COPRO-HOLDINGS | 7059
Sponsored Research

Sessa Investment ResearchAug. 18, 2023

17 years of sales growth due to recurring revenue business model;
Payout ratio of 50% + through FY27/3

INITIATION

Summary Construction technician dispatching company aiming to become an “Technician Support
Platform company”
COPRO-HOLDINGS. Co., Ltd., (COPRO) boasts numerous customers, primarily major generalcontractors including top 5 players. By continuing to recruit employees that it can dispatch, thecompany has recorded net sales growth for seventeen years since its establishment on accountof its recurring revenue business model. COPRO aims to become a company that supports thevarious workstyles of technicians by expanding its share of the construction technician
dispatching market, promoting the dispatch of mechanical design engineers, expanding the
SES engineer dispatching market, and promoting new businesses through an M&A strategy.
 Projected double-digit growth in both net sales and profit for FY24/3
COPRO forecasts that net sales will grow 29.3% year on year and operating profit increase
36.2% year on year. The company aims to further accelerate its expansion by continuing to
make growth investments, including recruiting expenses, primarily those related toconstruction technician dispatching. On a consolidated basis, its number of technicians rose
40.7% year on year to a historic high of 4,271.
 Firm financial position
COPRO continues to be debt free with no interest-bearing debt since FY21/3. The company
also boasts an extremely high equity ratio of over 70% for the past three years. To establish acapital structure that limits capital increases, the company is moving forward with expanding
earnings through the optimal use of financial leverage, reducing taxes, and implementing acapital policy to improve ROE.
 Medium-Term Management Plan (FY23/3–FY27/3)
Through its Medium-Term Management Plan “COPRO Group Build the Future 2027,”
COPRO aims to post net sales of ¥40,000 mn and non-GAAP operating profit of ¥5,000 mn in
FY27/3, the final year of the plan. In addition to growing its current business portfolio, thecompany will move forward with its entry into new temporary staff dispatching fields throughM&As and other measures. Having announced a dividend policy with a target dividend payout
ratio of at least 50%, the company has adopted an aggressive shareholder return policy.

FY

Net Sales

YoY

Oper. profit

YoY

Ordin. Profit

YoY

Net profit

YoY

EPS*(2)

DPS*(2)

(¥mn)

（％）

(¥mn)

（％）

(¥mn)

（％）

(¥mn)

（％）

(yen)

(yen)

2019/3

10,819

20.7

1,344

50.3

1,336

51.1

938

54.4

113.8

21.0

2020/3

13,122

21.3

1,592

18.4

1,585

18.6

1,084

15.5

115.1

30.0

2021/3

14,836

13.1

1,437

-9.7

1,439

-9.2

1,009

-6.9

53.4

37.5

2022/3

15,589

5.1

1,621

12.8

1,619

12.5

962

-4.6

51.1

20.0

2023/3

18,791

20.5

1,321

18.5

1,324

18.2

864

-10.2

46.5

25.0

2024/3 CE*(1)24,298

29.3

1,800

36.2

1,870

41.2

1,167

35

62.3

40.0

Focus Point
Strength is the construction
technician dispatching business. Has
continued to generate net sales
growth for 17 years since its
establishment due to extremely
strong financial position. Focus onaggressive shareholder return policy.
2-for-1 stock split is scheduled for
October 1, 2023.

Key Indicators
Share price (23/8/16 cp)

2,457

YH (23/8/16 cp)

2,457

YL (23/1/5 cp)

985

10YH (23/8/15)

2,520

10YL (20/4/22)
Shrs out. (mn shrs)

591
10.00

Mkt cap (¥ bn)

24.57

CAP ratio (23/3)

70.4%

24.03 P/E (CE)19.7x

23.03 P/B (act)

3.2x23.03 ROE (act)

12.6%

24.03 DY (CE)

3.3%*The above figures are before stock split (23/10/1)

1Y stock priceSource: Tradingview

Team coverage
research@sessapartners.co.jp

Source: Compiled by SIR from TANSHIN financial statements.

*(1)The Company plans to conduct a 2-for-1 stock split of shares of common stock with a record date of October 1, 2023.
*(2) Retroactive adjustments were made to take into account the impact of the stock split.

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COPRO-HOLDINGS | 7059

Sessa Investment Research Valuation, stock spilt
COPRO’s expected dividend payout ratio and expected dividend yield greatly exceed
peers, and thus, its share price valuation is expected to rise in line with its progress in
implementing its medium-term management plan. On August 10, the company
announced a 1-for2 stock split of its common shares with a record date of September 29,
2023. This is expected to expand the its investor base and increase liquidity.

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COPRO-HOLDINGS | 7059
Table of Content

Sessa Investment Research

Front Page-Summary■ Company profile

Background for founding and history

4

Recent material disclosure news: Stock split

5

Corporate system of thought / Business outline

6

Recurring revenue model

8

Creating human resources

9

Retention rate

10

Sales strategy and customer portfolio

11

M&A strategy / Market environment

13Competitive environment

15

Strengths and weaknesses

16

Dividend policy

17

FY23/3 results summary18

FY24/3 earnings forecasts

19

Distinguishing features of the main PL/BS
indicators / Distinguishing features of cash flows

20

Summary / External environment and assumption

21

Growth strategy and road map / Long-term vision22■ Share price insights

Share price / Valuation24■ Corporate governance

Governance system / Directors / Shareholders
Initiatives to achieve the sustainable development
goals (SDGs)

26

Income Statement

29

Balance Sheet

30

State of Cash Flows31■ Business model■ Shareholder return■ Recent earnings andforecasts■ Key financial indictors■ Medium-term
management plan

■ Financials

26

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Background for founding and history
After graduating from Nagoya Kogakuin College of Technology in 1998, Kosuke Kiyokawa
joined a local construction company with an eye toward some day taking over the familybusiness, his father’s construction business. His initial goal was to move up from site supervisor;
and after working on sales for five years at a major construction-related outsourcing company,
he took up the position of president of a group subsidiary.
Kiyokawa quickly acquired experience and knowledge of sales, which he initially had none of,and at the age of 26, he was promoted to president of a subsidiary of the company asmentioned above. Kiyokawa humbly says that his success was because of not only the skilled
team and good teachers who supported him but also his father, who taught him to value
discipline and respect others.
Unsatisfied with what he had accomplished, Kiyokawa considered it important to increase thequality of the company’s work force by lowering the turnover rate and improving in-housetraining and to increase efficiency by raising the retention rate and reducing hours not utilized inorder to further increase growth. To achieve all of that, it was important to take control ofadministration operations, marketing, and the human resources department, but Kiyokawa
noticed that even though he was president, from the perspective of the parent company, heappeared to be only one division’s sales department manager.
Therefore, Kiyokawa established COPRO-ENGINEERD Co., Ltd., in 2006. His goal was to create
an outstanding human resources service company by taking charge of recruiting, training,matching, and retention rate, the four pillars considered indispensable to complete in regard to
the temporary staff dispatching business.

Company profile

Representative, CEO
Mr. Kosuke Kiyokawa

2006

Oct

2006
2007
2008
2008
2008
2009
2011
2012
2013
2014

Oct
Fab
Mar
Mar
Aug
Oct
Jul
Oct
Apr
Jun

2015

May

2015
2016
2017

Sep
May
Apr

2019

Mar

2020

Apr

2020

Sep

2020
2021
2021

Nov
Apr
Sep

2022

Apr

2022

Apr

Company History
Trusty-Crew. Co., Ltd. is established in Naka-ku, Nagoya, as dispatches and provides job introductions
business
Nagoya Branch is opened
Yokohama Branch is opened
Company name change to COPRO-ENGINEERD. Co., Ltd.
Nagoya Branch is relocatedTokyo Branch is opened
Sapporo Branch is opened
Osaka Branch is opened
Fukuoka Branch is opened
Sendai Branch is opened
Hiroshima Branch is opened
Changed the company name to COPRO-HOLDINGS Co., Ltd. (currently name) for the purpose oftransitioning to a holding company. At the same time, COPRO-ENGINEERD. Co., Ltd.(currently aconsolidated subsidiary) was established as a wholly owned subsidiary through a corporate split-off,and transferred the Group's main business, temporary staffing and placement services, to the newcompany
Revision of the Worker Dispatching Act
Head office is relocated to Nakamura-ku, Nagoya
COPRO-ENGINEERD. Co., Ltd. Omiya Branch is opened
The company’s stock is listed for public trading on the Mothers section of the Tokyo Stock Exchange
and the Centrex section of the Nagoya Stock Exchange
COPRO GLOBALS PTE.LTD. is established in Singapore
Listed to the First Section of the Tokyo Stock Exchange and the First Section of the Nagoya Stock
Exchange
COPRO VIETNAM CO., LTD. is established in Vietnam
Acquired all shares of ATOMOS Co., Ltd. and made it a subsidiary
Acquired all shares of VALUE ARK CONSULTING Co., Ltd. and made it a subsidiary
Listed in the Prime Market of the Tokyo Stock Exchange and the Premier Marketof the Nagoya Stock Exchange
COPRO-ENGINEERD Co., Ltd. took over Hucoss Co., Ltd. ‘s worker dispatching and Fee-charging
employment placement business by the absorption-type split.
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At COPRO, he established a system that makes it possible to provide the constructionindustry, which faces chronic labor shortages and extreme fluctuations in demand, alarge number of well-trained temporary staff. For both staff retention rate and contract
renewal rate, the company has maintained the highest level for the industry. Because ofstrong demand for temporary staff dispatching, employing and retaining human sources
are important factors for growth. Therefore, the company tries to achieve a highretention rate for temporary staff technicians through various activities, such as training
to improve skills, which includes an extensive new employee training program; making
career development visible; and conducting follow-up sales to companies workers aredispatched to. A high retention rate creates a virtuous cycle of reducing recruiting costs.
This is because the high employee retention rate makes it possible to cut recruiting
costs, and the extensive training program leads to high productivity. Furthermore, thelow non-working time contributes to greater net sales per employee.
Management did not initially plan on taking the company public because its businessmodel does not require a large amount of capital, but in order to raise funds to expand
its sales area and enter new markets, the company debuted on the Tokyo Stock
Exchange’s MOTHERS market and the Nagoya Stock Market in March 2019.
Although some of its plans were delayed due to the COVID-19 pandemic, in April 2021,
COPRO acquired ATMOS Co. Ltd., which dispatches technical engineers to andundertakes contracted work from product development departments of both Japaneseand overseas customers in the manufacturing industry. Because ATMOS’s and COPRO’s
business models are similar, the company can expand into a completely new market. To
mitigate the labor shortage in Japan, COPRO also established COPRO VIETNAM Ltd.,
creating a foothold in the growing temporary staff dispatching market in Southeast Asia.
In September 2021, COPRO also acquired VALUE ARK CONSULTING Co., Ltd., in orderto enter the system engineer dispatching market. Forecasting a shortage of 800,000 IT
workers for Japanese companies through 2030, COPRO then acquired Hucoss Co., Ltd.,
which provides various services, including those related to technician outsourcing,
operation support, and administration operations, in April 2022. The company took overthe business through a spin-off of the construction technician dispatching business of
Hucoss, a Takasago Thermal Engineering group company.
In the same month, the company debuted on the Tokyo Stock Exchange’s Prime
Market and Nagoya Stock Exchange’s Premier market.
Recent material disclosure news: Stock split
At its Board of Directors meeting held on August 10, COPRO decided to implement a
stock split and announced it the same day. This will be the company’s second stock split,
two years and six months after its first one on April 1, 2021. The following is a summaryof the stock split.
The company is aiming to lower the unit investment amount, expand its investor base,and increase liquidity. It will conduct a 2-for-1 stock split of its common shares with arecord day of September 29, 2023. The stock split will be effective as of October 1, 2023.
This will increase the number of issued shares by 10,000,000, which will result in a totalof 20,000,000 issued shares after the stock split. The total number of authorized shares
after the stock split will double in number to 80,000,000.

5COPRO-HOLDINGS | 7059
Business model

Sessa Investment Research

Corporate Philosophy
COPRO views the temporary staff dispatching business as “human resource
development”. Facing changing times, the group is working to increase productivity anddemonstrate its true value by introducing technology in addition to face-to-facecommunication. Even so, President Kiyokawa has positioned the idea that regardless oftechnology progress, only people can do work that requires consideration of otherpeople as the core of the group’s corporate philosophy.
Believing in the limitless potential of people, the Group touts the vision of "becominga "Human Resource Development Company" that ignites the spirit of individuals." To
excite each person’s passion, rouse them to action, continually inspire them, and createa dynamic "Human Driven Society", the company focuses on the interactive human andbusiness skills of employees.
Furthermore, the company thinks that undertaking thorough “education” and“matching”and creating an environment in which employees can work with excitement
makes it possible to retain employees, and it is exactly this that makes it possible toprovide the best services to customers.
COPRO’s corporate philosophy system chart

Source: The company website

Business Outline
COPRO consists of COPRO-HOLDINGS and five consolidated subsidiaries (COPROENGINEERD Co., Ltd., COPRO GLOBALS Pte. Ltd., COPRO VIETNAM CO., LTD., ATMOS Co.
Ltd., and VALUE ARK CONSULTING Co., Ltd.). As a holding company, the parent company
COPRO-HOLDINGS handles such operations as group management and incidental andrelated operations. Moreover, COPRO-ENGINEERD plans to change its name to COPROCONSTRUCTION as of October 1, 2023. The company says that this is to raise awareness ofthe company as the core Group company and create a new corporate image. At the sametime, the company will merge ATMOS and VALUE ARK CONSULTING and change the nameof the resulting company to COPRO-TECHNOLOGY. The company is trying to increase
competitiveness by unifying the mechatronics and IT fields to expand employment
opportunities for engineers and reinforce support for career development.
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Temporary staff dispatched by the group conclude an employment contract with thegroup company (dispatching company), and at the client company (companies
employees are dispatched to), they serve as an intermediary between various workers,
including scaffolding workers, plastering workers, painters, assembly workers, andplumbers, and at locations such as construction sites, they are involved in managing theoverall construction project, including schedule management, safety management, andcost management. Dispatching temporary staff to do work handled by craftsmen is
prohibited by the Act on Securing the Proper Operation of Worker Dispatching
Businesses and Protecting Dispatched Workers, but the company does not do that.
While COPRO has only a single segment, the technician dispatching business, thefollowing is a breakdown for technician dispatching business service, which is similar tothe so-called general business segment, and the company provides services throughgroup consolidated subsidiaries.
(1) Construction technician dispatching business (COPRO-ENGINEERD Co., Ltd.)COPRO-ENGINEERD dispatches and provides job introductions only for construction
and plant technicians. As for the type of company employees are dispatched to andoperations handled, these include site supervision for construction, civil engineering,
installation, and plant sites and operating CAD equipment.
(2) Mechanical design and development engineer dispatching and contracting(ATMOS Co., Ltd.)ATMOS dispatches mechanical design and development engineers and provides
related contracting services. Workers are dispatched to the development and design
departments of major manufacturers of various types of machinery, such astransportation machinery, industrial machinery, home appliances, and agricultural
machinery, and the company also handles contracted design and development ofmachinery.
(3) SES (VALUE ARK CONSULTING Co., Ltd.)The System Engineering Service (SES) business consists of engineer dispatching
services related to system development. The company operates the BS Career IT
website, which provides information on projects for freelance IT engineers, and offers
such services as system development for client companies, including listed companies.
Value Provided by COPRO Group

Source: compiled by SIR from company’s IR material

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Net sales for the most recent fiscal years, FY22/3 and FY23/3, which are based on abreakdown of technician dispatching business services, are as follows. In FY23/3, thecompany changed the categories used to break down group net sales to “dispatching”(construction, plant, and mechanical design and development), “introduction”(construction and plant), “contracting” (mechanical design and development), and “SES
services.” For FY22/3, provided information is based on post-change categories.

Breakdown of technician dispatching services
Services

FY23/3

YoY

14,761

17,47318.4%

mechanical design anddevelopment

216

512

137.0%

Introduction

construction, plant

70

77

10.0%

Contracting

mechanical design anddevelopment

447

509

13.9%

SES services

95

220

131.6%

Total Sales

15,58918,791

20.5%

Dispatching

construction, plant

FY22/3

Source: compiled by SIR from the company’s IR material

Recurring revenue model
A recurring revenue business model is one for which net sales increase in proportion to thenumber of temporary staff dispatched. Net sales are determined by the number of
temporary staff technicians and contract unit price per employee.
The number of temporary staff technicians is calculated by multiplying the number of
temporary staff technicians by the utilization rate, and the contract unit price is determinedby the skills and years of experience of the temporary staff technician, and grows
proportionally to the years of experience. Therefore, capturing employees who can become
high value-added engineers (outstanding skills and years of experience) drives growth, andfigures such as recruiting power, retention rate, and human resource training are importantfactors that impact value added.
Correlation Between Net Sales and Number of Technicians

Achieved 17 consecutive years of revenue growthsince COPRO founding
Consolidate net sales

FY07/3(1st FY)(hundred mn yen, people)

Number of consolidated
technicians & engineers

FY20/3

FY21/3

FYE2/3 FY23/3 FY24/3（forecast）

Source: Compiled by SIR from the company IR material.

*The number of consolidated technical employees is the number of employees at the end of the FY, including I T freelancers
in the SES business.

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Creating human resources
COPRO’s business model is based on generating earnings by dispatching temporary staff toconstruction and plant sites, and thus, human capital is the most important asset for thecompany. For construction/plant technician dispatching and introduction, its core services, thecompany’s efforts to create human resources are focused on the following four activities.

Mascot of COPRO
Mr. COP-RO(1) Securing human resources
In terms of recruiting, in addition to the internet, COPRO operates its own job search site
Gen-Kyari, a site specialized for the construction and plant industry, and provides the full rangeof support from posting job opening information for all of Japan to providing consulting
services related to hiring and post-hiring. The company is focused on recruiting not only young,inexperienced workers but also new graduates, which are vital to secure the human resourcesthat will drive its medium- to long-term business growth.
(2) Providing thorough education when joining the company
COPRO holds new employee explanatory and training sessions for dispatched technicalemployees and thoroughly confirms points regarding their awareness and attitude of being
dispatched technical employees. The company thoroughly provides new employee education
so that they can handle the various problems that may arise at the company they will work at,
and these topics include attendance management, employee rules, information security,
support systems, operations dispatched workers cannot do, harassment, work safety, responsein the case of a work emergency, and hazard prediction, all of which are issues that the Group’s
dispatched technical employees must know.
(3) Building a meticulous follow-up system for dispatched technical employees
For dispatched technical employees, COPRO offers high-quality support, such as follow-up
health management after dispatch and mental health management, and this is done to spreadthe group’s corporate philosophy and raise the retention rate by increasing the satisfaction of
dispatched technical employees. In this way, the company is tackling various issues, such asincreasing customer satisfaction.
(4) Providing learning venues
Turning to human resource development, COPRO has established a training facility in
Nagoya , called “Supervisor Seed”, and staffed them with full-time instructors in order to offer
career development support appropriate for the experience of the participant. By expanding
the training environment through remote training, the company is promoting careerdevelopment for more people, regardless of where the dispatched technical employee lives.
Courses that the company offers start with basic ones on such topics as the industry, the workthat dispatched technical employees do, safety management, industry terminology, andproduction designs, but also include detailed lectures to check the level of understanding,which makes it possible for even beginners and people with no experience to improve theirskills steadily.

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Retention rate
One of COPRO’s important KPIs is the retention rate for employees who haveconcluded an employment contract. There are substantial benefits to a high retention
rate. First of all, job seekers have greater trust in temporary staffing companies with ahigh retention rate, which makes it easier to secure human resources, and thusincreases the percentage of highly skilled employees. This also raises the trust andevaluation of customers, the companies employees are dispatched to, and leads tohigher contract unit price. This has a positive impact on attracting customers, such as
developing new companies employees can be dispatched to. Of course, this also
restrains recruiting costs.
To raise the retention rate, COPRO strives to quickly resolve problem points andconcerns by creating numerous opportunities for training and individual meetings,
setting career path into the future, and holding regular follow-up meetings incooperation with dispatched employees and customers, company employees aredispatched to. One reason temporary staff contracts are terminated and employees
leave their jobs is a mismatch in skills and other items between the dispatchedemployee and company that the employee is dispatched to. The company conducts
highly precise matching by ascertaining and responding when there is a mismatch
regarding what skills are necessary for what operation, and this leads to higher retention
rate.
COPRO was also the first company in the industry to loan out smartphones installedwith an attendance management system to dispatched employees, which makes it
possible for the company to daily ascertain hours worked at companies employees aredispatched to and creates an environment in which it is easy for dispatched employees
to contact follow-up staff at the company regarding concerns about such issues asmeasures related to physical well-being and stress, work environment, and worries.
Retention Rate (Construction Technician Dispatching Business)
FY22/3
1Q

FY23/3

2Q

3Q

4Q

1Q

2Q

3Q

4Q

Retention Rate (Cumulative
84.8%
total for this term)*1

79.3%

74.6%

69.4%

89.7%

84.2%

79.0%

74.4%

Retention Rate (LTM)*2

69.5%

69.2%

69.4%

71.8%

72.3%

72.7%

74.4%

68.0%

Source: compiled by SIR from company’s results explanatory material* Retention rate (cumulative for current fiscal period): Percentage of registered at the end of the previous 4Q still registered at the end of
the corresponding* Retention rate (LTM): Percentage of registered at the end of the previous corresponding quarter still registered at the end of thecorresponding quarter one year later.

Retention Rate (Mechanical Design and Development Engineer Dispatching and Contracting )Retention Rate (Cumulative
total for this term)*1
Retention Rate (LTM)*2

FY22/3
3Q
９-11

1Q
-

2Q
6-8

-

95.4%

91.7%

-

92.7%

90.8%

FY23/34Q
12-3*3

1Q
4-6

2Q
7-9

3Q
10-12

4Q
1-3

88.9%

93.1%

89.7%

85.3%

81.0%

88.9%

84.7%

85.2%

84.9%

81.0%

Source: compiled by SIR from company’s results explanatory material
1 Retention rate (cumulative for current fiscal period): Percentage of registered at the end of the previous 4Q still registered at the end of
the corresponding
2 Retention rate (LTM): Percentage of registered at the end of the previous corresponding quarter still registered at the end of thecorresponding quarter one year later.
3. 4Q FY22/4 is the four months from Dec. 2021 through March 2022 because of a change in relevant subsidiaries accounting period.

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Sales strategy and customer portfolio—Concentrating resources to customers
COPRO’s sales strategy consists of selecting customers to target for sales, concentrating on
multi-approach sales, and dispatching technicians. By conducting deep sales that target a more
focused group of companies, the company ascertains new needs of existing client companies andincreases the number of deals. A key performance indicator for the construction technician
dispatching business is the target company assignment rate, and for FY23/3, 89% of alltechnicians were assigned to a customer, a year-on-year increase of 1.6 ppt. Prioritizing
assignment of technicians to target customers leads to higher retention rates, which has a major
positive impact on profitability by constraining recruiting costs and increasing contract unit prices.
COPRO is also working to reinforce its sales capabilities from a human resource training
perspective through such initiatives as expanding in-house education for employees via proactive
alliances with other companies and operational tie-ups and assigning technicians with greater
value added to customers. In November 2022, COPRO added, to its training curriculum, the DX
service SPIDERPLUS, which increases the productivity of SpiderPlus’s construction operations
through an operation tie-up with SpiderPlus, a company working to implement DX for
construction operations. By training technicians who can immediately make contributions andhandle actual construction site DX, COPRO is working to reinforce sales of temporary staff
dispatching for construction sites, where there is a greater need for DX. The company is also
working to strengthen its training of human resources who can handle inspections of buildings
and plants that use drones and robots and expand sales appropriate for customers’ construction
DX through an operational tie-up with Blue Innovation Co., Ltd., which touted in February 2023
that it has increased productivity through the use of drones and robots.
Target customers are primarily the five main general contractors (Obayashi Corporation, Kajima
Corporation, Shimizu Corporation, Taisei Corporation, and Takenaka Corporation) but also include
such companies as large general contractors and subcontractors. The percentage of dispatched
construction technicians assigned to major general contracts increased to 22.2% in FY23/3 from
21.4% for FY22/3. However, COPRO assigns customers to one of three ranks (A rank–C rank)
depending on the size and importance of factors such as sales to the customer, and theassignment rate for rank A companies rose to 41.1% in FY23/3 from 34.9% FY22/3. The company
has achieved high sales efficiency by increasing assignment of human resources to valuable
customers.
Percentage of Dispatched Construction Technicians Assigned to Major General
Contractors for the Construction Technician Dispatching Business
FY

FY22/3

FY23/3

Percentage of Dispatched Construction Technicians
Assigned to Major General Contractors

21.4%

22.2%

The assignment rate for rank A companies

34.9%

41.5%

Source: compiled by SIR from the interview with the company

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As for the number of job posting requests, an important KPI for the construction technician
dispatching business, the number for FY23/3 rose 89.4% year on year. On the other hand, thenumber of customers fell 31.4% to 415 in FY23/3 from 605 in FY22/3. This also reflects
COPRO’s sales efficiency strategy, and the company is selecting and concentrating humanresources. As a result, sales per company rose to the ¥4 mn level from the former ¥2 million
level.

Construction Technician Dispatching Business (net sales / customers)
FY20/3

Net sales (¥ mn)

FY21/3

FY22/3

FY23/3

13,122

14,836

14,831

17,550

Customers (companies)

544

622

605

415

Net sales per customer (¥ mn)

24.1

23.9

24.5

42.3

18,99435,978Job posting requests (requests)--* The data is for the consolidated subsidiary COPRO-ENGINEERD, which conducts construction technician dispatchingbusiness. Figures for FY20/3–FY21/3 are not available.

Main Customers (Construction technician dispatching business )Obayashi Corporation, Kajima Corporation, Shimizu Corporation, Taisei Corporation,
and Takenaka Corporation, Kandenko Co., Ltd., Kyudenko Corporation, Kumagai Gumi
Co.,Ltd., Konoike Construction Co., Ltd., Taikisha Ltd., Dai-Dan Co., Ltd., Daiwa House
20 Construction
related companies Industry Co., Ltd., Takasago Thermal Engineering Co., Ltd., Tokyu Construction Co., Ltd.,
Toda Corporation, Nishimatsu Construction Co., Ltd., Nippo Corporation, Fujita
Corporation, Maeda Corporation, Sumitomo Mitsui Construction Company, Ltd.
Source: compiled by SIR from list of COPRO-ENGINEERD main customers on the company’s website

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Sessa Investment Research

M&A strategy
COPRO acquired the mechanical design and development engineer dispatchingcompany ATMOS Co., Ltd., in April 2021 and the system engineering business VALUEARK CONSULTING Co., Ltd., in September of the same year. In addition to strong organic
growth of its existing businesses, primarily for its core business, the company has
position M&As as an important management strategy to achieve discontinuous growth.
It is also aiming to achieve the earnings targets in its Medium-Term Management Planearlier than given through the active use of M&As. Its basic M&A strategy is to target
the field of human resources services for high value-added engineers, which offers
strong growth potential. The company will also target companies with outstanding
engineers and companies with the resources necessary to build a Technician Support
Platform. Having set a WACC hurdle rate of 8%–9%, the company only considers M&As
that offer a rate that surpasses this rate.
Market environment
Japan continues to face a labor shortage, and recruiting by companies to ensure
human resources has picked up. In the temporary staffing industry, which COPRO is partof, demand has trended upward because of this labor shortage. Furthermore, the “2024problem,” which will require changes to systems for supplying goods and services invarious industries, has provided a tail wind for temporary staffing companies. On theother hand, securing employees has grown even important in the temporary staffing
industry, and measures to change and strengthen the human resources supply system,
such as aggressively investing in recruiting, raising the retention rate, educating
employees, providing a wider range of employment contracts, and reviewing
companies that employees are dispatched, are important to increase earnings.
(times)1.60

Effective Opening-to-Application Ratio (Seasonally Adjusted)

1.50

1.49
1.40

1.40

1.36

1.30

1.31
1.20

1.20

1.10

1.10

1.04

2020
1.00

Jan

Apr

Jul

Oct

1.15

2021
Jan

2022
Apr

Jul

Oct

Jan

2023
Apr

Jul

Oct

Jan

Apr

Source: Compiled by SIR from Ministry of Health, Labor and Welfare statistics

As for the construction industry, COPRO’s business field, construction investment in Japan
will probably continue to grow for the time being for various reasons, including active
redevelopment in major cities, construction of hotels due to the strong tourism industry,
strengthening of infrastructure to respond to disasters, the Osaka World Expo, andconstruction of the Linear Chuo Shinkansen. In this environment, the construction industry is
expected to face more serious labor shortages and tighter labor supply because of chroniclabor shortages and restrictions on overtime work in the Labor Standards Act coming into
effect for the construction industry in April 2024.

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Sessa Investment Research

Construction Investment in Japan (¥100 mn)

FY2014FY2015FY2016FY2017

PrivateResidence

FY2018

Private NonResidence(YoY growth rate)
3.6% increase in FY2022
Projected 1.4% increase in FY2023

FY2019Renovation

FY2020Government

FY2021

FY2022

FY2023

Forecast

Source: compiled by SIR from on Ministry of Land, Infrastructure, Transport and Tourism and Research Institute ofConstruction and Economy data.

Therefore, COPRO projects that the market for construction and plant technician
dispatching, its core business, will grow at an average annual rate of 8.8%. As noted
above, while the construction industry faces a prominent labor shortage compared toother industries, the construction market is expected to grow, albeit at a gradual pace,for various reasons, including urban redevelopment. Therefore, it is COPRO’s opinion
that general contractors, the company’s customers, will continue to make greater use of
dispatched workers as outsourcing becomes even more common.

Source: Excerpted from the company’s Medium-Term Management Plan (FY23/3–FY27/3)

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Sessa Investment ResearchCompetitive environment
Japan will tend to continue to face labor shortages, as discussed in the market
environment section, and therefore, companies are working harder to secure humanresources because of increased movement of both people and things as the COVID-19
pandemic subsides. In this environment, the construction industry is seeing an increase inconstruction investment in Japan, which includes infrastructure construction andredevelopment projects in major cities; therefore, the construction technician dispatchingmarket will likely grow for the time being, but competition to recruit temporary staff willprobably grow fiercer.
Therefore, COPRO thinks that the market share of major construction technician
dispatching companies, including itself, will grow. This is based on the fact that the market
share for the nine listed companies that dispatch temporary staff to the constructionindustry, including COPRO, account for only 45% of the market, and there are numerous
small and medium-sized companies. In the future, as competition to secure temporary staff
technicians intensifies, investment in recruiting is expected to increase, and it is COPRO’sview that small and medium-sized companies will struggle to grow on their own. As a result,it expects that major companies with the high market share will steal share from small andmedium-sized enterprises in various ways, including M&As. That is, it can be argued that it
is highly likely that the industry structure will shift, albeit at a slow pace, from the current
one with many market players to one in which a few companies dominate the market.

The market share of major construction technician dispatching companies(Comparison of nine listed companies)(¥100mn)

369

O

216

O

203

T

Share
5.7％

175

Copro EG
COPRO
EG
T

131

N

130
76

W
U

52

W

44

Market size*¥307.2bn

Source: Compiled by SIR from the company IR material.

Note*:
Market size is based on company estimates (FY2022/3)
Figures applicable to the dispatch of construction technicians from the most recent financial data of each company.

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COPRO-HOLDINGS | 7059

Sessa Investment ResearchStrengths and weaknesses
Strength (1) Human resource education with an extensive company-wide network andhigh retention rate
COPRO boasts numerous strengths, including its ability to capture customers throughits network of offices throughout Japan; highly flexible human resource foundation thatmeets broad human resource needs through aggressive recruiting; high retention rate oftechnical employees due to its extensive education, training, mental health care, andsupport; and high utilization rate based on trust between high-quality technical staff andcustomer companies. Its country-wide network of offices and aggressive recruitment
make it possible for the company to meet a broad range of human resource needs fromanywhere in Japan and expand business with companies that employees are dispatchedto (customers) throughout Japan. This also establishes a virtuous cycle in which raising
the retention rate of technical employee by expanding the support system andincreasing the matching rate makes it possible to expand business with existingcustomers on account of having dispatched quality technical employees and capture
new customers. Furthermore, the retention and contract renewal rates for theconstruction technician dispatching business are extremely high at 74.4% and 82.4%,
respectively, making it possible to flexibly respond to the demands of companies
employees are dispatched to.
Strength (2) Growing demand for temporary staff technicians for various reasons,
including the “2024 problem” and graying of society
Demand for temporary staff by companies will likely grow stronger and stronger forsuch reasons as shortage of technicians due to the graying of society and changing
values regarding such issues as workstyles that are not constrained by time andenvironment. In addition, in terms of the “2024 problem,” the construction industry, theindustry that the company’s main customers belong to, will face stricter regulations on
the upper limit on overtime work starting in April 2024. In the construction industry,workers are growing fewer in number and older, and when regulations on overtime
work grow stricter, the amount of work that each worker does will decrease, and thiswill further exacerbate the labor shortage.
Weakness (1) Building an overseas-related businessCompared to other major companies in the same industry, COPRO has been slow to
expand overseas. At the current time, they have no overseas-related sales. However, thecompany established COPRO VIETNAM CO., LTD., in April 2021, with an eye towardbuilding a human resource training and temporary staff dispatching and introduction
business in Vietnam, a country that many Japanese general contractors and Japaneseplant companies are entering.
Weakness (2) Potential upward trend in recruiting and education costs
Growing demand for temporary staff on account of the “2024 problem” and graying ofsociety will create a seller’s market for temporary staff dispatching companies like
COPRO. On the other hand, there are a limited number of experienced workers in theindustry, and continually recruiting and educating new graduates and inexperienced
workers is important to expand the universe of temporary staff technicians and maintainhigh quality worksites. There will likely be a growing number of cases of othercompanies headhunting temporary staff technicians, which could increase the cost of
recruiting costs and education costs.

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COPRO-HOLDINGS | 7059
Shareholder return

Sessa Investment Research

Dividend policy
COPRO has positioned shareholder return as an important management issue, and its
shareholder return is primarily through dividends. For the period of the Medium-Term
Management Plan “COPRO Group Build the Future 2027” (FY23/3–FY27/3), the company
has set a basic policy of continuing to pay a stable dividend proportional to profit growth
based on aggressive investments, not to reduce dividends. Furthermore, when announcing
its FY23/3 financial results on August 10, the company added a new dividend payout ratio
target to the previous policy. Therefore, the basic dividend policy was changed to paying astable dividend proportional to profit growth generated through aggressive investments toachieve a consolidated dividend payout ratio of at least 50%, which exceeds that appearing
in the medium-term management plan. Additionally, on the same day, COPRO announced a2-for-1 stock split with a record date of September 29, 2023, as discussed above.
The pre–stock split FY24/3 expected annual dividend and the August 10 revised expectedannual dividend, which reflects the stock split, are as follows.
The company made public a pre–stock split announcement increase in its FY24/3 annual
dividend per share of ¥30, resulting in an annual dividend per share of ¥80. As shown in thefollowing figure (Dividend and Payout Ratio), the FY24/3 dividend payout ratio based on
profit is 64.2%, surpassing the 53.7% for FY23/3.
Dividend and Payout Ratio(Before Stock Split Announced August 10, 2023)
yen

yen
yen

yen
yen
yen
yen

FY18/3

FY19/3

Ordinary dividend(interim)

FY20/3

FY21/3

FY22/3

Ordinary dividend(year-end)

FY23/3

FY24/3(CE)Commemorative
dividend (year-end)

Dividend Payout
Ratio(%)* Dividend per share was retroactively revised to reflect impact of 1-2 stock split conducted on April 1, 2021.

Dividend forecast for FY24/3 (After stock split)
InterimYear-end

Annual dividend

FY23/3 (act)10.0 yen

40.0 yen50.0 yen

FY24/3 (Initial forecast)
Before stock split

30.0 yen50.0 yen

80.0 yen

FY24/3 (Revised forecast)
After stock split

30.0 yen25.0 yen
After stock split

30.0 yen

Source: Compiled by SIR from the company IR material.
* Dividend per share was retroactively revised to reflect impact of 1-2 stock split conducted on April 1, 2021.

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COPRO-HOLDINGS | 7059
Recent earnings
and forecasts

Sessa Investment Research

FY23/3 results summary
The main consolidated financial results for FY23/3, the first year of the current MediumTerm Management Plan (FY23/3–FY27/3), are as follows. COPRO recorded net sales of¥18,791 mn (+20.5% YoY), operating profit of ¥1,321 mn (-18.5% YoY), recurring profit of¥1,324 mn (-18.2% YoY), and net profit of ¥864 mn (-10.2% YoY). Its operating profit margin
fell 3.4 ppt to 7.0%. Non-GAAP operating profit was ¥1,606 mn (-12.8% YoY).
Profit at all levels below operating profit fell year on year because of an increase in SG&A
expenses as gross profit rose 15.1% year on year to ¥5,575 mn. SG&A expenses increased
32.0% year on year, resulting in the SG&A expense ratio rising 1.9 ppt to 22.6% for FY23/3
from 20.7% for FY22/3. The SG&A expense ratio of 22.6% was the highest for the past five
years. This was for various reasons, including an increase in both recruiting expenses due toactive upfront investments and labor costs on account of efforts to reinforce the sales
division, which is necessary to expand business.
As for main KPI for the construction technician dispatching business, the company’s corebusiness, the number of new recruits rose 76.5% to 1,472 while the number of technicians
throughout the Group grew 835 year on year to 3,036, a record high. The retention rate for
employees who concluded an employment agreement was 74.4%, substantially surpassing
the 69.4% for the previous fiscal year. A high retention rate is valuable in that it tends toincrease trust from job seekers, making it easy to secure human resources. This also
increases trust and evaluations from companies employees are dispatched to, the company’s
customers, and results in higher contract unit prices, which holds down recruiting costs.
Construction Technician Dispatching Business Strategy: Major KPIs

Source: compiled by SIR from the company FY23/3 IR material*◎ indicates better than expected or better than the previous FY’s performance, ○ indicates the performance is on par with the forecast or the previous
FY’s performance, △indicates an improving trend, and × indicates the performance is below the forecast or the previous FY’s performance.

As for other businesses, the number of engineers for the mechanical design anddevelopment engineer dispatching business grew to 159 from 116. The retention rate for theseengineers fell to 81% from the 88.9% for the previous fiscal year. On the other, the utilization
rate continues to be extremely high at 97.5%. As for the system engineering support business,
the number of recruits rose to 21 from 16 for the previous year, and the number of techniciansat the end of the fiscal year increased to 100 in FY23/3 from 90 in FY22/3.
In addition to a dividend per share at the end of the 2Q of ¥10, the company decided to pay
an end-of-the-year dividend per share of ¥40, resulting in an annual dividend per share of ¥50.
The company raised its dividend ¥10 from an annual dividend per share for FY22/3 of ¥40.
Because of that, the company’s dividend payout ratio largely rose to 53.7% from 39.2% for theprevious fiscal year.
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Sessa Investment Research

FY24/3 earnings forecasts
For FY24/3, COPRO forecasts net sales of ¥24,298 mn (+29.3% YoY), operating profit of¥1,800 mn (+36.2% YoY), recurring profit of ¥1,800 mn (+41.2% YoY), net profit of ¥1,167 mn(+35.0% YoY), and non-GAAP operating profit of ¥2,140 mn (+33.2% YoY). This would be record
net sales and profit. As noted above, the company announced a substantial increase of ¥30 in
the annual dividend per share, resulting in an annual dividend of ¥80. Therefore, the dividend
payout ratio would be 64.2%, which surpasses the FY23/3 payout ratio of 53.7%. In addition to
the interim dividend of ¥30 per share, the company is expected to pay a year-end dividend of¥25, which reflects the stock split.
Along with the dividend increase, the company announced 2Q cumulative earnings
forecasts—net sales of ¥11,203 mn (+29.3% YoY), operating profit of ¥495 mn (+5.3% YoY),
recurring profit of ¥565 mn (+19.7%), and net profit of ¥316 mn (+12.7% YoY). The increase in
2Q net sales and profit compared to 1Q is primarily because new graduate technicians andadministrative staff join the company in 1Q and receive about one month of in-house training,
and for technicians, only the cost of sales, no net sales, are recorded. That is the reason that 1Q
net sales and profit fail to increase. New graduate technicians are assigned starting in the firstpart of May, which is when they are expected to begin to contribute to earnings.
The number of technicians on a consolidated basis, the driving force of net sales growth, areforecast grow 40.7% compared to FY23/3, hitting an historic high of 4,271. Of those 4,271, it
appears that the number of technicians for the construction technician dispatching business,the company’s core business, will grow a substantial 1,112 to 3,889 from 2,777 in FY23/3.
FY24/3 net sales for the construction technician dispatching business are expected to hit¥22,300 mn (+27.3%) due to the increase in number of employees. As for the mechanicaldesign and development engineer dispatching and contracting business, the company plans toincrease the number of recruits 44.7%, 123 people, by pouring personnel and recruiting
expenses into the new priority fields of software and semiconductors.
Construction Technician Dispatch Business Strategy•In FYE2024, we will accelerate the speed of expanding our size by enlarging the two wheels of sales and recruitment.
•We will transition to a profit generation phase from FYE2024.

FY22/ 3

FY23/ 3

 Significant increase in the Recruitment reformnumber of projects acquired by
implemented, resulting in asignificant increase in theimplementing sales reforms
number recruited Due to recruitment loses,
Perfectionof the two wheels of
unable to increase thesales and recruitment
number of technicians

FY24/ 3
(forecast) Enlarging the two wheels of sales
and recruitment
 Accelerating growth throughexpanded reproduction
 Construction of a “Technician Support Platform”

Source: Compiled by SIR from the company FY23/3 IR material

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COPRO-HOLDINGS | 7059
Key financial indictors

Sessa Investment Research

Features of the main PL/BS indicators
In addition to being interest-bearing debt free, COPRO has remained debt free since
FY22/3. While cash (including cash equivalents) as a percentage of net assets has trended
downward over the past five years, it remains high at 62% for FY23/3. With an extremely
high equity ratio, which has exceeded 70% over the past three years, the company boasts
strong resilience and flexibility even if it were to take a hit. Through FY23/3, there has a been
downward trend in several indictors including sales per employee, operating profit margin,
EBITDA margin, ROE, and ROA, which are indicators of profitability and efficiency. This is
primarily because profitability has temporarily deteriorated as a result of the SG&A expense
ratio hitting a record high for the past five years of 22.6% for various reasons, including an
increase in recruiting expenses due to aggressive upfront investments and an increase inlabor costs due to efforts to strengthen the sales division, which is necessary to expand thebusiness. The number of employees in FY23/3 grew a substantial 38.9% year on year to3,301.
Features of cash flows
As for cash flows from operating activities over the past five years, net profit after taxes hasremained positive. Cash flows from investing activities have primarily been used to acquire
tangible fixed assets such as new offices. Cash flows from investing activities for FY22/3 roseto ¥1,264 million primarily because of a payment of ¥920 million to acquire shares of thesubsidiaries ATMOS Co. Ltd., and VALUE ARK CONSULTING Co., Ltd. through a M&A. Cashflows from financing activities were primarily the repayment of long-term loans, payment toredeem bonds, and payment of dividends. Because the FY22/3 payments to repay longterms loan and redeem bonds were the last, the company had no payments for interestbearing debt since then. The payment of dividends for FY23/3, which is recorded as a cash
flow for financing activities, totaled ¥371 mn, around three times the ¥123 mn paid for
FY19/3, which means the company is very aggressive in regard to shareholder return.
Main Financial Indicators (FY19/3–FT23/3)

FY
Sales per capita (¥mn)
SG&A to sales ratio (%)
Operating Profit Margin (%)
EBITDA Margin (%)
ROE (%)ROA (%)ROIC (%)
Total Asset Turnover (turn)Financial Leverage(X）Current interest rate (%)
Equity Ratio(%)
Current ratio(%)
Interest-bearing debt (¥mn)
Net interest-bearing debt (¥mn)
D/E Ratio (X)Net D/E Ratio (X)Cash and deposits/Net assets (%)
Cash & Cash Equivalents / Market
Capitalization (%)
Cash Flows from Operating Activities (1)Cash Flows from Investing Activities(2)Cash Flows from Financial Activities
Free Cash Flow (FCF) (1)+(2)FY19/3
6.1
21.1
12.4
13.2
25.4
14.6
20.2
1.68
1.59
8.7
62.8%
308.1
869
(3,892)0.19(0.83)
101.4%

FY20/3
5.9
21.2
12.1
12.8
21.3
14
19.6
1.69
1.46
8.3
68.3%
289.8
273
(4,559)0.05(0.83)
88.0%

FY21/3
6.5
19.3
9.7
10.3
17.2
12.2
16.6
1.79
1.36
6.8
73.7%
342.5
89
(5,232)0.01(0.83)
84.8%

FY22/3
6.6
20.7
10.4
11.6
15
11.1
15.9
1.8
1.34
6.2
74.0%
311.5
0
(4,058)(0.62)
61.7%

FY23/3
5.7
22.6
7
8.4
12.6
9.2
12.7
2
1.41
4.6
70.4%
285.3
0
(4,407)(0.62)
62.0%

44.5%

61.4%

36.7%

38.4%

31.3%

1,165
(123)
761
1,042

1,126
(145)
-885
981

989
(83)
-417
906

825
(1,264)
-825
(439)

1,011
(292)
-372
719

Source: created by SIR from SPEEDA data. Note: For detailed cash flows see financial data (pg. 30)

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COPRO-HOLDINGS | 7059
Medium-term
management plan

Sessa Investment Research

Summary
In May 2022, COPRO announced its Medium-Term Management Plan “COPRO Group Build
the Future 2027,” which covers the five-year period from FY23/3 through FY27/3. The
company aims to build a Technician Support Platform over those five years. In particular, thegroup, which dispatches temporary staff, is working to build a platform to flexibly support
career development for technicians, provide customers with greater corporate value bybuilding a business model that makes it possible for not only workers with experience in theindustry but also new graduates and workers with no industry experience to gain experience
over many years with peace of mind and an eye toward becoming a technician andexpanding its business.
Actual financial earnings targets for FY27/3 include net sales of ¥40,000 mn, non-GAAP
operating profit of ¥5,000 mn, and temporary staff technicians of 6,2000 (number of workers
at the end of the fiscal year). Furthermore, COPRO changed its dividend policy when it
announced this plan, adopting a basic policy during the plan period of paying a stabledividend proportional to profit growth achieved through aggressive investments, notreducing dividends. The company incorporated a consolidated dividend payout ratio of 50%
or more as a quantitative target in its FY23/3 results. a Non-GAAP operating profit that thecompany gave as a numerical target adds back in depreciation expense, goodwill
amortization, and stock-based compensation expenses, and is often used as an indicator of
cash-base earning power.
In its plan, the company forecasts annual growth in net sales of 20.8% between FY23/3 andFY27/3, and aims to increase the number of temporary staff technicians, which support
growth in net sales, 19.5% annually. Non-GAAP operating growth is forecast to grow at anannualized rate of 33.0%.
Medium-Term Management Plan (FY23/3–FY27/3)
Key Target Figures
Net Sales (¥ bn)
Non-GAAP
Operating Profit (¥ bn)
Temporary staff technicians(Persons)

FY23/3

FY27/3

CAGR

18.8

40.0

20.8%

1.6

5.0

33.0%

3,036

6,200

19.5%

Source: Compiled by SIR from the company IR material* FY23/3 net sales and non-GAAP operating profit are rounded down off to the nearest 100 million yen.

External environment and assumption
From both a macro and semi-micro perspective, the good business environment willprobably continue. Demand for temporary staff by companies will likely grow stronger andstronger for such reasons as shortage of technicians accompanying the graying of society andchanging values regarding workstyles unbound by time and environment. In addition, in termsof the so-called “2024 problem,” the construction industry, the industry that the company’s
main customers belong to, will face stricter regulations on the upper limit of overtime work
starting in April 2024. In the construction industry, workers are growing fewer in number andolder, and when the regulations on overtime work become stricter, the amount of work thateach worker does will decrease, and this will probably exacerbate the labor shortage. For not
only the construction industry but all industries, securing human resources is expected to growmore difficult, but it can be argued that COPRO possesses the ability to recruit workers, boasts
a high retention rate, and is implementing extremely good measures in response to growing
demand for top temporary staff, including starting to build a thorough education system for
new recruits and “Technician Support Platform.”
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COPRO-HOLDINGS | 7059

Sessa Investment Research

Furthermore, in its medium-term management plan, the company projects that theconstruction/plant technician dispatching market will grow at an annualized rate of 8.8%
through 2030 as noted in the business model market environment section (page 13). This
assumes that the construction industry continues to grow at a gradual pace and there
continues to be a chronic labor shortage, forcing construction companies to regularly
outsource work.
Growth strategy and road map
Construction of the Technician Support Platform is the core COPRO’s medium-term
management plan. The company will actively provide support for developing a career
path that until now has been the responsibility of temporary staff technician. During thefirst half of the plan period, the company aims to build a foundation so that even new
graduates and workers with no industry experience can grow as technicians with peaceof mind by refining the career path system and building a training system.
As for the construction technician dispatching, the company’s main business, the sales
and recruiting reforms implemented through last year are bearing fruit, and starting in
FY24/3, the company will likely harvest those fruits. The company is also actively working
to innovate its operations through DX, expand the mechanical design and SES businesses,
reinforce organization capabilities, and invigorate the organization. To generate not only
strong organic growth for the existing business that surpasses plans but also
discontinuous growth, the company will accelerate growth to achieve its earnings targets
in the plan earlier than forecast by aggressively moving forward with M&As.

Source: Expert from the company materials of Medium-Term Management Plan

Long-term vision
Although the construction/plant technician dispatching business boasts strong growthpotential, it will be difficult for the company to achieve its long-term earnings targets with
only this business. Therefore, in the long-term vision, the company considers M&A an
important option to achieve its targets. The target of M&As will be construction/planttechnician dispatching, mechanical design and development technician dispatching, andSES companies, but even when examining other fields, the company will stay focused onhuman resource services that specialized in high value-added technicians.

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COPRO-HOLDINGS | 7059

Sessa Investment Research

Progress of the Medium-Term Management Plan

Consolidated Net Sales

Non-GAAP Operating Profit

Source: Compiled by SIR from the company IR material

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COPRO-HOLDINGS | 7059
Share price insights

Sessa Investment Research

Share price
COPRO’s share price has risen dramatically since the start of the year. On a closingprice basis, its lowest price since the beginning of the year was ¥985 (January 5) and its
highest price, ¥2,457 (August 16). The share price rose, along with trading volume, on
May 16, the day after the company announced its FY23/3 earnings. This was probably
driven by the it announcement in the press release “Notice Regarding Changes to Our
Dividend Policy,” which was made public at the same time, that during the period of theMedium-Term Management Plan “COPRO Group Build the Future 2027” (FY23/3–
FY27/3), released on May 13, 2022, in addition to its former policy of paying a stabledividend proportional to profit growth generated through aggressive investments, thecompany would aim to achieve a consolidated payout ratio of at 50% over the same
period. The announcement was positively received by the market, and there areprobably strong expectations for its profit growth to be achieved through aggressive
future investments.
Relative Stock Price Chart / TOPIX (Latest 12 months)
COPRO

TOPIX

Source: Trading View

Valuation
When calculating the stock price, comparisons of valuations with comparable companies isoften used as reference, but a company’s earnings and growth power depend on such factors
as business portfolio, which is impacted by the composition of the company’s customers,
valuation, and capital structure, making it difficult to compare companies using the samemeasure. In addition, valuations differ depending on management strategy, financial strategy,
shareholder return policy, and other factors. It is also difficult to make adjustments to suchfactors as dilution, SDGs policy, and governance, which financial indicators cannot easily
capture, so that the same valuation axis can be used. In terms of broad industry categories,
COPRO belongs to the human resources–related services industry. This industry is broken down
into the two subsectors—temporary staff dispatching, like COPRO, and human resources
introduction.
Investors must decide which valuation indicators are effective, and because COPRO has aconstruction technician dispatching business, SIR uses 6 other companies in the same industry
to compare valuations. Furthermore, an analysis of the valuation of 21 temporary staff
dispatching companies that dispatch staff to other manufacturing and non-manufacturing
companies, which includes construction technician dispatching, is also provided. As an
additional reference, a comparison of the valuation of and distinctive financial figures for 38
major companies related to human resource introductions, which match job seekers tocompanies hiring and provide recruiting operation support services but differ from humanresource dispatching companies that employ the staff they dispatch.
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COPRO-HOLDINGS | 7059

Sessa Investment ResearchFirst of all, the most eye-catching item is the high expected dividend payout ratio.
COPRO boasts an expected dividend payout ratio that substantially exceeds the averagefor not only the six companies that conduct construction technician dispatching (2) but
also the representative subsector of the human resources–related sector. This is becauseof COPRO’s dividend policy, which has a target of consolidated dividend payout ratio of atleast 50% for FY23/3–FY27/3, the period of the company’s current medium-term
management plan, as noted above, and its shareholder return policy based on strong
earnings. Furthermore, even though COPRO’s stock price has risen substantially since thebeginning of the year, the expected dividend yield of 3.3% calculated using the recent
stock price and a dividend per share of ¥80 (¥30 for FY22/3 → ¥50 for FY23/3 → ¥80 for
FY24/3), is extremely high.
The company's share price has been rising since the beginning of August on the back of
its shareholder return policy, strong earnings performance, and announcement of a stock
split. The company’s valuation based on PER and EV/EBITDA multiple is around 50%
higher compared to the average for the 6 companies in the same industry (2). Its ROE at
12.6% falls short of the average for companies (2)–(4). Because COPRO continued to be
debt free (no interest-bearing debt), its financial leverage was 1.4x for FY23/3, which isonly half the average for the 6 companies of 2.7x. Incidentally, its net profit margin was
4.6%, which exceeds the average of 3.6% for those same 6 companies, and its total asset
turnover was 2.0x, almost the same as the 2.1x for those 6 companies. COPRO’s dividendon-equity ratio has also risen to the 5% level from the 2% level a couple of years ago. The
company has indicated that it will expand its business in new fields, and furthermore, its
Medium-Term Management Plan touches on the idea of using debt for investment funds
related to entering new growth fields and promoting a financial strategy to increase thefinancial leverage effect without further increasing capital. The company can be expected
to draw the attention of the market through future rise in ROE and growth in new growthfields.
Comparison of Valuation with Comparable Companies
PER(1)

PBR

PSR

(x)

(x)

(x)

EV/EBITDA
multiple

19.7

3.2

1.2

12.7

2.5

39.8

(4) 38 human resources-introduction companies(2)Average for the 65 companies (excluding COPRO)

COPRO and Comparable Companies(1) COPRO(2) 6 companies in the same industry of temporary
staff dispatching for IT and manufacturing, including
construction and plants (2)(3) 21 companies dispatching temporary staff to the
manufacturing and non-manufacturing industries
(2)

ROE
(%)

Expected
payoutratio (%)

Expected
dividend
yield (%)

Equityratio (%)

Operatingprofitmargin (%)

Are there
outstanding
interest-paying
liabilities

11.8

12.6

64.2

3.3

70.4

7.0

No

0.7

7.9

16.6

34.0

3.0

43.5

5.7

Yes

5.5

1.0

16.7

19.0

34.7

2.3

48.2

6.1

19 of 21, yes

28.0

4.1

2.4

12.7

17.7

23.0

1.2

60.0

13.0

30 of 38, yes

30.5

4.4

1.8

13.6

18.0

28.7

2.9

54.7

10.1

55 of 65, yes

Source: Compiled by SIR from SPEEDA data
(1) Recent share price / company’s future EPS for the period; (2) (2), (3), and (4), do not include COPRO

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COPRO-HOLDINGS | 7059
Corporate
governanceSessa Investment Research

Governance structure
COPRO has introduced auditors. The Board of Directors consists of five internal directors
who are knowledgeable of the company’s operations and four outside directors who are
independent but possess abundant knowledge. Increasing the number of outside directors
was an important turning point for the company, and in terms of recruiting and securing
outstanding human resources, Mr. Kiyokawa pointed out that this played an extremely
important role in building the current human resource management system, a critical system.
The company has also established a Board of Auditors, a majority of whose members areoutside auditors.
Board members
Of the COPRO’s directors, one outside director is a licensed social insurance consultant andanother possesses abundant experience and knowledge as a manager. The Audit Committee
consists of one inside auditor and two outside auditors (one CPA and one attorney). The
company still does not have any female or non-Japanese directors, but the Articles ofIncorporation permit one additional director, and an issue is how the company responds todiversity, such as sex, nationality, work experience, and age.
Four of the current directors are independent outside directors, and they account for 44%of the 9 directors. This is high for Japanese companies, and independent outside directors
account for a majority of directors at only 12% of Japanese companies. The Board of
Directors consists of directors with deep knowledge and strong skills directly related to thisbusiness field or the related fields of law, accounting, and personnel. However, the company
lacks any female or non-Japanese directors, and currently faces the problem of expertise intechnology and ESG. All of the outside directors do not conduct business with the company
or other directors, ensuring there are no conflicts of interest with shareholders.
Shareholders
Kosuke Kiyokawa, the founder and current Representative Director, holds 58% of issued
shares. The other individual shareholder that holds more than 5% of the company’s shares is
Mr. Kageyama, but the company does not have a direct relationship with him. Financial
institutions hold 6.5% of outstanding shares; overseas companies, 4.0%; other institutions
4.5%; and other individual investors, 21.4%.
The founder’s concentrated holding of shares reduces agency costs because it guarantees
alignment of the interests of the management team and those of shareholders, but in termsof the Tokyo Stock Exchange’s criteria for maintaining listing on Prime Market, there is theissue of protecting minority shareholders if excessive concentration reduces liquidity
required by many institutional investors and weakens governance monitoring.
Major Shareholders
Name

RITAMEKO. Co., Ltd.
Kosuke Kiyokawa
Kyoichi Kageyama
The Master Trust Bank of Japan, Ltd. (trust account)
Custody Bank of Japan, Ltd. (trust account)
Atsuhiro Morinuki
Seigo Naito
Hiroyuki Nomura
INTERACTIVE BROKERS LLC
GOLDMAN SACHS INTERNATINAL
Treasury shares
Number of shares outstanding

As of March 31, 2023
No. of shares held
(1,000 shares)

4,200.0
1213.5
500.0
261.4
156.9
150.0
108.5
90.0
87.7
80.6
706.407
10,000.0

Ratio of shareholding
(%)

45.19
13.06
5.38
2.81
1.69
1.61
1.17
0.97
0.94
0.87
7.06
100.00Source: Compiled by SIR from company’s securities report*RITAMEKO is an asset management company of Kosuke Kiyokawa, the Representative Director and President of the COPRO.

26

COPRO-HOLDINGS | 7059

Sessa Investment Research

Weak oversight raises the issue of minority shareholder protection. As noted above, COPRO
has established a governance structure, and in order to further improve governance,
President Kiyokawa also recognizes the need to sell off some of his holdings at an
appropriate time and using an appropriate method that does not impact the market.
COPRO has set a basic policy of not conducting any type of business with controllingshareholders, but it has a system in which a committee composed only of independent,
outside directors and independent and outside auditors, can approve exceptions to this rule.
However, in all situations, exceptions must be deliberated on by that committee and thenapproved by the Board of Directors.
COPRO does not now have a disclosable succession plan, but has established a Nomination
and Compensation Committee, and if it becomes necessary, the committee will deliberate
on a successor based on experience, abilities, and personality.
Initiatives to achieve the sustainable development goals (SDGs)
COPRO recognizes that five of the seventeen sustainable development goals set by theUnited Nations are most important for long-term success of its business.
1. Quality education
2. Decent work and economic growth
3. Industry, innovation and infrastructure
4. Reduce inequalities
5. Responsible consumption and production

COPRO's flow of humanresource creation

Source: The company web site

 Human assets
For the time being, COPRO’s growth is expected to depend on whether it can hire andtrain employees, and its retention rate. Therefore, the sustainable goals related tohuman resource development are probably the most important for the company’s longterm success. These goals fall into three categories—quality education, decent work, andeconomic growth, and reduce inequalities. The company is expanding the career
opportunities and increasing work satisfaction of experienced dispatched employees by
providing them with opportunities to acquire more advanced technical and specializedskills. The company also provides OJT to new employees with no or little experience,quickly increasing their productivity and expanding their employment opportunities. In
addition, the company is broadening career development opportunities by offeringcontinuing education programs for experienced employees and supporting skill
improvements. The management team thinks that the key to long-term success isproviding all people, regardless of age, sex, handicap, or nationality, equal opportunities
and the same wage for the same job.
It is the opinion of COPRO that the ability to recruit and retain employees by continuingthese programs while adjusting costs will make it possible to gain a strong competitive
advantage that is sustainable far into the future.

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COPRO-HOLDINGS | 7059

Sessa Investment Research

FY21/3

FY22/3

FY23/3

Number who have taken inexperienced
personnel training (persons)

287

246

1,131

Number of inexperienced personnel hired(persons)

432

108

1,004

Percentage of female employees (%)

30.4

33.2

36.0

Number of foreign employees (persons)

34

59

92

69.1

69.4

74.4

Retention rate (%)
Source: The company web site about sustainability Industry, technical innovation, and infrastructure
COPRO thinks that in the construction industry plagued with concerns about a shortageof skilled workers, it can contribute to sustainable industrialization by supplying
technicians with advanced skills.
 Responsible consumption and production
Despite using few natural resources as its main assets are its human resources andtemporary staff dispatching know-how, COPRO aggressively works to lessen its
environmental burden by preventing or reducing waste it produces and promoting
recycling.
FY21/3

FY22/3

FY23/3

Number of sheets of paper used(million sheets)

2.34

1.84

1.82

Paper use reduction rate (%)

-18.3

-23.5

-0.7

Source: The company web site about sustainability

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COPRO-HOLDINGS | 7059

Sessa Investment Research

Financials
 Income Statement
FY¥mn, %

2019/03act

2020/03act

2021/03act

2022/03act

2023/03act

2024/03
INIT CE

Total Revenue

10,81913,123

14,837

15,58918,791

24,298

Total Cost of Sales

7,194

8,747

10,53910,744

13,216

Cost of Sales

7,194

8,747

10,53910,744

13,216Gross Profit

3,625

4,376

4,298

4,845

5,575

Gross Margin

33.5

33.3

29.0

31.1

29.7

Selling, General and Administrative Expenses

2,280

2,783

2,860

3,223

4,253

Operating Profit

1,345

1,593

1,438

1,621

1,322

1,800

Operating Profit Margin

12.4

12.1

9.7

10.4

7.0

7.4

Non-Operating Income

2

2

5

1

4

Interest and Dividends Income

0

0

0

0

0

Non-Operating Expenses

10

9

3

3

2

Interest Expenses

4

2

1

0

0

Ordinary Profit

1,337

1,585

1,440

1,620

1,324

1,870

Ordinary Profit Margin

12.4

12.1

9.7

10.4

7.0

7.7

-2

-18

-1

-64

-5

18

91

62

0

2

36

92

126

5

Pretax Profit

1,335

1,567

1,439

1,556

1,319

Pretax Profit Margin

12.3

11.9

9.7

10.0

7.0

Income Taxes

396

483

430

593

454

Income Taxes - Current

366

510

417

583

475

Income Taxes - Deferred

30

-26

13

10

-21

Net Profit Attribute to parent company
shareholders

939

1,084

1,009

963

865

Net Profit

939

1,084

1,009

963

865

Net Profit Margin (Attribute to parent
company shareholders)

8.7

8.3

6.8

6.2

4.6

Other Comprehensive Income

0

2

3

Foreign Currency Translation Adjustments (CI)

0

2

3

Extraordinary Gains/Losses
Extraordinary Gain
Extraordinary Loss

Comprehensive Income

939

1,084

1,010

965

868

Comprehensive Income Attributable to
Owners of the Parent

939

1,084

1,010

965

868

1,167

4.8

Source: Compiled by SIR from SPEEDA data
Note: The last digit of figures may differ from that of figures released by the company because of differences in the method used to round figures off tothe nearest million yen.

29

COPRO-HOLDINGS | 7059

Sessa Investment Research Balance Sheet
FY

2019/032020/032021/032022/032023/032024/03

6,486

6,898

7,408

6,748

7,752

4,761

4,832

5,321

4,058

4,407

4,761
1,526

4,832
1,856

5,321
1,880

4,058
2,227

4,407
2,900

0

0

0

0

988
389
20
75

1,133
372
41
113

1,107
357
28
161

2,093
407

2,243
584

524
104
7,475

648
130
8,031

589
118
8,514

999
781
687
139
8,841

988
675
672
171
9,995

2,105

2,380

2,163

2,166

2,717

1,057

1,145

1,130

1,328

1,728

270
0
270

186
0
186

85
0
85

26

26

15

244

160

70

1

8

28

23

1

677
600
43
557

163
86
16
70

79
4
4

101

166

24

31

(Assets)
Current Assets
Cash Cash Equivalents And Shortterm Investments
Cash & Cash Equivalents
Accounts Receivables
Allowance for Doubtful Accounts Assets
Non-Current Assets
Property, Plant & Equipment (PPE)Construction In Progress
Intangible Assets
Goodwill
Investments and Other Assets
Deferred Tax Assets - Non-Current

Total Assets(Liabilities)
Current Liabilities
Accounts Payable - Other andAccrued Expenses
Short-Term Debt
Short-Term Borrowings
Current Portion of Long-term Debt
Current Portion of Long-Term
Borrowings
Current Portion of Straight Bonds
Asset Retirement Obligations Current
Non-Current Liabilities
Long-Term Debt
Long-Term Borrowings
Straight Bonds
Provision for Retirement Benefits
Asset Retirement Obligations - NonCurrent

78

84

103

98

125

Total Liabilities（ Net Assets）

2,782

2,543

2,242

2,266

2,883

Total Shareholders' Equity

4,693
4,693
30
1,170
3,494
-1

5,488
5,488
30
1,173
4,287
-1

6,272
6,272
30
1,231
5,013
-1

6,575
6,537
30
1,238
5,619
-349

7,112
7,036
30
1,239
6,112
-345

0

2

5

0

2

5

6,272

36
6,575

71
7,112

Shareholders' Equity
Capital Stock
Capital Surplus
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive
IncomeForeign Currency Translation
Adjustments
Share Warrants

Total Net Assets

4,693

5,488

Source: Compiled by SIR from SPEEDA data
Note: The last digit of figures may differ from that of figures released by the company because of differences in the method used to round figures off tothe nearest million yen.

30

COPRO-HOLDINGS | 7059

Sessa Investment Research Cash Flow Statement
FY

2019/032020/032021/032022/032023/032024/03

Cash Flows from Operating Activities

1,165

1,126

989

825

1,011

Depreciation and Amortization - CF

80

86

93

186

254

Depreciation - CF

80

86

93

121

148

65

106

2

36

4

-1

5

0

0

0

0

0

Amortization of Goodwill - CF
Gain/Loss on Sale of PPEInterest and Dividends Received Operating CF
Interest Paid - Operating CF

-4

-2

-1

0

0

Cash Flows from Investing Activities

-123

-145

-83

-1,264-292

Purchases/Sales of PPE

21

Payments for Purchases of PPE

21

Proceeds from Sales of PPE

-75

-47

-130

-216

-214

Purchases/Sales of Intangible Assets
Payments for Purchases of Intangible
AssetsCash Flows from Financial Activities

-75

-47

-130

-230

-217

14

3

-9

-40

-98

-75

-71

Repayments of Long-Term Debt

-9

-40

-98

-75

-71
-372

Cash Flows from Financial Activities

761

-885

-417

-825

Repayments of Long-Term Debt

-244

-571

-160

-110
-40

Repayments of Long-Term Borrowings
Redemption of Bonds

-244

-571

-160

-70

Proceeds from Issuance of Stock

1,171

3

54

6

3

0

-350

0

-283

-357

-372

0

2

2

Redemption/Retirement of Stock
Cash Dividends Paid

-123

-292

Foreign exchange adjustment
Changes in Cash Flow

1,804

96

489

-1,263349

Cash & Cash Equivalent - Beginning

2,895

4,699

4,795

5,284

4,021

Cash & Cash Equivalent - Ending

4,699

4,795

5,284

4,021

4,370

Free Cash Flow (FCF)

1,042

981

906

-439

719

Source: Compiled by SIR from SPEEDA data
Note: The last digit of figures may differ from that of figures released by the company because of differences in the method used to round figures off tothe nearest million yen.

31

Sessa Investment Research

LEGAL DISCLAIMER
This report is intended to provide information about the subject company, and it is not intended tosolicit or recommend investment. Although the data and information contained in this report havebeen determined to be reliable, we do not guarantee their authenticity or accuracy.
This report has been prepared by Sessa Partners on behalf of the concerned company for which it hasreceived compensation. Officers and employees of Sessa Partners may be engaged in transactions
such as trading in securities issued by the company, or they may have the possibility of doing so in
the future. For this reason, the forecasts and information contained in this report may lackobjectivity. Sessa Partners assumes no liability for any commercial loss based on use of this report.
The copyright of this report belongs to Sessa Partners. Modification, manipulation, distribution ortransmission of this report constitutes copyright infringement and is strictly prohibited.

Sessa Partners Inc.
#5a i-o Azabu, 2-8-14
Azabujyuban, Minato-ku, Tokyo

info@sessapartners.co.jp

32