■Long-Term Vision and Mid-Term Management Plan for SANWA TECHNOS＜8137＞

1. Long-term vision

Under the company motto “create people, start companies, and serve society,” the company group utilizes a global network to provide “the latest information,” “solutions that capture needs,” and “safe and secure services” to customers, and has contributed to the promotion of industries and the realization of a sustainable society through collaboration with partner companies. Since changes in the global social situation have been remarkable in the past few years, and the market environment has also changed drastically, the long-term vision “Sun-Wa Vision 2030” for the fiscal year ending 2031/3 and the 11th three-year medium-term management plan “SNS2024 (Sun-Wa New Stage 2024)” with the fiscal year ending 2023/3 as the first year were formulated (announced in 2022/5). The mission (mission and value of existence), vision (what the company group aims for), and value (values for fulfilling the mission and realizing the vision) in the long-term vision are as follows.

The mission is defined as “connecting technologies from around the world, creating new value, and supporting the creation of a rich society,” and we contribute to the development of a sustainable society by providing the latest technology proposals and optimal products by utilizing a global network. Also, as a vision, they set out to aim to be “the best partner in manufacturing that changes “what you want to do” to “what you can do.”

Regarding values (values) for fulfilling missions and realizing visions, the three points of “customer orientation,” “challenge spirit,” and “teamwork and communication” are listed. In “customer orientation,” we always think about things from the customer's perspective, capture true customer needs by sharing values, and do our best as the best understanding person. In the “spirit of challenge,” we set high goals for our own growth, enhance creativity and expertise by taking on positive challenges without fear of change, and aim to improve corporate vitality. Also, in “teamwork and communication,” we create new value by respecting others, understanding differences, and acknowledging their value. Also, it is said that comprehensive strength will be demonstrated by valuing partner companies.

It is expected that the fiscal year ending 2026/3 and beyond will enter the profit expansion stage due to the execution of business strategies and growth strategies

2. Progress of the medium-term management plan “SNS2024 (Sun-Wa New Stage 2024)”

(1) Numerical management targets and progress

In the three-year medium-term management plan “SNS2024,” which started from the 2023/3 fiscal year, the most important management index was set from “sales” to “operating profit,” and a target of 7 billion yen was set for the fiscal year ending 2025/3, which is the final year, and at the same time, efforts were made to improve corporate value, and the goal was to achieve PBR 1.0 times or more at an early stage. However, due to the effects of global economic deceleration due to inflation, review of capital investment, etc., the operating profit plan for the fiscal year ending 2025/3 is 3.08 billion yen, which is expected to fall below the initial target of 7 billion yen. As for companies whose main battleground is the industrial electronics field, it is unavoidable that a cycle of good or bad business results will occur because they are strongly affected by corporate capital investment movements, but since the 2025/3 fiscal year overlapped with a period of poor external environment, it can be said that the divergence with the initial target increased.

In fact, when viewed as a cumulative total of 3 periods from the fiscal year ending 2023/3, operating profit is expected to earn 16.8 billion yen, a level close to the initial target of 18 billion yen. Also, when viewed in comparison with the 3-period cumulative total from the fiscal year ending 2020/3 to the fiscal year ending 2022/3, operating profit margin also rose 1.9 times, and the operating profit margin also rose from 2.1% to 3.4%, etc., and when viewed as a medium-term trend, the profit scale is expected to expand, and profitability is also expected to improve, and we are evaluating that some effects of the business strategies and growth strategies that the company has been working on since the 2023/3 fiscal year have begun to appear.

(2) Strategic policy and progress

As a basic policy to be tackled with “SNS2024,” the company has set three points: a) focusing on growth fields where innovation is required, b) providing products with higher added value and new solutions, and c) contributing to the realization of a sustainable society through sustainability management. Among these, with regard to focusing on growth fields where innovation is required, the customer segment is divided into “fields where active resources are invested (semiconductor manufacturing equipment, robot mounters, machine tools),” “fields where selective resources are injected (FA equipment, vehicles, equipment),” and “other fields,” and “other fields,” using the company's strengths and market attractiveness (market size, growth rate, profit margin) as both axes, and formulating and implementing business strategies for each customer segment where resources are invested It is a strategy to expand total profit and strengthen profitability.

When the composition ratio of gross profit (standalone, domestic business) for the fiscal year ending 2024/3 is divided by field, the FA equipment and automotive fields are the highest at 24% each, followed by the semiconductor manufacturing equipment field at 10%, the robot mount field at 8%, the equipment field at 5%, and the machine tool field at 3%. The company has set profit growth rates in these fields at an annual rate of 10% or more (15% or more for semiconductor manufacturing equipment only) as a three-year target, and has been working to achieve the target. Progress up to the second quarter (interim period) of the fiscal year ending 2025/3 is on schedule at 9.8% for the machine tool sector, but for other fields, the pace is below target due to deterioration in the market environment. In particular, the robot mount field is significantly lower, with an 18.1% decrease, but the deterioration of the market environment in the chip mounter industry and associated component inventory adjustments are factors. However, it seems that inventory levels of parts at major customers have returned to an appropriate level, and it is expected that orders will also begin to recover due to movements in line with actual demand from the second half onwards. Although there is still a strong sense of uncertainty in terms of overall business confidence, it is expected that it will regain vitality after 2025, mainly in the FA field.

Looking at the results of efforts for the 2nd quarter (interim period) of the fiscal year ending 2025/3 by customer segment, in the semiconductor manufacturing equipment field among the fields that actively invest resources, in addition to acquiring joint development themes with major Japanese manufacturers, contacts with major American manufacturers also proceeded. Furthermore, in order to explore the possibility of utilizing the same technology in surface treatment and inspection processes for cutting-edge semiconductors, a capital and business alliance was formed with Logic & Design, which has high-performance image processing technology. The development of manufacturing technology for cutting-edge semiconductors is being strengthened as a national policy, and it is expected that if the same technology is adopted, the company's growth potential in the semiconductor manufacturing equipment industry will increase even further. Regarding the robot mount field, business negotiations were obtained through cooperation with the semiconductor manufacturing equipment segment. Specifically, business negotiations on components for new product development with major foreign manufacturers of semiconductor assembly equipment are progressing. In the machine tool field, we worked to obtain business negotiations through proposals for process intensification, automation, and energy saving equipment, and to discover functional themes required by customers for the in-house package product “AR^2 System (AR^2 System)” developed in collaboration with Mtech.

Among the fields where selective resources are invested, in the FA equipment field, in addition to obtaining business negotiations by proposing supplier seeds in order to further capture Japanese global companies, overseas regional strategies were formulated and activities to capture excellent foreign customers were promoted. Regarding the automotive field, development and transaction expansion other than the main Tier 1 customers progressed under the themes of ADAS and electrification. There are many business negotiations related to ADAS, electrification, and connectivity, and it is a field where steady growth can be expected in the future. Regarding the equipment field, business negotiations on the robot solution package “AR^2 System,” developed in collaboration with Yaskawa Electric robots and Mtech, which sells sets, have increased mainly for the automobile-related industry. The advantage of this solution is that detailed robot setting work during type switching can be easily performed in robotic production lines, and introduction effects can be expected even in production lines for multi-product small-lot production where it was difficult to introduce robots in the past. Other companies also provide solutions with similar concepts, but it seems that the strength of the company's technology is that it can be controlled with high accuracy.

(Author: FISCO Visiting Analyst Joe Sato)