Hirayama Research Memo (1): Expected to continue double-digit annual sales and profit growth, driven by the return of domestic production in the manufacturing industry | Reuters

*16:01 JST Hirayama Research Memo (1): Prospects for continuous double-digit annual sales and profit growth driven by manufacturing industry returning to domestic production
■Summary

Hirayama Holdings7781is a manufacturing support company that supports manufacturing (manufacturing industry) in Japan. The company continues to grow by cultivating new customers with a hook of consulting services that lead to improvements in manufacturing sites. In July 2018, FUN to FUN Co., Ltd., a company in the same industry, became a subsidiary, and in December of the same year, Heiwa Iron Works Co., Ltd. and in June 2019, Daimatsu Motor Co., Ltd. (currently Daimatsu Services Co., Ltd.) became a subsidiary. The company is expanding its business base through aggressive M&A strategies such as

1. Performance overview for the fiscal year ending June 2022
In the consolidated results for FY06/22, sales increased 21.4% YoY to ¥27,978 million, and operating profit increased 30.0% YoY to ¥692 million, showing significant increases in both sales and profits. Net sales in the mainstay Insourcing and Temporary Staffing business grew by 19.8% year on year, thanks to the development of new customers and the acquisition of orders for dispatch projects at high unit prices, while sales of the Engineer Temporary Staffing business rose 23.4% year on year. All business segments posted double-digit sales growth, with sales of the overseas business up 39.9% year-on-year. In terms of profits, there was an increase in hiring-related expenses and advertising expenses to increase personnel, and there was an opportunity loss due to the temporary suspension of operations at customers’ plants due to a shortage of semiconductors. absorbed by In the insourcing and temporary staffing business, sales by customer industry increased in almost all industries, and sales to the auto parts industry in particular grew 1.6 times year on year due to the expansion of the scale of transactions with new customers.

2. Earnings forecast for the fiscal year ending June 2023
Consolidated results for FY06/23 are expected to continue increasing sales and profits, with sales of JPY32.0bn (+14.4% YoY) and operating profit of JPY900mn (+30.0% YoY). While uncertainty about the future of the economy is increasing, manufacturing industries are beginning to return to Japan as the yen depreciates. Therefore, the busy situation is expected to continue at least until the second quarter. In terms of sales by business segment, the Insourcing and Temporary Staffing business, centered on the automotive parts and medical equipment industries, increased 15.9% year on year, the Engineer Temporary Staffing business increased 21.5% year on year, and the Others business increased 36.4% year on year. Outlook. As for the overseas business, due to the uncertain market environment, sales are expected to decrease by 15.7% year-on-year, which is a conservative forecast. In terms of profits, although we expect to continue to see an increase in personnel recruitment-related costs, this will be absorbed by the effect of increased sales. In other businesses, the deregulation of immigration restrictions on foreigners will lead to growth in foreign worker acceptance and management services, and a recovery in consulting services, such as manufacturing site study tours for foreigners, will lead to higher sales and profits.

3. Progress of medium-term management plan
The company aims to achieve sales of JPY40.0bn and an operating profit margin of 4% in FY06/24 as its medium-term management targets. Regarding the growth strategy, we will 1) create high-value-added services by integrating new businesses (IoT/AI solutions at production sites, facility maintenance/maintenance) and existing businesses, and 2) recruit high-value-added human resources as we expand the field of engineer dispatch. Training and recruitment of diverse human resources, 3) Deployment of acceptance and management contract services for foreign workers in all occupations, 4) Horizontal development of domestic human resources business packages (temporary staffing/manufacturing contracting, improvement consulting, human resource education) (Thailand) 5) Expand customer base in the service business (retail, logistics, nursing care, etc.). With the depreciation of the yen, the manufacturing industry is increasingly moving back to Japan, and the company, which has strengths in supporting the start-up of new factories and the ability to recruit and train workers, believes it will be a good opportunity to further expand its business. We are watching. In addition, the company plans to horizontally deploy know-how on site improvement to non-manufacturing fields such as retail and logistics, and to focus on expanding the dispatch of field engineers, for which demand is increasing. In addition, high growth is expected in the future for foreign worker acceptance management contract services. It is said that there will be a labor shortage of about 6.4 million people in Japan in 2030, and employment of foreign workers is expected to expand. The company’s growth potential is increasing due to changes in the market structure, and if it can respond appropriately to this increase in demand, at FISCO we think it will be possible to continue to achieve double-digit annual growth going forward.

■ Key Points
・In the fiscal year ending June 2022, sales, operating income, and ordinary income will increase by double digits, reaching record highs
・ Demand for human resources services remains strong, and double-digit increases in sales and profits are expected to continue in the fiscal year ending June 2023.
・Aiming for double-digit annual growth with strengths in on-site improvement consulting and human resource recruitment and training capabilities, including foreign technical intern trainees

(Written by FISCO Visiting Analyst Yuzuru Sato)

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