Summary of Midac Holdings <6564> Business
3. Trend by Segment
The trend of segment sales, operating profit, and operating margin for the past six periods (March 2019 to March 2024) is that high-profit waste disposal business accounts for approximately 90% of revenue and operating profit, in terms of composition. The main waste disposal business is expanding both in revenue and operating profit. Operating profit margin is also on the rise, increasing by 17.9 points from 35.5% in March 2019 to 53.4% in March 2024. In addition to the effect of expanding business scale, the high profitability of waste incineration (intermediate treatment) and final disposal in revenue composition has also contributed to this. The expansion of waste disposal business is driving an increase in the consolidated operating profit margin, increasing by 13.6 points from 23.5% in March 2019 to 37.1% in March 2024. It is also characterized by an extremely high-profit structure.
Governance strengthened against legal regulatory risk, small market competition risk
4. Risk factors, issues and countermeasures
As general risk factors in the industrial waste processing industry, there are legal regulation, increase and decrease of waste emissions due to waste disposal law and related laws and economic fluctuations, intensifying market competition, and so on. Regarding legal regulations, the company strives to comply with compliance by strengthening the group's governance to avoid administrative sanctions such as business suspension orders or license cancellations. For final disposal sites, when the designated filling capacity is filled, the operation is terminated. In order to develop a new final disposal site, it is necessary to conduct prior consultations with the local government, select and acquire land, conduct an environmental assessment survey, and explain to the local residents. The company is promoting the development plan of a new final disposal site according to its medium- to long-term business plan since it takes a considerable period of time. Regarding waste emissions, significant changes are not expected for the time being, and certain waste emissions are predicted to continue in the future. With regard to market competition, the industrial waste processing industry has many small and medium-sized businesses that only collect and transport or process intermediates, but the company group maintains its competitive advantage by establishing a consistent processing system. Therefore, we consider that the risk of business deterioration due to intensified competition is small.
When the designated landfill capacity is reached, the operation is terminated for the final disposal site. However, to develop a new final disposal site, it is necessary to hold prior consultations with the local government, select and acquire land, conduct environmental assessment surveys, and explain to local residents, and then begin construction after obtaining permission from the local government. It takes considerable time, so the company is promoting a plan to develop a new final disposal site in line with its medium- to long-term business plan. As for the amount of waste generated, there is no significant change in the short term, and it is predicted that a certain amount of waste will continue to be generated in the future. As for market competition, the industrial waste disposal industry has many relatively small-scale operators who only collect and transport or only engage in intermediate treatment, while the company group maintains a consistent processing system and maintains competitive advantages. Therefore, we believe that the risk of performance deterioration due to increased competition is small.
(Authored by FISCO guest analyst Masanobu Mizuta)