Overview of Daiki Axis <4245> Business.
2. Residential Equipment Related Business.
Construction-related companies made up 63.8% of the sales composition for residential equipment related business in the fiscal year ending December 2023, while home center retail products made up 10.3%, and residential equipment department contracts made up 24.9%.
Daiki, which is the predecessor of the company, started in 1958 as a “store for tiles and sanitary ceramics,” and has a decades-long track record in wholesale of housing equipment. They sell water-related housing equipment such as system kitchens, toilets, and unit baths to primary constractors, local construction companies, and home builders. The sales area is primarily in the Shikoku and Seto Inland Sea area where the headquarters is located, as well as in the China and Kinki regions facing it. They have achieved high sales in the region, including wholesale of decorations and external decorations for public facilities. In recent years, they have also focused on proposing environmentally friendly products such as wooden water tanks and environmental pile construction methods that capture the needs of the times. They also supply home center retail products to DCM Holdings group companies and undertake construction work for home center stores in addition to handling materials and facilities sales and installations for hotels, hospitals, and educational facilities. It is a wholesale-type business model, so the profit margin is relatively low at around 1.5% to 2.0%, but they aim to improve their added value and competitiveness by strengthening their manufacturing capabilities, including completing all processes of wood structure businesses in-house.
3. Renewable Energy Related Business.
In the renewable energy-related business, sales of the electricity generation business from solar power accounted for 81.5%, followed by biodiesel fuel at 8.1%, small wind power generation business at 1.1%, and hydro-thermic processing business at 1.8% in 2023. Since 2019, DASP has centralized the development and management of wind and solar power generation facilities, and in July 2021, they integrated the biodiesel fuel business of their company by transferring to and acquiring Sun-Ai Eco-Home, which they plan to merge in January 2023.
(1) Sales of the electricity generation business from solar power.
In the 2021 fiscal year, grid connection of the power generation equipment installed on the roof of 130 DCM group stores for the solar power generation-related business was completed. It will be a long-term stable source of revenue.
※ The depreciation period for solar power generation facilities is 20 years, the same as the purchase period under the fixed price purchase system (FIT system). Also, the company has already set a budget by period estimation for the removal cost 20 years later.
In addition to sustainable business operations after the end of the FIT system, there is increasing demand worldwide for various models, such as PPA models※, due to increased environmental awareness. Following the acquisition of Sun-Ai Eco-Home in 2021, they acquired 100% of the shares of Media, which is based in Saitama City, Saitama Prefecture and became a subsidiary in February 2023. Media is mainly engaged in electrical construction businesses involving solar power generation facilities; designing, constructing, and maintaining them, as well as the electricity sales business of the self-owned solar power generating facilities. The Daiki Axis group will acquire management resources related to solar power generation through vigorous M&A activities to build a system that can respond more quickly to requests from large power consumers.
※ The electricity consumer agrees to purchase the electricity generated by DCM at a contracted price equivalent to the amount of electricity consumed, and DCIM provides operation and maintenance services for the solar power system they have installed for free. It is focused on as a post-FIT system business model, while the demand for electricity is increasing, mainly among large companies, in order to achieve carbon neutrality.
(2) Biodiesel Fuel Business.
The biodiesel fuel business started in 2002. It collects plant-based edible oil used for fried foods, etc. from general households, restaurants, convenience stores, food processing factories, etc., refines it into biodiesel fuel, and reuses it as an alternative fuel for diesel oil. The use of biomass energy using plant-based waste edible oil as a raw material is considered to be "carbon neutral." The company is promoting the recycling of waste edible oil while seeking the realization of a local production and consumption circular energy through the "oil-more project" with the cooperation of municipalities.
New developments were seen in 2023. In April, DASP began providing high-quality biodiesel fuel "D·OiL" for airport work vehicles that will be used in JAL (Japan Airlines) Matsuyama branch's demonstration experiments. In addition, from August, it has been providing "D·OiL" to biofuel buses that started demonstration operations in the Nikko region, including the Oku-Nikko area, which was selected as a decarbonization leading region by the Ministry of the Environment. From 2024 onwards, the company will start production of biodiesel fuel at a manufacturing facility in the Kanto region in June, completing the facility in April.
(3) Small Wind Power Generation Related Business
It entered the small-scale wind power generation related business in the fiscal year ending December 2019. DASP interconnected small-scale wind power generation at 12 sites by the end of fiscal year 2021 and began selling electricity under the FIT program. It currently manages 24 sites and aims to operate at all 70 sites nationwide by the end of the fiscal year 2025. The expected sales revenue per site is 20-25 million yen, with an operating margin of about 25-30%. However, since the purchase price for the same category was revised to 20 yen/kWh, equivalent to 20kWh or more in fiscal year 2018, it intends to correspond to the new FIT with a 50kW machine. If approved, a 50 kW machine will be installed at sites with less than 20 kW. Although the installation cost is the same, it plans to take advantage of the merit that sales revenue will increase by 2.5 times.
In the "FY2020 CO2 Emissions Reduction Incentive-Type Technology Development and Demonstration Project" by the Ministry of the Environment, Zephyr Co., Ltd., Ricoh Japan Co., Ltd. (a subsidiary of Ricoh <7752>), and DASP are participating as joint implementers in the "Technology Development and Demonstration Project for Low-Voltage Wind Power Generation." Based on the fact that there have been moves to create an independent grid using regional disaster prevention measures, self-employed lines and existing distribution networks, and moves to consume renewable energy in-house at business sites, it aims to develop a wind power generation machine with a rated output of 50 kW that has a high social acceptability. Zephyr is responsible for overall wind turbine design, blade design, reuse of auto parts, field testing, and wind turbine control algorithm development, while Ricoh Japan develops maintenance support tools using AI. DASP is responsible for manufacturing FRP (fiber-reinforced plastic) blades.
(Written by Fisco Guest Analyst Ikuo Shibata)