| OPTEX CO., LTD. (6914) |
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Company |
OPTEX CO., LTD. |
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Code No. |
6914 |
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Exchange |
TSE 1st Section |
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Industry |
Electric equipment (manufacturer) |
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President |
Toru Kobayashi |
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HQ Address |
5-8-12, Ogoto Otsu, Shiga |
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Year-end |
December |
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URL |
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* Stock price as of the close on August 6, 2014. Number of shares at the end of the most recent quarter excluding treasury shares.
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* Estimates are those of the Company.
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| Key Points |
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| Company Overview |
 Business Description   Advantages : Diversified Technologies/Expertise on Sensing and Unique Sensing Algorithm  History Recently, it has been working on enhancement of solutions based on image processing technologies and high-end security systems. In 2008, it acquired ZENIC INC., which specialized in contracted development of IC/LSI for image processing systems. Furthermore, it acquired FIBER SENSYS INC. (US) in 2010 and RAYTEC LIMITED (UK) in 2012 respectively. The former has abundant experience in high-end security systems (fiber-optics intrusion detection systems) for critical sites in US and Europe. The latter deals with supplemental lighting systems using infrared rays for CCTV installed in high-end security systems for large critical sites.  |
| Fiscal Year December 2014 1H Earnings Results |
 Sales Up 12.5% yoy and Ordinary Profit Up 12.9%
Sales for 1H rose 12.5% to ¥12.517 billion. Overseas sales increased 15% due to the correction to yen exchange rate, especially in Europe (up 19% yoy), and domestic sales also increased 8% yoy driven by strong FA Business. Three main business segments recorded double-digit sales growth: Security-related grew 13%, Automatic door-related 15% and FA 17% respectively.In terms of profitability, the company benefited from the weakening yen and the better sales mix (higher share of profitable Sensing business and lower share of EMS business), which pushed up the cost ratio by 1.3 pp to 46.2%. This has absorbed an increase in expenses at overseas subsidiaries and labor costs as well as an increase in SG&A costs including the sett-up costs of integrated Sales Head Quarters in four main areas under the new organization, exhibition-related expenses in US and UK and various expenses at a joint venture established by a subsidiary. As a result, operating profit rose by 38.8% yoy to ¥1.380 million. On the other hand, ordinary profit grew only by 12.9% due to exchange loss of ¥106 million (compared to exchange profit of ¥178 million in the previous year). The company revised its earnings estimates on 13 June and now expects sales to be ¥12.6 billion, operating profit ¥1.44 billion, ordinary profit ¥1.46 billion and net profit ¥880 million. As the profits generated by subsidiaries were lower than expected, the deviation from the revised estimates has become larger. Falling profitability due to the unfavorable changes in sales mix and various expenses at joint ventures put downward pressure on profits.  Quarterly Earnings
  Sensing Business
Sales rose by 13.4% yoy to ¥8.807 billion and operating profit rose by 48.4% yoy to ¥954 million. By segment, Security-related sales were ¥6.416 billion (up 12.7% yoy) and Automatic door-related sales were ¥2.082 billion (up 14.7% yoy). As for Security-related business, overseas sales expanded significantly driven by the robust sales of outdoor security sensors for general residences in Southern Europe and the better performance at the sales subsidiary in South Korea. Domestic sales also improved from the previous year, absorbing a fall in nuclear power plant-related sales by developing new customers in solar electric generation-related business and the solid sales of products for security companies. With regard to Automatic door-related business, overseas sales increased mainly in Europe, where sales to both automatic door manufacturers and distributors recorded strong growth. Meanwhile, domestic sales remained solid as the reverse effect from the last-minute demand before the hike of consumption tax turned out to be minor, while the construction-related demand surged.
FA Business
Sales increased 17.3% yoy to ¥2.541 billion, while operating profit decreased 18.6% to ¥114 million. Overseas sales expanded due to strong growth in Europe (mainly sales at SICK in Germany) and in Asia (contribution from a newly established joint venture in China). Domestic sales also increased on the back of aggressive investments by logistics, electronic components and automobile industries. However, profits slumped due to falling profitability after the unfavorable changes in sales mix and the increase in SG&A costs with the start of full operation at a joint venture in China.
EMS Business
Sales declined by 11.3% yoy to ¥355 million, while the segment profits surged by 140.6% yoy to ¥77 million. The decrease in orders led to a drop in sales but the improvement in the cost ratio pushed up the profits.
  
∗ROE(return on equity) is calculated by multiplying three elements: 'net profit margin' (net profit divided by sales), 'total assets turnover' (sales divided by total assets) and 'leverage' (total assets divided by equity capital). ROE = Net Profit Margin × Total Assets Turnover × Leverage
∗Although the above numbers are calculated based on the summary of financial results and the financial statements published by the company, the numbers of total assets and equity capital used for the calculation are mean values during each term (mean of the balances as of the end of previous term and current term). As the capital ratio stated on the summary of financial results or the financial satetements is calculated using equitiy capital as of the end of the term, its reciprocal and the numbers of leverage on the above table may differ. |
| Fiscal Year December 2014 Earnings Estimates |
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No changes for Revised Earnings Estimates as of 13 June: Sales Up 13.2% yoy and Ordinary Profit Up 14.2% yoy
The company expects sales and profits continue to expand in 2H of FY12/14 compared to the previous year and the half-year, however, it has slightly revised down profit estimates for 2H due to 'slower pace of economic recovery than expected'. Year-end dividends are scheduled to be ¥15 (total annual dividends will be ¥35 with ¥20 for 1H which includes special dividends of ¥5 to celebrate the 35th anniversary of the company's foundation).
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| Progress in Business Strategies |
 Strategies for each business are as follows: Security-related Business
Two pillars of business strategies in EMEA (the company's main focus area) are 1) to maintain the largest share in the outdoor security sensor market and 2) to enter into Middle East and African markets. On the back of heightening security consciousness, outdoor security sensor has now become fast-growing market with high potential. Demand for high-end sensors for oil-related facilities is rising in Middle East, while many projects are in progress in African countries. Americas are the second important area after EMEA for the company, where it intends to focus on Visual Verification. In US, police normally dispatches its officers to actual sites after confirming intruders on security cameras (some states have revised the legislation in that way), so demand for alarm systems equipped both with a sensor and a camera is growing. Meanwhile, in Japan, the company focuses on expanding sales of high-end security products for solar power companies as well as promoting system using LED lighting to parking lots and car dealers. In Asia, it tries to enhance sales of high-end products to meet an increasing demand created by infrastructure building as well as self-protection products for residential markets. According to the company, the security market is worth ¥10 trillion worldwide, of which ¥8 trillion is dominated by cash transport and call for services and the remaining ¥2 trillion is the equipment market. Within the latter, the market for security camera system is said to be worth ¥800 billion and the alarm system ¥300 billion, of which intrusion sensors account for ¥100 billion (¥30 billion for outdoor sensors). Honeywell keeps the largest share of 18.5% within the intrusion sensor market followed by tyco (11.5%), United Technologies (10.0%), OPTEX (7%), and BOSCH (6%). OPTEX plans to meet demand for overall security system by reinforcing products such as sensor cameras and lighting for cameras. Automatic Door-related Business
EMEA is the prime area for the company's automatic door-related business and it focuses on enhancing the product line-up which is compliant to European safety/product standards (enhancement of the product line-up for major sensors have completed). It now plans to enhance peripheral equipments and to build relationships with automobile makers based on trust by sharing business road maps. In Americas, another important area along with EMEA, the company tries to differentiate itself by its superior infrared technology. Specifically, it highlights the reliability of its infrared technology by installing 'doorway detection function' to all models. Furthermore, the company plans to launch appropriate products to maintain high level of customer satisfaction. And in Asia, where products with high quality and reliability have become widespread, it strives to work together with local makers in order to improve efficiency in sales activities. New Business Fields
The company drives forward its growth strategy in accordance with 'Matrix of Business Development', using matrices of market development and product development to achieve four strategic goals: 'expansion of core businesses', 'development of new application', 'development of newly emerging markets' and 'entry into new business fields'. New business fields include electric railway, public transport and vehicle detecting and the actual business plans for these fields are currently being drawn up in US and UK.In UK, an increasing number of laser scan sensors have been installed to prevent accidents at railroad crossings. Meanwhile, sensors for parking meters are under the proving tests in US.  ※ FA Business (scope of business of consolidated subsidiary OPTEX FA Co., Ltd.)
OPTEX FA aggressively offers solutions to automobile, semiconductor, electric/electronics, food/pharmaceutical/cosmetics, logistics and other industries to acquire new customers in Japan and overseas (particularly in emerging markets). As a part of this effort, it intends to reinforce the existing partnership with Mitsubishi Electric and explores other collaboration opportunities in Japan. In China, where production automation is under way, the local distribution company (joint venture) has officially started operation.
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| Conclusions |
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Under these circumstances, OPTEX has been providing sensor lights (lights with a dimming control function), which detect intruders by sensors and intimidate them by irradiating light to them, to parking lots at various facilities and toll parking lots. In addition, the company has several leading companies in this filed within its group such as ZENIC Inc. (develops IC and LSI for image processing), RAYTEC LIMITED. in UK (deals with supplemental lights for CCTV cameras to enable high-resolution images) and FIBER SENSYS INC. in US (deals with fiber-optic intrusion detection systems). The market expansion for security systems combining these existing products with cameras should provide major business opportunities for the company and we look forward to future developments. 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) 2014 Investment Bridge Co., Ltd. All Rights Reserved. |
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