December 20, 2022

Estore Corporation (TSE Standard/4304)
A pioneer in EC support.
The trend of digital transformation (DX) is a great business opportunity, andthe company is expected to make a leap forward.

Executive Summary

KAsset Representative
Market analyst＊ The Estore Group provides e-commerce support to companies. It is a pioneer
and a leader of “corporate e-commerce support.” The group consists ofEstore, which is a holding company, and four consolidated subsidiaries. Its
strength is its one-stop service, including the production and operation of EC
sites, marketing support, and payment settlement services.

Kenichi Hirano
Corporate profile
Location

Toranomon, Minatoku, Tokyo

Representa
tive

Kenichi Ishimura,President and CEO
Yoichi Yanagida,
President and COO

Established1999

Capital

768 million yen

ListedSeptember 19, 2001

URL

https://estore.co.jp/

Business

Information &Communication
Stock price data(closing price as of December 19)
Stock price
Number of shares
outstanding

1,407
5,636,636
sharesMarket cap

7,931 million yen

Dividend pershare (est.)

50.0 yen

PER (est.)

8.8xActual PBR

2.8x＊ Since its inception, the company has supported “corporate EC sites” rather
than “shopping malls” in the EC industry, and it now has a 25% market sharefor establishing corporate EC sites. In the rapidly changing IT industry, thecompany has grown by constantly predicting such changes and providing
timely services. In the current era of rapid digitalization, the company isaggressively pursuing M&A and business alliances under the keywords of“sophistication & comprehensive services” in order to survive the DX
competition. In this fiscal year, the company made SHIFFON Co., Ltd. (nowSHIFFON) a subsidiary and launched a hands-on incubation (HOI) businessin addition to its existing services.
＊ In 2Q of FY 3/2023, the company posted net sales of 2.85 billion yen (up0.3% YoY) and operating income of 250 million yen (down 54.3% YoY) as thelatest performance. The sharp decline in profit was due to aggressive upfront
investment in the development of new functions, development costs for largescale projects and temporary costs such as M&A expenses. In the second
half of the fiscal year, performance is expected to grow significantly due to theChristmas and New Year gift season, which tends to increase EC
consumption every year, as well as the contribution of the new subsidiary
SHIFFON.

＊ The EC market expanded due to the restrictions on going out amid the
COVID-19 pandemic. Spending through EC remains firm, and enterprises’
willingness to invest in DX is strong. It is certain that the EC market willcontinue to expand, so the business environment is favorable. However,competition is projected to intensify. The company aims to ride the wave of
DX and achieve significant growth by expanding its lineup of services inmarkets where it can read market trends that are changing at a tremendous
pace and maximize the synergy among group companies. In the fiscal year
ending March 2025, the final year of the medium-term management plan, thecompany expects net sales of 10.1 billion yen and operating income of 2.1
billion yen.
＊ The company is expected to be a rising star in 2023 as it engages in“corporate EC site” support business, which increases customer profits by“providing customers with all the EC solutions (systems, marketing, andpayment settlement) they need,” which can be called “true DX” to triumph in
the unified commerce market.

1

Copyright © Finantec Co., Ltd. All Right ReservedDecember 20, 2022

Overview/History◼

Overview

The group’s primary business is to support companies’ own e-commerce sites. As of November 2022, thegroup consists of Estore, which is a holding company, and four consolidated subsidiaries. The services they
offer include (1) EC systems, (2) payment settlement services, and (3) marketing services. The company’s
strength lies in its ability to provide one-stop services to increase the competitiveness of customers’ own EC
sites. In the current fiscal year, the company is launching a hands-on incubation (HOI) business with the aimof turning its accumulated know-how into their “own business” rather than just “providing support.”

Estore Group

Medium-sized EC System

Large-scale EC
system(100%-owned)

Marketing(100%-owned)

System development(100%-owned)

EC Support

Apparel product planning
manufacturing and sales(50%-owned)

HOI◼ History
Kenichi Ishimura, the current representative director and CEO, founded the company in February 1999 tosupport “online specialty shops.” At that time, EC was in its infancy, and Rakuten and an NTT-relatedcompany were the only two companies operating EC shopping malls, while the company was the only
company providing corporate EC support. The company is a pioneer in corporate EC support, being the
firstinJapan to offer the “shopping cart” function as seen in many EC sites. The IT world is changing rapidly,
and technology and services are destined to face fierce competition. The company has always grasped
these changes accurately and has changed its main services, such as the provision of rental servers andmarketing support, over a span of almost seven years. Through a series of capital and business alliances,the company provided three services (system, marketing, and payment settlement) until 2019 with Estore
only. However, in order to change itself in the era of paradigm shift where society is drastically changing,the company has been conducting M&A successively, starting with Commerce21 Corporation(hereinafter “C21”) in 2020, followed by WebCrew Agency Inc. (hereinafter “WCA”), and Irvine Systems,
Inc. Through these acquisitions, the company has established a structure that allows the group toprovide consistent support for e-commerce sites, including production, operation, payment settlement
and marketing. Furthermore, in August 2022, the company acquired SHIFFON, an apparel business, asa consolidated subsidiary, and launched a hands-on incubation (HOI) business.

2

Copyright © Finantec Co., Ltd. All Right ReservedDecember 20, 2022

Business Environment
According to the statistics by the Ministry of Economy, Trade and Industry, the B2C-EC market size in the goods sales
sector in 2021 was 13.3 trillion yen, up 1.5 trillion yen from the previous year, and EC adoption rate was 8.78%, up 0.7 points.
Compared to 2020, when the EC market expanded significantly owing to a rise in demand from people staying home due to the
spread of COVID-19, the growth rate is slightly lower, but EC adoption rate is increasing, which indicates that consumption at
EC sites appears to have taken root.
Despite continued strong growth, Japan’s EC adoption rate is still in the 8% range, lagging behind other developed countries,
as shown in the chart below. Therefore, there is ample room for growth in Japan’s EC market, which is expected to grow to atleast 18%.
The B2C-EC market for goods sales can be divided into “platforms” and “corporate EC,” and it is estimated that major EC
platforms account for about 70% of this market. While opening a store or displaying items on a major EC platform has theadvantage of attracting a large number of customers, there are fees, competitors, and restrictions on access to customer
information. On the other hand, corporate e-commerce enables direct promotion of a brand’s worldview and access to consumer
information. However, it requires technology and know-how, so it is not easy. Nevertheless, from a quantitative perspective, B2C(D2C), where companies sell directly through their own EC sites, is expected to grow. This is the reason why the company
focuses on corporate EC sites. In the current era of declining population and digitalization, corporate EC sites are a necessity forcompanies seeking to improve management efficiency, and full-scale growth is just beginning.
 Yearly changes in the size of the B2C-EC market for goods sales and EC adoption
rate(Unit: 100 million yen)Global EC adoption rate (B to C)2018

 Yearly changes in the size of the B2C-EC market and EC adoption rate (Unit: 100 million yen)

Source: Ministry of Economy, Trade and Industry

3

Copyright © Finantec Co., Ltd. All Right ReservedDecember 20, 2022

Position in the Industry◼

Position in the industry

Since the start of its business, the company has been providing EC support to its customers, and boasts
the industry’s top market share for corporate EC site production at 25% (based on sales) and theindustry’s top GMV (Gross Merchandise Value) at 405.3 billion yen. (from the medium-term management
plan released in 2020)

Major customers include a number of Japanese companies. (from the supplementary financial data)

4

Copyright © Finantec Co., Ltd. All Right ReservedDecember 20, 2022

Business Model◼

Revenue structure

The company provides three services: EC systems, payment settlement services, and sales promotion
strategy proposal & sales promotion agency services. As shown in the figure below, the company’s
involvement in the production of EC systems can lead to the provision of other services such as payment
settlement and sales promotion, creating a revenue structure that cyclically generates synergetic effects
among services.

While many competitors respond to customer needs only partially, the company can provide a one-stop service
from the sales domain, including market analysis and system development, to the sales promotion domain based on
payment settlement and purchase data analysis. Since information is not fragmented, they are able to respondprecisely to customer needs. This comprehensive capability is their greatest strength and is the reason why thecompany is the industry leader.

◼

Revenue model of each service

There are two EC systems: “Shopserve” provided by Estore and “Sell-side Solution” developed on
consignment by C21. The former is a SaaS-type EC site production system for small and medium-sizedcompanies, featuring stable operations and an overwhelming API. The latter is a PaaS-type system that cangenerate significant recurring revenues through maintenance, operation, and additional development after
initial development. More than 10% of the best 100 Japanese companies in terms of sales are theircustomers.
The payment settlement service is a business based on settlement agency commissions with a linear
revenue model in which revenue is generated according to the number of customers and the amount ofbusiness flow.
Marketing is a business that supports customer acquisition and website production with the aim ofincreasing client companies’ EC sales and improving operational efficiency. This is a business model withhigh recurring revenues: the higher the retention rate, the lower the customer acquisition cost per customer,
and the longer the retention, the higher the order amount.

5

Copyright © Finantec Co., Ltd. All Right ReservedDecember 20, 2022

Business ModelGroup companies

Services

EstoreCloud EC system

C21

Dedicated EC system construction and packaged
EC system

Payments, etc.

EstoreProvision of pay-as-you-go services such as
settlement services

Sales
promotion
proposals

EstoreEC system

Sales
promotionagencyConsulting
C21

WCA

Mass marketing (acquisition of new customers)
Direct marketing (making repeat customers)

In addition to these, SIFFON, an apparel planning and sales company, was made a
consolidated subsidiary in August 2022 and the HOI business was launched in earnest. Thisbusiness aims to improve profitability by acquiring companies that can be expected to achievesignificant results by strengthening e-commerce services. Although performance is expected tofluctuate depending on the availability of projects and the speed at which performance improves,
the business is basically expected to improve profitability and provide a significant return.

6

Copyright © Finantec Co., Ltd. All Right ReservedDecember 20, 2022

Performance Trends
The performance has been strong. During the COVID-19 ciricis from 2020 to 2021, the e-commerce market expanded
dramatically due to so-called "stay-at-home" spending. After the government lifted restrictions on going out, the growth in the ecommerce market has moderated, but the number of e-commerce users has spread and its spending has been growing steadily.
Companies have been forced to be aware of the e-commerce and digital transformation trends and have a strong appetite forinvestment. In this environment, the Company's performance has also shown steady growth as an industry leader, althoughprofits have fluctuated due to development investment and M&As.

(Million yen)

2019.32020.32021.32023.3(Forecast)

2022.3

4,932

4,852

10,504* 5,746

9,600

Operating income

515

478

906

1,051

1,250

Operating income
margin（％）

10.4

9.9

8.6

18.3

13.0

Ordinary income

582

526

1,073

1,078

1,270

Net income

409

367

482

677

800

Net sales*The decline in sales in 3/22 was due to the switch from the gross amount to the net amount. Sales increased by
6% in the previous presentation.
In the current period, the second quarter of the fiscal year ending March, e-commerce spending has been moderated, but
supported by client companies' DX investments, the Company secured sales of 2.85 billion yen, an increase of 0.3% year-onyear. However, operating income fell sharply to 250 million yen (-54.3%). This was due to one-time factors such as aggressive
investment in the development of new functions, as well as higher development costs in 1H due to M&A expenses and somelarge-scale projects (see diagram below). Differences from the plan do not appear to be significant.



Factors behind changes in operating income(from the financial results briefing materials)

Comparison of 1H Results

2022.32023.3YoY
1H(%)(Million yen)

1H

2H

Net sales

2,842

2,904

2,849

0.3

Operatingincome

540

511

246

-54.3

Operatingincomemargin（％）

19.0

17.6

8.6

Ordinary
income

540

538

168

-68.9

Net income

348

329

92

-73.6

The performance is expected to grow significantly in the second half of the year due to the Christmas and New Year gift season,
which in previous years has tended to increase demand for e-commerce spending, as well as the contribution of the newsubsidiary SHIFFON.

7

Copyright © Finantec Co., Ltd. All Right ReservedDecember 20, 2022

Capital Policy◼ SummaryThe consolidation of SHIFFON on August 31, 2022 has resulted in a significant rise in assets/liabilities.
The balance of assets increased by 3.78 billion yen from the end of the previous fiscal year.
On the other hand, both short-term and long-term borrowings have increased as the acquisition of sharesof the new subsidiary was compensated for by bank loans.
Free cash flow, calculated by subtracting investment cash flow from operating cash flow, is also negativeat this point in time due to an increase in investment.
□ Consolidatedbalancesheet for連結貸借対照表（決算説明資料より）
Q2 FY3/23 (from the financial results presentation)
2023年3月期
第2四半期

M&A of SHIFFON is expected to take 2 steps, acquiring 50% in August 2022, and acquiring an additional
20% in June 2023. For the time being, the Company's policy is to prioritize upfront investment for growth.

8

Copyright © Finantec Co., Ltd. All Right ReservedDecember 20, 2022

Mid-term Plan◼

Management policy

There has been no change in the basic policy of “corporate EC support” since the company’s establishment. In adigital society inundated with information, the amount of information exceeds the amount that can be digested.
Under such circumstances, consumers need information necessary for their lives, and businesses need information
for their operations. Consumers seek product lineups and price competitiveness from “mall stores,” while they seek
specialization and quality from “corporate EC sites.” Therefore, the company, whose customers are “corporate EC”
operators, will focus on ARPU (Average Revenue Per User) and LTV (Life Time Value), although it is necessary toacquire new customers.

◼

Mid-term plan

As the paradigm shift in society progresses rapidly and DX becomes inevitable, the growth of the EC market,
which is positioned at the center of this shift, is expected to accelerate. In addition, the fusion of physical stores andEC (unified commerce) is expected to progress, and the trend of DX is a great opportunity for growth. In its mediumterm management plan (FY 3/2021 to FY 3/2025), the company is actively pursuing business alliances and M&A toaccelerate its growth as a comprehensive solution provider for EC, offering “more sophisticated and comprehensive
services.” As mentioned above, this fiscal year, the company acquired SHIFFON as a subsidiary and launched a
new HOI business on a full-scale basis. This business will contribute to the company’s performance from thesecond half of the year.
Target figures in the medium-term management plan are described below. The company aims to double net
sales to 10.1 billion yen and quadruple operating income to 2 billion yen from FY 3/2021. The ratio between the EC
support business and the HOI business is 75:25.
Medium-term performance forecast (from the medium-term management plan)

Excluding the special factors in 2020 and 2021 (the demand by people staying at home during the COVID19 pandemic), the B2C-EC market has grown at an average annual rate of over 8% since 2015. Despite
being a pioneer, the company’s growth rate was lower than that of the market, because Estore had been
providing services all by itself until 2020 as mentioned above. However, with the establishment of a one-stop
service structure through M&A after 2020, the company expects its growth rate to increase in the future.
Considering the acceleration of corporate investment in DX as a chance to make a leap forward, thecompany plans to continue to aggressively pursue business alliances and M&A opportunities, and expects tosee large returns from its HOI business. The company aims to make a leap forward as a provider ofcomprehensive solutions for supporting EC.

9Copyright © Finantec Co., Ltd. All Right ReservedDecember 20, 2022

Issues and Risks
System development is indispensable for the company, which operates in the IT market
where technological innovation advances rapidly. Securing and training system engineers andsales staff is also a challenge. In addition, securing personnel with strong marketing andconsulting skills is an important issue in order to expand the HOI business as M&A will increase
as well as to increase the satisfaction of EC system customers.
In addition, it appears that the introduction of payment services to C21’s customers is notprogressing as initially planned, and if it does not progress as expected, it will be necessary tocover its shortfalls by other service areas to achieve the goals of the medium-term managementplan.
If the results of M&A are less than expected, the company’s financial condition may
deteriorate and should be monitored closely.

10

Copyright © Finantec Co., Ltd. All Right ReservedDecember 20, 2022

Stock Price Analysis
The company’s consolidated results in the second quarter of the fiscal year ending March 31, 2023 showed aslight increase in net sales to 2,849 million yen, but operating income fell 54.3% year on year to 246 million yen,ordinary income fell 68.9% year on year to 168 million yen, and net income fell 73.5% year on year to 92 million yen,resulting in a sharp drop in profits, which led to a nosediving stock price. However, we believe this is a good time topurchase its stock. The first reason is that the significant decrease in profit in the second quarter was due to thestrengthening of sales activities to acquire blue-chip customers, recruiting activities to strengthen the personnel
structure, and M&A-related expenses. The company’s full-year consolidated forecasts for 2023 remain unchanged,
calling for net sales of 9.6 billion yen (up 67.0% YoY), operating income of 1,250 million yen (up 18.9% YoY),
ordinary income of 1,270 million yen (up 17.8% YoY), and net income of 800 million yen (up 18.1% YoY). Secondly,
the dividend is still scheduled to be increased by 10 yen/share to 50 yen/share, showing continuous dividend
increase from 29 yen/share in 2020. It is noteworthy that the company has never decreased the dividend amount.
The dividend yield as of December 2 was 3.65%, making it a growing stock. Thirdly, the company is expanding its
business domain by linking systems and marketing. The company’s main business is to provide customers with EC
solutions (systems, marketing, and payment settlement) in a single package, which can be called “true DX,” andsupport “corporate EC” to increase customers’ profits. This business structure was reinforced by acquiring WCA,
which operates marketing business. In addition, the synergetic effects with another group company C21, which
excels at planning EC infrastructure and consulting, would strengthen the company. The EC industry is entering theera of unified commerce, and “sophisticated and comprehensive services” are at the center of this era. We believethat the company will be the winner in such an era. In this sense, the share price of 1,407 yen as of December 19,
2022, after a prolonged slump from the high of 3,600 yen on February 15, 2021, does not make sense. We would
like to expect much from it, as a promising stock in 2023.

Share price trends (weekly)
Stock price (historical)

4,000

Year’s high

1,712

3,500

Year’s low

1,222

3,000

All-time high590,000

All-time low

620

2,500

2,000
1,500
1,000
500

2021年1月4日
2021年2月1日
2021年3月1日
2021年3月29日
2021年4月26日
2021年5月24日
2021年6月21日
2021年7月19日
2021年8月16日
2021年9月13日
2021年10月11日
2021年11月8日
2021年12月6日
2022年1月4日
2022年1月31日
2022年2月28日
2022年3月28日
2022年4月25日
2022年5月23日
2022年6月20日
2022年7月19日
2022年8月15日
2022年9月12日
2022年10月11日
2022年11月7日
2022年12月5日

0

11

Copyright © Finantec Co., Ltd. All Right ReservedDecember 20, 2022

Disclaimer
This report was prepared by the analyst of KAsset Co., Ltd., entrusted by Finantec Co., Ltd.
Although the analyst received information by The Company concerned through interviews etc,
the hypothesizes and conclusions in this report were based on the analysis and evaluation notby The Company concerned, but by the analyst entrusted to prepare the report.
This report is intended to provide information, and is not a solicitation to buy or sell securities
and other financial product.
In any case, the final decision of the investment is subject to be determined based on the
judgment and responsibility by investors. Finantec and the analyst as trustee do not assume
any responsibility.
The contents of this report are presented based on the information available at the time thisreport was prepared, and the contents may be changed without notice. All rights to thismaterial revert to Finantec and KAsset Co., Ltd., and may not be reproduced, transmitted oraltered without permission.

Inquiries about this report:
Finantec Co., Ltd. 〒103-0026 4F, Annex, Kabutocho Kaisei Bldg., 13-1 Kabutocho, Nihonbashi, Chuo-ku,
Tokyo
Email: report@finantec-net.com
TEL:+81-3-4500-6880 FAX：+81-3-4500-6888

12

Copyright © Finantec Co., Ltd. All Right Reserved