■Summary

Hagihara Electric Holdings <7467> is a trading company based in Nagoya that deals in Semiconductors, Electronic Components, and Electronic Equipment, as well as the development, manufacturing, and sales of its own products. Approximately 89% of revenue (for the fiscal year ending March 2024) comes from customers in the Automobiles industry, with Denso <6902> and other Toyota Group companies being major clients. In recent years, the company has been focusing on its solution business.

1. Performance for the second quarter of the fiscal year ending March 2025.

For the second quarter of the fiscal year ending March 2025, consolidated results showed revenue of 131,780 million yen (a 22.0% increase compared to the same period last year), operating profit of 3,728 million yen (an 18.8% decrease), ordinary profit of 3,209 million yen (a 30.6% decrease), and net income attributable to shareholders of the parent company of 2,066 million yen (a 31.9% decrease). While revenue was affected by production adjustments from Automobiles-related customers and stagnation in the China market, it achieved a record high due to the acquisition of new business flows, the effects of a weaker yen, and demand for investment in production facilities. However, due to changes in revenue composition leading to a decline in gross profit margin and increased investments in growth such as human resources and systems, operating profit declined. Additionally, exchange losses were recognized as non-operating expenses, resulting in larger decreases in ordinary profit and net income attributable to shareholders of the parent company. By segment, both the device business and solution business experienced revenue growth but faced declines in profit.

2. Performance forecasts for the fiscal year ending March 2025.

The consolidated results for the fiscal year ending March 2025 are projected to be revenue of 255,000 million yen (a 13.3% increase compared to the previous fiscal year), operating profit of 7,000 million yen (a 9.2% decrease), ordinary profit of 6,200 million yen (a 14.1% decrease), and net income attributable to shareholders of the parent company of 3,850 million yen (a 12.9% decrease). This is a downward revision from the initial forecast (revenue of 269,000 million yen, operating profit of 7,900 million yen) announced on November 8, 2024. Although revenue is expected to increase, it is below initial plans. On the other hand, investments such as pre-investments will proceed as planned, thus an overall decrease in profit is anticipated. Although segment-specific forecasts have not been disclosed, it is expected that both segments will show revenue growth alongside decreases in profit, similar to the first half. Regarding annual Dividends, since there is a target payout ratio of 30-40% starting from the fiscal year ending March 2025, a forecast of 185 yen (90 yen for the interim period and 95 yen for the year-end) is planned despite the expected decrease in profit.

3. Medium-term management plan: Aim for revenue of 300 billion yen and operating profit of 11 billion yen by the fiscal year ending March 2027.

The company has announced a new medium-term management plan "Make New Value 2026 (MNV2026)" which ends in the fiscal year ending March 2027. This plan aims for structural transformation and establishment of a business foundation towards a growth stage, considering changes in the external environment, with the main policy being "Enhancement of corporate value - Improving earning power." To achieve this, the company plans to execute three structural reforms (business structure, capital productivity, human capital) and six key strategies (device business strategy, solution business strategy, business innovation strategy, advanced management strategy, human resource strategy, and ESG promotion). Additionally, numerical targets are set for the fiscal year ending March 2027, aiming for revenue of 300 billion yen, operating profit of 11 billion yen, the ROE of over 11%, and a payout ratio of 30-40%. Although performance for the initial year, the fiscal year ending March 2025, has been downgraded, the company plans to maintain these target goals and steadily advance key initiatives. Attention is drawn to how the company will change in the future according to this plan.

■Key Points

A semiconductor trading company that accounts for about 89% of revenue for automotive-related companies. It also engages in ADAS (Advanced Driver Assistance Systems) and Internet of Things.

In the second quarter of the fiscal year ending March 2025, a 18.8% decrease in operating profit is predicted compared to the same period last year, and an operating profit decrease of 9.2% for the full year is also expected due to preliminary investment burdens.

The target for the medium-term management plan remains unchanged: revenue of 300 billion yen, operating profit of 11 billion yen, and ROE of over 11% for the fiscal year ending March 2027.

(Written by FISCO guest analyst Noboru Terashima)