COMPANY RESEARCH AND ANALYSIS REPORT

Sanki Engineering Co., Ltd.
1961
Tokyo Stock Exchange First Section

3-Sept.-2019
FISCO Ltd. Analyst

Noboru Terashima

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. In FY3/19, net sales increased 24.8% YoY and operating income rose 61.3% YoY exceeding ¥10bn.........
2. Promoting the targets in “Century 2025” Phase 1, the medium-term management plan. ............................
3. FY3/20 forecast...........................................................................................................................................

01
01
01

4. Going forward, the Company is targeting an annual dividend of ¥60 or above and moreover,to buy back 5mn treasury shares.. ...............................................................................................................

02■Company outline--------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Company outline.................................... ......................................................................................................
2. History................................................... ......................................................................................................

03
03■Business description---------------------------------------------------------------------------------------------------------------------------------------------- 04
1. Outline of business by segment............. ......................................................................................................
2. Strengths, distinguishing traits, and competitors. ........................................................................................
3. Main competitors.........................................................................................................................................
4. Trend in orders received and the economic environment. ............................................................................

04
05
05
05

■Business trends----------------------------------------------------------------------------------------------------------------------------------------------------------- 06
1. FY3/19 results overview......................... ......................................................................................................
2. Financial condition................................. ......................................................................................................
3. Cash flow conditions.. ..................................................................................................................................

06
10
11

■Medium-term management plan----------------------------------------------------------------------------------------------------------------- 12
1. “Century 2025” Plan: from Phase 1 to Phase 2............................................................................................
2. Phase 2: The basic policies are a continuation of Phase 1...........................................................................
3. Phase 2: Strengthening core businesses. ....................................................................................................
4. Phase 2: Initiatives to promote growth strategy. ..........................................................................................
5. Phase 2: Initiatives to enhance the Sanki Brand. .........................................................................................
6. Phase 2: Financial and capital policies.. .......................................................................................................
7. Phase 2: ESG policies. . ................................................................................................................................
8. Phase 2: Strengthen the ability to communicate information. ......................................................................
9. Financial performance targets: The top priority is achieving the management targets. ................................

12
13
13
14
14
15
15
16
19

■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 17• FY3/20 outlook...................................... ......................................................................................................

17■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 19

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

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/██Summary
A comprehensive engineering company conducting facilities
construction work and plant work with strengths of advanced
technology and credibility cultivated over a long history
Sanki Engineering Co., Ltd. <1961> (hereafter, “the Company”) is an engineering company whose main businessis the planning, design, manufacture, supervision, installation, sale and consultation of systems and equipment for
construction and plant facilities, in office buildings, schools, hospitals, shopping centers, industrial plants, R&D
centers and other facilities. The Company’s strengths include comprehensive engineering capabilities across adiverse range of business operations, combined with advanced technology and credibility accumulated over a
history of more than 90 years.
1. In FY3/19, net sales increased 24.8% YoY and operating income rose 61.3% YoY exceeding ¥10bn
In the FY3/19 results, orders received were ¥217,096mn (up 13.6% year-on-year (YoY)), net sales were ¥212,314mn(up 24.8%), gross profit was ¥31,684mn (up 26.4%), operating income was ¥10,637mn (up 61.3%), ordinary income
was ¥11,204mn (up 50.7%), and profit attributable to owners of parent was ¥9,046mn (up 131.6%), and the results
were above the target values in the medium-term management plan, “Century 2025” Phase 1. The balance carriedforward was also maintained at the high level of ¥149,495mn (up 3.3% from the end of the previous fiscal year). The
gross profit margin increased by 0.2 percentage point YoY to 14.9%, including because of the ongoing favorable
business environment and as the Company continued to work to thoroughly manage costs prices and strengthen
the site support system.
2. Promoting the targets in “Century 2025” Phase 1, the medium-term management plan
In March 2016, the Company announced “Century 2025” as its long-term version as a10-year goal toward the 100th
anniversary of its foundation. It has positioned the first three years of this plan as “Century 2025” Phase 1, and for
FY3/19, which is the final fiscal year of Phase 1, the Company have achieved the numerical targets it had set, which
was net sales of ¥195bn and operating income of ¥7.5bn, but it has already achieved these targets. Following on
from this, it has announced Phase 2, and while the three key initiatives are a continuation of Phase 1 and there areno major changes, it has added “Disclose financial & capital policies and ESG policies” and “Reinforce Information
Transmission” It has also set quantitative management targets for FY3/22, of an ordinary profit margin of 5.0% orabove, an annual dividend of ¥60 or above, the acquisition of 5mn or more treasury shares (three years from FY3/20),
a ratio of the total return of profits of 70% or above, and ROE of 8.0% or above (final fiscal year).
3. FY3/20 forecast
For FY3/20, the Company is forecasting orders received of ¥190,000mn (down 12.5% YoY), net sales of ¥200,000mn(down 5.8%), operating income of ¥8,800mn (down 17.3%), ordinary income of ¥9,000mn (down 19.7%), andprofit attributable to owners of parent of ¥6,200mn (down 31.5%). The FY3/19 results were at an outstanding
level, so profits are forecast to decrease YoY. But the forecasts are in line with the initial targets in the medium-term
management plan “Century 2025” and this is not a cause for concern. Given that there is plentiful construction
work at hand and the building construction industry surrounding the Company remains active, it is fully possible it
will achieve its targets.

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

01 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/

Summary

4. Going forward, the Company is targeting an annual dividend of ¥60 or above and moreover, to buy back5mn treasury shares
Up to the present time, the Company has actively returned profits to shareholders through not only stably paying
dividends and increasing the dividend in recent years, but also by buying back treasury shares. In FY3/18, in addition
to the ordinary dividend, it paid a special dividend of ¥15 for an annual dividend of ¥35.0 (dividend payout ratio,
55.5%), while in FY3/19, it paid an additional special dividend of ¥20 for an annual dividend of ¥60.0 (dividend
payout ratio, 40.0%). Going forward, it is targeting an annual dividend of ¥60 or above, and depending on thecircumstances, it will also actively acquire treasury shares (around 5mn shares in the next three years). In such ways,
the Company can be highly evaluated for actively returning profits to shareholders.
Key Points
Mitsui-affiliated, domestically-leading facilities construction company that is currently implementing measures
to improve the profit margin• Profits are forecast to decline in FY3/20, but the forecasts are in line with the targets in the medium-term
management plan and this is not a cause for concern.
• Actively returns profits to shareholders. Targeting an annual dividend of ¥60 or above and acquiring 5mn
treasury shares in the next three years.
•㻾 㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻞㻠㻜㻘㻜㻜㻜
㻞㻜㻜㻘㻜㻜㻜

㻞㻝㻞㻘㻟㻝㻠

㻝㻣㻥㻘㻡㻥㻤

㻝㻣㻤㻘㻥㻜㻝

㻔¥㼙㼚㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕㻝㻢㻤㻘㻡㻝㻞

㻝㻣㻜㻘㻝㻡㻣

㻝㻞㻘㻜㻜㻜
㻞㻜㻜㻘㻜㻜㻜
㻝㻜㻘㻜㻜㻜

㻝㻜㻘㻢㻟㻣

㻝㻢㻜㻘㻜㻜㻜

㻤㻘㻤㻜㻜㻝㻞㻜㻘㻜㻜㻜

㻢㻘㻡㻜㻥

㻢㻘㻜㻝㻞

㻢㻘㻜㻜㻜

㻢㻘㻡㻥㻟

㻤㻜㻘㻜㻜㻜
㻠㻜㻘㻜㻜㻜

㻤㻘㻜㻜㻜

㻠㻘㻜㻜㻜
㻞㻘㻜㻜㻜

㻞㻘㻥㻡㻝

㻜

㻜
㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤

㻲㼅㻟㻛㻝㻥

㻲㼅㻟㻛㻞㻜㻌㻱

Source: Prepared by FISCO from the Company’s financial results

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

02 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/██Company outline
One of the largest facilities construction company in Japan. As a
Mitsui-affiliate, it has a history of nearly 100 years.
1. Company outline
Sanki Engineering is a facilities construction company that was established in 1925 as a spin-off of the machinery
division of the former Mitsui & Co., Ltd. The first large projects for the Company were the Shiga manufacturing plantof Toyo Rayon (currently Toray Industries, Inc. <3402>), and a refrigerated warehouse for Aomori Seihyo. Initially,
the Company engaged in heating, plumbing, steel frame construction and the supply of construction materials. It
has subsequently branched out into electrical work, developing integrated plant construction planning, design andinstallation as its main operations.
After World War II, the operations expanded due to the demand derived from the Korean War, and in 1958, theCompany’s capital exceeded ¥1,000mn. In subsequent years, the Company participated in projects undertaken
in preparation to host the Tokyo Olympic Games in 1964, and grew in tandem with the expansion of the Japanese
economy. The Company diversified from the facilities construction business, such as heating, ventilation, air-conditioning (HVAC), plumbing, and electrical systems into other types of facilities, such as transport equipment,
conveyance systems, water treatment facilities and waste treatment facilities. Today, it is a leading domestic facilities
construction company. The Company’s shares were listed on the Tokyo Stock Exchange in 1950.
2. History
Today, Sanki Engineering is a domestically-leading facilities construction company. In April 2015, prior to the 90th
anniversary of its establishment in FY3/16, it appointed Mr. Tsutomu Hasegawa as President and Representative
Director. Subsequently, at the end of FY3/16 it announced “Century 2025” as its long-term vision toward the 100th
anniversary of its establishment in 2025, which adds President Hasegawa’s new strategy to the policy it has taken.
History
1925

Sanki Engineering Co., Ltd. established as a spin-off of the machinery division of the former Mitsui & Co., Ltd.

1935

10th anniversary of its establishment. Had 5 branches, 6 sub-branch offices, 3 affiliated companies, and around 300 employees

1958

Capital exceeded ¥1,000mn

1963Completed the Sagami Plant (currently, the Yamato Plant)

1964

Participated in projects relating to the Tokyo Olympic Games, including the Yoyogi National Gymnasium, and the NHK Broadcasting
Center1982

Newly established Technical R&D Institute in Yamato City, Kanagawa Prefecture, equipped with facilities for basic research and forlargescale experiments

2000

Opened the Shonan Training Center (Yokosuka City, Kanagawa Prefecture) and strengthened human resource development

2011

Relocated its head office to the current location in the Tsukiji area of Tokyo

2015

90th anniversary of its establishment. Announced its long-term vision “Century 2025”

2018

Opened Sanki Techno Center, a comprehensive training and research facility (Yamato City, Kanagawa Prefecture)

Source: Prepared by FISCO from the Company’s website, etc.

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

03 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/██Business description
Four main segments, with a focus on the Facilities Construction
Business
1. Outline of business by segment
The Company’s main operations are divided into four business segments: three facility business segments ofFacilities Construction, Machinery Systems, Environmental Systems, and Real Estate. An overview of each segment
is set out below.
(1) Facilities Construction Business
The Facilities Construction Business engages in activities including planning, design, installation, maintenance,and repair of facilities including office buildings, schools, hospitals, shopping centers, factories, R&D centers,
and other facilities. The scope of activities handled by this business is extensive and can be further divided into
the following sub-segments.
a) HVAC and plumbing for buildings
The HVAC and plumbing for buildings business provides HVAC, water supply and wastewater systems, plumbing,area heating and cooling systems, kitchen systems, and disaster readiness systems for general buildings andfacilities, such as office buildings, schools, hospitals, department stores, hotels, and warehouses.
b) Industrial HVAC
The industrial HVAC business provides HVAC for factories and research facilities of all industries, especially clean
room systems for semiconductor plants and food processing plants, which are areas of strength for the Company,
as well as special air-conditioning systems and appurtenances for manufacturers of medical systems, and thelike; in addition to environmental control systems and so forth for automobile manufacturers.
c) Electrical systems
The electrical systems business provides electrical systems, communications-related systems, electrical civil
works, and so forth.
d) Facility systems
The facility systems business offers project management and other services for the construction or relocationof the offices and dealing rooms of financial institutions and other industries. It also provides central monitoring
and automatic control systems, Internet protocol (IP) solutions, network solutions, business continuity plan (BCP)
solutions and other services for large-scale buildings.
(2) Machinery Systems Business
The Machinery Systems Business supplies materials handling systems, including various transportation equipment(conveyors, sorting systems, etc.), and conveyance systems for factories and automated warehouses.
(3) Environmental Systems Business
The Environmental Systems Business provides facilities such as water treatment facilities (including facilities totreat drinking water and dispose of sewage, facilities for the disposal of industrial wastewater, and facilities forthe treatment or incineration of sludge), facilities for the treatment of waste (including waste incineration facilities,
landfill wastewater treatment facilities), and others.

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

04 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/

Business description(4) Real Estate Business
The Real Estate Business utilizes vacant land, such as former factory sites, and manages real estate lease businessand building management business.
Sanki Engineering’s main business is the provision of the facilities and solutions as described above. The Company
obtains about half of its orders directly from facility owner clients and half indirectly through general contractors.
Just as the size of the orders varies widely from a few million yen to a few billion yen, the order completion timevaries from a few weeks to a few years for longer orders. The profitability of an order varies and may differ fromthe originally planned profitability depending on factors such as labor and material costs and the management
construction schedule. Some orders end up more profitable than originally planned, and some are less profitable.
2. Strengths, distinguishing traits, and competitors(1) Broad business domain and one-stop shop solutions
It’s no exaggeration to say that there are countless companies in Japan providing the same kind of construction
and facilities as Sanki Engineering. The Company’s strength lies in the wide range of its businesses, which includes
HVAC for building, plumbing, industrial HVAC, electrical systems, facility systems, automated control systems
for buildings, transportation systems, and water treatment facilities. The Company can provide services for many
types of facilities and solutions covering all phases from planning and design, to installation, maintenance, repair,and replacement, depending on the life cycle of the building. This capability allows its customers to place one-stop
shop orders to resolve their problems. By making use of “total engineering” and “life-cycle engineering,” which
combines a wide variety of businesses horizontally, the Company can provide optimal systems with high added
value, and this comprises the Company’s strength.
(2) Top-class technology and high-quality customer base
One of the Company’s main strengths is the advanced technology it has accumulated since before World War
II. Moreover, this top-class technology spans a wide range of fields. Furthermore, Sanki Engineering has earned
a reputation for reliability over decades of business, which underpins its extensive, high-quality customer base.
This can also be considered a strength of the Company. In addition to its prewar achievements, the Company’s
involvement in numerous post-war projects, including the construction of facilities for the Tokyo Olympic Gamesof 1964, have enabled it to obtain orders for recent large projects, such as the ABENO HARUKAS in Osaka andTokyo Midtown Hibiya.
3. Main competitors
Sanki Engineering’s competitors vary by project, but its main competitors among the comprehensive facility construction companies are other large companies such as Takasago Thermal Engineering Co., Ltd. <1969>, Shinryo
Corporation (unlisted), Dai-Dan Co., Ltd. <1980>, and Taikisha Ltd. <1979>. Compared to these competitors,
Sanki Engineering’s strengths lie in its broad business domain and its superiority in industrial HVAC systems, suchas clean rooms.
4. Trend in orders received and the economic environment
Given the nature of Sanki Engineering’s businesses, orders received are the most important factor affecting theCompany’s performance. Annual orders received are greatly affected by the overall Japanese market, or theJapanese macro-economy. As the Company’s main business is facilities construction, it is influenced by the macro
indicator of private sector, non-residential construction investment. The correlation between orders received andprivate sector, non-residential construction investment is arguably very high.

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

05 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.

3-Sept.-2019

1961 Tokyo Stock Exchange First Section

http://www.sanki.co.jp/en/ir/

Business description㻻㼞㼐㼑㼞㼟㻌㼞㼑㼏㼑㼕㼢㼑㼐㻌㼢 㼑㼞㼟㼡㼟㻌㻼㼞㼕㼢㼍㼠㼑㻘㻌㼚㼛㼚㻙㼞㼑㼟㼕㼐㼑㼚㼠㼕㼍㼘㻌㼏㼛㼚㼟㼠㼞㼡㼏㼠㼕㼛㼚㻌㼕㼚㼢㼑㼟㼠㼙㼑㼚㼠㻻㼞㼐㼑㼞㼟㻌㼞㼑㼏㼑㼕㼢㼑㼐㻌㻔㼘㼑㼒㼠㻕㻼㼞㼕㼢㼍㼠㼑㻘㻌㼚㼛㼚㻙㼞㼑㼟㼕㼐㼑㼚㼠㼕㼍㼘㻌㼏㼛㼚㼟㼠㼞㼡㼏㼠㼕㼛㼚㻌㼕㼚㼢㼑㼟㼠㼙㼑㼚㼠㻌㻔㼞㼕㼓㼔㼠㻕

㻔¥㼎㼚㻕

㻔¥㼠㼚㻕

㻞㻡㻜

㻞㻜㻜

㻞㻜
㻝㻡㻌

㻝㻡㻌
㻝㻞㻌

㻝㻡㻜

㻝㻜㻜

㻝㻜㻌

㻝㻤㻤

㻝㻝㻌

㻝㻣㻡
㻝㻠㻟

㻝㻠㻣

㻝㻝㻌

㻝㻢㻡

㻝㻞㻌

㻝㻟㻌

㻝㻢
㻝㻢

㻝㻟㻌
㻝㻞

㻝㻢㻤

㻝㻣㻟

㻝㻤㻟

㻝㻤㻡

㻝㻥㻝

㻞㻝㻣

㻡㻜

㻤

㻠

㻜
㻞㻜㻜㻤

㻞㻜㻜㻥

㻞㻜㻝㻜

㻞㻜㻝㻝

㻞㻜㻝㻞

㻞㻜㻝㻟

㻞㻜㻝㻠

㻞㻜㻝㻡

㻞㻜㻝㻢

㻞㻜㻝㻣

㻜
㻞㻜㻝㻤 㻔㻲㼅㻕

Source: Prepared by FISCO based on materials from the Ministry of Land, Infrastructure, Transport and Tourism, etc.

██Business trends
In FY3/19, operating income exceeded ¥10bn (up 61.3% YoY).
Balance carried forward was also maintained, up 3.3% from the endof the previous fiscal year
1. FY3/19 results overview(1) Earnings
In the FY3/19 results, orders received were ¥217,096mn (up 13.6% year-on-year (YoY)), net sales were
¥212,314mn (up 24.8%), gross profit was ¥31,684mn (up 26.4%), operating income was ¥10,637mn (up 61.3%),
ordinary income was ¥11,204mn (up 50.7%), and profit attributable to owners of parent was ¥9,046mn (up131.6%), and the results were above the target values in the medium-term management plan, “Century 2025”
Phase 1. The balance carried forward was also maintained at the high level of ¥149,495mn (up 3.3% from the endof the previous fiscal year). The gross profit margin increased by 0.2 percentage point YoY to 14.9%, including
because of the ongoing favorable business environment and as the Company continued to work to thoroughlymanage costs prices and strengthen the site support system.
In the Facilities Construction Business as a whole, orders received increased 19.0% YoY, with significant increase
for industrial HVAC, centered on large-scale projects related to electrical machinery and semiconductors, while
they also trended firmly for HVAC and plumbing for buildings and electrical systems. Conversely, orders received
in the Plant & Machinery Systems Business declined 7.1%, but this was mainly due to the 10.5% decrease in
the Environmental Systems, which recorded large-scale projects in the previous fiscal year. Orders for Machinery
Systems were also maintained at around the same level as in the previous fiscal year, including due to orders forlarge-scale projects.

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

06 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.

3-Sept.-2019

1961 Tokyo Stock Exchange First Section

http://www.sanki.co.jp/en/ir/

Business trends

FY3/19 results(¥mn, %)
FY3/18AmountFY3/19YoY change% change

Orders received

191,113

Ratio-

Amount217,096

Ratio-

25,983

13.6

Balance carried forward

144,712-

149,495

-

4,782

3.3

Net sales

170,157

100.0

212,314100.0

42,15724.8

Gross profit

25,06014.7

31,684

14.9

6,624

26.4

SG&A expenses

18,466

10.8

21,046

9.9

2,580

14.0

Operating income

6,593

3.9

10,637

5.0

4,044

61.3

Ordinary income

7,434

4.4

11,204

5.3

3,769

50.7

Profit attributable toowners of parent

3,906

-

9,046

4.3

5,140

131.6

Source: Prepared by FISCO from the Company’s Summary of Financial Results

On the other hand, the SG&A expenses increased ¥2,580mn, or 14.0%YoY, to ¥21,046mn, but the SG&A
expenses ratio fell from 10.8% in the same period of the previous fiscal year to 9.9%, due to the increase in net
sales. The main factors behind the increase were the rise in normal expenses, the rise in costs related to the
Yamato site redevelopment, the increase in R&D expenses, the increase in personnel hired, and a rise in personnel
costs in conjunction with workstyle reforms, but each was within the expected range. However, these wereabsorbed by the higher gross profit, and operating income increased significantly YoY.
(2) Earnings by segment
Net sales and ordinary income by segment(¥mn, %)
FY3/18

FY3/19AmountRatio

AmountRatio

170,157

100.0

212,314100.0

42,157

24.8

HVAC and plumbing for buildings

63,782

37.5

71,558

33.7

7,776

12.2

Industrial HVAC

46,55627.4

73,493

34.6

26,936

57.9

Electrical systems

20,653

12.1

23,214

10.9

2,561

12.4

Facility systems

8,695

5.1

11,033

5.2

2,337

26.9

Facilities Construction Business

139,68882.1

179,300

84.5

39,611

28.4

Machinery Systems Business

9,254

5.4

11,791

5.6

2,536

27.4

Environmental Systems Business

19,90911.7

20,471

9.6

562

2.8

Real Estate Business

1,755

1.0

1,926

0.9

170

9.7

578

0.3

718

0.3

139

24.2

Net sales

OthersYoY change% change

Adjustments-1,030--1,893--863-

Ordinary income

7,434

4.4

11,204

5.3

3,769

50.7

Facilities Construction Business

6,010

-

9,905

-

3,895

64.8

Machinery Systems Business

-40

-

238

-

279

-

Environmental Systems Business

575

-

312

-

-263

-45.8

Real Estate Business

476

-

471

-

-4

-1.0

Others

49

-

52

-

2

6.0

Adjustments

362

-

223

-

-139

-38.4

Source: Prepared by FISCO from the Company’s Summary of Financial Results

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

07 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.

3-Sept.-2019

1961 Tokyo Stock Exchange First Section

http://www.sanki.co.jp/en/ir/

Business trends

In the Facilities Construction Business, net sales were ¥179,300mn (up 28.4% YoY). By sub-segment, in HVAC
and plumbing for buildings, net sales increased 12.2% YoY to ¥71,558mn. In industrial HVAC, which is a field inwhich the Company specializes, orders were favorable mainly from the electrical machinery and semiconductor
industries, so net sales were strong recording ¥73,493mn (up 57.9%). The excellent sales were also maintainedfor electrical systems, up 12.4% to ¥23,214mn, while in facility systems, they increased 26.9% to ¥11,033mn.
Historically, HVAC and plumbing for buildings has been the largest sub-segment in the Facilities Construction
Business, but in FY3/19 the significant increase in industrial HVAC caused it to overtake the building HVAC andplumbing sub-segment.
In the Plant & Machinery Systems Business, total net sales increased 10.6% YoY to ¥32,263mn. Machinery
Systems Business net sales were ¥11,791mn (up 27.4%) and Environmental Systems Business net sales were
¥20,471mn (up 2.8%). Other than these facilities work segments, net sales in the Real Estate Business increased
9.7% YoY to ¥1,926mn due to factors including the start of leasing of part of the former Yamato Plant site to
Nippon Life Insurance Company. As a result of the above, sales increased in every sub-segment.
In ordinary income and loss by segment, the Company recorded ¥9,905mn (up 64.8% YoY) in the Facilities
Construction Business, ¥238mn in the Machinery Systems Business (versus a loss of ¥40mn in FY3/18), and an
ordinary loss of ¥312mn (down 45.8% YoY) in the Environmental Systems Business. Also, the Real Estate Businessand Others recorded ordinary income of ¥471mn (down 1.0%) and ¥52mn (up 6.0%), respectively.
(3) Orders received by segment
Orders received by segment(¥mn, %)
FY3/18

FY3/19AmountRatio

AmountRatio

Amount191,113100.0

217,096

100.0

25,983

HVAC and plumbing for buildings

62,274

32.6

65,639

30.2

3,364

5.4

Industrial HVAC

58,90730.8

82,72938.1

23,821

40.4

Electrical systems

22,675

11.9

23,342

10.8

667

2.9

Facility systems

9,585

5.0

10,821

5.0

1,236

12.9

Facilities Construction Business

153,44380.3

182,533

84.1

29,08919.0

Machinery Systems Business

12,100

6.3

12,049

5.6

-50

-0.4

Environmental Systems Business

24,247

12.7

21,70510.0-2,541-10.5

Real Estate Business

1,755

0.9

1,926

0.9

170

9.7

587

0.3

960

0.4

372

63.5

-1,020--2,078--1,057-

Orders received

OthersAdjustments

Ratio
13.6

Source: Prepared by FISCO from the Company’s Summary of Financial Results

In the Facilities Construction Business as a whole, orders received were ¥182,533mn (up 19.0% YoY). By
sub-segment, the Company secured the level above the previous year in HVAC and plumbing for buildings
at ¥65,639mn (up 5.4%). In industrial HVAC, the Company acquired large-scale projects relating to electricalmachinery and semiconductors, and orders during the period also increased, so orders received grew significantly
to ¥82,729mn (up 40.4%). Orders were also solid in electrical systems at ¥23,342mn (up 2.9%) and facility
systems at ¥10,821mn (up 12.9%).

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

08 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.

3-Sept.-2019

1961 Tokyo Stock Exchange First Section

http://www.sanki.co.jp/en/ir/

Business trends

In the Plant & Machinery Systems Business, orders received for Machinery Systems were mostly flat YoY at¥12,049mn (up 0.4%), but this was a good result considering the high- level result in the year-earlier period (orders
received in FY3/18 totaled ¥8,130mn) with large-scale orders received. On the other hand, for Environmental
Systems, orders declined by 10.5% to ¥21,705mn, but this was not a bad result considering the fact that orders
received in the year-earlier period were abnormally high due to a large-scale DBO* project. As a result, in the Plant& Machinery Systems Business as a whole, orders received were ¥33,755mn (down 7.1%), and combined with
Facilities Construction Business, in facilities work segments as a whole, orders were ¥216,288mn (up 14.0%).
*	DBO (Design Build Operate) is a method for publicly-built, privately-operated projects with a collective order made to
private companies (such as the Company) for design, building, and operations and maintenance management.

In areas other than facilities work segments, orders received in Real Estate Business totaled ¥1,926mn (up 9.7%),
and in Others totaled ¥960mn (up 63.5%). Total orders received in FY3/19 (including adjusted amounts) was¥217,096mn (up 13.6%), and a high level was maintained. As a result, the balance carried forward at the endof the fiscal period was ¥149,495mn (up 3.3% versus the end of the year-earlier period), staying at a high level.
The Company received a total of 23 large-scale projects (orders exceeding ¥1,000mn) worth ¥55,118mn.
Compared to the previous fiscal years, both the number of orders and the amount increased (20 orders worth¥40,822mn in FY3/18 and 15 orders worth ¥40,057mn in FY3/17).
Breakdown of large-scale projects with orders exceeding ¥1,000mn(projects)
FY3/17

FY3/18

FY3/19

Offices422Retail outlet

1

-

-

Commercial facility

-

-

1

Hotels-11

Factories

4

6

10

Logistics Center

-

-

1

Multiple-dwelling complex

-

2

1

Hospitals/convalescence institutions

1

1

1

Research institutes

1

1

1

General government buildings

-

-

1

Gymnasiums

-

1

1

Others-3

1

Railway and airport facilities

-

1

1

Power stations, substations

1

-

-

Waste processing facilities

1

2

1

Water treatment and sewage plants

2

-

-

Total

15

20

23

40,05740,822

55,118

Total (¥mn)

Source: Prepared by FISCO from the Company's results overview

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

09 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/

Business trends㻸㼍 㼞㼓㼑㻙㼟㼏㼍㼘㼑㻌㼜㼞㼛㼖㼑㼏㼠㼟㻌㼣㼕㼠㼔㻌㼛㼞㼐㼑㼞㼟㻌㼑㼤㼏㼑㼑㼐㼕㼚㼓㻌¥㻝㻘㻜㻜㻜㼙㼚㻔¥㼙㼚㻕㻡㻡㻘㻝㻝㻤

㻠㻜㻘㻜㻡㻣

㻠㻜㻘㻤㻞㻞

㻝㻡㻔㼜㼞 㼛㼖㼑㼏㼠㼟㻕㻞㻜㻔㼜㼞 㼛㼖㼑㼏㼠㼟㻕㻞㻟㻔㼜㼞 㼛㼖㼑㼏㼠㼟㻕㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤

㻲㼅㻟㻛㻝㻥

Source: Prepared by FISCO from the Company's results overview

2. Financial condition
The financial condition at the end of FY3/19 was that current assets were ¥141,342mn (up ¥18,441mn YoY), which
was due to factors including a ¥20,784mn increase in notes and accounts receivable on completed construction
contracts and others. Noncurrent assets were ¥53,979mn (down ¥133mn), which was primarily because of anincrease in tangible noncurrent assets of ¥3,667mn on the fully-fledged redevelopment of the Yamato site, and adecrease in investments and other assets of ¥3,675mn, and other factors. As a result, total assets at the end of
FY3/19 were ¥195,321mn (up ¥18,307mn).
Current liabilities were ¥91,317mn (up ¥17,530mn), mainly due to a ¥18,431mn increase in notes and accounts
payable on construction contracts and others. Noncurrent liabilities were ¥14,232mn (down ¥2,803mn), with themain factors including decreases of ¥1,390mn in long-term loans and ¥2,147mn in deferred tax liabilities. As aresult, total liabilities at the end of FY3/19 were ¥105,549mn (up ¥14,726mn). Total net assets were ¥89,772 (up¥3,581mn). This was mainly due to factors including a ¥5,406mn increase in retained earnings from the recordingof profit attributable to owners of parent and a ¥2,237mn decrease in valuation difference on other securities.

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

10 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/

Business trends

Condensed balance sheet(¥mn)
FY3/18

FY3/19ChangeCash and deposits

43,866

42,612-1,254

Notes and accounts receivable on completed construction contracts and others

64,45885,243

20,784

122,901

141,342

18,441

Tangible noncurrent assets

10,662

14,3293,667

Intangible noncurrent assets

813

688

-124

Investments and other assets

42,63638,961-3,675Current assets

Noncurrent assets

54,112

53,979-133

Total assets

177,014

195,321

18,307

Notes and accounts payable on construction contracts and others

49,854

68,286

18,431

Short-term loans

6,894

6,874

-19

Payments received for work in progress

3,439

3,395

-43

73,78791,317

17,530Long-term loans

6,610

5,220

-1,390Liability for retirement benefits

2,884

3,120

235

Deferred tax liabilities

2,187

40

-2,147

Current liabilities

Noncurrent liabilities

17,035

14,232-2,803

Total liabilities

90,822

105,549

14,726

Total net assets

86,191

89,772

3,581

Source: Prepared by FISCO from the Company’s financial results

3. Cash flow conditions
In FY3/19, cash flow provided by operating activities was ¥6,786mn, with the main cash inflow items being profit
before income taxes, etc., of ¥11,326mn, and an ¥18,912 increase in trade payables, and the main cash outflow
item being a ¥21,467mn increase in trade receivables. Cash flow used in investing activities was ¥3,775mn, due
mainly to ¥6,447mn in purchase of property, plant and equipment and ¥2,198mn in proceeds from sales of investment securities. Cash flow used in financing activities was ¥5,215mn, with the main cash outflow items including¥1,409mn in net decrease in short- and long-term borrowings, ¥1,191mn in purchase of treasury shares, and¥2,423mn in dividends paid.
As a result, the balance of cash and cash equivalents at the end of FY3/19 had decreased ¥2,254 mn from the endof the previous fiscal year to ¥42,612 mn.
Condensed statement of cash flows(¥mn)
FY3/18

FY3/19

6,306

6,786

Profit before income taxes

6,454

11,326

Decrease (increase) in trade receivables-3,546-21,467

Increase (decrease) in trade payables

1,092

18,912-2,510-3,775-2,290-6,447

1,814-5,215

Net increase (decrease) in short- and long-term borrowings

7,849-1,409Purchase of treasury shares-3,679-1,191Dividends paid

-2,195-2,423

Cash flows from operating activities

Cash flows from investment activities
Purchase of property, plant and equipment
Cash flows from financing activities

Net increase (decrease) in cash and cash equivalents

5,679-2,254

Cash and cash equivalents at end of period

44,866

42,612

Source: Prepared by FISCO from the Company’s financial results

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

11 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/██Medium-term management plan
Century 2025 Plan, Phase 2 from FY3/20
1. “Century 2025” Plan: from Phase 1 to Phase 2
The Company has announced a 10-year long-term vision “Century 2025” that covers from fiscal 2016 to fiscal
2025, the 100th anniversary of its establishment. The ultimate goal of this long-term vision is to be “The Company
of Choice.” The Company has divided the 10 years into three phases described below in order to achieve this goal
and the Company’s policy is to implement business strategies promoted in each phase of medium-term management
plan.
Long-term vision “Century 2025”

Source: From the Company’s materials

The Company has already achieved the quantitative targets for Phase 1 of the medium-term management plan,
which were net sales of ¥195bn and operating income of ¥7.5bn in FY3/19. It also had set qualitative targets (keyinitiatives); “Strengthen Core Businesses,” “Promote Growth Strategies,” and “Enhance the Sanki Brand,” and it
can be said to have basically achieved these targets as well.

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

12 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/

Medium-term management plan

2. Phase 2: The basic policies are a continuation of Phase 1“Century 2025” enters Phase 2 from FY3/20, but since the initiatives in Phase 1 are already steadily showing theireffects, the Company has set the basic policies for Phase 2 as(1) continue to pursue further quality for technologies and people from the initiatives in Phase 1, and continue to
implement the key initiatives from Phase 1, of “Strengthen Core Businesses,” “Promote Growth Strategies,”and “Enhance the Sanki Brand.”(2) and in addition, promote understanding of the Company by "Disclosing financial and capital policies and the
ESG policy" and "Strengthening the ability to communicate information."
By working on these initiatives, it is aiming to increase “reliability” to become “The Company of Choice” from thenext phase, Phase 3.
3. Phase 2: Strengthening core businesses
It will implement initiatives to “Improve component technologies and achieve stable growth.” From FY3/20, theFacility Systems Business will be separated from the Facilities Construction Business segment and become a new
segment.
Improve component technologies and achieve stable growth

Source: Prepared by FISCO from the Company's materials

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

13 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/

Medium-term management plan

4. Phase 2: Initiatives to promote growth strategy
Implement initiatives to "pursue future growth in the areas of technology and business."
Pursue future growth in the areas of technology and business

Source: Prepared by FISCO from the Company's materials

5. Phase 2: Initiatives to enhance the Sanki Brand
Implement initiatives to Develop human resources that possess the Sanki spirit and contribute to society.
Develop human resources that possess the Sanki spirit and contribute to society

Source: Prepared by FISCO from the Company's materials

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

14 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/

Medium-term management plan

6. Phase 2: Financial and capital policies
Establish financial and capital policies to rise medium- to long-term corporate value.
Raising medium- and long-term corporate value

Source: Prepared by FISCO from the Company's materials

7. Phase 2: ESG policies
Implement initiatives to create sustainable social value.
ESG Policies

Source: Prepared by FISCO from the Company's materials

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

15 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/

Medium-term management plan

8. Phase 2: Strengthen the ability to communicate information
The Company is actively communicating information by implementing initiatives to further spread awareness of the
Sanki brand both internally and externally.
Proactive transmission of information

Source: Prepared by FISCO from the Company's materials

9. Financial performance targets: The top priority is achieving the management targets
During the “Century 2025” Phase 2 period, the Company is implementing various initiatives, such as those describedabove, and it has set financial performance targets for this period.
Financial performance targets(¥bn)
Phase1

Phase 2

FY3/17

FY3/18

FY3/19FY3/20FY3/21

FY3/22

Net sales

1,685

1,701

2,123

2,000

2,000

2,000

Gross profit

225

250

316

300

310

320

13.4

14.7

14.9

15.0

15.5

16.0

68

74

112

90

95

100

4.1

4.4

5.3

4.5

4.8

5.0

(gross profit margin, %)Ordinary income(ordinary income margin, %)Source: Prepared by FISCO from the Company's materials

In consideration of the external environment and employees’ styles of working, it is targeting total net sales for thethree years of ¥200bn, while targeting gross profit margin, which the Company holds in the highest importance, of
16.0% and an ordinary profit margin of 5.0% for the final fiscal year.
The forecast is for profits to decline YoY in FY3/20, but in this regard, the Company has stated that this is because
profits in FY3/19 were unusually good, and forecasts do not deviate from the initial assumptions in the medium-term
management plan.

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

16 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/

Medium-term management plan㻻㼞 㼐㼕㼚㼍㼞㼥㻌㻵㼚㼏㼛㼙㼑㻌㻾㼑㼟㼡㼘㼠㼟㻌㼍㼚㼐㻌㻲㼛㼞㼑㼏㼍㼟㼠㼟㻾㼑㼟㼡㼘㼠㼟㻌㼍㼚㼐㻌㼒㼛㼞㼑㼏㼍㼟㼠㻔¥㼎㼚㻕㻵㼚㼕㼠㼕㼍㼘㻌㼜㼘㼍㼚

㻝㻞㻚㻜
㻝㻜㻚㻜

㻥㻚㻜㻌

㻤㻚㻜

㻣㻚㻜㻌

㻣㻚㻡㻌

㻢㻚㻜

㻥㻚㻡

㻤㻚㻜㻌

㻝㻝㻚㻞㻌

㻠㻚㻜

㻢㻚㻤㻌

㻣㻚㻠㻌

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤

㻝㻜㻚㻜㻌

㻥㻚㻜㻌

㻥㻚㻡㻌

㻝㻜㻚㻜㻌

㻲㼅㻟㻛㻞㻜㻌㻱

㻲㼅㻟㻛㻞㻝㻌㻱

㻲㼅㻟㻛㻞㻞㻌㻱

㻞㻚㻜㻜㻚㻜㻲㼅㻟㻛㻝㻥

Source: Prepared by FISCO from the Company's materialsManagement targets

Source: Prepared by FISCO from the Company's materials██Outlook
Profits are forecast to decline, but the forecasts are in line with theinitial targets and this is not a cause for concern• FY3/20 outlook
For the FY3/20 full year results, the Company is forecasting net sales of ¥200,000mn (down 5.8% YoY), operating
income of ¥8,800mn (down 17.3%), ordinary income of ¥9,000mn (down 19.7%), and profit attributable to ownersof parent of ¥6,200mn (down 31.5%). These forecasts assume orders received of ¥190,000mn (down 12.5%) andbalance carried forward of ¥139,495mn (down 6.7% from the end of the previous fiscal year).

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

17 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.

3-Sept.-2019

1961 Tokyo Stock Exchange First Section

http://www.sanki.co.jp/en/ir/

Outlook

Breaking down net sales, in the Facilities Construction Business, they are forecast to be ¥163,000mn (down 9.1%
YoY). By sub-segment, sales are expected to be ¥66,000mn (down 7.8%) for HVAC and plumbing for buildings and¥63,000mn (down 14.3%) for industrial HVAC. Both are due to the outstanding results achieved in FY3/19. Sales ofelectrical systems are forecast to be basically unchanged YoY at ¥24,000mn (up 3.4%), and those of facility systems
to increase to ¥10,00mn (down 9.4%). In the Plant & Machinery Systems Business, net sales for Machinery Systems
are forecast to increase slightly to ¥12,000mn (up 1.8%) while Environmental Systems is projected to increase to¥23,000mn (up 12.4%) from construction work at hand.
In the mainstay Facilities Construction business, orders received are forecast to decline to ¥155,000mn (down
15.1%) due to the favorable performance in FY3/19. By sub-segment, in HVAC and plumbing for buildings, orders
are expected to be ¥62,000mn (down 5.5%), in industrial HVAC, ¥59,000mn (down 28.7%), in electrical systems,¥23,000mn (down 1.5%), and in facility systems, ¥1,100mn (up 1.7%). In the Plant & Machinery Systems Business,orders are expected to be ¥12,000mn (down 0.4%) for Machinery Systems and ¥21,000mn (down 3.2%) for
Environmental Systems, both mostly unchanged YoY. As a result, overall orders received including Real EstateBusiness and Others are forecast to decrease 12.5% to ¥190,000mn.
FY3/20 forecast(¥mn, %)
FY3/19FY3/20 E

AmountRatio

AmountRatio

217,096100.0

190,000

100.0-27,096

HVAC and plumbing for buildings

65,63930.2

62,00032.6-3,639-5.5

Industrial HVAC

82,72938.1

59,00031.1-23,729-28.7

Electrical systems

23,34210.8

23,000

12.1

-342

-1.5

Facility systems

10,821

5.0

11,000

5.8

179

1.7

Facilities Construction Business

182,53384.1

155,000

81.6-27,533-15.1

Machinery Systems Business

12,0495.6

12,000

6.3

-49

-0.4

Environmental Systems Business

21,70510.0

21,000

11.1

-705

-3.2

Real Estate Business

1,926

0.9

2,000

1.1

74

3.8

960

0.4

600

0.3

-360

-37.5

Orders received

OthersYoY change% change-12.5-2,078

-1.0

-600

-0.3

1,478

-71.1

212,314100.0

200,000

100.0-12,314-5.8

HVAC and plumbing for buildings

71,55833.7

66,00033.0-5,558-7.8

Industrial HVAC

73,493

34.6

63,00031.5-10,493-14.3

Electrical systems

23,21410.9

24,000

12.0

786

3.4

Facility systems

11,033

5.2

10,0005.0-1,033-9.4

Facilities Construction Business

179,300

84.5

163,000

81.5-16,300-9.1

Machinery Systems Business

11,791

5.6

12,000

6.0

209

1.8

Environmental Systems Business

20,471

9.6

23,000

11.5

2,529

12.4

Real Estate Business

1,926

0.9

2,000

1.0

74

3.8

718

0.3

600

0.3

-118

-16.4

Adjustments
Net sales

Others-1,893

-

-600

-

1,293

-

Gross profit

31,68414.9

30,00015.0-1,684-5.3

SG&A expenses

21,046

9.9

21,200

10.6

154

0.7

Operating income

10,637

5.0

8,800

4.4

-1,837-17.3

Ordinary income

11,204

5.3

9,000

4.5

-2,204-19.7

Profit attributable to owners of parent

9,046

4.3

6,200

3.1

-2,846-31.5

Adjustments

Source: Prepared by FISCO from the Company’s financial results supplementary materials

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

18 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.
1961 Tokyo Stock Exchange First Section

3-Sept.-2019
http://www.sanki.co.jp/en/ir/

OutlookOverall, the Company has set a conservative forecast due to the outstanding results achieved in FY3/19. Given
that currently there is ample work in hand, we feel there is every likelihood that the Company will achieve the above
targets. Going forward, the point to pay attention to is avoiding unexpectedly unprofitable projects by rigorous
progress management. In respect of orders also, the environment surrounding the construction and HVAC industries
is good, and given that there is expected to be an ample volume of works, it is felt that it is possible for the Company
to secure their target for orders received.
The gross profit margin in the previous fiscal year was at a high level (14.9%), but the Company plans to ensure aslightly higher level (15.0%) this fiscal year. It will do so by continuing to implement measures to improve profits,
including establishing and enhancing site support system, particularly by strengthening negotiating capabilities for the
procurement of materials, and supporting on-site purchasing operations through ongoing integrated managementby the Procurement Division. As a result of the above, if net sales are as expected, gross profit of ¥30.000mn (down
5.3% YoY) is expected. Meanwhile, SG&A expenses are expected to increase by 0.7% YoY to ¥21,200mn, partly
due to the leveling off of higher-than-normal expense increases. As a result, the Company is expecting operating
income of ¥8,800mn (down 17.3%).
Ordinary income is forecast to decline, but this was because of the outstanding result achieved in the previous fiscal
year, and moreover, as can be seen from the graph, Ordinary Income Results and Forecasts, it is line with the initial
target of ¥9bn (in the long term vision, “Century 2025.” So in consideration of these points, it can be said that thisFY3/20 forecast is not a cause for concern.

██Shareholder return policy
Actively returns profits to shareholders by increasing the dividend
and acquiring and retiring treasury shares
The Company actively returns profits to shareholders. Its basic dividend policy up to FY13 was to pay an annual
dividend of ¥15, but from FY14, the profit structure changed and it increased the dividend. The FY3/19 results wereexcellent, so in addition to an ordinary dividend of ¥40, it paid a special, period-end dividend of ¥20, and as a result
the annual dividend was ¥60 (dividend payout ratio, 40.0%). It has stated that it intends to pay an annual dividendof ¥60 or above from FY3/20 onwards.
Also, as part of its measures to return profits to shareholders, the Company has actively acquired its treasury shareson the stock market and retired them. On November 16, 2018, the Company retired 1 million of the treasury sharesit held and newly acquired 1 million treasury shares.
Looking at the Company’s buy-backs of treasury shares and the dividend amounts from FY3/14 to FY3/19, we
see that the total amount was ¥20,678mn, and the ratio of this amount to the total profit attributable to owners ofparent during this period, or in other words, the ratio of the total return of profits (weighted average), was 76.0%. In
the three years from FY3/20, it intends to acquire around 5mn treasury shares, and combined with the dividend, toachieve a ratio of the total return of profits of 70% or above. In such ways, we can highly evaluate the Company’s
positive approach to returning profits to shareholders, and moreover the fact that it has clarified its specific policies
for returning profits to shareholders in Phase 2 of the medium-term management plan.

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

19 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanki Engineering Co., Ltd.

3-Sept.-2019

1961 Tokyo Stock Exchange First Section

http://www.sanki.co.jp/en/ir/

Shareholder return policy

Shareholder returns
Share buybacks
No. of shares

Amount (¥mn) (A)Dividend amount (B)Amount of shareholder
returns (C) = (A) + (B)Profit attributable toowners of parent

FY3/191,000,000

1,191

3,595

4,786

9,046

FY3/183,000,000

3,679

2,136

5,815

3,906

FY3/17

0

0

1,906

1,906

4,698

FY3/16

0

0

1,906

1,906

5,327

FY3/152,000,000

1,604

1,270

2,874

2,461

FY3/144,000,000

2,408

983

3,391

1,763

20,67827,201

Total
Total return ratio (weighted average)
Source: Prepared by FISCO from the Company's financial results and results briefing materials

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

20 20

76.0%

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
The intellectual property rights, including the copyrights to the main text hereof, the data
and the like, belong to FISCO, and any revision, reprocessing, reproduction, transmission,
distribution or the like of this report and any duplicate hereof without the permission of FISCO
is strictly prohibited.
FISCO and its affiliated companies, as well as the directors, officers and employees thereof,
may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-11-9 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (Financial information Dept.)
Email: support@fisco.co.jp