■ Company Overview of Elecomatech <2715>

2. Features and Strengths

(1) Abundant Commodities and Strong Customer Base

The company's primary feature is its multitude of trading partners and commodities. The number of suppliers reaches approximately 7,000 (manufacturers), while about 6,000 sales partners (users) engage in transactions focused primarily on electronic materials and electronic components. Although individual suppliers and sales partners are not disclosed, the top 10 sales partners account for about 40% of revenue (for the fiscal year ending March 2024). The diversification of suppliers, sales partners, and handled commodities allows for stable growth that is less significantly influenced by specific customer or product trends.

(2) Proposal Power and Manufacturing Capability (Locations)

Due to having numerous customers, the company receives many requests from them. On the other hand, having handled many commodities over many years has allowed the company to thoroughly understand the characteristics and properties of various commodities. By combining this knowledge with past know-how, the company responds to customer requests. The ability to anticipate customer needs and propose solutions itself is a strength that allows the company to pursue not only passive business development but also active business development.

Furthermore, in the case of this company, it has a manufacturing division (1 domestic factory, 2 overseas factories, and numerous manufacturing contractors), so it can offer not just parts but also module products, custom products, and semi-finished products based on customer requests. In a sense, for customers, it is a 'convenient and accommodating vendor', and this fact enables many customers to continue business with the company for many years, which is also a point of strength for the company.

(3) Three-Dimensional Revenue Structure

In the case of a Common Index electronics trading company, it is important to have customers (X-axis) and commodities (Y-axis) as key elements for revenue expansion, resulting in a flat revenue structure. In the case of this company, it can be said that with the addition of a third axis (Z-axis) element such as planning (proposal), manufacturing, and quality control, the revenue structure becomes three-dimensional.

Especially in recent years, not only has the company strengthened its trading functions, but also its planning and proposal capabilities have improved, making the Z-axis higher (thicker). Compared to a typical building, it is similar to a tall building having a stronger structure that is less likely to collapse, making the company's revenue structure strong and not easily broken. This three-dimensional revenue structure is also a characteristic and strength of the company.

3. Main Services and Functions

The company offers not only basic services and functions as an electronics trading company, such as supplying optimal components, providing credit and finance, and managing delivery and inventory, but also higher-level, value-added services and functions like planning, development, and manufacturing services. The company cites the following five services and functions as its features, which enable it to connect diverse commodities to Business and translate them into performance.

(1) Planning and Development / Design

The sales department, development department, and technical department collaborate to plan, develop, and design new parts and units.

(2) Procurement Agency Service

Acting as an agent to procure the optimal components for the quality, cost, and delivery times requested by customers.

(3) Manufacturing Services

Utilizing its own factories and high-quality external contractors both domestically and overseas, customized products, module products, and finished products (ODM) are offered.

(4) Quality and Environmental Management

In order to deliver high-quality products, an advanced quality control system has been established.

(5) Overseas Network

Using a worldwide network, smooth Global Logistics has been realized.

The company maintains a relatively high gross profit margin by adding high-value-added services and functions to simple trading company functions. It is expected that the company's gross profit margin will further improve through the utilization of these five services and functions in the future.

With a structure that can ride on growth areas, revenue growth is maintained.

4. Long-term Performance Trends

Looking back at the company's long-term performance trends, it can be said that while being in the volatile electronics industry, it has achieved stable growth by overcoming the waves of economic cycles and product cycles. In the early 2000s, the company grew with mobile phone-related products, focusing on materials such as FPC (flexible printed circuits), substrate mounting, optical films, and so on. With these products, the revenue first exceeded 100 billion yen in the fiscal year ending March 2008. Subsequently, due to the transition to terrestrial digital broadcasts for televisions, components related to LCD televisions became a significant business. Moreover, from 2010 onwards, with the rapid growth of Smart Phones and tablets, the company sold various films and Glass and quickly recovered from the Lehman shock, achieving continuous updates of record profits, and in the fiscal year ending March 2016, revenue first surpassed 200 billion yen. In recent years, the business has reached a plateau due to the maturation of the Smart Phone market, but by strengthening planning and proposal abilities, such as selling drive recorders as ODM products, the company has maintained growth, achieving a record-high revenue of 239.7 billion yen in the fiscal year ending March 2023. Furthermore, the next growth market for the company is gradually shifting towards Automobiles and Overseas markets. It is expected that the company's business opportunities will expand further, as it not only has numerous trading partners and diverse commodities but also possesses proposal and manufacturing capabilities.

Thus, the company has maintained growth by providing appropriate components and products according to the market and situation at the time. This can be described as a "market-sensitive strategy," but in reality, the company’s strength and characteristic lie in its ability to "ride the winning horse." The company is capable of sustainable growth because it has a broad customer base, numerous commodities, and development capabilities, allowing it to "be able to ride on growth fields," which is not something that any company can achieve.

(Written by FISCO guest analyst Noboru Terashima)