■ Mid-term Outlook

1. Development of new building techniques with excellent seismic and earthquake resistance

First Corporation (1430) aims to expand its orders by developing new building techniques in the mid-term and differentiating itself from other companies. Specifically, the company is focusing on research and development of new building techniques with excellent seismic and earthquake resistance. The current seismic design standards have been in effect since 1981 and over 40 years have passed since its implementation. According to a survey by the Ministry of Land, Infrastructure, Transport and Tourism, it is estimated that by the end of 2023, there will be approximately 340,000 units of condominiums that have exceeded 40 years of age under the new seismic standards. Furthermore, it is projected to expand to approximately 2.6 million units, about 8 times that number, by the end of 2038. Generally, condominiums are rebuilt after 30-40 years, so it is not difficult to imagine that the need for rebuilding will continue to exist even for condominiums that comply with the new seismic standards. In this context, the company believes that its new building techniques with excellent seismic and earthquake resistance will be a differentiating factor. The research and development is progressing smoothly, and it appears that tangible results can be announced in the near future. The company will continue to focus on research and development, and will disclose progress to investors as appropriate.

Even in the midst of a nationwide population decline, the population decline in the Greater Tokyo Area, which the company considers a major business area, is relatively moderate. Additionally, the company expects a steady demand for condominiums for sale. With a market share of 3.21% in this region as of the fiscal year ending in May 2024, there is still potential for market expansion.

The company is also constructing an office building at its Kyushu branch. Based on its track record, the company is actively exploring further business expansion.

2. Business expansion with a focus on M&A

One of the negative factors in the construction industry at present is the chronic labor shortage. In response, the company actively takes measures such as expanding its construction workforce through business alliances. In addition to business alliances, the company also considers M&A as a means to alleviate the labor shortage. Since nurturing talent takes time, the company currently focuses on securing orders according to its scale, but is prepared to strengthen its lineup through M&A as needed. In terms of M&A, the company will proceed with caution, considering cost performance. With the expectation of a favorable external environment, the company will establish a system to effectively incorporate strong demand into its performance and utilize M&A to expand its business domain. In May 2024, the company reorganized its recruitment and talent development department under the management headquarters and established it as the recruitment and talent development office, which is directly under the president's authority. By strengthening its recruitment capabilities, the company aims to expand its construction workforce and construction capacity.

On the other hand, an important factor to consider in terms of future growth is expanding into new areas, with special attention to the Kyushu branch. Since its establishment in April 2018, the branch had been in an investment-first state, but recently it has been steadily expanding its business activities by undertaking the construction of office buildings in Hakata-ku, Fukuoka City, Fukuoka Prefecture, as well as selling business sites and handling in-house development projects. The population in this region, which serves as the gateway to Asia, is expected to increase until 2038, making the establishment of the Kyushu branch significant in terms of future business expansion.

(Written by FISCO Guest Analyst Yoichiro Shimizu)