Bridge Report:（7590）Takasho fiscal year January 2022

President Nobuo Takaoka	Takasho Co., Ltd. (7590)

Company Information

Stock Information

*Stock price as of closing on April 4, 2022. Number of shares issued at the end of the most recent quarter excluding treasury shares. 
*ROE and BPS are based on FY January 2022’s results. DPS and EPS are the forecast for FY January 2023. The data is rounded off. 

Consolidated Earnings Trends

*Estimates are those of the Company. 
*Unit: million yen 

We present this Bridge Report along with the earnings results for fiscal year January 2022. 

Table of Contents

Key Points
1.Company Overview
2.Buisiness Development
3.Fiscal Year January 2022 Earnings Results
4.Fiscal Year January 2023 Earnings Forecasts
5.Mid/long-term Plan
6.Conclusion
<Reference: Concerning Corporate Governance>

Key Points

• In the fiscal year January 2022, sales and current profit grew 12.4% and 32.8%, respectively, year on year. As the demand for gardening was growing inside and outside Japan, the sales of Living Garden products in the fields of construction and renovation of detached houses for new lifestyles were healthy. Inside Japan, the professional use segment contributed the most, increasing its sales by 11.0%, and the home use segment grew its sales by 4.4%. Outside Japan, the company increased transactions with major retailers and the sales in the e-commerce segment were healthy, so sales grew considerably by 55.2%. Regarding profit, despite the rise in prices of raw materials, the skyrocketing of marine freight due to the shortage of containers, and the augmentation of advertising and marketing costs for upfront investment, operating profit margin improved from 6.3% in the previous fiscal year to 7.1%, thanks to sales growth, productivity enhancement, increases in the ratio of sales of in-house products and the ratio of e-commerce segment sales, etc.

   

• For the fiscal year January 2023, it is expected that sales and current profit will grow 11.7% and 7.1%, respectively, year on year. The company will keep striving to enhance its brand power as a garden lifestyle maker based on the 5th Room concept. In Japan, the company will promote activities of proposing garden spaces and marketing through DX, in response to the governmental policy of realizing daily life while coping with the novel coronavirus, and strive to strengthen its production system by enlarging the factories and installing production equipment at subsidiaries for in-house production, etc. Furthermore, the company will concentrate on the improvement of its brand power through TV commercials linked with social media. Outside Japan, a subsidiary for in-house production in China will enlarge its factory to increase production output, and sales activities in North America, Europe, and the Oceanian region will be enhanced. The company will also promote marketing activities in Southeast Asia. Regarding dividends, the company plans to pay a term-end dividend of 23.0 yen/share like in the previous fiscal year.

   

• It seems that their growth potential has increased further, due to the expansion of spending by housebound consumers caused by the spread of the novel coronavirus. In the fiscal year January 2022, the company achieved double-digit growth of sales and profit, despite the disturbance in maritime transportation and the skyrocketing of raw material prices. In particular, overseas business growth is remarkable. The overseas market size is significant, so the potential of the company’s business is high. In Japan, differentiation strategies based on DX would lead to the strengthening of competitiveness. Regarding profit, the profitability in overseas markets is low, except China, where there are production facilities, as the company posted a loss in Europe, so there is significant room for improvement. With respect to its share price, PER seems to be low, when the above-mentioned potential for growth and improvement is considered.

1. Company Overview

Takasho Corporation maintains a basic business concept of contributing to the “Creation of comfortable spaces” and handles garden exterior products. In the aftermath of the Second World War, Takasho changed its business style from sales of gardening materials to a gardening business, and then to a comprehensive lifestyle business, growing as a lifestyle maker that proposes better lifestyles with gardens. Its vision is to create mental and physical health and happy family lifestyles that bring smiles to the people. Takasho always forecasts future changes to accurately create new value that matches the market’s needs, and pursues its goal of becoming the “only global company” contributing broadly to gardening culture in urban environments. Its mission is “to be a company that provides better lifestyles globally through gardens.” The Takasho Group manufactures products in Japan and China for sale in Japan, Europe, Asia, Oceania and　the United States. The Group’s integrated structure with the ability to plan, manufacture and sell products has allowed it to become the leading company within the “gardening market,” which is growing to become a firmly established market in Japan. Takasho has 6 domestics and 13 overseas group companies. The Company listed its shares on the JASDAQ market in September 1998, and after a capital increase in 2012 and 2013, moved its shares to the Second Section of the Tokyo Stock Exchange on October 19, 2017, and to the First Section of the Tokyo Stock Exchange on July 9, 2018. The company chose the Prime Market, in the new market classification of TSE, which became effective on April 4, 2022.

Company Overview 

Corporate Mission  

(Taken from the material of the company)

Business Segment

(Taken from the material of the company)

Market

The scales of the domestic professional use market and DIY market, which are major targets of the company, are both 700 billion yen. The scales of the domestic contract segment and the overseas market, which is growing rapidly, are both as large as 14 trillion yen, so there is significant potential.

(Taken from the material of the company)

Topics

The company increased its capital through a public offering. The company plans to use the procured funds for the purposes and effects shown in the following figure, and will strive to complete the mid/long-term plan (which will be described in detail later).

(Taken from the material of the company)

2. Business Development

Business Operations 

The company has invested in mainly the factory for in-house products, but recently, it has been also investing in the factory of in-house software. Takasho GLD-LAB.Soft-Factory Tottori was opened in April last year.

(Taken from the material of the company)

DX (Digital Transformation) 

In May, TAKASHO GARDEN LIFE DESIGN LAB PHIL. Corp. was established in the Republic of the Philippines to accelerate DX development.
The company established Takasho VR Park

(Taken from the website of the company)

In addition, the company handles useful tools and content tools, which will be proposed further through DX.

(Taken from the material of the company)

Proposal for Packages 

(Taken from the material of the company)

Home Use Initiatives 

The company proposes a lifestyle suited for various hobbies and interests.

(Taken from the material of the company)

Characteristics of the home use segment

The home use segment operates business internationally. Products are manufactured in Jiujiang, China, and sold inside and outside the country. A new factory was built, and the current area of premises is 30,000 tsubo (≒ 99,000 m2). The company implements its brand strategy by using online and real sales routes.

(Taken from the material of the company)

According to a survey of Takasho, the scale of the target overseas home use market is about 5 trillion yen in the U.S., about 4.7 trillion yen in India, 4 trillion yen in the U.K., and 2.3 trillion yen in Germany, totaling 17.2 trillion yen. The sales of Takasho amount to 930 million yen in the U.S. and 980 million yen in the U.K. Namely, there is great potential.

The Value Takasho Provides

(Taken from the material of the company)

SDGs Initiatives 

Takasho contributes to society through the sustainable development goals based on the principle of always anticipating change, creating new value, and contributing widely to the creation of urban environment garden culture. 

(Taken from the material of the company)

3. Fiscal Year January 2022 Earnings Results

3-1 Consolidated Earnings 

*Unit: million yen
*The figures include figures calculated by Investment Bridge Co., Ltd. as reference values, so they may differ from actual figures (the same shall apply hereinafter).

Sales increased 12.4% and ordinary income increased 7.4% year on year respectively
Sales were 20,781 million yen, up 12.4% from the previous fiscal year.
In the domestic field of exterior products for gardens, demand is growing in parallel with the increase in housing starts. Amid the spread of the novel coronavirus, housebound consumers hope to realize stress-free garden life by adding nature to their lives, such as flowers and plants, so people around the world are shifting to houses with gardens and housing in suburban areas. In such an environment, the company has strived to enhance activities of proposing and marketing garden spaces through DX, for example, by offering Metavergarden apps for AR and CG and opening online showrooms, and strengthen production systems for customization, to enable customers in domestic and overseas markets to enjoy nature and seasons and lead a comfortable life with a garden based on the 5th Room concept. Inside and outside Japan, sales grew from the previous fiscal year, thanks to the increase in housing starts and the favorable sales of Living Garden products in the renovation field, in response to the spread of new lifestyles. In addition, the sales of low-voltage LED lamps, which illuminate gardens in the night, increased 12.2% from the previous fiscal year, because there was growing demand from hotels and commercial facilities in addition to general houses for lifestyles with landscapes or designs that change with time and occasions, such as season, sunset, and weekend.
The sales of the domestic professional use segment increased 11.0% year on year to 12,337 million yen. In cooperation with major agencies and enterprises that install equipment, the company promoted a business model of having customers see products in an online showroom, which is available 24 hours a day, and receiving orders at actual showrooms of gardens and exteriors, which are scattered around Japan, differentiating its services from competitors. Such efforts paid off. In addition, the company can handle custom orders. It gave a proposal for a lifestyle with a garden through Façade Exterior & Living Garden, which offers various colors suited for customers’ interests and preferences, while utilizing both online and real contents. The number of housing starts increased in fields of privately owned houses, houses for rent, and houses for sale, and the number of orders received by major house builders increased from the previous fiscal year, so the sales of Living Garden-related products, including the core product Home Yard Roof, increased. The sales of the home use segment grew 4.4% from the previous fiscal year to 5,868 million yen. While the demand for gardening remained strong due to the change in lifestyles caused by the novel coronavirus inside and outside Japan, the original equipment manufacturing (OEM) at the company’s factory in China for Japanese chain stores increased, and overseas sales grew, so total sales rose.
Operating profit rose 27.4% from the previous fiscal year to 1,474 million yen.
Regarding profit, despite the rise in prices of raw materials, the skyrocketing of marine freight due to the shortage of containers, and the augmentation of advertising and marketing costs for upfront investment, operating profit margin improved from 6.3% in the previous fiscal year to 7.1%, thanks to sales growth, productivity enhancement, increases in the ratio of sales of in-house products and the ratio of e-commerce segment sales, etc. Regarding non-operating profit, exchange gain was posted, current profit rose 32.8% from the previous fiscal year to 1,530 million yen, and there was no longer gain on reversal of foreign currency translation adjustment, which was posted in the previous fiscal year, so parent net profit rose 5.1% from the previous fiscal year to 1,001 million yen.

*Unit: million yen 
* Composition of operating income is on a consolidated basis before consolidation adjustments

3-2 Financial Conditions

*Unit: million yen
*Interest Bearing Liabilities = Debt + Bonds + Leases

The total assets as of the end of January 2022 stood at 23,665 million yen, up 3,974 million yen from the end of the previous fiscal year.
Current assets grew 3,732 million yen from the end of the previous fiscal year to 15,920 million yen. This is mainly because cash and equivalents rose 1,657 million yen to 5.6 billion yen and merchandise and finished goods increased 1,172 million yen to 3,998 million yen. Noncurrent assets grew 241 million yen from the end of the previous fiscal year to 7,745 million yen. This is mainly because buildings and structures increased 184 million yen to 3,643 million yen and intangible assets rose 82 million yen to 496 million yen.
Total liabilities augmented 426 million yen from the end of the previous fiscal year to 10,601 million yen.
Current liabilities rose 1,150 million yen from the end of the previous fiscal year to 9,974 million yen. This is mainly because payables increased 1,582 million yen to 4,584 million yen, short-term debt decreased 208 million yen to 3,734 million yen, and current portion of long-term debt dropped 316 million yen to 39 million yen. Noncurrent liabilities declined 723 million yen from the end of the previous fiscal year to 627 million yen. This is mainly because long-term debt, which had increased for boosting the corporate finance for coping with the novel coronavirus was reduced by 660 million yen to 111 million yen through repayment, etc.
Total net assets grew 3,547 million yen from the end of the previous fiscal year to 13,064 million yen. This is mainly because capital stock increased 1,222 million yen to 3,043 million yen through capital increase, capital surplus grew 1,232 million yen to 3,094 million yen, and retained earnings rose 709 million yen to 6,137 million yen.
Capital-to-asset ratio was 54.8% (47.9% at the end of the previous fiscal year).

As of the end of the fiscal year January 2022, cash and equivalents stood at 5.6 billion yen, up 1,657 million yen from the end of the previous fiscal year.
Operating CF increased 1,484 million yen (it rose 1,899 million yen in the previous fiscal year). This is mainly because net profit before taxes and other adjustments was 1,525 million yen (1,218 million yen in the previous fiscal year), inventories increased 1,348 million yen (it decreased 416 million yen in the previous fiscal year), and payables augmented 1,448 million yen (it augmented 210 million yen in the previous fiscal year).
Investing CF decreased 708 million yen (it decreased 438 million yen in the previous fiscal year). This is mainly because the company spent 511 million yen for acquiring tangible assets (268 million yen in the previous fiscal year) and 145 million yen for acquiring intangible assets (170 million yen in the previous fiscal year).
Financing CF increased 741 million yen (it dropped 307 million yen in the previous fiscal year). This is mainly because the company posted a net expenditure of 985 million yen for repaying long-term debt for strengthening the corporate finance for coping with the novel coronavirus (a net revenue of 899 million yen in the previous fiscal year) and a revenue of 2,421 million yen by issuing shares for the purpose of enhancing mid/long-term growth potential and profitability.

4. Fiscal Year January 2023 Earnings Forecasts

4-1 Consolidated Earnings 

*Unit: million yen

In the fiscal year January 2023, it is expected that sales and current profit will grow 11.7% and 7.1%, respectively, from the previous fiscal year.
For the fiscal year January 2023, it is forecast that sales will grow 11.7% from the previous fiscal year to 23,204 million yen and current profit will rise 7.1% from the previous fiscal year to 1,639 million yen.
The business environment is projected to remain uncertain, due to difficult-to-predict risks of global turmoil and voluntary restraint of going out in the novel coronavirus pandemic. Meanwhile, the demand for garden exterior products is expected to keep growing, as people stay home for longer hours, due to the increase of housing starts and the spread of new lifestyles. In such a business environment, the company will make continuous efforts to enhance its brand power as a garden lifestyle maker to enable customers to enjoy nature and seasons and lead a comfortable life with a garden, based on the 5th Room concept in the fiscal year January 2023. In Japan, the company will promote activities of proposing garden spaces and marketing through DX, in response to the governmental policy of realizing daily life while coping with the novel coronavirus, and strive to strengthen its production system by enlarging the factories of subsidiaries, installing production equipment, etc. for customization. Furthermore, the company plans to concentrate on the enhancement of its brand power through TV commercials linked with social media. Outside Japan, the company will enlarge the factory of a subsidiary in China to boost in-house production output, and strengthen sales activities in North America, Europe, and Oceania. It will also conduct marketing activities in Southeast Asia. Regarding SG&A, the company will strive to reduce expenses by promoting AI, AI-OCR, and robotic process automation (RPA), in order to improve the efficiency of business operations and productivity.
Regarding dividends, the company plans to pay a term-end dividend of 23.0 yen/share like in the previous fiscal year.

5. Mid/long-term Plan

In the mid/long-term plan, the company aims to achieve sales of 30 billion yen and a current profit of 2.5 billion yen in the fiscal year January 2026. For sales, they aim to earn 50 billion yen in the fiscal year January 2030 and 100 billion yen in the fiscal year January 2050. For profit, they plan to grow them in line with the sales growth.
Compared with the previous plan, fiscal year January 2026 was added, and the forecast sales and profits from fiscal year January 2023 to fiscal year January 2025 have been revised upwardly.

(Taken from the material of the company)

*Unit: million yen

6. Conclusion

It is considered that the company has gotten out of the period of trial and error from fiscal year January 2015 to fiscal year January 2019, in which there were burdens of upfront investment and sluggish sales, and returned to the growth track. It seems that growth potential has increased further, thanks to the expansion of spending by housebound consumers amid the spread of the novel coronavirus. In fiscal year January 2022, sales and profit grew by double digits, despite the disturbance of maritime transportation and the skyrocketing of raw material prices. In particular, the growth of overseas business is remarkable. The overseas market is huge, so growth potential is significant. In Japan, we would like to pay attention to their activities for DX. Takasho VR Park can be said to be their culmination. From various aspects, customers can try the company’s products. Such strategies for differentiation are expected to strengthen their competitiveness in Japan. Regarding profit, the company improved profit margin steadily by streamlining business operations through DX. Outside Japan, profitability is low, except China, where there is a production site, as a loss is posted in Europe. There remains significant room for improving profit by expanding sales. Regarding the company’s share price, PER is considered to be low, when the above-mentioned potential for growth and improvement is considered.

<Reference: Concerning Corporate Governance>

◎ Organizational structure and composition of directors and corporate auditors 

◎ Corporate Governance Report
Last updated: December 27, 2021

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