NAGOYA ELECTRIC WORKS CO.,LTD.

Business Details

Centered on ITS (Intelligent Transport Systems), the segment's core business consists of system products that handle information collection, processing, and provision on an integrated basis. End users are predominantly road administrators such as the Ministry of Land, Infrastructure, Transport and Tourism, expressway companies, and local governments, resulting in a high degree of dependence on public-sector demand. Together with its subsidiary Infomex Matsumoto Co., Ltd., the company manufactures and sells LED Information Systems, Tunnel Disaster Prevention Systems, Weather & Disaster Prevention Monitoring Systems, and other products, addressing needs for infrastructure maintenance/preservation and disaster prevention/mitigation. From the current consolidated fiscal year, the segment name was changed from "Information Equipment Business" to "Social Infrastructure Business" (a name change only, with no change in substance).

Recent Overview

Net sales were roughly flat year on year, but operating profit deteriorated sharply, down 36.4%, due to construction delays and rising material costs

In FY2026 (ending March 2026), net sales came in at ¥17,307 million (up 0.3% year on year), roughly in line with the prior year. However, gross profit declined from ¥5,908 million to ¥4,991 million due to higher cost estimates resulting from construction delays and rising material costs driven by inflation. Operating profit was ¥1,749 million (down 36.4% year on year), and the operating margin fell sharply to 10.1% (from 15.9% in the prior year). On the other hand, orders received increased to ¥17,356 million (up 6.9% year on year), and the period-end order backlog was maintained at ¥16,704 million. For FY2027 (ending March 2027), the company expects further declines in both sales and profit, projecting net sales of ¥16,000 million and operating profit of ¥660 million, factoring in increased carryover due to larger and longer-duration projects as well as ongoing inflation and rising labor costs. Additionally, in April 2025 the company implemented a two-for-one stock split and introduced an employee stock delivery trust program.

Key Products

Growth Drivers

• Steady trend in public works spending, centered on large-scale repairs of aging infrastructure
• Winning new orders through proposals of new systems (orders received of ¥17,356 million in FY2026, up 6.9% year on year)
• Expansion into new business areas such as disaster prevention/mitigation solutions and support for new mobility fields including autonomous driving
• Continued winning of highly profitable projects for expressway companies (Central Nippon, West Nippon, and East Nippon)
• Creation of new value through transformation from an information board manufacturer into a comprehensive facilities company protecting road traffic safety
• Promotion of talent retention and enhancement of corporate value through the introduction of an employee stock delivery trust program

Risks

• Risk of rising cost estimates associated with construction delays (materialized in FY2026, causing operating margin to decline from 15.9% to 10.1%)
• Risk of increased material costs due to inflation and rising labor costs (continues to be factored into the FY2027 forecast)
• High dependence on government agencies and road administrators (impact of fluctuations in government fiscal policy and infrastructure development plans)
• Risk of increased carryover of revenue recognition to subsequent periods due to larger project scale and longer construction periods
• Structural changes in the business due to declining demand for new expressway construction and a shift toward maintenance and renewal demand
• Risk of economic downturn due to the impact of U.S. trade policy
• Risk of increased costs from pursuing new products for future investment