COPRO-HOLDINGS | 7059
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Sessa Investment Research

February 27, 2024

Construction technician dispatching business, mainstream of theCompany, saw a significant surge in sales and profit in FY2024/3 3Q

3Q Follow-up

The demand for the business is expected to be strong for the time being
 Earnings Result Summary

COPRO-HOLDINGS. Co., Ltd., (COPRO) announced its 3Q FY24/3 (9 months) results. Key
consolidated figures included net sales of ¥17,496 mn (+28.8% YoY), operating profit of¥1,406 mn (+63.0% YoY), ordinary profit of ¥ 1,480 mn (+70.8% YoY), and profit
attributable to owners of parent of ¥936 mn (+79.7% YoY). COPRO-CONSTRUCTION.
Co., Ltd., (formerly COPRO-ENGINEERED), which operates the Company‘s core businessof construction technician dispatching, proactively increased the number of recruits
amid the chronically serious shortage of labor against the backdrop of regulations
capping overtime work to start in April 2024 and big construction projects. Sharp
expansion of construction technician dispatching business drove the COPRO’s entire
earnings growth. The number of construction technicians increased by 803 (+31.2%
YoY) to 3,373 (2,570 at the end of 3Q 23/3).
 FY24/3 full-year forecasts
The Company did not change the full-year forecasts for FY24/3, which had been revised
upward at the time of the announcement of the business results for 1H FY24/3. The
forecasts consist of net sales of ¥24,298 mn (+29.3% YoY), operating profit of ¥2,042 mn(+54.5% YoY), ordinary profit of ¥2,115 mn (59.7% YoY) and profit attributable to owners ofparent of ¥1,361 (+57.4% YoY). DPS per year is expected to reach ¥45, a sharp growth from¥25 for FY23/3. The Company estimates that the demand for temporary staff dispatching
will remain strong in 4Q FY24/3, and will continue to control SG&A expenses flexibly. The
Company has continued to recruit many technicians and engineers and the number of themis expected to reach 4,271 as of the end of FY24/3, a record high.
 Share price insight
The share priced shot up approximately 3.2 times over the last one year. As of February 22,
PER is 25.5x against the Company’s FY24/3 forecasts and PBR is 4.89x. The favorable
business performance supported by the strong demand for the temp staff dispatching in theconstruction industry, which has been faced with labor shortage, and its active shareholder
return policy have increased the Company’s valuation. In terms of operating profit growthrate and dividend payment ratio for FY24/3, the Company is expected to surpass the peersin the same industry. This is because the Company’s sales exposure to construction industry,
which has been in a serious shortage of labor, is even higher than peers.
FY

Net Sales(¥mn)

FY2019/3
FY2020/3
FY2021/3
FY2022/3
FY2023/3
FY2024/3 CE
FY2023/3 3Q
FY2024/3 3Q

10,81913,122
14,836
15,58918,791
24,29813,584
17,496YoY Oper. profit YoY Ordin. Profit YoY
(¥mn)
(¥mn)
（％）
（％）
（％）

20.7
21.3
13.1
5.1
20.5
29.3
18.7
28.8

1,344
1,592
1,437
1,621
1,321
2,042
862
1,406

50.3
18.4
-9.7
12.8
-18.5
54.5
-23.1
63.0

1,336
1,585
1,439
1,619
1,324
2,115
866
1,480

51.1
18.6
-9.2
12.5
-18.2
59.7
-22.6
70.8

Net profit

YoY

EPS*

DPS*

(¥mn)

（％）

(yen)

(yen)

938
1,084
1,009
962
864
1,361
521
936

54.4
15.5
-6.9
-4.6
-10.2
57.4
-15.9
79.7

113.8
115.1
53.4
51.1
46.5
72.3
28.1
49.9

21.0
30.0
37.5
20.0
25.0
45.0
-

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 is on aggressive shareholder
return policy.

Key Indicators
Share price (2/26)

1,795

YH (2/22)

1,879

YL (2/14)

1,495

10YH (24/2/22)

1,879

10YL (20/4/22)

365

Shrs out. (mn shrs)

20.00

Mkt cap (¥ bn)

36.6

CAP ratio (23/3)

71.2%

24.03 P/E (CE)25.5

23.03 P/B (act)

4.89x

23.03 ROE (act)

12.6%

24.03 DY (CE)

2.5%

1Y stock priceSource: TradingView

Team coverage

research@sessapartners.co.jp

Source: Compiled by SIR from TANSHIN financial statements.

Note: A two-for-one stock split of common stock was conducted on September 30, 2023.
*EPS and DPS are retroactively adjusted to reflect a 1-for-2 stock split.

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COPRO-HOLDINGS | 7059
3Q FY24/3 Results

Sessa Investment Research

Summary
COPRO recorded consolidated net sales of ¥17,496 mn (+28.8% YoY), operating profitof ¥1,406 mn (+63.0% YoY), ordinary profit of ¥1,480 mn (+70.8% YoY), and consolidated
net profit of ¥936 mn (+79.7% YoY). The Company actively recruited a great many
construction technicians to meet the stronger demand for temporary staff dispatchingalong with a serious shortage of labor caused by regulations capping overtime work to
start in April 2024 and big construction projects. Consequently, the business ofconstruction technician dispatching expanded, achieving an impressive increase in sales
and profits. The number of registered technicians and engineers increased by 883 to
3,709 (+31.2% YoY).
COPRO-ENGINEERED, which had engaged in the Company’s core business, changed its
name to COPRO CONSTRUTION. Co., Ltd. in 3Q FY24/3. ATMOS and VALUE ARKCONSULTING merged and changed the name to COPRO TECHNOLOGY. Co., Ltd. as of
October 1, 2023, which provides mechanical design and development engineer
dispatching and contracting services and SES (system engineering service). The businessresults by segment and of the consolidated subsidiaries for 3Q FY24/3 are shown below.

The core business of construction
technician dispatching expandedwith a record high in the numberof recruits.

For a rise in the number of recruits,
active advance use of expenses
such as advertising spending andthe like was made.

Construction technician dispatching business
COPRO CONSTRUCTION. Co., Ltd. (hereafter, COPRO CN), which thought it the mostimportant to establish the system to get hold of the technicians, a driving force for thebusiness expansion of the Company, to well satisfy the stronger demand caused byregulations capping overtime work to start this coming April, kept strengthening recruiting
activities. In recruitment, COPRO CN not only actively but cost-efficiently used recruiting
expenses as it did in the previous fiscal year. Besides, COPRO CN introduced a job application
management system for reinforcement of recruiting activities. The system aims to mainly
help reduce lead time by automatically setting interviews and to increase the number ofinterviews, the first step in the recruiting process. In April 2023, COPRO CN was able toemploy 154 new graduate technicians, up by 100 YoY, establishing another strong channel for
recruiting other than mid-career employment.
Recruiting technicians very independently and very adroitly brought in a sharper increase in
the number of technicians recruited than the average increase in the same industry. The
number came to 1,539, up by 514 (+50.1% YoY), including the 154 new graduate technicians.
The net increase after reducing the number of retirees was +596. The total number of
construction technicians registered at the end of 3Q FY24/3 strikingly increased by 803(+31.2% YoY) to 3,373 from 2,570 in 3Q FY23/3. The average utilization rate during the periodof 3Q FY24/3 was 94.5%, remarkably high.
COPRO CN’s sales in 3Q FY24/3 rose notably to ¥15,991 mn (+25.6% YoY) supported by arecord high in the number of recruits, while operating profit increased by 15.5% YoY,
absorbing a hike in training and personnel expenses resulting from active recruitment of
the technicians.
Mechanical design and development engineer dispatching and contracting and SES(System Engineering Service) business
COPRO TECHNOLOGY. Co., Ltd. (hereafter, COPRO TC), established by the merger of
ATMOS and VALUE ARK CONSULTING, unified its sales and recruiting structures, andconsolidated its administrative divisions into the pure holding company. Especially inrecruitment, COPRO TC strengthened its independent recruiting sites by opening“Bscareer Mechanical and Electrical” in November 2023 after opening “Bscareer IT”, IT
project introduction site, in March 2023.

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COPRO-HOLDINGS | 7059

Sessa Investment Research

As of November 30, 2023, COPRO TC took over SES business (with the dispatchingbusiness and quasi-assignment contracts) from PIC, which operates the web/softwaredevelopment and system consulting business. Thus, COPRO TC was able to make progressin building a foundation for business expansion as it was able to take over not merely theclient network, such as main system integrators, but also highly skilled IT engineers.
Therefore, the number of engineers at the end of 3Q FY24/3 increased by 80 (+31.3%
YoY) to 336 (256 in 3Q FY23/3).
Taking over the business above mentioned from PIC, COPRO TC was able to strengthen
SES business and its sales reached ¥1,505 mn (+76.7% YoY). Gross profit rose sharply as
well. Operating profit, which recorded ¥-20 mn (¥-3 mn 3Q FY23/3), was affected by theintentionally upfront expenses such as advertising spending to increase the number of
recruits.
The table below shows financial results by subsidiaries. Concerning the results of COPRO
CN and COPRO TC, the details are mentioned above, while COPRO-HD showed +¥156 mn
YoY in profit contribution by streamlining back-office operations along with lower
personnel and stock-based compensation costs in the head office.
Financial Results by Subsidiaries (¥mn)

Net sales
COPRO CN
COPRO TC
Gross profit
COPRO CN
COPRO TC
SG&A expenses
COPRO CN
COPRO TC
COPRO-HD andothersOperating profit
COPRO CN
COPRO TC
COPRO-HD andothers3Q
13,584
12,732
852
4,054
3,754
299
3,191
1,940
303

FY23/3
YoY
18.7%
15.4%
109.1%
14.8%
8.9%
261.0%
32.5%
42.6%
71.7%

CHG
2,144
1,699
444
524
307
216
782
579
126

3Q
17,49615,991
1,505
4,880
4,459
420
3,474
2,240
441

FY24/3
YoY
28.8%
25.6%
76.7%
20.4%
18.8%
40.4%
8.9%
15.5%
45.5%

CHG
3,912
3,258
653
826
705
121
282
300
138

947

8.8%

76

791

-16.5%

-156

862
1,814
(3)

-23.1%-13.0%
-

(258)
(271)
89

1,406
2,219
(20)

63.0%
22.3%
-

543
404
(16)

(947)

-

(76)

(791)

-

156

Source: Compiled by SIR from the Company IR material.
*Figures for subsidiaries are adjusted for consolidation after eliminating intra-group transactions.

Really favorable businessenvironment for the Company
both on a macro and a semimacro levels.

The favorable business environment is to continue
The number of construction workers declined by 30.1% to 4.79 million in 2022 from thepeak of 6.85 million in 1997. Under circumstances like this, according to the Company's
research, the market for human resource services for the construction industry is expected
to grow from ¥530 bn in FY2021 to ¥650 bn in FY2026.
According to the Company, there are two reasons why the market for human resource
services for the construction industry is to grow. Firstly, considering restrictions on overtime
work to come into effect this coming April and the resulting shortage of labor, theconstruction industry, which has suffered from a decrease in the number of workers, isforced to depend on the temporary staff dispatching service. Secondly, the need in theconstruction industry for use of the temporary staff dispatching services will get much
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COPRO-HOLDINGS | 7059

Sessa Investment Research(continued)
stronger due to many large projects to be continued such as redevelopment work in theTokyo metropolitan area, the Osaka-Kansai Expo and Integrated Resort development plan,
both to be held in Osaka Bay, new construction work of some semiconductor production
plants, and new construction/renovation projects of social infrastructure through Japan.
Net sales and profits will
hit a record high

FY24/3 Full-year Earnings Forecasts
COPRO’s full-year consolidated earnings forecasts for FY24/3 are as follows: net sales of¥24,298 mn (+29.3% YoY), operating profit of ¥2,042 mn (+54.5% YoY), ordinary profit of¥2,115 mn (+59.7% YoY), and net profit of ¥1,361 mn (+57.4% YoY). The Company sticks
to these forecasts, which are based on the upward revision at the time of announcementof financial result of 1H 24/3. The annual DPS is expected to sharply increase to ¥45 from¥25 for FY23/3. ¥25 reflects the stock split on October 1, 2023, retroactively.
The Company expects that the demand for the temporary staff dispatching service willremain strong in 4Q, supporting the Company’s forecasts, but that it will keep an eye oncontrolling SG&A expenses. The Company considers it very important to establish asystem to increase sales steadily while carefully controlling costs. In addition, it willkeep preferably capturing many technicians by actively using recruiting expenses andthe like, as planned to make a good preparation for the expectedly stronger demandcaused by restrictions on overtime work for the construction industry to start thiscoming April. The number of technicians and engineers is expected to reach 4,271 at
the end of 4Q FY24/3.
FY24/3 Company Earnings Forecasts (¥mn)
Net sales
Gross profit
SG&A expenses
Operating profit
Non-GAAP OP
Ordinary profit
Profit attributable to owners of parent

EPS (¥)
No. of consolidated technicians(person as of FY end)

FY2023/3
18,791
5,575
4,253
1,321
1,606
1,324
864
46.6
3,036

YoY
20.5%
15.1%
32.0%
-18.5%-12.8%-18.2%-10.2%-8.8%

2024/3(Forecast)
24,298
7,065
5,023
2,042
2,342
2,115
1,361
72.3

37.9%

4,271

YoY
29.3%
26.7%
18.1%
54.5%
45.7%
59.7%
57.4%
55.2%
40.7%

Source: Compiled by SIR from the Company IR material.

Medium-Term
Management Plan

Currently, the Company has been implementing the Medium-Term Management Plan
“COPRO Group Build the Future 2027,” which was announced in May 2022 and covers the
five-year period from FY23/3 through FY27/3. Over those five years, the COPRO Group,
which dispatches temporary staff, is working to build “Technician Support Platform” toproactively support career development for technicians and engineers. The Company
believes that this platform will create its new business model that can make it possible forboth the experienced workers in the industry and the new graduates/workers with noindustry experience to work long without worrying about the future, gaining experience astechnicians or engineers. The Company also believes that this platform will be able to help
the Company’s business expand as the customers can enjoy the greater enterprise value
provided by this business model.
The specific targets for FY27/3 include net sales of ¥40,000 mn, non-GAAP operating
profit of ¥5,000 mn, and the consolidated number of technicians and engineers recruitedfor dispatching of 6,200. Non-GAAP operating profit is the sum of operating profit,
depreciation, goodwill amortization, and stock-based compensation expenses, and is often
used as an indicator of cash-base earnings power.
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COPRO-HOLDINGS | 7059

Sessa Investment Research

The Company, which is in the second term of the Plan currently, has made greater progressagainst the targets initiated in 2022 May. The Company's core business of construction
technician dispatching has enjoyed a favorable external business environment. The applicationof overtime caps to start in April 2024 on a macro level and a lot of large construction projects
on a semi-macro level have supported the environment. Taking advantage of the environment,
where the demand for temporary staff dispatching has been increasingly strong, the Company
plans to aggressively recruit technicians and engineers.
Mid-Term Management Plan
– Financial performance targets

Source: The Company IR material

The current share price of ¥1,832 as of February 22 is very close to a high of the 52-week pricerange (between ¥1,879, a high on February 22, 2024 and ¥577, a low on March 13, 2023). SIR
believes that the share price increase reflects the expansion of earnings performance appreciating
the strong demand for temporary staff dispatching in the construction industry, which has been
faced with a shortage of labor, and the Company’s active shareholder return policy. Based on the
A remarkable change in earnings
performance and dividend payout, current share price, PER is 25.5x against the Company’s forecasted EPS for FY24/3 and PBR is 4.89x,much surpassing the others in thewhich is higher than the average of 16.3x of PER and 2.91x PBR of the other 5 companies in theindustry.
same industry, which provides the temporary staff dispatching for construction and plantengineering industries as well as for manufacturing and IT industries. SIR estimates that some of thereasons why the valuation multiples of the Company are higher than those of peers could be thefact that the Company’s sales exposure to the construction industry, which is suffering from ashortage of labor, is much higher than that of peers. The impact on the entire earnings, as a whole,becomes huge, compared with the others. In fact, the Company’s forecast for FY24/3 shows anincrease of 54.5% in operating profit YoY, while the forecast of peers posts a decrease of 16.6% YoY
on average. Of the five companies, the two forecast a decrease in profits, while the other three
foretell an increase in profits of around 10%. The Company’s 12.6% of ROE for FY23/3 is lower than
17.7%, an average of the other 5 companies. However, given that the Company's forecast for net
Note: (1) TechnoPro Holdings, Inc., Open Up
profit growth for FY24/3 is +57.4% YoY, the expected ROE for FY24/3 could be higher than peers.
Group Inc., UT Group Co., Ltd., WILL GROUP,
INC., and WILLTEC Co., Ltd. OUTSOURCING Inc.,The Company’s dividend payout ratio of 62.2% for FY24/3 also indicates its notable activeness ina major player in the industry, is excluded as it
has announced an MBO and the prospect of
the shareholder return policy.
delisting.
(2)PER= market capitalization based on the
Comparison of Valuation with Peers

Share price insightmost recent share prices/net profits forecasted
by the companies, (3) PBR = market cap. basedon the most recent share prices/total net
assets of the most recent 3Q results, (4)Dividend yield = estimated DPS /the mostrecent share prices, (5) Dividend Payout Ratio =estimated DPS/EPS forecasted by thecompanies, (6) Change in operating profit forthe current fiscal year forecasted by thecompanies, (7) ROE = net profit for theprevious fiscal year/ the term-average ofshareholders' equity and other capital for theprevious two fiscal years.

Comparison of Valuation

COPRO

(%)

Payoutratio (5)(%)

Expected OPchange ratio(6)(%)

ROE(7)
(%)

2.5

62.2

54.5

12.6

PER(2)PBR(3)

DY(4)

(x)

(x)

25.5

4.89

5 comparable companies of
temporary staff dispatching for
16.3
2.91
3.2
49.4
-16.6
IT and manufacturing, including
construction and plants (1)Source: Compiled by SIR from SPEEDA data. Share prices are calculated using the closing price on February 22.

17.7

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Sessa Investment Research

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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.
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info@sessapartners.co.jp

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