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リケンNPR Research Memo(11):第一次中計期間の3年平均総還元性向70%以上を目途に還元水準引き上げへ

Riken NPR Research Memo (11): Aim to raise the level of return by targeting an average total return rate of 70% or more during the first mid-term plan period.

Fisco Japan ·  Jul 11 00:51

■ Growth strategy 1. Business environment Considering the business environment surrounding the "AIAI Three Education Zones" developed by the AIAI group <6557>, AIAI NURSERY in the field of licensed nursery schools is expected to experience a large shift in nursery policies from 2024, as the organization responsible for child and family services was established in April 2023 with the aim of improving the quality of early childhood education and care, and as a response to the "unprecedented decline in the number of children" in Japan. However, despite the encouragement from the government, the saturated market feeling cannot be ignored due to the declining birth rate and the significant reduction in the number of newly opened nursery schools, taking into account factors such as the resolution of the waiting list problem in the industry. We also believe that the elimination of small-scale operating companies, considering the shortage of childcare workers, is a possibility to consider. On the other hand, the number of children with developmental disabilities is increasing even in the declining birth rate, and the demand for facilities for disabled children (child development support, medical child development support, after-school day services, visit support for nursery facilities, etc.) is rapidly increasing. Considering this situation, we believe that, not only is the business environment for AIAI PLUS and AIAI VISIT positive, the business environment for the "AIAI Three Education Zones", which provides integrated child care, therapeutic care, and education, is also favorable. 2. AIAI Group Mid-term Management Plan 2023-2025 The company formulated the AIAI Group Mid-term Management Plan 2023-2025 in May 2023, which incorporated a reconsideration of the position of the tech field, the construction of new business models such as nursery school visit support (AIAI VISIT) and early childhood education programs. The target figures are listed as sales of 12-13 billion yen and operating profit of 300-500 million yen in the final fiscal year ending March 2026, and cumulative investment of 680 million yen over three years. In the first term of the plan, ending in March 2024, sales and operating profit exceeded the final year target value, and the total number of children, the total number of visits to nursery facilities, and the total number of internal license holders all exceeded the plan. The growth strategy is progressing smoothly, and there is no major change in the basic strategy of maximizing group synergy through the "AIAI Three Education Zones". Regarding AIAI NURSERY, considering the situation in which the speed of opening licensed nursery schools is slowing down throughout the industry due to the resolution of the waiting list problem, the company will slow down the speed of opening new facilities with the maturity of the market in mind. However, in addition to continuing to expand into regions with high needs and high investment efficiency, the company will promote efforts to reorganize the industry. On the other hand, due to the growing demand for facilities for disabled children, AIAI PLUS will be developed as a pillar of growth after AIAI NURSERY, and the expansion of AIAI VISIT will be fully implemented in the Tokyo metropolitan area as a new business model. Regarding the expansion of AIAI VISIT, securing specialized visiting support personnel is an important point, so we will strengthen our approach from a variety of channels and promote the excavation of potential qualified persons. 7. Corporate-related initiatives In terms of financial and capital aspects, the company will continue to improve its self-capital and aim to support the stable growth of its business from a financial perspective. In terms of human capital, we will promote the creation of a work environment in which all employees at the facilities and offices can work comfortably and foster human resources. In AIAI NURSERY and AIAI PLUS, we will increase the options for work styles based on the preferences and stages of life of the employees working in the facilities, and establish a workplace environment where work and family can be balanced.

4. Shareholder return policy

Riken NPR <6209> positions the return of profits to shareholders as an important management issue, considering the balance between investment for growth and corporate value improvement, and financial soundness. It aims to continue stable dividends, while conducting flexible share buybacks and implementing shareholder returns that consider capital efficiency and total return tendencies. Based on this basic policy, the first medium-term management plan aims to raise the dividend payout ratio to over 40% (currently about 30%), the total return tendency including self-share buybacks to over 70% on average over three years (currently about 30%), a self-share buyback of 10 billion yen over three years, and to raise shareholder return levels. This is expected to result in a DOE of 3% as of March 2027.

The dividend for the fiscal year ending March 2024 was 70 yen (payable at the end of the fiscal year), consisting of a regular dividend of 45 yen and a commemorative dividend of 25 yen. The dividend payout ratio was 6.4%, but the negative goodwill resulting income pushed the net income attributable to the parent company's shareholders higher, making it an irregular figure. The actual dividend payout ratio calculated based on the net income attributable to the parent company shareholders excluding the negative goodwill resulting income, including the interim dividend of 21.00 yen, was 36.0% with a total dividend of 91.00 yen. The dividend for the fiscal year ending March 2025 is expected to be 115 yen (45 yen at the end of the second quarter and 70 yen at the end of the fiscal year) with a dividend payout ratio of 40.4%. The company purchased 1,368,400 shares of its own shares through off-auction trading of its own shares (ToSTNeT-3) in May 2024, at a total acquisition price of 399.9 million yen, and the total return tendency for the fiscal year ending March 2025, including this, is expected to be 90%.

5. Sustainability management

The company promotes sustainability management, which is essential for the sustainable growth of the company and society, based on six main items of sustainability management (strengthening initiatives for carbon neutrality, promoting DE&I, contributing to the local community, improving corporate governance, improving employee engagement and human resource development strategies, and building a secure and safe workplace). As sustainability goals (KPIs), the company aims to reduce GHG emissions by 39% compared to the fiscal year ending March 2014 (51% by the fiscal year ending March 2031), achieve a female management ratio of 3% or more in Japan and 7% or more on a consolidated basis, achieve a male childcare leave acquisition rate of 50% or more in Japan, achieve a practical rate of practicing the code of conduct established in March 2024 of 80% or more on a consolidated basis by the fiscal year ending March 2027, and increase employee human resource development investment by 30% on a consolidated basis compared to the fiscal year ending March 2023. To strengthen its initiatives for carbon neutrality, the company promotes electrification of Kewpara (casting equipment), upgrading to high-efficiency equipment, introducing photovoltaic power generation, developing small-scale wind power generation systems, procuring renewable energy, purchasing green power certificates, and utilizing J-credits (carbon offsetting), among others.

Expect the full-scale realization of synergy effects from management integration.

Although the market perception of automotive engine components has become tougher due to the trend towards EVs, as previously stated, the company assumes that the rapid increase in EVs is unlikely. In addition to the possibility of a slowdown in EV advancement, a scenario in which ICE survival is assumed. Furthermore, it is considered that the company's automotive and industrial machinery component-related businesses, such as piston rings, can achieve stable earnings by adopting an appropriate business strategy. Taking these factors into consideration, we believe that investors' image of the market for automotive engine components is somewhat pessimistic. In the future, attention should be paid to the progress of the first medium-term management plan, as the full-scale realization of synergy effects from management integration can be expected.

6. Our view

The market recognition of automobile engine components is becoming tougher due to the trend towards electrification, but as mentioned earlier, the company assumes that the electrification process is unlikely to proceed rapidly. In addition to the possibility of slow electrification, scenarios for the survival of ICE are also considered. Furthermore, it is believed that the company's automotive and industrial machinery component-related business, including its piston rings, can achieve long-term stable profits by adopting appropriate business strategies. Considering these points, we at our company believe that investors' image of the market for automobile engine components may be somewhat pessimistic. In the future, we should pay attention to the progress of the first mid-term management plan, as the synergy effects of management integration can be expected to be fully realized.

(Authored by FISCO guest analyst Masanobu Mizuta)

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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