JDSC <4418> is expanding its AI solution business that develops algorithm modules utilizing artificial intelligence (ai) and machine learning, and in October 2023, it consolidated and made a domestic top-class DM handling volume mail customer center (MCC) a subsidiary.
Through joint research and development with major companies representing various industries, the company has created numerous AI-related services and solutions to solve common industry issues (SDGs: Sustainable Development Goals), and widely offers them to other companies as their own products. Unlike one-off ai algorithms development or system development, it has the characteristic of generating continuous income from multiple customers, with profitability improving as it expands horizontally. In terms of technology, it has rich knowledge through collaboration with the University of Tokyo, among others. Currently, it provides services such as demand forecasting solutions, marketing optimization solutions, etc., and in the maritime sector, it operates a joint venture company "seawise" with companies like Mitsui & Co., Ltd. and Tsuneishi Corp.
For the fiscal year ending June 2024, the revenue increased significantly to 16,457 million yen, 8.5 times higher than the previous period, while operating profit decreased by 26.1% to 500 million yen. The revenue increased significantly due to the group integration of MCC, and the gross margin of MCC alone improved from 3.25% to 3.59%. In addition, in the standalone AI solution business, as of the end of June 2024, there were 39 large customers, the average unit price of all customers trended at 24 million yen, and the repeat customer ratio remained stable at 65%. The growth cycle from "organizational expansion" to "revenue expansion" continues into the first quarter of the fiscal year ending June 2024, with plans to further accelerate growth as they have already finalized 27 new hires for the fiscal year ending June 2025. They have announced revenue of 20 billion yen for the fiscal year ending December 2025, a 21.5% increase from the previous period, and an operating profit of 300 million yen, six times higher.
The company, with its organizational foundation solidifying, plans to establish and disclose a three-year medium-term management plan by 2024. Due to the strong demand in the AI/DX domain, talent recruitment and development are advancing, enabling continuous top-line growth and profit generation. In fact, for the fiscal year ending December 2025, they aim to achieve a top-line growth of around 20-30% annually while focusing on securing operating profit in the black and improving profit margins. The growth of the seawise business area is also worth noting. They support efforts towards enhancing the "lifelong value of ships" of each company through the provision of an industrial platform, assisting from a data perspective. This area is experiencing high demand domestically and internationally, with business development progressing smoothly, such as receiving orders and commencing operations on ships. With confirmations of results and data accumulation underway, as well as progress in alliances, they plan to introduce more than 70 ships in the current fiscal year, in addition to the 50 ships implemented last year. They have also started approaching overseas markets such as Greece and Singapore. Progress in product development through orders from overseas shipowners and alliances with overseas ship classification societies, manufacturers, etc., is underway, with upcoming releases planned. While aiming to introduce 100 ships by the end of the year, there is significant potential for profit generation as a standalone business in the medium to long term, which could contribute significantly to the company's performance in the future.
Regarding the subsidiary MCC, the company will promote the enhancement of high added value through initiatives such as DX promotion and AI utilization. While boasting the highest domestic DM handling volume and high revenue stability, the profit margin compared to other competing companies was low. Leveraging the JDSC Group's expertise, they aim to maintain the leading position in the DM industry by becoming the No. 1 in both quality and quantity, and expect to increase EBITDA from approximately 0.2 billion yen to 2-3 times in the medium to long term. In the short term, they will respond to major changes in the business environment, such as the discontinuation of some services by Yamato Transport and price increases in Japan Post's postcards and envelopes, by incorporating the switching demand. Overall, leveraging the positioning as an AI solution provider, they aim to expand their business domain. It is worth keeping an eye on the future trends of the company that has entered the phase of performance recovery.