COPRO-HOLDINGS | 7059
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Sessa Investment Research

June 6, 2024

Striking expansion of business performance; An increase individend payment since the listing is to continue
FY2024/3 Earnings Result Summary: COPRO-HOLDINGS. Co., Ltd., (hereafter, theCompany) announced the full year results for FY2024/3 after the market close on
Tuesday, May 14, 2024. The key consolidated figures include net sales of ¥24,098 mn(+28.2% YoY), operating profit of ¥2,141 mn (+62.0% YoY), ordinary profit of ¥2,211 mn(+67.0% YoY), and profit attributable to owners of parent (hereafter, net profit) of¥1,463 mn (+69.3% YoY). Having posted a dramatic increase in net sales due to record
hiring, COPRO CONSTRUCTION. Co., Ltd., which operates the Company’s core construction
technician dispatching business, made substantial contributions to increased earnings.
FY2025/3 Earnings Forecast: The demand from the construction industry, major clientof the Company, is expected to remain strong due to urban development project
related works, renovation works of aging infrastructure facilities, construction works of
new semiconductor factories, and the like. Furthermore, there is still strong demand as
a result of the construction industry’s structural labor shortage and the so-called “2024problem” due to amended Labor Standards Act. Because of this, the Company projects
double-digit growth in both net sales and profit for the current fiscal year. Dividend pershare will be increasing by ¥10 on a retroactive revision basis for FY2025/3, meaning a
consecutive increase since the listing in March 2019.
Medium-term Management Plan: For FY2025/3, the third fiscal year of the Mediumterm Management Plan (FY2023/3–FY2027/3), the Company’s initial net sales and NonGAAP operating profit forecasts will surpass Mid-term Management Plan targets by
11.9% and 17.1%, respectively. For the final fiscal year of the Mid-term Management
Plan, the Company has set targets of ¥40.0 bn in net sales, ¥5.0 bn in Non-GAAP
operating profit, and 6,200 temporary technicians and engineers (number oftechnicians and engineers throughout the Group at the end of the fiscal year).

4Q Follow-up

Focus Point

Strength is the construction
technician dispatching business. Has
extremely strong financial position
and active shareholder return policy
and has increased its dividend inevery financial year since listing. The
client construction industry
continues to have a strong andimportant use of temporary staffing
due to structural labour shortages.

Key Indicators
Share price (6/5 CP)

1,430

YH (3/14)

1,919

YL (5/22)

1,481

10YH (24/3/14)

1,919

10YL (20/4/22)

365

Shrs out. (mn shrs)

20.00

Mkt cap (¥ bn)

28.6

CAP ratio (2024/3)

66.8%

25.03 P/E (CE)

15.5

24.03 P/B (act)

4.31

24.03 ROE (act)

19.2%

25.03 DY (CE)

4.2%

1Y stock priceNet Sales

FY

(¥mn)

YoY

（％）

Oper. profit
(¥mn)

YoY

（％）

Ordin. Profit
(¥mn)

YoY

（％）

Net profit
(¥mn)

YoY

EPS

(4)

（％） (yen)

DPS

(4)

(yen)

13,122

21.3

1,592

18.4

1,585

18.6

1,084

15.5

56.4

15.0

(1)

FY2021/3

14,836

13.1

1,437

(9.7)

1,439

-9.2

1,009

(6.9)

52.4

18.8

FY2022/3(2)15,589

5.1

1,621

12.8

1,619

12.5

962

(4.6)

50.4

20.0

FY2023/3

18,79120.5

1,321 (18.5)

1,324

-18.2

864 (10.2)

46.1

25.0

FY2024/3

24,098

28.2

2,141

62.0

2,211

67.0

1,463

69.3

74.4

50.0

FY2025/3 CE

30,000

24.5

2,700

26.1

2,714

22.7

1,755

19.9

92.0

60.0

FY2024/3 2Q

11,137

28.5

737

56.9

810

71.8

510

81.9

26.2

15.0

FY2025/3 2Q CE

13,948

25.2

1,032

40.0

1,046

29.0

675

32.3

35.4

20.0

FY2020/3(3)

Source: Compiled by SIR from TANSHIN financial statements.

Note: 1) A two-for-one stock split of common stock was conducted on April 1, 2021. (2): For 2022/3, “the account standard for revenue
recognition” and the like were adopted, but the effect was negligible. Therefore, SIR showed the percentage change from the previous
year. 3) A two-for-one stock split of common stock was conducted on October 1, 2023. 4) EPS and DPS are retroactively adjusted toreflect a 2-for-1 stock split. EPS – diluted shares adjusted.

Source: TradingView

Team coverage

research@sessapartners.co.jp

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COPRO-HOLDINGS | 7059

Sessa Investment Research

Share price insights: COPRO-HOLDINGS’s shares are currently trading at ¥1,430 (June 5
closing price), which is 25.5% down from their high for the year of ¥1,919 (Mar. 14,2024). COPRO-HOLDINGS has often underperformed the TOPIX since March. This isconsistent with the general trend of small and mid-cap stocks underperforming largecap stocks, and primarily because of demand and supply factors. From a fundamentals
perspective, it is difficult to find a reason for the weakness in the Company’s share priceas its earnings are extremely strong. The Company’s shares are trading at a PER of 15.5x
based on the Company’s forward EPS for FY2025/3, surpassing the average for the six
companies in the same industry of 13.4x. This is probably because the market positively
responded to the Company’s forecast of operating profit growth of 26.1% and expected
dividend payout ratio of 65.2%, which exceeds the average for the six peers ofoperating profit growth of 23.9% and expected dividend payout ratio of 53.5%. (see the“Share price insights” on the last page for the six peers).

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COPRO-HOLDINGS | 7059

Sessa Investment Research

Summary

FY2024/3 Results
Achieving an impressive increasein sales and profits

The Company announced the full-year results for FY2024/3 after the market close on
Tuesday, May 14, 2024. The key consolidated figures including net sales of ¥24,098 mn(+28.2% YoY), operating profit of ¥2,141 mn (+62.0% YoY), ordinary profit of ¥2,211 mn(+67.0% YoY), and net profit of ¥1,463 mn (+69.3% YoY). The Company actively recruiteda great many construction technicians to meet the stronger demand for temporary staff
dispatching along with a serious shortage of labor caused by regulations capping
overtime work started in April 2024 and big construction projects. Consequently, thebusiness of construction technician dispatching expanded, achieving an impressive
increase in sales and profits.

Financial Results by Subsidiaries (¥mn)*1
FY actNet sales
COPRO CN*2
COPRO TC*3
Gross profit
COPRO CN
COPRO TC
SG&A expenses
COPRO CN
COPRO TC
HD/ Other
Operating profit
COPRO CN
COPRO TC
HD/ Other

18,791

17,550
1,241
5,575
5,136
438
4,253
2,584
414
1,254
1,321
2,551
24
(1,254)

YoY
20.5%
18.3%
63.8%
15.1%
10.5%
124.5%
32.0%
43.9%
61.5%
7.2%
-18.5%-10.6%-FY2023/3
CHG
3,202
2,718
483
730
487
243
1,030
788
157
84
(299)
(301)
85
-84

%*4
100.0%
93.4%
6.6%
29.7%
22.6%
7.0%
-

%*5
100.0%
100.0%
29.3%
35.3%
14.7%
33.4%
14.5%
1.9%
-

FY act24,09821,883
2,214
6,774
6,204
569
4,632
2,906
580
1,144
2,141
3,298
(10)
(1,145)

YoY
28.2%
24.7%
78.4%
21.5%
20.8%
29.9%
8.9%
12.4%
40.1%
-8.7%
62.0%
29.3%
-

FY2024/3
CHG
5,306
4,333
973
1,199
1,068
131
379
321
166
(108)
820
746
(35)
108

%*4
100.0%
90.8%
9.2%
28.1%
19.2%
8.9%
-

%*5
100.0%
100.0%
28.4%
25.7%
13.3%
26.2%
15.1%
-0.5%
-

Source: Compiled by SIR from the Company IR material.
Note 1: Figures for subsidiaries are adjusted for consolidation after eliminating intra-group transactions.
2. COPRO CN=COPRO CONSTRUCTION
3. COPRO TC=COPRO TECHNOLOGY
4. As the percentage of consolidated net sales
5. As the percentage of COPRO CN and COPRO TC, respectively

Construction technician dispatching business

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

COPRO CONSTRUCTION. Co., Ltd. (hereafter, COPRO CN), which operates the Company‘score business of construction technician dispatching and thought it the most important toestablish the system to get hold of the technicians, a driving force for the business expansion,
to well satisfy the stronger demand caused by regulations capping overtime work started thisApril, kept strengthening recruiting activities.
In addition to continuing to aggressively but efficiently spend on recruiting with a focus oncost effectiveness, COPRO CN launched its own job-search website Bscareer Construction in
March 2024, introduced an application management system, and worked to reinforce
recruiting activities, such as reducing lead time by automatically setting interviews.
Furthermore, in April 2024, 154 new graduate engineers (+100 persons, YoY) joined theCompany, and COPRO CN moved forward with building recruiting channels other than midcareer hires. As a result, the number of technicians rose by 791 (+28.5% YoY) to 3,568. The
Company maintained a high average utilization rate during FY2024/3 of 94.6%, compared to96.3% in FY2023/3, despite a dramatic increase in the number of new hires. COPRO CN
posted operating profit of ¥3,298 mn (+29.3% YoY) because of strong growth in net sales due
to record recruiting and high utilization rate that compensated for the increase in recruiting
and personnel expenses.

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COPRO-HOLDINGS | 7059

For a rise in the number of
recruits, active advance use of
expenses such as advertising
spending and the like was madeEntered engineer dispatchingbusiness in semiconductorrelated field

The significant decrease in the
SG&A-to-sales ratio of 3.6 ppt
also contributed to the increasein operating profit

Business
Environment

Sessa Investment ResearchMechanical design and development engineer dispatching and contracting and SES(System Engineering Service) business
The business is handled by COPRO TECHNOLOGY. Co., Ltd. (hereafter, COPRO TC),
established by the merger of ATMOS Co., Ltd. and VALUE ARK CONSULTING Co., Ltd. This
was an opportunity to unify its sales and recruiting structures, as well as to consolidate its
administrative divisions.
In recruitment, 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. As of November 30, 2023, COPRO TC took overSES business (with the dispatching business and quasi-assignment contracts) from PacificInformation Consultants Co., Ltd., which operates the web/software development andsystem consulting business.
Thus, COPRO TC is making progress in building a foundation for business expansion as it
was able to take over not merely the client network, such as main system integrators, butalso highly skilled IT engineers. In addition, COPRO TC started to expand into new businessfields by opening the semiconductor engineer training center Semicon Techno Lab, which
specializes in training engineers responsible for semiconductor manufacturing equipments
maintenance and inspections, in February 2024. As Japan works to increase domestic
production of semiconductors for such reasons as concerns about economic security risks, ashortage of engineers for semiconductor device manufacturers and semiconductor
manufacturing equipment manufacturers has developed. Therefore, COPRO TC is moving
forward with training human resources who handle such work as semiconductor
manufacturing equipment maintenance and field engineer operations.
Therefore, the number of engineers at the end of FY2024/3 increased by 102 (+39.4%
YoY) to 361. As for profit, COPRO TC posted a slight operating loss of ¥10 mn due to upfront
advertising-related expenses in order to increase the number of new recruits.
ProfitIn addition to the increase in the number of COPRO CN technicians, COPRO TC has seen thenumber of its engineers, the group as a whole increased by 893 persons (+29.4% YoY) to
3,929 as of the end of FY2024/3, compared to 3,036 of FY2023/3. As a result, itsconsolidated sales increased by 28.2% YoY.
Recruiting expenses increased due to aggressive recruiting. Furthermore, personnel andother expenses increased as a result of efforts to reinforce the sales and recruiting
departments in preparation for even greater demand for construction technician
dispatching starting this fiscal year. On the other hand, SG&A expenses rose 8.9% YoY,
primarily because of a decline in not only personnel expenses due to streamlined head
office back-office operations but also stock-based compensation expenses. The increase in
SG&A expense was less than the growth in net sales of 28.2%. The SG&A-to-sales ratio fell
3.4 percentage points YoY to 19.2% from 22.6%.
Therefore, operating profit rose a substantial 62.0% YoY. Ordinary profit increased
67.0% YoY due to the posting of a refund from a cancelled insurance policy.
Background for continuing strong business environment
According to Ministry of Internal Affairs and Communications’ Labour Force Survey, thenumber of people employed in the construction industry fell 30.1% to 4.79 million in 2022
from its peak of 6.85 million in 1997. Under these conditions, the Company’s research
estimates that the market size for human resources services for the construction industry willgrow to ¥650.0 bn in FY2026, a 22.6% increase from ¥530.0 bn in FY2021.

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COPRO-HOLDINGS | 7059

Sessa Investment Research

The following two reasons are given for the growth in the market. First, there is a shortageof workers due to a cap on overtime that came into effect in April 2024, forcing theconstruction industry, which is also impacted by the shrinking labor force, to rely on
temporary staff dispatching.
The second reason is that there continues to be large-scale projects related to theconstruction of new and maintenance of existing social infrastructure throughout Japan,
including redevelopment projects in the Greater Tokyo area, construction of the Expo 2025
Osaka, Kansai venue and integrated resorts with casino in the Osaka Bay Area, andconstruction of new semiconductor manufacturing plants. The Company expects to see evengreater need for human resources services in the construction industry.

FY2025/3
Earnings Forecasts
Operating profit and Non-GAAP
operating profit for the current
financial year is growing fasterthan the target figures in themedium-term management plan
*Non-GAAP operating profit iscalculated by adding depreciation
costs, goodwill amortization andstock-based compensation
expenses back to operating profit.

Full-year Earnings Forecasts
The Company’s full-year consolidated earnings forecasts for FY2025/3 are as follows: net
sales of ¥30.0 bn (+24.5% YoY), operating profit of ¥2,700 mn (+26.1% YoY), Non-GAAP
operating profit* of ¥3,162 mn(+29.7%YoY), ordinary profit of ¥2,714 mn (+22.7% YoY),
and net profit of ¥1,755 mn (+19.9% YoY).
The Company announced its five-year Medium-term Management Plan (FY2023/3–
FY2027/3) on May 13, 2022. In the plan, the Company set FY2025/3 targets of ¥26.8 bn innet sales and ¥2.7 bn in Non-GAAP operating profit. Therefore, the Company’s recently
announced forecasts for FY2025/3 net sales and Non-GAAP operating profit are 11.9% and17.1% greater than Medium-term Management Plan targets.
As demand for temporary technicians and engineers remains strong, the Company plansto aggressively recruit 2,776 technicians and engineers (+24.9% YoY). Because theCompany expects 1,537 technicians and engineers to resign (+15.7%), it looks like thenumber of technicians and engineers throughout the Group will grow to 5,168 (+31.5%
YoY) by the end of FY2025/3.

FY2025/3 KPIs by Business (unit: persons)

Source: Compiled by SIR from the Company IR material.
* The above figures, excluding retention rate of SES, include IT freelance engineers. The retention rate is for dispatched technical employees
only, excluding IT freelancers.
* Retention rate = Number of technicians at the end of the current fiscal year (current quarter) ÷ (Number of technicians at the end of theprevious fiscal year (previous quarter) + Number of technicians at the end of the current fiscal year (current quarter)) × 100

5COPRO-HOLDINGS | 7059

Reinforcing the semiconductor
engineer dispatching business,a new business field

Medium-Term
Management Plan
FY2025/3 earnings growing at
pace to exceed Medium-termManagement Plan targets

Sessa Investment Research

The outlook for FY2025/3 earnings by business are as follows.
Construction technician dispatching businessFor construction technician dispatching, COPRO CN is improving the accuracy of its sales
and recruiting process and strengthening its ability to supply customer companies withhuman resources by further reinforcing its own recruiting, one of its strengths. COPRO CN
will expand its recruiting channel from its existing recruiting medium to include its job-search
website Bscareer Construction, referral recruiting based on introductions by parties such as
its own employees, and similar channels. Furthermore, to promote the retention of workers
with no experience in the industry, which it is hiring more of, the Company will implement
such measures as holding training, follow-up meetings, and career meetings to raise theretention rate. COPRO CN is trying to increase the number of its technicians who earn a highunit price and expand net sales by improving the retention rate for technicians with 1-2 yearsof experience in the industry. COPRO CN plans to hire 2,299 construction technicians (+13.6%
YoY) in FY2025/3.
Mechanical design and development engineer dispatching and contracting and SES(System Engineering Service) business
For this business, COPRO TC is working to increase the number of engineers by continuing
to make growth investments this fiscal year and expects to hire 207 mechanical design anddevelopment engineers (+75.4% YoY) and 270 SESs (+275.0 YoY). Furthermore, it has plans to
expand into the semiconductor engineer dispatching business, a new business field, and thefirst step in this plan was the February 2024 opening of the semiconductor engineer training
center Semicon Techno Lab.
Progress with “COPRO Group Build the Future 2027” plan

The Company is implementing its Medium-term Management Plan (FY2023/3–FY2027/3),
which it announced in May 2022, and this fiscal year is the third fiscal year of the plan. As
discussed above, the Company’s forecasts for FY2025/3 net sales and Non-GAAP operating
profit are 11.9% and 17.1% greater than the FY2025/3 targets included in Medium-termManagement Plan. This is because the external environment for the construction technician
dispatching business, the Company’s core business, is better than initially expected. The
Company has started to actively hire technicians, who are meeting the demand for
temporary staff dispatching which continues to grow for both macro reasons (cap on
overtime work since April 2024) and semi-macro reasons (many large-scale projects related
to the construction of new and maintenance of existing social infrastructure throughout
Japan). SIR thinks this external business environment will continue for the time being.

Progress of the Medium-Term Management Plan

Source: Excerpted from the Company IR material.

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COPRO-HOLDINGS | 7059
Share Price Insights

Sessa Investment Research

COPRO-HOLDINGS’s shares are currently trading at ¥1,430 (June 5 closing price), which
is 25.5% down from their high for the year of ¥1,919 (Mar. 14, 2024). COPRO-HOLDINGS
has often underperformed the TOPIX since March. This is consistent with the generaltrend of small and mid-cap stocks underperforming large-cap stocks, and primarily
because of demand and supply factors. From a fundamentals perspective, it is difficult tofind a reason for the weakness in the Company’s share price as its earnings are extremely
strong. The Company’s shares are trading at a PER of 15.5x based on the Company’s
forward EPS for FY2025/3, surpassing the average for the six companies in the same
industry of 13.4x. This is probably because the market positively responded to theCompany’s forecast of operating profit growth of 26.1% and expected dividend payout
ratio of 65.2%, which exceeds the average for the six peers of operating profit growth of
23.9% and expected dividend payout ratio of 53.5%.
SIR also believes that this is also due to the Company's easy-to-understand equity story that
the Company's sales exposure to the construction industry, which is the Company's clientbase is in and plagued by structural labor shortages as well as the "2024 problem,“ isoverwhelmingly higher than that of the other six companies. As for peers, SIR selected thefollowing six companies from the eight companies with the greatest net sales in the market
for human resources services for the construction industry based on COPRO research:
TechnoPro Holdings, Inc. (6028), Open Up Group Inc. (2154), UT Group Co., Ltd. (2146), WILLGROUP, Inc. (6089), Nareru Group Inc. (9163), and WILLTEC Co., Ltd. (7087). OUTSOURCING
Inc. (2427) was excluded from the peers because it was delisted following an MBO conducted
June 6, 2024. Furthermore, TRYT Inc. (9164) was excluded from valuation comparison
because it did not pay a dividend for the previous or current fiscal year.
Relative Chart: COPRO HD vs TOPIX [1 year]

COPRO HD

TOPIX

Source: TradingVIew

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Sessa Investment Research

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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.
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