■ Long-term Growth Strategy

C&G Systems <6633> announced its medium-to-long-term business policy in early 2020, with the final fiscal year ending in December 2025. Despite being in a stagnant state due to the impact of the coronavirus pandemic, the company has not changed this business policy and plans to continue implementing the following measures. The quantitative targets, such as a CAGR of 5% from December 2018 to December 2025, a recurring profit margin of 20% in December 2025, and an ROE of 15% or more, have not changed either.

Overview of the medium-to-long-term business policy:

(1) Expansion of core revenue sources

(2) Expansion of CAD/CAM application areas

(3) Deepening of technology (business expansion into the IoT field)

(4) Promotion of research and development

Previously, there were six policies, but they have been summarized into the four mentioned above. In summary, the direction is as follows:

(1) Expansion of core revenue sources

(Expansion of core revenue sources)

In order to establish a management foundation for sustainable growth, we aim to achieve this goal through the following three measures:

a) Maintenance and expansion of a stable revenue structure through maintenance businesses: Improving maintenance renewal rates through continuous version updates

The maintenance renewal rate for the fiscal year ending December 2023 is 95.4% and we will maintain at least this level.

b) Expanding market share: Strengthening OEM partnerships and providing CAD/CAM engines to other industry competitors and manufacturing companies

We started supplying OEM to NDES Co., Ltd. in October 2022. We will continue to supply OEM to other industry competitors and explore new OEM partnerships.

c) Strengthening domestic and overseas strategic initiatives

Expansion of overseas subsidiaries and overseas technical agents (ASEAN region).

Establishment of a regionally self-contained business model for technical support/user customization, including the opening of a Vietnam Technical Center in Hanoi in February 2023.

Simultaneously expanding the network of technical agents and focusing on expanding sales channels.

In addition, we will continue to work on the multi-platformization and strengthening of the area of layered manufacturing (metal/resin) in the field of CAM.

(2) Expansion of CAD/CAM application areas (Parts CAM).

We will introduce our highly accurate CAD/CAM assets cultivated in mold processing into the component processing market to expand sales. We have already been selling the CAM system "Parts CAM" for the component processing market since February 2020, but in the future, we will expand into the mold peripheral market, mass production market, and other markets from the CAD/CAM business area.

(3) Deepening of technology (business development in the IoT field): "AIQ"

We will strengthen "AIQ" as a new source of revenue. "AIQ" is a solution that utilizes IoT to digitally capture and utilize various data and process conditions in the digitalized management of the manufacturing process. While the use of IoT in the manufacturing industry is gaining attention, "AIQ" is attracting attention as the company's unique solution that smartizes production and process management of molds and components. The company plans to expand into markets beyond the mold manufacturing industry.

In version V16.1 of "AIQ", production planning support function was installed to enhance mass production management, and support for the invoice system was also implemented. Furthermore, in version V16.2 in December 2023, a similar image search function using AI was added, allowing the specification of product images as search criteria for production results.

(4) Promotion of research and development

A research and development department was established at the "Technical Development and Exchange Center" in Kitakyushu Academic City, with the aim of promoting fundamental and applied research related to the company's business areas and unique technologies. Specifically, by collaborating with the three fields of "AI", "IoT", and "shape recognition", as well as the company's main products such as "CAM-TOOL", "EXCESS-HYBRID II", and "AIQ", the goal is to contribute to the efficiency of factory operation, energy conservation, addressing labor shortages, supporting the transfer of skills from skilled workers, and measures against aging.

As a result of the research, in the latest version of "AIQ" released in December 2023, the "AI-based similar image search" function was installed, allowing the specification of product images as search criteria for production results. In addition, in the latest version of "EXCESS-HYBRID II" released in February 2024, specific functions such as "similar body search" were implemented.

Furthermore, in the latest version of "CAM-TOOL" released in April 2024, which is related to the promotion of AI, functions for calculating cutting conditions using AI developed through industry-academia collaboration have been installed, and the company is gradually incorporating AI-enabled high-value-added functions into existing products.

(Written by FISCO guest analyst Noboru Terashima)