Nomura Research Institute (4307) Model update: Improving market sentiment starts here

Research evidence excerpt

Nomura Research Institute (4307) Model update: Improving market sentiment starts here

business, we expect PPA amortization to decline by ¥2 billion

YoY in FY2026 due to impairment losses recognized in FY2025, making this

less likely to be a risk factor. We forecast 1Q sales of ¥215.3 billion (Bloomberg

consensus estimate: ¥204.7 billion) and operating profit of ¥41.4 billion (¥41.5

billion), and we do not expect any surprises.

• MTP: We expect the MTP targets of sales revenue of ¥950 billion and

operating profit of ¥200 billion to be generally achieved in FY2027, one year

ahead of schedule. We expect improvement in the gross margin will contribute

approximately ¥20 billion to profit from FY2026 to FY2027 (the period in

which we expect the company to achieve its MTP targets). This corresponds to

the upper limit of the range of productivity improvement effects that the

company anticipates AI will bring (we think future productivity improvements

will largely be explained by AI). Similarly, we expect improvement in gross

margin to contribute an even bigger boost to profit of ¥28 billion by FY2028.

If the company implements STEP 3-2 ahead of schedule, we think there will

be upside to our forecasts. With regard to token costs, we do not consider them

a risk based on a recent management meeting we attended.

• Key points: The main factor for the company’s share price will be improved

sentiment toward system integrators, which had declined on AI concerns.

Global IT spending seems unlikely to bottom out in the next three months

(report), but we think we can expect sustainable robust domestic IT services

due to their lack of cyclicality. Security is a growing theme, with NRI planning

to increase cybersecurity personnel from around 1,400 at FY2025-end to 2,000