3837.T

• Company Overview & Core Positioning

  • Adsol Nissin is an independent IT company founded in 1976, with 676 employees, listed on the Prime Market of the Tokyo Stock Exchange. It is not part of a large corporate group, and maintains a global development network with 3 domestic branches/offices, 3 development bases in Vietnam, and an R&D center in San Jose, USA focused on AI research. It will celebrate its 50th anniversary in March 2026.
  • The company focuses on the social infrastructure domain, providing IT-enabled software development and solutions to support public safety, security and sustainability. It does not manufacture hardware, but has deep expertise in embedded control and OS knowledge for hardware, and can build integrated software-hardware systems, which is its core competitive advantage.

• Core Business: Power Market Trends and Power-related Business

  • Current power market is driven by three core trends: 1) Stable power supply: continuous system updates are required to prevent outages; 2) Response to growing power demand: boosted by AI adoption, data center expansion and extreme weather, power demand is rising, driving investment in transmission and distribution infrastructure; 3) Decarbonization and sustainability: growing demand for energy management systems to optimize consumption of renewable energy.
  • The company has accumulated unique expertise covering the entire power value chain from power generation to transmission, distribution and end consumption, which no other competitor can match. It has an advantage in near-hardware layer software development and deep knowledge of power hardware communication and system control.
  • For end-user side energy management systems (focused on large consumers like data centers, factories and hospitals), the company has partnered with Schneider Electric as Japan's first SI partner, combining Schneider's hardware with the company's software to achieve power usage optimization. The company is developing this new business via alliances with other firms targeting large end-users, and co-creating new services in this new domain.

• AI-related Initiatives

  • The company has been focused on AI since 2019, participating in AI research at AIST, established an in-house AI Research Institute in 2022 focused on practical application of AI technology. It conducts joint research with the University of Tokyo applying AI to analyze satellite data, and provides AI quality verification and consulting services to ensure AI output accuracy.
  • Inquiries for AI-related system development have increased significantly. The company has developed its own in-house generative AI AdsolChat built by a 100-person working group, which is widely used for internal operations, and launched the external AI consulting and engineering service +AIdea in October last year, which has received strong market interest and many inquiries.
  • Contrary to industry trends of reducing hiring due to AI adoption, the company is increasing hiring: 72 new graduates will join this spring, up from ~50 last year, and the company will continue expanding both new graduate and mid-career hiring. The company believes that human input is still required to maximize AI effectiveness and guarantee AI output quality, so human talent remains core for growth.

• Operating Model and Profitability

  • The company has shifted from building systems based on customer-defined requirements to a full-lifecycle partnership model: working with customers to define future goals, co-design required systems, and provide end-to-end support from development to operation, maintenance, and efficiency optimization. This social infrastructure-focused end-to-end IT consulting and delivery model has driven significant profit margin improvement, and the company plans to continue expanding consulting projects.

• Full-year FY2026 March fiscal year is on track to achieve 3 consecutive years of record-high performance, supported by strong business conditions.
• The company is targeting the establishment of a next-generation business model aligned with its mid-term management plan goal of contributing to the realization of smart cities, and will continue strengthening its 5 key growth priorities.
• The company expects the energy management system business for large consumers (data centers, factories) to grow significantly in the future, driven by rising demand for power efficiency and decarbonization.
• Data center related power efficiency and transmission/distribution infrastructure projects are already ongoing with multiple existing implementations, and demand is expected to further expand going forward as hardware infrastructure expansion is followed by software system investment.
• For shareholder returns, the company plans to pay a 5 yen per share commemorative dividend for its 50th anniversary, and is on track to achieve 16 consecutive years of dividend increases. The company will maintain its existing dividend policy: payout ratio of 50% or higher, DOE of 6% or higher, progressive consecutive dividend increases of at least 1 yen per share, with twice yearly (interim and year-end) dividend payments, to return business growth results to shareholders.
• Longer term, the company expects total company scale to grow, with the energy segment continuing to grow while other segments grow faster, leading to a gradual decline in energy's revenue share while energy remains a core business.

1. Social Infrastructure Business: This segment includes Energy (Electricity & Gas), Transportation, Public (disaster prevention, etc.), and Communication & Network sub-segments. In the FY2025 March full year, total company revenue was 15.4 billion yen, with the Energy (Electricity & Gas) sub-segment accounting for approximately 50% of total company revenue, making it the core revenue contributor for the entire firm. Other sub-segments include transportation, public services, and communication & network.
2. Advanced Industry Business: This segment includes Manufacturing, Services, and Enterprise sub-segments. The Manufacturing sub-segment centers on manufacturing, factory, and data center related business; the Services sub-segment has seen strong growth recently, with expanding DX and modernization projects for smartphone payment, credit card payment and other payment-related businesses; the Enterprise sub-segment develops medical-related business including electronic medical records and medical systems. For the FY2026 March 3rd quarter (cumulative), total company revenue was 12.8 billion yen, up 11.2% year-over-year, and operating profit was 1.795 billion yen, up 30.6% year-over-year, both achieving record highs.

No specific material risks or operational failures were discussed in the provided transcript.

Q: Among social infrastructure areas other than power, which areas do you expect DX demand to expand going forward?

A: We see growing DX and new service creation opportunities in the railway sector, which has accumulated large amounts of passenger flow data. The trend of utilizing this data for new business is just beginning, and we see this as a major business opportunity for our company.

Q: What is your approach to balancing deepening of existing social infrastructure/power business and expansion into new growth areas?

A: We will continue to serve our existing business areas as before, but we recognize that only relying on existing business will not deliver medium- to long-term growth. So we are working with customers to develop new models for power, railway, disaster prevention and other existing areas using AI and other advanced technologies. We are also focused on improving our consulting capabilities to maximize the value of our software, and are targeting an evolution to a more service-oriented business model beyond the traditional IT company framework.

Q: Among existing core businesses, which area do you expect to see higher growth going forward?

A: We expect high growth from the services segment, especially the payment sector. Our strength is not in payment applications themselves, but in building the underlying framework infrastructure that supports payment services. We have deep expertise in the payment infrastructure layer, which allows us to expand into multiple payment-related areas including smartphone payment, credit card payment, and payment services offered by power and railway companies, leveraging our accumulated knowledge.

Q: What is your view on the concept of the 'death of SaaS', and could advanced new AI models like Claude 3.5 lead to slower revenue growth for your company?

A: We are aware of this discussion and the industry concerns about AI impact, but at this point we believe the impact on our business and revenue is low. This is because even with AI adoption, AI cannot automatically deliver high efficiency on its own, and human input is ultimately essential. While AI may take over some portion of software development work in the future, quality assurance of AI-generated output and efficient implementation still require human judgment and skills, and this is where our market demand lies.

Q: What is your medium- to long-term portfolio target in line with your smart city initiative, given that energy makes up roughly half of your revenue now?

A: Medium- to long-term, we want to progress toward the broad smart city vision laid out in our mid-term management plan. As an IT company, we do not build physical smart city infrastructure like roads and buildings, but we aim to contribute to the development of new smart cities via IT. All 7 of our current business areas (energy, transportation, public, communication, manufacturing, services, enterprise/medical) are core interconnected foundations for smart cities. The key opportunity is connecting and optimizing these areas via IT, and we will continue working with universities and other companies to pursue this smart city vision and create new business opportunities aligned with our core values of safety, security, and environment.

Q: Is the high revenue share of the energy segment likely to decrease going forward?

A: I expect the energy segment will continue to grow, but other business areas will grow faster than energy, so the share will gradually decline, while overall company scale will grow.

Q: Is data center related power transmission and distribution infrastructure demand already translating to higher orders, or is this a medium- to long-term theme?

A: Data center related business is already ongoing, we currently have multiple projects for power efficiency optimization at data centers, and we are advancing proposal activities for new data centers in partnership with our alliance partners. We are also receiving inquiries from manufacturing factories beyond data centers, and we expect demand to further expand going forward. Since some requirements cannot be met with software alone, we work with partner firms like Schneider Electric to deliver full solutions, and we have strong expectations for this area's future growth. For transmission and distribution infrastructure projects driven by growing power demand, hardware expansion of transmission lines is currently underway, and we expect this will definitely lead to growing demand for our software system solutions in the future.

Q: The stock price has hit a year-to-date high. Do you think the current market valuation is appropriate?

A: Stock prices are formed by market supply and demand and investor valuations. Our company will continue to steadily advance initiatives to improve medium- to long-term corporate value, and we aim to continue meeting investor expectations.

Q: What is your policy on stock split, and at what price level would you consider a split?

A: We will comprehensively consider the stock price level, market environment, liquidity conditions, shareholder structure and other factors, and appropriately consider stock split if necessary.

Q: Beyond the commemorative dividend, do you plan to distribute commemorative gifts to shareholders for the 50th anniversary?

A: At this point in time, we have not announced any plans for commemorative gifts beyond the commemorative dividend. We will take the suggestion under consideration for the future.