■Future Outlook LeTech <3497> expects an increase in sales and ordinary income of more than 20%, with sales of 2.14 billion yen (+33.8% YoY), operating income of 150 million yen (+7.7% YoY), ordinary income of 100 million yen (+21.7% YoY), and net income of 1.03 billion yen (-11.4% YoY) for the July 2024 term, and has maintained its initial forecast (announced in September 2023).
For the consolidated results of Takashima <8007> by the end of March 2025, the revenue is expected to increase by 4.3% from the previous period to 9.4 billion yen, the operating profit is expected to increase by 14.4% to 2 billion yen, the ordinary profit is expected to decrease by 0.2% to 2 billion yen, and net income attributable to shareholders of the parent company is expected to decrease by 66.9% from the previous period to 16 million yen. All segments of Building Materials, Industrial Materials, and Electronics and Devices are expected to see increases in revenue and profit. In particular, the Building Materials and Industrial Materials segments aim to expand their performance by pursuing synergies with consolidated subsidiaries and focusing on strengthening and expanding the company's solutions. The Electronics and Devices segment will continue to expand its business through ongoing improvements in business activities, despite a tough business environment outlook. Regarding consolidated operating income, effects of revenue growth as well as the falling off of the merger and acquisition expenses related to Iwasui Development and the effects of consolidated subsidiary will be a factor that increases profits. It is assumed that the net income attributable to the parent company shareholders will fall significantly by 66.9% from the previous period as a result of the reaction to the disappearance of special profits recorded due to the sale of fixed assets in the fiscal year ending March 2024, while the business itself is expected to have significant progress.
The fiscal year ending in March 2025 is the second year of the mid-term management plan "SUSTENA V (Value)". The company has already satisfied all items of the Prime Market Listing Maintenance Standards ahead of schedule as of March 31, 2024, and will continue to focus on enhancing corporate value by actively promoting strategic investment while being conscious of capital costs. Furthermore, in line with the review of the asset allocation and the restructuring of the industrial materials segment, the company plans to change the segment classification in a way that eliminates the rental real estate segment from the fiscal year ending March 2025. Also, the company plans to independently allocate corporate costs that have been allocated to each segment so far as total company expenses. This will clarify the profitability of each segment and the profit level directly supported by each department.
The segment outlook is as follows.
(1) Building Materials Segment
Revenue is expected to increase by 2.6% from the previous period to 5.97 billion yen, and segment profit is expected to increase by 3.2% to 2.05 billion yen. The company aims to pile up profits while promoting further strengthening and expanding of the offering functions in each field. In the field of building materials, which mainly deals with non-residential buildings such as large logistics facilities and factories, it expects a steady market trend. In such a situation, it steadily accumulates orders by combining the construction and installation functions that Iwasui Development possesses with the sales function that Takashima possesses. Regarding the insulation material field, it is expected that the market needs will remain stable. For the same field, it expects to expand the business performance by ensuring the provision of established functions that meet customer needs. In the field of renewable energy materials, it is expected that the need for renewable energy will perform favorably in the backdrop of the rise in fuel costs, including crude oil. By combining the construction and installation functions of the new energy distribution system with Takashima's sales functions, it aims to promote the expansion of business performance while enhancing and expanding the offering functions. Regarding the field of housing materials, it assumes that the market environment will be severe, such as a decrease in the number of housing construction starts. Despite such a situation, it expects to respond carefully to customer needs and expand business performance.
In the mid-term management plan "SUSTENA V (Value)", the segment aims to incorporate the needs of expanding into such performance keywords as "building materials and energy-saving technology that increases the functionality of large-scale logistics warehouses etc. that expand on the e-commerce market" "disaster prevention and high-performance housing" "photovoltaic power generation for self-consumption like factory and local government" and "EV-related products", and incorporate them into business performance. Currently, with the consolidation of subsidiary corporations of the new energy distribution system and Iwasui Development, the company's providing functions are being strengthened and expanded. The company will continue to focus on expanding business performance while clarifying the areas for executing strategic investments even for the fiscal year ending March 2025.
(2) Industrial Materials Segment
Sales revenue increased by 2.4% to 17.6 billion yen, and segment profit is expected to increase by 4.7% to 750 million yen. By enhancing sales targeting areas such as automobiles, medical care, and construction, and strengthening manufacturer capabilities, the company aims to expand performance. In particular, for resin-related materials, the company will provide products that accurately capture market changes such as logistics materials for EVs, as the automotive industry, a customer, is in a transitional period to the EV market. For fiber-related materials, the company expects a decrease in demand from the apparel industry due to the yen's depreciation, and the market environment is expected to be tough. Nevertheless, the company will maintain and expand profitability by providing customers with higher value-added solutions such as OEMs.
In "SustainaV (value)", the company aims to expand performance by accurately responding to the diversifying needs of customers targeting "EV-related logistics materials" and "functional industrial materials (fire resistant, disaster prevention, logistics, medical care related)" as keywords. From April 2024, a wholly owned subsidiary, Takashima Industries Co., Ltd., will be established and the industrial materials business handled by Takashima will be transferred to the new subsidiary. This is aimed at improving competitiveness by constructing a new governance structure to respond to rapidly changing business environments, enhancing organic cooperation among group companies belonging to the industrial material segment, and speeding up decision-making and investing in agile human resources for business investment. The establishment of a new company is expected to further increase the quality and speed of strategic investments in the segment.
(3) Electronic Device Segment The sales composition ratio is 16.4%. As iTak (International) Limited based in Hong Kong and the iTak group, we source and sell electronic components that meet customer needs mainly in Asia in the Device Business, and conduct assembly businesses where the iTak group itself performs substrate mounting (EMS) with those electronic components as a manufacturer. With 7 business locations (excluding liaison offices) and 2 self-owned factories (in Thailand and Vietnam), the iTak group locations work together strongly to actively operate as one business entity and cover major countries in Asia. One of the features of the iTak group is its ability to support product manufacturing globally from business locations close to the customer's development, production, and procurement bases. Under the "SustainaV (Value)" policy, we are investing in our own factories in Thailand and Vietnam to respond to the needs of customers who are looking for manufacturing bases as China Plus One. (a) Device We handle LCD displays for a wide range of applications from consumer products to automotive and industrial equipment, as well as audio parts (microphones, speakers, receivers, etc.), power electronics-related components such as semiconductors, capacitors, and relays (relays). We systematically source them from manufacturers mainly in Asia, and conduct systematic inventory management and part quality management, leveraging customer support capabilities. In addition, as mentioned above, we have established our own factory for producing LCDs in Vietnam and are strengthening our own manufacturing capabilities. (b) Assembly
Sales revenue increased by 12.9% to 16.7 billion yen, and segment profit is expected to increase by 15.0% to 500 million yen. Although the semiconductor supply shortage problem has been resolved, it is expected that the tough market environment caused by the long-term slump in the consumer electronics market will continue as product inventory accumulates while excessive parts inventory caused by prolonged lead times cannot be digested. Nevertheless, the company will thoroughly adhere to the basic principle of delivering electronic devices that customers require with high quality on a predetermined delivery date. Even in the face of a sluggish market, there are competitors entering the market with a low-price strategy. The company aims to maintain a reasonable profit level by further improving its strengths with technology and quality as keywords. In addition, under the current medium-term management plan, "SustainaV (value)", the company will continue to provide energy-saving devices at a global level, contributing to the realization of a sustainable society. The company also plans to strengthen its production system through investments in factories in Thailand and Vietnam as appropriate.
(Written by FISCO Guest Analyst Yoichiro Shimizu)