Nomura System Corporation,Ltd (3940) — Company information

Business

Nomura System Corporation is an independent IT consulting company founded in 1986, which launched its ERP Solutions Business in earnest in 2002. The company has entered into a service partner agreement and an SAP PartnerEdge channel agreement (VAR) with SAP Japan Co., Ltd., providing a consistent offering of implementation consulting, maintenance services, and license sales for SAP ERP products. Major clients are large corporations such as Stanley Electric Co., Ltd. (21.4% of sales), NHK Media Holdings (13.2% of sales), and NHK Enterprises (10.4% of sales). The company operates as a single segment on a non-consolidated basis and is listed on the Standard Market of the Tokyo Stock Exchange.

Business Model

Quasi-delegation contracts and similar arrangements account for the majority of net sales (¥3,266,903 thousand in FY2025, 98.4% of the total), giving the company a stable earnings structure with reduced project-based contract risk. By combining Prime/Sub-Prime Consulting, which deals directly with end users, with FIS (Function Implementation Service) delivered via prime contractor partners, and by raising the proportion of in-house personnel (from 43% to 52%), the company has reduced outsourcing costs while improving profit margins.

Company Strengths

The HR solution template "Jet-One" has obtained SAP Japan's ALL in-One Solution certification, enabling short-term, low-cost implementation within 3 months. The company has also developed proprietary templates for areas beyond HR, such as "Zex-One" (Asset Retirement Obligation Solution Template), aiming to differentiate itself from competitors and enhance supply capacity.

The current ratio at the end of FY2025 (ending March 2025) was extremely high at 789.9%, with cash and cash equivalents secured at ¥2,700 million. Against total assets of ¥3,977 million, liabilities stood at ¥451 million (debt ratio of approximately 11.3%), maintaining debt-free management and extremely low financial risk.

The number of prime (direct end-user transaction) clients increased from 23 to 28 companies, and the proportion of work handled by the company's own personnel improved from 43% to 52%. In FY2025 (ending March 2025), cost of sales decreased by 1.2% year on year, while gross profit increased by 8.6%, and operating margin reached 17.7%.

ENVALITH's Perspective

In the first quarter of FY2026 (ending December 2026), the company recorded net sales of ¥849 million (down 11.9% year on year) and operating profit of ¥124 million (down 44.5% year on year), a significant decline. Against the full-year forecast (net sales of ¥3,800 million, operating profit of ¥530 million), the first-quarter progress rate was only 22.3% for net sales and 23.4% for operating profit, making a sharp recovery over the remaining three quarters essential to achieve the target. The company has kept its full-year forecast unchanged, but the delayed progress warrants close attention.

In terms of market environment, demand for core system migration associated with the end of standard support and maintenance for SAP ERP 6.0® (the so-called 2027 issue) is expected to continue as a medium-term tailwind. On the other hand, given the nature of project-based business, discrepancies in the timing of order intake and project commencement widen the swings in quarterly performance. Risks of delayed IT investment decisions by clients due to external factors such as strengthened US tariffs, tensions in Japan-China relations, and the situation in the Middle East also continue to exist.

In the first quarter, the company acquired 1,024,200 shares of treasury stock (acquisition amount of ¥142 million), increasing the number of treasury shares at period-end to 1,582,404 (3.4% of shares issued). This flexible capital policy, aimed at improving capital efficiency and allocating shares to incentive plans, can be viewed favorably. On the other hand, net assets decreased by ¥207 million from the previous period-end to ¥3,318 million, and depending on the scale of future acquisitions, it will be necessary to continue monitoring the impact on the equity ratio and net assets per share.

Performance Trend

Revenue continued to grow steadily from ¥2,791 million in FY2021 to ¥3,321 million in FY2025, with operating profit also reaching a record high of ¥586 million in FY2025. However, the first quarter of FY2026 (ending December 2026) saw a sharp deceleration, with revenue of ¥849 million (down 11.9% year on year) and operating profit of ¥124 million (down 44.5% year on year). Cost of sales declined only 1.4% year on year, meaning the revenue decline hit profit directly. The full-year forecast (revenue of ¥3,800 million, operating profit of ¥530 million) has been left unchanged, projecting an increase in revenue but a decline in profit compared to the previous fiscal year, as clients become more cautious about IT investment amid external headwinds such as US tariffs and geopolitical risk, creating a short-term drag.

Growth Strategy

Strengthening the earnings base through a three-pronged approach: expanding Prime (direct transaction) projects, developing new services, and human resource development

Actively capturing core system migration demand arising from the expiration of standard support and maintenance for SAP ERP 6.0®. Promoting sales activities leveraging a high project success rate and strong consulting capabilities, aiming to expand orders for migration projects.

Continuing to improve gross profit margin by reducing reliance on outsourcing and expanding direct transaction projects. Increasing the proportion of work handled by in-house personnel strengthens the profit structure. As of 1Q FY2026, profit margin declined due to lower sales, with improving project mix remaining a challenge.

Aiming to improve capital efficiency through share buybacks, including allocation to incentive plans. Conducted share buybacks of ¥142 million in 1Q FY2026 (ending March 2026). Plans to maintain the annual dividend at ¥3.55 per share, ensuring a balance between shareholder returns and growth investment.

Nomura System Corporation,Ltd

Business

Business Model

Company Strengths

ENVALITH's Perspective

FY2026 Q1 results show significant declines in both revenue and profit, requiring a heavy weighting toward the second half to achieve the full-year forecast

As an external factor, the SAP 2027 issue in the market environment is a tailwind, but shifts in project timing are amplifying performance volatility

Acceleration of treasury stock buybacks signals a shareholder return stance, but the impact on net assets and EPS dilution warrants attention

Performance Trend

Growth Strategy

Disclaimer

Nomura System Corporation,Ltd

Business

Business Model

Company Strengths

Differentiation through proprietary SAP-focused templates

High financial soundness and liquidity

Improved profitability structure driven by expansion of prime contracts

ENVALITH's Perspective

FY2026 Q1 results show significant declines in both revenue and profit, requiring a heavy weighting toward the second half to achieve the full-year forecast

As an external factor, the SAP 2027 issue in the market environment is a tailwind, but shifts in project timing are amplifying performance volatility

Acceleration of treasury stock buybacks signals a shareholder return stance, but the impact on net assets and EPS dilution warrants attention

Performance Trend

Growth Strategy

Expanding sales by capturing SAP migration demand

Improving profitability through expansion of Prime (direct transaction) projects

Improving capital efficiency through agile capital policy

Disclaimer