BRIDGE REPORT
(6914)

東証1部

Bridge Report:(6914)OPTEX GROUPSecond quarter of fiscal year ending December 2021

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Isamu Oguni President and CEO

OPTEX GROUP (6914)

 

 

Company Information

Market

TSE 1st Section

Industry

Electric equipment (manufacturer)

President and CEO

Isamu Oguni

HQ Address

4-7-5, Nionohama, Otsu, Shiga Prefecture

Year-end

December

Homepage

https://www.optexgroup.co.jp/en/

 

Stock Information

Share Price

Shares Outstanding (Term end)

Total market cap

ROE Act.

Trading Unit

¥1,447

37,735,784 shares

¥54,603 million

4.3%

100 shares

DPS Est.

Dividend yield Est.

EPS Est.

PER Est.

BPS Act.

PBR Act.

¥30.00

2.1%

¥92.64

15.6x

¥896.02

1.6x

*The share price is the closing price on August 18. Shares outstanding, DPS and EPS are taken from the brief financial report for the second quarter of FY December 2021. ROE and BPS are the results in the previous term.

 

Earnings Trend

Fiscal Year

Sales

Operating profit

Ordinary profit

Net profit

EPS

DPS

December 2017

37,504

4,885

5,036

3,386

97.63

27.50

December 2018

40,113

4,989

5,038

3,775

104.85

30.00

December 2019

37,517

2,856

2,876

2,197

60.02

32.50

December 2020

34,846

2,098

2,176

1,395

38.59

30.00

December 2021 Est.

45,000

4,500

4,800

3,350

92.64

30.00

* Net profit is net profit attributed to parent shareholders. On April 1, 2018, a 2-for-1 stock split was implemented. Both EPS and DPS are revised retroactively.

 

This Bridge Report presents OPTEX GROUP’s earnings results for the second quarter of fiscal year ending December 2021 and so on.

 

Table of Contents

Key Points
1. Company Overview
2. The Second Quarter of Fiscal Year Ending December 2021 Earnings Results
3. Fiscal Year Ending December 2021 Earnings Forecasts
4. Medium Term Business Plan
5. Conclusions
<Reference: Regarding Corporate Governance>

 

 

Key Points

  • In the second quarter of the fiscal year ending December 2021, sales grew 36.7% year on year to 22,750 million yen. The acquisition of Sanritz Automation Co., Ltd. as a subsidiary in the previous term as well as strong growth of the existing businesses such as the the FA segment, IA business, contributed to the sales increase. Operating profit was 2,520 million yen, up 221.8% year on year. Although the acquisition of Sanritz Automation as a subsidiary reduced gross profit margin, the rise in sales increased gross profit. The company achieved significant profit growth by offsetting an increase in SG&A. The initial forecasts announced in February were exceeded considerably. Both sales and profit grew greatly year on year also on a quarterly basis. Sales in the second quarter hit a record high.

     

  • The company revised its full-year business forecasts based on the powerful performance in the first half. Sales and operating profit are projected to grow by 29.1% and 114.4% year on year to 45 billion yen and 4.5 billion yen, respectively. Sales is expected to rise by double digits in all the regions and all the company’s major business segments. Sanritz Automation, which was acquired as a subsidiary, is expected to make a sales contribution of about 3.5 billion yen. In the third and subsequent quarters, the assumed currency exchange rate remains 105 yen for a dollar. The exchange rate for a euro has been changed from 120 yen to 125 yen. There is no change in the dividend estimate. The company plans to pay a dividend of 30.00 yen per share, unchanged from the previous term. The estimated payout ratio is 32.4%.

     

  • Under its business philosophy, “We aim to become a corporate group full of Venture Spirit!” OPTEX GROUP is taking on another challenge to generate sales of 50 billion yen in the fiscal year ending December 2023. It revised the full-year business forecasts for the fiscal year ending December 2021 upward, delivering stronger business performance than the initial forecast. The company strives to achieve sales of 50 billion yen, a goal set for the final fiscal year of the business plan, ahead of schedule.

     

  • It is necessary to further strengthen group management for attaining the goals of the medium-term business plan, and the company considers business growth, strengthening of the manufacturing system, and enhancement of the management structure as three pillars of its business strategies. For business growth, it will pursue expansion of sales and profit through a three-tiered business structure that is based on (i) further growth of the existing businesses (Sensing Solution (SS) and Industrial Automation (IA) Businesses), (ii) growth through transformation of the business model from “Mono Uri (selling products)” to “Koto Uri (selling solutions and services),” and (iii) acceleration of growth through such means as M&As.

     

  • In the current term that is the first step in taking on another challenge to generate sales of 50 billion yen, the company made an extensive upward revision to the full-year business forecast as the business results in the first half exceeded the initial forecast for the businesses related mainly to factory automation. In the second half, however, sales and profit are expected to shrink when compared with those of the first half although they both will increase by 22% and 51%, respectively, when compared with the sales and profit of the same period of the year before. The company gives a conservative forecast because it anticipates that components will be in short supply.

     

  • Although factors behind uncertainty amid the novel coronavirus pandemic are still at play, a growing number of people have received vaccination against the disease across the world, which has improved the situation from the profound insecurities in the previous year. Under these circumstances, we would like to keep an eye on whether OPTEX GROUP will be able to solidify its business foundation for boosting sales in the third and ensuing quarters and achieving the objective of the medium-term business plan, which is sales of 50 billion yen in the final fiscal year (ending December 2023), ahead of schedule.

     

1. Company Overview

OPTEX GROUP Co., Ltd. is a holding company centered around OPTEX Co., Ltd. that manufactures and sells outdoor sensors (top share of 40% in the global market), automatic door sensors (30% share of the global market and 50% share of the domestic market) and environment-related products.
OPTEX GROUP holds subsidiaries including OPTEX FA CO., LTD., which deals with FA related sensing business; CCS Inc., which holds the global top share in the LED lighting business for image processing; Sanritz Automation Co., Ltd., which has a wealth of results in the development, manufacturing and sales of industrial computers, Three Ace Co., Ltd., which specializes in the development of various systems, applications, and digital content; Optex MFG Co., Ltd., which is responsible for manufacturing Group products, RAYTEC LIMITED (UK), which has attained the largest global share (about 50 %) for supplemental lights for CCTV; and FIBER SENSYS INC. (US), which deals with optical fiber intrusion detection systems.
As of December 31, 2020, the company operates in 84 locations worldwide, including 28 overseas companies.

 

OPTEX CO., LTD.

Develops and sells sensors for various uses, such as security sensors and sensors for automatic doors

OPTEX FA CO., LTD.

Development and sales of photoelectric sensors, image inspection systems, displacement sensors and measuring instruments

CCS Inc.

Development, manufacturing and sales of LED lighting devices, and systems for image processing

Sanritz Automation Co., Ltd.

Development, manufacturing and sales of industrial computers

THREE ACE CO., LTD.

Development of various systems, applications, and digital content

OPTEX MFG CO., LTD.

Manufactures products for the Group and provides contract manufacturing service for electronic equipment

SICK OPTEX CO., LTD.

Development of general-purpose photoelectric sensors. A joint venture of SICK AG (Germany) and OPTEX FA CO., LTD.

GIKEN TRASTEM CO., LTD.

Development, manufacturing and sales of people counting systems, customer traffic counting/management systems

ZENIC INC.

Contracted development of IC and LSI for image processing, and design and sales of FA systems

O’PAL OPTEX CO., LTD.

Management of outdoor activities and environmental hands-on learning programs

FIBER SENSYS INC. (US)

Development, manufacturing and sales of fiber-optic intrusion detection systems

FARSIGHT SECURITY SERVICES LTD. (UK)

Security company providing remote video surveillance services

RAYTEC LIMITED. (UK)

Development, manufacturing and sales of supplemental lighting for surveillance cameras

GARDASOFT VISION LIMITED. (UK)

Development, manufacturing, and sale of LED lighting controllers for machine vision

 

1-1 Corporate History

In May 1979, Mr. Toru Kobayashi (currently serving as a director and senior corporate adviser), who was developing security sensors in a manufacturer of anti-crime devices in Kyoto, established OPTEX Co., Ltd. with the spirit of the endeavor to “make their products recognized in the world as much as possible.”
In November 1979, the company developed “the world’s first far-infrared sensor for automatic doors.” Around that time, pressure-sensitive rubber mats were used for automatic doors, and an automatic door sensor that utilizes far-infrared light was epoch-making. OPTEX was unrivaled in maintenance and installation services and seized the largest share in the market of automatic door sensors in the third year after inauguration (currently occupying about 50% of the Japanese market).
Since then, the company has developed a wide array of products for security, automatic doors, and industrial equipment with its unique ideas and technologies that embodies them.

 

In the 1980s, the company entered overseas markets. While it had been considered impossible to set a far-infrared sensor outdoors because external factors, such as light, would cause errors, the company developed the outdoor far-infrared sensor “VX-40” with its original technology, and that sensor was highly evaluated mainly in the European market, and occupied the largest share in the global market of outdoor intrusion detection sensors.
Through business expansion, the company became an over-the-counter company (equivalent to being listed in the JASDAQ market) in 1991. Then, it was listed in the second section of Tokyo Stock Exchange (TSE) in 2001, and in the first section of TSE in 2003.

 

Recently, the company has been strengthening solutions based on image processing technologies and high-end security systems. In 2008, it reorganized ZENIC INC., which undertakes the development of ICs and LSI for image processing, etc., into a subsidiary. In 2010, it acquired FIBER SENSYS INC. (US), which has plenty of experience handling high-end security systems (optical fiber intrusion detection systems) for important facilities in Europe and the U.S., as a subsidiary. In 2012, it acquired RAYTEC LIMITED (UK), which handles supplemental lighting for cameras of high-end security systems for important large-scale facilities, as a subsidiary.
In May 2016, it acquired CCS Inc., which has the world’s largest share in the market of LED lighting for image processing, as a subsidiary, and transformed it into a 100% subsidiary in July 2018.
With the aim of adopting next-generation business administration and pursuing group synergy, it shifted to the holding company system on January 1, 2017.
Mr. Isamu Oguni was appointed as President and CEO in March 2019.

 

In December 2020, the company acquired Sanritz Automation Co., Ltd., which has an abundance of experience in developing, manufacturing, and selling industrial computer systems, as a subsidiary. In February 2021, it announced a three-year medium-term management plan ending fiscal 2023. To achieve this plan, the company aims for further growth as the global niche No. 1 company by promoting business model reforms and strengthening solution proposal capabilities.

 

1-2 Business Description

The Company’s business is composed of its main SS business (security sensor segment and automatic door sensor segment), sensors for industrial machinery, LED lighting device and system for image processing, the “IA Business” which works towards the automation, labor saving, and optimization of the production line using industrial computers, “EMS business,” which was included in the SS business up until the previous term and provides contract manufacturing services for electronic equipment in China, and Other business (operation of sport clubs and development of applications and digital content).
The above segmentation will be put into practice from the first quarter of the fiscal year ending December 2021.

 

Segment

Business Description

SS Business

Security Sensor segment

Main products include various indoor and outdoor sensors, wireless security systems and LED lighting control systems, etc. For outdoor sensors, the company has the leading share in the global market. Recently, it focuses on development of the automobile detection sensor using microwave technologies.

Automatic Door Sensor segment

The company developed the world’s first automatic door sensor using infrared rays.

Main products are automatic door opening/closing sensors, shutter sensors for factories, wireless touch switches, etc.

Other

Equipment for measuring water quality. Transportation safety products, Customer traffic counting/management systems, developing/marketing of image processing-related products.

IA Business

FA segment

Main products include photoelectric sensors used for quality control and automation of production lines, displacement sensors, image sensors, LED lights, etc. In Japan, these products are provided to a wide range of industries such as food or pharmaceutical for quality control of production lines. In Europe, its products on an OEM basis through its technological partner SICK AG (Germany) that has the largest share in industrial sensor market. Also, its house-brand products have been launched in Asia and North America.

MVL segment

The company has a significant share in the LED lighting business for image processing. The company offers solutions using the natural light LED developed by the company, which boasts the best color rendering property in the field.

IPC segment

Has shown great results in the development, manufacturing, and sale of industrial computers. Specializes in the development of devices and systems that require both “hardware” and “software” of industrial built-in computers.

EMS-related

Contract manufacturing services for electronic equipment, developed at a factory in China.

Others

Operating outdoor activities and environmental hands-on learning programs and development of applications and digital content.

*SS: Sensing Solution、IA:Industrial Automation、FA:Factory Automation、MVL:Machine Vision Lighting、IPC:Industrial PC 、EMS: Electronics Manufacturing Service

 

1-3 Advantages: Diversified Technologies/Expertise on Sensing and Unique Sensing Algorithm

To produce stable and reliable sensors, it is essential to build on a number of elemental technologies and expertise, as well as “algorithms” to control physical changes. The company takes advantage of its technologies/expertise suitable for intended applications and its unique sensing algorithm to secure the largest share in the global market.

 

Noise abatement technology

・Hardware design to minimize various noises

・Conduct a number of environmental assessments based on its own standard, and launch products that passed the assessments

Sophisticated optical design

・Make use of optical simulation to achieve high-density areas eliminating blind spots

・Packaging technologies to enable downsizing

Compliant to public standards for reliability

・Adapted and compliant to any global standards

・Adapted and compliant to industry standards and guidelines

(CE marking, EN standard [TUV certified], ANSI, JIS, etc.)

Environment friendly design

・By identifying 15 restricted-use materials and 10 self-control materials, the company succeeded in excluding toxic substances in all products

・Compliant to RoHS directive, lead-free solder alloy

・Design to minimize the effect from CO2 when in use

Secure & safe control

・Adopt self-diagnosis functions in emergency or in failure to prevent system outage, and fail-safe devices for sensors

・Propose preventive maintenance measures to maintain functions

Unique sensing algorithm

・Unique algorithm to eliminate the impact of noise ineliminable by hardware, detect, scan and analyze only the intended events

・Various automatic correction functions to maintain performance in the field

 

1-4 ROE analysis

 

FY 12/ 11

FY 12/ 12

FY 12/ 13

FY 12/ 14

FY 12/ 15

FY 12/ 16

FY 12/ 17

FY 12/ 18

FY 12/ 19

FY 12/ 20

ROE (%)

6.0

4.6

8.2

8.6

8.7

7.4

12.6

12.3

6.8

4.3

Net profit margin (%)

5.58

3.99

6.87

7.39

7.38

5.83

9.03

9.41

5.86

4.00

Total asset turnover (times)

0.85

0.91

0.92

0.89

0.91

0.91

0.95

0.95

0.86

0.76

Leverage (times)

1.27

1.28

1.30

1.31

1.30

1.41

1.48

1.38

1.35

1.41

 

The company is aiming for an early recovery to the target of 10% or more.

 

1-5 Efforts on ESG

The company believes that building a relationship of trust with a wide range of stakeholders is essential for improving corporate value and has posted 「ESG information」(https://www.optexgroup.co.jp/en/esg/stakeholder.html)on its website to further enhance ESG information disclosure. In addition, Published the ESG Bridge Report through Investment Bridge Inc.
The company identify the materiality for sustainable growth for the first time, and mention the challenges and initiatives for the future in the report.
https://www.bridge-salon.jp/report_bridge/archives/eng/6914/20210525.html

 

 

 

2. The Second Quarter of Fiscal Year Ending December 2021 Earnings Results

(1) Business Results

 

2Q of FY 12/20

Ratio to sales

2Q of FY 12/21

Ratio to sales

YoY

Difference from previous forecast

Sales

16,636

100.0%

22,750

100.0%

+36.7%

+19.7%

Gross profit

8,974

53.9%

11,862

52.1%

+32.2%

-

SG&A

8,190

49.2%

9,341

41.1%

+14.1%

-

Operating profit

783

4.7%

2,520

11.1%

+221.8%

+152.0%

Ordinary profit

872

5.2%

2,841

12.5%

+225.6%

+147.0%

Quarterly Net Profit

586

3.5%

1,921

8.4%

+227.7%

+174.4%

*Unit: million yen. The Quarterly Net profit is the quarterly profit attributable to owners of the parent company. The same shall apply hereinafter. The difference from previous forecast is based on a comparison to the forecasts announced in February of 2021.

 

Substantial increase in sales and profit, the initial forecasts were exceeded considerably
Sales grew 36.7% year on year to 22,750 million yen. The acquisition of Sanritz Automation Co., Ltd. as a subsidiary in the previous term as well as strong growth of the existing businesses such as the FA segment, IA business, contributed to the sales increase. Operating profit was 2,520 million yen, up 221.8% year on year. Although the acquisition of Sanritz Automation as a subsidiary reduced gross profit margin, the rise in sales increased gross profit. The company achieved significant profit growth by offsetting an increase in SG&A. The initial forecasts announced in February were exceeded considerably.

 

◎Trends in each quarter

 

Both sales and profit grew greatly year on year also on a quarterly basis. Sales in the second quarter hit a record high.

 

◎Regional trends

 

2Q of FY 12/20

Ratio to sales

2Q of FY 12/21

Ratio to sales

YoY

Difference from previous forecast

Consolidated Sales

16,636

100.0%

22,750

100.0%

+36.7%

+19.7%

Domestic

7,761

46.7%

10,410

45.8%

+34.1%

+13.0%

Overseas

8,875

53.3%

12,340

54.2%

+39.0%

+26.1%

 America

2,052

12.3%

2,602

11.4%

+26.8%

+18.9%

 Europe

4,734

28.5%

6,495

28.5%

+37.2%

+19.8%

 Asia

2,089

12.6%

3,243

14.3%

+55.2%

+49.0%

*Unit: million yen. The difference from previous forecast is based on a comparison to the forecasts announced in February of 2021.

 

Both Japan and overseas showed an increase in sales. Asia, especially China showed large growth from the previous forecast.

 

◎Average exchange rate

 

2Q of FY 12/20

2Q of FY 12/21

USD

¥108.27

¥107.69

EURO

¥119.30

¥129.82

 

 

(2) Earnings by Segment

①Trends in each segment

 

2Q of FY 12/20

Ratio to sales

2Q of FY 12/21

Ratio to sales

YoY

Difference from previous forecast

SS Business

8,048

48.4%

9,961

43.8%

+23.8%

+13.3%

IA Business

8,176

49.1%

12,218

53.7%

+49.4%

+25.8%

EMS Business

188

1.1%

328

1.4%

+74.5%

+50.5%

Others

223

1.3%

242

1.1%

+8.5%

-12.0%

Sales

16,636

100.0%

22,750

100.0%

+36.7%

+19.7%

SS Business

398

4.9%

1,199

12.0%

+201.3%

-

IA Business

630

7.7%

1,445

11.8%

+129.4%

-

EMS Business

19

10.1%

112

34.1%

+489.5%

-

Others

-32

-

-20

-

-

-

Adjustments

-232

-

-215

-

-

-

Operating profit

783

4.7%

2,520

11.1%

221.8%

-

*Unit: million yen. Ratio to sales of Operating profit refers to Sales Profit margin. The difference from previous forecast is based on a comparison to the forecasts announced in February of 2021.

 

②Trends in each segment and region

 

2Q of FY 12/20

Ratio to sales

2Q of FY 12/21

Ratio to sales

YoY

Difference from previous forecast

SS: Security

5,317

100.0%

6,832

100.0%

+28.5%

+16.1%

Japan

1,133

21.3%

1,197

17.5%

+5.6%

+4.1%

AMERICAs

1,089

20.5%

1,308

19.1%

+20.1%

+12.9%

EMEA

2,593

48.8%

3,699

54.1%

+42.7%

+25.9%

Asia

502

9.4%

628

9.2%

+25.1%

-1.4%

 

 

 

 

 

 

 

SS: Automatic door

1,894

100.0%

2,139

100.0%

+12.9%

+9.4%

Japan

991

52.3%

1,026

48.0%

+3.5%

+4.6%

AMERICAs

481

25.4%

577

27.0%

+20.0%

+16.3%

EMEA

365

19.3%

474

22.2%

+29.9%

+15.3%

Asia

57

3.0%

62

2.9%

+8.8%

-7.5%

 

 

 

 

 

 

 

IA:FA

3,383

100.0%

4,803

100.0%

+42.0%

+36.4%

Japan

1,671

49.4%

2,136

44.5%

+27.8%

+19.0%

AMERICAs

51

1.5%

70

1.5%

+37.3%

+1.4%

EMEA

988

29.2%

1,217

25.3%

+23.2%

+12.4%

Asia

673

19.9%

1,380

28.7%

+105.1%

+140.8%

 

 

 

 

 

 

 

IA:MVL

4,792

100.0%

5,666

100.0%

+18.2%

+20.5%

Japan

2,880

60.1%

2,946

52.0%

+2.3%

+15.9%

AMERICAs

431

9.0%

630

11.1%

+46.2%

+35.8%

EMEA

788

16.4%

1,105

19.5%

+40.2%

+11.7%

Asia

693

14.5%

985

17.4%

+42.1%

+39.1%

 

 

 

 

 

 

 

IA:IPC

-

-

1,749

100.0%

-

+17.2%

Japan

-

-

1,733

99.1%

-

+16.2%

AMERICAs

-

-

16

0.9%

-

-

 

 

 

 

 

 

 

EMS

189

100.0%

329

100.0%

+74.1%

+50.9%

Japan

129

68.3%

225

68.4%

+74.4%

+52.0%

AMERICAs

-

-

1

0.3%

-

-

Asia

60

31.7%

103

31.3%

71.7%

+47.1%

*Unit: million yen. The difference from previous forecast is based on a comparison to the forecasts announced in February of 2021.

 

◎SS Business
Sales and profits increased.
(Security sensor segment)
Sales increased.
* Japan: The sales of outdoor intrusion detectors for security companies and large-scale critical facilities were healthy, resulting in an increase in sales.
* AMERICAs: The sales of products for general housing, business offices and large-scale critical facilities were favorable, resulting in a large increase in sales.
* EMEA: The sales of products for general housing, business offices and large-scale critical facilities were favorable, resulting in a significant increase in sales.
* Asi The sale of products for critical facilities was favorable, resulting in a large increase in sales.

 

(Automatic door sensor segment)
Sales increased.
* Japan: Due to the steady demand from stores that sell daily necessities and the demand for the sensor for the use of non-contact, the sale to automatic door dealers has increased steadily, resulting in an increase in sales.
* AMERICAs: The sale of products for major automatic door manufacturers in North America was favorable, resulting in a large increase in sales.
* EMEA: The sale of products for major automatic door manufacturers in Europe was favorable, resulting in a large increase in sales.

 

◎IA Business
Sales and profits increased.
(FA segment)
Sales increased.
* Japan: The sales for the food industry and electric devices, electronics and semiconductor related investments were favorable, resulting in a significant increase in sales.
* EMEA: The sale of displacement sensors for electronic parts was healthy, resulting in a large increase in sales.
* Asi The vigorous capital investment demand in China caused a steady growth in the sale of displacement sensors, resulting in a large increase in sales.

 

(MVL segment)
Sales increased.
* Japan: The sale for the automotive industry was sluggish, but the sale for electric devices, electronics and semiconductor related investments was healthy, resulting in a slight increase in sales.
* AMERICAs: The continued projects for the medical industry in the North American region and the orders received for semiconductor related investments resulted in a large increase in sales.
* EMEA: The sales for the French subsidiary expanded due to the recovery of economic activities in Europe and product distribution to the United States of America, resulting in a large increase in sales.
* Asi The sale for semiconductor related investments in China expanded, resulting in a large increase in sales.

 

(3) Financial Conditions and Cash Flow

◎Main BS

 

End of Dec.2020

End of Jun.2021

Increase/ decrease

 

End of Dec.2020

End of Jun.2021

Increase/ decrease

Current Assets

33,067

36,317

+3,250

Current liabilities

11,421

12,801

+1,380

Cash

14,583

15,923

+1,340

Payables

1,961

2,593

+632

Receivables

8,305

9,881

+1,576

ST Interest Bearing Liabilities

6,420

6,194

-226

Inventories

8,318

8,990

+672

Noncurrent liabilities

3,343

3,232

-111

Noncurrent Assets

14,323

14,515

+192

LT Interest Bearing Liabilities

232

38

-194

Tangible Assets

6,167

6,540

+373

Net defined benefit liabilities

1,289

1,286

-3

Intangible Assets

3,742

3,459

-283

Liabilities

14,765

16,034

+1,269

Investment, Others

4,413

4,516

+103

Net Assets

32,625

34,798

+2,173

Total assets

47,390

50,833

+3,443

Total Liabilities and Net Assets

47,390

50,833

+3,443

*Unit: million yen

 

Total assets were 50,833 million yen, up 3,443 million yen from the end of the previous term, due to an increase in cash, receivables and etc.
Total liabilities went up 1,269 million yen from the end of the previous term to 16,034 million yen because, in part, the amount of payables increased while the amount of borrowings dropped.
Net assets were 34,798 million yen, up 2,173 million yen from the end of the previous term, due to an increase in retained earnings, etc.
The equity ratio was 68.0%, down 0.4 point from the end of the previous fiscal year.

 

◎Cash Flow

 

2Q of FY 12/20

2Q of FY 12/21

Increase/decrease

Operating CF

1,865

2,298

+433

Investing CF

-671

-636

+35

Free CF

1,194

1,662

+468

Financing CF

-569

-1,079

-510

Cash and equivalents

12,797

15,588

+2,791

*Unit: million yen

 

The surpluses of the operating and free CFs became larger owing partly to an increase in quarterly net profit before taxes.
The deficit of the financing CF widened due to such factors as a decrease in borrowings and payment of dividends.
The cash position increased.

3. Fiscal Year Ending December 2021 Earnings Forecasts

(1) Earnings forecast

 

FY 12/20

Ratio to sales

FY 12/21 Est.

Ratio to sales

YoY

Revision rate

Progress rate against the full year

Sales

34,846

100.0%

45,000

100.0%

+29.1%

+12.5%

50.6%

Operating Profit

2,098

6.0%

4,500

10.0%

+114.4%

+50.0%

56.0%

Ordinary Profit

2,176

6.2%

4,800

10.7%

+120.5%

+50.0%

59.2%

Net Profit

1,395

4.0%

3,350

7.4%

+140.1%

+52.3%

57.3%

*Unit: million yen.

 

Earnings results were largely revised upward
The company revised its full-year business forecasts based on the powerful performance in the first half. Sales and operating profit are projected to grow by 29.1% and 114.4% year on year to 45 billion yen and 4.5 billion yen, respectively. Sales is expected to rise by double digits in all the regions and all the company’s major business segments. Sanritz Automation, which was acquired as a subsidiary, is expected to make a sales contribution of about 3.5 billion yen. In the third and subsequent quarters, the assumed currency exchange rate remains 105 yen for a dollar. The exchange rate for a euro has been changed from 120 yen to 125 yen. There is no change in the dividend estimate. The company plans to pay a dividend of 30.00 yen per share, unchanged from the previous term. The estimated payout ratio is 32.4%.

 

◎Regional trends

 

FY 12/20

Ratio to sales

FY 12/21 Est.

Ratio to sales

YoY

Revision rate

Progress rate against the full year

Consolidated sales

34,846

100.0%

45,000

100.0%

+29.1%

+12.5%

50.6%

Domestic

15,494

44.5%

21,299

47.3%

+37.5%

+10.8%

48.9%

International

19,352

55.5%

23,701

52.7%

+22.5%

+14.0%

52.1%

 AMERICAs

4,402

12.6%

5,109

11.4%

+16.1%

+10.6%

50.9%

 Europe

10,428

29.9%

12,599

28.0%

+20.8%

+15.2%

51.6%

 Asia

4,522

13.0%

5,993

13.3%

+32.5%

+14.7%

54.1%

*Unit: million yen.

 

(2) Trends in each segment

①Sales of each segment

 

FY 12/20

Ratio to sales

FY 12/21 Est.

Ratio to sales

YoY

Revision rate

Progress rate against the full year

SS Business

17,398

49.9%

20,388

45.3%

+17.2%

+10.3%

48.9%

IA Business

16,488

47.3%

23,490

52.2%

+42.5%

+14.5%

52.0%

EMS Business

472

1.4%

570

1.3%

+20.8%

+29.0%

57.5%

Others

488

1.4%

552

1.2%

+13.1%

-2.8%

43.8%

Consolidated sales

34,846

100.0%

45,000

100.0%

+29.1%

+12.5%

50.6%

*Unit: million yen.

 

②Trends in each segment and region

 

FY 12/20

Ratio to sales

FY 12/21 Est.

Ratio to sales

YoY

Revision rate

Progress rate against the full year

SS: Security

11,549

100.0%

13,724

100.0%

+18.8%

+12.1%

49.8%

Japan

2,312

20.0%

2,708

19.7%

+17.1%

+8.4%

44.2%

AMERICAs

2,255

19.5%

2,639

19.2%

+17.0%

+8.6%

49.6%

EMEA

5,752

49.8%

7,035

51.3%

+22.3%

+17.6%

52.6%

Asia

1,230

10.7%

1,342

9.8%

+9.1%

+0.7%

46.8%

 

 

 

 

 

 

 

 

SS: Automatic door

3,938

100.0%

4,477

100.0%

+13.7%

+9.2%

47.8%

Japan

2,030

51.5%

2,228

49.8%

+9.8%

+7.6%

46.1%

AMERICAs

999

25.4%

1,180

26.4%

+18.1%

+10.7%

48.9%

EMEA

783

19.9%

914

20.4%

+16.7%

+11.5%

51.9%

Asia

126

3.2%

155

3.5%

+23.0%

+9.2%

40.0%

 

 

 

 

 

 

 

 

IA:FA

7,307

100.0%

9,115

100.0%

+24.7%

+22.3%

52.7%

Japan

3,436

47.0%

4,183

45.9%

+21.7%

+30.3%

51.1%

AMERICAs

109

1.5%

159

1.7%

+45.9%

0.0%

44.0%

EMEA

2,264

31.0%

2,424

26.6%

+7.1%

+10.6%

50.2%

Asia

1,498

20.5%

2,349

25.8%

+56.8%

+24.3%

58.7%

 

 

 

 

 

 

 

 

IA:MVL

9,181

100.0%

10,805

100.0%

+17.7%

+8.8%

52.4%

Japan

5,233

57.0%

5,741

53.1%

+9.7%

+2.7%

51.3%

AMERICAs

1,039

11.3%

1,114

10.3%

+7.2%

+15.6%

56.6%

EMEA

1,629

17.7%

2,226

20.6%

+36.6%

+14.7%

49.6%

Asia

1,280

13.9%

1,724

16.0%

+34.7%

+20.2%

57.1%

 

 

 

 

 

 

 

 

IA:IPC

-

-

3,570

100.0%

-

+14.0%

49.0%

Japan

-

-

3,554

99.6%

-

+13.5%

48.8%

AMERICAs

-

-

16

0.4%

-

-

-

 

 

 

 

 

 

 

 

EMS

472

100.0%

570

100.0%

+20.8%

+29.0%

57.7%

Japan

338

71.6%

369

64.7%

+9.2%

+17.9%

61.0%

AMERICAs

-

-

1

0.2%

-

-

-

Asia

134

28.4%

200

35.1%

+49.3%

+55.0%

51.5%

*Unit: million yen.

 

 

4. Medium-Term Business Plan

4-1 Medium-term Managerial Goals

Under its business philosophy, “We aim to become a corporate group full of Venture Spirit!” OPTEX GROUP is taking on another challenge to generate sales of 50 billion yen in the fiscal year ending December 2023.
It revised the full-year business forecast for the fiscal year ending December 2021 upward, delivering a business performance stronger than the initial forecast. The company strives to achieve sales of 50 billion yen, a goal set for the final fiscal year, ahead of schedule.

 

 

4-2 Three Pillars of Management Strategy

In order to achieve the goals of the medium-term management plan, it is necessary to further strengthen the group management, and the company havs positioned "Business Gowth," "Strengthening Manufacturing Systems," and "Strengthening the Management System" as the three pillars of management strategy.

 

①Business Growth -Evolution of business model, M&A strategy-
We will pursue sales and profit growth through a three-tiered structure: further growth of existing businesses (SS and IA businesses), growth through evolution of the business model from the sale of products to the sale of solutions and services, and acceleration of growth through M&A, etc.In the "Growth through evolution of business model from mono- to multi-selling", the following initiatives will be promoted in the SS and IA businesses.

 

*SS Business:Security Sensor segment
The company will expand sales of its image verification solutions in the United States and Europe. It will provide not only sensors but systems as well.

 

(Taken from the reference material of the company)

 

*SS Business: Automatic Door Sensor Segment
The company will expand its Data Service Business using its advantage of occupying 50% of the domestic market.
The company launched a sharing service, OMNICITY, in February of this year.

 

(Taken from the reference material of the company)

 


(Taken from the reference material of the company)

 

*IA Business:FA segment
The company will further promote cooperation with SICK AG, the world’s leading sensor manufacturer.

(Taken from the reference material of the company)

 

*IA Business (Machine Vision Lighting (MVL) segment)
The company proposes comprehensive solutions by using AI and robots to cultivate data in the field of visual inspection that is currently performed with the human eye.

(Taken from the reference material of the company)

 

② Strengthening Manufacturing System — Cost reduction through group synergy
In June 2021, the company placed the engineering department, the research and development department, the production department, and the quality assurance department of OPTEX MFG CO., LTD., and CCS Inc. in the same location.
While OPTEX MFG engages primarily in providing mass-produced products by manufacturing sensors for security, automatic doors, and factory automation, CCS mainly offers custom-made products by manufacturing LED lights for image inspection.
Taking advantage of the difference in the product characteristics between the two companies, OPTEX GROUP shares their know-how and implements measures for improving quality, cost, delivery (QCD), such as reduction of the cost of parts and processing costs.

 

③ Strengthening the Management System — Improvement of the unifying power as the holding company
The holding company OPTEX GROUP will serves as a control tower to conduct business operations that will further raise the corporate value when they are carried out from a group-wide viewpoint among the operations conventionally run by each of the group companies.
Starting off with adopting a cash management system (CMS), the company aims to cut down on cost by integrating indirect operations through adoption of shared services.
It will also enhance its group management structure by focusing on understanding the group-wide business conditions, strengthening the strategic planning functions and management power, and minimizing risks.

 

OPTEX GROUP aims to continuously achieve management indexes such as a sales growth rate of over 10%, a rate of operating profit on sales of over 15%, and a return on equity (ROE) of over 10%, which it has considered to be important, by enhancing management capabilities.
Giving a particular focus to one of the indexes, a rate of operating profit on sales of over 15%, the company projects that the cost of goods sold and the SG&A ratio will account for 45% and 40%, respectively, of the total cost.

 

5. Conclusions

In the current term that is the first step in taking on another challenge to generate sales of 50 billion yen, the company made an extensive upward revision to the full-year business forecast as the business results in the first half exceeded the initial forecast for the businesses related mainly to factory automation. In the second half, however, sales and profit are expected to shrink when compared with those of the first half although they both will increase by 22% and 51%, respectively, when compared with the sales and profit of the same period of the year before. The company gives a conservative forecast because it anticipates that components will be in short supply.

 

Although factors behind uncertainty amid the novel coronavirus pandemic are still at play, a growing number of people have received vaccination against the disease across the world, which has improved the situation from the profound insecurities in the previous year. Under these circumstances, we would like to keep an eye on whether OPTEX GROUP will be able to solidify its business foundation for boosting sales in the third and ensuing quarters and achieving the objective of the medium-term business plan, which is sales of 50 billion yen in the final fiscal year (ending December 2023), ahead of schedule.

 

 

 

<Reference: Regarding Corporate Governance>

◎Organization type, and the composition of directors and auditors

Organization type

Company with audit and supervisory committee

Directors

11directors, including 4 outside ones

 

◎Corporate Governance ReportThe latest revision date: March 26, 2021

 

<Fundamental concept>
As the Group, we recognize that it is our greatest mission to continuously improve corporate value while earning the trust of our shareholders, investors, customers and society. To practice it, we consider enhancement of the corporate governance as one of important management tasks and aim to improve the transparency of management, maintain management systems accompanying fair and prompt decision making and strengthen management monitoring function.

 

<Reasons for Non-compliance with the Principles of the Corporate Governance Code (Excerpts)>
The company has implemented all of the principles of the Governance Code.

 

<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>

Principle

Items to be disclosed

Principle 1-4 Cross-Shareholdings

Only if the Company deems it to be strategically conducive to the enhancement of business relationships and

increased corporate value for the Group will it acquire shares for cross-shareholding upon discussions and

resolutions of the Board of Directors. In addition, the Company examines the significance of cross-shareholdings

at a meeting of the Board of Directors every year. If the Company determines it to be rationally

pointless to hold certain shares in light of the intended objectives of cross-shareholding, it will sell them in

consideration of market trends, etc., thereby endeavoring to reduce such holdings.

Listed shares currently held by the Company: One stock amounting to 55 million yen

(amount recorded on the balance sheet)

With regard to exercising the voting rights it holds, the Company approves or disapproves shareholder

proposals based on comprehensive judgment by examining each agenda item individually according to its

criteria for exercising voting rights and by taking into consideration whether or not the proposed motion will

contribute to the sustained growth of the subject company and the enhancement of corporate value thereof

and whether or not the proposed motion will cause significant damage to shareholder value.

Principle 5-1 Policy for the constructive dialogues with shareholders

To facilitate proactive and constructive dialogue with shareholders, the Company has established a public relations/ IR section

and endeavors to provide clear explanations of the Company’s management policy and management situation.

In addition, the representative director, president, officer in charge, and public relations/IR personnel systematically hold briefings for institutional investors and briefings

for individual investors and field requests for interviews from institutional investors.

Moreover, the ordinary general meetings of shareholders are held on Saturdays to ensure the attendance of a

wide range of shareholders, and these meetings are followed by briefings for shareholders and social

gatherings for shareholders to ensure that they understand the Company’s policies for the future.

Note: At the 42nd Ordinary General Meeting of Shareholders, the Company cancelled the social gathering for

shareholders to prevent the spread of COVID-19.

 

 

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.

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