The Narrell Group ＜9163＞ is mainly working on dispatching engineers for the construction industry and providing engineer dispatching/system engineering services for the IT industry. By segment, the construction solution business (temporary dispatch of construction management engineers, CAD engineers, etc. to construction companies such as general contractors) accounts for 89.5% of sales for the 3rd quarter of the fiscal year ending 2024/10, and the same composition ratio of the IT solution business (temporary staffing for development projects such as SIers, etc., and infrastructure management work, etc.) accounts for 10.5%.

The construction solutions business is aimed at the construction/plant industry, carrying out construction management work, dispatching engineers such as CAD operators, etc., and also performs contract work for preparing construction drawings. Mainly, we receive orders for construction, civil engineering, air conditioning, sanitation, and electrical equipment, and dispatch engineers to various areas of the construction industry. Recently, they have been involved in TSMC Kumamoto Plant construction, Tokyo Olympics-related facilities, linear wind power generation, etc., and play an important role in connecting construction companies that are clients and craftsmen who are field workers. In addition, the IT solution business is outsourcing IT engineers, etc. through temporary staffing of IT engineers, etc. and SES (system engineering service) contracts for development projects and infrastructure management tasks such as SIers. Development projects for the telecommunications industry and the financial industry can be cited as the main end users. Both businesses focus on hiring inexperienced people in terms of recruitment.

Cumulative sales revenue for the 3rd quarter of the fiscal year ending 2024/10 reached 15801 million yen, up 21.0% from the same period last year, and operating profit reached 2149 million yen, up 17.7% from the same period last year. The number of people enrolled and contract unit prices have increased due to strong demand for construction personnel, and both the construction solution business and IT solution business are doing well. The contract unit price in the construction solutions business increased 1,000 yen from the second quarter to 0.511 million yen, and the number of people employed in the same quarter was 381, a steady increase of 33 compared to the same period last year. Also, the occupancy rate is 93.7%, and the retirement rate improved by 0.8 points to 28.5%. Full-year sales revenue is expected to increase 21.3% from the previous fiscal year to 21830 million yen, and operating profit is expected to increase 12.2% to 2770 million yen.

While the market size is expanding, the construction industry faces issues such as chronic shortage of human resources, aging engineers, and delays in DX conversion, and strong demand continues. In fact, it seems that there was a shortage of about 0.063 million construction engineer dispatch demand in 2022, and it is expected that the supply-demand gap for construction engineer personnel will not be filled in the future. Under these circumstances, the company already has a fixed sales scale in the field of engineer dispatch for the construction industry, even when compared to competitors, and among them, it boasts high growth potential and profitability among engineer dispatch companies, with a sales growth rate of 21.8% and an operating profit margin of 13.7% from 2021 to 2023. The structure of the Narrell Group, which supports high growth and high profits, lies in “recruitment power” and “room for unit price improvement” based on a recruitment strategy for inexperienced people. The number of hires has been increased with an average annual growth rate CAGR of 17.6% from 2020 to 2023 due to an efficient recruitment system, and the number of people enrolled as of the end of 2024/9 has reached 3,236 people. Also, since stable supply of young human resources, which are particularly lacking in the construction industry, is possible, it is structurally an age structure where it is easy to raise contract unit prices. Since training methods for young human resources were established and the number of workers increased after the 2nd year, contract unit prices for the past 3 years have been on an upward trend. In the future, further expansion of the temporary staffing business and expansion into recruitment services will be strengthened, and it seems that expansion into construction ICT consulting is also anticipated in the medium term. It seems that an in-house training system has already been established, and it is said that construction ICT human resources will be educated through in-house education in the future. Furthermore, shareholder returns through stable dividends are planned, and the dividend payout ratio is expected to be 48% this fiscal year, and the dividend yield has already exceeded 4.5%. It seems that stable income gains can be anticipated due to high growth and high profits in the future. Even as the market size expands, I would like to keep a close eye on future trends of the company, which has top growth potential and profitability even when compared to competitors, in the construction industry, where there is a chronic labor shortage.