■ Long-term Growth Strategy
AIAI Group <6557> surrounding the "AIAI Three Education Zones" that it operates; For AIAI NURSERY in the (licensed nursery) field, child and family services was established in April 2023 with the aim of improving the quality of early childhood education and care and as a response to the "unprecedented decline in the number of children" in Japan. However, despite the encouragement from the government, the saturated market feeling cannot be ignored due to the declining birth rate and the significant reduction in the number of newly opened nursery schools, taking into account factors such as the resolution of the waiting list problem in the industry.
The business environment surrounding Valtus Holdings <4442> for the next few years (market expansion, etc.) can be said to be favorable due to the following points:
(1) Growth potential in the target industry
In the future, the markets that the company will target are undoubtedly various software and IT industries. However, the annual average growth rate (CAGR) of the world software testing market is expected to be 9.2%, and the industry itself is likely to achieve high growth.
(2) Accelerating outsourcing of testing processes (software development companies)
Based on the current situation, software testing is likely to be outsourced from development companies to specialized testing companies in the future.
(Concerns of software development companies)
- About 40% of the labor hours of high-cost development engineers are spent on testing and verification
- Testing processes do not increase the motivation of developers and are inefficient
- Developers themselves conducting testing and verification lack objectivity and reliability
(Reasons why testing processes were not outsourced)
Major SIer companies contracted projects in bulk and ordered subcontractors and grandchildren to proceed with development. This structure involved development engineers conducting testing processes as well.
(Testing process outsourcing is expected to accelerate in the future)
- Reduction of development costs due to shortening of testing time by development engineers (according to the company, it is possible to handle about 60-70% of cases when development engineers conduct testing)
- Establishment of highly comprehensive and efficient testing methods (proprietary methods of each company) with high reproducibility and shareability will become feasible
- The effectiveness of testing and verification by third-party specialized testing companies is drawing attention
- Improvement of software quality itself by participating from upstream processes
- An increase in requests from upstream processes such as user companies
2. Outline of the new medium-term management plan
In the aforementioned business environment, the company has announced a 'new medium-term management plan' for the next 10 years.
(1) Vision and concept of the new medium-term management plan
The vision is to improve the overall quality of the software testing industry and enhance the social value of the software testing market, aiming for further market expansion. Ultimately, the company itself aims to be a "value-up platformer".
The concept is to build a "Valtes Quality" business model that spreads to the industry. In addition, strengthen and expand the "business model without relying on people".
(2) Quantitative targets
The quantitative targets for the near future (3 years later, March 2027) are as follows:
Consolidated revenue of 15.73 billion yen (actual performance of 10.36 billion yen in March 2024)
Operating profit of 1.68 billion yen (same as 0.84 billion yen)
Sales composition ratio of "business model without relying on people" exceeding 3% (tiny same as before)
Operating profit margin of 10.6% (same as 8.1%)
Total assets of 8.09 billion yen (same as 5.39 billion yen)
Shareholders' equity of 5.07 billion yen (same as 2.82 billion yen)
Interest-bearing debt of 1.30 billion yen (same as 0.99 billion yen)
ROE 23.6% (same as 19.8%)
is our goal.
(3) Five basic strategies based on the concept
Based on the above concept, we will promote the following five basic strategies in the future.
Basic Strategy 1: Software Testing Strategy
Basic Strategy 2: Tool Strategy
Basic Strategy 3: Barukare (Mainland Education) Strategy (Note: Barukare = Valtes College abbreviation)
Basic Strategy 4: Security Strategy
Basic Strategy 5: Development Business Strategy
(Written by FISCO guest analyst Noboru Terashima)