■Summary

Sanei Corporation <8119> has a history of 78 years and is a multifunctional trading company that mainly handles high value-added products. It deals with a wide range of household products and operates a comprehensive supply chain from manufacturing, import and export, wholesale to retail. The company has 17 bases overseas and 29 directly managed retail stores in Japan. Its uniqueness is clearly defined in handling high value-added products, such as the introduction of European brands to Japan and the OEM supply of products represented by Ryohin Keikaku <7453>. The revenue ratio is approximately 70% from OEM business and about 30% from brand business. The main segments of the business are the Furniture and Household Products business (45.2% of sales for the half-year ending March 2024), the Apparel Accessories business (42.6% of sales for the same period), and the Electrical Appliances business (7.9% of sales for the same period).

1. Overview of the 2025 Fiscal Year First Half Results

In the second quarter of the fiscal year ending March 2025 (hereinafter referred to as the half-year period), the consolidated performance showed significant increases, with revenue of 20,900 million yen (up 22.6% year-on-year), operating profit of 1,328 million yen (up 189.5% year-on-year), ordinary profit of 1,217 million yen (up 117.4% year-on-year), and net profit attributable to parent company shareholders of 1,018 million yen (up 99.7% year-on-year). In terms of revenue, the Apparel Accessories and Furniture and Household Products businesses drove the overall company to double-digit revenue growth. In the Apparel Accessories business, demand grew for outing, travel, and inbound-related products due to the recovery of these demands, and new initiatives such as sustainable products also contributed to revenue growth. In the Furniture and Household Products business, despite the economic downturn in Europe and China, OEM was generally on a recovery trend, and E-Commerce contributed significantly to revenue growth. The increase in gross profit due to revenue growth, along with cost-cutting measures from subsidiary dissolutions and a reduction in the number of stores, was effective. Operating profit increased by 869 million yen to 1,328 million yen, and ordinary profit increased by 657 million yen to 1,217 million yen, achieving a significant increase in profit. Given that the ordinary profit forecast at the beginning of the period was 500 million yen, the actual results showed an approximate 2.4 times increase in the half-year.

2. Performance Outlook for the Fiscal Year Ending March 2025

The consolidated performance for the fiscal year ending March 2025 expects revenue to increase by 6.3% year-on-year to 39,000 million yen and ordinary profit to increase by 20.2% year-on-year to 1,500 million yen, indicating growth in both revenue and profit. The fiscal year ending March 2025 is the second year of the new mid-term management strategy "SANYEI 2025," positioned as a year to solidify the foundation toward achieving an ordinary profit of 2 billion yen in the final year, with an increase in growth investments. In terms of revenue, the Furniture and Household Products business is expected to see growth through the expansion of the EC business, which is the growth driver of the mid-term management strategy, and through orders from new clients, which is a key initiative. In the Apparel Accessories business, robust demand for outings and inbound is expected to continue, along with the growth of environmentally related commodities. However, in the Electrical Appliances business, a decrease in overseas OEM is anticipated, leading to a forecasted decline in revenue. The revenue progress rate for the half-year period is 53.6%. On the profit side, an increase in revenue, coupled with progress in structural reforms during the first half of the year, has led to a favorable upward revision. The ordinary profit progress rate during the half-year period reached a high level of 81.2%. In the latter half of the year, external factors such as inbound consumption, including domestic personal consumption, are expected to remain strong, and the business environment for travel, apparel accessories, beauty and grooming products, and environmentally related products, which the company excels in, is also expected to be favorable. Regarding internal factors, the company is in the finishing stages of structural reforms and business restructuring carried out since the past, and proactive investments to further enhance profitability will be made in the latter half.

3. Growth Strategy

The company launched the "Our EARTH Project" in September 2019, with the concept of being "more earth-friendly," engaging in activities such as importing and selling overseas brand products related to "sustainable" and "ethical," developing its own brands, and providing materials for manufacturing. The handled brands exceed 10, including "uF (you ef)," which uses recycled materials for bags and pouches, and "YOT WATCH," a watch made from toy waste, as well as the fabric brand "e.dye (R)" which utilizes waterless dyeing technology and the "heat shield sheet" that is a heat prevention product used in roofs and walls to reduce heat intrusion from the sun, among many other rapidly growing products and materials. In October 2024, "uF" received the 2024 Good Design Best 100 award. The high evaluation was given not just for its design and convenience but also for utilizing "e.dye" dyed fabric, reducing and visualizing CO2 emissions (verifiable via QR code).

4. Shareholder return policy

The company revised its policy on the distribution of surplus funds and dividends in May 2024. Under the new policy, appropriate profit returns to Shareholders, who are connected to the company based on the corporate philosophy of "the thoughts of flowing fortune," are positioned as one of the important management issues. Regarding dividends, the basic approach is to implement mid-term and end-of-term dividends twice a year, aiming for a payout ratio of 30-50%. Currently, the company is gaining confidence in profit generation, and with the possibility of an increase in the payout ratio due to the new policy, an increase in the rate of dividend growth can be expected.

In order to create an investment-friendly environment and expand the investor base, the company conducted a Stock Splits at a ratio of 4 shares for every ordinary share, effective October 1, 2024. The dividend for the fiscal year ending in March 2025 is expected to be 29.0 yen annually (10.0 yen for the interim and 19.0 yen for the end term, marking an increase of 19.0 yen from the previous fiscal year) significantly up from the initial forecast of 20.0 yen per year (the amount before the Stock Splits is converted to post-split figures). A payout ratio of 30.5% is anticipated.

■Key Points

The mid-term period for the fiscal year ending March 2025 is expected to show significant increases in both revenue and profit due to the demand for outdoor activities, leading to a surge in related products. The structural reform has contributed to a decrease in selling, general and administrative expenses.

For the fiscal year ending March 2025, a revenue of 39 billion yen and an ordinary profit of 1.5 billion yen (upward revision in July) are predicted. In the second half of the year, investments to solidify the groundwork toward the final year of the medium-term management plan will be actively pursued.

The presence of the E-Commerce business and sustainable business, which are focused growth drivers, is increasing.

A Stock Splits has been implemented. The annual dividend for the fiscal year ending March 2025 is planned to be 29.0 yen, an increase of 9.0 yen compared to the previous year, with a payout ratio of 30.5% expected.

(Written by FISCO Guest Analyst, Hideo Kakuta)