(4172) Towa High Systems - New Analyst Report 6/28

1. Company Overview

・Towa High Systems (hereafter, the company) is an enterprise that develops and provides an integrated system for dental clinics based on electronic medical records.

2. Financial analysis

・In the period from fiscal year 15/2 to fiscal year 23/9, sales remained flat, and ordinary profit declined at an annual rate of 0.5%. After going through a period where profits did not grow by prioritizing strengthening the internal management system, it improved over the 21/9 period, but sales and profit declined continuously in the 22/9 and 23/9 periods.

・When comparing financial indicators with listed companies that provide systems for medical institutions, although safety is high, their small scale and low growth potential are conspicuous. Also, due to the low total asset turnover ratio, ROE, which indicates profitability, remains at a low level.

3. Non-financial analysis

・The source of the company's intellectual capital is the founder's commitment (human capital) over many years. The centralized strategy specialized in systems for dental clinics was successful, and the customer base (related capital) was expanded mainly in western Japan through highly advantageous product development and sales strategies suited to the products. This led to the accumulation of system development know-how (organizational capital), and a virtuous cycle leading to the next product development began to be drawn.

4. Analysis of management strategies

・Issues to be addressed include expanding sales of AI and voice series, developing customers and expanding market share in the Kansai and Tokyo metropolitan areas, and securing human resources.

・For the time being, the policy is to concentrate on business expansion by expanding sales of AI and voice series developed in collaboration with Hitachi, Ltd. (6501 Tokyo Stock Exchange Prime).

5. Analyst Assessment

・The Securities Research Center has adopted a centralization strategy that specializes in systems for dental clinics, and is evaluating the fact that it has built a unique style not only for product development, but also for sales and support.

・Sales trends for the AI and voice series, which are currently continuing to release new products, will be the focus for the time being. Since it is the first product in the industry to have functions, in addition to introducing it to existing customers, I would like to pay attention to how much it can contribute to the acquisition of new customers.