Company Research and Analysis Report
FISCO Ltd.
http://www.fisco.co.jp

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section1-Jul.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

伪伪Focus on Full-Fledged Expansion of the Engineering
Business Under the New Medium-Term Business
Plan
Sun-Wa Technos Corporation (8137) is an independent trading company that specializes intechnology products. One of the strengths of the company is that it has three business divisions ofelectrical machinery, electronics, and general machinery. Another strength is the company’s two-way
trade in which it sells equipment and materials for manufacturers’ production lines and then buys andsells the products made by these manufacturers to other companies. By utilizing these strengths,
Sun-Wa Technos has expanded its businesses.
The company prepared the Challenge 1500 new medium-term business plan that covers FY3/17
to FY3/19. The new plan moves forward with policies from the previous JUMP 1200 medium-term
plan. It aims to expand engineering business that had already been a key point and take on a
new challenge with the global SCM (supply chain management) solutions business. It also seeks tostrengthen sales agent business as previously. Based on these initiatives, the company sets finalyear FY3/19 goals of ¥137,000mn in sales and ¥4,300mn in operating income.
We will be primarily focusing on progress in the engineering business as a high-margin area,
compared to sales agent business. However, we think profitability is currently well off from thepotential level owing to the small business scale and still being in the process of acquiring experienceand knowhow. Yet we are not pessimistic about this point because the company has been obtaining
related experience and knowhow by acquiring human resources and targeting negotiations in growthmarket areas. We will be focusing on whether the company can establish engineering business as
not only a source of stronger sales but also a high-margin business.
Sales fell yoy in FY3/16 under pressure from sales declines in semiconductor and liquid crystal
display (LCD) and amusement markets. Profits moved lower too, including the impact of upfront
investments under costs. This was the final year of the previous medium-term business plan, but
missed medium-term plan goals. While FY3/17 faces pressure from a stronger yen, compared to
FY3/16, the company expects gross demand to exceed the previous year at the full-year level in
FY3/17 thanks to a recovery in demand from the second half of the year. It guides for ¥114,500mn insales (+8.3% yoy) and ¥2,500mn in operating income (+2.3%).

伪伪Check Point• Announced the Challenge 1500 new medium-term business plan
• Strengthening the engineering business• Aiming for sales and profit increases in FY3/17

We encourage readers to review our complete legal statement on “Disclaimer” page.
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(¥mn)

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SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section㻟㻘㻠㻣㻝㻝㻜㻜㻘㻜㻜㻜

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FISCO Ltd. Analyst
Hiroyuki Asakawa

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Important disclosuresand disclaimers appear
at the end of this document.

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1-Jul.-16

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伪伪Results Trends
Detailed review of the Challenge 1500 new medium-termbusiness plan
(1) Overview of the new medium-term business plan
Sun-Wa Technos had been implementing the JUMP 1200 medium-term business plan with the final
year in FY3/16 and prepared the three-year Challenge 1500 new medium-term business plan thatcovers FY3/17 to FY3/19 due to completion of the previous plan.
The Challenge 1500 new medium-term business plan lists four items as the basic policies, including“contributing to customers’ product manufacturing in the core businesses of electrical machinery,electronics, and general machinery,” and highlights “systems, equipment, and parts/components
sales business,” “engineering business,” and “global SCM solutions business” in the businessstrategy to achieve plan goals. We look at the business strategy points in detail below.
Basic Policies in Challenge 1500
Contribute to customers’ product manufacturing with our core businesses of electrical machinery,electronics, and general machinery
Provide unique high value-added solutions
Provide the latest technology information as a technology trading company
Strengthen group capabilities by enhancing the global network
Source: FISCO Ltd. based on company materials

The company aims to reach the following results goals by steadily carrying out these businessstrategies. It is recalibrating in light of FY3/16 results and recent business conditions and targeting
profit levels from the previous medium-term plan once again. It hopes to attain ¥150,000mn in sales
in FY3/20, the 70th anniversary since its founding, and the final-year goal from the new medium-termplan of ¥137,000mn has an important role as the last step leading to the FY3/20 target.
Business Goals in Challenge 1500
FY3/16
Results
Net sales
105,748
Operating income
2,444
Operating income margin
2.3%
Ordinary income
2,645
Ordinary income margin
2.5%
Source: FISCO Ltd. based on company forecasts(unit: ¥mn)
Challenge 1500 medium-term business plan
FY3/17
FY3/18
FY3/19Business goals
Business goals
Business goals
117,000
126,000
137,000
2,800
3,500
4,300
2.4%
2.8%
3.1%
3,000
3,700
4,500
2.6%
2.9%
3.3%

We encourage readers to review our complete legal statement on “Disclaimer” page.
2

■■Results Trends(2) Systems, equipment, and parts/components sales business details

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section1-Jul.-16

The systems, equipment, and parts/components sales business aims to bolster sales in therespective areas by leveraging the company’s strength of having three business divisions of electricalmachinery, electronics, and general machinery. In some respects, this simply restates what thecompany is already doing and does not appear to offer anything fresh. However, closer inspectionof the content indicates that it intends to go a step further beyond existing frameworks of “being a
distributor for major manufacturers” to “building and strengthening new cooperative relationships”
and “early identification of customer needs” to “discovering new products.”
Although the company is not disclosing specific content on these efforts at this point, our sense
in direct contact with management is that it is making steady progress in a number of cases. We
think the company’s advances with this business strategy point will ultimately lead to convergencewith “engineering business,” which is another business strategy point. This is still a future prospect.
However, we will be paying close attention to this business strategy point from the perspective ofstrengthening the current income foundation.
(3) Engineering business details

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

We think reinforcement of engineering business is the top management priority, just as in theprevious medium-term business plan. Engineering business at Sun-Wa Technos is a sales approachfor “proposing products from the three business divisions of electrical machinery, electronics, andgeneral machinery as system solutions, rather than standalone items.” The company does notbook sales as the engineering business and related income is allocated to the electrical machinery,electronics, and general machinery divisions (there is a possibility of revision to a business segmentin the future, but we assume continuation of current segment allocation).
We can use the example of a food supermarket to help explain the positioning of engineeringbusiness. Up to now, the company has been selling ingredients, such as meat, fish, and vegetables,
to customers. Engineering business, meanwhile, involves preparing these individual ingredients fordelivery to customers. The extent of processing can vary from selling a prepared item to selling ameal box, providing a menu of multiple standard meals, or operating a separate restaurant. We think
Sun-Wa Technos already started supplying “prepared items” in the previous medium-term businessplan.
We see a good chance of full-fledged ramp-up of engineering business in the new medium-termbusiness plan period for a number of reasons. The first is that Sun-Wa Technos Asia (Thailand) has
been building a track record over the past 3-4 years, and management plans to begin the rollout ofengineering business from overseas markets. We attribute this approach to the fact that the local
market is not as well established and technology requirements are not as high as in Japan. The
company plans to accumulate a track record in Thailand as the advance guard and then expand to
China, North America, and other markets.
The other reason is that the company’s engineering business corresponds to areas that its
procurement sources and sales destinations want to “unload to realize smooth operations.” Inother words, it involves “recruitment of outsourcing needs.” We think this aspect is very important.
Engineering business has the potential to develop into a competitive relationship with procurement
sources if pursued too far. Sun-Wa Technos, however, clearly rejects this notion and is highly awareof the need for a framework that provides benefits to procurement sources and sales destinations.
We thus expect the company to expand engineering business by handling tasks with support frommajor manufacturers that are its suppliers.

We encourage readers to review our complete legal statement on “Disclaimer” page.
3

■■Results Trends

Engineering Business

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section1-Jul.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

Source: Company materials(4) Global SCM solutions business details
The concept for the global SCM (supply chain management) solutions business came out of the ideaof utilizing logistics warehouses held by Sun-Wa Technos’s 13 overseas local entities and logistics
knowhow to generate income by providing paid services to customers and also expand business
opportunities.
We think the global SCM solutions business can be implemented in a variety of ways. One example
is described here. The company delivers other items required by the customer at the same time,
unrelated to whether they are Sun-Wa Technos’s catalog products or not, in addition to the ordered
product when delivering products based on an order from the customer. The company intends tooperate this service as an income-earning business, rather than a free service, obtaining margin oneach of the products.
While it might seem as if the company suddenly presented the global SCM solutions business for the
first time in the latest plan, this is not the case. Sun-Wa Technos prepared for launching a businessfrom the previous medium-term plan, as explained in more detail below. We believe it clarified thisarea as a business strategy in the new plan in part because the operational framework is ready now.
The company has not indicated the potential size of the business. We advise against excess
expectations because the current medium-term business plan covers the first three years after
starting the business. However, Sun-Wa Technos expects growth by the business itself as well as
synergies and indirect effects with other business strategies. Additionally, we think it is important
to note that management plans to allocate income to the three existing business areas, similar
to engineering business, and this structure lacks visibility. We believe investors need to carefully
monitor trends in quarterly results announcements and other disclosure.
(5) Our view of the new medium-term business plan
The new medium-term business plan has just begun, and it is still too early to offer an assessment
due to a complete absence of evidence. In this context, we take the following view of the positioningof the Challenge 1500 plan.

We encourage readers to review our complete legal statement on “Disclaimer” page.
4

■■Results Trends

Normal progression from the JUMP 1200 previous mediumterm plan

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
SectionWe think Challenge 1500 is a business plan that follows normal progression from the previous
medium-term plan. We compared priority measures for realizing the above-mentioned businessgoals in the JUMP 1200 previous medium-term plan and Challenge 1500. Although similar items
continue from the previous medium-term plan to the new medium-term plan, the company has clearly
moved forward in the specific content. We could say that “organization building” was the main aim of
JUMP 1200, and Challenge 1500 aims to generate income by “utilizing the organization.”
Comparison of “Priority Measures” in New and Previous Medium-Term Business Plans

1-Jul.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

Source: FISCO Ltd. based on company materials

In JUMP 1200, income results made relatively healthy progress in the first and second fiscal years,
but FY3/16, the final year, ended up well below goals from the initial plan. Some observers might
conclude from these results that the previous medium-term plan failed, but we disagree with thisassessment. The company consistently focuses on reinforcement of engineering business in theprevious and new medium-term business plans. During the previous medium-term plan period,
the company created the engineering department for implementation and the industry solutions
department to support smooth progress by these activities and made related revisions to the overall
organizational chart. We view these changes as a “major reform” considering that Sun-Wa Technos
is not a company with much leeway in personnel.
We think it is more accurate to see the Challenge 1500 new medium-term plan as part of an effective
six-year medium-term plan, rather than being a standalone three-year plan, in light of trends from
JUMP 1200 to Challenge 1500. We thus expect the new medium-term plan to deliver a certain levelof results that include actual income.

Full-fledged ramp-up of engineering business andestablishment as a high-margin area
We think assessment of whether Challenge 1500 succeeds or not depends on whether engineeringbusiness is successful or not. This is a natural outcome of taking the above-mentioned view of
Challenge 1500 as part of a six-year medium-term business plan. The company has been consistently
emphasizing reinforcement of engineering business for the six years.
Engineering business has been steadily booking sales at Sun-Wa Technos Asia (Thailand) overthe past few years. While it was flat yoy at about ¥300mn in FY3/16, the company targets steady
expansion of this business during the Challenge 1500 period and just over a billion yen in sales in
FY3/19. It also depicts future sales growth in electrical machinery and general machinery divisions
as the result of advances by engineering business as a longer-term view.

We encourage readers to review our complete legal statement on “Disclaimer” page.
5

■■Results Trends

Sales at Sun-Wa Technos Asia (Thailand)

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section1-Jul.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

Source: Company earnings presentation materials

We believe it will take some time to reach this level, and Sun-Wa Technos also needs to cultivateengineering business as a high-margin area at the same time. Using the example described above,engineering business should obtain added value from the processing portion and be capable ofcharging higher prices than in the case of just selling ingredients. It can obtain even higher prices
if the taste is delicious. However, profitability has not changed much from when it was just selling
ingredients at this point because the “recipe is fully known.” We think improvement of this pointis almost equally as important as growth in engineering business. There is not much meaning toengineering business that is not profitable.
The company itself is highly aware of this importance, and we intend to closely monitor future trends.
We find it positive for whether Sun-Wa Technos can improve profitability that it has been enhancing
the depth of personnel with internal resources and people recruited from outside of the company.
Another positive trend is steady expansion of Sun-Wa Technos’s entry into areas with strong growth
opportunities that it refers to as “negotiations targeting growth markets.” San-Wa Technos explained“negotiations targeting growth markets” as something separate from the engineering business story.
However, these negotiations involve products from multiple areas across the company’s businessdivisions, including as a project with external business partners in some cases, and are truly
engineering business activities. We expect expansion of “negotiations targeting growth markets”
to boost Sun-Wa’s experience and contribute significantly to acquisition of technologies to make“profitable meals.” From this perspective, we think progress with “negotiations targeting growthmarkets” is also a key performance indicator (KPI) in assessing the company’s prospects.
Value of Transactions Negotiated in Four Growth Markets
FY3/14
AmountMarketNew energy
About ¥4.5bn
Energy saving
About ¥1.7bn
Medical treatment and home care
About ¥0.3bn
Social infrastructure
About ¥0.1bn
Total
About ¥6.6bn
Source: FISCO Ltd. based on company materials

FY3/15
AmountFY3/16
AmountAbout ¥ 7.8bn
About ¥ 3.0bn
About ¥ 1.1bn
About ¥ 0.8bn
About ¥12.7bn

About ¥ 4.5bn
About ¥ 6.6bn
About ¥ 1.4bn
About ¥ 1.0bn
About ¥13.5bn

Negotiations inprogress
As of May 2016
About ¥ 5.8bn
About ¥11.3bn
About ¥ 0.9bn
About ¥ 1.6bn
About ¥19.6bn

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6

伪伪Business Trends
Upbeat momentum in business with the automotive industry,though sales and profit declined

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section(1) FY3/16 consolidated results
In FY3/16, consolidated net sales fell 5.0% yoy to ¥105,748mn, operating income decreased 29.6%
yoy to ¥2,444mn, ordinary income decreased 29.7% yoy to ¥2,645mn, and net income attributableto parent company shareholders dropped 31.5% yoy to ¥1,690mn. Both sales and profits weakened.
The company lowered guidance at the 2Q announcement, but actual results slightly missed theserevised levels.
FY3/16 Results

1-Jul.-16
1H

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

FY3/152H
Full year

1H

2H

Results Results Results Results
Net sales
50,784 60,492 111,276
Gross profit
6,500
7,488 13,988
Gross profit margin
12.8% 12.4% 12.6%
SG&A expenses
4,948
5,568 10,516
Ratio of SG&A
9.7%
9.2%
9.5%
expenses to sales
Operating income
1,552
1,919
3,471
Operating income
3.1%
3.2%
3.1%
marginOrdinary income
1,710
2,051
3,761
Net income attributable to
1,108
1,358
2,466
parent shareholders
EPS (¥)
77.23
94.60 171.83
Source: FISCO Ltd. based on company materials

FY3/1654,457
6,748
12.4%
5,331

(unit: ¥mn)

Full year
Revisedvs.
Results
Results
YOY
guidance
guidance
51,291 112,000 105,748
-5.0%
-5.6%
6,508
- 13,256
-5.2%
12.7%
- 12.5%
5,481- 10,812
2.8%
-

9.8%

10.7%

-

10.2%

-

-

1,417

1,027

2,800

2,444

-29.6%-12.7%

2.6%

2.0%

2.5%

2.3%

-

-

1,545

1,100

3,000

2,645

-29.7%-11.8%

1,033

657

2,000

1,690

-31.5%-15.5%

71.96

45.80

139.31117.76-31.5%-15.5%

Viewed by customer industry, slumps in demand from semiconductor and LCD and amusement
industries stood out, and the mainstay factory automation and industrial equipment industry provided
stronger sales than a year earlier on an overall basis but some individual products incurred sales
declines (from the previous year). While Sun-Wa Technos posted healthy sales to automotive, social
infrastructure, and medical equipment industries, these additions were not enough to offset weakoverall demand and sales declined as a whole.
Breakdown of FY3/16 Sales by Industry

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Source: FISCAL Ltd. based on earnings presentation materials

We encourage readers to review our complete legal statement on “Disclaimer” page.
7

■■Business Trends

SUN-WA TECHNOSCORPORATIONIn the electrical machinery business, sales decreased 15.8% yoy to ¥19,069mn. This reflected
lower sales of servo motors for industrial machinery and control equipment for solar power systems,
which offset higher sales of electrical products for semiconductor manufacturing equipment. Sales
in the electronics business fell 3.6% yoy to ¥77,593mn. While sales of electronic parts rose steadily
for automotive and industrial equipment industries, they dropped for amusement equipment andthis weighed on segment sales. Sales in the general machinery business climbed 11.6% yoy to¥9,084mn. Increased sales of mounters to the home equipment industry and production equipment
for the automotive industry offset a decline in sales of transport facilities and equipment used by the
LCD industry.

8137 Tokyo Stock Exchange First
SectionNet Sales Trend by Business Segment (Quarterly Basis)
FY3/15
1Q

1-Jul.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

2Q

3Q

Electrical machinery
4,295
6,039
5,194
YOY
-33.5%-2.3%
7.6%
Electronics
17,235 19,210 20,338
YOY
18.1% 11.2% 19.1%
General machinery
1,787
2,216
1,394
YOY
67.4% 11.0%
8.5%
Total net sales
23,318 27,466 26,925
YOY
5.4%
7.9% 16.2%
Source: FISCO Ltd. From company materials

4Q
7,132
-2.2%
23,690
14.4%
2,744
4.5%
33,567
9.6%

Full
year
22,660-8.5%
80,473
15.6%
8,141
16.7%
111,276
9.8%(unit: ¥mn)

FY3/16
1Q

2Q

3Q

4Q

4,664
8.6%
19,60913.8%
1,204-32.6%
25,478
9.3%

5,444
-9.9%
20,860
8.6%
2,676
20.8%
28,9795.5%

3,880-25.3%
16,938-16.7%
1,935
38.8%
22,754-15.5%

5,081-28.8%
20,186-14.8%
3,269
19.1%
28,537-15.0%

Full
year
19,069-15.8%
77,593
-3.6%
9,084
11.6%
105,748-5.0%

Regional sales results were Japan at ¥79,995mn (-2.1% yoy), Asia at ¥30,097mn (-8.8%), and the
US and Europe at ¥3,685mn (+7.4%). Asian business clearly weakened. We think the forex rate
impact from JPY gains against the CNY undercut Asian business with a roughly ¥1bn setback insales. The sales-decline effect of an actual drop in Chinese demand worked out to about ¥2bn.
Regional profit results were Japan at ¥1,580mn (-25.8%), Asia at ¥853mn (-32.3%), and the US andEurope at ¥2mn (-96.6%). Profits declined in all regions. We attribute the larger decline in Japan’s
profit compared to sales mainly to aggressive investments and a rise in personnel costs ahead of the
new medium-term business plan.
Results Trends by Geographical Market (details)

Japan

1H
Net sales
39,622YOY
6.8%
Operating income
975
YOY
8.0%
Operating income margin
2.5%
Net sales
12,916YOY
7.6%
Operating income
553
YOY
28.9%
Operating income margin
4.3%
Net sales
1,475
YOY
11.5%
Operating income
36
YOY
122.0%
Operating income margin
2.4%
Source: FISCO Ltd. from briefing materials

Asia
US and Europe

FY3/152H42,127
4.2%
1,153
-7.8%
2.7%
20,098
36.3%
707
19.4%
3.5%
1,956
4.7%
51
410.0%
2.6%

Full year
81,749
5.5%
2,128
-1.1%
2.6%
33,014
23.4%
1,260
23.5%
3.8%
3,431
7.5%
87
225.3%
2.5%

1H
40,093
1.2%
925
-5.0%
2.3%
16,336
26.5%
500
-9.7%
3.1%
1,726
17.0%
7
-79.1%
0.4%

FY3/162H
39,902-5.3%
655-43.2%
1.6%
13,761-31.5%
353-50.1%
2.6%
1,959
0.2%
-5
-0.3%

Full year
79,995-2.1%
1,580-25.8%
2.0%
30,097-8.8%
853-32.3%
2.8%
3,685
7.4%
2
-96.6%
0.1%(unit: ¥mn)
FY3/17(E)Full year
88,500
10.6%
1,600
1.3%
1.8%
29,900
-0.7%
860
0.8%
2.9%
5,400
46.5%
0
0.0%

We encourage readers to review our complete legal statement on “Disclaimer” page.
8

■■Business Trends

Projecting higher sales and profits in FY3/17(2) FY3/17 consolidated outlook

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
SectionThe company guides for ¥114,500mn in net sales (+8.3% yoy), ¥2,500mn in operating income(+2.3%), ¥2,700mn in ordinary income (+2.1%), and ¥1,800mn in net income attributable to parent
shareholders (+6.5%) in FY3/17.
FY3/17 is the first fiscal year of the Challenge 1500 new medium-term business plan. The maindifference between goal values presented in the plan and the FY3/17 guidance values is the forex
rate assumption. The new medium-term business plan uses ¥117/$ for all of the fiscal years that itcovers, while guidance adopts ¥110/$ to reflect the recent rate.
Overview of FY3/17 Forecasts

1-Jul.-16

FY3/16
1H

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

2H(unit: ¥mn)

FY3/17Full year

1H

2H

YOY
8.3%
2.3%
2.1%

Mediumterm planPlan
117,000
2,800
2.4%
3,000

6.5%

-

Full year

Results Results Results Forecasts Forecasts Forecasts
Net sales
54,457 51,291 105,748 55,000 59,500 114,500
Operating income
1,417
1,027
2,444
1,050
1,450
2,500
Operating income margin
2.6%
2.0%
2.3%
1.9%
2.4%
2.2%
Ordinary income
1,545
1,100
2,645
1,150
1,550
2,700
Net income attributable to
1,033
657
1,690
800
1,000
1,800
parent shareholders
Source: FISCO Ltd. from company materials

The company projects larger gross demand than in the previous year on an overall basis in FY3/17,
and this explains the outlook for sales and profit gains. However, sales and profits are skewed
toward 2H because of the prospect of needing some time for demand to recover. The plan forecasts
continuation of an upward trend in sales to the automotive industry, but a decline in sales to themainstay factory automation and industrial equipment industry. At the regional level, it counts onhigher profits at overseas sites where it targeted aggressive expansion in FY3/16. Sun-Wa Technos
projects a sharp increase in US and European segment sales from FY3/16’s ¥3,685mn to ¥5,400mn
in FY3/17.
We see a good chance of Sun-Wa Technos attaining its FY3/17 targets, though are not overly
optimistic. The company has high sales ratios for products from Yaskawa Electric (6506) and Omron(6645) among the items that it handles and factors in rising sales for the products of both companies
excluding the forex impact. We think this indicates that the business environment is not that weakin real term.
We believe trends in the engineering business are a key point in FY3/17. Sun-Wa Technos has put
effort into the engineering business over the past few years, but this had a strong trial-and-error
aspect through JUMP1200. We expect a full-fledged offensive aimed at switching to more lucrative
business utilizing past experience under the new medium-term business plan. While the outcome ofthis offensive will obviously have a large impact on the company’s earnings, we think it will provide
an important investment perspective for investors too.

We encourage readers to review our complete legal statement on “Disclaimer” page.
9

■■Business Trends

Summary Income Statement and Major Indicators

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section1-Jul.-16

FY3/13

FY3/14

FY3/15

FY3/16

Net sales
YOY
Gross profit
Gross profit margin
SG&A expenses
YOY
Ratio of SG&A expenses to sales
Operating income
YOY
Operating income margin
Ordinary income
YOY
Net income attributable to parent shareholders
YOY88,264-1.6%
10,968
12.4%
8,699
2.4%
9.9%
2,269
-31.0%
2.6%
2,519-26.0%
1,520-23.0%

101,378
14.9%
12,680
12.5%
9,469
8.9%
9.3%
3,211
41.5%
3.2%
3,438
36.5%
2,168
42.6%

111,276
9.8%
13,98812.6%
10,516
11.1%
9.5%
3,471
8.1%
3.1%
3,761
9.4%
2,466
13.8%

105,748-5.0%
13,256
12.5%
10,812
2.8%
10.2%
2,444
-29.6%
2.3%
2,645-29.7%
1,690-31.5%(unit: ¥mn)
FY3/17Full year
1H(E)(E)
55,000 114,500
1.0%
8.3%
1,050
2,500
-25.9%
2.3%
1.9%
2.2%
1,150
2,700
-25.6%
2.1%
800
1,800
-22.6%
6.5%

EPS (¥)
Dividend (¥)

118.7120.0

162.9822.0

171.8326.0

117.76
28.0

55.72
14.0

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

125.3828.0

Summary Balance Sheet

Current assets
Cash and deposits
Accounts receivable
Non-current assets
Property, plant and equipment
Intangible assets
Investments and other assets
Total assets
Current liabilities
Notes and accounts payable - trade
Short-term loans payable, etc.
Non-current liabilities
Long-term loans payable
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Valuation gains or losses
Minority interest
Total net assets
Total liabilities and net assets

End-FY3/12
35,741
4,171
27,094
6,798
3,808
44
2,945
42,53926,914
22,132
2,926
3,053
1,800
12,396
1,935
1,341
9,173
-53
137
37
12,571
42,539End-FY3/13
39,758
7,433
27,866
7,497
4,074
42
3,381
47,25628,64824,784
2,250
4,258
2,486
13,6601,935
1,341
10,437-53646
41
14,34947,256End-FY3/14
45,3296,937
33,075
8,369
4,038
76
4,254
53,69830,73525,917
2,528
4,309
2,205
16,8072,553
1,958
12,350-53
1,847
18,65453,698End-FY3/15
49,2397,584
34,419
9,509
3,879
243
5,386
58,74832,37027,496
2,782
4,426
2,100
18,9292,553
1,958
14,472-54
3,022
21,951
58,748(unit: ¥mn)
End-FY3/16
46,857
6,359
33,006
8,581
3,788
240
4,553
55,43928,691
24,732
2,317
4,484
2,400
20,217
2,553
1,958
15,761-54
2,045
22,26355,439Cash Flow Statement

Cash flow from operating activities
Cash flow from investing activities
Cash flow from financial activities
Effect of exchange rate change on cash and cash equivalents
Net change in cash and cash equivalents
Balance of cash and cash equivalents at term start
Balance of cash and cash equivalents at term end

FY3/12
1,297
-215
-472
-50
560
3,126
3,687

FY3/13
3,652
-110
-415
135
3,262
3,687
6,949

FY3/14-1,374
-127
769
236
-496
6,949
6,453

FY3/15
1,353
-444
-470
209
647
6,453
7,100

(unit: ¥mn)
FY3/16
-60
-384
-654
-125
-1,2257,100
5,875

We encourage readers to review our complete legal statement on “Disclaimer” page.
10

伪伪Shareholder Return Policy
Fundamentally provides shareholders return as dividends

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section1-Jul.-16

Important disclosuresand disclaimers appear
at the end of this document.

The company’s basic policy is to provide returns to shareholders in the form of dividends. Management
prioritizes providing stable, continuous dividends, as demonstrated in its track record to date. Whileremaining very aware of the need for stable dividends, the company has also increased them in
keeping with earnings growth.
For FY3/16, the company paid a dividend of ¥28 per share (+¥2 yoy) in line with the target from thestart of the term. The dividend payout ratio based on ¥117.76 in net income per share was 23.8%.
The company disclosed a target of ¥28 for FY3/17, unchanged from the previous year. Although
Sun-Wa Technos decides the dividend in the context of paying a stable dividend and a dividend thatreflects earnings (as noted above), we think it kept the dividend target at the existing level because
it only expects a single-digit (6.5%) rise in net income attributable to parent shareholders in FY3/17.
The dividend payout ratio based on estimated net income per share comes to 22.3%. We see apossibility of a dividend hike if earnings substantially overshoot due to paying an additional dividend
to reflect higher earnings, but believe it is too early to expect this outcome.

㻱㻼㻿㻘㻌㻰㼕㼢㼕㼐㼑㼚㼐㻘㻌㼍㼚㼐㻌㻰㼕㼢㼕㼐㼑㼚㼐㻌㻼㼍㼥㼛㼡㼠㻌㻾㼍㼠㼕㼛㻱㻼㻿㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻌㼟㼏㼍㼘㼑㻕（¥）

FISCO Ltd. Analyst
Hiroyuki Asakawa

㻞㻜㻜㻚㻜㻜
㻝㻢㻜㻚㻜㻜

㻰㼕㼢㼕㼐㼑㼚㼐㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕

（㻑）

㻞㻟㻚㻤㻌
㻞㻞㻚㻟㻌

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㻞㻜㻚㻜

㻝㻢㻚㻤㻌
㻝㻡㻚㻝㻌

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㻝㻞㻜㻚㻜㻜

㻝㻣㻝㻚㻤㻟

㻝㻢㻞㻚㻥㻤

㻤㻜㻚㻜㻜

㻝㻡㻚㻜
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㻝㻝㻤㻚㻣㻝
㻠㻜㻚㻜㻜㻝㻞㻡㻚㻟㻤

㻝㻝㻣㻚㻣㻢㻞㻜㻚㻜㻞㻞㻚㻜㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻞㻢㻚㻜

㻞㻤㻚㻜

㻞㻤㻚㻜

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣㻱

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㻲㼅㻟㻛㻝㻡

Source: FISCO Ltd. from abbreviated financial statements

We encourage readers to review our complete legal statement on “Disclaimer” page.
11

Disclaimer
FISCO Ltd. (the terms “FISCO”, “we”, mean FISCO Ltd.) has legal agreements with theTokyo Stock Exchange, the Osaka Exchange,and Nikkei Inc. as to the usage of stock
price and index information. The trademark and value of the “JASDAQ INDEX” are theintellectual properties of the Tokyo Stock Exchange, and therefore all rights to them belong
to the Tokyo Stock Exchange.
This report is based on information that we believe to be reliable, but we do not confirm or
guarantee its accuracy, timeliness,or completeness, or the value of the securities issued bycompanies cited in this report. Regardless of purpose,investors should decide how to use
this report and take full responsibility for such use. We shall not be liable for any result of its
use. We provide this report solely for the purpose of information, not to induce investment
or any other action.
This report was prepared at the request of its subject company using information provided
by the company in interviews, but the entire content of the report, including suppositions andconclusions, is the result of our analysis. The content of this report is based on informationthat was current at the time the report was produced, but this information and the content
of this report are subject to change without prior notice.
All intellectual property rights to this report, including copyrights to its text and data, areheld exclusively by FISCO. Any alteration or processing of the report or duplicationsof the report, without the express written consent of FISCO, is strictly prohibited. Anytransmission, reproduction, distribution or transfer of the report or its duplications is also
strictly prohibited.
The final selection of investments and determination of appropriate prices for investment
transactions are decisions for the recipients of this report.
FISCO Ltd.