Otsuka Corporation (4768): 2Q results: Gross profit margin below our estimates, but overshoots for hardware & software sales

Research evidence excerpt

Otsuka Corporation (4768): 2Q results: Gross profit margin below our estimates, but overshoots for hardware & software sales

J P M O R G A N Asia Pacific Equity Research

03 August 2026

Otsuka Corporation (4768) Underweight

4768.T, 4768 JP

2Q results: Gross profit margin below our estimates, but Price (03 Aug 26):¥3,219

overshoots for hardware & software sales Price Target (Dec-26):¥2,800

Somewhat positive: 2Q sales were ¥412.7 billion (+8.7% YoY; our estimate: Japan Equity Research

¥380.6 billion; Bloomberg consensus estimate: ¥366.4 billion), and operating

IT Services and Telecoms

profit was ¥29.6 billion (+5.7%; our estimate: ¥27.2 billion; Bloomberg consensus

estimate: ¥26.4 billion). Versus our forecast, results mainly beat in the SI business Matthew Henderson AC

at both the sales and operating profit levels, driven by upside in software sales and (81-3) 6736-8831

matthew.henderson@jpmorgan.com

PC unit volumes. While we had anticipated potential upside to the standalone SI JPMorgan Securities Japan Co., Ltd.

gross margin, the actual driver of the overshoot for operating profit was stronger-

than-expected revenue growth (i.e., volume) rather than margin. Management

highlighted strength in security-related sales at the results briefing, but profitability

remains unclear, and uncertainty on that front persists.

• 2Q earnings, focal points going forward: Standalone system integration (SI)

sales were ¥254.9 billion (+7.9% YoY; our estimate: ¥211.9 billion), with gross

profit of ¥38.4 billion (gross margin: 15%; our estimate: ¥36.4 billion). SI-

related products including PC sales beat our estimate by ¥26.2 billion; we think

both hardware and software contributed to the upside. The company says

software revenue growth was strong in MS Office applications and security