[CIJ Earnings Deep Dive] A Growth Story: Unpacking Strong Performance and the Upward Revision of the Mid-Term Management Plan

Based on the financial results of CIJ Co., Ltd. (Securities Code: 4826), this report provides a detailed analysis of the company's latest earnings highlights, shifts in business and customer structure, key strategic initiatives, and the revision of its mid-term management plan.

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1. Earnings Overview: Significant Revenue and Profit Growth Exceeding Plans and Year-on-Year Results

The company delivered strong results for the current period, significantly outperforming both the initial plan and the figures from the same period last year. Net sales reached 29,424 million yen (103.2% of the plan, up 9.4% YoY) , operating profit was 2,619 million yen (116.4% of the plan, up 20.7% YoY) , ordinary profit was 2,663 million yen (116.8% of the plan, up 20.8% YoY) , and net profit attributable to owners of the parent was 1,804 million yen (120.3% of the plan, up 20.7% YoY) .

Growth was driven by robust demand for system development in the public and energy sectors, alongside the contribution from the consolidation of Infotech Solution Co., Ltd. through M&A. Regarding profitability, despite proactive "human capital investment" —including salary hikes and improved benefits—the company achieved substantial profit growth. This was driven by increased revenue, improved profit margins, and the mitigation of unprofitable projects (specifically, the containment of cost overruns that occurred in the previous fiscal year).

The following slide illustrates the growth rates across various profit levels compared to the same period last year.

[Slide Commentary: Summary of YoY Performance (PAGE_4)]

This slide symbolizes the recent expansion in CIJ's earning power. While net sales grew by 9.4%, operating, ordinary, and net profits all showed high growth exceeding 20% (ranging from +20.7% to +20.8%) . Furthermore, the operating profit margin improved by 0.8 percentage points, rising from 8.1% in the previous year to 8.9% . This visualizes not just a scale expansion, but a steady improvement in the "quality" of earnings.

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2. Analysis of Business Segments and Customer Structure

■ Sales Trends by Business Segment

Looking at sales by business segment, the core System Development segment remained the primary driver, recording 24,936 million yen (up 7.0% YoY) , supported by steady order intake in the public and energy sectors. Growth was further bolstered by peripheral areas:

• Consulting & Research : 1,140 million yen (up 10.3% YoY) – Driven by project and technical support in the information and communications sector.
• SI/PI (System/Package Integration) : 1,116 million yen (up 30.1% YoY) – Strong performance in public sector implementation support and comprehensive welfare systems.
• Other (Operations & Maintenance, etc.) : 2,231 million yen (up 30.7% YoY) – Increase in O&M projects within the information and communications sector.

■ Customer Composition and Direct vs. SIer Ratio

In terms of sales by customer, the top 10 clients accounted for 13,837 million yen, representing 47.0% of total sales (a decrease of 4.3 percentage points YoY), indicating a trend toward customer diversification. Major customer groups include NTT Group at 7,236 million yen (24.6% of total) and Hitachi Group at 4,130 million yen (14.0% of total) , with these two groups accounting for approximately 38.6% of total sales.

By business model, sales via major SIers reached 24,291 million yen (SIer ratio of 82.6%), while prime (direct) contract sales reached 5,133 million yen (prime ratio of 17.4%). Although the prime ratio decreased slightly compared to the previous year due to a significant increase in SIer-led projects, prime sales continued to grow in absolute terms (from 4,788 million yen to 5,133 million yen) .

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3. Cost Structure and Factors Behind Net Profit Growth

In the analysis of profit fluctuations, while gross profit increased by 765 million yen , selling, general and administrative (SG&A) expenses rose by 316 million yen. The primary components of the SG&A increase are as follows:

• Personnel expenses (base pay increases, etc.) : +195 million yen
• Amortization of goodwill (due to consolidation) : +43 million yen
• Payment fees and others : +21 million yen

Despite active human capital investment to secure talent and improve engagement, the company absorbed these costs through sufficient gross profit expansion, resulting in an operating profit increase of 448 million yen. Regarding net profit attributable to owners of the parent (1,804 million yen, up 309 million yen), the growth was further supported by tax deduction effects (112 million yen) resulting from the application of tax incentives for wage increases .

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4. Financial Foundation and Cash Flow Health

On the balance sheet (B/S), total assets reached 19,394 million yen (up 717 million yen from the end of the previous fiscal year) , and total net assets reached 15,000 million yen (up 483 million yen) . The equity ratio remains at a very high level of 77.3% , confirming a robust financial position.

Regarding cash flow (C/F), cash flow from operating activities reached 2,048 million yen (up 265 million yen YoY) , indicating a steady increase in cash-generating ability from core operations. Investing C/F (-213 million yen) included the acquisition of subsidiary shares due to changes in the scope of consolidation (-147 million yen), while financing C/F (-1,704 million yen) reflected active shareholder returns, including dividend payments (-1,015 million yen) and share buybacks (-501 million yen). As a result, the year-end balance of cash and cash equivalents reached 8,344 million yen (up 130 million yen YoY) , ensuring ample liquidity.

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5. Key Business Activities and Growth Strategy Topics

During the current period, several important measures were implemented to ensure sustainable future growth. Key topics under the promotion policy are as follows:

[Slide Commentary: Overview of Management Policy Activities (PAGE_18)]

This slide is a crucial document listing the specific actions taken during the period based on the company's three promotion policies: (1) Adapting to changes in the business environment and challenging new areas, (2) Promoting the development of specialized SEs, and (3) Promoting sustainability management. It clearly shows that the expansion of the business foundation (M&A/alliances) and the strengthening of the technical foundation (Generative AI/human resource development) are progressing in parallel.

■ Details of Strategic Initiatives

1. Consolidation of Infotech Solution Co., Ltd. Shares were acquired effective December 1, 2025. By bringing this company, which has strengths in software development for government, social infrastructure, and financial institutions, under its umbrella, the CIJ Group aims to achieve mutual complementarity in technical domains and industrial sectors, thereby expanding its customer base.
2. Business Alliance with Hitachi's "Digital Systems & Services Sector" To respond to rapid technological advancements such as DX and Generative AI, the company is building a strategic collaborative relationship in system development, including joint IT talent development through personnel exchanges, knowledge sharing, and joint training.
3. Company-wide Deployment of Generative AI and Promotion of AI-Driven Development Positioning the use of Generative AI as a key management theme, the company has conducted internal research reporting sessions and practical hands-on training using RAG (Retrieval-Augmented Generation) chatbot construction and Ragas-based accuracy evaluation frameworks. By introducing Generative AI into development processes and implementing AI agents, the company aims for dramatic improvements in development productivity and quality .

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6. Revision of the Mid-Term Management Plan (Upward Revision of Targets)

Based on steady performance and changes in the external environment, CIJ has announced an upward revision of its earnings targets for the final year of its mid-term management plan.

[Slide Commentary: Revision of the Mid-Term Management Plan (PAGE_25)]

This slide is one of the most important charts showing CIJ's future growth trajectory. The previous plan targeted net sales of 30,000 million yen and operating profit of 2,400 million yen (8.0% margin) for the fiscal year ending June 2027. Based on current results and future outlook, the company has upwardly revised the net sales target by 1,000 million yen to 31,000 million yen and the operating profit target by 350 million yen to 2,750 million yen (8.9% margin) . A key point is that the company expects profit growth to exceed the costs of continued proactive human capital investment.

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7. Shareholder Return Policy and Dividend Forecast

Reflecting strong performance, the company plans to pay an annual dividend of 20.00 yen (compared to 15.00 yen in the previous year) , consisting of an ordinary dividend of 18.00 yen plus a 2.00 yen 50th-anniversary commemorative dividend. This is expected to result in a Dividend on Equity (DOE) ratio of 7.6% and a total payout ratio of 90.1% .

Furthermore, for the next fiscal year (ending June 2027), the company plans an annual dividend of 21.00 yen (10.00 yen for both interim and year-end, representing a substantial increase in the ordinary dividend). Backed by a stable financial foundation, the company maintains a strong commitment to shareholder returns.

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8. Conclusion

CIJ's financial materials demonstrate that strategic initiatives—such as securing orders in growth sectors like public and energy, the acquisition of Infotech Solution, and the alliance with Hitachi—are steadily yielding results. The company has achieved revenue growth and productivity gains that exceed the costs of human capital investment. With the upward revision of the mid-term management plan and the increase in dividend levels , the momentum toward enhancing shareholder value is clearly strengthening.