BRIDGE REPORT
(4248)

東証1部

Takemoto Yohki Co., Ltd. (4248)
Emiko Takemoto, President
Emiko Takemoto, President
Corporate Profile
Company
Takemoto Yohki Co., Ltd.
Stock Code
4248
Exchange
Second Section, TSE
Industry
Chemical (Manufacturing)
President
Emiko Takemoto
HQ Address
2-21-5 Matsugaya, Taito-ku, Tokyo
Year-end
End December
URL
Stock Information
Share Price Shares Outstanding Market Cap. ROE (actual) Trading Unit
¥1,710 5,682,160 shares ¥9.716 billion 14.5% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (actual) PBR (actual)
¥32.00 1.9% ¥153.16 11.2x ¥1,054.36 1.6x
* Stock price as of closing on March 17, 2017. Number of shares at the end of the most recent quarter excluding treasury shares.
ROE and BPS are from the end of the recent fiscal year.
 
Earnings Trends
Fiscal Year Sales Operating Profit Current Profit Net Profit EPS(¥) Dividend(¥)
FY12/12 9,654 632 658 434 84.79 4.00
FY12/13 10,017 757 813 592 115.56 5.00
FY12/14 11,062 877 879 581 112.97 19.00
FY12/15 12,221 1,250 1,275 827 145.65 28.00
FY12/16 12,799 1,259 1,279 836 147.30 30.00
FY12/17 Est. 13,218 1,252 1,264 870 153.16 32.00
* Estimates are those of the Company. A 10 for 1 stock split was performed on September 12, 2014 and EPS and dividends have been retroactively adjusted to reflect this split.
We present this Bridge Report reviewing the fiscal year December 2016 business performance of Takemoto Yohki Co., Ltd.
 
Key Points
 
 
Company Overview
 
Takemoto Yohki Co., Ltd. plans and designs "Standard Bottles." A "Standard Bottle" is a term to refer to a packaging container when it is planned and designed in-house and, at the same time, when a mold necessary for manufacturing this packaging container is also owned in-house. Takemoto Yohki's primary customers for standard bottles are companies in the fields of cosmetics and beauty, general and health foods, sundries, and chemical and pharmaceuticals. Takemoto boasted of 3,065 molds for various packaging containers as of the end of December 2016. Amongst the unique characteristics of the Company are its high proposal-based marketing capabilities, bountiful stock, wide range of customers, and ability to provide a wide variety of products on a small lot basis in short delivery times. The Company is actively operating business overseas as well. Two subsidiaries are operated in China and one in the United States, Netherland, Thailand and India.
 
<Corporate History>
Shigeru Takemoto (Grandfather of the current President Emiko Takemoto) started his business under the name of Takemoto Shoten in 1950, amidst the shortages of goods in the post World War II era, for the recycling of glass products. In 1953, Mr. Takemoto converted his business into a limited company and renamed it Takemoto Yohki Co., Ltd. and began manufacturing glass containers. In 1963, Takemoto started dealing in its signature brand "Standard Bottles."

A regional sales office was opened in Osaka in 1980. Masahide Takemoto (Currently advisor to the Company and the father of Emiko Takemoto) took the helm of the Company and explored new markets in the Kansai region, where its main sales had been limited to "custom made" products, with bottle dealers and accessory dealers being separated. In its efforts, the Company leveraged both the "Standard Bottles" and "one stop product provision." The wide range of products allowed the Company to capture demand from customers and expand its sales channels. After the expansion into the Osaka region, a groundbreaking feat back then, the Company further expanded into Fukuoka, Sapporo, and Nagoya regions, and succeeded in building its nationwide sales and service coverage network.

1984: As a means of strengthening its competitive capabilities, Takemoto added the manufacturing function in addition to its trading firm capability, and started plastic container processing and printing along with the opening of the Yoshikawa Plant (Yoshikawa City, Saitama Prefecture).
1996: Takemoto led the industry by creating a manufacturing and sales subsidiary in China as the starting point of its global strategy.
2004: Emiko Takemoto was appointed as representative director and president of the Company. The Company is continuing its efforts in increasing its share of the Japanese market and cultivating overseas markets.
12/2014: Takemoto Yohki Co., Ltd. listed its shares on the Second Section of the Tokyo Stock Exchange.
 
 
The dream of the company founder of conducting business in China, the birthplace of container culture, through collaborative partnerships with local companies came to fruition with the launch of business there in 1996. The current president Emiko Takemoto also places a high emphasis upon instilling and diffusing both the corporate philosophy and mission in employees through training and various other occasions.
 
<Market Environment>
As demonstrated in the graph shown below, the market value of the shipments of packaging containers has trended sideways in recent years, and the outlook for declines in the Japanese population is expected to limit any increases in demand within Japan in the future.
 
 
Having said that, demand for the Company's "Standard Bottles" is expected to keep growing due to the following circumstances:
 
Maturing of the consumer market, diversification of consumer tastes and expansion in sales over the Internet have contributed to a shortening of the product lifecycle, signaling the end of the era of "mass production, mass sales" and the start of the era of "high-mix low-volume production."
Furthermore, Takemoto's customers, namely cosmetics and toiletries manufacturers, are undergoing trends that call for "shorter product development periods" and "cost reductions."
Consequently, customers confronted by these trends are expected to rely less on in-house packaging container development and more on Standard Bottle products, which can be procured both on time and in the required volumes.
 
At the same time, companies' shares of the ¥155.8 billion cosmetics and toiletry container market in 2008 were as follows:
 
 
The custom bottle segment of the market, where customers own the rights to and bear the cost of metal molds, is estimated to account for 70% to 80% of the total market, with generic bottle accounting for the remaining 20% to 30% of total market. Furthermore, Takemoto Yohki estimates that its Standard Bottle brand of generic bottles account for about 20% of the total generic bottle segment of the market.

Despite the saturation of the packaging and container market, Takemoto's small share suggests that its potential expansion in the market share is quite large.

In addition, because standard bottles which require mold investments need continual investments, strong financial capabilities are required. In this aspect, Takemoto Yohki, the only listed company in its industry, holds a major advantage.

In this manner, they are aiming to increase their market share competitively upwards and downwards and it is assumed that their current market share definitely surging upwards, even more so than their 4.2% in 2008, as shown above.
 
◎ A growing overseas market
The cosmetics market in developing nations, primarily in Asia, is rapidly growing.
In five years, the Chinese market has grown in scale by 50%. It is predicted to exceed that of Japan's by 2017 and India along with other ASEAN countries are expected to experience a high rate of growth as well.
There is a high level of trust for Japanese-made bottles in developing countries which in itself has huge potential for business.
 
<Business Description>
Takemoto Yohki Co., Ltd. manufactures and sells containers and accessories such as caps and dispensers, for use by customers in the cosmetics and beauty, general and health foods, sundries, and chemical and pharmaceuticals industries. The Company does not manufacture mere containers to hold substances; it primarily creates high value-added products while paying close attention to design, function, barriers, safety and environmental issues.
 
 
 
 
◎ Business Model
When a cosmetics and toiletry product manufacturer customer commissions a container manufacturer to produce a unique and differentiated type of containers, in most cases the container manufacturer is responsible for design and manufacture of custom-made products while the customer shoulders the cost of creating molds. The time and cost of creating molds, however, is usually a heavy burden when sourcing containers because they take as long as three months and as much as several million yen.

In contrast to the above, Takemoto Yohki creates molds in-house on behalf of the customer. Having allowed the customer to choose molds of its preference from a wide range of products, Takemoto manufactures and delivers the products. Therefore, the delivery time and development costs of packaging containers are reduced and customers can purchase only the required amount of containers as needed at the time. In this manner, Takemoto Yohki is able to plan and create its own brand of containers, which it calls "Standard Bottles," through this strategy of creating and owning the molds in-house.

Takemoto owned 3,065 molds as of the end of December 2016 and boasts of the industry's largest collection of molds. At the same time, Takemoto can offer customized products that match customers' needs by using different caps and other accessory parts, and by changing the color and printing used on the Standard Bottle products. Furthermore, the Company maintains inventories of certain products, helping it to realize short delivery times of a wide variety of products in small lots.
 
 
The Company sells its products in Japan, China, the United States, and other regions throughout the world, and the entire Takemoto Yohki group conducted business with more than 4,500 customers in fiscal year December 2016.

Standard Bottle sales comprise approximately 70% of total sales. In addition, the Company deals in products made from molds manufactured by customers and, as part of its trading firm function, purchases products made by other companies.
 
 
◎ Production System
They have constructed a cooperative framework with outsourced manufacturers and possess 6 bases in Japan and 2 in China. Since Nov. 2016, Okayama Office has been operating to strengthen Western Japan's product supply system.
Their domestic manufacturing thoroughly meets the needs of their clients, such as small batches and multi-products, short deadlines, stable quality, vast product line, sudden orders, and mass production.
In China, they are concentrating on upgrading their production capabilities and improving their quality.
 
 
Takemoto Yohki has achieved high ROE.
ROE is considered by the Company to be an "important management benchmark" and it will endeavor to achieve a stable level of 15% or above over the medium term.
 
<Characteristics and Strengths>
① Broad Customer Base
Takemoto Yohki boasts of an extremely wide range of clients with some 4,500 customers within and outside Japan. In addition, no single client contributes more than 10% of the total sales and the stable cash flow secured from this client base enables continuous investments into molds. Furthermore, the Company's high quality proposal-based marketing capability contributes to high levels of customer satisfaction and repeat business.
 
② Bountiful Stock of Molds
As explained earlier, the bountiful stock of 3,065 product molds allows Takemoto Yohki to respond flexibly to customers' needs. In addition, the Company is fortifying its product lineup and promoting development of high-value- added container products with design and functionality taken into consideration. At the same time, efforts are being made to reduce investment burden and risks by standardizing, communizing, and miniaturization.
 
③ Flexible Product Supply Structure
Takemoto has built a structure that can supply a wide range of products in small volumes and in short delivery times through its manufacturing network of 6 plants within Japan and 2 in overseas markets. Moreover, new manufacturing technologies are being introduced aggressively with product cost, strength and quality in mind, and in order to respond to customers' needs for customized products.
 
④ "High Levels of Development and Proposal-Based Marketing"
The high levels of development and proposal-based marketing capabilities are the source of the sustained increase in corporate value and contribute to the establishment of a wide customer base. About thirty planning, development and technology staff endeavor to realize various ideas for products, taking material, shape, functionality, and safety into consideration. About 1,000 types of Standard Bottle brand products are on display at the Kappabashi Showroom and reflect the high levels of development and proposal-based marketing capabilities of the Company.
 
 
By using its Standard Bottle development foundation and its bountiful stock of molds, the Company has been offering development proposals to customers and providing them with high-quality original molds with low prices and short delivery times. The Company calls such an endeavor "custom bottle innovation" and has been promoting it more aggressively.
 
⑤ Unique Business Model
Their 3 competitive factors of having a broad and vast client base (stable operating CF), abundant mold stock, and high capabilities in developmental proposals produce synergy and have built a business model unique to Takemoto Yohki.
 
 
 
Fiscal Year December 2016 Earnings Results Overview
 
 
Increased sales of both standard bottles and custom bottles lead to sales growth. Profit remains at the same level.
Sales were 12,799 million yen, up 4.7% year on year.
In Japan, needs for standard bottles continued to grow, with new orders and sales increasing. Repeated demand for cosmetics were strong while the sales of both standard and custom bottles increased due to active developmental proposal-based selling. Furthermore, the enlargement of the Yuki Office in May 2016 improved production efficiency.
In China, the sales of both standard bottles and custom bottles saw an increase, but sales aimed at mid-sized clients did not grow as planned. The strong yen and weak yuan led to a 463 million yen equivalent year on year decrease.

Operating income remained at about the same level as the previous year at 1,259 million yen.
In Japan, the impact of the increase in sales, a reduction in manufacturing costs due to improved operating rate and lower prices of plastic materials contributed.
Despite lower costs due to improvements in production efficiency and lower prices in raw materials in China, fluctuations in the exchange rate caused a 58 million yen equivalent year on year decrease.

Sales to all client categories grew.
 
 
 
Mainly because of an increase in cash and deposits, current assets increased 417 million yen from the end of the previous term. As a result of noncurrent assets growing 1,271 million yen from the end of the previous term due to an increase in property, plant and equipment such as buildings and structures, total assets rose by 1,689 million yen from the end of the previous term to 12,646 million yen.
Due mainly to an increase in long-term debt, total liabilities grew by 1,263 million yen from the end of the previous term to 6,645 million yen.
Retained earnings increased and net assets rose by 425 million yen from the end of the previous term to 6,001 million yen.
As a result, equity ratio fell by 3.5% to 47.4% from the end of the previous term.
 
 
The surplus in operating CF grew due mainly to an increase in depreciation cost.
As a result of the deficit in investing CF growing due mainly to an increase in acquisition of property, plant and equipment, the negative value in free CF rose as well.
Financing CF became positive due to an increase in long-term debt.
Cash position rose 330 million yen from the end of the previous term to 1,699 million yen.
 
(4) Topics
◎ Metal Molds Development Conditions
Takemoto Yohki maintained a library of 3,065 in-house owned metal molds at the end of December 2016.
They have established a new mid-term objective of developing over 400 molds in total for Japan, China, and other regions by 2019. To achieve this, they will make progress in measures to make some mold manufacturing process undertaken at their Chinese subsidiary in-house, standardize mold design and improve and strengthen their framework for mold development.

In the term ended Dec. 2016, they have been developing molds for functional products, primarily company-made, but due in part to highly difficult special order products, the final outcome of manufactured molds was 234, down year on year and also short of their target of 320.
 
 
 
Fiscal Year December 2017 Earnings Estimates
 
 
Increase in sales and decrease in profit.
Sales are forecasted to be 13,218 million yen, up 3.3% year on year. While needs for standard bottles will continue to grow, sales are estimated to increase due to expanding developmental proposals and increments in new molds.
Unit price for purchasing materials is expected to remain at about the same as average price in the previous term.
Operating income is to be a marginal change at 1,252 million yen. A decrease in profit is anticipated due to increased depreciation costs from building two factories in Japan during the previous term and prior investments (factory machinery, molds, and securing personnel) for expanding production.
Dividends are expected to be 16.00 yen per share mid-term and 16.00 yen per share at the end of the term, totaling 32.00 yen which is a 2 yen rise from the previous term. The projected payout ratio is 20.9% with a goal of 20% or more.
 
 
Under the current situation, the impact is expected to be limited given the marginal amount of sales between Japan and overseas markets.
However, the influence of changes in the Japanese yen relative to the Chinese yuan is fairly large. With regards to the US dollar, while the scale of business of the United States subsidiary is still small, the exchange rate has relatively large impact on the amount paid for raw materials procured within Japan.
 
 
Medium Term Business Plan Achievements
 
They have set up the following 4 challenges to strengthen their system of only supplying the necessary packages of containers at the necessary time for customers with required amount.
 
 
 
 
<Key Points>
Continue actively developing standard bottles. They managed to manufacture 195 in 2016, so they have set a target of 300 in 2019.
For customized bottles, they will expand their customized bottle factories using key ideas such as: new shapes, new decorations, high quality, mass production, and shorter deadlines.
Further innovate customized bottles. They managed to develop 39 in 2016 and have set a goal of 120 in 2019.
Proceed to expand globally, not only in Japan and China, but throughout Thailand, Europe, U.S., India and others.
 
(2) Numerical Targets for Various Markets
 
<Key Points>
They lowered projections of the Chinese market according to their revised exchange rate forecast but expect strong performance on a local monetary scale.
They started building their factory in India in 2017. This factory is planned to be operational in 2018 and will contribute to increasing sales in other markets.
 
 
Conclusion
 
In our previous report, we stated, "A concern is the Company's failure to achieve the target number of metal molds during the first half." Even in the full year, they were unable to meet their target. They spent much time trying to complete special order items, so they plan to use a few highly experienced staff members along with concentrated efforts to improve their developmental capabilities a step further.
Meanwhile, their initiatives towards globalization established in the mid-term managerial plan are progressing smoothly. Their goals of building a factory in India, along with continuing investments in China and employing local Indian staff are expected to be completed in the near future and localization in China has progressed further. Although the Company foresees operating losses in 2018 and 2019 due to prior investments into other market segments including India, we are curious to see when they will begin to contribute to profits.
 
 
<Reference: Regarding Corporate Governance>
 
 
 
 
<Disclaimer>
This report is intended solely for information purposes, and is not intended as a solicitation to invest in the shares of this company. The information and opinions contained within this report are based on data made publicly available by the Company, and comes from sources that we judge to be reliable. However we cannot guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and or opinions, nor do we bear any responsibility for the same. All rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All investment decisions are the responsibility of the individual and should be made only after proper consideration.
Copyright(C) 2017, Investment Bridge Co., Ltd. All Rights Reserved.
 
 
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