustain competitiveness.
Achieving the FY2027 plan hinges on price pass-through and continued efficiency improvements: Operating Income target ¥87.5B (+19.7%) far outpaces Revenue growth +4.6%, premised on maintaining Gross Margin and absorbing SG&A through efficiency. In a personnel-cost inflationary environment, execution of price revisions and productivity gains will determine outcomes, as will project management quality on large SI contracts and continued order flow backed by contract liabilities. Persistent underinvestment (CapEx/Depreciation 0.04x) is a medium-term risk, leaving room to strengthen technical base and talent development investment.
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 Company based on public financial statements. Investment decisions should be made at your own responsibility, and, where appropriate, after consulting a professional advisor.