Addressing segment changes; maintain Buy

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Addressing segment changes; maintain Buy

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NEC (6701)

Maintain Rating: BUY | PO: 6,900 JPY | Price: 4,407 JPY

Maintain Buy rating and ¥6,900 price objective 21 July 2026

Reflecting the segment changes announced on 10 July, we revise the segment Equity

breakdown of our earnings forecasts. Our earnings forecasts remain unchanged. We

maintain our Buy rating and price objective of ¥6,900 (based on a 26x P/E applied to Hideaki Tanaka >>

FY3/28 earnings). There are three key pillars to our Buy thesis: (1) growth and improved Research Analyst

BofAS Japan

profitability in IT services driven by the DX support model BluStellar, (2) expansion of the +81 3 6225 8431

defence-related business, and (3) expectations for strong earnings growth. We forecast hideaki.tanaka@bofa.com

the company's Non-GAAP operating profit to increase at a 17% CAGR over the three Hiromu Yabuki >>

Research Analyst

years through FY3/29, a level that ranks among the highest in the sector. BofAS Japan

hiromu.yabuki@bofa.com

BluStellar to drive earnings growth

The company targets BluStellar revenue of ¥1.3tn (13% CAGR) and a 25% Non-GAAP

operating margin (¥325bn in Non-GAAP operating profit, 26% CAGR) in FY3/31. Stock Data

BluStellar comprises three businesses: Scenario Offering, Products & Services, and

ABeam. We are focused on growth in Scenario Offering, which has the highest Price 4,407 JPY

profitability among the three businesses. Price Objective 6,900 JPY

Date Established 18-May-2026

We believe the FY3/31 targets are highly achievable Investment Opinion C-1-7

The company is targeting approximately ¥800bn in Non-GAAP operating profit in FY3/31 52-Week Range 3,606-6,194 JPY

(15% CAGR). We forecast ¥640bn in Non-GAAP operating profit in FY3/29. Given the Market Value (mn) 6,012,247 JPY