Company researchTSE GROWTH · 4475 · FY end SEP

May 14, 2026

HENNGE K.K.

HENNGE provides cloud security that lets Japanese companies access business email and applications securely, and is expanding into data protection and endpoints. Watch whether ARR growth reaccelerates from 14.7% and where margins settle as investment in new products continues.

Company

HENNGE K.K.

ＨＥＮＮＧＥ株式会社

Subscription cloud security for identity management and business email.

Last Close: ¥1,016; May 12, 2026 · −46% from Aug-25 peak · +4% off Mar floor
Market Cap / enterprise value (EV): ¥33bn / ¥26bn EV; net cash ¥7bn (22% of cap) · ¥910M buyback Dec 2025
EV / OP · forward: 12.5x; vs 3yr median ~22x · peer median ~14x · near-miss §14
ROCE · trailing: ~48%; FY09/23 34% → FY09/25 48% · 3yr trend expanding
OP Margin · group: 16% · grp; FY09/26 guide 16% · gross margin 86.8% rising
Equity ratio · §14.5 adj: 63% adj / 37.3% rep; contract liab ¥4.7bn = 43.6% of TA · SaaS convention

01 · Stock price trends

What moved the share price over the past two years?

The stock price was around 1,000 yen in May 2024, and rose to 1,899 yen in August 2025. However, over the next six months, most of the gains were lost. The trigger was not a deterioration in business performance, but the next year's plan announced in November 2025 and the slowdown in ARR growth over the following two quarters.

4475 and TOPIX · 24 months · Daily candlestick + volume

high price¥1,899 · 2025-08-14 low price¥973 · 2026-03-13 most recent¥1,016

HENNGE · Daily candlestick 60 day moving average TOPIX-linked ETF (1308.T, standard alignment) Volume

01 · The rally In spring 2024, HENNGE was valued as a solid domestic identity-management and email-security SaaS business, with limited grounds for a large growth premium. Strong FY24 and FY25 quarterly results changed that view. FY24 sales rose 25% and OP 71%; during FY25, HENNGE One ARR entered the ¥10bn range and Basic-to-Pro migration appeared to be progressing. About 3,500 customers, a gross margin rising from 84.1% in FY24 to 86.5% in FY25, and monthly gross revenue churn falling to 0.33% suggested low churn and room to upsell. The shares reached ¥1,899 on August 14, 2025.

02 · The reversal The outlook changed in November 2025. FY25 sales grew 30.6%, OP 76.7%, and ARR reached ¥11.1bn. However, FY26 guidance combined 17.5% sales growth with a 16.0% OP margin, little changed from FY25’s 16.4%. Management was investing in endpoint and managed security, domain protection and a US joint venture. These were longer-term investments, but short-term investors saw slower growth and higher costs. ARR growth slowed from 20.6% in February 2026 Q1 to 14.7% in May Q2. Q2 also showed fewer users per customer as new business skewed toward smaller companies and some large existing customers chose single-feature plans instead of Pro. The market discounted the Pro-driven ARPU growth story. The price reached ¥973 on March 13, 2026, nearly halving from August’s high.

03 · Current position Management bought back shares during the decline. On November 21, 2025 it authorized up to 700,000 shares and ¥1.19bn; by December 19 it had acquired all 700,000 for ¥0.909988bn, averaging about ¥1,300, with completion disclosed on December 22. The purpose was to prepare for share compensation and stock-funded M&A, control dilution and improve capital efficiency. This did not reverse the valuation decline. The May 12, 2026 close of ¥1,016 was above March’s low but well below August’s high. Business quality remained strong: ROCE about 48%, gross margin 86.8% and FCF yield about 8%. Next-twelve-month EV/EBIT was roughly 12.5x, versus around 22x at the high. The next valuation depends on explanations of ARR growth, Pro migration, upfront investment and capital allocation.

02 · Issue

Three questions dividing investor views

There are three points that

investors are trying to determine. Will ARR growth accelerate again? Will the company be able to maintain a sufficient profit margin after investing in growth? Will it continue to buy back its own shares with discipline?

Issue 01 · Slowdown in ARR growth rate

Is the ARR growth rate of +14.7% a temporary slowdown, or will the future growth rate remain at this level?

bullish The bullish view is that although the ARR growth rate alone has slowed, the fundamental KPIs have not collapsed yet. Q2 What is the number of customers in FY26?3,731 companies (+17.3% compared to the same period last year), the number of users is2,960,000 people (+11.9%), Pro composition ratio in one quarter18% to 20%and monthly gross revenue churn.0.45% to 0.26%improved to. Q4 ARR growth rate in FY26+18% or moreReturning to, it becomes easier to explain the slowdown in H1 as a reaction to the high growth of the previous year.

bearish The bearish view is that the quality of growth has changed. New acquisitions are focused on mid-sized and small businesses, and the number of users per contract is decreasing. Some of the existing major companies are choosing single functions instead of Pro, and advertising expenses will increase by 20.1% in FY26 plan, exceeding the sales plan of +17.5%. Q4 ARR growth rate in FY26+12% or lessIf it falls to this level, it will be interpreted as a structural slowdown, not just a baseline effect.

Issue 02 · Suppression of profit margin

Is the operating profit margin plan of 16.0% for FY26 intended to advance growth investment, or does it indicate a limit to profitability?

bullish The bullish view is that the earning power itself is high. The gross profit margin is86.8%, capital investment is sales0.7%, almost no interest-bearing debt, and ROCE isApproximately 48%becomes. H1's operating profit margin is20.7%The difference from the full-year plan of 16.0% can be interpreted as being due to the inclusion of branding, US JV, and new product launch costs first. FY26 results17% or moreIf you land on this, it will be easier to evaluate the company as one that can maintain profit discipline while making investments.

bearish The bearish view is that external factors will put pressure on profit margins. Microsoft E5 includes Defender for Office 365 and Entra ID, which overlaps with HENNGE One's Email DLP/ID area. Additionally, a high proportion of AWS-related expenses are denominated in dollars, and a weaker yen will reduce gross profit margins. FY26 operating profit marginless than 14%If the forecast is revised downward, the market may perceive it as a ceiling on profitability rather than an advance in investment.

Issue 03 · Capital allocation

Was ¥0.91bn of share buyback a step toward improving capital efficiency, or was it a purchase at a high price?

bullish The bullish view appreciates that the company has started using its balance sheet. Stock buybacks from November to December 2025¥0.90998bn・700,000 sharesThis is equivalent to 2.2% of the number of outstanding shares after deducting treasury stock. The message is that it is not just about accumulating cash on hand, as it also has the meaning of reducing dilution from stock compensation. If FY26 full-year results indicate additional share buybacks or a continued return policy, confidence in capital allocation will likely increase.

bearish A bearish view focuses on the level at which the stock was purchased and the ambiguity of the explanation. Acquisition will be from November 26, 2025 to December 19, 2025, with an average of approx.1,300 yenIt was held in At that time, the actual ARR growth rate was approximately 31 times, and had already slowed down. Why would a company that can reinvest in a high ROCE business buy its own stock at that price? If this point is not explained, it will remain a question of the discipline of capital allocation rather than shareholder returns. If no additional policies are indicated in the FY26 full-year financial results and only cash accumulates, this issue will be brought to mind again.

03 · Evaluation improvement

Three points to pay attention to in IR and capital policy

It's not just performance that moves

's stock price. If investors' questions are answered with specific performance indicators and capital policies, evaluations can change. HENNGE has three priorities.

Highlight 01 · Disclosure

ARR by product for ID, DLP, Security, Endpoint, and Domain Protection

Composition of HENNGE One ARR (H1 FY26 disclosure basis)

Disclosure ARR

¥119

ID layer (undisclosed)

opaque

DLP/Security

opaque

Endpoint / Domain Protection

Start-up period

Multi-module configuration not visible under single segment disclosure

HENNGE One's consolidated sales94.5%However, from the perspective of investors, the content is still poorly disclosed. By understanding the ARR breakdown for identity, DLP, security, endpoint, and domain protection, you can determine which areas are growing and which are experiencing competition from Microsoft. If we can track the actual state of progress toward Pro, the launch of new products, and cross-selling to existing customers in the same table, we will be able to explain the quality of growth, rather than just a "slowdown in ARR growth rate."

execution burden

1 KPI table

Shortest execution time

Q3 FY26 financial results · August 2026

Highlight 02 · Disclosure

Pro ARR, conversion rate from Basic to Pro, usage growth by contract year

Changes in composition ratio of Pro plan (% of total ARR)

FY25 Pro ratio (CFO)

~17%

Q1 FY26 Pro ratio

~18%

Q2 FY26 Pro ratio

20%

Pro ratio rose 200bp in the quarter. The focus is on the absolute level and upgrade rate

Pro ratio in Q2 FY2618% to 20%I went up to However, ratio alone is not enough. Investors want to know the absolute ARR of Pro, the conversion rate of existing Basic customers to Pro, and how many months after implementation will upgrades occur. If these are shown, we can verify to what extent the goal of FY29 ARR ¥20bn can be explained not only by acquiring new customers but also by upselling existing customers. For IR purposes, this is the most cost-effective additional disclosure.

execution burden

1 slide

Shortest execution time

Q3 FY26 financial results · August 2026

Highlight 03 · Capital policy

Will share buybacks be positioned as an offset for dilution or as a return based on a calculation formula?

Formula-type share buyback (image)

Current situation

opportunistic

Execution in December 2025

Approximately 31 times the actual result

Formula type alternative

EV/EBIT 12 times or less

Mechanically buy at an appropriate valuation level, not at the peak

Stock buybacks in December 2025 averaged approximately1,300 yenAs a result, I invested ¥0.91bn at a high level before the stock price fell. The next evaluation material is whether the rules of “why and at what level to buy” become clear. The capital allocation message becomes much easier to understand if you know whether you want to mechanically offset the dilution of stock compensation every year, or whether you buy only when valuation metrics such as EV/EBIT fall below a certain level. If an explanation is provided along with preparations for the transition to the prime market, it will provide material for evaluating governance, liquidity, and shareholder returns in an integrated manner.

execution burden

Board of Directors resolution

Shortest execution time

FY26 full year results November 2026

04 · Valuation

Scenarios for the next four quarters

I have three views regarding the next four quarters. This is not a target stock price, but a scenario for investors to sort out under what conditions the valuation multiple should be raised or lowered.

bearish case

¥800 〜 ¥900

−21% 〜 −11%

Assumed valuation multiple EV/EBIT approximately 10 to 11 times (next 12 months)

The slowdown in ARR growth is considered to be other than temporary;Undervalued evaluation remains due to lack of informationIt is a case.

conditions for this to occur

Q4 What is the ARR growth rate for FY26?+12% or less compared to the same period last yearto land on.
Branding investment did not lead to sales, resulting in lower operating profit margin in FY2614% or lessrevised downward to
No disclosure of ARR by module, no announcement of second share buyback in full-year FY26 results.
Pro ratio is21〜22%(FY29 ARR ¥20bn did not reach the required 25% or more).

's 800 yen level is not a level based on acquisition premium. This is a case where public market valuation multiples are further reduced due to distrust in ARR growth rates and profit margins.

neutral case

¥1,000 〜 ¥1,200

0% 〜 +18%

Assumed valuation multiple EV/EBIT approximately 12 to 14 times (next 12 months)

ARR growth rate remains in the mid-double digits,Profit margin is also within the company plan, this is a case in which the focus of disclosure and capital policy moves forward.

conditions for this to occur

ARR growth rate through FY26+14〜18%fits in the range.
FY26 operating profit margin is within the company plan (15〜17%) to land.
Q4 One of the three points of interest will advance by FY26 (in light of new product launches, ARR disclosure by module is most likely).
In the capital allocation policy for FY26 full-year results, there is mention of a second share buyback or a sustainable shareholder return policy.

bullish case

¥1,400 〜 ¥1,700

+38% 〜 +67%

Assumed valuation multiple EV/EBIT approximately 16 to 18 times (next 12 months)

Two of the three points of interest have materialized.This is a case where the ARR growth rate accelerates again due to professionalization and new product cross-selling.

conditions for this to occur

Q3/Q4 ARR growth rate increased due to additional deployment of Endpoint and domain protection+20% compared to the same period last yearAccelerate again.
Pro ratio is25% or moreThe absolute ARR is also disclosed.
Disclosure of ARR by module begins.
Capital allocation policy is clearly stated (e.g. return of a certain percentage of annual FCF, share buybacks according to EV/EBIT level).

Even in the bullish case for

, the price is not expected to reach the August 2025 high of 1,899 yen. In order to regain the EV/EBIT of around 22x that it had at that time, in addition to a clear re-acceleration of ARR growth rate, success in adjacent areas including the US JV will be required. This is an issue that is too early to confirm in the fourth quarter.

Business evaluation · HENNGE ONE

Cloud ID/DLP/Security SaaS Single segment

H1 FY26 sales (annualized)¥11.6bn

Segment operating profit margin (H1)20.7%

Expected EBITAbout ¥2.4bn

Peer valuation multiple (4776, 4477, 3923)EV/Sales 7-12x

Medium expected EV:About ¥80bn(EV/Sales 7x)

Evaluation by business · Adjacent businesses

Endpoint + Domain Protection + US JV · Value as a future option

HENNGE Endpoint & Managed SecurityReleased in March 2026

domain protection moduleScheduled after October 2026

HENNGE Inc. (US JV, from April 2025)Continued deficit

Peer valuation multiple (NET, OKTA, ZS)Single product comparison not possible

Medium expected EV:Not quantified as value as a future option

Important note

This material is not investment advice.

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