Good morning, everyone. My name is Hiroshi Tanabe, President and Representative Director at COMSYS Holdings. Thank you for taking the time to join us today. Allow me to get right into the presentation. Here are the highlights I will be discussing today. As you can see at the top, we delivered exceptionally strong results across the board, reaching new record highs. Following the rollout of our COMSYS Group 2030 Vision last year, we have made smooth and steady progress right off the bat in year one. We are also driving the three key initiatives highlighted at the bottom here. First, we started disclosing operating profit by business segment. Second, independent outside directors now form a majority on our board, and an independent outside director serves as the Chair of the Board and the Chair of the Nomination and Remuneration Advisory Committee.
Lastly, we are enhancing shareholder returns through a dividend increase. I will walk you through the details in the coming slides. First, let us look at the results for the fiscal year ended March 2026. Building on the previous fiscal year, we secured a second consecutive year of record highs for orders received, net sales, operating profit, and net profit. You can also see an improvement in operating profit margin. This slide illustrates our performance trends. Here we have our orders received and net sales. Orders received reached JPY 685.6 billion, marking a new record high. Looking at the breakdown, NTT Engineering, the IT solutions business, and the social systems-related business all achieved new record highs. Unfortunately, NCC Engineering was the only area that has yet to see a full recovery. Net sales followed a similar trajectory, with the IT solutions business also recording a new record high.
This slide presents our sales breakdown by business. The carrier-related business accounted for 44.8%, IT solutions for 22%, and social systems for 33.2%. As indicated by the two smaller pie charts at the top, net sales have roughly doubled from a fiscal year ended March 2016 baseline a decade ago, when we recorded approximately JPY 320 billion in sales. Additionally, back then, the carrier-related business represented two-thirds, roughly 65%, of group total sales, whereas today, this number has dropped to just under 45%. The revenue contributions from both the IT solutions and social systems-related businesses have expanded significantly, both in percentage as well as absolute JPY amount terms. The IT solutions business alone now generates over JPY 100 billion in sales, while the social systems-related business exceeds JPY 200 billion. In summary, we have successfully scaled these operations. Our company was originally built on a foundation in the carrier-related business.
Historically, we have driven growth by taking the expertise built in our carrier-related business and deploying it across the IT solutions and social systems-related businesses. Because of this interconnected approach, we have traditionally managed and reported our profits on a consolidated basis. However, given the sheer scale and revenue contribution these segments have now reached, we have decided to begin disclosing sales and profits by business segment. It goes without saying that our overarching focus remains on driving overall top-and-bottom-line growth, but we believe this new level of disclosure reflects the ongoing evolution of our business mix. Here is the breakdown of operating profit, which came in at JPY 50.9 billion in the fiscal year ended March 2026. On a segment-by-segment basis, the carrier-related business generated JPY 27.1 billion, which represents an operating profit margin of 9.6%.
The IT solutions business recorded JPY 10.5 billion in profit, with a margin of 7.6%. Lastly, the social systems-related business generated JPY 13.2 billion, reflecting a margin of 6.3%. The carrier-related business consistently generates our highest margins, reflecting our 75-year track record in this sector. Decades of accumulated expertise have allowed us to continuously refine our on-site execution and deeply align with our clients' needs. This operational maturity is the primary driver behind the segment's exceptionally strong profitability. As I touched on earlier, we have significantly expanded our IT solutions and social systems-related businesses over the past decade. Because our strategic focus has been on rapidly building scale to prepare for the future, the profit margins remain lower than those of the carrier-related business. Moving forward, however, we are confident we can improve these margins as we further refine our expertise and operational efficiencies. This slide presents our contract backlog.
Outside of NCC Engineering, we have achieved new record highs across the board here as well. I would now like to highlight a few key orders received in the second half of the fiscal year ended March 2026. Within the carrier-related business, we continue to secure a substantial volume of orders for NTT DOCOMO's projects to improve network quality. One notable highlight is that we successfully secured multi-year orders upfront to smooth out project pipelines from the fiscal year ended March 2026 onward. We also continue to see robust demand for data center projects, securing new large-scale contracts on top of a solid base of ongoing key projects. In the renewable energy space, we are winning orders from on-site PPA operators for solar carport installations.
While the solar sector faces some headwinds in the public eye today, we remain committed to this business as a way to build a sustainable environment and society for the long term. On top of that, in the wake of the Yashio sinkhole incident in Saitama last year and similar events, we are fielding a significant uptick in inquiries from public sector and infrastructure operators for national resilience projects. Next, allow me to outline our business plan for the fiscal year ending March 2027. This is year two of our COMSYS Group 2030 Vision, and we are aiming to set new records across the board. We are guiding to JPY 720 billion in orders received on the expectation that strong order momentum will continue and JPY 670 billion in net sales, backed by our ample contract backlog.
On the profit side, we are targeting JPY 54 billion in operating profit and JPY 37.8 billion in net profit. We are holding ROE flat in our guidance for now, but raising it remains a priority. COMSYS is firmly committed to. Turning to orders received, net sales, and operating profit. Across the board, this is a year where we are letting overall margins dip temporarily to invest for the future. More specifically, DX investment in human capital and higher shared costs as we deepen integration across the group. As a result, we don't expect to be able to lift margins much in IT solutions or social systems for now. Instead, we've structured the plan so that the carrier-related business carries the load for the group overall. Let me walk through each segment in turn. Let's now turn to the carrier-related business.
For NCC Engineering, which also includes our infra sharing work, we expect net sales to be roughly flat. That said, we do anticipate Rakuten Mobile's CapEx and the broader ramp-up of infra sharing solutions to gain real momentum going forward. We are determined to do everything we can to support our clients, and we see meaningful room to grow this sub-segment further. On the NTT mobile business side, our contract backlog for mobile base station construction is up substantially on a year-on-year basis. As I touched on earlier, our client has been placing orders earlier in the cycle, allowing us to smooth out project pipelines effectively. NTT DOCOMO has also streamlined processes for on-site construction and approaches that make it easier to negotiate with building owners. As a result, we expect to make even greater construction progress than we did last year.
This translates to JPY 300 billion in net sales and JPY 30.3 billion in operating profit, with a modest uplift in margin as well. Moving to the market outlook, we anticipate true explosive growth for both fixed and mobile networks will materialize in the fiscal year ending March 2031 and beyond. This will be driven by the IOWN concept and next-generation mobile standards such as 6G, which are unlikely to see widespread deployment within the next two to three years. Nevertheless, over the near term, we continue to see abundant demand for the installation of 10-gigabit internet fiber-optic lines. Furthermore, the NTT Group announced plans last year for the migration and removal of copper lines. In response, we are working to migrate the services currently delivered over copper lines into fiber-optic lines, and this is on-site work where we are counted on to deliver.
On top of that, a brand-new category of work is emerging, namely the physical removal of the now-empty copper cables, and the volume here is set to grow significantly. Turning to mobile, we have been consistently enhancing our capabilities in this area for some time now. Compared to our first-half execution capacity last year, we have secured roughly three times that capacity for the fiscal year ending March 2027. By bringing that capacity to bear at full strength from the start of the year, we are working to lock in our full-year construction volume. Moving on to the IT solutions business, we successfully completed several large-scale projects during the fiscal year ended March 2026. These projects contributed significantly to both net sales and operating profit.
Flawless execution on these large-scale projects without any need for rework allowed us to secure solid sales and achieve a high profit margin in the outgoing fiscal year. While we do not currently have visibility on equivalent large-scale projects for the fiscal year ending March 2027, we intend to stay in close dialogue with our clients throughout the year and capture the kind of work that will drive results in future years. Furthermore, we believe we can expand our role as a prime contractor by offering compelling public sector DX, as well as cloud and zero trust security solutions. To make that happen, we are committed to securing the talent we need. The COMSYS Group's core strengths in the IT domain are outlined in the upper center section of this slide.
Our greatest competitive advantages lie in our ability to build ultra-large-scale IT infrastructure, as well as our expertise to design and configure virtual servers, advanced networks, and voice solutions. Additionally, our extensive network of group companies and operational bases provides us with nationwide standardized rollout capabilities, complemented by our robust system development capabilities. These represent significant competitive strengths. Building on these strengths, we intend to enhance our deployment and operational support services, as shown in the lower section of this slide. By strengthening areas such as cloud deployments, specifically lift and shift projects, along with cloud operations, as well as security monitoring and operations, we are building a structure that allows clients to entrust us with their end-to-end needs as a one-stop shop provider. To enable this, as shown at the bottom of the slide, we are currently working to internalize the modernization of our IT infrastructure.
Now, while this connects to the higher shared costs I mentioned earlier, we have begun deploying these systems in-house as an upfront investment. By taking on cybersecurity, Microsoft 365, and AI implementations ourselves, we are building hands-on expertise around what matters most when migrating off legacy systems and where difficulties tend to arise. The aim is to then turn that knowhow into something we can offer our clients. At present, we have over 60 personnel assigned to Microsoft POCs and nearly 100 members involved in deployment projects to build this expertise. Additionally, TOSYS, one of our group companies, has been selected as a Microsoft FastTrack Ready Partner to support Microsoft 365 deployments, making it one of only a dozen or so companies in Japan to become part of this elite group.
We are working to raise the baseline skills across the COMSYS Group by sending employees from various group companies to TOSYS for on-the-job training. Building on the expertise we accumulate through these efforts, we intend to further strengthen our existing competitive advantages and broaden the range of clients who choose to work with us. As shown on the left side of the slide, we will deepen our relationships with existing key clients. We also aim to earn greater trust from system integrators and vendors through our nationwide standardized rollout capabilities and construction quality so that they entrust us with more of their work. On top of that, we will work to grow our new client base as well. Now turning to the right side of the slide, as I have mentioned more than once, our roots are in carrier-related construction work.
From those teams, over the years, we expanded into the IT solutions and social systems-related businesses, and there has always been a culture of working as one across these areas. We intend to strengthen that further. In the IT space as well, we will have teams from the social systems and carrier-related businesses take on the on-site work, freeing the IT solutions team to move into higher-layer domains and upstream processes. This is how we intend to secure both sales and profit across the group as a whole. Moving on to the social systems-related business. We forecast JPY 231 billion in net sales and JPY 14 billion of operating profit. As I touched on earlier regarding the rise in various shared expenses, we expect operating profit margin to slip slightly, but our underlying earning power has genuinely improved.
This forecast incorporates four newly consolidated subsidiaries, which we expect will contribute roughly JPY 9 billion to net sales. Demand in this segment remains robust, and we will continue to actively capture large-scale projects. We will also engage closely with our clients on design changes and other modifications, ensuring these translate cleanly into net sales and profits. By building on our accumulated experience, we will sharpen our bidding accuracy and lift our technical evaluation scores, driving stronger overall performance. Let's now look at the data center business. We have been highlighting our ambition to grow this segment since last year. During our first-half earnings presentation, we guided to roughly JPY 50 billion in orders received for the fiscal year ended March 2026 and ultimately landed at JPY 58.5 billion. The upside came from securing JPY 7 billion in orders ahead of schedule in March.
Projects originally slated for the fiscal year ending March 2027. We have built our capabilities to the point where we can now secure close to JPY 100 billion in orders over a two-year span at this scale. With a solid contract backlog in hand, our focus now shifts to executing these projects reliably and to completion. Looking at the right side of the slide, our competitive edge comes from construction expertise honed over 75 years of building telecom facilities. As the slide notes, data centers are essentially massive telecom facilities. Indeed, the internal infrastructure consisting of electrical systems, HVAC, servers, routers, and cabling mirrors what we have long handled in telecom facilities, and this direct overlap in expertise is exactly why we are able to execute these projects so effectively today.
As noted at the bottom of the slide, we are cross-deploying engineers from the carrier-related business to handle roughly 40% of the construction for our data center projects. Looking ahead, we anticipate a broader shift toward regional decentralization. To build the agility required for this, we are upskilling our regional engineers on data center projects in the Tokyo metropolitan area. Currently, we are training roughly 50 engineers from across the COMSYS Group, preparing them to spearhead future regional data center rollouts. DCI, Data Center Interconnect projects, which involve connecting data centers via optical fiber, are another natural extension of our core strengths. Additionally, we have launched our containerized data center business. Our TOSYS Cube Park NAGANO facility, operated by TOSYS, is already operational, and we are actively rolling out these packaged solutions nationwide. Let's now move on to initiatives to enhance corporate value.
To further enhance corporate governance, we are establishing a majority independent board. Specifically, independent outside directors will be appointed to chair both the board of directors and the Nomination and Remuneration Advisory Committee. As you can see in the graph on board composition, back in 2018, we had a total of 16 directors, only four of whom were outside directors. Since then, we have actively driven board effectiveness by reducing its overall size, and additionally, with this latest change, the board now consists of six outside directors and five inside directors. Turning to our committee operations, we amended the articles of incorporation back in June 2023. While the rule allowing a non-CEO board chair was established three years ago, we are now fully putting this structure into practice.
Through these changes, we will enhance board oversight functions, foster independent and objective board discussions, and further elevate transparency and fairness in our executive Nomination and Remuneration Advisory Committee processes. On the sustainability front, we recently earned our first-ever CDP Climate Change A List rating for 2025. Additionally, while final calculations are still underway, we are virtually certain to reach net zero Scope two emissions for fiscal year 2025. While we are proud of these results, the critical task is maintaining this momentum, since we recognize that our climate initiatives represent an ongoing permanent commitment. Finally, to drive engagement, we launched our Employee Stock Ownership Plan, ESOP for short, this past March. Rolled out to roughly 10,000 COMSYS Group employees, this plan fosters an ownership mindset. Our goal is to create a system where employees are directly rewarded for their hard work, boosting loyalty and driving overall corporate performance.
Turning to our employee benefits, enrollment in the Employee Stock Ownership Association has increased significantly. While this plan itself was already in place, we raised the stock incentive match rate from 5% to 20% in April 2025. Consequently, membership grew by 40%, while overall contributions increased 2.6-fold. We are also focused on empowering partner companies. Starting last year, we have rolled out new recruitment programs and training support to build a long-term talent pipeline. Furthermore, we are driving fair and sustainable pricing negotiations. To guarantee equitable business practices, we are engaging in rigorous negotiations and deploying specialized personnel to visit each company and listen to their specific challenges. We are steadily advancing these initiatives across the group. Next is our shareholder returns policy. For the fiscal year ended March 2026, we are rewarding shareholders with a JPY 10 per share dividend increase.
For the year-end dividend, we are raising our initial forecast of JPY 60 to JPY 70, bringing the annual total to JPY 130 per share. In addition, share buybacks, which totaled JPY 10 billion last year, will increase to JPY 11 billion this time, resulting in a total payout ratio of 69.1% for the fiscal year ended March 2026. The targets we set out under our medium-term management plan are shown on the far right of the table below. A dividend increase of at least JPY 5 every fiscal year, a total payout ratio of approximately 70%, and a target ROE of 10%. Of these, we have largely achieved the two relating to shareholder returns. This slide covers our dividend history. This concludes my presentation. Thank you for your time today.
Thank you, President Tanabe. We will now open the floor to questions. Mr. Kawashima at SMBC Nikko Securities Inc. will be posing the first question.
My name is Kawashima, and I am with SMBC Nikko Securities. Thank you for the presentation. I have two questions. The first being on the outlook for orders received in the NTT Mobile business. It looks like another solid year, but I would like to dig into the threefold increase you mentioned earlier. Granted, it depends on the baseline and scope, but how much does this expanded construction capacity flow through to future order volumes? With NTT DOCOMO itself working to accelerate network quality improvements, is there room for your market share to expand on the back of strong execution and in-year project completion? Put another way, beyond the overall market volume growing, I would like to understand how your own efforts shape the outcome.
Second, apologies, this is something I am asking all the companies in your sector. Our sense is that the situation in the Middle East has a relatively limited impact on your business. Could any concerns around materials procurement or on-site execution emerge going forward? Or, given that some materials are client-supplied, are you fairly shielded from direct cost increases? I would appreciate your thoughts.
Thank you. Let me start with NTT Mobile. To put the threefold figure in context, in terms of construction volume, we are looking to complete three times as many base stations in the first half of the ongoing fiscal year as we did in the first half of the fiscal year ended March 2026. That is between the months of April and September. We expect to deliver that threefold pace in the first half alone and to sustain it through the second half.
What makes this possible is that orders came in early, giving us ample time for client negotiations and design work, letting us hit the ground running from day one of the fiscal year. We have also been in active dialogue with NTT DOCOMO going back two years now, asking for more compact equipment for rooftop base stations, broader use of prepackaged solutions, and the ability to work from standardized base station designs. NTT DOCOMO has signed off on most of these, and on-site construction, design, and client negotiations have become much more straightforward as a result. Combined with the smoothing out of our project pipeline, the various refinements we have made, and the additional headcount we have brought on, our capacity is now roughly three times what it was in the first half last year.
That gives us strong conviction we can deliver on this over the course of the ongoing fiscal year. On your first point, that is, whether this ultimately translates into market share gains, every player in our space is working hard at it. We do hope that, going forward, we can be rewarded with additional share for the results we are delivering. That said, for now, our focus has to be on executing flat out on what is in front of us, and we will take up that discussion once we have a clearer line of sight. On your second point regarding the situation in the Middle East, yes, we have been hearing from some of our material suppliers. For example, on paints and thinners used for base station coating work, suppliers have flagged upcoming price increases.
On the concrete and asphalt mixtures used in road construction, some suppliers are telling us they can no longer deliver on the same terms as before and that this type of work may not be sustainable going forward. That said, in the context of our overall business, this is a very small slice, so we have not built any of it into our current business plan. Naturally, we will have to keep a close watch on this going forward. Cables, for example, use a lot of plastic in their components, and various materials go into the sheathing itself. For now, we are hoping these areas won't be affected, but this is something we need to keep monitoring. In terms of fuel costs, we are starting negotiations with our clients to pass on those price hikes.
Given how this situation may continue to develop within the group, we are centralizing information collection across the COMSYS Group as part of our crisis management. This is roughly where we stand for now. Does that cover your question?
Thank you.
Mr. Hamakawa with Nomura Securities will be posing the second question.
My name is Hamakawa, and I am with Nomura Securities. Thank you for your presentation. I also have two questions. We just discussed the demand outlook for the mobile business, but it appears that net sales in the fiscal year ended March 2026 fell short of the company's targets. Could you elaborate on the background behind the delays in sales and construction execution relative to your plan and the factors that give you confidence these issues will be resolved over the course of the ongoing fiscal year?
Second, on the IT solutions business, you mentioned there were some large, high-margin projects in the previous fiscal year. Could you provide more color on the specific nature and scale of these projects? You are also guiding for a slight profit decline in IT solutions this fiscal year. Is the company just being conservative or setting those large projects aside? Was this a segment that could otherwise have delivered solid profit growth? It would be helpful to hear your thoughts on the IT solutions business more broadly. This concludes my second question.
Thank you for your questions. Addressing your first point, we increased our on-site construction capacity by 50% between the first and second halves of the fiscal year ended March 2026. A primary reason for the sales shortfall was the challenge of getting that newly added capacity fully up to speed.
We had assumed these new teams would match the output of our veteran personnel, and despite extensive training to close the gap, the expected results did not fully materialize. Additionally, we encountered supply chain constraints with certain equipment and components toward the end of the March 2026 fiscal year. In aggregate, these factors caused us to fall slightly short of our targets. That said, this uncompleted volume has rolled over into the ongoing fiscal year. So rather than viewing this through the lens of a single year, we see it as our mission to execute these necessary volumes over a multi-year horizon, and we are dedicating our utmost efforts to achieving this. Turning to the IT solutions business, we successfully concluded several multi-year large-scale projects in the March 2026 fiscal year, each worth over JPY 10 billion.
To give you a clearer picture, we served as the prime contractor on two of these major initiatives. One involved securing and deploying equipment for a nationwide network rollout, and the other was a large-scale nationwide transportation system. Both were highly complex, multi-year endeavors that we brought to a successful close. We were able to achieve high margins because our clients engaged substantively in the discussions and worked with us to nail down the requirements, and because we were able to put the right people on these projects. That is, people with the skills to run large-scale work properly. As a result, we completed these projects with minimal rework. Large scale combined with minimal rework is what drove margins so high.
While we currently do not have visibility on new projects of a similar scale for the March 2027 fiscal year, flawlessly executing these past deals has significantly deepened our clients' trust. These are clients with various kinds of plans in the pipeline. I want this to be a year where we sit down with them carefully and convert those plans into orders. On top of that, there is plenty of mid-sized work, namely projects in the JPY 1 billion-JPY 2 billion range, that we can both win and complete within the ongoing fiscal year. By steadily picking these up, we want to keep pushing profit margins higher.
That said, on the overall margin, the large projects we ran so successfully have wrapped up, and the forward-looking spending I have referred to repeatedly, for example, things like DX investments, is not something the existing business can fully cover on its own, leading to slightly lower margins. That said, I do think our ability to win large orders has strengthened, and we have become much better at capturing the mid-sized work as well. On top of that, we have been hearing from our key clients, the ones where we currently come in as a secondary contractor, that they intend to keep moving further upstream into higher-layer work. As they do, we step in and pick up the work they have been doing, and since that work sits in the natural extension of our on-site execution capabilities, we can do it very efficiently.
Building this out is how we believe we can lift both margins and order volumes. These are just where we are starting, and we need to push much further from here.
Just a quick follow-up. Is it safe to assume that the supply chain constraints involving those component delays have now been fully resolved?
So far in the March 2027 fiscal year, we haven't received any reports of projects stalling due to component and equipment shortages. So we believe the situation is stable for now. That said, we still have to monitor whether the situation in the Middle East or other macro factors might impact these components. The same applies to other IT domains like semiconductors. That is, whether we can secure a stable supply throughout the entire year is something we must watch carefully.
While we believe we are fine at this exact moment, frankly speaking, we can't just be blindly optimistic about the future. My honest assessment is that we absolutely need to stay vigilant.
Understood. Thank you.
Mr. Teraoka with Daiwa Securities will be posing the next question.
My name is Teraoka, and I'm with Daiwa Securities. I would like to look at two specific areas. First, on the IT solutions business and the social systems-related business, this fiscal year, margins are expected to come down a bit on the back of some upfront investments. When do you expect to reach an inflection point where margins start improving? Second, your guidance is for ROE to come in flat this fiscal year ending March 2027, and you have said you are committed to raising it. Then there is also the medium-term target under the COMSYS Group 2030 Vision. Could you walk us through how you're thinking about lifting ROE from here?
To address your first question on the timeline for margin expansion in the IT solutions and social systems-related businesses, our strategy positions the ongoing fiscal year as the trough, with a recovery trajectory to follow. This depends entirely on our ability to secure highly profitable contracts and to consistently raise the percentage mix of large-scale prime projects within the IT solutions business. As I touched on earlier, a critical driver in the IT solutions business is executing rigorous project management to eliminate rework. Having accumulated substantial expertise in this domain, we are highly confident in our capacity to consistently replicate these successful outcomes on future projects.
Turning to the social systems-related business, a critical factor for success is our ability to raise our technical scores and strengthen our cost estimation during bidding, and we have been making progress on these fronts. On a public sector project we just wrapped up, we came in with the top evaluation score, and I'm hearing more of these wins lately. It will take a year or two before this shows up in the numbers, but grinding away at the basics is part of the answer. The other part is large projects, where one faces a variety of risks one simply cannot anticipate, and getting better at negotiating through these issues is vital. The traditional approach was to have the site manager handle price negotiations, since they are the ones working with the client and partner companies day in and day out.
A clear drawback with this approach is that they either hold back or are stretched too thin to give the negotiations the attention this process needs. As such, we have implemented a new management framework for our most critical large-scale projects, wherein the back-office and sales teams take over a significant part of the negotiations, with the aim of protecting overall project profitability. We want to start seeing results from this as early as we can, and I am confident we will see a steady incremental expansion in the profit margins for this business, starting in the ongoing fiscal year ending March 2027. Additionally, turning to ROE, our objective is to push beyond the 10% threshold. We are having various internal discussions about how to optimally allocate our capital.
I cannot get into the specifics here yet, but we do intend to share a concrete plan with you in due course. What's more, 10% is not the end of the road for us. Rather, we are aiming above this threshold, and to get there, we are working on capital efficiency, as well as on lifting net profit to drive ROE higher. We appreciate your patience as we finalize these details.
Understood. Thank you.
Mr. Yagi with Morgan Stanley MUFG Securities will be posing the next question.
Thank you for your presentation. My name is Ryo Yagi, and I'm with Morgan Stanley MUFG Securities. My first question concerns the operating profit margin for the social systems-related business. While you anticipate a margin recovery following the current upfront investment phase, margins are declining this fiscal year despite robust revenue growth.
I would like to clarify if this contraction is solely attributable to upfront investments, or if the shifting segment mix, driven by the expansion of infrastructure and electricity and telecom, is also a factor. My goal is therefore to confirm the trajectory of the baseline profitability in the context of a shifting segment mix. My second question focuses on the order outlook for the data center business. Orders received continue to grow steadily, but I imagine construction capacity could eventually become a constraint. Market demand itself is clearly robust, so I would like to understand how much further room there is to expand orders received and net sales going forward.
Thank you for your questions. To address your first question on the profit margin of the social systems-related business, our per-project gross margins remain entirely stable.
Most of that upfront spend is going into DX, which we are still deploying internally for now, so it is cost-heavy at this stage. However, as outlined in the IT solutions business overview, we expect these capabilities to ultimately drive external-facing sales and profit. The shifts toward cloud infrastructure and highly secure networks is set to accelerate. Once IT solutions is large enough to carry the group's shared expenses on its own, the load on social systems related comes down, and margins there can move up. This is the basic structure at work here. I want to make clear that we are not taking on low-margin work to fill the book. Rather, we will continue pursuing promising projects, and we intend to keep lifting margins the way I described earlier.
On your question about the segment mix, the upfront spend I mentioned, that is DX and other expenses, sits across the whole group. But the segment that will translate that into higher margins going forward is mainly IT solutions. That said, as sales and headcounts grow there, the math on how shared expenses get allocated also works in favor of social systems related, and that helps margins in that segment, too. This is our thought process here. As I touched on briefly earlier, of the JPY 231 billion in net sales for the social systems-related business, roughly JPY 9 billion comes from a small number of small and mid-sized companies that have recently joined us through M&A and are now COMSYS Group consolidated entities. Smaller companies tend to carry higher indirect costs and SGA, and that does weigh on our margins in the near term.
That said, by getting them onto the COMSYS Group's shared platforms and working together on projects that unlock real synergies, we are confident we can lift both sales and margins. That is the whole reason we have been pursuing these M&A deals. However, realistically, this is not something that plays out in a single year, but over the next few years, we have to deliver tangible results. Looking at the data center business, honestly, there is no shortage of projects out there. That is part of why we have set orders received at JPY 38 billion for now. We are not yet at a point where we can give you a view on the fiscal year ending March 2028 and beyond, but demand in the Tokyo metropolitan area remains very strong.
From what we hear, there is still land available in Inzai and the surrounding areas, and a good portion of the distribution lines TEPCO has secured are still just reserved and not yet in use. As such, we expect more projects to keep coming out of the Tokyo metro area. Additionally, as shown on the right, the next phase will almost certainly be about regional decentralization through something like Watt-Bit Integration that brings the environmental angle into areas near nuclear plants or other locations with a lighter environmental footprint. The engineers we have brought together from across the country are being prepared to spearhead that next phase. If we can build up that capability now, we believe we can keep growing the business into that next era. We have also started on the containerized data center side.
Specifically, we launched the first one for internal use, but we are already seeing real inquiries come in, so this is another area we have great hopes for going forward. I am afraid I cannot give you the specific numbers you were probably hoping for, but that is as far as we can go today.
Just one quick follow-up. Demand still looks strong, and I take it that growing net sales beyond where you are now is part of the current plan. Should I assume you have a reasonable degree of visibility on that at this point?
The answer is yes. We can grow it further, and indeed, we have to. Demand really is abundant. As you pointed out, capacity is a consideration, not just our own, but also that of our partner companies. So it is a question of picking better projects, ones where we can best demonstrate our capabilities. In absolute terms as well, we do think we can lift the top line to some degree.
Understood. Thank you.
Mr. Nakagawa with Mizuho Securities will be posing the next question.
My name is Nakagawa, and I am with Mizuho Securities. Thank you for the presentation. I have two questions, the first relating to SGA expenses. You noted that costs will increase this fiscal year, driven by upfront DX investments and other factors. Based on your targets, SGA expenses are projected at JPY 45.2 billion, representing a year-on-year increase of roughly JPY 4 billion. Could you clarify how much of that total increase is directly attributable to these upfront investments? Additionally, should we expect these DX-related costs to normalize this fiscal year, or will they persist beyond that horizon? Turning to my second question on the IT solutions business.
The completion of several large-scale projects in the fiscal year ended March 2026 establishes a tough comparable for the March 2027 fiscal year. Are your sales teams actively continuing to pursue new projects of a similar scale? Also, how should we model the potential upside for orders received in the second half?
Thank you for your questions. Addressing your first question, these upfront investments are driving roughly 50% of this increase. Also note that these are largely system subscription fees rather than capital expenditures, so the costs will naturally span multiple years. Specifically, we expect this elevated run rate to last for approximately three years before tapering off. This overlap is standard for any major system migration, as we must maintain our legacy platforms while spinning up the new infrastructure. That said, once we fully decommission the legacy systems, that dual cost burden will drop.
What's more, these new platforms will significantly enhance our security, drive operational efficiency, and create new added value. We are actively packaging the implementation expertise we are building during this transition as a direct service to our clients. This includes the roadblocks we faced and the expense overlaps we had to contend with. Ultimately, please view this as a strategic upfront investment cycle that will elevate our cost base for a three-year horizon. To your second question on our pipeline for large-scale projects, we are absolutely continuing to pursue these opportunities. As I touched on earlier, our flawless execution of two recent large-scale projects, with virtually zero rework, has deepened our client relationships. This track record puts us in an excellent position to win the contracts for their next-generation systems, and we are actively working other enterprise accounts to convert these opportunities.
Additionally, we have built partnerships with specific vendors to manage the nationwide deployment of their enterprise solutions. For instance, a major storage vendor recently named us their top partner in Japan. As a result, when they secure massive enterprise deals, they increasingly hand the implementation directly to the COMSYS Group. That vendor-led pipeline alone drove several billion JPY in revenue last year, and we see runway to scale this further going forward. Furthermore, the public sector continues to roll out massive national resilience projects, and local governments are executing their own targeted infrastructure upgrades. Within these scenarios, our regional group companies leverage their strong local footprints to secure major orders while relying on the broader COMSYS Group's collective execution capabilities to deliver the work. We have immense confidence in this group-wide operational model.
We anticipate the government-backed market for building new social infrastructure across these regional areas will remain highly active, and we intend to systematically convert these opportunities into our contract backlog over the coming years. Does this answer your question?
Yes, that is very clear. Thank you.
Allow us to close today's financial results presentation for COMSYS Holdings for the fiscal year ended March 2026. Thank you for taking the time out of your busy schedules to view today's presentation.