ENVALITH
日本ナレッジ株式会社 logo

Nihon Knowledge Co.,Ltd.

5252・Growth Market・Information & Communication

Official website
日本ナレッジ株式会社 logo
Nihon Knowledge Co.,Ltd.5252

Business

Nihon Knowledge Co., Ltd. is an IT services company founded in 1985, operating two businesses: the Verification Business (approximately 59% of net sales), which provides software testing and quality verification, and the Development Business (approximately 41% of net sales), which handles ERP contract development, proprietary packages, and security products. Its main customers are major SIers, package software vendors, and the information systems departments of operating companies, with the Otsuka Corporation group accounting for 31.0% of net sales. The company listed on the Tokyo Stock Exchange Growth Market in March 2023. In October 2025, it made Artechs Co., Ltd. a subsidiary, expanding its coverage into areas such as manufacturing and transportation/communications. The company conducts business through processes compliant with international standards (ISO/IEC/IEEE 29119).

Business Model

In the Verification Business, the company receives outsourced testing process work from SIers and operating companies, generating revenue through ongoing service provision. In the Development Business, in addition to contract customization of Otsuka Corporation's ERP "SMILE Series," the company has multiple revenue sources: sales of industry templates (PowerSteel / PowerCubic) for the steel and lumber wholesale industries along with regular version-upgrade maintenance, and license sales and maintenance of security products. Its proprietary developed products are expected to command high profit margins, and stable revenue from maintenance contracts underpins the business foundation.

Company Strengths

The company employs a large number of development engineers and achieves test automation by developing proprietary "helper apps" for areas that are difficult to address with off-the-shelf tools. In FY2026 (ending March 2026), the proportion of hybrid projects (D) reached 41.2%, and automation script development projects (B) also expanded to 8.7%. The company has accumulated a track record of contracted test automation work for multiple customers, and this has led to high customer retention rates in an area with few competitors.

"PowerSteel" for the steel industry and "PowerCubic" for the building materials and lumber wholesale industry had a track record of over 850 installations as of the end of March 2026. These Industry Templates (PowerSteel / PowerCubic), which accommodate industry-specific business practices (such as weight calculations and mixed inventory management units), can significantly reduce customer costs compared to scratch development. Demand for regular version upgrades and responses to tax system reforms generates stable maintenance revenue.

Verification of enterprise systems, which requires both business knowledge in areas such as sales, purchasing, and inventory management and an understanding of system architecture, presents high entry barriers due to the time required to acquire such expertise. The company's ability to apply the business knowledge and know-how accumulated over many years in the Development Business to the Verification Business is a key differentiating factor from competing companies specializing solely in verification. The involvement of engineers well-versed in business systems results in high project continuation rates and secures stable revenue.

ENVALITH's Perspective

Consolidated operating profit for FY2026 (ending March 2026) was ¥65 million (operating margin of 1.4%), a further decline from the non-consolidated FY2025 (ending March 2025) figure of ¥99 million. In addition to increased personnel expenses from aggressive hiring and wage increases, Artechs acquisition-related costs (advisory fees etc. of ¥6 million) and goodwill amortization (¥7 million) newly arose. The FY2027 (ending March 2027) forecast calls for operating profit of ¥150 million (up 129.3% year on year), but the feasibility of achieving this while the trend of rising personnel expenses continues warrants careful scrutiny.

FY2026 (ending March 2026) ordinary profit of ¥128 million significantly exceeds operating profit of ¥65 million, with the main driver of the gap being subsidy income of ¥52 million (non-operating income). Subsidies are a one-time revenue item with uncertain continuity, and underlying earnings power should be assessed based on the operating profit level. For the FY2027 (ending March 2027) ordinary profit forecast of ¥157 million as well, whether subsidies continue may be key to achievement, and investors should track the trajectory of operating profit improvement as the primary indicator.

Dependence on sales related to Otsuka Corporation's "SMILE Series" in the Development Business continues as a concentration risk. On the other hand, as an external factor, corporate IT and DX investment continues to trend firmly, and the demand environment for both the Verification Business and Development Business is favorable. Since FY2026 (ending March 2026) is the first year of consolidation, year-on-year comparison is not possible, and the overall picture of Artechs' earnings contribution (recorded only for the half-year period from October 2025 to March 2026) also remains unclear. The state of synergy realization as full-year contribution is added in FY2027 (ending March 2027) will be the next point of evaluation.

Growth Strategy

Pursuing both earnings recovery and scale expansion through advanced test automation, leveraging synergies with Artechs, and expanding ERP sales

In the Verification Business, the Company continues to promote test automation in order to differentiate itself from competitors. In FY2026 (ending March 2026), the Company undertook test automation projects for multiple customers and built up a track record. Going forward, the Company aims to expand its customer base through the provision of services such as quality improvement support.

The Company will strengthen collaboration with Artechs (Matsumoto City, Nagano Prefecture), which became a wholly owned subsidiary in October 2025, aiming to enter new customer groups such as manufacturing and transportation/communications industries and to expand the range of systems the Company can handle. In FY2026 (ending March 2026), collaboration began whereby Artechs took on part of the development work for projects contracted to the Company. In FY2027 (ending March 2027), full-year contribution will be added.

The Company will expand sales and support of the "SMILE Series" Industry Templates (PowerSteel / PowerCubic) for the steel and lumber industries by strengthening collaboration with partner companies. The Company aims to build up stable recurring revenue through maintenance and version upgrades. Expansion of sales of Security Products (DEFESA / monoPack) will also continue to be promoted.

The Company is actively working to secure human resources and improve wages and allowances, aiming to improve employee treatment and retain excellent personnel. In the short term, increased personnel expenses will pressure profits, but the policy is to translate expanded order intake capacity into medium- to long-term sales growth.

Last updated: July 19, 2026