CTS Co., Ltd.

Business Details

This segment targets construction company headquarters and construction sites as its primary customers, proposing and providing the "Site Assist Package (SAP)" which integrates the Cloud Storage Service, Cloud Video Service, Communication Service, communication/network services, Multi-function Display, and other offerings. Centered on a rental/subscription-based revenue model, the segment is driving adoption as remote support and information-sharing infrastructure for construction sites. It is the core segment, accounting for approximately 59% of total company sales, and is a highly profitable business maintaining a segment margin of over 32%.

Recent Overview

Steady orders from SAP-centered existing customers; profit margin improved on progress in BtoB conversion

In FY2026 (ending March 2026), orders based on integrated service proposals centered on existing customers progressed steadily, achieving net sales of ¥7,510 million (up 8.9% year-on-year) and segment profit of ¥2,403 million (up 12.1% year-on-year). Growth in rental/subscription revenue centered on Cloud Storage and Cloud Video Services drove the profit increase, improving the segment margin to 32.0% (up 0.9pt year-on-year). Seminar activities at 32 branches nationwide raised awareness and interest in SAP, advancing the conversion to BtoB transactions. For FY2027 (ending March 2026), DDS Business sales are planned at ¥8,370 million (up 11.5% year-on-year), of which SAP sales are planned at ¥3,470 million (up 24.1% year-on-year).

Key Products

Growth Drivers

• Continued growth in rental/subscription revenue centered on Cloud Storage and Cloud Video Services
• Expansion of a stable order base through progress in converting site-based transactions to corporate (BtoB) contracts
• Growth in SAP adoption demand driven by the Ministry of Land, Infrastructure, Transport and Tourism's promotion of i-Construction 2.0 and ICT Construction Stage 2
• Increased SAP awareness and new customer acquisition through seminar activities, exhibition participation, and enhanced marketing at 32 branches nationwide
• Diversification of the customer base through new market development in the public sector (e.g., river surveillance cameras)
• Enrichment of SAP content and promotion of AI implementation (SAP + AI) through deepened collaboration with File Force Co., Ltd. and others
• Expansion of sales activities to approximately 100 broad-area general contractors under the new medium-term management plan

Risks

• Risk that the flat trend in construction project volume, due to rising material costs and labor shortages in the construction industry, will constrain the expansion of SAP usage
• Risk that low awareness and understanding of SAP will require significant time for full-scale rollout and penetration, causing the pace of new customer acquisition to fall short of plan
• Risk that rising selling, general and administrative expenses due to increased compensation improvements, marketing costs, and system management expenses will pressure profit margins
• Risk that the repeat rate will remain significantly below the target (over 90%), staying around 70%, due to a slowdown in public works project volume
• Risk of uncertainty regarding the achievability of the new medium-term management plan (sales target of ¥16.0 billion, etc.), given that the previous medium-term management plan (FY2024–FY2026, ending March 2026) fell short of its sales target of ¥12.8 billion and other goals
• Risk that uncertainty in the global economic outlook and rising construction costs will suppress customers' capital expenditure appetite by affecting construction orders