Analyst Report

C&A Investment Research【Update Short Report】| Company |TAMAGAWA HOLDINGS CO., LTD.

| Code |6838：JASDAQ| Analyst |C&A Senior Analyst

Kazuma Kanou| Date of Issue |Nov/15/2019
Ver：20191115-１

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TAMAGAWA HOLDINGS CO., LTD.
6838: JASDAQ

Nov/15/2019【Update Short Report】
Significant increase in both revenues and earnings(2Q FY03/2020)(Full-term forecast: Operating income would increase to 520 million yen,namely 3.4 times larger than the previous term)"Strong Buy" rating continues with share price targeted at 3,500 yen【Target Share Price】

3,500 yen
（as of Nov/15/2019）（as of Dec./20/2018: 2,750 yen）
（as of Jul./02/2018: 2,500 yen）
【Rating】
Strong Buy（Continued）（as of Nov/15/2019）【Performance Forecasts】
FY03/2020 (official forecasts)
Net sales: 5,699 million yen; Operating income: 524 million yen;
Ordinary income: 372 million yen; Net income: 319 million yen（as of Nov/15/2019）【Themes】
EDGs/ESG; defensive; national strategies; renewable energy; photovoltaic station; wind power station;
growth; 5G; IoT; analog high-frequency radio; global niche; still-remaining company（as of Nov/15/2019）

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TAMAGAWA HOLDINGS CO., LTD.
6838: JASDAQ

Nov/15/2019【Overall results in 2Q FY03/2020】
Significant increase in both revenues and earnings
On November 14, 2019, the Company announced its financial results of the 2Q, FY03/2020 asfollows: Net sales: 2,469 million yen (increased by 49.1% YoY); Operating income: 331 millionyen (increased by 1,938.1% YoY); Ordinary income: 244 million yen (as opposed to Ordinary lossof (94) million yen in the same period of the previous year); Net income attributable to owners ofparent: 127 million yen (as opposed to Net loss attributable to owners of parent of (94) million yenin the same period of the previous year); thus achieving significant increase in both revenues andearnings.
(For reference: 2Q [1st half] FY03/2019: Net sales: 1,655 million yen; Operating income: 16 millionyen; Ordinary loss: (94) million yen; Net loss: (94) million yen)

Factor 1: Selling off Shimonoseki power station (ca. 1.8 Mw, FIT: 40 yen)
On September 30, 2019, the Company sold off Shimonoseki-Toyouracho photovoltaic station
owned by its subsidiary. This station was owned by the subsidiary, GP ENERGY CO., LTD., and isa good facility with power output of both high-voltage (1,700 Kw) and low-voltage (48.7 Kw), twoplots, and FIT of 40 yen/kwh. The Company has not made public about the sale value and otherdetails, but considering the currently booming market of buying and selling second-handphotovoltaic stations, it can be thought that the station could be sold off on quite favorable terms.
Proceeds from this sale have been reflected in the financial results of the current 1st half, which is a
key factor for the significant increase in earnings.

Factor 2: Departure from an extreme reliance on achievements during the second half
In TAMAGAWA ELECTRONICS, a fully-owned subsidiary engaging in electronic &communication devices business, due to its sales mainly coming from public offices andpublic-related fields, its earnings had previously tended to rely on achievements during the second
half and consequently get into the red during the first half every year. But since the current term, it
has increased its earnings during the first half by attracting private demands and other means, andputs its efforts to departure from such an extreme reliance on achievements during the second half.
As for the financial results of the current second quarter, sales ratio during the first half is 44.0%(36.3% during the previous first half), meaning increase by about 8 points. Moreover, segment
income in the current first half was 84 million yen (as opposed to loss of 31 million yen in theprevious first half), that is, remarkably increased by 115 million yen.
In this way, it can be said that departure from reliance on achievements during the second halfin the business segment of electronic & communication devices contributes to substantial increasein company-wide earnings in the first half.

Factor 3: Strong order-taking in the electronic & communication devices businessIn the business segment of electronic & communication devices, amount of order-taking in thefields of mobile communication and public offices / public-related increased by 49.3% YoY in the1Q and by 30.0% YoY in the 2Q, meaning continuously strong order-taking that leads to expanded
profitability.

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TAMAGAWA HOLDINGS CO., LTD.
6838: JASDAQ

Nov/15/2019【Full-term performance forecasts for FY03/2020】
Significant increase in both revenues and earnings(Operating income increased to 520 million yen, namely 3.4 times larger)
On May 21, 2019, the Company announced its performance forecasts for FY03/2020 as follows:
Net sales: 5,699 million yen (increase by 48.4%, 1,850 million yen YoY); Operating income: 524
million yen (increase by 242.2%, 387 million yen YoY); Ordinary income: 372 million yen(increase by 451 million yen from (79) million yen in FY03/2019); Net income attributable toowners of parent: 319 million yen (increase by 148.7%, 191 million yen YoY), which means
significant increase in both revenues and earnings, and no amendment followed (as of November15, 2019). It should be noted that significant increase in net sales is projected in every businesssegment (electronic & communication devices; renewable energy system sales; and renewableenergy power station).
TAMAGAWA ELECTRONICS, a subsidiary of the Company, has developed high-frequency
radio technologies as its backbone since its foundation in 1968, and has engaged indevelopment/manufacture of such as products applying optical technologies, those formillimeter-wave band, and those related to digital software, mainly deriving from its business inhigh-frequency circuit element. Therefore, the Company would anticipate to a great extent moreorder-taking due to growing demands for the field of 5G technologies and those for overseas
markets.
These forecasts for the next term would be achieved, due to the fact that the Company puts its
efforts into its renewable energy business such as small wind power stations and small-scale
hydraulic power generation, with a view to development/sales of power generation system utilizing
other kinds of renewable energy than photovoltaic generation, and that sales and operation ofpower stations are doing great for which orders were already received and which has become asource of stable revenues, and also that the Company considers selling off its own photovoltaic
stations and has already sold off Shimonoseki power station during the first half.

【5G-related: trillion dollars market】

Market trends and approaches
On October 1, 2018, Verizon, a major American communication company, started to provide fixedwireless access using 5G communication, and on April 3, 2019, started to provide 5G
communication services for smartphones as well. Also in the USA, AT&T started to provide
mobile routers for enterprises using 5G wireless communication. The USA took the lead incommercializing 5G communication services. Services for smartphones to be the main target ofearly-stage 5G communication have started in full swing also in Korea on April 3 this year. Twohours earlier announcement than that of Verizon made it become the "world first" 5G
communication services for smartphones.
While 5G (fifth-generation mobile communication system) related services have already been
started in full swing overseas, it is expected that in Japan relevant products will be available on themarket gradually around February, 2020 and onwards.
During the Rugby World Cup when Japan team brought a big wave with its great performance,
NTT DOCOMO, Inc. organized new-style sports spectating events using 5G at 16 venues
nationwide (VR viewing, multi-angle viewing, 5G LIVE SPORTS TOUR). In the future as well,there will be much more opportunities to experience 5G at all kinds of events, thereby making it
gradually apparent about how our future lives would be changed with the convenience andinnovative nature provided by such technologies.

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TAMAGAWA HOLDINGS CO., LTD.
6838: JASDAQ

Nov/15/2019

In 2026, market size would reach about one trillion dollars (about 110 trillion yen)
FUJITSU JOURNAL calculated the 5G market size that would reach about one trillion dollars in
2026. Present market size of the industry is 200-600 billion dollars. Video will be the mainstreamof mobile broadband traffic. Videos already account for about 60% of overall traffic, and areprojected to grow to about 74% in 2024. There are growing expectations towards video-related 5G
applications, such as images from viewpoints of players in sports, VR graphics, and 3D holograms.
It is expected that wider usage of 5G communication in industry would make the market size,
mainly in manufacturing industry, increase by 36% in 2026, creating huge, additional 619 billion
dollars market. Actually in industry, especially in manufacturing and automobile, various tradeorganizations have already been established in order to consider and standardize new structuresusing 5G, and to make some institutional streamlining and any other actions.

5G market expansion directly leads to expanded profitability of the Company
TAMAGAWA ELECTRONICS, a fully-owned subsidiary of the Company, released "Notices
regarding commencement of contracted development/manufacture of mm-wave products" on April
8, 2019. In the field of 5G, it is planned to newly utilize the frequency bands of SHF,
quasi-millimeter and millimeter waves in order to achieve 100 times faster transmission than ever,
and accordingly the Company started contracted development/manufacture of 5G-enabled products(modules, components and others) for high-frequency bands of quasi-millimeter and millimeterwaves up to 50 GHz band.
5G market expansion directly leads to expanded profitability of the Company, and therefore
attention must be paid to the market trend of 5G from now on.
(Noteworthy approaches)
In an effort to expand its business, the Company brings into view development/sales of power
generation system utilizing other kinds of renewable energy than photovoltaic generation, such as
small wind power stations and small-scale hydraulic power generation, and cooperates withTohoku University to research into evaluation of batteries for mobile IoT devices making use ofsurplus electricity in the internally/externally expanding field of natural energy (e.g., solar energy,wind power, biomass, and hot spring), as an academic-industrial partnership, that is expected to agreat extent to become an approach to further business expansion in the future.

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TAMAGAWA HOLDINGS CO., LTD.
6838: JASDAQ

Nov/15/2019

Rating criteria
Ratings are given based on the criteria as shown below.

Strong BuyShare price is expected to outperform TOPIX by 30% or more within one year.

Buy
Share price is expected to outperform TOPIX by 10% or more within one year.

NeutralShare price is expected to vary in the range less than +/- 10% of TOPIX within one year.

Sell
Share price is expected to underperform TOPIX by 10% or more within one year.

Points of concern
This material has been created based on various data, for information only and is not intended to attract
investment. In addition, it does not guarantee accuracy and completeness of any information contained herein.
Opinions, projections and other statements contained herein are such prospects at the time of creation thereof andsubject to change without notice. There exists some potential for loss of investment principal due to, for example,
share price fluctuation, change in management/financial conditions of the issuing company, and change in external
evaluation about them. Accordingly investors are encouraged to make final decisions on investment solely basedon their own judgment. Meanwhile, C&A Investment Research., as well as its affiliate, employee, officer, or family
member of them may possibly possess and/or trade securities of any company shown herein. Copyrights of thismaterial belong to C&A Investment Research. Unauthorized reproduction or transfer of any content herein isprohibited, whether electronically or mechanically, for any purpose.

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