Konami Group9766.T
Digital Entertainment prints a 36.7% segment business-profit margin at FY March 2026, up from 32.4% a year earlier, on 75% of revenue and 94.7% of group business profit. The cellular SOTP reconstructs equity value to ~¥2,470bn, or ~¥18,200 per share net of treasury ; spot is ¥18,930. The composition inefficiency is real and already priced — Digital Entertainment carries a 16.5x rent multiple, the non-core almost nothing. The swing factor is the durability of the 36.7% margin, tested by the FY March 2027 prints from H1. Konami did not purge in the FY2025–26 sector drawdown, so no dislocation entry is on offer.
Digital Entertainment at ¥128bn normalised business profit, on a 16.5x multiple consistent with Capcom's EV/EBIT band, is worth approximately ¥2,112bn.
The non-core — Sports, Gaming & Systems, Amusement, Arcade — produces ¥7.6bn of business profit and carries approximately ¥70bn on a blend of profit multiple and discounted asset value.
Net cash is ¥287.6bn. Equity value reconstructs to ~¥2,470bn, or ~¥18,200 per share on the count net of treasury.
Consolidated market cap at spot is ¥2,716bn. The conglomerate discount the SOTP applies is the discount the market already applies.
The dossier rests on whether the price still leaves anything. Digital Entertainment prints a 36.7% business-profit margin at FY March 2026, up from 32.4% a year earlier, on 75% of group revenue and 94.7% of group business profit. The consolidated multiple already carries this — P/B 4.55x against a five-year average of 3.64x, EV/business profit 16.9x. The cellular SOTP reconstructs equity value to ~¥2,470bn, ~¥18,200 per share on the outstanding count net of treasury. Spot is ¥18,930.
The composition inefficiency the framework identified is real and is priced. Digital Entertainment carries a 16.5x rent multiple consistent with Capcom; the non-core, which is 25% of revenue and 5% of profit, carries almost nothing. The discount the SOTP applies to the conglomerate is the discount the market applies.
The swing factor is the durability of the 36.7% margin. FY March 2026 carried a premium-launch pulse — Metal Gear Solid Δ and Silent Hill f, each above 1m initial units. Guidance for FY March 2027 is +2.3% revenue and +1.0% profit. Whether 36.7% is a plateau or a peak moves the SOTP by approximately ¥1,500 per share.
Konami returned −3.7% over one year through the FY2025–26 sector drawdown while Nintendo returned −39.6% and Capcom −29.9%. The sub-industry Market Rule 6 entry — own the quality name on the purge — is unavailable here because there was no purge.
Position framing is monitoring at current levels. Sizing is zero. The cellular levers are documented through segment business profit ; what is absent is a price dislocation or an allocation catalyst, neither present today. Conviction is moderate.
The eleven-year window from FY March 2015 to FY March 2026 reads as three regimes. A dispersed leisure conglomerate through FY March 2019, Digital Entertainment at 46% of revenue, EBIT margin climbing from 7.0% to 19.2% as mobile and card monetisation replaced premium console development — Hideo Kojima's departure and the wind-down of the Metal Gear premium model in 2015. A digital pivot from FY March 2020 to FY March 2023, COVID accelerating engagement, the margin reaching 24.9% in FY March 2022 then falling to 14.7% in FY March 2023 on a digestion air pocket with negative free cash flow. A fundamental rerating from FY March 2024, EBIT from ¥80.3bn to ¥135.9bn, P/B from 1.6x to 4.55x, Digital Entertainment reaching 75% of revenue.
| Inflection | FY Mar 2015Pre-digital | FY Mar 2019Pivot underway | FY Mar 2022Digital rent revealed | FY Mar 2023Digestion trough | FY Mar 2026Fundamental rerating |
|---|---|---|---|---|---|
| Revenue (¥bn) | 218.2 | 262.5 | 299.5 | 314.3 | 493.7 |
| EBIT (¥bn) | 15.3 | 50.5 | 74.4 | 46.2 | 135.9 |
| EBIT margin | 7.0% | 19.2% | 24.9% | 14.7% | 27.5% |
| Net income (¥bn) | 9.9 | 34.2 | 54.8 | 34.9 | 100.0 |
| FCF (¥bn) | 19.5 | 25.3 | 73.4 | −7.7 | 80.0 |
| Net cash (¥bn) | 23.3 | 126.8 | 150.4 | 129.8 | 287.6 |
| EPS diluted (¥) | ~72 | ~253 | 404.6 | 257.5 | 737.8 |
| ROIC ex-cash | ~10% | ~20% | ~26% | ~16% | ~34% |
Source: Data pack and konami_9766.xlsm, as of 31 May 2026 ; segment series FY March 2016–2026. FY March 2026 = year ended 31 March 2026. No stock split over the window. ROIC ex-cash is an analytical reconstruction (NOPAT = EBIT × ~0.70 over equity + debt − cash) ; FY March 2015 and FY March 2019 EPS are reconstructed from net income on a ~135–137m share count.
The cash tells the second half of the history. Net cash rose ×12 to ¥287.6bn, 51% of equity, against a ~30% payout and no material buyback. Reported ROIC of ~16% sits ~18 points below the ex-cash ROIC of ~34%, the full cost of the idle balance sheet. The rerating came from earnings ; the allocation lever is unused. The Governance pillar at 3.0/5 captures this.
The engine is a recurring rent on proprietary IP monetised continuously. eFootball at 1bn cumulative downloads and the Yu-Gi-Oh! ecosystem — physical cards over ~25 years plus Master Duel at 90m+ downloads — form a captive base monetised at near-zero marginal cost, decoupled from the release calendar. This is the structural half of demand. The cyclical half is the premium pulse, Metal Gear at 65.5m cumulative units and Silent Hill f, corrected by the +2.3% FY March 2027 revenue guidance.
The non-core is ~25% of revenue for ~¥7.6bn of business profit, 5.3% of the group. Gaming & Systems operating profit fell 61.4% over nine months at a ~6% margin, below the ~8% the sector framework had carried as static. Pricing power is real on Yu-Gi-Oh!, a TCG quasi-monopoly with autonomous pricing, and contested on eFootball against EA Sports FC. The critical cost is reintroduced console development from the premium revival ; the FX exposure is minor at 29% international against a 71% domestic base, neutralised at USD/JPY ~130.
FCF converts at ~56% of business profit at FY March 2026 and is lumpy across the cycle — −¥11.4bn in FY March 2020, −¥7.7bn in FY March 2023, +¥80.0bn in FY March 2026 — which forbids a top-down ratio. FCF yield is 2.9% at spot and shareholder yield ~1.2%. There is no yield floor ; the valuation floor is net cash plus the irreducible card and mobile rent. WACC bottom-up is 8.16% against the ex-cash ROIC of ~34%, a ~26-point spread on the core.
Near-zero marginal cost on the digital core, with ROIC ex-cash of ~34% against WACC of 8.16% and a margin expanding intra-segment from 32.4% to 36.7%. The recurring card and mobile rent converts asset-light. FCF conversion is lumpy at ~56% of business profit and capital is tied in a sub-WACC non-core that produces ~5% of profit on ~25% of revenue ; these hold the score below 4.5. The unit economic of the core is first-rate ; the consolidated conversion is not.
The decisive pillar, and the weakest. The dividend rose to ¥221.50 from ¥165.50 and TSE reform creates an optionality on cash return. Against it, net cash continued to rise to ¥287.6bn from ¥212.5bn at 51% of equity, payout held at ~30%, and board independence and the control structure are unsourced. The premium remains possibly governance-reversible. This pillar governs whether the rerating is durable and whether the cash optionality is ever realised. It is why the upside is latent rather than priced.
Captive recurring rent (eFootball 1bn downloads, Yu-Gi-Oh! Master Duel 90m+). Beta 0.46, the most defensive of the pure publishers. Concentration at 75% revenue / 95% profit and a non-repeatable premium pulse cap it.
Yu-Gi-Oh! is a TCG quasi-monopoly with ~25 years of switching costs. eFootball is contested by EA Sports FC. The premium console cost-moat is unproven against Capcom's RE Engine.
The 2015 exit from premium console and the mobile/card pivot were validated by EBIT margin 7.0→27.5% across three record years. Allocation is passive and the non-core has been retained without decisive restructuring.
Above Koei Tecmo (14/25, value gated by family control), below Capcom (19/25, the cleanest accounts in the bucket), at the upper end of the conglomerate cores. The grade justifies a premium multiple on the Digital Entertainment segment, on the consolidated line only through the SOTP that isolates it.
Is the 36.7% Digital Entertainment margin a structural plateau or a premium-launch peak ?
Operational rerating or reversible governance premium ?
The margin expanded intra-segment, an operational signal. The cash stayed on the balance sheet, so the governance and allocation lever is unactioned and the P/B premium is not yet paid by allocation. The rerating is operational on earnings and indeterminate on allocation.
Is the non-core a drag to prune or an asset ballast ?
The non-core is ~5% of business profit, with Gaming & Systems operating profit down 61.4% year on year at a ~6% margin. Against the decline sits iGaming optionality launched October 2025 and underlying asset value in fitness real estate and casino systems.
At ¥18,930 spot and EV/business profit of 16.9x, the market prices Konami as a quality publisher with a partial conglomerate discount. Two anchors do the work. The consolidated multiple applies a revenue-weighted average — the non-core is 25% of revenue — to a profit-weighted reality, where the non-core is 5% of profit ; the SOTP isolates that composition. And the 36.7% Digital Entertainment margin is treated as durable through-cycle, the swing the FY March 2027 prints test. The first anchor is the composition the SOTP already reads ; the second is the open question.
Digital Entertainment margin compresses toward 32% as the premium pulse fades without a recurring relay and eFootball cedes ground to EA Sports FC, while the multiple de-rates to 13x as the governance premium is requalified as reversible. Business profit toward ¥105bn, non-core toward ¥45bn as Gaming & Systems continues to decline. The downside is timing ; net cash of ~¥2,120 per share and the card and mobile rent floor it.
Execution to prudent guidance. Digital Entertainment normalises after the pulse at ~¥128bn business profit on ~36% margin, the recurring rent compensating, the non-core a stable drag, the cash not returned. The SOTP delivers ¥18,200 ; consolidated re-rating happens or does not, and the fair value does not require it.
The margin proves a structural plateau near 37%, sustained by recurring growth and a regular premium cadence, and management opens a cash-return ramp under TSE pressure. Digital Entertainment ~¥150bn at 18x in full recognition of the Capcom-grade rent, non-core ~¥110bn including iGaming optionality and disposal value. Equity ~¥3,098bn.
| KPI | Latest value | Status | What it tells us |
|---|---|---|---|
| Digital Entertainment segment margin | 36.7% (FY26) | Cardinal | The single number governing the dossier. Up from 32.4% intra-segment. Recurring growth ex premium-launch ≥10% at H1 FY March 2027 holds the plateau ; below 33% on two consecutive prints triggers the bear case. |
| Two consecutive prints below 33% | not yet | Trigger | Bear confirmation. Reframes weighted fair value toward ~¥14,000 and re-rates the core multiple toward 13x. |
| Buyback or special dividend | none | Trigger | Bull confirmation. Realises the ¥287.6bn cash optionality and lifts the Governance pillar from 3.0. |
| Group business profit | ¥143.6bn / 29.1% | Holding | Managerial AOP, +31.6% YoY, above IFRS EBIT of ¥135.9bn. The line the SOTP anchors on, not the consolidated multiple. |
| Net cash / equity | ¥287.6bn / 51% | Asymmetric | ~¥2,120 per share. Floors the downside and carries the unpriced allocation optionality. Rising without return confirms the cash trap. |
| Gaming & Systems margin | ~6% (9M) | Watch | Operating profit −61.4% YoY. Recovery above 10% unlocks SOTP value ; sustained below 5% confirms the capital trap. |
| P/B | 4.55x | Reference | +25% versus the five-year average of 3.64x. Above 5.5x is over-extension ; below 3.2x re-rates the core multiple to 13x. |
| Forward P/E vs corridor | 21.9x | Reference | Below the five-year average of 26x. The P/E de-rated while the P/B re-rated, the signature of an earnings rerating. |
| FCF yield (spot) | 2.9% | Reference | Lumpy. Shareholder yield ~1.2%. Konami is not a yield play ; the thesis is the rent and the composition. |
| Performance 1Y / beta 2Y | −3.7% / 0.46 | Reference | Held through the sector drawdown that took Nintendo −39.6%. Confirms the recurring-rent defensiveness empirically ; explains the absence of a dislocation entry. |
Two consecutive Digital Entertainment margin prints below 33% from H1 FY March 2027 reframe the dossier toward bear and compress weighted fair value toward ¥14,000. A non-core that resumes its share of revenue without a margin improvement acts as the second-order confirmation, requalifying the durable rent as a reversible premium.
A buyback above ¥30bn or a special dividend closes part of the discount on its own and lifts the Governance pillar from 3.0. Digital Entertainment recurring growth ex premium-launch above 10% confirms the structural plateau at the upper end of the prudent mid-cycle range. A disposal of Sports or Gaming & Systems realises asset value the consolidated market cap does not capture.
A value-destructive acquisition or a sub-WACC overinvestment in casino or iGaming that consumes the ¥287.6bn cash is the only vector of permanent loss, and it would force a complete re-underwriting toward the residual rent value below ¥10,000. Currently not signalled.
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