Growth strategy of Fullsat Marka Holdings <7128>

1. Medium-term management plan 'UNISOL'

The company set a long-term goal for the next 10 years of revenue of 400 billion yen, operating profit exceeding 20 billion yen, and a market capitalization target of 150 billion yen as its desired future state. In the medium-term management plan 'UNISOL' (December 2022 to December 2026), they position the first stage of building the foundation (returning to a growth track) in the first 2 years (December 2022 to December 2023), and the second stage of accelerating growth in the last 3 years (December 2024 to December 2026). The targets for the final year ending December 2026 are revenue of 200 billion yen, operating profit of 10 billion yen, operating margin of 5.0%, adjusted EBITDA of 11.5 billion yen, and ROE of 8.5%.

The basic strategy towards establishing a sustainable growth foundation includes differentiation in existing business areas 'deep dive', expansion into new business areas 'challenge', and enhanced commitment to SDGs 'sustainability'. Additionally, they focus on maximizing integrated synergies, deepening platform strategies, creating new solutions through the convergence of group functions, and advancing efforts towards smart factories. They aim to maximize integrated synergies through four pillars of short-term synergy (increasing industrial machinery share, expanding equipment tools, strengthening engineering business, enhancing overseas sales), and pursuing strategies in five fields of mid-to-long-term synergies (EV promotion, automation and labor saving, environment and energy conservation, food-related, global markets).

Specific strategies towards achieving an operating profit of 10 billion yen include aiming to add 2.8 billion yen through market recovery and execution of existing measures in existing businesses, 2 billion yen through realizing integrated synergies and strengthening efforts in strategic areas, and another 1 billion yen through strategic accumulation such as creating new added value and expanding business areas. The breakdown of the 2 billion yen synergy is set at 0.9 billion yen for the four pillars of collaboration, and 1.1 billion yen for the five strategic fields. They also aim to achieve additional growth through proactive M&A activities.

As of the end of the first half of December 2024, although the performance forecast for the fiscal year ending December 2024 was revised downward due to a slowdown in demand, the effects of maximizing synergies resulted in 197 million yen in December 2022, 440 million yen in December 2023, and 291 million yen in the first half of December 2024, showing generally smooth progress in the first stage. For the second stage, they aim to accelerate the growth speed towards achieving the final year goal through the expansion into new business fields, leaps in global markets, and strengthening stock-type businesses.

Furthermore, to enhance sustainable corporate value, they announced on March 28, 2024, 'Towards the improvement of sustainable corporate value - Measures towards realizing management conscious of capital costs and stock prices.' While ROE (return on equity) showed improvement trend at 6.6% as of December 2023, it remains below the expected shareholder capital cost of approximately 7.0% (calculated based on the company's standards), and the target ROE of 8.5% set in the medium-term management plan 'UNISOL' is considered desirable for the medium to long term. They also recognize that the current PBR (price-to-book ratio) remains below 1, and attribute this to the lack of market recognition for synergy realization efforts.

Based on this analysis of the current situation and to improve market evaluation, they aim to maintain a PBR above 1 in economic indicator targets, set ROE of 10% or higher, and have laid out a policy to enhance initiatives such as a 20 billion yen scale growth investment utilizing financial leverage, strengthening shareholder returns through agile share buybacks, and revitalizing trading transactions by attracting new individual shareholders.

(Authored by FISCO guest analyst Masanobu Mizuta)