Alpha-Win Company Research Report
CUBE SYSTEM INC.
(2335 TSE Prime)

Issued: 11/22/2023

Alpha-Win Capital Inc. Research Department● Summary

http://www.awincap.com/◆ Independent, mid-tier system integrator with long-term, stable growth
Company Overview
・CUBE SYSTEM INC. (hereinafter, “the Company”) is an independent, mid-tier system integrator listed on the
TSE Prime. Its main customers include the Nomura Research Institute (NRI) and the Fujitsu Group. It develops
systems and provides services mainly for the financial, distribution, transportation, telecommunication, andmanufacturing industries.
・ Its strengths are its excellent customer base, extensive experience, high credibility, and the technology andexpertise that it has cultivated over the years. Founded in 1972, it has 51 years of history. In April 2022, it moved
from the TSE First Section to the newly established Prime Market.

Business Performance・With the exception of one fiscal year, the Company has been continuously increasing sales YoY for the past 25
years. During this period, the annual sales growth rate (simple average of the rate of increase in sales) was +5.9%
and the annual recurring profit growth rate (simple average) was +7.1%; it has been steadily expanding its businessand keeping its business profitable over many years. Its recurring margin has stably been around 7% (simple
average of 7.3%) and the increase in sales has been contributing directly to increases in profit, dividend, and market
capitalization. In FY2023 (note that the Company’s fiscal year is March-ending, i.e., FY2023 ended in March
2023), it achieved record-high sales and profits. It also increased dividend for the fourth year in a row. This fiscal
year, it plans to achieve record-high results again.

Alliance
・In December 2022, the Company formed a capital and business alliance with NRI, a top-level and major bluechip company of the industry. NRI has become the Company’s largest shareholder (categorized as “other associatedcompany”), holding 20.2% of the Company’s voting rights. The NRI Group is also the Company’s largest customer,
accounting for 53.4% of its consolidated sales in the first half of FY2024.

Investment Plan
・Adding its own cash on hand to the capital raised through the capital alliance with NRI, the Company plans toinvest a total of 2.2 billion yen over the four-year period from FY2023 to FY2026. It plans to invest in strengthening
and enhancing its development bases and production system to achieve further growth and solve its bottleneck ofhuman resources.

◆ Results for the first half of this fiscal year: Sales increased by 14.2% YoY and operating profit
increased by 32.7% YoY. Results exceeded the initial plan, since sales grew thanks to the strong
performance of the SI Business and profitability also rose due to the improvement in productivity.
First Half: Summary
・In the first half of FY2024 (April to September 2023; hereinafter, “the first half” or “H1”), sales were 9,015 million
yen (+14.2% YoY), operating profit was 794 million yen (+32.7% YoY), recurring profit was 788 million yen(+32.6% YoY), and net profit attributable to owners of the parent (hereinafter, “net profit”) was 501 million yen(+29.1% YoY) (Figure 1 on page 2).
・The Company posted the highest first-half sales, operating profit, and recurring profit to date (net profit wasslightly below the level achieved in the first half of FY2022).
・Compared to the Company’s initial forecasts for the first half, which are 8,577 million yen in sales (+8.7% YoY),
700 million yen in operating profit (+17.0% YoY), 700 million yen in recurring profit (+17.7% YoY), and 457
million yen in net profit (+17.7% YoY), the results exceeded the forecasts by 438 million yen for sales (+5.1%),
94 million yen for operating profit (+13.4%), and 44 million yen for net profit (+9.6%).
Short Report

1/13

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023

・ In our previous research report, given the strong Q1 results and the Company’s somewhat conservative
assumptions for Q2, we had forecasted for the first half of this fiscal year that the downside risk of sales and profits
should be limited, while the profits may be revised upward by about 10%. The results were mainly as we had
expected.
・Due to the rising inflation and the materialization of geopolitical risks, the outlook for the global economy remains
uncertain. However, with the COVID-19 outbreak settling down, in addition to the recovery of inbound demandand positive corporate earnings, Japanese companies (the Company’s clients) have been actively investing in IT,
including DX (business transformation and process reform), the shift to the cloud, and adjustment to the new
invoicing system. The Company has consequently been receiving more orders.
・ To meet the strong demand, the Company has been working on increasing capacity and profitability bystrengthening its production system, working on people development, optimizing and consolidating resources, andstreamlining operations. Thanks to these efforts, it achieved significant increases in sales and profits.
・The gross margin rose by 0.8 percentage point from 20.9% in the first half of the previous fiscal year to 21.7% in
the first half of this fiscal year (the same order applies below). Meanwhile, SG&A expenses increased by 10.8%
from 1,053 million yen to 1,166 million yen, but this increase was 3.4 percentage points smaller than the sales
growth rate. Consequently, the SG&A expense ratio declined by 0.4 percentage point from 13.3% to 12.9%.
・As a result, the operating margin increased by 1.2 percentage points from 7.6% to 8.8%. This was because
profitability improved due to cost control and greater productivity gained through value-adding, improved
efficiency, and streamlining.
【Figure 1】Summary of Results for the First Half
Unit: million yen

Results for the Reuslts for theInitial Plan for YoY Difference fromYoY Change YoY ChangeFirst Half ofFirst Half of
the First Half the First Half's Plan
(Amount)(%)
FY2023
FY2024of FY2024(Amount)

Sales

7,892

9,015

1,123

14.2

Gross Profit

1,651

1,960

309

18.7

Gross Margin

20.9%

21.7%

0.8%

SG&A Expenses

1,053

1,166

113

SG&A Expense Ratio

13.3%

12.9%

-0.4%

Operating Profit

598

794

196

Operating Margin

7.6%

8.8%

1.2%

Recurring Profit

594

788

194

Net Profit

388

501

113

Net Profit Margin

4.9%

5.6%

0.6%

8,577

438

YoY Difference
from the First
Half's Plan (%)

Results forQ1 FY2023

Results forQ2 FY2023

Results forQ1 FY2024

Results forQ2 FY2024

5.1

3,892

4,000

4,376

4,639

12.4

785

866

938

1,022

19.5

18.0

20.2%

21.6%

21.4%

22.0%

1.3%

0.4%

10.8
32.7

700

94

8.2%

0.6%

32.6

700

88

29.1

457

44

5.3%

0.2%

13.4

YoY Change YoY Change(%) in(%) inQ1 FY2024 Q2 FY2024
16.0

513

539

568

598

10.7

10.9

13.2%

13.5%

13.0%

12.9%

-0.2%

-0.6%

272

326

369

425

35.9

30.4

7.0%

8.2%

8.3%

9.2%

1.3%

1.0%

12.6

271

323

371

417

37.0

29.1

9.6

173

215

232

269

34.2

25.1

4.4%

5.4%

5.3%

5.8%

0.9%

0.4%

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary and the financial results briefing’s supplemental materials.
(Note) Throughout this report, due to processing of data during calculations, values for the same item may slightly differ.

First Half: Results by Segment
・Overall, sales increased by 1,123 million yen YoY and operating profit grew by 196 million yen YoY.
1. Results by Service Category (three categories)
・The System Integration Services (SIS), its core business, accounted for 77% of total sales and 81% of total
operating profit (both for this first half’s results; the same applies hereinafter). This category’s sales increased by
1,240 million yen (+21.6% YoY) to 6,974 million yen. Of the three service categories, this was the only category
whose sales had increased (Figure 2 on page 3).
・In the SIS, business related to the financial industry was strong, with the expansion of system building projects
for regional banks, online banks, and a megabank as well as system building projects for an education company.
Operating margin rose from 6.9% in the previous fiscal year’s first half to 9.2%. With sales growth as well,operating profit in this fiscal year’s first half was 639 million yen, having increased significantly by 240 million
yen (+60.4% YoY).
・The System Outsourcing Services (SOS) accounted for 10% of total sales and 8% of total operating profit. This
category’s sales were 863 million yen, having decreased slightly by 25 million yen (-2.9% YoY) due to the scaling
down of system building projects for a stock exchange. Operating profit was 65 million yen, having increasedslightly by 2 million yen (+4.6% YoY).

Short Report

2/13This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023

・The Professional Services (ProS), a category which is about the same in scale as the SOS, accounted for 13% of
total sales and 11% of total operating profit. This category’s sales declined by 91 million yen (-7.2% YoY) to 1,177
million yen and its operating profit declined by 48 million yen (-35.0% YoY) to 89 million yen due to the scaling
down of system building projects for telecommunication companies in the telecommunication industry.
【Figure 2】Change in First-Half Results by Service Category
First Half
FY2023
A: Results
Apr-Sept 2022

First Half's Results
Unit: million yen or %Overall Sales

Service

Sales

System Integration: SIS
System Outsourcing: SOS
Professional: ProS

7,892
5,734
888
1,269
598
398
62
137
7.6
6.9
7.1
10.8

Overall Operating Profit

System Integration: SIS
System Outsourcing: SOS
Professional: ProS

Operating Profit
Overall Operating Margin
Operating Margin (%)

First Half
FY2024
B: Results
Apr-Sept 2023

System Integration: SIS
System Outsourcing: SOS
Professional: ProS

Change in Amount /Difference
YoY Change: C = B - A
YoY: million yen, %

9,015
6,974
863
1,177
794
639
65
89
8.8
9.2
7.6
7.6

1,123
1,240
-25
-91
195
240
2
-48
1.2
2.3
0.5
-3.2

% Change
YoY Ratio:
C/A
YoY: %% of Total Amountof Change% of Total

Q1 FY2024

Change in Amount /Difference

Breakdown of C

Breakdown of B

D: Results

E: Results

YoY Change: F = E - D YoY Ratio: F/D Breakdown of F%%

Apr-June 2022

Apr-June 2023

YoY: million yen, %

4,376
3,315
467
594
369
296
40
33
8.5
8.9
8.6
5.6

484
493
27
-37
97
124
5
-31
-1.0
-1.5
1.1
-0.5

14.2
21.6
-2.9
-7.2
32.7
60.4
4.6
-35.0

100.0
110.4
-2.2
-8.1
100.0
123.1
1.0
-24.6

100.0
77.4
9.6
13.1
100.0
80.5
8.2
11.2

Q1 FY2023

3,892
2,821
440
631
272
172
34
64
7.0
6.1
7.9
10.3

% Change% of Total

Q2 FY2023

Q2 FY2024

Change in Amount /Difference

Breakdown of E%

G: Results

H: Results

YoY Change: I = H - G

July-Sept 2022

July-Sept 2023

YoY: million yen, %% of Total
Amount of Change

YoY: %

12.4
17.5
6.2
-5.9
35.9
72.1
14.6
-48.7

%

100.0
101.9
5.6
-7.6
100.0
127.8
5.2
-32.0

100.0
75.8
10.7
13.6
100.0
80.2
10.8
8.9

4,000
2,913
448
638
326
226
28
73
8.2
7.8
6.3
11.4

4,639
3,659
396
583
425
343
25
56
9.2
9.4
6.3
9.6

% Change% of Total Amountof Change% of Total

YoY Ratio: I/G
YoY: %Breakdown of I%

Breakdown of H
%

639
746
-52
-55
99
117
-3
-17
1.0
1.6
0.1
-1.8

16.0
25.6
-11.6
-8.6
30.2
51.8
-10.7
-23.3

100.0
116.8
-8.1
-8.6
100.0
118.7
-3.0
-17.3

100.0
78.9
8.5
12.6
100.0
80.7
5.9
13.2

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing’s supplemental materials.

2. Results by Industry (four categories / six categories)
・Sales and profits increased significantly for the three industries excluding the transportation & telecommunicationindustries. The “other industries” category contributed the most to the results.
・Regarding the financial industry, which accounted for 32% of total sales and 33% of total operating profit (thelargest proportion by industry for both), sales increased by 555 million yen YoY (+23.8% YoY) to 2,892 million
yen due to the expansion of system building projects for banks, as mentioned earlier. Operating margin for the firsthalf of this fiscal year was 9.0%, an improvement of 0.3 percentage point from the first half of the previous fiscal
year. With sales growth as well, operating profit increased by 57 million yen (+28.5% YoY) to 260 million yen(Figure 3).
・Regarding the distribution industry, which accounted for 22% of total sales and 21% of total operating profit, salesrose by 286 million yen (+17.3% YoY) to 1,945 million yen due to the expansion of system building projects foran apparel company and a wholesaler. Operating margin also improved significantly from 6.9% to 8.8%, andoperating profit rose by 56 million yen (+48.7% YoY) to 170 million yen.
・Regarding the “other industries” category, which accounted for 32% of total sales and 30% of total operating
profit (roughly the same percentages as finance), all sub-segments (manufacturing, government, and other) saw
increased profits due to sales growth and improved profit margins. Sales rose by 559 million yen (+24.1% YoY)
to 2,883 million yen, and operating profit almost doubled (+108 million yen or +81.5% YoY) from 133 million
yen to 241 million yen. This category contributed the most to the overall profit growth during this fiscal year’s firsthalf (55.4% of total – the majority of growth).

・Regarding the transportation & telecommunication industries, which accounted for 14% of total sales and 15%
of total operating profit (the smallest proportions), system building projects were scaled down fortelecommunication and transportation companies, as mentioned earlier. As a result, sales fell by 278 million yen (17.7% YoY) to 1,293 million yen, and operating profit also declined from 147 million yen to 120 million yen (-26
million yen or -18.3% YoY).
【Figure 3】Change in First-Half Results by Industry
First Half's Results
Unit: million yen or %Overall Sales

Industry

Sales

Finance
Distribution
Telecommunication & Transportation
Manufacturing (other)Government (other)
Other (other)

First Half
FY2023
A: Results
Apr-Sept 2022

Overall Operating Profit

Operating Profit

Finance
Distribution
Telecommunication & Transportation
Manufacturing (other)Government (other)
Other (other)

Overall Operating Margin

Operating Margin (%)

Finance
Distribution
Telecommunication & Transportation
Manufacturing (other)Government (other)
Other (other)

7,892
2,337
1,658
1,571
723
427
1,173
598
202
114
147
17
23
91
7.6
8.7
6.9
9.4
2.5
5.5
7.8

First Half
FY2024
B: Results
Apr-Sept 2023

9,015
2,892
1,945
1,293
797
548
1,537
794
260
170
120
54
62
124
8.8
9.0
8.8
9.3
6.8
11.4
8.1

Change in Amount /Difference
YoY Change: C = B - A
YoY: million yen, %

1,123
555
286
-278
74
121
364
196
57
56
-26
37
39
33
1.2
0.3
1.9
-0.1
4.3
5.9
0.3

% Change
YoY Ratio:
C/A
YoY: %% of Total Amountof Change% of Total

Q1 FY2024

Change in Amount /Difference

Breakdown of C

Breakdown of B

D: Results

E: Results

YoY Change: F = E - D YoY Ratio: F/D Breakdown of F%%

Apr-June 2022

Apr-June 2023

14.2
23.8
17.3
-17.7
10.2
28.3
31.0
32.7
28.5
48.7
-18.3
206.6
165.4
35.9

100.0
49.4
25.5
-24.8
6.6
10.8
32.4
100.0
29.1
28.6
-13.3
18.9
19.9
16.9
-

100.0
32.1
21.6
14.3
8.8
6.1
17.0
100.0
32.7
21.4
15.1
6.8
7.8
15.6
-

Q1 FY2023

3,892
1,128
785
826
344
206
601
272
101
49
70
5
11
34
7.0
9.0
6.3
8.5
1.7
5.4
5.7

4,376
1,397
956
644
401
264
713
369
126
87
40
37
32
46
8.5
9.0
9.1
6.3
9.2
12.3
6.5

YoY: million yen, %

484
269
170
-182
57
58
112
97
24
38
-29
32
21
12
-2.5
0.9
-1.3
-7.7
2.7
2.1
2.5

% Change
YoY: %% of Total
Amount of Change

%

12.4
23.9
21.7
-22.1
16.6
28.2
18.6
35.9
24.1
77.9
-42.6
545.9
192.8
35.7

% of Total

Q2 FY2023

Q2 FY2024

Change in Amount /Difference

Breakdown of E%

G: Results

H: Results

YoY Change: I = H - G

July-Sept 2022

July-Sept 2023

YoY: million yen, %

100.0
55.6
35.1
-37.6
11.8
12.0
23.1
100.0
24.7
39.2
-29.9
33.0
21.6
12.4
-

100.0
31.9
21.8
14.7
9.2
6.0
16.3
100.0
34.1
23.6
10.8
10.0
8.7
12.5
-

4,000
1,209
873
745
379
221
572
326
101
65
77
12
12
57
8.2
8.4
7.4
10.3
3.2
5.4
10.0

4,639
1,495
989
649
396
284
824
425
134
83
80
17
30
78
9.2
9.0
8.4
12.3
4.3
10.6
9.5

639
286
116
-96
17
63
252
99
33
18
3
5
18
21
1.0
0.6
0.9
2.0
1.1
5.1
-0.5

% Change% of Total Amountof Change% of Total

YoY Ratio: I/G
YoY: %Breakdown of I%

Breakdown of H
%

15.7
30.9
13.2
-8.7
5.0
27.2
42.6
30.2
32.7
27.7
3.9
41.7
150.0
36.8

100.0
44.8
18.2
-15.0
2.7
9.9
39.4
100.0
33.5
18.3
3.0
5.1
18.3
21.3
-

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing’s supplemental materials.

Short Report

3/13This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

100.0
32.2
21.3
14.0
8.5
6.1
17.8
100.0
31.5
19.5
18.8
4.0
7.1
18.4
-

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023

3. Results by Business Model (three models)・The Enhancement Business accounted for 60% of total sales and 53% of total operating profit. Projects for a
megabank had expanded, but projects were scaled down for a telecommunication company, the central government,
a GMS, and a credit card company. As a result, compared to the first half of the previous fiscal year, sales fell by
400 million yen (-6.9% YoY) to 5,414 million yen. Operating margin decreased from 8.6% to 7.7%, and operating
profit also declined by 85 million yen (-17.0% YoY) to 417 million yen (Figure 4).
・The SI Business (Lift & Shift: migration from the legacy environment to the cloud environment in “Lift” andstepwise system restructuring while optimizing for the cloud environment in “Shift”), accounted for 37% of total
sales and 46% of total operating profit. System building projects expanded for regional banks, online banks, thecentral government, an education company, and an apparel company. Its sales increased by 1,498 million yen(+81.7% YoY) to 3,332 million yen, and its operating profit rose sharply by 278 million yen (+308.5% YoY) to
368 million yen. Operating margin jumped from 4.9% to 11.0%.

・ The Digital Business remains small in scale, accounting for 3% of total sales and 1% of total operating profit.
However, due to the expansion of DX projects for end users in the distribution and energy industries, its sales
increased by 25 million yen (+10.3% YoY) to 268 million yen. Operating profit increased from 5 million yen in
the previous fiscal year’s first half to 8 million yen, indicating that the business is becoming stably profitable albeit
at a small amount.
【Figure 4】Change in First-Half Results by Business ModelFirst Half's Results
Unit: million yen or %Overall Sales

Busines Model

Sales

Digital Business
SI Business
Enhancement BusinessFirst Half
FY2023
A: Results
Apr-Sept 2022

Overall Operating Profit

Digital Business
SI Business
Enhancement Business

Operating Profit
Overall Operating Margin
Operating Margin (%)

Digital Business
SI Business
Enhancement Business

7,892
243
1,833
5,814
598
5
90
502
7.6
2.1
4.9
8.6

First Half
FY2024
B: Results
Apr-Sept 2023

9,015
268
3,332
5,414
794
8
368
417
8.8
3.0
11.0
7.7

Change in Amount /Difference
YoY Change: C = B - A
YoY: million yen, %

1,123
25
1,498
-400
195
2
278
-85
-1.7
0.9
6.1
-0.9

% Change
YoY Ratio:
C/A
YoY: %

14.2
10.3
81.7
-6.9
32.7
46.9
308.5
-17.0

% of Total Amountof Change% of Total

Q1 FY2024

Change in Amount /Difference

Breakdown of C

Breakdown of B

D: Results

E: Results

YoY Change: F = E - D YoY Ratio: F/D Breakdown of F%%

Apr-June 2022

Apr-June 2023

100.0
2.2
133.4
-35.6
100.0
1.0
142.6
-43.6
-

100.0
3.0
37.0
60.1
100.0
1.0
46.3
52.5
-

Q1 FY2023

3,892
102
854
2,936
272
-4
34
242
7.0
-3.9
4.0
8.2

4,376
126
1,558
2,692
369
4
155
210
8.5
3.2
9.9
7.8

YoY: million yen, %

484
24
704
-244
97
9
120
-32
1.5
7.1
6.0
-0.4

% Change
YoY: %% of Total
Amount of Change

%

12.4
23.6
82.5
-8.3
35.9
To profit
352.2
-13.3

% of Total

Q2 FY2023

Q2 FY2024

Change in Amount /Difference

Breakdown of E%

G: Results

H: Results

YoY Change: I = H - G

July-Sept 2022

July-Sept 2023

YoY: million yen, %

100.0
5.0
145.5
-50.4
100.0
9.3
123.7
-33.0
-

100.0
2.9
35.6
61.5
100.0
1.1
42.0
56.9
-

4,000
141
979
2,878
326
9
56
260
8.2
6.4
5.7
9.0

4,639
142
1,774
2,722
425
4
213
207
9.2
2.8
12.0
7.6

566
67
567
-70
58
3
44
9
-0.9
1.5
-2.0
0.5

% Change% of Total Amountof Change% of Total

YoY Ratio: I/G
YoY: %Breakdown of I%

Breakdown of H
%

14.1
47.5
57.9
-2.4
17.7
33.3
78.6
3.5

99.7
11.8
100.3
-12.4
96.9
5.2
76.1
15.6
-

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing’s supplemental materials.

4. Sales by Customer Group (five customer groups)
・Regarding the sales to the NRI Group, which is the Company’s largest client, sales rose sharply by 1,001 million
yen (+26.3% YoY) from 3,809 million yen in the previous fiscal year’s first half to 4,810 million yen in this fiscal
year’s first half, partly thanks to the alliance that was formed. In addition to the expansion of projects in existing
fields, the Company won large projects in new fields, which contributed to this increase. In fact, this increase insales accounted for about 89.1% of the Company’s total amount of sales growth. Sales to the NRI Group therefore
also contributed to the majority of total sales (53.4%). Over many years, the Company’s growth has been driven
by the expansion of its business with the NRI Group (Figure 5).
・Sales to the Mizuho Group and others were also firm, having increased by 212 million yen and 99 million yen(YoY), respectively.
・On the other hand, sales to the Fujitsu Group and Aeon Group declined by 128 million yen (presumably
telecommunication-related) and 62 million yen (distribution-related), respectively.
【Figure 5】Change in First-Half Sales by Customer Group(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing’s supplemental materials. (Note) Change in Amount, %Change, and Difference in the Proportion are YoY comparisons. % of Total Amount of Change shows the breakdown of the YoY change.

Short Report

4/13

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

100.0
3.1
38.2
58.7
100.0
0.9
50.1
48.7
-

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023

First Half: Factors that Contributed to an Increase or Decrease in Profit
・The factors that increased or decreased operating profit in the first half of the current fiscal year are as shown in
Figure 6.
・There was an increase in costs (impact on profit: -112 million yen YoY in total) due to the expansion of the
production system (strengthened recruitment and expansion of production bases) (-69 million yen YoY) and theimprovement of the management foundation (-43 million yen YoY). However, these factors were more than offset
by the profit growth brought by the increase in orders (+99 million yen YoY) and the concentration of resources toprojects of the SI Business (+209 million yen YoY). As a result, operating profit increased by 195 million yen YoY(+32.7% YoY).
【Figure 6】Factors that Increased/Decreased Operating Profit in the First Half
(Unit of million yen YoY; Factor that Increased Profit / Factor that Decreased Profit)
1000

I ncrease in profit
due to an increasein the orders
received

900

209
-69

800

99

700
600

Production system
expansion( strengthening ofrecruitm ent / people
developm ent /expansion of bases)

598

500
400

Consolidation of
resources to the SI
Business' projects( Lift ＆ Shift）

300

794
-43

(Ref) Prepared by Alpha-Win Research
Dept. based on the financial results
briefing’s supplemental materials.

Managem ent foundation
im provem ent( strengthening
governance andinvesting in I T)

200

Increase in
Operating Profit＋195 million yen

1000First Half of FY2023

First Half of FY2024

・Results were strong in terms of profit, since orders were strong especially in the SI Business and there were no
unprofitable projects. Investments in development bases and production expansion seem to be conducted asplanned, without major delays or leftover budget (a new office was established in Fukuoka in the first half as anear-shore production base).

First Half: Progress and Seasonality of Quarterly Results
1. First Half・Progress in the first half in terms of achieving the Company’s full-year forecast was 50.1% for sales (48.3% in
the previous fiscal year’s first half) and 49.0% for operating profit (similarly, previously 41.2%). As reference, thesimple average of the progress in the first half over the past 10 years (including the previous fiscal year) was 48.7%
for sales and 43.3% for operating profit. The progress in this fiscal year’s first half exceeded these averages forboth sales and profit. Progress with profit has especially been solid since it has already reached approx. 50% of the
full-year plan in the first half of this fiscal year, even though profit generally tends to be larger in the second half.
・Regarding the sales progress of each business model, the SI Business made strong progress at 57.0% (43.8% in
the first half of the previous fiscal year) and the Enhancement Business was also solid at 48.2% (similarly, 50.4%),
while the Digital Business was sluggish at 29.2% (similarly, 40.4%).
・Regarding the sales progress for each industry, progress has been generally in line with the plan: 52.6% for thefinancial industry, 50.2% for the telecommunication & transportation industries, 49.5% for the distribution industry,and 48.1% for the other industries. Progress was particularly strong for the financial industry, whose sales growthrate is high, as it has presumably exceeded the Company’s expectations.
2. Quarterly Results・One of the characteristics of the Company is that its business performance and profit margins tend to fluctuate ona quarterly basis. The fourth quarter (Q4 or Jan-Mar) tends to contribute the most to the full-year results, withdelivery deadlines clustering (past 10 years’ average: 27.6% of full-year sales and 33.6% of full-year operating
profit). The next largest is the second quarter (Q2 or Jul-Sep; average of 25.8% and 26.8%, respectively), followedby the third quarter (Q3 or Oct-Dec; average of 23.7% and 23.2%, respectively). Q1 has generally been the smallest
in contribution (Figures 7-9 on page 6).
Short Report

5/13This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023

・In the first quarter of this fiscal year, sales were 4,376 million yen (+12.4% YoY), operating profit was 369 million
yen (+35.9% YoY), recurring profit was 371 million yen (+37.0% YoY), and net profit was 232 million yen(+34.2% YoY) (Figure 1 on page 2).

・Q2 results continued to show double-digit growths in both sales and profit, with sales of 4,639 million yen (+16.0%
YoY), operating profit of 425 million yen (+30.4% YoY), recurring profit of 417 million yen (+29.1% YoY), andnet profit of 269 million yen (+25.1% YoY). Like in Q1, the Company posted record-high quarterly sales again.
Each profit was also the second highest for a quarter, following the record highs of Q4 FY2023. Although theCompany's plan for Q1 and Q2 is not disclosed, both sales and profits are estimated to have exceeded its plan.
【Figure 7】Quarterly Change in Sales(Unit: million yen)

【Figure 8】Quarterly Change in Operating Profit(Unit: million yen)

5,000

600
4,500
4,000

500

3,500

400

3,000
2,500

300

2,000

200

1,500
1,000

100
500
0
FY2014FY2015FY2016FY2017FY2018Q1

FY2019Q2Q3

FY2020

FY2021

FY2022

FY2023

FY20240
FY2014FY2015FY2016FY2017FY2018Q1Q4FY2019Q2Q3

FY2020

FY2021

FY2022

FY2023

FY2024Q4(Note) Prepared by Alpha-Win Research Dept. based on the financial results briefing’s supplemental materials.

・In addition, from Q3 FY2023 to Q2 FY2024, the sales growth rate (YoY) for each quarter has accelerated from
2.5% ⇒ 7.3% ⇒ 12.4% ⇒ 16.0%. Regarding the operating margin, although it has been fluctuating since Q4
FY2023 from 11.5% ⇒ 8.5% ⇒ 9.1%, its YoY change (difference) has been improving for three consecutive
quarters, from +4.2% ⇒ +1.4% ⇒ +1.0%.
【Figure 9】Quarterly Change in Operating Margin(Unit: %)【Figure 10】Changes in First-Half Sales, Order Backlog,
and Orders Received (Unit: million yen)
10,000

14.0%

9,000

12.0%

8,000
10.0%

7,000

8.0%

6,000

6.0%

5,000
4,000

4.0%

3,000
2.0%

2,000

0.0%

1,000

14
15
16
17
18
19
20
21
22
23
24
20
20
20
20
20
20
20
20
20
20
20
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
Q1

Q2

Q3

Q4

FY

0
First Half
FY2019First Half
FY2020First Half
FY2021

Orders Received(Ref) Prepared by Alpha-Win Research Dept. based on the financial
results summary

SalesFirst Half
FY2022First Half
FY2023First Half
FY2024

Order Backlog(Ref) Prepared by Alpha-Win Research Dept. based on the financial
results briefing materials

Orders Received
・The overall amount of orders received increased from 8,122 million yen in the same period of the previous fiscal
year to 9,484 million yen (+1,362 million yen or +16.8% YoY). Consequently, the order backlog also grew steadily
from 4,506 million yen to 5,041 million yen (+534 million yen or +11.9% YoY) (Figure 10).
Short Report

6/13

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023

Orders Received: By Industry (four categories)
・Regarding both the orders received in the first half from each industry and the order backlog, their declines in thetransportation & telecommunication industries have been offset mainly by the strong performance of the businesswith the financial industry and other industries, similar to sales.
Orders Received: By Business Model (three models)・Orders received in the Enhancement Business declined from 5,631 million yen ⇒ 5,392 million yen (-239 million
yen or -4.3% YoY), and its order backlog also declined slightly from 3,012 million yen ⇒ 3,009 million yen (-3million yen or -0.1% YoY).
・Similarly, orders received in the Digital Business declined from 326 million yen ⇒ 240 million yen (-85 million
yen or -26.4% YoY), and the order backlog also declined from 271 million yen ⇒ 141 million yen (-129 million
yen or -47.8% YoY).
・On the other hand, in the SI Business (Lift & Shift), the amount of orders received increased from 2,164 million
yen ⇒ 3,852 million yen (+1,688 million yen or +78.0% YoY), and the order backlog increased significantly from
1,221 million yen ⇒ 1,889 million yen (+668 million yen or +54.7% YoY), compensating for the other businesses.

Number of Employees and Productivity
・In the Company’s business model, sales growth is generally directly correlated with the number of employees.
The total number of employees in Japan and overseas has been increasing steadily from 791 as of the end of
September 2020 → 815 as of the end of September 2021 (+24 or +3.0% YoY) → 869 as of the end of September
2022 (+54 or +6.2% YoY) → 894 as of the end of September 2023 (+25 or +2.9% YoY). Its capacity in terms ofhuman resources has been increasing. However, while it has been strengthening recruitment by improving
conditions for employees and incorporating web interviews, the demand for system development has continued toincrease and the Company is still somewhat short of talents.
・Quarterly sales per employee in Japan, which are one of its key management indicators (KPI), have changed in
the order of H1 FY2022 ⇒ H1 FY2023 ⇒ H1 FY2024 (this fiscal year) from 11,164 thousand yen/person ⇒10,494 thousand yen/person ⇒ 11,956 thousand yen/person. Similarly, operating profit per employee in Japan haschanged from 1,034 thousand yen/person ⇒ 795 thousand yen/person ⇒ 1,053 thousand yen/person. Both are
improving compared to before, as the Company has been focusing on improving productivity in addition toincreasing the number of employees.

Balance Sheet・As of the end of the first half, there has been no significant change in the balance sheet compared to the end oflast fiscal year.
・Its cash & deposits have increased at a gradual pace to 6.9 billion yen (4.6 months’ worth of the average monthly
sales forecasted for this fiscal year; essentially debtless with a debt of 230 million yen), and the Company has
ample liquidity on hand.
・With a current ratio of 384.8%, equity ratio of 74.3%, no goodwill, and an insignificant intangible fixed asset
balance of 3 million yen, the Company’s financial position is sound.
・Cash & deposits will most likely be used for greater shareholder returns and future growth, including investments
to expand the production system in line with the plan, M&A, business alliances, investments, and loans.

◆Full-Year Forecasts: The Company has not changed its plan, but Alpha-Win’s forecasts
have been revised upward.
Full Year: Company Forecast
・Although the first-half results exceeded the initial forecasts announced at the beginning of the fiscal year, theCompany has kept its forecast the same for the full fiscal year.
・For this full fiscal year, the Company expects 18,000 million yen in sales (+10.3% YoY), 1,620 million yen in
operating profit (+11.5% YoY), and 1,080 million yen in net profit (+9.1% YoY). It expects to achieve sales andprofit growths in the current fiscal year, as it did in the previous fiscal year, as well as achieving record-high sales
and profits for the consecutive year (Figure 11 on page 8).

・The Company plans to pay an annual dividend of 30 yen per share (15 yen for the first half and 15 yen for the end
Short Report

7/13

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023of the fiscal year). In the previous fiscal year, the Company also paid a commemorative dividend for the celebrationof its 50th anniversary (total of 24 yen/share), so the annual dividend totaled 50 yen per share (ordinary dividend
was 26 yen/share). This fiscal year, there will be no commemorative dividend, so the dividend will appear to havedecreased by 20 yen/share. However, in terms of the ordinary dividend, the dividend will essentially be increasedby 4 yen per share.
【Figure 11】This Fiscal Year’s Results (results for H1 and forecasts for H2 and the full year)
Unit: million yen

Last Fiscal
This Fiscal Year's
Year's Results Company Forecasts
FY2023
FY2024FY2023First-Half
Results

FY2024First-Half
Results

YoY Change(Amount)

YoY Change(%)

FY2023
Second-Half
Results

Sales

16,325

7,892

9,015

1,123

14.2

8,433

Gross Profit

3,570

1,651

1,960

309

18.7

1,919

18,000Gross Margin

21.9%

20.9%

21.7%

0.8%

SG&A Expenses

2,118

1,053

1,166

113

SG&A Expense Ratio

13.0%

13.3%

12.9%

-0.4%

Operating Profit

1,452

1,620

598

794

196

Operating Margin

8.9%

9.0%

7.6%

8.8%

1.2%

Recurring Profit

1,480

1,635

594

788

194

Net Profit

989

1,080

388

501

113

Net Profit Margin

6.1%

6.0%

4.9%

5.6%

0.6%

FY2024FY2024
InitialCurrent
Second-Half Plan Second-Half Plan
9,423

8,985

YoY
Difference(Amount)

YoY
Difference
(%)

552

6.5

-3.3

22.8%
10.8

1,065
12.6%

32.7

854

920

826

-28

10.1%

9.8%

9.2%

-0.9%

32.6

886

935

847

-39

-4.4

29.1

601

623

579

-22

-3.7

7.1%

6.6%

6.4%

-0.7%

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. H1= first half. H2 = second half.

・The Company has been working on strengthening its prioritized approach toward customers who are actively
pursuing strategic IT investments (strengthening its sales activities toward its major customers, expanding theexisting businesses, and developing new domains or areas of business). It is also working on co-creation withvendors for the cloud.
・The Company also plans to improve profitability and increase shareholder returns in the second half and beyondby expanding and optimizing its production system and resources, implementing measures to improve profitability
in the Enhancement Business, improving its development system, and working on internal DX.
・The Company has announced a plan to increase shareholder returns by raising the targeted consolidated dividend
payout ratio from 35% to 40% starting in FY2024.

This Fiscal Year: Alpha-Win Research Department’s Forecast
1. Full Year・We have revised our forecasts for the current fiscal year upward, considering the first-half results and order backlog
as well as the business environment. In the order of our previous forecast ⇒ current forecast, we have made thefollowing upward revisions: sales from 17,800 million yen ⇒ 18,500 million yen, operating profit from 1,600
million yen ⇒ 1,700 million yen, net profit from 1,065 million yen ⇒ 1,120 million yen, and dividend per sharefrom 30 yen ⇒ 32 yen. These forecasts exceed the Company’s forecasts by 500 million yen (+2.8%), 80 million
yen (+4.9%), 40 million yen (+3.7%), and 2 yen, respectively.
・At the time of the previous report, we had believed that if the Company appropriately conducts cost control, theplanned profit figures for the full year should be within an achievable range, since its customers have a strong
appetite for strategic IT investments, orders and order backlog are firm and increasing for the Company, its Q1
results have most likely somewhat exceeded its plan, and its Q2 forecasts also seemed conservative.
・However, taking into account the risks to a certain extent, such as the rise in subcontracting cost, personnel expense,and various other costs, we had made a somewhat cautious forecast for this fiscal year compared to the Company.
Our forecasts had each been slightly smaller than the Company’s plan, by 200 million yen for sales, by 20 million
yen for operating profit, and by 15 million yen for net profit (see our previous report published on June 9, 2023).
・The amount of upward revision in the first half was within the scope of our expectations. However, there are
currently no signs of a slowdown in business negotiations or orders in general, and the growth of sales to the NRIGroup has been greater than expected. The Company has also succeeded in winning orders for strategic andderivative projects from well-performing industries and has been making steady progress with the shift to highprofit projects, streamlining of resources, and cost control. Therefore, we analyzed that the current (new) forecasts
for the second half of this fiscal year are somewhat conservative, as described later, and that the results will most
likely exceed the Company’s plan.
Short Report

8/13

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023

2. Second Half・Although the first-half results have exceeded its plan, the Company has kept its full-year plan the same. Thismeans that the second half’s forecasts (calculated by subtracting the first-half forecast from the full-year forecast)have been revised downward, compared to their initial forecasts, by the same amount as the amount of upwardrevision in the first half.
・The Company’s second-half forecasts, in the order of the initial forecast ⇒ the current forecast, have all beenrevised downward as follows: sales of 9,423 million yen (+989 million yen or +11.7% YoY) ⇒ 8,985 million yen(+552 million yen or +6.5% YoY), operating profit of 920 million yen (+66 million yen or +7.7% YoY) ⇒ 826
million yen (-28 million yen or -3.3% YoY), net profit of 623 million yen (+21 million yen or +3.7% YoY) ⇒ 579
million yen (-22 million yen or -3.7% YoY), and operating margin of 9.8% ⇒ 9.2% (as reference, it was 10.1% in
the second half of the previous fiscal year) (see Figure 11 on page 8).
・At this point, in the second half, the Company expects a modest YoY increase in sales and decrease in profits,with a decline in the profit margins. The Company has commented, “This fiscal year’s plan is a challenging goal,
but we are committed to achieving it.”・However, the second half’s plan seems somewhat conservative, considering the order backlog as of the end of thefirst half, the current situation, the seasonal cycle of project delivery deadlines clustering in Q4, and the fact thatthe positive effects of increasing employees usually begin to be fully seen in the second half as new employees
begin their actual work.
・The Company’s forecasts seem to reflect the increase in costs in the second half to a certain extent, which includes
investments in human resources (personnel expense), business investments for expanding its development base as
well as investments in the Company’s own DX (both to improve operational productivity), and investments in thedevelopment of its original products. Therefore, there seems to be some room for cost control.
・These indicate that the downside risks of the second half’s business plan are limited. Considering the buffer fromthe first half, there is a possibility that the full-year results may exceed the plan.

◆Medium-Term Forecast: Alpha-Win expects a sales & profit growth of 6-10% per year.
Medium Term: Alpha-Win Research Department’s Forecast
・We have not changed our medium-term forecasts of the Company’s financial performance for the next fiscal year
and beyond. However, considering the business environment, the staff organization, and investment costs, we mayrevise them upward in the future (Figure 12).
・IT investments by the Company’s users (companies) are expected to keep increasing as they develop new businessmodels, strengthen their competitive edge, work on solving employee shortage, streamline and speed up operations,work on DX, and shift to the cloud. Therefore, the Company’s growth potential is large.
・With strong IT demand from companies, the Company is expected to achieve top-line growth by utilizing its
abundant cash on hand to hire more employees and expand its development bases. We forecast that through the
expansion of the Digital and the SI businesses, the effect of the alliance with NRI, the development of new
customers and new areas of business, and various measures to improve productivity, the Company will be able tomaintain a stable sales and profit growth trend of around 6-1 0% per year over the medium term.

【Figure 12】Medium-Term Financial Forecasts
Unit: million yen or %Sales
Gross Profit
Gross Margin
SG&A Expenses(Ratio to sales)

Operating Profit(Ratio to sales)

Recurring Profit(Ratio to sales)

Net Profit(Ratio to sales)

Sales (% YoY growth)Gross Margin (% YoY diff.)
SG&A Expenses (% YoY growth)

Operating Profit (% YoY growth)
Recurring Profit (% YoY growth)
Net Profit (% YoY growth)

FY2024
Medium-Term Plan
16,32519,000
3,570
21.9%
2,118
13.0%
1,452
1,710
8.9%
9.0%
1,480
9.1%
989
6.1%

FY2023 Results

1.4%
0.4%
4.2%
2.4%
3.3%
4.8%

FY2024 CE
18,000

1,620
9.0%
1,635
9.1%
1,080
6.0%

16.4%

10.3%

17.7%

11.5%
10.4%
9.2%

FY2024 Old E

FY2024 New E

FY2025 E

FY2026 E

17,800
3,900
21.9%
2,300
12.9%
1,600
9.0%
1,615
9.1%
1,065
6.0%

18,500
4,100
22.2%
2,400
13.0%
1,700
9.2%
1,715
9.3%
1,120
6.1%

19,000
4,150
21.8%
2,425
12.8%
1,725
9.1%
1,755
9.2%
1,155
6.1%

20,500
4,500
22.0%
2,650
12.9%
1,850
9.0%
1,870
9.1%
1,235
6.0%

9.0%
0.0%
8.6%
10.2%
9.1%
7.7%

13.3%
0.3%
13.3%
17.0%
15.8%
13.2%

2.7%
-0.3%
1.0%
1.5%
2.3%
3.1%

7.9%
0.1%
9.3%
7.2%
6.6%
6.9%

(Ref) Prepared by Alpha-Win Research Dept. (Note) CE: the Company’s forecast/estimate. E: Alpha-Win Research Dept.’s forecast/estimate.

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9/13

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023◆ Stock price and characteristics: Significantly outperforming the TOPIX over the longterm as a stable growth stock centered on domestic demand. Valuation is currently about
average but has the potential to rise.
Performance・Over the past approximately 14 and a half years, the Company’s stock price has increased by about 5.8x thanks
to its solid financial performance, significantly outperforming the TOPIX (by about +300%).
・Stocks benefiting from the weak yen, rising interest rates, and inbound demand, as well as economically sensitive
stocks, large-cap stocks, and tech stocks, have been bullish in the recent stock market. The Company stock, which
is defensive, domestic-demand-oriented, and small-cap, has been underperforming the TOPIX for the past 12
months (Figure C on page 13).
・However, compared to its two competitors listed on the TSE (HIMACS with securities code 4299 and Toho
System Science with securities code 4333), the Company’s stock has been outperforming both competitors as wellas the TOPIX since the announcement of its financial results (which were based on the closing price on November1). This is presumably due to the strong first-half results (strong progress and upward revisions) and because thelikelihood of achieving its full-year financial targets has increased (of the three companies, the Company is the
only one that plans for double-digit growths in full-year sales and profits).

Valuation
・Currently, the average valuation of all companies listed on the TSE Prime Market is as follows: forecasted P/E of
14.88, P/B of 1.27, and forecasted dividend yield (simple average) of 2.27% (based on the closing price ofNovember 10, 2023).
・Compared to these, the Company’s valuation is slightly high (in terms of the P/E and P/B). However, considering
this fiscal year’s strong financial performance and its growth potential over the medium term, its valuation does
not seem expensive.
・The current stock price seems to reflect the relatively low volatility observed from its past financial results, theproven stable growth in profit, and positive expectations for the future.
・Compared to its two competitors mentioned above, its valuation is in the middle range (the second highest among
the three companies) in terms of the major valuation measures excluding dividend yield (which is the lowest)(Figure 13).

【Figure 13】Comparison of Valuation with Competitors
Item

Stock Priceand Valuation

Company Name
Code
Stock Price (closing price on 11/10)
Market Cap (million yen)
P/E (price-to-earnings ratio)
P/B (price-to-book ratio)
Dividend Yield (%)

EV/EBITDA
P/S (price-to-sales ratio)
Sales (million yen)YoY Sales Growth Rate (%)
Operating Profit (million yen)
YoY Operating Profit Growth Rate (%)
Operating Margin (%)
First Half ofProgress with Sales (%)
This Fiscal
Year
Progress with Operating Profit (%)(Apr. to Sept.
Sales: Initial Plan
2023)
Sales: Diff. from Initial Plan (million yen)
Sales: Diff. from Initial Plan (%)
Operating Profit: Initial Plan
Operating Profit: Diff. from Initial Plan (million yen)
Operating Profit: Diff. from Initial Plan (%)
Company Forecast: Sales (million yen)This Full
Company Forecast: YoY Sales Growth Rate (%)
Fiscal Year
Company Forecast: Operating Profit (million yen)
(Apr. 2023 toCompany Forecast: YoY Operating Profit Growth Rate (%)
Mar. 2024)
Company Forecast: Operating Margin (%)

CUBE SYSTEM(CS: consolidated)

HIMACS(HM: consolidated)Toho System Science(TS: non-consolidated)

2335

4299

4333

1,104
17,388
15.50
1.73

1,364
16,931
13.82
1.50

1,129
23,482
19.41
2.27

2.72

3.15

3.54

6.42
0.97
9,015
14.2
794
32.7
8.8
50.1
49.0
8,577
438
5.1
700
94
13.4
18,000
10.3
1,620
11.5
9.0

4.78
0.93
8,668
-1.4
703
-19.3
8.1
47.8
41.8
8,840
-172
-1.9
620
83
13.4
18,150
4.7
1,680
-8.3
9.3

8.80
1.42
7,998
6.3
692
-6.6
8.7
48.5
44.6
7,888
110
1.4
703
-11
-1.6
16,500
6.8
1,550
2.3
9.4

All TSE Prime Stocks
1,202.63
14.99
1.27
Simple average: 2.27
Weighted average: 2.26

(Ref) See the next page for notes.

Short Report

10/13This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023(Ref) Prepared by Alpha-Win Research Dept. based on each company’s financial results summary for this first half and stock price data.
(Note)・Market cap = number of shares outstanding x stock price (closing price on 11/10/2023).
・EPS values used in P/E calculations are based on each company’s forecast for FY2024.
・BPS values used in P/B calculations reflect this fiscal year’s first-half results.
・EV/EBITDA = (market cap + interest-bearing debt – cash & deposits) / (operating profit + depreciation + intangible fixed assets
amortization, etc.). Interest-bearing debt and cash & deposits are based on this fiscal year’s first-half results. Operating profit is basedon each company’s full-year forecast for this fiscal year. Depreciation and intangible fixed assets amortization, etc., were estimatedby Alpha-Win based on the previous fiscal year’s results and this fiscal year’s first-half results.
・P/S = market cap ÷ sales (each company’s forecast for FY2024).
・H1 (first half): results from Apr. to Sept。
・HIMACS: moved from the Prime Market to the Standard Market on October 20, 2023.
・Toho System Science: reflects the 1.5-for-1 stock split conducted on September 1, 2023.
・Progress in the first half is the proportion of the full-year company forecast.

Stock Price Outlook
・In the short term, the Company’s stock price will likely be impacted by the full-year results (whether or not the
full-year profit forecasts will be revised upward) and the changes in stock return (whether there will be a dividend
increase, a share buyback, or a stock split).
・The contents and various numerical targets of the “VISION 2026: The Second Medium-Term Management Plan”
to be announced in the next fiscal year will be the key points to watch. Particularly important will be the top line
(sales growth rate, hiring and retaining of employees, and the effect of the alliance with NRI), the profit margins(gross margin, operating margin, and SG&A expense ratio), the securing of human resources especially in termsof the number of employees in Japan (the number hired, the turnover rate, and the number of employees), and thesales or operating profit per employee in Japan (KPI: key performance indicators).
・Another key point will be the business performance and IT investment trends of the Japanese companies that are
its end users (the environment surrounding orders received by the Company; changes in the volume of orders
received and the price per contract).
・ Regarding the second medium-term management plan (numerical targets are undisclosed at this point), theCompany intends to make a leap forward to achieve high profitability based on the concept of “stabilizing earnings
by finding new, direct customers and enhancing technology through stronger development capabilities.”
・We believe that if the Company can stably maintain a profit growth rate that is close to a double digit, then its
stock price may rise further to adjust for the level of P/E and the increase in EPS.
・From a medium- to long-term perspective, we believe that the Company will continue to be seen as a candidate
for investment as a defensive, stable growth stock centered on domestic demand.

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11/13

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023(Note) CE: the Company’s forecast/estimate. E: Alpha-Win Research Dept.’s forecast/estimate. “Revised Medium-Term Plan: CE”
is the Company’s forecast announced on May 11, 2022. Q1: Apr-June. Q2: July-Sept. H1 (first half): Apr-Sept. H2 (second half):
Oct-Mar.

(Note) Estimates for this fiscal year and the following two fiscal years have been made by Alpha-Win Research Department.

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12/13

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)

Issued: 11/22/2023【 Stock Chart (end-of-week prices): 2335 CUBE SYSTEM 】 Figure C
(Y)
1,600
1,500
1,400
1,300
1,200
1,100
1,000
900
800
700
600
500
400

Stock Price (left axis)
Price Relative to TOPIX (right axis)

2.00
1.90
1.80
1.70
1.60
1.50
1.40
1.30
1.20
1.10
1.00
0.90
0.80
0.70
0.60

)
6
7
7
7
8
8
8
9
9
9
0
0
0
1
1
1
2
2
2
3
3
3
/ 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 YY
09 01 05 09 01 05 09 01 05 09 01 05 09 01 05 09 01 05 09 01 05 09 M/(M(Note) From the first week of September 2016 to November 10, 2023

【Performance】
PeriodReturn vs. TOPIX
1 month3.9%
0.2%
3 months
-5.0%
-5.2%
6 months-4.1%-13.8%
12 months
8.6%
-9.1%
(Note)
・Reflects stock and index prices through theclosing price on 11/10/2023.
・“Vs. TOPIX” is the relative value after
subtracting the TOPIX’s performance from theperformance of the Company’s stock.
・Performance for the 1-month period is thecomparison between the closing price on the last
day of October and the closing price on November
10 (the same applies to the other periods).

＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

Disclaimer
This Alpha-Win Company Research Report (hereinafter, “this Report”) has been prepared by Alpha-Win-Capital
Inc. (hereinafter, “Alpha-Win”) on the request of the company presented in this Report.
This Report is not to be construed as a recommendation or solicitation of investment. Alpha-Win shall not beliable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use ofor reliance on this Report. Investors who read this Report must make their own decisions on all investment
matters and take full responsibility regarding their investment.
This Report has been prepared with a focus on objectivity and neutrality based on the analysis of generally accessible
public information and supplemental information including interview(s) by the analyst. Alpha-Win, the writer,
and/or other persons involved in the publication of this Report may already hold, or buy and sell in the future, thestock of the company presented in this Report.
Contents of this Report are based on information current as of the issue date and are subject to change
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We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability.
Copyright of this Report belongs to Alpha-Win and no part of the publication may be copied, photocopied,cited, or translated without our consent.
For inquiries regarding this Report, please send us an e-mail to info@awincap.com. However, Alpha-Win and thewriter of this Report do not have any obligation to reply to inquiries.
SV2023-1121-2000

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13/13This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.