Overview of Kichiri Holdings Co., Ltd. <3082>

1. Business content The main business of Sakai Heavy Industries <6358> is the manufacturing and sale of road rollers used for road paving, and road roller related products account for about 95% of its revenue. In addition, the company's corporate philosophy is to contribute to the world's land development through its road construction machinery business. 2. Characteristics and strengths As previously mentioned, the company is a specialist manufacturer of road construction machinery such as road rollers, but has the following characteristics and strengths. (1) Long history as a specialist manufacturer The company's biggest feature (strength) is its long history as a specialist manufacturer of road construction machinery, including road rollers. In other words, by focusing on and specializing in its global niche strategy, it has accumulated its own unique technologies. This long history and experience have enabled it to enhance its technical and credit strengths. (2) Technical strengths Simply saying "compacting or paving roads" requires different pressures, rotation forces, etc. (compaction technology) depending on the location, soil conditions, etc. According to the company, the construction function of the roller itself determines the final quality (density, flatness, lifespan) of the road or embankment, and it is generally said that if the compaction density is increased by 1%, the road lifespan is extended by 10%. Therefore, for construction clients and contractors, product quality (performance) is also a very important factor, in addition to the price of road rollers. Since the company has been a specialist manufacturer of road construction machinery, including road rollers, for a long time, it boasts high technical strengths in compaction technology that are not easily matched by other companies in the same industry. In summary, the technical strength of the company can be described as "knowledge about entities and concepts." In other words, it is their engineering ability to oversee the entire construction project and their ability to adapt to a variety of materials. Specifically, it is the combination of various technologies, such as mixing with tires, vertical vibration to increase the compaction force, horizontal vibration to scrape the ground, vertical vibration to form a thick layer of compaction, further high-density compaction by tire vibration, and solution to difficult compaction problems through high-frequency vibration. An example of the company's high technical strength is the ability to control the relationship between "mechanical vibration technology" and its "vibration suppression technology." Various mechanical vibrations are an important means of improving construction performance in road rollers, but this vibration itself can cause machine malfunctions and have a significant impact on operator comfort. Therefore, the power (technology) to control the conflicting relationship between vibration compaction strength and machine quality is important, and this cannot be accumulated in a short period of time.

The company mainly operates directly managed dining businesses based on self-developed formats, with dining operations accounting for over 90% of the revenue composition. In addition, they conduct DX business to streamline recruitment processes and local revitalization business to support hometown tax payment services. In January 2019, they transitioned to a holding company structure to establish a flexible business operation framework and began disclosing consolidated performance from the fiscal year ending June 2019. As of the end of June 2024, the consolidated subsidiary companies include Kichiri Corporation, which inherits existing businesses, as well as cloud-based services such as the online interview agency "Interview Cloud" and the video-based web recruitment system "ApplyNow" developed and sold by ApplyNow Corporation, and digital marketing conducted by Webryday Corporation (merged into ApplyNow as of July 1, 2024), and Unison Blue Corporation that runs the Plataran brand dining business in Japan, and PT KICHIRI RIZKI ABADI which operates "Ishigama Ya Hamburg" and "CHAVATY" in Indonesia. The majority of the revenue is generated by KICHIRI.

(1) Restaurant Business

In the dining business, they mainly develop and expand urban dining formats centered around 'KICHIRI', hamburger specialty stores such as 'Ishigama Ya Hamburg', and Korean cuisine specialty stores like 'VEGEGO', in addition to mall and suburban restaurant formats, cafe and takeout formats, all developed in-house. As of the end of June 2024, the number of stores reached 136. Following the stabilization after the COVID-19 pandemic, they expanded their presence, particularly focusing on mall and suburban restaurant formats where foot traffic swiftly recovered after the fiscal year ending June 2022. By the end of the fiscal year ending June 2024, the number of stores in this category exceeded that of urban dining formats, with 61 stores compared to 54 urban dining stores, accounting for just under half of the total.

"KICHIRI", their flagship format, operates 38 stores in the Kansai and Tokyo metropolitan areas. Targeting primarily female customers, they emphasize high-quality cuisine, stylish ambiance, and hospitality. Having opened their first store in Kobe in 2002, where they gained significant support in the Kansai region, they expanded to the Tokyo metropolitan area in 2006. Their store locations are strategically near major stations with daily passenger traffic exceeding 0.02 million people. In the Kansai region, they operate 'Casual Dining KICHIRI' targeting younger customers in their 20s and 30s with an average customer spending in the 3,000 yen range across 29 stores. In the Tokyo metropolitan area, they operate 'Shin Nihon Style KICHIRI' with an average customer spending of around 5,000 yen, catering to corporate entertainment needs across 7 stores.

"Ishigama Ya Hamburg", their first store in the Tokyo metropolitan area in 2010, offers popular hamburger specialties made with high-quality beef sourced from contracted farms. Despite slightly higher average customer spending in the 2,000 yen range, their strong customer draw has led them to expand mainly in large shopping malls like 'Lalaport', reaching 29 directly operated stores by the end of June 2024 (with an additional 3 domestic and 1 overseas franchise store). 'VEGEGO', their venture into Korean cuisine in Shinjuku in 2018, offers a unique dining experience where customers can choose from various rice, noodles, meat dishes, soups, and changing daily side dishes. With an average customer spending of around 1,500 yen, it is popular among female customers, leading to a growth to 15 stores by the end of June 2024, being the fastest-growing format in the past 2-3 years. Noteworthy for its high profitability, similar to 'Ishigama Ya Hamburg', it benefits from quick store setup in previously leased spaces, allowing for shorter preparation periods and lower initial investment costs.

* Based on results until the fiscal year ending June 2023, the takeover rate of 'VEGEGO' existing locations is 71%, significantly shortening store setup time from approximately 12 months for new stores to about 3 months. Similarly, the initial investment cost can be reduced from 55 million yen to 19 million yen.

(2) Other Businesses

Starting from the fiscal year ending June 2024, we have begun offering entrusted services related to hometown tax donation (handling of gifts to gift providers, payment agency for gift prices and shipping costs, various promotions, etc.). In addition, we are expanding the DX business through our subsidiary ApplyNow. In addition to our self-developed online interview outsourcing service "Interview Cloud," we have also developed services such as "ApplyNow," a application and selection service through recorded videos, "ApplyNow Sign," an electronic employment contract service, etc., and are selling them to companies and local governments. Currently, apart from development costs, we have achieved monetization. Our main service is "Interview Cloud," and the fee system includes not only initial costs at introduction, but also a usage-based billing system (980 yen per interview). It is characterized by being able to respond 24 hours a day, 365 days a year, allowing applicants to set their own interview schedules, and being superior to competing services in terms of convenience and cost, making it popular among companies looking to reduce part-time hiring costs.

(Written by FISCO guest analyst, Jo Sato)