Narel Group <9163> is mainly engaged in providing technician dispatch services for the construction industry, IT industry, and system engineering services. By segment, the construction solution business (dispatching construction management technicians, CAD technicians, etc. to general contractors and other construction companies) accounts for 89.5% of the third quarter revenue for the fiscal year ending October 2024, while the IT solution business (dispatching IT technicians for development projects and infrastructure management tasks for SIers, etc.) accounts for 10.5% of the same composition ratio.

The construction solution business provides technician dispatch services for the construction and plant industries, including construction management tasks, CAD operators, and subcontracting for construction drawing creation. It mainly focuses on receiving orders for areas such as architecture, civil engineering, HVAC, and electrical facilities, dispatching technicians to various fields in the construction industry. Recently involved in projects such as the TSMC Kumamoto factory construction, Tokyo Olympics-related facilities, linear and wind power generation, playing an important role in bridging between the contracting companies and onsite workers. The IT solution business, on the other hand, provides dispatch of IT technicians for development projects, infrastructure management tasks for SIers, and undertakes contracts via SES (System Engineering Services). Major end users include the communications and financial industries for development projects. Both businesses primarily focus on hiring inexperienced individuals.

The cumulative revenue for the third quarter of the fiscal year ending October 2024 reached 15,801 million yen, a 21.0% increase compared to the same period last year, with operating profit landing at 2,149 million yen, up by 17.7%. The strong demand for construction personnel has led to an increase in the number of employees and contract prices, with both the construction solution business and IT solution business performing well. The contract price in the construction solution business increased by 1,000 yen from the second quarter to 0.511 million yen, with 381 employees hired in the same quarter, showing a steady increase of 33 employees compared to the same period last year. The utilization rate is 93.7%, with a 0.8 percentage point improvement in the retirement rate to 28.5%. It is anticipated that the full-year revenue will increase by 21.3% to 21,830 million yen compared to the previous year, while the operating profit is expected to increase by 12.2% to 2,770 million yen.

The construction industry is facing challenges such as chronic labor shortages, aging technicians, and delayed digitization, despite a trend of market expansion, leading to sustained strong demand. In fact, there was an estimated shortage of about 63,000 construction technicians in 2022, indicating that the supply-demand gap of construction technical talent is likely to persist. In this context, the company already has a certain level of sales in the field of technician dispatch for the construction industry compared to its competitors. Particularly, boasting high growth and profitability in the technician dispatch industry with a sales growth rate of 21.8% and an operating profit margin of 13.7% from 2021 to 2023. The mechanism supporting Narel Group's high growth and high profitability lies in its recruitment strategy focusing on hiring inexperienced individuals and the potential for price increases. With an efficient recruitment system, the company has been able to increase its recruitment numbers at a CAGR of 17.6% from 2020 to 2023, reaching 3,236 employees as of the end of September 2024. Being able to supply stable young talent in the construction industry, the company has a demographic composition that allows for relatively easy price increases. By establishing a method for nurturing young talent and increasing the number of operational staff in the second year onwards, the contract prices have shown an upward trend over the past three years. The company aims to further expand its dispatch business, enhance its personnel introduction services, and is also considering expansion into mid-term construction ICT consulting. Internal training systems have already been established, and the company plans to educate construction ICT talent through internal education in the future. Additionally, planning for stable shareholder returns through dividend payments is in place, with a projected dividend payout ratio of 48% for the current fiscal year, and the dividend yield already exceeding 4.5%. Anticipating stable income gains through high growth and profitability in the future. Despite the expanding market and chronic labor shortage in the construction industry, the company stands out in terms of growth and profitability compared to its competitors, warranting close attention to its future developments.