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Helios Techno Holding Co., Ltd. (JP-6927) Tokyo Stock Exchange First Section ( I )

2018-09-05  提供機構:FISCO  作者:FISCO  點閱次數:2

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◆Summary

Healthy progress in growth strategies of new product development and sales expansion and service revenue gains, likely to restore earnings growth in FY3/20

Helios Techno Holding <6927> (hereinafter, also “the Company”) is a holding company formed in 2009 as a result of a business integration and business acquisition, including a renaming, undertaken by the former PHOENIX Electric Co., Ltd. It is now a pure holding company following a corporate split. The Company has three businesses: the Lamp business, the Manufacturing equipment business, and the Human resource service business.

1. Profit growth well above previous year and initial forecast on contribution from rapid growth in the Manufacturing equipment business

The Company reported ¥23,483mn in net sales (up 37.2% YoY) and ¥3,039mn in operating profit (up 119.2%) in FY3/18, posting significant growth in both sales and income. The Company raised full-year guidance a second time at the announcement of 3Q results, but ultimately exceeded these levels too. It acquired a large order for high resolution inkjet printers in FY3/17, and delivery of all of these printers in FY3/18 fueled stronger sales and profits.

2. Healthy progress in new product development, aiming to establish operations that respond to demand changes and realize sustainable growth

Manufacturing Equipment Business is the Company’s primary source of earnings and should drive future growth out of the three businesses. This segment supplies high resolution inkjet printers, alignment film manufacturing equipment, lithography equipment light source units (MLS), and other products. It also covers export business for used plants. While many of the Company’s manufacturing equipment products are related to flat panel display (FPD) production equipment, FPDs have steadily grown as a market through broadening final customers from electronics equipment to smartphones. Business is likely to grow in the automotive industry next. The Company is steadily developing new products and has established operations to sustain growth by effectively tapping into waves of change in demand drivers.

3. Expects weaker profit in FY3/19 on non-recurrence of a major deal, likely rebound in FY3/20

The Company forecasts lower earnings on an increase in sales in FY3/19 with net sales at ¥24,600mn (+4.8% YoY) and operating profit at ¥1,900mn (-37.5%). It expects flat sales YoY in Manufacturing Equipment Business, despite decline in high resolution inkjet printer sales, thanks to offsetting gains in other production equipment and used plants. The projected 4.8% rise in overall sales factors in healthy sales advances in the other two businesses. Profit is likely to weaken YoY because of decline in profitability from change in product mix. We think FY3/19 profit decline is a temporary situation and forecast restoration of a profit increase in FY3/20. There is no reason to be overly concerned.

◆Business overview

Operates three segments, earnings mainly from FPD production equipment (alignment film production equipment, HRPs, and others)

1. Business overview

The Company is a pure holding company with five subsidiaries including three core operating companies: PHOENIX Electric Co., Ltd., which handles the Lamp business; Nakan Techno Co., Ltd., which handles the Manufacturing equipment business, and Nippon Gijutsu Center Co., Ltd., which handles the Human resource service business. The Company has three business segments: the Lamp business, the Manufacturing equipment business, and the Human resource service business.

The Manufacturing Equipment Business is the primary source of earnings and mainly supplies alignment film manufacturing equipment, lithography equipment light source units, and other equipment used on LCD panel production lines. Additionally, while high resolution inkjet printers (HRPs), which rapidly increased sales as a new product in FY3/18, have a very wide range of potential applications, HRPs delivered during FY3/18 went toward OLED production. At this stage, the Company could be described as a flat panel display (FPD) production equipment manufacturer.

Sales of lithography equipment light source lamps steadily growing, shift to LEDs in general-purpose lighting lamps

2. Overview of Lamp business

Recently, MLS photolithography equipment light source units have been playing an increasingly important role in the Lamp business. Photolithography equipment is used in the lithography process for manufacturing color filters, an important component in LCD panels. While specialty manufacturers make photolithography equipment, the Company ships its MLS to the manufacturers. The Company currently makes exclusive deliveries to the top domestic equipment manufacturer. Light source lamps benefit from replacement demand because of limits on the lifespan of lithography equipment light source s. Replacement demand continues to grow at a healthy pace thanks to the Company’s MLS build-up and high operating rates on LCD panel production lines.

General-purpose lighting includes halogen lamps, LED lamps and other light source types. Demand is shifting to LED products that have longer lives and offer energy-saving benefits. Helios Techno is similarly experiencing growth in LED lamps paired with contraction of halogen lamps. The Company purchases LED chips from external suppliers and manufactures LED lighting products in-house. Projector lamps are lamps for projectors widely utilized at conferences and in school education. Replacement demand continues to offer a market in this business.

Mainly consists of products and services from Nakan Techno and Leadtech Products primarily utilized in FPD production equipment

3. Overview of Manufacturing equipment business

The Manufacturing Equipment Business consists of products supplied by Nakan Techno Co., Ltd. and Leadtech Co., Ltd, above-mentioned MLS units from PHOENIX Electric, and power device testers and other testing systems from Nippon Gijutsu Center Co., Ltd. Nakan Techno’s (including Leadtech) products and services have four sub-segments – flexographic printers, plants, new equipment (HRPs), and others. (MLS business was already covered earlier, and Nippon Gijutsu Center’s testing systems income is still limited.)

A leading product in this business is alignment layer manufacturing equipment for LCD panels using flexo printing technology. The two different formats utilized in alignment layer manufacturing equipment are flexo printing tech­nology and inkjet printer technology, and Nakan Techno is the only manufacturer of flexo-printer alignment layer manufacturing equipment. It supports Generation 8.5 mother glass.

The plants business mediates, transports, and relocates used LCD manufacturing equipment. Strong demand exists in China to purchase production equipment from past generations inexpensively and use them to lower LCD panel production costs. Leadtech’s strength is its wide range of technology and experience related to device transportation and installation in areas other than equipment manufacturing.

The newest addition to the Manufacturing equipment business is HRPs. These products utilize a variety of printing technologies, such as inkjet and gravure methods, to realize high resolution printing. Recently, orders for inkjet HRPs have been growing rapidly.

The “others” sub-segment includes supply of consumables for manufacturing equipment delivered in the past, and maintenance, repairs, and upgrades of such equipment. Sub-segment sales have grown considerably in the past few years because cumulative sales of the Company’s manufacturing equipment have risen to well above 50 units.

In FY3/17, Nippon Gijutsu Center completed development of a power device tester and these are being tested in the field. This tester is the Company’s catalog model and it plans to focus on further development of this product.

Developing engineer and worker dispatch business with a local-oriented approach Pursuing M&A opportunities to expand business

4. Overview of Human resource service business

The Human resource service business is operated by Nippon Gijutsu Center. Helios Techno had multiple human resource service companies in its group until Nippon Gijutsu Center absorbed KANSAI GIKEN Co., Ltd. through a merger in November 2013 and also absorbed Techno Provider Co., Ltd. through a merger in April 2015.

Human resource services include dispatch of manufacturing engineers, dispatch of workers, design subcontracting, and nursing care. We believe dispatching services for manufacturing engineers and workers are the business’ primary income sources. The sales strategy is based on a locality-centric business model. Based on a slogan of expanding broadly from a small area, it emphasizes building operations that expand the customer base in areas nearby existing customers and facilitate concentrated supply of dispatched workers. The primary aim, of course, is improving efficiency.

The Company has clearly stated that it plans to pursue M&A opportunities in the Human resource service business. The dispatching industry is struggling to secure human resource, and the Company sees appeal in M&A-led expan­sion because of opportunities to acquire both the human resource and the sales base. In line with its locality-centric business model, the Company plans to seek M&A opportunities with companies based in regions that can readily obtain synergies with existing customers.

◆Results trends

Sales and profits up sharply on rapid growth in Manufacturing Equipment Business

1. Review of FY3/18

The Company reported ¥23,483mn in net sales (up 37.2% YoY), ¥3,039mn in operating profit (up 119.2%), recurring profit of ¥2,983mn (up 116.9%), and ¥2,164mn in profit attributable to owners of parent (up 89.1%) in FY3/18, posting significant growth in both sales and income.

The Company raised full-year guidance a second time at the announcement of 3Q results, but ultimately exceeded these levels too.

The LCD panel production equipment industry, which is the Company’s main market, featured robust capital invest­ments again in FY3/18. OLED capital investments remained at a high level as well. In these conditions, the Company posted sharply higher sales at a 37.2% YoY increase on strong orders and deliveries of flexographic printers for alignment film production and lithography equipment light source units (MLS), its existing core products, and the delivery timing for a major deal in high resolution inkjet printers, a new product.

In earnings, meanwhile, Manufacturing Equipment Business generates a higher margin than the other two segments. The steep rise in this segment’s sales in FY3/18 improved overall product mix and thereby increased profit margin and fueled sharply higher earnings.

Boost to Manufacturing Equipment Business income from a major HRP deal amid generally upbeat FPD production equipment conditions

2. Earnings by business segment

(1) Lamp business

In FY3/18, Lamp business sales decreased 0.5% YoY to ¥3,634mn and the segment posted an operating profit of ¥3mn (down 96.6%).

Lithography equipment light source units (MLS) are increasing sales at a healthy pace among products handled by PHOENIX Electric. Ultraviolet lamps, an alternative light source for MLS, posted stronger sales in light of this trend. Nevertheless, Lamp Business sales slightly declined YoY due to impacts from a drop in general-purpose lighting lamps (including LEDs) and continuation of a contraction trend in projector lamps.

Segment operating profit fell sharply YoY, despite steady earnings from ultraviolet lamps as MLS alternative light sources, because of decline in the manufacturing plant’s operating rate with the slump in general-purpose lighting lamps that comprise the volume zone.

(2) Manufacturing equipment business

In FY3/18, Manufacturing equipment business sales increased 56.2% YoY to ¥15,403mn and operating profit jumped 117.4% to ¥3,236mn.

High resolution inkjet printers (HRP) were the driver of rapid income growth in the Manufacturing Equipment Business as explained earlier. The Company booked a large order for 60 machines in FY3/17 and shipped all of these machines, including accelerated deliveries, during FY3/18. This major order’s application appears to be OLED production with smartphones as the final user. However, even the Company itself does not have details on what will be printed or coated as well as on what materials or portion.

The Manufacturing Equipment Business has flexographic printers, plants, and “others” as sub-segments too. In flexographic printers, mainstay alignment film production equipment performed well. While some deliveries shifted to the next fiscal year because of activity related to HRP output during FY3/18, demand appears to have remained at a strong level. Plant business involves brokering and transferring used facilities and fluctuates substantially each year. Sales were down significantly YoY in FY3/18. However, existing orders suggest that sales are likely to double in FY3/19.

The “others” sub-segment consists of upkeep and maintenance and sales of consumables. Repair and mainte­nance income has grown to a sizable level with cumulative sales volume for the Company’s production equipment at over 50 systems (it rose sharply to well over 100 systems including the large HRP order). This area has substantially changed qualitatively tool, including realization of profitability in flexo plate (consumable) sales from FY3/17. Sales rose sharply YoY in FY3/18 with continuation of this positive trend.

(3) Human resource service business

In FY3/18, Human resource service business sales increased 23.8% YoY to ¥4,526mn and operating profit increased 19.6% to ¥217mn.

The Company develops engineer dispatch, design subcontracting, and manufacturing engineer dispatch business with a local-oriented approach. Income has been stable with support from improved staff quality and prompt and conscientious responses to customer requirements. Customer manufacturing sites face chronic manpower shortages. The Company has raised income with steady increases in the number of dispatched workers.

It reduced the FY3/18 segment sales target from ¥4,800mn in the period-start outlook to ¥4,200mn during the period. However, actual sales ultimately exceeded this level thanks to successful recruitment of engineers and manufacturing workers that supported robust demand for dispatches and consignments. Operating margin, meanwhile, slightly weakened from the previous year’s 5.0% to 4.8% on increased personnel hiring costs amid manpower shortages throughout society.

 

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