Zuken Inc.

Zuken provides software connecting circuit designs to physical printed circuit boards and wire harnesses. Its 50-year business is deeply embedded in Japanese OEM design environments, with maintenance and service revenue accumulating as software is renewed. The question is whether recently initiated capital returns become a continuing policy.

Company

Zuken Inc.

株式会社図研

Engineering software for printed circuit board and wire harness design, alongside systems engineering.

Last Close: ¥4,820; May 21, 2026 · −17% from Jul-25 peak · +55% off Aug-24 trough
Market Cap / enterprise value (EV): ¥101.6bn / ¥65.5bn EV; net cash ¥36.1bn (36% of cap) · FY03/26 total payout 134%
EV / OP · forward: 9.8x; trailing 11.2x · vs Jul-25 peak ~15.5x fwd · above its lone listed JP peer
Return on capital · trailing: 13%; FY03/24 10.6% → FY03/26 13.0% · expanding · cash-distorted (~50% ex-cash)
OP margin: 13.6% · FY03/26 reported; FY03/27 guide 14.6% · MTP FY03/28 target ~15.1% · expansion via SG&A leverage
Shares & Float: 21.1M sh · ex-treasury; treasury 1.17M (5.3%) · Kaneko family 24% · Artisan 8.1% · 60d turnover ¥275M

01 · Share-price regime

What moved the share price over the past two years?

From the low price ¥3,115 on August 5, 2024 to the high price ¥5,820 on July 17, 2025, the stock price increased +87% in about 11 months. Behind this are disclosures showing improvement in profit margins, review of return policy, and presentation of a three-year medium-term plan. After that, the stock was adjusted by about 30% in about nine months, and the next evaluation will be determined by three points: “valuation,” “support for dividends and share buybacks,” and “monetization of MBSE.”

6947 vs. TOPIX · 24 months · Daily candle + volume

high price¥5,820 · 2025-07-17 low price¥3,115 · 2024-08-05 Currently¥4,820

Zuken · daily candlestick 60 day simple moving average TOPIX linked index (1308.T) rebase Volume

01 · The rally Zuken’s software turns circuit designs into working printed circuit boards, automotive wire harnesses and defense and aerospace systems. It has five product families. Alongside Japanese OEMs, its 2006 Sim-Team acquisition deepened E3.series adoption among European industrial equipment and rail manufacturers. Design data accumulated over years are hard to migrate, underpinning a stable customer base over its 50-year history. CR-8000 and E3.series license sales lead to annual maintenance fees, while DS manages design data across product generations. Client Services reached 42.9% of FY3/26 sales and grew 9.1%, versus 3.5% license growth. Backlog was ¥26.22bn (+25%), about six months’ sales. Three disclosures supported the rise from ¥3,115 on August 5, 2024 to ¥5,820 on July 17, 2025: November 2024’s DOE target of at least 5%; May 2025 FY3/25 sales growth of 5.9% and OP growth of 12.4%, with maintenance and Japan improving mix; and a ¥3bn buyback alongside a three-year plan for ¥49bn sales and ¥7.4bn OP by FY3/28.

02 · The reversal The turning point was August 6, 2025. Q1 FY3/26 sales of ¥9.119bn (+1.1%) and OP of ¥0.827bn (−3.4%) looked like a slowdown, although the medium-term plan concentrated growth in years two and three and higher personnel costs reflected upfront MBSE development. The shares fell 23% from ¥5,820 to ¥4,500 by late January 2026. Disclosures nevertheless supported a stronger H2. Artisan Partners disclosed an 8.11% stake in October 2025; November added a ¥100 50th-anniversary dividend, taking FY3/26 DPS to ¥200. December’s plan update organized the strategy around semiconductors, autonomous AI and model-based systems engineering and announced participation in Resonac’s JOINT3 consortium for next-generation organic panel packaging. Investors still treated upfront costs as execution risk, leaving the price weak despite growing backlog.

03 · Current position May 14, 2026 FY3/26 results supported the H2 recovery: sales were ¥43.101bn (+5.8%) and OP ¥5.865bn (+8.8%), 4.7% above ¥5.6bn guidance. Record equity-method income of ¥0.9bn from Business Engineering lifted ordinary profit to ¥7.134bn (+20.2%). OP margin rose 40bp to 13.6%. FY3/27 guidance envisaged 6.7% sales growth and OP growth accelerating from 8.8% to 14.2%; the ordinary dividend rose 50% from FY3/25’s ¥100 to ¥150. May 2025’s ¥3bn buyback completed in late January 2026, following near-full execution of FY3/25’s ¥2.5bn authorization. LTM total payout reached 134% of net profit and treasury shares 5.3%. Watch whether ¥6.7bn FY3/27 OP guidance is conservative against the final-year ¥7.4bn target, whether the Americas return to profit after four loss-making years since FY3/23 as GENESYS-led MBSE sales approach FY3/28’s ¥3bn target, and how ¥36.1bn of remaining cash is allocated.

02 · Investor issues

Three questions dividing investor views

Based on

's most recent financial results and the Q&A at the FY3/26 financial results briefing, we will summarize three points of contention that will affect stock valuation.

Issue 01 · Capital allocation

Is ¥36.1bn of cash supporting the flexible M&A? Or is it surplus funds that are pushing down on capital efficiency, given that the return on capital in the main business is five times the interest rate on deposits?

bullish Bulls evaluate the fact that the company has carried out share buybacks to almost 100% of the upper limit for two consecutive years (FY3/25 ¥2.5bn, FY3/26 ¥3bn). In November 2024, the company introduced a policy of increasing DOE to 5% or more, and also raised the ordinary dividend by 50% for FY3/27. The total return rate for FY3/26 reached 134%, indicating that shareholder returns are no longer a temporary measure and cash growth has begun to come to a halt.This view will hold true if the company announces its policy of continuing share buybacks of more than ¥3bn per year or raising DOE to more than 6% in stages in the FY3/27 final financial year (May 2027), and if cash and deposits and short-term securities at the end of FY3/27 fall below ¥36.1bn.

bearish Bearish groups believe that even with ¥3bn of share buyback on FY3/26, its cash balance has increased, and that the 10-year "flexible M&A" framework is It was pointed out that only one bolt-on project (¥1.6bn) was produced, and that the FY3/27 planned ROE decreased from 13.0% in FY3/26 to 11.2% as surplus visualized costs.This view holds if cash and deposits and short-term securities exceed ¥37bn at the end of FY3/27, there is no additional approval beyond the share buyback already in progress, and there is no M&A of ¥3bn or more completed within the fiscal year.

Issue 02 · MBSE business

Will GENESYS become the second growth business towards FY3/28, or will the Americas business continue to be in the red?

bullish The bullish opinion is that the US segment operating deficit in FY3/26 was halved from -785 million yen in the previous year to -392 million yen, that participation in the JOINT3 consortium led by Resonac and collaboration with IBM on chip mounting for AI means external approval of chip and package design positioning, and that FY3/28 of the medium-term plan MBSE sales target ¥3bn implies a CAGR of 15.1% compared to FY3/25 actual ¥1.97bn, which is considered to be consistent with the trend already underway.This view will hold true if the America segment achieves operating profit or break-even point in Q4 FY3/27 (May 2027), and MBSE sales at the midpoint of the medium-term plan are disclosed at ¥2.5bn or higher.

bearish Bears point out that commercial MBSE buyers are also customers of Cadence Helium, Siemens Polarion, and Mentor E3D tool chains, which are areas where Zuken does not have an installed base. The 15.1% CAGR is a claim, not evidence, and neither the number of customers nor the mix of licenses and pilots is disclosed.This view will hold true if the US segment operating deficit in FY3/27 is over ¥300 million, and MBSE sales at the midpoint of the medium-term plan are disclosed at less than ¥2bn.

Issue 03 · Profitability by region

Will the Asian business be able to maintain an operating profit margin of 29.2% even if sales exceed ¥2.14bn of scale? Will European profit margins return to over 10%? Or is Japan the only country where profits can grow stably?

bullish Bulls read the fact that the Asia segment achieved an operating profit margin of 29.2% on sales of ¥2.14bn as evidence that the software model will cross borders, and that the missing variable is scale, and that the Indian CR-8000 lamp, which is listed in the medium-term plan, is the next vector. The decline in profit margins in Europe (11.0% → 9.3%) is due to FX and product mix issues, and the installed base of E3.series on railways and power grids continues to be the de facto standard.This view will hold true if Asian sales grow by more than 12% year-on-year in FY3/27, the operating profit margin remains above 28%, and the European operating profit margin returns to above 10%.

bearish Bearish groups point out that 30 years of overseas business has produced only one structural victory in Europe and one surplus in Asia based on small sales, and that the medium-term plan only incorporates overseas sales + ¥2.8bn until FY3/28, compared to additional sales in Japan + ¥5.5bn. The friction in the sales organization culture with non-Japanese buyers that has suppressed overseas business for 30 years has not been visibly addressed in the FY3/26 disclosure.This view will hold if the sales growth rate in Asia decelerates to less than 8% year-on-year in FY3/27, the European operating profit margin shrinks to less than 8.5%, and in addition, the American segment falls short of the expected loss cut in half set in FY3/26.

03 · Materials that affect capital efficiency

Three disclosure and capital-policy changes that could shift valuations

Even if

profits do not exceed company expectations, can change its evaluation by improving its disclosure and capital policy. List three materials that influence evaluation.

Highlights 01 · Capital policy

Will changes in total return policy reduce the decline in capital efficiency due to surplus cash?

FY3/26 cash flow + declared year-end dividend scheduled to be paid on FY3/27

Operating cash flow

+¥6.13bn

Capital investment

−¥0.76bn

Dividend payment during FY3/26 period

−¥2.15bn

Share buyback (completed in January 2026)

−¥3bn

= FY3/26 Net cash increase/decrease

+¥0.22bn

FY3/26 year-end dividend(Scheduled to be paid in June 2026)

−¥3.16bn

In FY3/26, share buybacks absorbed approximately 96% of operating CF, and cash remained almost unchanged.134%The total return rate includes the already decided FY3/26 year-end dividend (¥150/share x 21.08 million shares ≈ ¥3.16bn). Cash outflow for this dividend will occur in FY3/27.

Operating cash flow during FY3/26 period¥6.13bnwill be used as capital investment ¥0.76bn, dividend payment ¥2.15bn, ¥3bn share buyback completed in January 2026, and the remaining¥0.22bnhas accumulated in the cache. Total return rate134%Headline numbers are advance commitment: declared FY3/26 year-end dividend¥150/stock(≈¥3.16bn, paid in June 2026) and executed share buybacks are shown as a ratio to net income ¥5.4bn.Future policyIf a policy to gradually increase the DOE floor from 5% to 7%, a total return floor of 100% free cash flow with recurring share buyback authorizations in excess of dividends, or a cash ratio rule capped at 25% of market capitalization is indicated, the excess capital balance sheet could change from a "subject to observation" to a "revaluation event." In evaluating each yen that is retained, it is important to compare the return on invested capital of the main business and the yield on deposits. The only procedure required is one resolution of the board of directors.

execution burden
Board of Directors resolution + IR materials 1 slide

Shortest activation timing
FY3/27 final financial results · May 2027

Highlight 02 · Disclosure

Timing of profitability in the Americas business and KPIs for MBSE growth

America segment operating profit/loss · FY3/22–FY3/26

FY3/22

+¥0.125bn

FY3/23

−¥0.113bn

FY3/24

−¥0.354bn

FY3/25

−¥0.785bn

FY3/26

−¥0.392bn

4 consecutive years of operating deficit since FY3/23 · Losses halved in FY3/26 · Break-even year, number of MBSE customers, composition of commercial license and trial introduction are all undisclosed

America segment4 consecutive terms since FY3/23The company was in the black until FY3/22, and was profitable for several years even after the acquisition of Vitech in 2019, which included GENESYS; the loss in FY3/26¥-785 millionFrom¥-392 millionThe visible trend is that the number has halved. Current disclosures do not reveal break-even year and quarterly MBSE customer count/license vs. pilot mix. If these are organized into a single supplementary KPI table, it will be easier to view the "four-year investment phase" as a trajectory that the market can extrapolate from. This will also serve as supplementary material for the FY3/26 disclosure when evaluating the ¥3bnMBSE sales target for FY3/28, the final year of the medium-term plan. The additional information required is one supplementary KPI table from the quarterly financial results briefing.

execution burden
Quarterly 1 table added

Shortest activation timing
Q1 FY3/27 disclosure · August 2026

Highlight 03 · Disclosure

Progress of medium-term plan sales by MBSE, PDM, and 3DIC

Path to achieving medium-term plan · FY3/25 results → FY3/28 target

MBSE sales

¥1.97bn → ¥3bn

PDM sales

¥6.13bn → ¥7.6bn

3DIC research funds

Pre-Revenue · Budget not disclosed

Group operating profit

¥5.39bn → ¥7.4bn (FY3/28)

FY3/27 guide ¥6.7bn is +14.2% YoY, FY3/28 ¥7.4bn is further +10.5% Disclosure at the component level is important in medium-term plans where growth is concentrated in the second half

Medium-term plan is to increase MBSE sales by FY3/28¥3bn(From ¥1.97bn on FY3/25), PDM sales¥7.6bn(from ¥6.13bn), has a pre-revenue 3DIC research program (individual budget not disclosed). None of the three are disclosed as separate sales lines in the quarterly report and all are stored in the IT Solutions bucket. At a briefing in December 2025, the company explained that “PDM sales are no longer a clean proxy for consulting-driven business.” With quarterly disclosure of MBSE, PDM, and 3DIC sales and a supplementary table showing the cumulative progress of the medium-term plan, FY3/28¥7.4bnThe market will be able to accept operating profit targets based on disclosed evidence rather than a narrative.

execution burden
Quarterly 1 table added

Shortest activation timing
Q1 FY3/27 disclosure · August 2026

04 · Valuation

Scenarios for the next four quarters

We have divided possible developments in the next four quarters into three scenarios with different assumptions. Rather than making a single prediction of the future, this is a trial calculation that considers a valuation range based on a combination of disclosure and performance.

bearish scenario

¥3,600 – ¥4,200

−25% to −13%

Estimated valuation multiple · ~7–9x EV/EBIT (forecast basis)

MBSE failed to cross the FY3/28 ¥3bn line, capital return policy remained at DOE 5%, and cash exceeded ¥38bn.

Conditions for this route to hold

Q3 Group operating profit margin in FY3/27 (February 2027)less than 13%・Sales growth rateLess than +5%。

FY3/27 America segment operating deficit¥-400 millionSuper, MBSE sales at the midpoint of the medium-term plan areLess than ¥2bnDisclosed in.

In FY3/27 final results, DOE floor remains unchanged at 5%, no additional share buyback authorization, cash¥38bnBreakthrough.

B-EN-G's equity method profit¥0.9bnFrom¥0.5bnThe situation will return to normal, and the ordinary income growth rate will turn negative.

The FY3/28 medium-term plan target will be maintained, but there will be a slowdown in the second half.¥7.4bnExplicit reservation conditions are attached to operating profit targets.

bearish band ¥3,600–¥4,200 assumes FY3/27 expected EV/EBIT of ~7–9x. This is on par with ~7.2x for Business Engineering (4828), the only domestic listed software company in the same industry, and on par with JP's private acquisition range of 7-10x when Renesas acquired Altium in February 2024.

neutral scenario

¥4,500 – ¥5,200

−7% to +8%

Estimated valuation multiple · ~9–11x EV/EBIT (forecast basis)

The FY3/27 company plan was achieved within ±2%, capital returns continued at the same pace as FY3/26, and the medium-term plan progressed as planned.

Conditions for this route to hold

Sales in FY3/27¥46bn ±2%, operating profit¥6.7bn ±5%, net profit¥5.7bn ±5%。

FY3/27 ordinary dividend¥150Payment, additional in FY3/27 final settlement~¥3bnAuthorization for share buyback.

America segment operating deficit¥-200 millionOr shrink further to break-even point, MBSE sales will be¥2.5bnFollow.

Asia segment sales¥2.4bnoperating profit margin29%maintain, Europe is10%Stable profit margin.

At least one of the following (number of MBSE customers, sales table by medium-term plan component, step-up to DOE 7%) will be achieved during FY3/27.

bullish scenario

¥5,400 – ¥6,400

+12% to +33%

Estimated valuation multiple · ~11–14x EV/EBIT (forecast basis)

The medium-term plan was achieved ahead of schedule, higher minimum standards were established and institutionalized for capital returns, and the 3DIC strategy was converted to commercial licensing.

Conditions for this route to hold

FY3/27 operating profit¥6.7bnGroup operating profit margin exceeded company plan by more than 5%15%That's all for now.

The board of directors declared DOE in the FY3/27 final settlement.7%Estimated lower price or yearly¥3bn superauthorized regular stock buybacks.

3DIC program achieves customer acquisition on a public announcement basis (commercialization of Resonac JOINT3 or commercial license for chip implementation for IBM AI).

The Americas segment reached the operating break-even point during FY3/27, and MBSE sales at the midpoint of the medium-term plan¥2.7bnDisclosed above.

FY3/28 medium-term plan target¥7.4bnhas entered the achievable range based on the progress made up to FY3/27, and the results of H1 FY3/28 indicate that the final stage of the plan, which will see profit growth in the second half, is in sight.

Bullish band ¥5,400–¥6,400 assumes FY3/27 forecasted EV/EBIT of ~11–14x. This is higher than the ~7.2x of the only domestically listed peer company (4828), but it is still far below the 17-22x that is traded by global EDA peers such as Cadence and Synopsys. The estimated bullish upper limit valuation multiple is about two levels higher than the current 9.8x.

SOTP · Zuken's main software business

CR-8000 + E3.series + DS PLM + Client Service · Approximately 94% of group sales

FY3/27 Platform Sales (Guide)~¥43bn

Segment operating profit margin (FY3/27 company plan proxy)~14%

Implied segment operating income (medium)~¥6bn

Peer valuation multiple (B-EN-G 4828 ~7.2x forecast base)~7–12x EV/EBIT

Moderate entailment EV:~¥720–84 billion(12x forward segment operating profit)

Comparison of valuation multiples with other companies in the same industry · 2026-06-09

Set of listed Japanese software companies · EV recalculated at 2026-06-09 closing price

Zuken (6947) · Stock report · ROCE 13%~9.8x

Business Engineering (4828) · 21%Equity Method · ROCE 13%~7.2x

Obic (4684) · Profitability Quality Benchmark · ROCE 17%~15.2x

CDNS/SNPS (Global EDA peers/reference)~17–19x fwd

Cybernet Systems (4312) will be delisted in 2025. Excluded. JP-listed peers (4828) are ~7.2x on an expected basis (Obic is excluded due to different business characteristics); Zuken is9.8xSlightly higher than the only domestically listed peer in the industry, and well below the evaluation level of global EDA peers

SOTP · Crosscheck total

Main software business + 21% stake in B-EN-G + Net cash + Other businesses

Main software business EV (medium @ 12x)~¥75bn

Market value of 21% interest in B-EN-G (4828). 12,600,000 shares × ¥1,105 (2026-07-10)~¥13.9bn

Net cash (FY3/26 results)¥36.1bn

Estimated shareholder value by SOTP~¥125bn

Estimated value per share by SOTP~¥5,900

If one of the three points materializes, SOTP supports a neutral to bullish scenario · Current market capitalization¥101.6bn vs SOTP ~¥125bn

Important notice · Important Disclaimer
This material is not investment advice

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