■ Long-term Growth Strategy

Laboro.AI＜5586＞ has not announced any mid-term management plans, among others. However, as described below, the market environment is expected to remain stable, and the company plans to strengthen its professional human resource system to receive and execute projects from clients for growth.

1. Market Environment: Financial Estimates of the Value-Added AI Theme Market

According to the company's explanatory materials, the domestic AI business market size is expected to grow from 1.1 trillion yen in 2021 to 1.7 trillion yen in 2025 (a 54.5% increase), and the AI construction services market is expected to grow from 500 billion yen to 800 billion yen (a 60% increase).

In addition, the company states that "the ratio of the value-added type theme and the revenue business type (maintaining and operating current business) in the AI construction services market is generally in line with the budget allocation ratio of IT investments, and in the future, the increasing intent of each company to allocate more budget for value-added initiatives will reflect in an increased ratio of the value-added type. It is expected that in 2021, there was a scale of approximately 140 billion yen, constituting 24% of the AI construction services market, and this is anticipated to expand to approximately 280 billion yen, constituting 33%, by 2025."

2. The Market of the "Value-Added AI Theme"

(1) The "Value-Added AI Theme" targeted by the company

The AI development theme aimed at corporate growth through new business initiatives such as the creation of new products and services or business model transformation is defined as the "Value-Added AI Theme" and is a focus area.

(2) Focus Industry Sectors

The company will continue to focus on the following two industry sectors as a means to develop the value-added AI theme market.

(Research and Development Industry)

Aiming to create innovative products and services through research and development in sectors such as Manufacturing. Achievements include working with chemical and material manufacturers (exploration of new materials, development of new manufacturing methods, searching and summarizing research papers), and semiconductor manufacturing equipment manufacturers (new development of equipment and production lines incorporating AI).

(Social Infrastructure and Consumer Industry)

A field that directly provides products and services to consumers and supports social infrastructure. Achievements include food manufacturers (development of personal meal proposal services), pharmaceutical manufacturers (development of a personalized medical support platform utilizing personal health record data), and consumer goods manufacturers (development of 1-to-1 marketing services using dialogue AI).

3. Future growth strategy

(1) First Stage: Building a Foundation for Growth (up to FY 2024 September)

The following measures were implemented.

a) Stable expansion of the customer base

・Deepening existing customers

・Acquisition of new customers

b) Development of solutions

・Promotion of sales expansion for existing VD GAINIANBANKUAI

・Uncovering new VD GAINIANBANKUAI

c) Development of a system to support growth

Accelerating the recruitment of solution designers and machine learning engineers.

Establishing and strengthening a development system for new members to quickly launch and thrive.

Improving the environment for talent to work sustainably and with high engagement.

Considering the challenges in system formation that emerged in the fiscal year ending September 2024, the focus for the fiscal year ending September 2025 will be on system improvement as one of the most important agendas for management.

(2) Second phase: Establishment of custom AI business and exploration of non-linear growth opportunities (from the fiscal year ending September 2025 onwards).

The following measures will be implemented.

Stable earnings growth at a pace that exceeds market growth through a virtuous cycle of VM/VD.

Co-creating new business value of AI with industry-leading companies (VM).

Accumulation of know-how obtained through VM and solution development.

Expansion of customer base through solution 'deployment' to other companies including different industries (VD).

(3) Third stage: Establishment of a new business model for further expansion (long-term).

Consideration of infiltration into new areas for discontinuous growth.

Entry into custom AI and complementary areas (e.g., system development).

Consideration of utilizing inorganic methods for the above.

Shareholder return strategy: No. 1<3562> changed its shareholder return policy along with the publication of the new mid-term management plan "Evolution 2027" and showed the direction of significantly strengthening shareholder return. So far, we have aimed for stable dividends (30% dividend payout ratio as a guide), but in the future, we plan to implement stable and continuous shareholder dividends based on a policy of aiming for a 30% dividend payout ratio, regardless of changes in annual performance. A notable feature is that we have set a minimum dividend of the previous year's annual dividend per share and will continue to increase dividends, which is a significant enhancement of shareholder return and can also be evaluated as a expression of confidence in profit growth. Moreover, we have a policy of "flexibly implementing under financial discipline" for acquiring our own shares, showing a more proactive stance.* *Considering the gap between our own perception of the stock price and the market evaluation, ROE, capital efficiency, and CF level, we have a policy of implementing it flexibly. Dividends for the fiscal year ending February 2024 will increase by 1 yen from the previous year, as expected at the beginning of the period, to 33 yen per share (mid-term dividend of 16.5 yen and year-end dividend of 16.5 yen). We also acquired 340,000 shares of our own stock (with a purchase price of 397 million yen). Despite the anticipated decline in profits for the fiscal year ending February 2025, we are expected to follow the policy of increasing dividends every period and issue a dividend of 1 yen per share (a commemorative dividend for the 35th anniversary of our founding), with an expected increase of 2 yen from the previous year to 35 yen per share (mid-term dividend of 17.5 yen and year-end dividend of 17.5 yen).

Currently prioritizing investment for the future, with no dividends issued.

The company plans to distribute dividends as a shareholder return strategy, but currently prioritizes internal reserves and preliminary investments as the business is still in a growth phase, thus no dividends are being issued.

(Written by FISCO guest analyst Noboru Terashima)