■Medium- to long-term direction

4. Recognition of issues and measures aimed at improving corporate value

Daiki Axis (4245) recognizes issues with the situation where ROE has declined due to delays in price transfer of purchase price increases and profit pressure due to upfront investment, and PBR is also moving around 1 times higher. With a view to medium- to long-term growth, we will expand sales regions, strengthen production capacity and competitiveness, and work on cost management and IT promotion to improve profit margins. Acceleration of overseas expansion (especially India) in “environmental equipment related businesses” will be the driver for business expansion. In addition, points such as the development of PPA models and biodiesel fuel in the “housing equipment-related business” and the development of PPA models in the “renewable energy-related business” are mentioned in order to strengthen competitiveness. Meanwhile, with regard to cost management, we are considering adopting the Sri Lankan model* overseas, centralized purchasing in “housing equipment-related businesses,” and reviewing unprofitable businesses.

* Characteristics of the Sri Lankan model include 1) easy human resource development since it is assembly work, 2) initial investment is low because it is an assembly plant, and 3) savings on transportation costs, customs, and taxes.

5. Our highlights

As the domestic economy matures, we also evaluate the direction of focusing on water environment issues becoming serious in emerging countries around the world and linking solutions to social issues to the company's growth as a very attractive and reasonable strategy. Above all, the company, which can provide high quality products and services with specifications and costs commensurate with emerging countries, has a big advantage, and I think there is a good possibility that it will open up a market with large potential. Furthermore, what determines success or failure is probably how to cooperate with governments of various countries and proactively participate in making regulations, and the development of human resources who can play an active role in the world. The history of the spread of septic tanks in Japan is attracting attention as a model for Asia and Africa in the future, and for the company, which has a long history since the period of rapid growth, it is thought that reproducing the septic tank manufacturing and dissemination process in Japan in Asia and Africa will not only contribute to the environment, but also lead to a major leap forward for the company itself. As for human resource development, if the initiatives currently underway in India (Indian model) get on track, there is a possibility that it will be a turning point for speeding up future overseas expansion, including the production of human resources from there. Of course, there may also be difficulties peculiar to emerging countries, but I would like to look forward to that point from the new president's experience and management skills so far. In Japan, attention continues to be paid to strengthening the business infrastructure utilizing M&A. In particular, various strategic options can be considered for “housing equipment-related businesses,” which have structural problems, and “renewable energy-related businesses,” which are proceeding with a new business model in anticipation of post-FIT, but for the company, which has strengthened its business portfolio through M&A until now, there is a high possibility that new opportunities will come around when environmental changes and industry movements are intense.

(Written by FISCO Visiting Analyst Ikuo Shibata)