KYODO PUBLIC RELATIONS (Investment report – 2Q update)

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AI and influencers business are being layered onto a highly profitable PR base, while capital policy may support a valuation uplift.

Investment View

The quality of the profit upside was confirmed in 2Q, and the stock is at a level that can be evaluated positively as a medium- to long-term investment target

KYODO PUBLIC RELATIONS is changing its business structure from a traditional PR company into a highly profitable communication company by layering influencer marketing and AI & Big Data solutions onto the foundation of stable retainer-type revenues it has accumulated as an independent PR company. In the cumulative second quarter of FY12/2026, net sales were 4.528 billion yen, operating profit was 824 million yen, ordinary profit was 828 million yen, and interim net income attributable to owners of the parent was 463 million yen, renewing record-high net sales and profits for the first half. YoY, net sales rose 14.4%, operating profit rose 30.4%, ordinary profit rose 32.2%, and interim net income attributable to owners of the parent rose 30.5%, confirming profit growth exceeded net sales growth.

The key takeaway is not simply that 2Q profit exceeded the Company plan, but that the AI & Big Data solutions business further strengthened its role as a driver of companywide profit. In the cumulative 2Q, this business recorded net sales of 691 million yen, up 42.3% YoY, and segment profit of 186 million yen, up 134.2% YoY. The Company cites increases in ShtockData-related operating revenues, which are a recurring-revenue business, and BI tool implementation support services as factors. In the previous report, we noted that the AI/data domain could shift the axis of the Company’s stock price valuation. In this 2Q, we believe that possibility has begun to appear not only in net sales but also in profit figures.

Meanwhile, the Company’s full-year forecasts remain unchanged at net sales of 10.0 billion yen, operating profit of 1.6 billion yen, and net income attributable to owners of the parent of 0.9 billion yen. Progress toward the full-year plan for cumulative 2Q was 45.3% for net sales, 51.5% for operating profit, and 51.4% for net income attributable to owners of the parent. Profit progress is smooth, but the Company also has seasonality, with net sales and profits tending to accumulate in 4Q, so it is not unusual that the Company left the full-year forecasts unchanged at the 2Q stage. To expect performance upside that would affect the stock price, it is necessary to confirm from 3Q onward whether the high profit margin of the AI & Big Data solutions business, the increase in the number of retainer-contracting companies in the PR business, and the firmness of spot projects continue.

Assuming a stock price of 638 yen, forecast EPS of 51.6 yen, actual BPS of 266.1 yen, forecast ROE of 20.8%, and forecast dividend of 8 yen, the forecast PER is 12.2x, PBR is 2.40x, and forecast dividend yield is 1.3%. Using 17,629,984 shares outstanding, market capitalization is 11.25 billion yen. The stock price after the 2Q results is at a level where a certain revaluation has progressed since the previous report, but given the forecast ROE of 20.8%, the first-half operating profit margin of 18.2%, and profit growth in the AI/data business, it is difficult to say that the valuation has a strong sense of overheating.

Based on the above, the Company’s stock is in a phase where stable earnings in the PR business, profit contribution from the AI & Big Data solutions business, the decline in the investment unit after the stock split, and improved capital efficiency through the share buyback overlap. There is no need to be excessively bullish on a short-term upward revision, but the 2Q results support a more positive investment view than before. Over the medium to long term, if profitability in the AI/data domain continues and productivity improvement in the PR business is confirmed, the Company may be evaluated not as a small-cap PR company but as a high-ROIC communication technology company.

1. Evaluation of 2Q results

The first half was record-high; the main factors behind the profit upside were the AI/data business and the full AI shift

Consolidated results for the cumulative second quarter of FY12/2026 were net sales of 4.528 billion yen, operating profit of 824 million yen, ordinary profit of 828 million yen, and interim net income attributable to owners of the parent of 463 million yen. Against the 2Q plan set by the Company at the start of the fiscal year, the achievement rates were 100.6% for net sales, 117.7% for operating profit, 118.3% for ordinary profit, and 118.1% for interim net income attributable to owners of the parent, exceeding the plan particularly on the profit side.

Figure 1: Cumulative 2Q consolidated results highlights

Source: Prepared based on Company materials

Against net sales growth of 14.4%, operating profit growth was 30.4%, and the operating profit margin improved from 16.0% in the same period of the previous fiscal year to 18.2%. This appears to be the result not only of an increase in projects but also of simultaneous progress in growing high-margin businesses and improving efficiency through the full AI shift. The Company explains that each company received orders generally as planned and promoted rationalization through the full AI shift, resulting in profits exceeding the plan.

Against the full-year Company plan, net sales were 45.3%, operating profit was 51.5%, and net income attributable to owners of the parent was 51.4%. While net sales progress is within a natural range for the first half, operating profit and net income exceeded 50% at the halfway point. Therefore, the 2Q evaluation should focus on the high profit margin rather than upside in net sales.

However, because the Company left its full-year forecasts unchanged, it is too early to price in significant performance upside. Operating profit required in the second half is 775 million yen, meaning profit growth in the 15% range is required versus second-half operating profit of 670 million yen in the same period last year. Compared with the 30.4% increase in cumulative 2Q, the Company’s plan leaves some caution for the second half. Key points to confirm from 3Q onward are whether the AI & Big Data solutions business sustains its high profit margin, whether retainer sales in the PR business accumulate steadily, and whether event and goods revenues in the influencer business are not temporary.

2. Business analysis by segment

The structure in which PR is the earnings base and AI/data pushes up the growth rate and profit margin strengthens

The Company’s business comprises three pillars: the PR business, the influencer marketing business, and the AI & Big Data solutions business. In cumulative 2Q, all segments grew both sales and profit. In particular, in the AI & Big Data solutions business, profit growth was large relative to net sales growth, and the role of pushing up the companywide profit margin became clearer.

Figure 2: Cumulative 2Q consolidated net sales, profit, and profit margin by segment

Source: Prepared based on Company materials

The PR business recorded net sales of 3.227 billion yen and segment profit of 634 million yen. The Company explains that the number of retainer-contracting companies increased by approximately 10% YoY, and that profitability improved and stabilized. In addition, it worked on discovering potential customers through KYODO PUBLIC RELATIONS Ring, which was established in January 2026. From an investor’s perspective, the increase in retainer-contracting companies matters not only because it strengthens sales stability but also because it creates opportunities to expand into spot projects, digital PR, and AI/data-related proposals.

The PR business profit margin was 19.6%, and it remains high. The PR business has aspects of a human-resource-intensive business, but the Company is promoting efficiency improvements through the full AI shift in proposals, media list management, report preparation, effectiveness measurement, and other operations. Going forward, the Company will monitor the number of retainer-contracting companies, retainer sales, the scaling up of spot projects, net sales per person in charge, and reductions in person-hours through AI utilization.

The influencer marketing business recorded net sales of 610 million yen and segment profit of 73 million yen. Net sales grew moderately by 4.7%, but profit rose 19.1%, improving profitability. The Company explains that growth in tie-up projects with creators affiliated with the Company, along with event and goods revenue, pushed up the top line. Compared with the PR business and the AI & Big Data solutions business, this business has a lower profit margin, but it helps expand the Company’s proposal domains in youth-oriented communication, proprietary IP, and fan communities.

KPIs to monitor in the influencer domain going forward are the number of tie-up projects, project unit prices, the number of subscribers for major creators, the number of video views, net sales related to proprietary IP, event and goods revenues, and the scale of fan communities. The focus is not only on net sales expansion but also on whether the Company can reduce dependence on specific creators and SNS platforms and diversify revenue sources.

The AI & Big Data solutions business recorded net sales of 691 million yen and segment profit of 186 million yen, making it the most noteworthy business in these results. Net sales increased 42.3% YoY, profit increased 134.2%, and the profit margin reached 26.9%. The Company cites increases in ShtockData-related operating revenues and BI tool implementation support services. This indicates that the AI/data domain has begun to push up the Company’s profit structure, without remaining merely topical.

KPIs for this business include the number of companies adopting proprietary services such as ShtockData and CERVN, recurring fee sales, contract retention rate, net sales per customer, the number and unit prices of BI implementation support projects, and the continuity of Dataiku hands-on support. Although the competitive environment is severe, the ability to provide public relations activity design, execution, effectiveness measurement, SNS analysis, and data utilization in an integrated manner by combining them with the customer base of the PR business could become a unique strength of the Company.

3. Medium-term management plan and how to view performance upside

2Q profit is strong, but there are reasons for leaving the full-year forecasts unchanged

The Company has set its full-year plan for FY12/2026 at net sales of 10.0 billion yen, operating profit of 1.6 billion yen, and net income attributable to owners of the parent of 0.9 billion yen. At the cumulative 2Q stage, progress rates were 45.3% for net sales, 51.5% for operating profit, and 51.4% for net income attributable to owners of the parent. Operating profit margin was 18.2% in cumulative 2Q, exceeding the 16.0% full-year plan.

The key question is whether the Company’s plan appears conservative. Cumulative 2Q operating profit was 824 million yen, and second-half operating profit required to achieve the full-year plan is 775 million yen. Since second-half operating profit in the same period last year was 670 million yen, the second half needs 15%  growth to achieve the full-year plan. This is not an excessively high hurdle. On the other hand, uncertainty remains about whether the 2Q profit margin in the AI & Big Data solutions business will hold in the second half, how much spot projects in the PR business will accumulate, and how much personnel expenses and AI-related investments will increase.

Therefore, we believe the Company’s decision to leave its full-year forecasts unchanged at the 2Q stage is a cautious but natural judgment. An upward revision that would affect the stock price is likely only if three conditions are met. First, ShtockData-related operating revenues and BI implementation support in the AI & Big Data solutions business must maintain high growth rates in the second half. Second, the increase in retainer-contracting companies in the PR business must continue to be reflected in net sales and profits. Third, the efficiency effects of the full AI shift must become established as productivity improvements rather than temporary cost restraint.

Looking toward the next fiscal year, the business environment will be affected by stable PR demand, corporate demand for AI utilization, data analysis and BI implementation support, and advertising demand in the influencer domain. In particular, the AI/data business is well positioned to capture corporate demand for generative AI adoption and data infrastructure development. It may remain a growth driver in the next fiscal year. However, competition in this domain is also strong from major IT, consulting, and SaaS companies. Which customer segments the Company can serve, at what unit prices, and how continuously it can provide services will determine the stock price valuation from the next fiscal year onward.

Company actions that could lead to further revaluation of the stock price include disclosure of the number of adopting companies and recurring fee sales in the AI & Big Data solutions business, continued disclosure of the number of retainer-contracting companies and retainer sales in the PR business, clarification of progress on the share buyback and the cancellation policy, strengthening of IR based on an increase in trading volume after the stock split, and quantification of revenue contribution from SAKAE for Client, PR-FORCE, and other products.

4. Stock price trend and valuation

Even after a certain revaluation, a PER of 12.2x remains a cautious valuation relative to ROE in the 20% range

After rising substantially in 2024, the Company’s stock has continued to move firmly from 2025 into 2026. This is because performance improvement has not been temporary but has been confirmed across the three pillars of the PR business, the influencer marketing business, and the AI & Big Data solutions business. From 2020 to 2021, expectations for performance recovery from the COVID-19 pandemic supported the stock price. Since 2022, consolidation effects from VAZ and KeyWalker, improved operating profit margins, rising ROE, and expectations for AI adoption have pushed the stock price higher.

After the stock split in July 2026, the 638 yen stock price is equivalent to 1,276 yen on a pre-split basis. This is one step higher than the stock price of around 1,000 yen at the time of the previous report, and some expectations should be viewed as priced in before the 2Q results. However, the PER versus forecast EPS of 51.6 yen remains only 12.2x, and in relation to the forecast ROE of 20.8%, the stock price valuation remains cautious.

A PER of 12.2x is an earnings yield of approximately 8.2% when viewed as the reciprocal. Meanwhile, the Company’s forecast ROE is 20.8%, and it can generate high profits using shareholders’ equity. Because the dividend payout ratio, based on the forecast dividend of 8 yen, remains at 15.3%, most profits remain as internal reserves, leaving room to allocate them to growth investment, M&A, share buybacks, and strengthening the business base. In other words, if the Company can reinvest internal reserves while maintaining ROE around 20%, it is difficult to say the current PER of 12.2x fully reflects the Company’s capital efficiency and profit-growth capability.

Of course, a high ROE alone does not justify a high PER. For high ROE to support stock valuation, it must be backed by sustained earnings power, not a temporary profit upside. In this regard, the current 2Q results confirmed an increase in the number of retainer-contracting companies in the PR business, high growth and a high profit margin in the AI & Big Data solutions business, and efficiency improvement through the full AI shift. These factors increase the likelihood that the Company’s high ROE is not temporary but supported by its business structure.

Therefore, although the stock price of 638 yen is at a level after a certain revaluation from the time of the previous report, given capital efficiency with ROE in the 20% range, first-half results with an operating profit margin in the 18% range, and profit contribution from the AI/data business, it is difficult to view the stock as expensive. Rather, if it is confirmed that high ROE can be maintained going forward, we believe this is a phase in which the stock price valuation can improve through a higher PER.

An analysis of the stock price level using three methods indicates levels that exceed the current stock price in each case. Under the PBR method, applying a PBR of 2.7x to 3.8x to BPS of 266.1 yen gives a stock price range of 720 yen to 1,010 yen, with a median of 865 yen. Under the DCF method, taking normalized free cash flow of 700 million yen to 1.1 billion yen, a discount rate in the 9% to 10% range, a perpetual growth rate of 1% to 2%, and net cash into account, the stock price range is 655 yen to 1,120 yen, with a median of around 860 yen. Under the ROIC method, considering that ROIC exceeds WACC, applying a PBR of 3.0x to 4.3x gives a stock price range of 800 yen to 1,145 yen, with a median of 970 yen.

Figure 3: Analysis of stock price levels using three methods

Source: Prepared based on Company materials and specified stock price and indicators. The average of the medians under the three methods is 900 yen.

Averaging the medians of the three methods gives an indicative stock price level of 900 yen. Relative to the stock price of 638 yen, upside potential remains. However, this valuation assumes continued high growth in the AI & Big Data solutions business and a high profit margin in the PR business. If the AI/data business profit margin declines or spot projects in the PR business slow, the valuation range will need to be revised downward.

5. Shareholder distribution and supply-demand

The depth of stable shareholders is a stabilizing factor, but liquidity remains an issue

According to FactSet data, the Company’s identifiable shareholder ownership ratio is 68.20%, insiders hold 63.98%, institutional investors hold 4.26%, and the floating share ratio is 36.0%. Among major shareholders, Shinto Tsushin holds 32.61%, Mitsuru Yabuki holds 11.52%, Tadayoshi Mase holds 4.31%, Tetsuya Tani holds 3.76%, KYODO PUBLIC RELATIONS treasury shares are 2.62%, and Asset Management One holds 2.15%.

The depth of stable shareholders provides some downside resilience for the stock price. On the other hand, because floating shares are limited and the institutional investor ratio is also low, large-scale funds have difficulty entering even if the Company’s fundamentals are good. This is important in considering the Company’s stock price valuation. Even if a company has high ROE, high ROIC, net cash, and double-digit profit growth, domestic and overseas institutional investors may struggle to deploy sufficient capital in a stock with a small market capitalization and low liquidity.

In this respect, the stock split and share buyback in 2026 can be seen as capital-market measures that complement business growth. The stock split lowers the investment unit and can encourage participation by individual investors. The share buyback improves EPS and ROE and supports the stock from a supply-demand perspective. However, these alone do not sustainably raise the stock price valuation. What matters is whether trading volume increases after the stock split, whether a new investor base enters through enhanced IR disclosure, and whether KPIs for the AI/data business are shown quantitatively.

6. Growth strategy and risks

Implementation of SAKAE and Prism and the shift to recurring fees in the AI/data business are the next focus

The Company’s growth strategy can be organized into deepening the PR business, developing proprietary IP in the influencer marketing business, expanding the AI & Big Data solutions business, and improving productivity through the full AI shift. In the current 2Q, the Company confirmed expansion of the AI & Big Data solutions business and efficiency improvement through the full AI shift on the profit side.

As its second-half growth strategy, the Company has set forth implementation of AI orchestration centered on SAKAE and Prism. SAKAE is positioned as a data infrastructure that utilizes media data, journalist networks, article data, and other data. At the same time, Prism is envisioned as handling the execution layer, such as PR strategy formulation and proposal preparation. If implemented, the Company’s PR business may move closer to highly reproducible services using data and AI, away from traditional services that rely on human experience.

Upside factors are, first, the high profit margin of the AI & Big Data solutions business continuing; second, recurring fee sales such as ShtockData-related operating revenues accumulating; third, SAKAE and Prism contributing to productivity improvement in the PR business and pushing up the operating profit margin; and fourth, stock price formation improving through increased trading volume after the stock split and the share buyback.

Downside factors include intensifying competition in the AI/data domain, difficulty securing the human resources needed for BI implementation support and hands-on support, rising personnel expenses, dependence on specific creators and SNS platforms in the influencer business, and fluctuations in spot projects in the PR business. In particular, because the AI/data business has made it easier for investor expectations to rise in the current 2Q, the impact on the stock price will also be large if the growth rate or profit margin slows. In future results, we would like to confirm not only the net sales growth rate but also the profit margin, recurring fee sales, the number of adopting companies, and customer retention rate.

7. How to view management

A young top manager and experienced directors coexist; the focus is execution capability in the AI/data business and the supervisory function of independent outside directors

The Company’s Board of Directors comprises Chairman Tetsuya Tani and Representative Director Masataka Ishiguri at the center, along with internal directors, an honorary chairman, outside directors who are Audit and Supervisory Committee members, and independent officers. President Ishiguri is 50 years old and has served as a director for three years, creating a structure in which a relatively young top manager is responsible for transformation at a stage when the Company is linking its PR business with AI/data utilization. Meanwhile, directors with long tenures, such as Chairman Tani, Honorary Chairman Koga, Mr. Numata, and Mr. Kimura, also remain, and the structure can be seen as layering new growth domains while maintaining the existing customer base and PR business knowledge.

Two characteristics can be read from the composition of the Board of Directors. First, many internal directors have long tenures, and the organization has accumulated PR business knowledge, including its customer base, media relations, and crisis management. This supports the stability of retainer-type revenues and relates to the Company’s downside resilience. Second, the Company has appointed multiple independent outside directors and entered a phase in which a supervisory function is required over capital policy related to minority shareholders, including share buybacks, stock splits, growth investment, and M&A.

From an investor’s perspective, the evaluation of management has shifted from the stable operation of the traditional PR business to how well it can develop the AI & Big Data solutions business into a reproducible revenue source. Under President Ishiguri, SAKAE, Prism, ShtockData, CERVN, and other offerings must be more than thematic; they must link to improvements in net sales, operating profit margin, and ROIC. At the same time, whether independent outside directors can provide supervision with an awareness of capital efficiency and minority shareholder interests while using the PR business knowledge held by long-tenured directors will also become an issue related to stock price valuation going forward.

8. Conclusion

What was confirmed in 2Q was not a growth theme, but profit contribution

KYODO PUBLIC RELATIONS’ results for the second quarter of FY12/2026 reinforced the investment story presented in the previous report. The PR business deepened stable earnings through an increase in retainer-contracting companies, the influencer marketing business improved its profit margin despite moderate net sales growth, and the AI & Big Data solutions business boosted companywide profit, with net sales up 42.3% and profit up 134.2%. In particular, the AI/data domain can be evaluated as having advanced one step from a growth theme to actual profit contribution.

The stock price of 638 yen reflects expectations before and after the 2Q results to some extent. On the other hand, given a forecast PER of 12.2x, PBR of 2.40x, and forecast ROE of 20.8%, it is difficult to say the Company’s high profitability and profit growth in the AI/data business are fully reflected. The median stock price under the PBR, DCF, and ROIC methods is 900 yen, leaving upside potential relative to the current stock price.

The focus going forward is, first, whether high growth and a high profit margin in the AI & Big Data solutions business continue; second, whether the increase in retainer contracts in the PR business accumulates as stable earnings; third, whether the full AI shift centered on SAKAE and Prism leads to productivity improvement in the PR business; and fourth, whether the stock split and share buyback lead to improved liquidity and expansion of the investor base.

At this point, rather than viewing the Company’s stock as merely a small-cap PR company, it is more accurate to evaluate it as a highly profitable communications company that combines PR expertise, influencer IP, and AI/data utilization. If we look ahead to changes in the earnings structure three to four years from now, rather than relying only on a short-term upward revision, we believe a stock price of 638 yen is a level that can be evaluated positively over the medium to long term.

Company profile

KYODO PUBLIC RELATIONS is an independent PR company founded in 1964. It handles corporate public relations, media relations, crisis management, IR support, digital PR, overseas public relations, and other services, and relies on retainer-type revenue from long-term, ongoing contracts. Its current business comprises three pillars: the PR business, the influencer marketing business, and the AI & Big Data solutions business.

The PR business is the core business, supporting public relations activities, media response, information dissemination, crisis management, and communication design for client companies. The influencer marketing business, centered on VAZ, handles youth-oriented media, creators, tie-up projects, fan communities, and product development. The AI & Big Data solutions business, centered on KeyWalker, provides ShtockData, CERVN, Dataiku, Tableau-related services, and other services, and supports companies’ data collection, analysis, visualization, and AI utilization.

In recent years, through the establishment of KYODO PUBLIC RELATIONS Ring, Kyodo PR Connect, SAKAE, Prism, and other initiatives, the Company has promoted standardization, efficiency improvement, and data utilization in the PR business. By layering AI and data infrastructure onto PR services that have traditionally depended on human expertise, the Company aims to improve project unit prices, retention rates, profit margins, and share of wallet with customers. In the second quarter of FY12/2026, profit contribution from the AI & Big Data solutions business expanded significantly, and the Company is strengthening its characteristics as a highly profitable communication company.

Key financial data

Source: Prepared by Omega Investment based on FactSet standard calculations; figures rounded to the nearest whole number. The number of shares outstanding is reported as the adjusted figure before the split.

Share price

Key stock price data

Financial data (quarterly basis)

Source: Omega Investment from company materials

Financial data (full-year basis)

Source: Omega Investment from company materials