Summary: RIZAP Group<2928>The comprehensive enterprise, which is committed to proving that "people can change" as its unique management philosophy, develops a variety of businesses in the three areas of health creation, health care / beauty, lifestyle, and investment. Under the vision of "Global No.1 in the self-investment industry", it has achieved remarkable growth by actively utilizing M&A under the holding company structure and has grown to include 68 group companies, including 5 listed subsidiaries, and 4,606 consolidated employees. Listed on the Sapporo Stock Exchange's Ambitious Market in 2006, it formulated a medium-term management plan in September 2022, but revised it in February 2024 to achieve an operating profit of ¥400 million (fiscal year ending March 2027) by aggressively expanding the new business "chocoZAP". The fiscal 2024 performance was sales revenue of ¥16,629.8 million (+7.6% YoY), operating loss of ¥594 million (compared to a loss of ¥4948 million in the same period of the previous year), pre-tax loss of ¥4524 million (compared to a loss of ¥7,031 million in the same period of the previous year), and net loss attributable to the owners of the parent of ¥4,300 million (compared to a loss of ¥12,673 million in the same period of the previous year). Due to the black ink conversion of the chocoZAP business, it achieved a black ink of ¥417.5 million on an operating profit basis in the fourth quarter alone. As for sales revenue, the RIZAP-related business (including the chocoZAP business) significantly increased its revenue (+¥201 million) by focusing on expanding the convenience gym "chocoZAP". In existing businesses, there was an increase in revenue, including Antiroza Co., Ltd. (+¥419.8 million), while there was a decrease in revenue due to store structure reform in REXT Co., Ltd., etc. (-¥599.8 million) and the impact of selling the Sikata business under the subsidiary BRUNO<3140>at the end of the previous year (-¥511.1 million). As for operating loss, the group as a whole improved due to the transition of the chocoZAP business to the investment recovery period and the success of business portfolio reform such as REXT.
Quanzhou Electric <9824> is the top domestic comprehensive specialty trading company for independent electric wires. With about 250 suppliers and an inventory of about 50,000 items, its delivery system of delivering "the necessary products in the necessary amounts at the necessary times" is a strength. It differentiates itself with its self-developed original products.
2Q FY2024 consolidated financial results (actuals)
For the 2Q of FY2024, the consolidated sales revenue was 661.25 billion yen (+6.9% YoY), operating profit was 51.04 billion yen (+18.6% YoY), ordinary profit was 53.27 billion yen (+18.8% YoY), and net income attributable to parent company shareholders was 36.74 billion yen (+22.7% YoY), with both sales revenue and profit reaching a new record high. The average copper price was 1,322 thousand yen/t (+8.1% YoY). The main reason for the increase in revenue was due to solid real demand and high copper prices. However, the 2Q (accounting period) was slightly sluggish compared to the 1Q, with some for certain clients. The gross profit margin improved by 0.6 points YoY due to changes in the product mix, and the operating profit increased by 18.6% YoY as sales expenses remained within the budget while expenses increased by 5.3% YoY.
FY2024 consolidated financial results (forecast)
For the full FY2024, the consolidated sales revenue is expected to be 1,320.00 billion yen (+5.6% from previous year), operating profit to be 96.00 billion yen (+14.7% from previous year), ordinary profit to be 100.00 billion yen (+14.0% from previous year), and net income attributable to parent company shareholders to be 70.00 billion yen (+18.2% from previous year). These forecasts have been revised upwards from the forecast at the time of the 1Q earnings report (operating profit of 92.00 billion yen, ordinary profit of 95.00 billion yen, net income attributable to parent company shareholders of 66.00 billion yen) due to higher average copper prices at 1,482 thousand yen/t (+20.3% from previous year). In addition to solid demand for automobiles and ongoing improvement in profit margins for construction, it is expected that sales to the semiconductor manufacturing equipment industry that was somewhat sluggish in the first half will recover in the second half. However, given that recent copper prices have been volatile, we need to be even more attentive to future price movements.
Mid-term management plan: operating profit target of 10.0 billion yen within reach, possibility of announcing new plan
The company has announced a mid-term management plan that ends with FY2026. While the main important initiatives are not significantly different from before, it has set quantitative targets of 150.0 billion yen in sales revenue, 10.0 billion yen in operating profit, and ROE of 10.0% or higher for FY2026. However, considering that the forecast operating profit for FY2024 is already revised upward to 10.0 billion yen, it is highly likely that this target will be achieved during the middle of the mid-term management plan. Therefore, we expect that a new mid-term management plan will be announced at the end of FY2024. We are looking forward to the content and quantitative targets of this new plan, as well as the qualitative changes that the company will undergo.
Positive attitude towards shareholder returns and improving capital efficiency
The company's financial structure is sound, and it aims to improve capital efficiency by targeting an ROE of 10.0% or higher. As a specific measure to achieve this, it continues to increase its dividend payout, and for the previous fiscal year, it initially planned an annual dividend of 80 yen per share, but ultimately increased it to 110 yen per share due to its strong performance. Furthermore, for the ongoing FY2024, it has already announced an increase in dividends to 130 yen per share (65 yen for the first half, 65 yen for the second half) following the strong results of the first half, which means that an actual increase in dividends has been made for 11 consecutive years※. In addition, the company is actively and continuously buying back its own shares. Until April 10, 2024, it had already completed the purchase of 270 thousand shares (JPY 1 billion), and it has announced that it will buy back additional 100 thousand shares (JPY 500 million) from June to the end of October 2024. Furthermore, on December 14, 2023, it canceled the 1,500 thousand shares of its own shares it owned. The company's proactive stance towards shareholder returns and improving capital efficiency should be highly evaluated.
※In FY2019, a commemorative dividend of 5 yen for the first half and 5 yen for the second half was implemented to celebrate the company's 70th anniversary.
Additionally, the company is aggressively and continuously conducting share buybacks. For the ongoing fiscal year, it has already completed JPY 1 billion share buybacks up until April 10, 2024, and it has announced that it will conduct an additional JP¥ 500 million share buyback from June to the end of October 2024. Furthermore, on December 14, 2023, it cancelled 1.5 million treasury shares it owned. The company's proactive approach to shareholder returns and improving capital efficiency should be highly commended.
■Key Points
As an independent company, it is one of the top wire comprehensive trading companies in the industry, aiming to differentiate itself with original commodities.
Revenue and profit are expected to increase by 14.7% compared to the previous period for the October 2024 fiscal year.
As a target in the mid-term management plan, it aims to achieve an ordinary profit of 10 billion yen in the October 2026 fiscal year, which is well within range by the October 2024 fiscal year.
(Written by FISCO guest analyst Noboru Terashima)