Research Coverage Report by Shared Research Inc.

6165

Punch Industry
Shared Research Inc. has produced this report by request from the company discussed in thereport. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc.
make every effort to provide an accurate, objective, and neutral analysis. In order to highlightany biases, we clearly attribute our data and findings. We will always present opinions fromcompany management as such. Our views are ours where stated. We do not try to convince or
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Coverage initiated on: 2023-05-29
Last update: 2023-08-31

INDEX
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.
Key financial data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.
Recent updates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.
Trends and outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11..
Quarterly trends and results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11..
Full-year company forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13..
Medium-term outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14..
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21..
Business description&nbsp; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21..
Market and value chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30..
Strengths and weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35..
Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39..
Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39..
Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40..
Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41..
Historical earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41..
Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47..
Company profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51..

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Executive summary
Business overview
Punch Industry Co., Ltd. (TSE Prime: 6165) is a manufacturer of ejector pins, punches, and dies used in plastic molds andpress dies (it does not manufacture molds or dies itself). The company’s technicians, who have acquired manufacturing skills
over many years in areas such as heat treatment, surface treatment, and grinding, process steel and cemented carbide
materials to make both standard and special-order products. The company focuses on making products to order based on
customer specifications (accounting for roughly 60% of revenue from mold and die components) using its cutting, grinding,and other precision processing technology. Customers are companies in the automotive, electronic devices andsemiconductors, and other manufacturing sectors. Punch Industry operates globally, generating about two-thirds of revenue
overseas, with China alone accounting for half of revenue.
Most mass-produced metal and plastic products are made using molds and dies. They are used to make a wide range of
products, including components and products for automobiles, electrical appliances (household and industrial appliances),toys, daily necessities, and miscellaneous goods. Customers use the company’s mold and die components in various
applications, such as ejector pins that push products out of molds and punches and dies used in material processing (punches
apply pressure and dies receive pressure).
Founded in 1975 by Yuji Morikubo, the company in 1982 was first in the world to succeed in mass-producing high-speed steel
ejector pins for plastic molds (its heat treatment technology ensured their hardness and toughness). Subsequently, Punch
Industry grew its market share by achieving higher accuracy and durability than conventional products. In 1989, it moved into
the production of press die components. In 1990, the company was one of the first Japanese manufacturers to make inroads
into the Chinese market, in pursuit of lower labor costs. The ensuing collapse of Japan’s bubble economy and the 2008
global financial crisis pushed down the production value of molds and dies in Japan, but the company continued to grow by
expanding its manufacturing and sales operations in China and elsewhere in Asia, Europe, and the US.
Revenue for FY03/23 was JPY42.8bn and operating profit was JPY2.4bn. By industry, the automotive sector accounted for
42.2% of revenue, electronic devices and semiconductors accounted for 18.4%, consumer electronics and precisionequipment accounted for 10.1%, and other industries (e.g., industrial machinery, telecommunications, healthcare, food,trading companies) accounted for 29.3%. Products break down into standard products (roughly 40% of revenue) and specialorder products (roughly 60%). The company has an abundant lineup of highly versatile standard products needed for various
molds and dies, mainly plastic molds and metal press dies, which it sells through catalogs.
The company focuses in particular on special-order products. Since molds and dies are made for different end products, they
all have unique shapes and sizes. Many are unable to be completed using standard products alone (in many cases theirshapes, size, dimensions, materials, and other specifications are unsuited to standard products). If a customer wants tocustomize a standard product but the required processing is technically out of reach or manufacturing costs cut into its
profitability, it will special-order the product from the company. In manufacturing special-order products according tocustomer design drawings, the company’s skilled technicians have to perform minute processing in increments of 0.01mm
or 0.001mm using machinery and equipment.
In the company’s manufacturing, technicians with years of technical expertise carry out production in-house. The company
also outsources production through a network of about 300 partner plants that it has built up. About 70% of employees workin the manufacturing division. Under the production framework the company has put in place, they draw on more than
2,000 machine tools and measuring and inspection equipment to carry out all stages of production, from pre- to postprocess. Technicians are divided according to process. Because technicians are in charge of processing using specificmachinery and equipment over a long period of time, each acquires highly specialized processing skills, such as manualpolishing and circular processing.
In terms of sales, the company receives about 70% of orders for standard products online (the rest are via in-person sales
calls, email, fax, etc.). For special-order products, sales staff personally visit customers to take orders. They listen carefully tocustomers’ technical issues and formulate proposals to meet their needs, including the most appropriate product,
customization (i.e., hardness, materials used, processing method, surface treatment, etc.), total cost, and delivery timeframe.
For this reason, sales staff also receive training to learn about actual processing and to gain knowledge about industries andtechnologies. Technicians also go along on sales calls. This sales approach builds trust with customers and leads to further
orders for special-order products. In Japan, the company does business with about 6,000 companies through a network of 11
sales offices nationwide. It was also one of the first Japanese companies in its field to expand abroad, establishing a
manufacturing subsidiary in China in 1990, and now does business with about 8,000 customers there.
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Shipment volume is linked to how many molds and dies are used by customers across a wide range of manufacturing sectors,
including automobiles, electrical appliances (household and industrial appliances), toys, daily necessities, and miscellaneous
goods. Revenue is shipment volume multiplied by product unit price. Unit prices of standard products range from JPY100 toseveral JPY’000, and range from JPY1,000 to JPY0’000 for special-order products. Order quantities can range from a single
item to several hundred items or more. Customers renew orders when a component wears out. The company derives about athird of its revenue from plastic mold components, slightly over half from press die components, and the remainder fromfactory automation products. Cost of revenue consists of the cost of materials used in manufacturing (around 10%), personnel
costs (around 30%), and the cost of procuring external products (around 40%). On the profit front, special-order products
carry a relatively high gross profit margin, while margins for standard products are low. However, since the company receives
most standard product orders online and operating expenses are low, the difference in operating margins between standard
and special-order products turns out to be minimal.
Company data estimates that Punch Industry has about a 6% share of the global mold and die components market, ranking
second. The same data also estimates the company has the second-largest market share in Japan, at about 18%, and the top
market share in China, at about 10%. Misumi Group (TSE Prime: 9962) holds the top global market share for mold and die
components, but essentially only sells standard products. Punch Industry says it has the top market share for special-orderproducts in both Japan and China, and that there are no other large-scale players in this area. (In some cases, mold and die
manufacturers and users of their products make products by customizing existing standard products. Since there are no
aggregate statistics for special-order products alone, it is impossible to accurately estimate market share.)
The company estimates the global market for mold and die components at around JPY596.0bn. Production value of press
dies in Japan declined from JPY576.2bn in 2004 to JPY464.0bn in 2020 (CAGR of -1.3%). Production value of plastic molds
also decreased over the same period, from JPY619.3bn to JPY382.8bn in 2020 (-3.0%). The downtrend in domestic
production value reflects factors such as shift offshore of manufacturing bases by manufacturers, the growing trend towardeliminating of plastics, economic deterioration, and a drop-off in production due to the pandemic. Meanwhile, global moldand die production value rose from USD91.6bn in 2008 to USD125.4bn in 2016 (CAGR of 4.0%). Growth was most marked
in China and other Asian countries, to which companies transferred production in pursuit of cheaper labor. The company has
mitigated the impact of the shrinking mold and die components market in Japan by expanding revenues abroad, mainly in
China.

Earnings trends
In FY03/23, the company recorded revenue of JPY42.8bn (+8.7% YoY), operating profit of JPY2.4bn (-19.9% YoY), recurring
profit of JPY2.4bn (-20.4% YoY), and net income attributable to owners of the parent of JPY1.4bn (-31.9% YoY). Revenue wasup YoY across all regions, reflecting a rebound from the COVID-19 pandemic.
The company revised down its FY03/24 earnings forecast at the time of the Q1 results announcement. The revised forecast
calls for revenue of JPY37.6bn (-12.1% YoY), operating profit of JPY750mn (-69.2% YoY), recurring profit of JPY1.0bn (-58.2%
YoY), and net income attributable to owners of the parent of JPY100mn (-92.8% YoY). Amid global inventory adjustments anda downtrend in the market, the company expects soaring prices of raw materials and resources, parts shortages, risingprocurement costs, and higher utilities expenses will continue to affect earnings.
In July 2023, the company announced updates to its medium-term business plan, Value Creation 2024, and its plan tostreamline operations by soliciting voluntary retirement and dissolving a consolidated subsidiary. It also announced that its
executives would return a portion of their remuneration. Due to global factors such as rising geopolitical risks, soaring pricesof raw materials and other resources, and parts supply shortages, the company's progress in executing its medium-term plan,
Value Creation 2024, was significantly behind. In addition to making up for the delays, the company has decided it needs to
update the plan, including adding new growth strategies for the future. Among the key initiatives outlined in the Value
Creation 2024 Revival plan is the realignment of domestic businesses. The company decided to consolidate production andsales bases, and solicit voluntary retirement and dissolve a consolidated subsidiary to streamline operations. It is still
reviewing its KPI targets for the new medium-term plan as the number of voluntary retirees following the consolidation of
production and sales bases is not finalized yet. It intends to disclose the information as soon as it becomes available.

Strengths and weaknesses
Shared Research believes the company has the following three strengths.
The company has established the top spot in the global special-order product market through its precision processing
technology and production framework, supported by a corps of highly skilled technicians operating a large pool ofmachinery and equipment, and a network of sales offices from which staff personally visit customers.
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Through a training framework that includes the in-house training facility Punch Academy, the company can pass on skills
to younger technicians, give hands-on training to sales staff on customer molds and dies and its own mold and die
components, and provide ongoing education to other employees.
Having been first off the mark to enter the Chinese market and having subsequently expanded its manufacturing andsales network there, the company now boasts the number one share of the growing Chinese market, serving 8,000
customers.
Shared Research believes the company has the following three weaknesses.
Training up skilled technicians takes a significant amount of time, and the company’s tardiness in rolling out state-of-the-art
machine tools, robotics, and automated machinery has slowed the growth of the business.
The company was slow to expand into online sales of standard products, thus ceding market share to early-birdcompetitors.
The company lags significantly behind competitors in the factory automation business, which it has positioned as a growtharea in the current medium-term business plan.

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Key financial data
Income statement

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

FY03/23

FY03/24(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Consolidated
forecast

Revenue

36,75636,64941,02539,35929,43734,39340,93635,34932,46242,80037,600

YoY

17.6%

16.8%

6.9%

-0.3%

11.9%

-0.2%

-13.6%

-8.2%

21.2%

8.7%

-12.1%

Gross profit

7,661

9,362

10,178

10,192

11,658

11,472

9,187

9,087

11,445

11,631

YoY

24.9%

22.2%

8.7%

0.1%

14.4%

-1.6%

-19.9%

-1.1%

26.0%

1.6%

Gross profit margin

26.0%

27.2%

27.7%

27.8%

28.4%

28.0%

26.0%

28.0%

29.1%

27.2%

Operating profit

1,162

1,724

1,987

1,991

2,844

2,579

836

1,613

3,042

2,437

750

YoY

64.1%

48.4%

15.2%

0.2%

42.8%

-9.3%

-67.6%

93.0%

88.5%

-19.9%-69.2%

Operating profit margin

3.9%

5.0%

5.4%

5.4%

6.9%

6.3%

2.4%

5.0%

7.7%

5.7%

2.0%

Recurring profit

1,047

1,617

1,667

1,874

2,732

2,547

713

1,677

3,008

2,394

1,000

YoY

27.3%

54.4%

3.1%

12.5%

45.7%

-6.8%

-72.0%

135.1%

79.4%-20.4%-58.2%

Recurring profit margin

3.6%

4.7%

4.5%

5.1%

6.7%

6.2%

2.0%

5.2%

7.6%

5.6%

2.7%

Net income

721

1,188

1,249

1,376

1,789

960

-3,486

478

2,041

1,390

100

238.0%

64.9%

5.1%

10.1%

30.0%

-46.3%--

327.2%-31.9%-92.8%

2.4%

3.5%

3.4%

3.8%

4.4%

2.3%

-

1.5%

5.2%

3.2%

0.3%

17,922

22,122

22,122

22,122

22,122

22,122

22,122

22,122

22,332

24,622

-

-

-

100

200

380

313

303

276

191

49.8

65.5

56.5

62.5

81.6

43.9

-160.0

21.9

93.4

60.6

-

-

-

62.4

81.4

43.7

-

21.8

84.4

60.2

Dividend per share (JPY)

10.0

12.5

12.5

13.0

16.8

16.8

2.0

2.0

13.0

19.5

Book value per share (JPY)

522

642

632

646

737

721

537

568

737

778

YoY
Net marginPer-share data
Shares issued at year-end(000shares)Treasury shares ('000)
EPS (JPY)
EPS (fully diluted; JPY)

4.1
20.3

Balance sheet(JPYmn)
Cash and cash equivalents

1,528

3,303

3,236

3,280

3,771

3,580

3,390

4,092

4,816

5,213

Total current assets

14,66819,37017,87619,15020,842

19,55917,792

18,061

21,28022,078

Tangible fixed assets

7,612

8,169

7,697

8,669

9,939

9,972

7,135

6,195

7,013

7,315

Intangible assets

1,799

1,790

1,322

1,243

1,158

1,002

345

175

178

695

392

296

443

390

621

622

305

272

304

368

Total fixed assets

9,803

10,254

9,462

10,302

11,718

11,596

7,784

6,642

7,494

8,378

Total assets

24,471

29,62427,33829,45232,561

Investments and other assets

31,15525,577

24,703

28,77430,456

Short-term debt

5,304

4,849

3,551

4,346

3,730

4,326

3,149

3,325

2,486

2,039

Total current liabilities

11,372

12,312

10,451

11,725

12,65011,531

9,280

9,455

10,001

9,181

Long-term debt

2,440

2,307

1,794

2,461

2,152

2,342

2,927

1,252

908

676

Total fixed liabilities

3,736

3,106

2,887

3,551

3,736

3,890

4,549

2,811

2,466

2,223

Total liabilities

15,10815,41813,33815,276

16,386

15,421

13,82912,266

12,467

11,403

Shareholders' equity

9,354

14,20013,988

14,167

16,14915,687

11,704

12,39916,26519,008

Total net assets

9,363

14,205

13,99914,176

16,175

15,734

11,747

12,436

16,307

19,053

Total interest-bearing debt

7,744

7,156

5,345

6,807

5,882

6,668

6,076

4,576

3,394

2,715

Cash flows from operating activities

1,195

1,805

3,187

1,785

3,394

3,185

2,490

2,943

2,941

2,560

Cash flows from investing activities-1,252-1,180-1,159-2,770-2,336-3,253-1,789-670-1,100-1,547

Cash flows from financing activities

-370

1,014

-1,902

1,200

-739

74

-772

-1,685-1,601

-756

9.6%

10.1%

8.9%

9.8%

11.8%

6.0%

-25.5%

4.0%

14.2%

7.9%

Cash flow statement(JPYmn)

Financial ratios
ROE

Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding methods.
Net income is net income attributable to owners of the parent.

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Results by segment
By region

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

FY03/23
Cons.

Revenue

29,43734,39336,75636,64941,02540,93635,34932,46239,35942,800-13.6%

YoY

17.6%

16.8%

6.9%

-0.3%

11.9%

-0.2%

-8.2%

21.2%

8.7%

Japan

14,387

15,211

15,637

15,904

17,154

16,777

14,566

12,33814,02014,104

YoY

5.2%

5.7%

2.8%

1.7%

7.9%

-2.2%

-13.2%-15.3%

13.6%

0.6%

% of revenue

48.9%

44.2%

42.5%

43.4%

41.8%

41.0%

41.2%

38.0%

35.6%

33.0%

China

12,98916,20817,807

17,428

20,10319,89916,837

16,88920,95623,451

YoY

29.9%

24.8%

9.9%

-2.1%

15.3%

-1.0%

-15.4%

0.3%

24.1%

11.9%

% of revenue

44.1%

47.1%

48.4%

47.6%

49.0%

48.6%

47.6%

52.0%

53.2%

54.8%

Other

2,062

2,973

3,312

3,317

3,769

4,259

3,946

3,235

4,382

5,244

YoY

51.3%

44.2%

11.4%

0.2%

13.6%

13.0%

-7.3%

-18.0%

35.5%

19.7%

% of revenue

7.0%

8.6%

9.0%

9.1%

9.2%

10.4%

11.2%

10.0%

11.1%

12.3%

Southeast Asia

1,535

1,376

1,740

1,966

-

-10.4%

26.5%

13.0%

YoY
% of revenue

4.3%

4.2%

4.4%

4.6%

Europe, the US, and otherregions

2,410

1,858

2,641

3,277
24.1%

YoY
% of revenue
By industry

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19--22.9%

42.1%

6.8%

5.7%

6.7%

7.7%

FY03/20

FY03/21

FY03/22

FY03/23(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Revenue

29,43734,39336,75636,64941,02540,93635,34932,46239,35942,800-13.6%

YoY

17.6%

16.8%

6.9%

-0.3%

11.9%

-0.2%

-8.2%

21.2%

8.7%

Automotive

13,21015,54017,06016,78018,37017,877

15,37013,682

16,442

18,082

YoY

27.0%

17.6%

9.8%

-1.6%

9.5%

-2.7%

-14.0%-11.0%

20.2%

10.0%
42.2%

% of revenue

44.9%

45.2%

46.4%

45.8%

44.8%

43.7%

43.5%

42.1%

41.8%

Electronic devices &semiconductors

5,190

6,540

6,550

7,000

7,880

7,558

6,113

6,315

8,043

7,866

YoY

-0.8%

26.0%

0.2%

6.9%

12.6%

-4.1%

-19.1%

3.3%

27.4%

-2.2%

% of revenue

17.6%

19.0%

17.8%

19.1%

19.2%

18.5%

17.3%

19.5%

20.4%

18.4%

Consumer electronics &precision equipment

3,520

4,510

4,800

4,480

4,780

4,837

4,298

3,888

4,192

4,312

YoY

6.7%

28.1%

6.4%

-6.7%

6.7%

1.2%

-11.1%

-9.5%

7.8%

2.9%

% of revenue

12.0%

13.1%

13.1%

12.2%

11.7%

11.8%

12.2%

12.0%

10.7%

10.1%

Other

7,510

7,800

8,300

8,400

9,940

10,662

9,566

8,574

10,67912,538

YoY

22.9%

3.9%

6.4%

1.2%

18.3%

7.3%

-10.3%-10.4%

24.6%

17.4%

% of revenue

25.5%

22.7%

22.6%

22.9%

24.2%

26.0%

27.1%

26.4%

27.1%

29.3%

(FA revenue)
YoY% of revenue

2,740

2,483

-

-9.4%

7.0%

5.8%

Source: Shared Research based on company data

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Recent updates
Earninings forecast revision2023-08-09

Punch Industry Co., Ltd. revised its 1H and full-year FY03/24 forecasts.

Revised 1H FY03/24 forecast
Revenue: JPY19.3bn (previous forecast: JPY20.3bn)
Operating profit: JPY330mn (JPY810mn)
Recurring profit: JPY620mn (JPY800mn)
Net income attributable to owners of the parent: JPY120mn (unchanged)

Revised full-year FY03/24 forecast
Revenue: JPY37.6bn (previous forecast: JPY42.0bn)
Operating profit: JPY750mn (JPY2.2bn)
Recurring profit: JPY1.0bn (JPY2.1bn)
Net income attributable to owners of the parent: JPY100mn (JPY800mn)

Reason for revision
In Q1 FY03/24, revenue declined YoY in Japan and China. Amid global inventory adjustments and a downtrend in themarket, soaring prices of raw materials and resources, parts shortages, rising procurement costs, and higher utilities
expenses continued to affect earnings. In China, while service demand recovered following the lifting of the zero-COVID
policy, sluggish demand for durable goods such as automobiles and smartphones and a deterioration in the real estatemarket slowed the economic recovery. As a result, in China, revenue from all main sectors (automotive, electronic devices
and semiconductors, consumer electronics and precision equipment) dropped YoY.
Amid the increasingly harsh operating environment, Q2 revenue has not recovered in Japan and China. The company
reported sluggish orders for mold and die components for new automobiles from the automotive sector and slow demandfor products for smartphones in the electronic devices and semiconductors industry. The company initially expected theeconomy to recover from Q3 in China. As such, it decided to make a significant downward revision to its revenue target. In
addition, the company is seeing a greater-than-expected impact of rising procurement costs. It will work to improve
profitability by revising selling prices from Q3. However, the company expects this move will not fully offset the impact of a
profit decline resulting from lower revenue and increased procurement costs. Accordingly, the company revised its 1H andfull-year FY03/24 forecasts.
Under its medium-term business plan, Value Creation 2024 Revival (out July 5, 2023), the company aims to achievesustainable growth in profit by focusing on the high-value-added special-order product business. Among the key initiatives
outlined in the Value Creation 2024 Revival plan is the realignment of domestic businesses. The company is working toconsolidate production and sales bases, and solicit voluntary retirement and dissolve a consolidated subsidiary to streamline
operations. It intends to swiftly rebuild the business structure to improve its earnings. Expenses for special retirement
allowances and outplacement services in line with management optimization have not been factored into the revised
forecasts. The number of voluntary retirees following the consolidation of production and sales bases is not finalized yet. The
company intends to disclose the information as soon as it becomes available.

Updates to medium-term business plan, voluntary retirement
program, dissolution of consolidated subsidiary2023-07-05

Punch Industry Co., Ltd. announced updates to its medium-term business plan, Value Creation 2024, and its plan tostreamline operations by soliciting voluntary retirement and dissolving a consolidated subsidiary. It also announced that its
executives would return a portion of their remuneration.

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Reasons for updating the medium-term plan and streamlining operations
The business environment has become increasingly harsh due to global factors such as rising geopolitical risks, soaring
prices of raw materials and other resources, and parts supply shortages. As a result, the company's progress in executing its
medium-term plan, Value Creation 2024, was significantly behind, and in addition to making up for the delays, the company
has decided it needs to update the plan, including adding new growth strategies for the future. In May 2023, the company
announced a change in listing from the TSE Prime Market to the Standard Market. It plans to concentrate management
resources on executing various initiatives set forth in the updated plan, Value Creation 2024 Revival.
Among the key initiatives outlined in the Value Creation 2024 Revival plan is the realignment of domestic businesses. The
company decided to consolidate production and sales bases, and solicit voluntary retirement and dissolve a consolidated
subsidiary to streamline operations.

Medium-term business plan Value Creation 2024 Revival
The company will work on structural reforms under the basic policy of aiming for sustainable growth in profit by focusing on
the high-value-added special-order product business.
In terms of production, the company plans to dissolve its consolidated subsidiary, Pintec Corporation, and reorganize its
group production system by transferring production functions of the Kitakami, Miyako, and Hyogo plants to the Vietnam
plant. In terms of sales, the company intends to establish a customer center to streamline the ordering process. It will also
solicit applicants for voluntary retirement in line with the alignment of production and sales bases.
Overseas, the company will continue to work on its growth strategy of acquiring new sales bases and distributors, expanding
sales of special-order factory automation products, and redirecting focus to the Indian market.
The company is still reviewing its earnings forecasts and KPI targets for FY03/24 (the second year of the medium-termplan) and FY03/25 (the final year) as the number of voluntary retirees following the consolidation of production and sales
bases is not finalized yet. It intends to disclose the information as soon as it becomes available.

Voluntary retirement program
Eligible employees: Employees of all departments
Expected number of applicants: Approximately 200
Application period: From August 7 to August 25, 2023
Retirement date: September 30, 2023
Special consideration: In addition to regular retirement allowances, special retirement allowances and outplacement services
will be offered.

Subsidiary to be dissolved (Pintec)
Trade name: Pintec Corporation
Business: Manufacturing and sales of mold and die components for flexible printed circuit boards and printed circuit boards,
and components for plastic molds
Major shareholder and shareholding ratio: Punch Industry (100%)
Operating results: Revenue of JPY633mn, operating loss of JPY24mn, and net loss attributable to owners of the parent of
JPY23mn in FY03/23
Retirees upon dissolution: All 73 employees to retire on September 30, 2023
Schedule for end of production and liquidation: Pintec will withdraw from domestic production after completing production
at end-September 2023. The subsidiary will hold an extraordinary meeting of shareholders to resolve its dissolution.
Liquidation is expected to be completed by end-FY2024.

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Return of executive remuneration (details and duration)
President and CEO: 50% of fixed monthly remuneration (12 months), 100% of performance-based remuneration
Director and senior executive officer: 30% of fixed monthly remuneration (12 months), 100% of performance-based
remuneration
Executive officer: 100% of performance-based remuneration

Outlook
The company is examining the impact of the voluntary retirement program and the dissolution of the consolidated subsidiaryon its consolidated earnings for FY03/24, and will disclose the information when it is confirmed. It also plans to announce
KPI targets for the new medium-term business plan, Value Creation 2024 Revival, once expenses associated with special
retirement allowances and outplacement support are determined.

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Trends and outlook
Quarterly trends and results
Earnings (cumulative)

FY03/22

FY03/23

FY03/24(JPYmn)

Q1

Q1-Q2

Q1-Q3

Q1-Q4

Q1

Q1-Q2

Q1-Q3

Q1-Q4

Q1

Revenue

9,279

19,52429,37339,35910,234

21,66632,69442,800

9,442

YoY

29.4%

26.7%

24.2%

21.2%

10.3%

11.0%

11.3%

8.7%

-7.7%

9,028

Gross profit

2,757

5,864

8,759

11,445

11,631

2,416

YoY

48.7%

46.6%

35.8%

26.0%

4.9%

3.1%

3.1%

1.6%

-16.4%

Gross profit margin

29.7%

30.0%

29.8%

29.1%

28.3%

27.9%

27.6%

27.2%

25.6%

SG&A expenses

1,960

4,096

6,188

8,403

2,185

4,512

6,945

9,194

2,317

YoY

7.2%

11.1%

12.1%

12.4%

11.5%

10.2%

12.2%

9.4%

6.0%

SG&A ratio

21.1%

21.0%

21.1%

21.4%

21.4%

20.8%

21.2%

21.5%

24.5%

Operating profit

797

1,769

2,571

3,042

706

1,537

2,083

2,437

98

-

464.7%

175.5%

88.5%-11.4%-13.1%-19.0%-19.9%-86.1%

YoY

8.8%

7.7%

6.9%

6,049

Operating profit margin

8.6%

Recurring profit

762

1,736

2,544

3,008

698

1,525

1,983

2,394

338

-

365.7%

153.0%

79.4%

-8.3%

-12.2%-22.0%-20.4%-51.6%

YoY

9.1%

2,891

7.1%

6.4%

5.7%

Recurring profit margin

8.2%

8.9%

8.7%

7.6%

6.8%

7.0%

6.1%

5.6%

3.6%

526

1,259

1,778

2,041

428

906

1,094

1,390

119

-

-

-

327.2%-18.7%-28.0%-38.5%-31.9%-72.2%

5.7%

6.4%

6.1%

5.2%

4.2%

4.2%

3.3%

3.2%

1.3%

Net margin
Earnings (quarterly)(JPYmn)FY03/22

FY03/23
Q3

Q1

Q2

Q4

Q1

Q2

Q3

Q4

9,279

10,245

9,849

9,986

10,234

11,432

11,02910,105

9,442

YoY

29.4%

24.3%

19.4%

13.4%

10.3%

11.6%

12.0%

1.2%

-7.7%

Q1

Gross profit

2,757

3,107

2,895

2,686

2,891

3,158

2,979

2,603

2,416

YoY

48.7%

44.8%

18.0%

1.9%

4.9%

1.6%

2.9%

-3.1%

-16.4%

Gross profit margin

29.7%

30.3%

29.4%

26.9%

28.3%

27.6%

27.0%

25.8%

25.6%

SG&A expenses

1,960

2,135

2,093

2,215

2,185

2,326

2,433

2,250

2,317

YoY

7.2%

15.0%

14.2%

13.3%

11.5%

8.9%

16.3%

1.6%

6.0%

SG&A ratio

21.1%

20.8%

21.2%

22.2%

21.4%

20.3%

22.1%

22.3%

24.5%

Operating profit

797

972

802

471

706

831

546

353

98

-

237.2%

29.4%-30.7%-11.4%-14.4%-31.9%-25.0%-86.1%

Operating profit margin

8.6%

9.5%

8.1%

4.7%

6.9%

7.3%

5.0%

3.5%

1.0%

Recurring profit

762

974

808

464

698

827

459

411

338

-

165.7%

27.7%-30.9%-8.3%-15.2%-43.2%-11.5%-51.6%

Recurring profit margin

8.2%

9.5%

8.2%

4.6%

6.8%

7.2%

4.2%

4.1%

3.6%

Net income

526

732

519

262

428

478

188

296

119

-

-

12.0%

-53.0%-18.7%-34.7%-63.8%

12.8%-72.2%

5.7%

7.1%

5.3%

2.6%

4.2%

4.2%

1.7%

2.9%

1.3%

YoY

YoY
Net margin

Q1-Q4

% of
forecast
25.1%

FY
forecast
37,600-12.1%

13.1%

750-69.2%
2.0%

33.8%

1,000
-58.2%
2.7%

119.0%

100-92.8%
0.3%

FY03/24

RevenueYoY

FY03/24
Q1-Q3

1.0%

Net income
YoY

Q1-Q2

Q2

Q3

Q4

Source: Shared Research based on company data

Q1 FY03/24 results
Summary
Revenue: JPY9.4bn (-7.7% YoY)
Operating profit: JPY98mn (-86.1% YoY)
Recurring profit: JPY338mn (-51.6% YoY)
Net income attributable to owners of the parent: JPY119mn (-72.2% YoY)
Revenue was JPY9.4bn (-7.7% YoY). Amid global inventory adjustments and a downtrend in the market, soaring prices ofraw materials and resources, parts shortages, rising procurement costs, and higher utilities expenses continued to affectearnings. As a result, revenue declined YoY in Japan and China. In China, while service demand recovered following thelifting of the zero-COVID policy, sluggish demand for durable goods such as automobiles and smartphones and adeterioration in the real estate market slowed the economic recovery. Meanwhile, earnings improved YoY in Southeast
Asia, Europe, the US, and other regions.
Gross profit was down 16.4% YoY to JPY2.4bn, with the gross profit margin down 2.7pp to 25.6%. Gross profit decreased
due to lower revenue in China and Japan caused by market deterioration, lower plant utilization, and rising energy costs.
SG&A expenses were up 6.0% YoY to JPY2.3bn. Travel and transportation expenses and promotional costs increased dueto the normalization of sales activities as the pandemic subsided. The company booked about JPY12mn in goodwill
amortization following the acquisition of ASCe.
Factors affecting operating profit: Lower revenue depressed profit by JPY223mn YoY (due mainly to deterioration in
Chinese and Japanese markets); higher cost ratio pushed down profit by JPY251mn YoY (due mainly to lower utilization
rates in line with a revenue decline and rising energy costs); and higher SG&A expenses reduced profit by JPY132mn

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YoY (increases in sales activity expenses [which were curbed a year ago] and goodwill amortization expenses associatedwith the acquisition of ASCe)

Progress versus full-year company forecast
The progress rate versus the full-year FY03/24 forecast was 25.1% for revenue, 13.1% for operating profit, 33.8% forrecurring profit, and 119.0% for net income attributable to owners of the parent.

Business environment
The company initially expected a recovery in consumer spending following the easing of COVID-related restrictions.
However, the operating environment remained harsh due to increased geopolitical risks, concerns over the economic
downturn, and forex fluctuations caused by rapid yen depreciation. The manufacturing industry saw a significant rise in raw
material and resource prices, despite improvements in semiconductor and raw material shortages. The outlook remained
uncertain due to the absence of stay-at-home demand and global inventory adjustments.

Revenue by region, industry
Revenue was JPY3.3bn in Japan (-6.6% YoY), JPY4.8bn in China (-13.7% YoY), and JPY1.4bn in other regions (+16.8% YoY). In
Japan, the company reported sluggish earnings from automotive, electronic devices and semiconductors, and various otherindustries. In China, worse-than-expected conditions in the automotive, real estate, and home appliance markets led to a dropin orders. The company initially forecast growth in demand from 2H due to an economic recovery. However, it now projects
that demand will not recover before the end of the fiscal year. Accordingly, the company lowered its earnings forecast. In
Southeast Asia, earnings from Vietnam, the Philippines, and Thailand drove revenue growth. In Vietnam, revenue fromproducts for electronic devices for printers and wire harnesses for automobiles was strong. In Europe, revenue from products
for medical applications remained solid. In the US, the company's sales efforts resulted in increased orders for products forelectronic devices and semiconductors.
By industry, the automotive sector accounted for JPY4.0bn of revenue (-8.8% YoY), electronic devices and semiconductors
accounted for JPY1.8bn (-6.0% YoY), consumer electronics and precision equipment accounted for JPY935mn (-11.4% YoY),
and other sectors accounted for JPY2.7bn (-6.0% YoY). Revenue from the factory automation business was JPY637mn (+11.4%
YoY). Orders from the automotive sector for mold and die components for new automobiles were sluggish. Demand forsmartphone products slowed, resulting in sluggish earnings from the electronic devices and semiconductors market.
Earnings from the food and medical industries were strong. Revenue increased in the factory automation business, with andwithout the contribution of newly acquired ASCe.
In 2H, the company plans to effectively increase selling prices of some standard products by lowering discount rates set
for each customer. According to the company, competitors are also raising prices, so customers are more likely to accept
these changes.

OthersCapex of JPY267mn (-JPY4mn YoY) slightly fell short of the plan as the company curtailed spending due to sluggish earnings.
Depreciation was JPY283mn (-JPY6mn YoY). The company recorded a foreign exchange gain of JPY192mn under nonoperating income, and an impairment loss of JPY118mn under extraordinary losses as initially planned.
Joint research agreement with JAXA
In August 2023, the company announced that it had entered into a joint research agreement with the Japan Aerospace
Exploration Agency (JAXA). Under the agreement, the two parties will investigate the manufacturing technology that uses thecompany's proprietary bonding technology, P-Bas , for applications in a part of rocket engines and assess its feasibility.

🄬

The company proposed to JAXA the use of its proprietary bonding technology, P-Bas, for processing rocket engine parts withcomplex shapes that cannot be machined (cut) using conventional methods from technical and cost perspectives. In the joint
research, the two parties will work to learn bonding conditions for heat-resistant alloys and explore ways to minimize
distortion during the bonding process.
The company does not expect these initiatives to contribute to revenue and profit in the short term. However, it believes
that working on aerospace-related projects (which require ultra-fine processing and precision measurement) will help
improve its technological capabilities.

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Full-year company forecast
FY03/22

FY03/23

FY03/24(JPYmn)1H results

2H results

FY results

1H results

2H results

FY results

1H forecast

2H forecast

Revenue

19,524

19,83539,35921,666

21,13442,80019,25018,35037,600

YoY

26.7%

16.3%

21.2%

11.0%

6.5%

8.7%

-11.2%-13.2%-12.1%

Cost of revenue

13,66014,25427,914

15,617

15,552

31,169

-

-

-

YoY

19.7%

19.2%

19.4%

14.3%

9.1%

11.7%

-

-

-

Gross profit

5,864

5,581

11,445

6,049

5,582

11,631

-

-

-

YoY

46.6%

9.7%

26.0%

3.1%

0.0%

1.6%

-

-

-

Gross profit margin

30.0%

28.1%

29.1%

27.9%

26.4%

27.2%

-

-

-

SG&A expenses

4,096

4,308

8,403

4,512

4,683

9,194

-

-

-

YoY

11.1%

13.7%

12.4%

10.2%

8.7%

9.4%

-

-

-

SG&A ratio

21.0%

21.7%

21.4%

20.8%

22.2%

21.5%

-

-

-

Operating profit

1,769

1,273

3,042

1,537

899

2,437

330

420

750

464.7%

-2.1%

88.5%

-69.2%YoY

FY forecast-13.1%-29.4%-19.9%-78.5%-53.3%

Operating profit margin

9.1%

6.4%

7.7%

7.1%

4.3%

5.7%

1.7%

2.3%

Recurring profit

1,736

1,272

3,008

1,525

869

2,394

620

380

1,000

365.7%

-2.5%

79.4%

-12.2%-31.7%-20.4%-59.3%-56.3%-58.2%

Recurring profit margin

8.9%

6.4%

7.6%

7.0%

4.1%

5.6%

3.2%

2.1%

2.7%

Net income

1,259

782

2,041

906

484

1,390

120

-20

100

-

-23.5%

327.2%-28.0%-38.1%-31.9%-86.8%--92.8%

6.4%

3.9%

5.2%

4.2%

2.3%

3.2%

0.6%

-

0.3%

YoY

YoY
Net margin

2.0%

Source: Shared Research based on company data

Revised earnings forecast (August 2023)
Revised full-year FY03/24 forecast
Revenue: JPY37.6bn (previous forecast: JPY42.0bn)
Operating profit: JPY750mn (JPY2.2bn)
Recurring profit: JPY1.0bn (JPY2.1bn)
Net income attributable to owners of the parent: JPY100mn (JPY800mn)

Reason for revision
In Q1 FY03/24, revenue declined YoY in Japan and China. Amid global inventory adjustments and a downtrend in themarket, soaring prices of raw materials and resources, parts shortages, rising procurement costs, and higher utilities
expenses continued to affect earnings. In China, while service demand recovered following the lifting of the zero-COVID
policy, sluggish demand for durable goods such as automobiles and smartphones and a deterioration in the real estatemarket slowed the economic recovery. As a result, in China, revenue from all main sectors (automotive, electronic devices
and semiconductors, consumer electronics and precision equipment) dropped YoY.
Amid the increasingly harsh operating environment, Q2 revenue has not recovered in Japan and China. The company
reported sluggish orders for mold and die components for new automobiles from the automotive sector and slow demandfor products for smartphones in the electronic devices and semiconductors industry. The company initially expected theeconomy to recover from Q3 in China. As such, it decided to make a significant downward revision to its revenue target. In
addition, the company is seeing a greater-than-expected impact of rising procurement costs. It will work to improve
profitability by revising selling prices from Q3. However, the company expects this move will not fully offset the impact of a
profit decline resulting from lower revenue and increased procurement costs. Accordingly, the company revised its 1H andfull-year FY03/24 forecasts.
Under its medium-term business plan, Value Creation 2024 Revival (out July 5, 2023), the company aims to achievesustainable growth in profit by focusing on the high-value-added special-order product business. Among the key initiatives
outlined in the Value Creation 2024 Revival plan is the realignment of domestic businesses. The company is working toconsolidate production and sales bases, and solicit voluntary retirement and dissolve a consolidated subsidiary to streamline
operations. It intends to swiftly rebuild the business structure to improve its earnings. Expenses for special retirement
allowances and outplacement services in line with management optimization have not been factored into the revised
forecasts. The number of voluntary retirees following the consolidation of production and sales bases is not finalized yet. The
company intends to disclose the information as soon as it becomes available.
The company maintained its annual dividend forecast of JPY20.3 per share (DOE of about 3%), based on its dividend
policy established in January 2023 (payout ratio of 30% or higher, DOE of 3% or higher). Shared Research views thisdecision as evidence of the company's commitment to prioritizing shareholder returns, despite a temporary deteriorationin earnings.

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Assumptions made when preparing the forecast
The company assumes the forex rates of JPY19.00/CNY and JPY136.00/USD. It forecasts capex of JPY1.5bn and depreciationof JPY1.2bn. The company projects that revenue from China (which, among other factors, caused the downward revision of
earnings forecast) will not recover and remain sluggish from Q2.
The company expects to determine expenses related to streamlining operations (voluntary retirement program, etc.) by
the time of its 1H earnings announcement.

Initial full-year forecast (out May 2023)
The company forecasts revenue of JPY42.0bn (-1.9% YoY) in FY03/24, operating profit of JPY2.2bn (-11.8% YoY), recurring
profit of JPY2.1bn (-12.3% YoY), and net income attributable to owners of the parent of JPY800mn (-42.5% YoY). The company
plans to pay a full-year dividend of JPY20.3 per share (+JPY0.8 YoY; payout ratio of 62.0%, DOE of 3.0%). It projects ROE of
4.2% (-3.7pp YoY) and ROIC of 6.9% (-1.2pp YoY).
Regarding SG&A expenses, the company expects expenses for the acquisition of ASCe incurred in FY03/23 to falloff. It
plans to implement regular pay raises or revise salaries (raise the base pay). In extraordinary gains/losses, the company
expects to record impairment losses for the Japan business.
The projected payout ratio is higher YoY, as the company set the DOE target at 3.0% (calculated by dividing total
dividends paid by average shareholders' equity for the current and previous fiscal year). The company says it will
repurchase own shares flexibly, taking into consideration its financial position and the market environment, including
share prices.

Outlook
Punch Industry recognizes the mold and die components market is trending downward due to heightened global
geopolitical risks, soaring prices for raw materials and resources, component shortages, and other factors. The company does
not expect an upturn in the economy anytime soon. It expects the market to be weak in 1H especially, and gradually recoverin 2H (in China in particular). It has seen a significant delay in the progress of its medium-term business plan Value Creation
2024 due to an ongoing rise in procurement costs and utilities expenses. It also expects to record an impairment loss
through its Japan business.

Revenue by region, industry
The company forecasts revenue of JPY14.0bn (-0.7% YoY) in Japan, JPY22.5bn (-4.1% YoY) in China, and JPY5.5bn (+4.9% YoY)
in other regions. It expects revenue in other regions to be driven by ongoing revenue growth in the food and medicalrelated sectors in Europe and the US.
By industry, the company projects revenue of JPY17.7bn (-2.1% YoY) for automotive, JPY7.7bn (-2.1% YoY) for electronic
devices and semiconductors, JPY4.1bn (-4.9% YoY) for consumer electronics and precision equipment, and JPY12.5bn (-0.3%
YoY) for other.

Updates to medium-term management plan
In addition to recovering from the aforementioned progress delay, the company recognizes the need to update its mediumterm business plan to include its new growth strategy. It says it will work to achieve a swift recovery in earnings by focusing its
management resources on updating its medium-term plan and implementing initiatives under the plan. The company
intends to promptly disclose its revised plan once it has been finalized.

Medium-term outlook
Value Creation 2024 Revival
In July 2023, Punch Industry announced updates to its medium-term business plan, Value Creation 2024, and its plan tostreamline operations by soliciting voluntary retirement and dissolving a consolidated subsidiary. It also announced that its
executives would return a portion of their remuneration.

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Reasons for updating the medium-term plan and streamlining operations
The business environment has become increasingly harsh due to global factors such as rising geopolitical risks, soaring
prices of raw materials and other resources, and parts supply shortages. As a result, the company's progress in executing its
medium-term plan, Value Creation 2024, was significantly behind, and in addition to making up for the delays, the company
has decided it needs to update the plan, including adding new growth strategies for the future. In May 2023, the company
announced a change in listing from the TSE Prime Market to the Standard Market. It plans to concentrate management
resources on executing various initiatives set forth in the updated plan, Value Creation 2024 Revival.
Among the key initiatives outlined in the Value Creation 2024 Revival plan is the realignment of domestic businesses. The
company decided to consolidate production and sales bases, and solicit voluntary retirement and dissolve a consolidated
subsidiary to streamline operations.

Medium-term business plan Value Creation 2024 Revival
The company will work on structural reforms under the basic policy of aiming for sustainable growth in profit by focusing on
the high-value-added special-order product business.
In terms of production, the company plans to dissolve its consolidated subsidiary, Pintec Corporation, and reorganize its
group production system by transferring production functions of the Kitakami, Miyako, and Hyogo plants to the Vietnam
plant. In terms of sales, the company intends to establish a customer center to streamline the ordering process. It will also
solicit applicants for voluntary retirement in line with the alignment of production and sales bases.
Overseas, the company will continue to work on its growth strategy of acquiring new sales bases and distributors, expanding
sales of special-order factory automation products, and redirecting focus to the Indian market.
The company is still reviewing its earnings forecasts and KPI targets for FY03/24 (the second year of the medium-termplan) and FY03/25 (the final year) as the number of voluntary retirees following the consolidation of production and sales
bases is not finalized yet. It intends to disclose the information as soon as it becomes available.

Key initiatives
In Japan, the company will implement the following measures under the theme of realignment.
1. Realign sales structure: Expand sales of special-order factory automation products; establish a customer center
2. Realign production structure: Consolidate group production bases and streamline in-house operations through factory
automation
3. Continue to strengthen R&D: Improve new P-Bas technology; enhance aerospace-related operations
In consolidating group production bases, Punch Industry is considering transferring part of standard product production
operations at domestic plants to the Vietnam plant, and moving print pin production operations handled by Pintec to the
Dalian plant. The company has recently ramped up production capacity at overseas plants (including the one in Vietnam).
It therefore expects to reduce costs by increasing utilization. Meanwhile, the company will focus on production of specialorder products at its domestic plants.
In establishing a customer center, the company aims to improve operational efficiency by centralizing customer service
operations across all branches. This initiative addresses the issue of the company's slow response from quotation to orderplacement.
Overseas, the company will implement the following measures under the theme of growth.
1. China: Strengthen factory automation operations; establish new sales agencies
2. Southeast Asia: Renew its focus on the Indian market; establish new sales bases
3. Europe, US, and other regions: Acquire new customers
The company sees the Indian market as a growth market. However, the mold and die manufacturing industry was
underdeveloped there (local manufacturers often imported complete sets of molds and dies from overseas, resulting inless demand for mold and die components). Now, with the number of local mold and die manufacturers growing, thecompany has a greater chance of developing the market. As such, it plans to launch a new project to consider full-fledged
market development.

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Outlook
The company is examining the impact of the voluntary retirement program and the dissolution of the consolidated subsidiaryon its consolidated earnings for FY03/24, and will disclose the information when it is confirmed. It also plans to announce
KPI targets for the new medium-term business plan, Value Creation 2024 Revival, once expenses associated with special
retirement allowances and outplacement support are determined.

Medium-term business plan Value Creation 2024 (FY03/23–
FY03/25)
The company announced its medium-term business plan, Value Creation 2024, in March 2022. The plan positions growing
demand for automation and labor saving as a new driver of growth. The plan set out three strategies: (1) responding to
growing demand for automation and labor saving at manufacturing sites with special-order products in the factory automation
area; (2) establishing a solid presence in the mold and die components business through the ongoing development of newtechnologies and services; and (3) enhancing corporate value by pursuing the SDGs and ESG solutions to social issues.

Priority initiatives
Expanding new and existing businesses
Strengthening the production framework
Strengthening R&D

Expanding sales of special-order products in the factory automation area, enhancing customer services in theordering framework, expanding the sales network outside Japan and China
Global procurement, ramping up the group production framework, boosting productivity through automation andlabor-saving technology
New P-Bas processing method, manufacture and sales of products other than mold and die components,
augmenting the aerospace businesses

Source: Shared Research based on company data

Expanding new and existing businesses
The company cites data from the New Energy and Industrial Technology Development Organization in projecting that the
robotics market in Japan will expand from JPY2.85tn in 2020 to JPY9.7tn by 2035. To capture this demand, it will expand
sales of special-order products in the factory automation area through its Japan and China businesses, including taking
advantage of business alliances. The company targets an increase in revenue from the factory automation business from
JPY2.7bn in FY03/22 to JPY5.0bn in FY03/25. It plans to expand the business in four steps: (1) precision components andprecision jigs and tools; (2) assembled precision components; (3) simplified, powered equipment; and (4) production line
equipment. The company says it has progressed up to step (2), and is selling the special-order products listed. Punch Industry
had planned to expand equipment sales through tie-ups and acquisitions, but the October 2022 consolidation of ASCe, adeveloper and manufacturer of automated machinery, has enabled the company to expand its sales targets to include
advanced equipment (such as those specified in steps [3] and [4]).
The company is working to enhance customer services in the ordering process, such as upgrading the current online
ordering system, Punch-Net, to improve customer convenience and reinforce the customer follow-up framework, aiming toelevate the proportion of online orders from 39% in FY03/22 to 48% in FY03/25. Another focus is 3D Measurement
Partners, a new service launched in January 2022 for measuring product shapes, processing and analyzing data, investigating
the causes of defects, and proposing improvement measures.
In terms of expanding the sales network outside Japan and China, the company will further reinforce the “five-pole” sales
framework set out in the previous medium-term plan. In Southeast Asia, the company will strengthen sales in the electronic
devices and semiconductors business and step up local sales efforts capitalizing on the Vietnam plant, targeting an increase
in revenue from the region from JPY1.7bn in FY03/22 to JPY2.6bn in FY03/25. In Europe, the US, and other regions, thecompany will strengthen sales of products for the US healthcare sector and reinforce relationships with distributors in
Europe, targeting an increase in revenue from these regions from JPY2.6bn in FY03/22 to JPY4.0bn in FY03/25.
Strengthening the production framework
In terms of global procurement, the company will capitalize on the production capacity of its own plants and partner plants
overseas and further upgrade the production lineup at the Vietnam plant, where it aims for sustainable growth. The company
plans to raise revenue from the Vietnam plant by 35% in FY03/25 versus FY03/22. In addition, the company’s procurement
department in Japan will step up its overseas procurement volume, aiming for a 35% increase in FY03/25 versus FY03/22.
In ramping up the group production framework, the company will invest in improving the production capacity, technology,
and quality of its overseas plants and boost production volume at its plants in Japan. The company earmarks a total of
JPY3.0bn by FY03/25 for investment in overseas plants. It will transfer production and make capital outlays at four plants in
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Japan (including plants of group companies) to enhance production efficiency. The company aims to grow revenue from inhouse production in Japan by 25% in FY03/25 versus FY03/22.
In terms of automation and labor-saving technology, the company will enhance production efficiency through the use of IT
tools at all 12 group plants. Specifically, the company will automate in-plant operations, pare down failure costs (spoilage
costs), invest in upgrading production capacity, seek to capture more orders by enhancing its quality and technicalcapabilities, and lock in orders by responding more quickly to requests for quotations. It seeks to enhance production
efficiency by 10% in FY03/25 versus FY03/22.
Strengthening R&D
The company will continue to develop new technologies aimed at further business growth. One focus is its new P-Bas (shortfor Punch bonding and sintering) bonding and materials development technologies for creating ideal cooling circuits by
joining multiple, separately processed components. With regard to the manufacture and sales of products other than moldand die components, the company will launch special-order products in the factory automation area and initiate marketing to
lay the groundwork for these products down the road. The company will also work on aerospace products that require ultraprecision processing.
Other
To strengthen its management foundation, the company will construct new IT tool-based services, reform operations byoverhauling its in-house IT infrastructure, and cultivate staff to spearhead digital transformation initiatives. Among these
initiatives, the company in particular plans to pursue the AI-based management of design drawings, visualization ofprocessing progress, customer management using sales data, and the consolidation of processing status data. The company’s
financial strategy is to seek to optimize the capital structure in a way that is attentive to the cost of capital, boosting earning
power through management stressing ROIC, and improving the soundness of its financial position. In terms of sustainability,
the company will draw down carbon emissions, reinforce corporate governance, cultivate human resources, and reformworking styles. For its ROIC-centered management, the company aims to enhance corporate value by maintaining ROIC of atleast 10%, which exceeds the cost of capital.
Targets
The company targets revenue of JPY50.0bn in FY03/25 (JPY39.4bn in FY03/22), operating profit of JPY5.0bn (JPY3.0bn),
and net income attributable to owners of the parent of JPY4.0bn (JPY2.0bn). It is earmarking cumulative capital investment
over the three-year period of JPY5.0bn (over half of which is for plants in China and JPY2.0bn of which is for facility
overhauls in Japan). It expects depreciation of JPY3.0bn. By region, the company targets revenue in FY03/25 of JPY17.9bn(JPY14.0bn) in Japan, JPY25.5bn in China (JPY21.0bn), JPY2.6bn in Southeast Asia (JPY1.7bn), and JPY4.0bn in Europe, theUS, and other regions (JPY2.6bn). By industry, the company targets revenue of JPY20.4bn (JPY16.4bn) from the automotive
sector, JPY10.1bn (JPY8.0bn) from electronic devices and semiconductors, JPY5.5bn (JPY4.2bn) from consumer electronics
and precision equipment, and JPY14.0bn (JPY10.7bn) from other sectors.

Previous medium-term business plans
Targets and results
Value Creation 2015
(JPYmn)
Revenue

FY03/14

FY03/15

Value Creation 2020

FY03/16

FY03/17

FY03/18

Value Creation 2020 Plus

FY03/19

FY03/20

FY03/21(revised)

FY03/21

FY03/22

Targets

28,00028,90030,50037,00039,00042,00044,50047,00033,10036,100Results

29,43734,39336,75636,64941,02540,93635,34932,462

32,46239,359Difference

1,437

5,493

6,256

-351

2,025

-1,064-9,151-14,538

-638

3,259

Operating profit Targets

1,050

1,330

2,000

2,000

2,200

2,500

2,800

3,300

1,200

1,800

Results

1,162

1,724

1,987

1,991

2,844

2,579

836

1,613

1,613

3,042

Difference

112

394

-13

-9

644

79

-1,964-1,687413

1,242

Source: Shared Research based on company data
Note: Unless otherwise noted, all medium-term target values are as initially announced.

In previous medium-term business plans, revenue came in above initial target in five out of nine years, as did operating
profit.

Value Creation 2015 (FY03/14–FY03/16)
Value Creation 2015, the medium-term business plan announced in November 2013, set out three challenges: (1) global
expansion (making inroads into markets in India, Southeast Asia, and Europe and the US); (2) making inroads into newmarkets (forays into new or underdeveloped areas); and (3) transitioning to a highly profitable business model (reforming the
profitability of businesses in Japan and China).
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In terms of (1) global expansion, the company formed a new global business division and put in place a sales framework
based on personal visits by sales staff, pursuing the following objectives.
Europe and the US
Asia (outside China)

Establishing a special-order product business centered on automotive products
Establishing a business presence in Singapore, Vietnam, Indonesia, and India, positioning Malaysia as the coreJapan

Multiregional support from the global business division (strategizing)

Source: Shared Research based on company data

Regarding (2) making inroads into new markets, the company sought to enter into new areas and markets by harnessing its
advanced technological capabilities, pursuing the following objectives.
China

Targeting the western China market with Chongqing as a strategic base

Asia (outside China)

Solidifying a staging ground for the horizontal development of strategies in Japan and China
Multiregional response from the global business division (marketing), making inroads into healthcare, food, and other newmarkets

Japan

Source: Shared Research based on company data

In (3) transitioning to a highly profitable business model, the company aimed to grow sales of high value-added products
drawing on its comprehensive production framework and advanced technological capabilities, pursuing the following
objectives.
China

Expanding the strategic product lineup

Asia (outside China)
Japan

Augmenting the cemented carbide business (making it more aggressive and more resilient)Completing reforms to the earnings structure, establishing group-wide R&D framework centered on the R&D division

Source: Shared Research based on company data

Targets for the final year of the plan (FY03/16) were revenue of JPY30.5bn (JPY25.0bn in FY03/13), operating profit of
JPY2.0bn (JPY708mn), recurring profit of JPY1.9bn (JPY823mn), net income attributable to owners of the parent of JPY1.2bn(JPY213mn), and ROE of 16.0%. By region, the company targeted revenue of JPY14.3bn in Japan (JPY13.7bn), JPY13.7bn in
China (JPY10.0bn), and JPY2.5bn in Asia (outside China) and other regions (JPY1.4bn). By industry, the company targetedrevenue of JPY13.0bn (JPY10.4bn) from the automotive sector, JPY5.6bn (JPY5.2bn) from electronic devices andsemiconductors, JPY3.6bn (JPY3.3bn) from consumer electronics and precision equipment, and JPY8.3bn (JPY6.1bn) fromother sectors.
Review of Value Creation 2015
In terms of (1) global expansion, the company made acquisitions, acquired production capacity and markets in Southeast
Asia, secured sales channels in Europe, and established a business foundation in India. In terms of (2) making inroads into
new markets, the company acquired AS 9100 certification, carried out marketing in underdeveloped areas, and clarified
targets in new areas. In terms of (3) transitioning to a highly profitable business model, the company established an R&D
framework, boosted sales of high value-added products in Japan, expanded the lineup of strategic products in China, andaugmented the cemented carbide products business in Southeast Asia. Revenue for FY03/16 was JPY36.8bn against thetarget of JPY30.5bn. The positive impact of forex translations helped the company reach its target. Operating profit came inat JPY1,987mn, falling just shy of the JPY2.0bn target.

Value Creation 2020 (FY03/17–FY03/21)
Value Creation 2020, the medium-term business plan the company announced in March 2016, set out four challenges: (1)establishing a “five-pole” sales framework (establishing a sales framework in Europe and the US, becoming a global company
operating on five sales poles); (2) enhancing customer services (becoming a company that customers support, honing
technical capabilities); (3) promoting highly profitable businesses, augmenting R&D (expanding the lineup of high valueadded products, reforms to lower the cost of manufacturing); and (4) working style reforms (greater work efficiency, work-lifebalance, diversity). The plan also called for a return to the spirit of the founder (“Punch Spirit”).
Regarding (1) establishing a “five-pole” sales framework, the company aimed to establish a sales framework in Europe andthe US rather than focusing solely on Asia. In terms of (2) enhancing customer services, Punch Industry sought to boost
customer satisfaction through optimal global procurement. It also sought to use reverse engineering to address the problem
of customers in the mold and die and component manufacturing sector losing their design drawings due to mergers andconsolidation.
In terms of (3) promoting highly profitable businesses, the company looked to optimize the group production framework,
starting with its Vietnam plant, positioning the three years through FY03/19 as a run-up investment period. The plan was toPunch Industry 6165
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start operations at the Vietnam plant, streamline costs at its production sites in Japan, and shift production between its
Chinese production sites. From FY03/20, eyeing the full-fledged rollout of the group production framework, the company
moved to upgrade production capacity at its Vietnam plant, transfer production between production sites in Japan, and stepup the production of special-order products at production sites in Japan. In terms of augmenting R&D, the company sought toboost transactions with customers in the food, healthcare, and aerospace sectors, promising growth areas that are lesssusceptible to economic fluctuations.
Targets for the final year of the plan (FY03/21) were revenue of JPY47.0bn (JPY36.8bn in FY03/16), operating profit of
JPY3.3bn (JPY2.0bn), net income attributable to owners of the parent of JPY2.3bn (JPY1.2bn), and ROE of 11.0%. By region,
the company targeted revenue of JPY18.7bn in Japan (JPY15.6bn), JPY22.4bn in China (JPY17.8bn), and JPY5.9bn in Asia
(outside China) and other regions (JPY3.3bn). By industry, the company targeted revenue of JPY20.6bn (JPY17.1bn) from theautomotive sector, JPY8.4bn (JPY6.6bn) from electronic devices and semiconductors, JPY6.6bn (JPY4.8bn) from consumer
electronics and precision equipment, and JPY11.5bn (JPY8.3bn) from other sectors.
In terms of dividends, the company targeted a consolidated payout ratio of 30%.
Review of Value Creation 2020
The company recorded JPY35.3bn in revenue in FY03/20, far short of the JPY44.5bn target, reflecting the breakout of US–
China trade friction in FY03/19. In the company’s focus regions outside Japan and China, orders for special-order products
grew in Vietnam and Indonesia. The company established a local subsidiary in the US, but US–China trade friction
hampered the pace of expansion there. In Europe, the company made use of both direct sales and distributors, but revenue
was down in line with a downturn in the economy. Operating profit came in at JPY836mn, falling far short of the target of
JPY2.8bn. This result was due in large part to a decline in revenue amid deteriorating market conditions, a higher cost ratio
stemming from lower plant utilization, and a negative forex impact (a strong yen). The company recorded a net loss
attributable to owners of the parent of JPY3.5bn in FY03/20, the first time it posted a net loss since going public. The main
reason was the recording of impairment losses on a plant in Japan. The global COVID-19 outbreak in 2020 increased thelikelihood of a further slowdown in performance going forward.
Consequently, the company in May 2020 announced a revised medium-term plan, Value Creation 2020 Plus, which
included a revised forecast for FY03/21.

Value Creation 2020 Plus (FY03/21–FY03/22)
Like the plan it replaced, Value Creation 2020 Plus, the medium-term business plan the company announced in May 2020,
set out four challenges: (1) establishing a “five-pole” sales framework (extending sales channels to Southeast Asia, andEurope and the US); (2) reinforcing sales capabilities stressing a customer-centric perspective (cultivating a sales force with
abundant processing knowledge through relocation and staff development); (3) optimizing the global production framework
and reinforcing R&D (production frameworks that harness the characteristics of each plant, reducing man-hours andimplementing new construction methods through R&D); (4) working style reforms and HR development (empowering
women in the workforce, work-life balance, global HR development).
The first challenge, (1) establishing a “five-pole” sales framework, was unchanged from Value Creation 2020. In terms of (2)reinforcing sales capabilities stressing a customer-centric perspective, the plan called for reassigning staff from manufacturing
divisions with a firm understanding of design drawings who can propose processing methods to the sales force, to capture
more orders for special-order products. It also called the company to enhance staff training, such as holding mold and die
study sessions and manufacturing training for sales staff as well. Improvements to the ordering system focused on facilitating
the more seamless ordering of standard products. Another thrust was a satellite office concept to reinforce the company’ssales approach of being in close contact with local communities.
In terms of (3) optimizing the global production framework, in Japan, the company sought to implement production
frameworks that take advantage of the characteristics of each plant, improve manufacturing methods and streamline costs,
exchange technology with customers, and develop new businesses. The focus in China was on stepping up sales of nonautomotive products, establishing new production lines with faster turnaround, and expanding sales of strategic products.
From its base in Malaysia, the company sought to boost orders in the Southeast Asian region, collaborate with thedevelopment divisions in Japan and China, and expand sales of special-order products. In Vietnam, the company aimed tostabilize production of standard products, boost production efficiency and lower costs, and achieve profitability at an earlystage.
Targets for the final year of the plan (FY03/22) were revenue of JPY36.1bn (JPY35.3bn in FY03/20), operating profit of
JPY1.8bn (JPY836mn), net income attributable to owners of the parent of JPY1.1bn (net loss of JPY3.5bn), and ROE of 9.0%. By
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region, the company targeted revenue of JPY15.4bn in Japan (JPY14.6bn), JPY17.1bn in China (JPY16.8bn), JPY1.6bn inSoutheast Asia (JPY1.5bn), and JPY2.0bn in Europe, the US, and other regions (JPY2.4bn). By industry, the company targetedrevenue of JPY15.6bn (JPY15.4bn) from the automotive sector, JPY6.5bn (JPY6.1bn) from electronic devices andsemiconductors, JPY4.3bn (JPY4.3bn) from consumer electronics and precision equipment, and JPY9.7bn (JPY9.6bn) fromother sectors.
Review of Value Creation 2020 PlusAs the manufacturing sector bounced back from the pandemic in FY03/22, revenue was JPY39.4bn, exceeding the target of
JPY36.1bn. Thanks primarily to revenue that exceeded expectations, operating profit came in at JPY3.0bn, also exceeding
the target of JPY1.8bn and reaching its highest level since the company went public.
As for measures outlined in the plan, the “five-pole” sales network saw higher revenue in China, Southeast Asia, Europe, theUS, and other regions, buoyed by post-pandemic recovery. The company continued to struggle in Japan but was on the roadto recovery. In reinforcing sales capabilities stressing a customer-centric perspective, the company transferred staff frommanufacturing to sales, but still struggled to gain access to customers, many of which turned down requests for sales calls due
to lingering COVID-19 concerns. The company expanded revenue in healthcare and mask-related mold and die component
areas. In terms of optimizing the global production framework and reinforcing R&D, the company stabilized production bytransferring production of finished products to its Vietnam plant. R&D projects progressed smoothly. In terms of working stylereforms and HR development, the company promoted working remotely as one avenue to more diverse working styles, andalso took steps to empower women in the workforce and improve employee engagement.

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Business
Business description
The company mainly engages in the manufacture and sale of plastic mold and press die components.
Molds and dies are used to mass-produce metal or plastic industrial products of the same shape by means of, forexample, press forming and other deformation processing or injection molding, in which materials are melted andformed in a mold.

The company derives about a third of its revenue from plastic mold components, slightly over half from press die
components, and the remainder from factory automation products. It manufactures both standard and special-order products,
with the latter accounting for about 60% of total revenue. The company has a rich lineup of standard products offering thehigh versatility and quality required for various molds, mainly plastic molds and metal press dies, which it sells via catalog.
Standard product orders are made mostly through catalogs and websites. Special-order products target customers needingproducts with shapes and sizes that deviate from the catalog specifications. Sales staff personally visit customers to takeorders, allowing the company to carefully tailor special-order products to customer demands.

Plastic mold components
Plastic molds are used to make numerous plastic products, such as mobile phone and digital camera casings. Molten plastic
resin is injected into a mold mounted in an injection molding machine and then allowed to cool and harden. The company’s
product lineup includes the mold attachment components below.

Source: Company data

Mainstay standard plastic mold component products are as follows.
Sprue bushings
Gate bushings
Ejector pins

Components for pouring molten plastic from the injection nozzle of an injection
molding machine into the mold
Components through which plastic flows from the sprue bushing into the productpart of the mold. After molding, when the mold is opened, the product part isseparated from this component.
Components that separate and eject molded products from the mold

There are straight, stepped, and square ejector pins. Other components include ejector sleeves, center pins, straight andstepped core pins, ejector pins and core pins for die casting molds, components related to date stamps and stoppers forcavity inserts, angular pins and locking blocks, slide cores and guard rails, runner and gate components, die opening
controllers, cooling and heating items, coil springs, and screws and other hardware.

Press die components
With a press die, materials (steel plates) are placed between upper and lower dies attached to a press machine, and the pressmachine applies pressure to them. The company’s press die components attach to such dies.

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Source: Company data

Mainstay standard press die component products are as follows.
Die set guides
Punches
Stripper guides

Components used to maintain proper alignment between upper and lower dies
Tools pressed against a material, usually paired with a die, to impress a shape
Components used to align the punch-die with the die set guide and maintain proper clearance

Punches include simple punches, jector punches, small diameter punches, two-step punches, thick plate punches, dowelhole punches, tapped punches, punches with key grooves, flange stoppers, shank cuts, straight punches, mini punches, andpunch blanks. Other components include block and pilot punches, button and block dies, punch guide bushings, punches
and dies for molding processing, irregularly shaped punches and dies, retainers, precision and carbide punches, screws andother hardware, guide lifter components, misfeed sensor components, coil springs, guide post components, hookcomponents for die storage, components for automotive dies, and transfer die components.

Special-order products
Unlike standard products, special-order products are made to customer requirements. The company is focusing on thisproduct group, which accounts for about 60% of revenue from mold and die components. It makes special-order products tocustomer specifications drawing on its cutting, grinding, and other precision processing technology. The company cancustomize any of its wide range of standard products, but the bulk of orders are for ejector pins and core pins in terms ofplastic mold components, and punches and dies in terms of press die components.
Since molds and dies are made for different end products, they all have unique shapes and sizes. Many are unable to becompleted using standard products alone (in many cases their shapes, size, dimensions, materials, and other specifications
are unsuited to standard products). If a customer wants to customize a standard product but the required processing istechnically out of reach or manufacturing costs cut into its profitability, it will special-order the product from the company.
The company has built a comprehensive service framework spanning material procurement, heat treatment, processing,surface treatment, inspection, and measurement.
The company handles a wide range of materials, including plastic mold steel, cold and hot mold steel, carbon steel, alloy orcarbon tool steel, stainless steel, cemented carbide, chromium molybdenum steel, copper alloy, spring steel, high carbon
chromium bearing steel, high-density polymer alloy, and aluminum alloy. It can also offer various secondary processing suchas surface treatment and heat treatment to meet functional needs like high strength, wear resistance, and sliding
performance. The company also accepts computer-aided design (CAD) data-based orders. Average lead times for
manufacturing are 8–10 days. Each month, the company carries over a certain amount of order backlog into the following
month but says the gap between monthly orders and revenue is small.
Unlike products mass-produced on a line, special-order products require technicians to perform minute processing inincrements of 0.01mm or 0.001mm according to design drawings obtained from customers. As a result, filling orders
from a large number of customers requires a large corps of technicians operating a large pool of machine tools andmeasuring and inspection equipment.

Punch Industry 6165
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Customers submit a design drawing along with their order, based on which the company generates a spot quote, informing
the customer about delivery date and price. Order quantity can be as small as a single unit. Typical special-order items are as
follows.

Range of special-order product customization (plastic mold ejector pin)
Hardness
Diameter
LengthRoundness
Surface treatment
Materials
Processing

59–61 Rockwell hardness
0.2mm–12mm. Tolerance: 0.002mm
Maximum: 350mm. Tolerance: 0.005mm
0.0015mm
Hard chrome plating, titanium nitride, titanium carbon nitride
Molybdenum high-speed tool steel, martensitic stainless steel, die steel, die steel + nitridization
Tip boss processing, tip shape processing, large outer radius processing, outer and inner radius
processing, double slope processing, undercut processing, double taper processing, diameter cut
processing, rib processing, gas venting + concave engraving, slope processing + convex
engraving

Source: Shared Research based on product catalog on company website.

The company’s policy is not to expand the lineup of standard products but rather to extend the range of processing,enhance quality, and boost competitiveness in terms of prices and delivery times for its special-order products. The
company also says that an upcoming upgrade to its online site will enable online orders for special-order products.
The company carefully tailors special-order products to customer demands. Sales staff personally visit customers to takeorders. Meeting special-order requests fosters trust, which often feeds into orders for standard products as well.
Conversely, the company is attuned to the needs of customers who have started using its standard products for different
sizes and surface treatments, which sometimes generates orders for special-order products.

Sales and manufacturing
The company pursues a business approach that integrates its manufacturing division, backed by fully equipped production
capabilities, with its customer-centric sales division, enabling it to handle a wide range of products, from standard products to
products tailored to customer specifications.

Sales
The company has 11 sales offices in Japan and 40 offices overseas, from which its own sales staff personally visit customers totake orders. In Japan, the company has branches in Miyagi, Iwate, Tochigi, Saitama, Kanagawa, Nagano, Aichi, Ishikawa,
Osaka, Hiroshima, and Fukuoka prefectures. Overseas, its Chinese subsidiary Punch Industry (Dalian) operates 34 sales
offices in Shanghai, Beijing, and Guangzhou. In Southeast Asia, the company conducts sales through local subsidiaries inIndia, Malaysia, Singapore, and Vietnam, through joint ventures in Indonesia, and through distributors in Thailand, South
Korea, Taiwan, Australia, Turkey, and the Philippines. Elsewhere, sales are the purview of a sales subsidiary in the US anddistributors in Germany and the UK.
For special-order products, sales staff personally visit customers to take orders. They listen carefully to customers’ technicalissues and formulate proposals to meet their needs. Because they have to formulate such proposals, which include the mostappropriate product, customization (i.e., size, length, hardness, surface treatment, materials used, processing method), andtotal cost, the company’s sales staff also receive hands-on training at the plant before taking on their sales assignment.
Training makes use of the Punch Academy in-house training facility (see below). In many cases, after the company delivers a
product to a customer, it makes repeated follow-up visits to deliver supplies.
If a problem occurs, the company works with the customer to identify a solution, determining whether the problem iswith the product or the customer’s processing, or whether the product needs to be customized. In recent years, thecompany has expanded opportunities for its manufacturing technicians to accompany sales staff on calls to explore
customer needs more deeply. This hands-on sales approach helps earn customer trust, which feeds into new orders for
special-order products when customers approach the company with new product needs or want to improve thefunctionality of existing products.
The company operated an online sales site, called Punch-Net, which allowed users to browse products in a web catalog, getestimates, and order products. In January 2023, the company relaunched the site as PunchCoco, with expanded functionality.

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The new site gives users access to convenient functions such as product search and shopping cart functions, personalized
menus, and chatbot support. Roughly 70% of standard product sales come in through the site.
As the company’s lineup includes a large number of products and variations, the number of catalogs and page count per
catalog has kept growing, often making the search for new products time-consuming for customers. Also, the former
online site lacked sufficient search functionality. The relaunch in 2023 vastly improved customer convenience, allowing
customers to easily search for and compare products. The company says it expects higher traffic from new customers who
would previously have dropped out at the search stage due to a lack of product knowledge. Future upgrades to the online
site will include inventory and special-order functions, as well as Chinese language support.

Manufacturing
The company has built a production framework that integrates all processes by making full use of the precision processing
technical expertise it has cultivated since its founding as well as its 2,000 machine tools and nearly 1,000 pieces ofmeasuring and inspection equipment. The company is marked by having a large corps of technicians with years of technicalexpertise in areas such as heat treatment, surface treatment, and grinding for steel and cemented carbide materials.
In manufacturing special-order products according to customer design drawings—a strategic focus for the company—
technicians have to perform minute processing in increments of 0.01mm or 0.001mm. This requires a large corps oftechnicians operating a large pool of machine tools and measuring and inspection equipment. Technicians are divided
according to process. Often more than 10 people will be involved in a single product. Because they are in charge ofprocessing using specific machinery and equipment over a long period of time, each technician acquires highly specialized
processing skills. This specialization is the backbone of the company’s precision manufacturing (the flip side is that it takes
time to train up technicians).
Approximately 70% of the company’s workforce (about 2,800 people) belongs to the manufacturing division. The volume of
products manufactured per person per day can be in the thousands range for mass-produced standard products, but varies for
special-order products depending on the product. Because the company inspects products in-house for manufacturing
defects, it says its rate of failures resulting in complaints is less than 1%.
The most difficult aspect of manufacturing is determining which process will create the special-order product that best
meets the customer’s request based on the design drawing received. However, the company says other companies cannot
emulate the expertise it has built up in this area.
The company’s pool of machinery and equipment includes 650 cutting machines, 1,200 grinding machines, 210 electric
discharge machines, 90 pieces of heat treatment equipment, 10 pieces of surface treatment equipment, and 920 inspection
and measuring devices.
The company manufactures globally through a network of four bases in Japan and eight overseas. Plants in Japan are theKitakami plant in Iwate Prefecture, the Miyako plant in Iwate Prefecture, and the Hyogo plant in Hyogo Prefecture. Overseas,
the company has manufacturing plants in six locations in China (including Dalian, Wafangdian, Wuxi, and Dongguan) andalso in Malaysia and Vietnam.
The company has built a manufacturing framework that encompasses roughly 300 partner plants (outsourced products
generate about half of total revenue). To sell a product as its own requires the company to identify partner plants that canguarantee certain level of quality. Cultivating a new partner plant takes time, and the company says it can only bring a few
companies on board each year.

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HR development: The company established Punch Academy in April 2017 on the grounds of the Kitakami plant. The
staff training facility is equipped with facilities for the hands-on training of new hires, ongoing training based on job
position, training to instill new skills, and staff development and technical training for sales representatives. The
company brings in as lecturers veteran technicians who are at the age of stepping back from the front lines. As
instructors, these veterans develop the younger generation of workers, passing on the manufacturing skills cultivatedover many years that are the company’s chief strength.
Working style reforms: The company’s medium-term business plan calls for the empowerment of women, a better worklife balance, and the development of global talent. Specific measures include diversity training; new and stronger
support measures to balance work with childcare and long-term care; Punch Family Salon, an online gathering for bothmale and female employees who are on maternity or childcare leave; and encouraging male employees to takechildcare leave. The company has also launched a personal job planning system. As part of giving back to thecommunity and developing personnel who will take responsibility for the future of the regions in which it operates, thecompany also gives guidance for certification programs at local high schools.

Revenue by customer, industry, and region
The company serves customers across a broad range of industries, including the automotive and home appliance sectors. The
customer base includes 15,000 companies (6,000 in Japan, 8,000 in China, and 1,000 elsewhere). The company estimatesthat about 12,000 of these are makers of products other than molds and dies—in other words, mold and die users—with theother 3,000 specializing in mold and die manufacturing. Even the top revenue-generating customers account for only 1%–
2% of total revenue at most. The company says it has no large customers of note.

Revenue by industry
By industry

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

FY03/23
Cons.

Revenue

29,43734,39336,75636,64941,02540,93635,34932,46239,35942,800

YoY

17.6%

16.8%

6.9%

-0.3%

11.9%

-0.2%

-13.6%

-8.2%

21.2%

8.7%

Automotive

13,21015,54017,06016,78018,37017,877

15,37013,682

16,442

18,082

YoY

27.0%

17.6%

9.8%

-1.6%

9.5%

-2.7%

-14.0%-11.0%

20.2%

10.0%

% of revenue

44.9%

45.2%

46.4%

45.8%

44.8%

43.7%

43.5%

42.1%

41.8%

42.2%

Electronic devices &semiconductors

5,190

6,540

6,550

7,000

7,880

7,558

6,113

6,315

8,043

7,866

YoY

-0.8%

26.0%

0.2%

6.9%

12.6%

-4.1%

-19.1%

3.3%

27.4%

-2.2%

% of revenue

17.6%

19.0%

17.8%

19.1%

19.2%

18.5%

17.3%

19.5%

20.4%

18.4%

Consumer electronics &precision equipment

3,520

4,510

4,800

4,480

4,780

4,837

4,298

3,888

4,192

4,312

YoY

6.7%

28.1%

6.4%

-6.7%

6.7%

1.2%

-11.1%

-9.5%

7.8%

2.9%

% of revenue

12.0%

13.1%

13.1%

12.2%

11.7%

11.8%

12.2%

12.0%

10.7%

10.1%

Other

7,510

7,800

8,300

8,400

9,940

10,662

9,566

8,574

10,67912,538

YoY

22.9%

3.9%

6.4%

1.2%

18.3%

7.3%

-10.3%-10.4%

24.6%

17.4%

% of revenue

25.5%

22.7%

22.6%

22.9%

24.2%

26.0%

27.1%

26.4%

27.1%

29.3%

Source: Shared Research based on company data
Note: End user basis.

Revenue generated by the automotive sector, which accounts for the largest percentage of total revenue, climbed from
JPY9.2bn in FY03/12 to JPY18.4bn in FY03/18, but declined after that before rising again in FY03/23 to JPY18.1bn (42.2%
of total revenue). Revenue from the electronic devices and semiconductors sector increased from JPY5.5bn in FY03/12 to
JPY7.9bn in FY03/23. Revenue from the consumer electronics and precision equipment sector increased from JPY3.5bn in
FY03/12 to JPY4.8bn in FY03/19, but then declined to JPY4.3bn in FY03/23. Revenue from other sectors (including
industrial machinery, telecommunications, healthcare, food, and trading companies) increased from JPY5.6bn in FY03/12 to
JPY12.5bn in FY03/23.
The company reports that profit margins by customer industry are somewhat low for the automotive sector, slightly higher
for electronic devices and semiconductors, and remain stable at a certain level for consumer electronics and precisionequipment and other sectors. The tendency toward lower margins in the automotive sector reflects the common practiceamong automakers to pressure suppliers to keep costs down. However, the company says the selling prices for its
automotive products are already relatively low, so it is not under as much pressure to cut prices as the manufacturers ofthe molds and dies themselves, and that its margins tend to stay relatively flat. With regard to automobile electrification,
the company notes that demand is waning for engine products, which are mostly forged parts, but since its lineup
includes few products for forged parts, it foresees no major impact from this.
Many consumer electronics and precision equipment products require strict precision. This is an area where the company
can leverage its strengths in high-precision components and enjoy relatively high margins. In the semiconductor area,
the company mostly supplies stamped ejector pins to makers of post-process bonding equipment and has a virtual

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monopoly in this market. As with consumer electronics and precision equipment, customers make numerous demands,
and the different specifications required by each customer means more special-order products. Special-order volume isthus growing along with expansion in the market.
The healthcare and beverage areas are another focus for the company, and revenue here is gradually increasing. The
company recently saw a spike in demand for test tube molds used in COVID-19 PCR testing. Demand in the beverage
sector is growing for replacement components for preform plastic bottle molds.

Revenue by region
By region

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

FY03/23(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Revenue

29,43734,39336,75636,64941,02540,93635,34932,46239,35942,800

YoY

17.6%

16.8%

6.9%

-0.3%

11.9%

-0.2%

-13.6%

-8.2%

21.2%

8.7%

Japan

14,387

15,211

15,637

15,904

17,154

16,777

14,566

12,33814,02014,104

YoY

5.2%

5.7%

2.8%

1.7%

7.9%

-2.2%

-13.2%-15.3%

13.6%

0.6%

% of revenue

48.9%

44.2%

42.5%

43.4%

41.8%

41.0%

41.2%

38.0%

35.6%

33.0%

China

12,98916,20817,807

17,428

20,10319,89916,837

16,88920,95623,451

YoY

29.9%

24.8%

9.9%

-2.1%

15.3%

-1.0%

-15.4%

0.3%

24.1%

11.9%
54.8%

% of revenue

44.1%

47.1%

48.4%

47.6%

49.0%

48.6%

47.6%

52.0%

53.2%

Other

2,062

2,973

3,312

3,317

3,769

4,259

3,946

3,235

4,382

5,244

YoY

51.3%

44.2%

11.4%

0.2%

13.6%

13.0%

-7.3%

-18.0%

35.5%

19.7%

% of revenue

7.0%

8.6%

9.0%

9.1%

9.2%

10.4%

11.2%

10.0%

11.1%

12.3%

1,535

1,376

1,740

1,966

-

-10.4%

26.5%

13.0%

Southeast Asia
YoY
% of revenue

4.3%

4.2%

4.4%

4.6%

Europe, the US, and otherregions

2,410

1,858

2,641

3,277

-

-22.9%

42.1%

24.1%

6.8%

5.7%

6.7%

7.7%

YoY
% of revenue

Source: Shared Research based on company data

By region, revenue from China expanded from JPY9.2bn in FY03/12 to JPY23.5bn in FY03/23, due in large part to the highgrowth rate of the Chinese mold and die market and expansion of the company’s manufacturing and sales network there.
Revenue from Japan increased from JPY13.4bn in FY03/12 to JPY17.2bn in FY03/18, but declined to JPY14.1bn in FY03/23.
This reflects factors such as the offshore shift of manufacturing bases and contraction in the number of mold and die
manufacturers in Japan. Revenue from Southeast Asia is on the increase. In order of scale, the company generates the largest
share of its revenue in Vietnam, followed by Singapore, Thailand, Indonesia, Malaysia, India, and the Philippines. In Europe,
the US, and other regions, Europe accounts for about two-thirds of revenue with the remainder coming from the US andother regions.
In China, which generates more than half of total revenue, sales activities were liberalized around 2000 in line with
rapid growth of the economy and China’s accession to the WTO. Since then, the company has increased its sales andmanufacturing network in that country and, as in Japan, has adopted an integrated production and sales approach andestablished a framework to sell directly to manufacturers. This positioned the company to expand revenue in line with
China’s economic growth.
The company says there is room for improvement in the frequency of its contact with customers, citing the lack of
manpower at its sales offices, and says there are many potential customers in each region that it has yet not been able toreach.

Suppliers
Steel and cemented carbide are the chief raw materials for the company, which it mostly procures from specific specialized
trading companies, steel manufacturers, and steel companies. The company uses a network of about 300 partner plants inJapan for its manufacturing.

New business areas and services
Factory automation business
The special-order factory automation components the company currently sells include jig bushings, shafts and shaft holders,locator devices, guide and spring-related components, screws, nut-related components, and other special-order components
for various equipment.
The company entered the factory automation component business after building its Chiba plant in 1996. It later withdrew
from the standard product aspect of this business in Japan in 2011 after struggling with fierce price competition. Since then,Punch Industry 6165
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the company has sold special-order precision components and precision jigs and tools, and assembled precision components
for factory automation equipment. Revenue from the factory automation business was JPY2.5bn in FY03/23, mainly fromprecision components and precision jigs and tools. The company has expanded its sales channels by making sales proposals
for precision parts for factory automation equipment and precision jigs and tools to customers in its main businesses.
In October 2022, the company acquired a 100% stake in manufacturer ASCe, which has strengths in the in-housedevelopment of factory automation equipment for sectors including food processing, automotive components, electronic
devices, and healthcare, and made the company a subsidiary. The cost of the acquisition was JPY550mn, and the deal
generated goodwill of JPY491mn (provisional). ASCe’s revenue is still in the JPY’000mn range. ASCe designs andmanufactures factory automation equipment, production equipment, and various jigs that realize labor saving andautomation. To meet demand from a broad range of customers in the above-mentioned industries, the company only carries
out special-order design, assembly, adjustment, and software debugging in-house. This means the benefit of shorter delivery
times for customers.
ASCe’s production track record includes needle-less liquid seasoning injectors, inspection devices, press-fitting machines,
leak testers, laser markers, robot handling devices, stamp inspection machines, washing conveyor belts, product sorting
conveyor belts, and sponge slicers. ASCe’s (patented) needle-less seasoning injector is a device like a squirt gun that sprays
and injects seasoning liquid at high pressure into foods such as meat and fish, reducing the time it takes to marinate. Also,
since there are no needles to pierce the food, there is no risk of contamination, and it takes less time to clean theequipment.
Value Creation 2024, the company’s medium-term business plan, calls for expanding the factory automation business to 10%of consolidated revenue (revenue of around JPY5.0bn) through the sale of special-order factory automation products. Armedwith the capability to develop and manufacture factory automation-related equipment stemming from the consolidation ofASCe, Punch Industry has launched a project to promote this business and is working to plan and implement sales strategies
and upgrade and cultivate new factory automation partner plants. The Punch group will leverage ASCe’s advanced design
and technical capabilities for factory automation equipment. ASCe will benefit from access to the company’s sales network
serving 15,000 companies worldwide and its network of partner plants and other procurement resources. Both the company
and ASCe will benefit from technology exchanges. The company also says it will pursue automation and labor-saving
initiatives in its own plants.

P-Bas bonding technology
The company announced in November 2022 that it had trademarked P-Bas, a metal uniting technology. Short for “Punch
bonding and sintering,” P-Bas involves both bonding and sintering technologies for uniting objects by using special
equipment to press and heat multiple components and materials that have been processed separately. The company iscurrently using its bonding technology to manufacture mold components and using its sintering technology in new material
development.
The bonding technology makes possible the manufacture of components that are difficult to machine—such as components
made using metal 3D printers that contain complex-shaped cooling circuits—by manufacturing and machining thecomponents separately before joining them. P-Bas offers several advantages over metal 3D printer manufacturing, such as
fewer manufacturing man-hours, lower materials costs, more choices of materials, and higher product strength. The company
is aiming to steal a share of the market for components currently made with metal 3D printers, stressing its ability to boost
productivity and reduce costs for customers.
The company’s sintering technology is a bonding process to sinter materials and make them denser using mechanicalpressure and heating. The material used in this process is key. Specialty steel manufacturers mainly produce the materials
frequently used in mold and die components. Because these manufacturers mass-produce material in large furnaces anddesign alloys with mass production in mind, they may not necessarily be capable of offering the optimal material forcustomer applications. In particular, compared to press dies, the combination of characteristics of the materials used in plastic
molds varies widely depending on the product being molded, such as in terms of wear resistance, high thermal conductivity,
polishing and non-magnetic properties, rust resistance, and amenability to surface treatment. To develop new materials thatcan meet these challenges, the company entered into a joint research agreement with the Hakodate Regional Industrial
Promotion Foundation, which manages the Hokkaido Industrial Technology Center, to explore the development of highperformance powder alloys for plastic molds.
Participation in lunar exploration program, Project YAOKIIn May 2023, Punch Industry signed a technology partnership agreement with Dymon Co., Ltd., a robot and spacetechnology development startup, and decided to participate in Dymon's lunar exploration program, Project YAOKI. The
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company will provide its 3D scanner measurement service to Dymon's lunar rover, and utilize its technological prowess
accumulated through manufacturing mold and die components and factory automation components/equipment. It willleverage its mold and die component processing and P-Bas metal uniting technologies to develop new materials. In doing so,together with Dymon, the company will contribute to leading Project YAOKI to success, and to the aerospace industry as awhole. Through the partnership, the company intends to further enhance customer service in the ordering process, promote
P-Bas as part of its initiative to strengthen R&D, and bolster business in the aerospace sector.
Project YAOKI is a project for exploring the moon, to secure resources and establish a human activity base, such as building
human habitats, by sending the lunar rover YAOKI developed by Dymon to the moon, where it will drive on the moon
surface to acquire close-up images of the lunar surface. In 2023, YAOKI lunar rover will board the Nova-C lunar lander ofIntuitive Machines, Inc., a US company selected for NASA's Commercial Luna Surface Services (CLPS), on this company's IM2 Mission, and will be dropped on the moon to begin exploration.
Joint research agreement with JAXA
In August 2023, the company announced that it had entered into a joint research agreement with the Japan Aerospace
Exploration Agency (JAXA). Under the agreement, the two parties will investigate the manufacturing technology that uses thecompany's proprietary bonding technology, P-Bas , for applications in a part of rocket engines and assess its feasibility.

🄬

The company proposed to JAXA the use of its proprietary bonding technology, P-Bas, for processing rocket engine parts withcomplex shapes that cannot be machined (cut) using conventional methods from technical and cost perspectives. In the joint
research, the two parties will work to learn bonding conditions for heat-resistant alloys and explore ways to minimize
distortion during the bonding process.
The company does not expect these initiatives to contribute to revenue and profit in the short term. However, it believes
that working on aerospace-related projects (which require ultra-fine processing and precision measurement) will help
improve its technological capabilities.

3D Measurement Partners
The company started full-fledged operation of a new service in January 2022, 3D Measurement Partners, which uses 3Dscanner-based measurement technology to measure shapes that defy accurate measurement with conventional techniques orthat take a long time to measure. The company analyzes and processes the 3D scan data created in the measuring process,packages it with technology and certain conditions, and proposes a solution to customer issues. Customers benefit fromshorter development lead times and more robust quality. Since 2016, the company had been engaging in a reverse
engineering business that replicates components by converting actual objects into 3D data without design drawings. The
background to the new service was the customers’ need to verify quality.
Customers can use the service in the development and design stages to clarify shape changes, allowing them to verify theirdevelopment strategy and put the proper technology in place, which means higher design quality and shorter development
times. In the pre-production stage as well, 3D scan data analysis and processing is useful in improving and streamlining the
manufacturing process and production specifications, ensuring product perfection, and raising the quality level. At the mass
production stage, if there is a product defect, the service makes it possible to locate the problem and identify its cause andformulate concrete response measures.

Distribution business
In November 2022, the company entered into a distribution agreement with Trusco Nakayama (TSE Prime: 9830). As thefirst stage in the business on the Japan side, the company began taking online orders for 11 items in seven productcategories, including Trusco Nakayama parts and brake cleaners and nitrile gloves. Down the road, on the China side, thecompany plans to launch sales of all Trusco Nakayama maintenance, repair, and operation products, and increase the lineup
of products handled in Japan as well. The company says it plans to expand its distribution business to sell products other thanmold and die components to more than 10,000 customers in Japan and China.

Earnings structure
Revenue
Shipment volume is linked to how many molds and dies are used by customers across a wide range of manufacturingsectors. By industry, the automotive, electronic devices and semiconductors, and consumer electronics and precisionequipment sectors together account for about 70% of revenue, which closely tracks production volume in these
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industries as a whole. Revenue is shipment volume multiplied by product unit price. Although unit prices vary greatly
depending on the product, standard products generally range from JPY100 to several JPY’000 and special-order products
range from JPY1,000 to JPY0’000. Order quantities can range from a single item to several hundred items or more.
Customers renew orders when a component wears out. (The product life of a typical punch is about 300,000 shots.) The
company began raising unit prices on some standard products in October 2022 (by 10%–20%) in response to climbing
raw materials prices and other changes in the environment. This was the company’s first price hike in a long time, butcompetitors tended to follow suit.
The company says the proportion of standard to special-order products is about 40:60 in terms of revenue. It generates
about 60% of revenue on products made in-house and the other 40% or so on products outsourced to partner plants.
Among its three product groups—plastic mold components, press die components, and factory automation products—
press die components account for the largest slice of revenue, albeit just slightly more than plastic mold components. The
proportion of revenue from factory automation products is still in the single digits.

Cost of revenue
In FY03/23, of the JPY10.8bn in cost of revenue on the parent income statement, product manufacturing costs were
JPY5.1bn. This further breaks down into labor costs of JPY3.3bn, other expenses of JPY1.0bn, and cost of materials of
JPY743mn. The company does not disclose details on its consolidated cost of revenue, but reports that about 10% is costof materials, about 30% is personnel costs, and about 40% is costs incurred to purchase outsourced products from partner
plants. The cost of materials accounts for a relatively small portion of cost of revenue; the bulk is personnel costs andproduct purchases from group companies and partner plants. The largest cost of materials is iron (supplied by specialist
trading companies), which the company uses in its in-house production and which is linked to iron scrap prices. However,most of the company’s products are small and do not use a large volume of iron. Other expenses consist of tool
replacements, utilities, and depreciation.
In terms of procurement within the group, the company’s procurement department in Japan buys around JPY2.0bn ofgoods from overseas subsidiaries, or around 40% of total procurement. The current medium-term business plan calls forthe procurement department in Japan to step up purchases from overseas subsidiaries, aiming for a 35% increase in
FY03/25 compared to FY03/22 (it expects this to yield a benefit of around JPY100mn in consolidated gross profit).
On the profit front, the gross profit margin is slightly higher for special-order products and slightly lower for standard
products. However, the company says that, since it receives most orders for standard products online and operating
expenses are low, the difference in operating margins between standard and special-order products is minimal. (Thecompany sees its lineup of standard products to be necessary in building up the customer base.)

SG&A expenses
SG&A expenses

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

FY03/23(JPYmn)ParentParentParentParentParentParentParentParentParentParentSG&A expenses

6,499

7,638

8,191

8,201

8,815

8,893

8,352

7,474

8,403

9,194

Salaries and allowances

1,861

2,073

2,277

2,286

2,515

2,518

2,540

2,491

2,710

2,958

Provision for bonuses

129

162

162

178

181

171

101

100

156

141

Provision for directors' bonuses

-

-

-

-

15

2

-

-

17

Retirement benefit expenses

52

107

86

131

141

127

83

87

84

80

Packing and transportation costs

936

1,072

1,087

1,061

1,123

1,066

975

903

1,099

1,105

-

Provision for doubtful accounts

61

-10

56

51

-86

44

3

-11

-5

29

Source: Shared Research based on company data

Major components of SG&A expenses are personnel costs and product packing, transportation, and other logistics costs.
The company puts the ratio of variable costs at around 30% for in-house products and around 70% for outsourced
products. Given the ratio of in-house to outsourced products at 45%–55%, this puts the marginal profit ratio at around50%.

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Profitability and financial indicators
Profit margins

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

FY03/23

Gross profit margin

26.0%

27.2%

27.7%

27.8%

28.4%

28.0%

26.0%

28.0%

29.1%

27.2%

Operating profit margin

3.9%

5.0%

5.4%

5.4%

6.9%

6.3%

2.4%

5.0%

7.7%

5.7%

EBITDA margin

8.1%

9.1%

9.5%

9.5%

11.0%

10.7%

7.3%

8.0%

10.2%

8.4%

Financial ratios

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

FY03/23

ROA (based on recurring profit)

4.6%

6.0%

5.9%

6.6%

8.8%

8.0%

2.5%

6.7%

11.2%

8.1%

ROA (based on net income)

3.2%

4.4%

4.4%

4.8%

5.8%

3.0%

-12.3%

1.9%

7.6%

4.7%

ROE

9.6%

10.1%

8.9%

9.8%

11.8%

6.0%

-25.5%

4.0%

14.2%

7.9%

Free cash flow yield-13.33%-6.76%

18.98%-3.26%-4.91%-2.28%-17.34%9.45%-0.66%

4.49%

Total asset turnover

130.7%

127.2%

129.1%

129.1%

132.3%

128.5%

124.6%

129.1%

147.2%

144.5%

0.97

1.26

1.34

1.25

1.27

1.27

1.29

1.47

1.71

Current ratio

1.94

Quick ratio

0.96

1.21

1.33

1.26

1.25

1.26

1.44

1.45

1.60

1.81

Equity ratio

38.3%

48.0%

51.2%

48.1%

49.7%

50.5%

45.9%

50.3%

56.7%

62.6%

Source: Shared Research based on company data

Market and value chain
Mold and die market overview
Production value by demand sector(%)

Automotive

Demand sector

Electronic
Precision
devices(appliances) instruments

Motorcycles

73.5

1.9

3.8

Industrial
machinery
2.1

Toys, daily
Telecommunications necessities,
devicesmiscellaneous
goods

Officeequipment
3.2

1.8

1.9

Healthcare

3.7

Other
1.5

6.6

Source: Shared Research based on Japan Die & Mold Industry Association’s “Japanese Mold and Die Industry at a Glance (2023).”

The automotive sector (including motorcycles) is the largest mold and die demand sector in Japan, accounting for about
three-fourths of production value. Other sectors include electrical appliances (household and industrial appliances), toys,
daily necessities, miscellaneous goods, industrial machinery, precision equipment, and telecommunications, office, andhealthcare equipment.

Mold and die market size
Mold and die production value in Japan(JPYmn)

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

Mold and die
production
value

865,1211,012,718

1,121,367

1,361,310

1,304,201

1,241,744

1,376,448

1,531,580

1,798,507

1,957,542

1,729,943(JPYmn)Mold and die
production
value

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

1,542,599

1,387,429

1,517,884

1,682,028

1,828,817

1,895,446

1,637,307

1,686,419

1,570,572

1,463,165

1,557,705(JPYmn)Mold and die
production
value

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

1,624,023

1,712,650

1,787,459

1,701,469

1,697,984

1,159,035

1,087,388

1,162,867

1,250,599

1,257,499

1,342,439

2015

2016

2017

2018

2019

2020

2021

1,376,759

1,440,944

1,525,782

1,475,268

1,360,230

1,543,858

1,483,670(JPYmn)Mold and die
production
value

Source: Shared Research based on industrial statistics and economic census data from the Ministry of Economy, Trade and Industry

Mold and die production value peaked at JPY1.96tn in 1991, fluctuating in line with the economy during subsequentrecessions, including the bursting of the bubble economy around 1992, the recession that began around 1999, and theglobal financial crisis around 2008. In 2010, after this last crisis, production value had fallen to JPY1.09tn, but has since been
on a recovery trend, reaching JPY1.48tn in 2021.

Number of mold and die manufacturers(JPYmn)Mold and die
manufacturers(JPYmn)Mold and die
manufacturers(JPYmn)Mold and die
manufacturers(JPYmn)Mold and die
manufacturers

1986

1987

12,2001997

11,656
1998

11,965
2008

12,953
2009

9,741
2019

9,680

1988
12,8851999
11,994
2010
9,221

1989
12,148
2000
12,1252011

1990
13,115
2001
11,330
2012

7,588

8,344

1991

1992

12,815
2002

1993

12,254
2003

11,3522013

2004

10,686
2014

8,048

1994

12,912

2005

10,483
2015

7,820

1995

12,227

2006
9,984

2016
6,535

1996

12,455

10,3602017

7,292

12,0382007
10,234
2018

7,074

6,883

2020

6,696

4,327

Source: Shared Research based on industrial statistics and economic census data from the Ministry of Economy, Trade and Industry

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The number of mold and die manufacturers peaked at 13,115 in 1990, subsequently following a long-term downtrend, fallingto 6,696 in 2019 and further to 4,327 in 2020 when the pandemic hit. In particular, the number of small and medium-sizedbusinesses is shrinking. Industrial statistics and economic census data from the Ministry of Economy, Trade and Industry (METI)
showed that manufacturers with 10 or fewer employees accounted for 79.1% of the total in 1986, but this had shrunk to 61.1%
in 2020. The background to this contraction is as follows.
Many small and medium-sized mold and die manufacturers operate out of tiny factories based in towns, and arevulnerable to the impact of an aging population, labor shortages, the lack of successors, and economic deterioration.
Because there were many mold and die manufacturers, competing on the basis of price against the estimates ofseveral other companies became the norm, rendering many transactions unprofitable. This put smaller manufacturers
less able to compete on prices at a relative disadvantage.
Japanese manufacturing customers for molds and dies have also shifted production offshore in pursuit of cheaperlabor, particularly to China and elsewhere in Asia. Smaller manufacturers lagged behind in their overseas expansion.
The production value of large companies has not seen a similar decrease—according to the above METI data, production
value of manufacturers with 100 or more employees stood at JPY325.6bn in 2002, rising to JPY388.9bn in 2019 and
JPY691.5bn in 2020.
Small and medium-sized mold and die manufacturers tend to special-order products they are unable to make in-house,
while larger manufacturers are more willing to attempt to make products in-house when the market shrinks, by leveraging
spare manpower. While Punch Industry has many customers among the larger manufacturers, the shrinking pool ofsmaller manufacturers could mean fewer special-order customers for the company. Still, overall production volume formolds and dies are projected to increase globally (especially in China), while fewer smaller customers in Japan implies
higher operating efficiency, which could have a positive impact on earnings. As a result, the company says it can continue
to grow.

Mold and die production value by product type
(JPYmn)

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Press dies

576,174

588,447

619,299

588,478

579,971416,934

357,865

358,677

418,756473,316

Plastic molds

619,313642,056

653,393618,234

589,661

420,827

371,680

375,053374,748374,211Forged dies

53,73855,60953,71957,29063,15038,13442,907

46,24550,17447,212Die casting molds

107,483

121,271

128,588

117,965

114,527

71,96070,96280,947

95,07897,872

Rubber, glass
molds

49,56551,38752,16548,45648,55638,28734,43540,196

41,51038,745

Other moldcomponents,
accessories
Total
(%)

241,738

238,399

254,173259,353

253,893

179,825

184,881

207,565

206,879

197,127

1,648,011

1,697,169

1,761,337

1,689,776

1,649,758

1,165,967

1,062,730

1,108,683

1,187,145

1,228,483

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Press dies

35.0%

34.7%

35.2%

34.8%

35.2%

35.8%

33.7%

32.4%

35.3%

38.5%

Plastic molds

37.6%

37.8%

37.1%

36.6%

35.7%

36.1%

35.0%

33.8%

31.6%

30.5%

Forged dies

3.3%

3.3%

3.0%

3.4%

3.8%

3.3%

4.0%

4.2%

4.2%

3.8%

Die casting molds

6.5%

7.1%

7.3%

7.0%

6.9%

6.2%

6.7%

7.3%

8.0%

8.0%

Rubber, glass
molds

3.0%

3.0%

3.0%

2.9%

2.9%

3.3%

3.2%

3.6%

3.5%

3.2%

Other moldcomponents,
accessories

14.7%

14.0%

14.4%

15.3%

15.4%

15.4%

17.4%

18.7%

17.4%

16.0%

(JPYmn)

2014

2015

2016

2017

2018

2019

2020

Press dies

474,327

509,354498,979

510,997

513,059

510,924

463,990

Plastic molds

401,828

442,340

463,865

460,638

432,699

410,829

382,899

Forged dies

48,76550,74848,00947,17951,01249,266

53,955Die casting molds

101,268

120,809

118,793

117,401

123,174

111,907

95,195

Rubber, glass
molds

42,942

41,51043,31545,39644,242

44,10336,998Other moldcomponents,
accessories
Total
(%)

208,377

232,954

241,110275,292

277,164

255,457

200,483

1,277,507

1,397,715

1,414,071

1,456,903

1,441,350

1,382,486

1,233,520

2014

2015

2016

2017

2018

2019

2020

Press dies

37.1%

36.4%

35.3%

35.1%

35.6%

37.0%

37.6%

Plastic molds

31.5%

31.6%

32.8%

31.6%

30.0%

29.7%

31.0%

Forged dies

3.8%

3.6%

3.4%

3.2%

3.5%

3.6%

4.4%

Die casting molds

7.9%

8.6%

8.4%

8.1%

8.5%

8.1%

7.7%

Rubber, glass
molds

3.4%

3.0%

3.1%

3.1%

3.1%

3.2%

3.0%

Other moldcomponents,
accessories

16.3%

16.7%

17.1%

18.9%

19.2%

18.5%

16.3%

Source: Shared Research based on industrial statistics and economic census data from the Ministry of Economy, Trade and Industry.

In Japan, the production value of press dies, a mainstay product for the company, fell from JPY576.2bn in 2004 (35.0% of
total production value) to JPY464.0bn in 2020 (37.6%). Production value of plastic molds, another mainstay product for
Punch Industry, decreased from JPY619.3bn (37.6%) in 2004 to JPY382.9bn (31.0%) in 2020. At least four factors are likely
behind the decrease in mold and die production value: (1) the offshore transfer of manufacturing bases; (2) the global trend
toward environmental protection, spurring the elimination of plastics in various products; (3) the massive impact of economic

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downturns on small and medium-sized businesses; and (4) the COVID-19 outbreak in 2020, causing production cuts across awide range of manufacturing sectors.

Global mold and die market
Global mold and die output(JPYbn)China

US

Global mold and die
outputJapan

5,052.6

1,636.7

South Korea
1,543.8

Germany
803.7

Other
580.7

Total
1,106.0

10,723.5

Source: Shared Research based on Japan Die & Mold Industry Association’s “Japanese Mold and Die Industry at a Glance (2023).”
Note: Figures are for 2019.

According to a 2023 survey by the Japan Die & Mold Industry Association, global mold and die production represented
JPY9.9tn in 2019. China was the largest producer, representing roughly JPY5.0tn, followed by the US at roughly JPY1.6tn andJapan at roughly JPY1.5tn.

Scale of global mold and die market(USDmn)

2008

2009

2010

2011

2012

2013

2014

2015

2016

Scale of mold anddie market

91,60883,40588,86597,897

107,449

108,211

117,919

125,240

125,380

Source: Shared Research based on a collection of data related to the Vision 3.0 of Die & Mold Industry publication from the Japan Die & Mold Industry Association

The global mold and die market stood at USD91.6bn in 2008, expanding to USD125.4bn in 2016 (at a CAGR of 4.0%). In
recent years, China and other countries in Asia have seen high growth rates, whereas growth in Japan has been flat andproduction value in the US and Europe moved into contraction in 2020 due to the pandemic, and recovery has beenlackluster.

Global market share
Company data suggests that Punch Industry holds the second largest share of the global mold and die components market, ataround 6%. The same data shows that its market share is about 18% in Japan, ranking the company second, and about 10% in
China, ranking the company first there. The company reports its share of the global market has been flat at around 6% for the
past decade. The picture is different for special-order mold and die components, a strategic focus for the company. Misumi
Group (TSE Prime: 9962) holds the top global market share for mold and die components, but essentially only sells standard
products. Punch Industry claims top market share for special-order products in Japan and China, its chief business regions,
given that no other competitors have expanded their special-order business on a similar scale. (Since there are no aggregate
statistics for special-order products alone, it is impossible to accurately estimate market share.)Competitors
Main global competitor: Misumi Group (TSE Prime: 9962)
Misumi Group has three business segments: the die components business, which manufactures the same press die andplastic mold components as Punch Industry does (21.2% of revenue in FY03/23), the factory automation business, which sells
components and equipment (32.7%), and the distribution (VONA) business, which sells third-party manufactured
components, tools, and supplies (46.1%). It posted revenue of JPY373.2bn in FY03/23 and operating profit of JPY46.6bn.
Misumi Group got its start in the die components business, later expanding into the factory automation and distribution
businesses. Like Punch Industry, Misumi Group is globally active, having made inroads into countries worldwide, mainly in
Asia, the US, and Europe, based on a three-pronged structure of sales offices, distribution centers, and production sites. Its
network includes 22 overseas manufacturing bases, 62 sales offices, and 18 distribution hubs. Misumi Group operates undera model that stresses quality, low cost, and short delivery times (QCT) and targets a standard domestic delivery time of twodays or less, with an on-time delivery rate of 99% or higher.
Revenue from Misumi Group’s die components business was JPY79.1bn in FY03/23. It boasts the top market share among
global mold and die component manufacturers (at roughly 12%; company estimates). Because it essentially only sells
standard die components, Misumi Group competes with Punch Industry in the area of standard products but not specialorder products. Misumi Group’s plastic mold component lineup includes ejector pins, sprue bushings, parting lock sets,
and taper pins. Its press die component lineup includes punches, button dies, guide pins, and gas springs. It lists its
standardized components in catalogs, from which customers can place orders simply by selecting dimensions andspecifications of components. In 2012, Misumi Group acquired US-based mold and die components manufacturers(Dayton Progress and Anchor Lamina America, the components business arm of Anchor Danly).
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Misumi Group’s factory automation business generated revenue of JPY121.9bn in FY03/23. Here, it manufactures
standardized components for automation machinery used in factory automation and other production systems. Its factory
automation standardized mechanical components include shafts, timing pulleys, linear bushings, and flat belt conveyors.
Other products in the segment include automatic stage units, actuators, optical measurement devices, and opticalwaveguide alignment devices.
Revenue from the VONA (third-party product distribution) business was JPY172.1bn. The product offerings in this businessinclude sensors and switches, couplings, screws, bolts, nuts, castors, connectors, cables, transformers, end mills,
wrenches, milling chips, calipers, carts, work gloves, and parts cleaners. It sells a wide range of its own and third-party
products related to plants and manufacturing. According to company data, Misumi Group sells the products of over
3,000 manufacturers in Japan, making it the largest domestic player. It has built online platforms rooted in each region
worldwide, with sites in 12 languages serving 16 countries.
Misumi Group generated 53.7% of revenue overseas in FY03/23. By region, it generated JPY68.9bn of revenue in
China, JPY56.2bn in Asia outside China, JPY42.5bn in the US, JPY24.3bn in Europe, and JPY8.6bn in other regions. By
setting up local subsidiaries, the company entered the Taiwan market in 1987, followed by the US in 1988, Singapore in
1994, Hong Kong in 1995, Thailand in 1997, South Korea in 1999, Germany in 2003, China in 2003, Malaysia in 2006,
Vietnam in 2006 (through a sales office), India in 2009, and Italy in 2010.
Misumi Group is aggressively investing in growth and actively promoting a shift to digitalization (making IT-related outlaysof JPY8.7bn in FY03/23). One of the strengths of the company’s online sites is the ability to search 80 sextillion (80bn x1tn) product variations via its online catalogs. Its website notes that Misumi Group receives more than 90% of orders
online. It launched a service in 2016, called meviy, that offers immediate quotations and as fast as one-day shipment bysimply uploading product design data (3D-CAD data). Company data reports that revenue from the meviy platform grew
to about JPY3.5bn in Q4 FY03/22. Misumi Group also offers RAPiD Design, a 3D-CAD data library software package forcomponents used in production and automation facilities and equipment, as well as MiSUMi FRAMES, a software platformthat allows users to intuitively design and order aluminum casings with simple mouse operations.

Comparison of Punch Industry and Misumi Group’s die components business
FY03/13

Punch Industry

Misumi Group’s die
components business

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

FY03/23

CAGR/Average

Revenue

25,041

29,43734,39336,75636,64941,02540,93635,34932,46239,35942,8005.5%

Operating profit

708

1,162

1,724

1,987

1,991

2,844

2,579

836

1,613

3,042

2,437

13.2%
5.1%

Operating profit
margin

2.8%

3.9%

5.0%

5.4%

5.4%

6.9%

6.3%

2.4%

5.0%

7.7%

5.7%

Revenue

37,02056,30964,737

69,732

69,79776,52376,44372,413

66,871

75,10879,125

7.9%

Operating profit

2,501

3,288

4,279

3,464

3,097

5,869

6,109

5,009

4,930

9,542

8,723

13.3%

Operating profit
margin

6.8%

5.8%

6.6%

5.0%

4.4%

7.7%

8.0%

6.9%

7.4%

12.7%

11.0%

7.5%

Source: Shared Research based on company data

The CAGR for revenue during FY03/13–FY03/23 is 5.5% for Punch Industry and 7.9% for Misumi Group. In 2012,
Misumi Group acquired US-based mold and die components manufacturers (Dayton Progress and Anchor Lamina
America, the components business arm of Anchor Danly). This accounts for the spike in revenue in FY03/14. Over thesame period, the CAGR for operating profit is 13.2% for Punch Industry and 13.3% for Misumi Group, while average
OPM is 5.1% for Punch Industry and 7.5% for Misumi Group. Since it specializes in standard products and online sales,
Shared Research thinks Misumi Group’s higher OPM reflects lower manufacturing and sales costs.
Comparing the mold and die business, prices of Punch Industry’s standard products are on a par with or slightly lower
than that of Misumi Group, while there is no difference in terms of quality or delivery times. Misumi Group also handles
about 90% of the lineup of standard products that Punch Industry handles. The companies used to compete on prices, butneither is currently engaged in fierce price competition. In terms of sales, Misumi Group specializes in standard products
and in-person visits to customers are rare. Punch Industry is distinct in that its sales staff personally visit customers to takeorders. There is no competition between the companies in the special-order products business. The company dominates
the field here, with its ability to gauge customer needs that standard products cannot meet and offer the original productsthat customers demand.
Other competitors in Japan include Honeston (unlisted, FY2019 revenue of around JPY3.8bn), Takano (unlisted), andChampion (unlisted, FY2017 revenue of around JPY2.0bn). In the area of special-order products, larger mold- and dierelated companies and small and medium-sized plants based in regional towns sometimes make the components they needin-house or take small-lot orders from customers, in which case they compete with one another. (In some cases, they produce
only a single product, which makes accurate estimates of the degree of competition difficult.)

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Competitors in China include Jouder Precision Industry (SZSE: 300549; FY12/22 revenue of CNY396.7mn), Beijing Shimao
Machinery Electronics & Technology (unlisted), and BYTE CCM (unlisted). The company considers that there are few largescale competitors. Competitors in other regions include Husky Injection Molding Systems (unlisted) in Canada, Lung Kee
Bermuda Holdings (HKEX: 255, FY12/22 revenue of HKD1.6bn) in Hong Kong, and HASCO Hasenclever (unlisted) in
Germany.

Results of listed mold- and die-related companies
Name

TickerMisumiGroup

TSE Prime:
9962

Fuji Die

TSE Prime:
6167

Sanko Gosei

TOWA

Punch
Industry

TSE Prime:
7888
TSE Prime:
6315
TSE Prime:
6165

OperatingprofitmarginROE

Equity ratio(JPYmn) (JPYmn)

(%)

(%)

(%)

FY03/23

373,151

46,615

12.5%

11.7%

82.3%

FY03/22366,160

52,210

14.3%

14.8%

79.8%

FY03/21

310,719

27,199

8.8%

7.8%

80.0%

FY09/22

16,874

1,113

6.6%

4.1%

76.1%

FY09/21

14,247

96

0.7%

2.5%

79.4%

FY09/20

17,426

875

5.0%

3.3%

76.4%

FY05/23

81,113

3,484

4.3%

8.7%

38.9% Manufactures and sells plastic molded products and molds and dies used in automobiles, home

FY05/2265,661

2,543

3.9%

8.4%

FY05/2155,145

2,411

4.4%

6.8%

39.1% appliances, telecommunications equipment, etc. Mold and die products account for about 20% of
35.8% revenue

FY03/23

53,822

10,037

18.6%

16.7%

64.3%

FY03/2250,666

11,505

22.7%

22.6%

57.1%

FY03/2129,706

3,618

12.2%

9.2%

60.2%

FY03/23

42,799

2,436

5.7%

7.9%

62.4%

FY03/22

39,358

3,041

7.7%

14.2%

56.5%

FY03/2132,462

1,613

5.0%

4.0%

50.2%

Fiscal year

Revenue

OperatingprofitOverview

Manufactures factory automation and die components (standard products only); distribution offactory automation and die components. Die components generate about 20% of total revenue
Manufactures and sells dies, plugs, tools, and molds using cemented carbide. Mold and die
products account for about 25% of revenue

Manufactures and sells precision molds for semiconductor manufacturing and molding
equipment. Mold products account for about 20% of revenue

Source: Shared Research based on respective company data and Bloomberg data

Compared to the 9.5% average OPM of the four other mold- and die-related companies over the past three years, Punch
Industry’s OPM is slightly lower, at 6.1%. The disparity reflects the higher weight of the other companies in higher-margin
business segments outside the mold and die business, such as Misumi Group’s factory automation business and TOWA’s
semiconductor equipment and fine plastic mold businesses. Average ROE for the past three years is 9.7% for the four
companies, but 8.7% for Punch Industry.
Other listed companies in Japan that manufacturer molds and dies and their components but generate less than 20% of total
revenue in these areas are as follows.
Mitsui High-tec (TSE Prime: 6966), Press Kogyo (TSE Prime: 7246), Aichi Steel (TSE Prime: 5482), Tazmo (TSE Prime:6266), Enomoto (TSE Prime: 6928), Nifco (TSE Prime: 7988), J-MAX (TSE Standard: 3422), Pegasus (TSE Prime: 6262),
and Rhythm (TSE Prime: 7769).

Barriers to entry
Barriers to entry into the mold and die components business include the need for expensive equipment and the need tosecure highly skilled processing technicians. This does not apply to small-lot production, however, which can be handled by asmaller group of technicians and less equipment and so does not make entry very difficult (thus the proliferation of small andmedium-sized businesses). In this context, Punch Industry is working to enhance customer convenience for its standard
products, including by developing new products that meet customer needs, enabling online ordering, and responding
flexibly to delivery deadlines. The company is also actively working to pare down manufacturing costs in an effort to heighten
its competitiveness. In terms of special-order products, the company’s competitive edge lies in its ability to support detailed
custom specifications for a large number of items and its mass-production capabilities. The company aims to further set itself
apart by strengthening its comprehensive production framework backed by advanced technological capabilities and its handson sales approach.

Alternatives
In some cases, companies in manufacturing sectors and mold and die manufacturers have shifted to the in-house productionof mold and die components. In particular, small and medium-sized mold and die manufacturers in Japan have seen longterm contraction in their work loads, and there was a growing tendency for companies to bring mold and die component
production in-house to maintain utilization levels at their facilities. However, the size of molds and dies and the size of theircomponents is fundamentally different, making in-house component production inefficient due to losses at the time of
repurposing their facilities. Moreover, even if a company starts making mold and die components in-house, when production
volume for its molds and dies resumes, it will often pull out of component manufacturing. Punch Industry says the fullfledged entry of new competitors is thus not expanding. Furthermore, one of the company’s strengths is in the processing of

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round products. Despite requiring a great deal of specialized equipment, round components make up a small proportion of
the entire range of mold and die components. This makes the in-house production of round products challenging, and evenif other companies seek to do so, they often buy the company’s products as blanks. For these reasons, many companies do
not attempt to produce components entirely in-house.

Strengths and weaknesses
Strengths
The company has established the top spot in the global special-order product market
through its precision processing technology and production framework, supported by acorps of highly skilled technicians operating a large pool of machinery and equipment,
and a network of sales offices from which staff personally visit customers.
Since molds and dies are made for different end products, they all have unique shapes and sizes. Many are unable to becompleted using standard products alone (in many cases their shapes, size, dimensions, materials, and other specifications
are unsuited to standard products). Thus, even if a customer tries to customize a standard product, if the required processing
is technically out of reach or manufacturing costs cut into its profitability, it faces the need to special-order the product.
Unlike products that are mass-produced on a line, manufacturing special-order products according to customer design
drawings requires minute processing in increments of 0.01mm or 0.001mm. This requires a large corps of highly skilled
technicians operating a large pool of machine tools and measuring and inspection equipment. Shared Research considers
Punch Industry to have no competitors of similar size with a comparable corps of technicians (2,800) or comparable
machinery and equipment (2,000 units). The company also has 11 sales offices in Japan and 40 offices overseas, from which
its global sales staff personally visit customers to identify and address their special-order product needs. They listen carefully
to customers’ technical issues and formulate proposals to meet their needs, including the most appropriate product,
customization (i.e., size, length, hardness, surface treatment, materials used, processing method), and total cost. The
company’s sales staff thus have a high level of technical knowledge about molds and dies.
Furthermore, outside Japan, Punch Industry has capitalized on its group technical capabilities and capital strength as aleading mold and die components manufacturer to provide training for locally hired staff. The technical level of overseas
technicians and sales staff is now on a par with personnel in Japan (the level is especially high in China). The company’s maincompetitor, Misumi Group, specializes in the online sales of standard products, and there are no other companies ofcomparable scale that make in-person sales calls for special-order products. The trust Punch Industry gains through this handson sales approach has the further benefit of feeding into orders for its standard products. The company has established far
and away the dominant position in the special-order product market. Shared Research believes this position is underpinnedby the company’s advanced precision processing technology supported by its large corps of technicians and large pool ofmachinery and equipment, as well as the global network of sales offices pursuing this hands-on sales outreach.

Through a training framework that includes the in-house training facility Punch Academy,
the company can pass on skills to younger technicians, give hands-on training to sales
staff on customer molds and dies and its own mold and die components, and provide
ongoing education to other employees.
The company established Punch Academy as a staff training facility, equipped with facilities for the hands-on training of newhires, ongoing training based on job position, training to instill new skills, and staff development and technical training forsales representatives. Veteran employees who are at the age of stepping back from the front lines serve as instructors,
training the next generation of workers. This enables the company to pass down the precision manufacturing skills that form
the core of its skills base to subsequent generations. Also, in taking orders, the company’s sales representatives have to put
together complex proposals, listening to customers’ technical issues and determining the most appropriate product toaddress the issues (type of product and material used), consider customization (i.e., of size, hardness, treatment, processing
method), and estimate total cost. For this reason, sales staff receive hands-on training in processing using actual machineryand equipment at the plant before taking on their sales assignment, acquiring specialized knowledge on the structure ofmolds and dies, the role of the company’s products, and the various kinds of customization available, among other things.
In addition to education for new hires, the company conducts ongoing production and quality education based on job
position. Punch Academy offers more than 40 courses annually. The company also shares information on educational

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methods and curriculum with overseas subsidiaries and other group companies, seeking to raise the level of educationgroup-wide. China has been a particular focus. When the company first entered the market there, it put in place a program
to bring Chinese technicians over to Japan every year, training them for one year and sending them back. This has raised theoverall technical capabilities of local staff in China.
Competitor Misumi Group does not engage in the manufacture of special-order products, and its die components businessaccounts for only about 20% of revenue. It also focuses its education on areas such as automation equipment and new digitaltechnologies, and Shared Research recognizes that Misumi Group does not offer the same level of specialized mold and die
component education as Punch Industry does. Shared Research also understands that many of the other competitors are
smaller companies, and none of them maintains a comparable educational framework. Shared Research sees the company’s
educational framework—which enables highly skilled technicians to pass down its distinctive mold and die componentrelated manufacturing technology cultivated over many years to younger technicians while also being able to retrain other
employees—as a major strength for the company.

Having been first off the mark to enter the Chinese market and having subsequently
expanded its manufacturing and sales network there, the company now boasts thenumber one share of the growing Chinese market, serving 8,000 customers.
China has achieved rapid economic growth since around 2000 and established itself as the manufacturing center of theworld. In terms of global production value, China is currently the world’s largest mold and die producer (generating about
40% of global mold and die output in 2019). In 1990, Punch Industry was one of the first Japanese manufacturers to go into
China and establish a local subsidiary (Misumi Group entered the Chinese market in 2003). Initially, the company
positioned the subsidiary as a manufacturing base, and every year brought several dozen technician trainees over to Japan toacquire advanced technical skills and hone their technical capabilities. China’s joining of WTO in 2001 made it possible forcompanies with foreign capital to sell molds and dies there. The company took advantage of this to reinforce both its
manufacturing and sales network. Customers in China tend to opt for customized products, which they use to make productswith the potential to tap into new markets. Honing technical capabilities and capturing demand for special-order products
from Chinese customers became the source of the company’s growth in China.
As of March 2023, the company has established six manufacturing bases in China, including in Dalian, Wafangdian, Wuxi,
and Dongguan, and 34 sales bases, including in Shanghai, Beijing, and Guangzhou. The company now boasts the number
one (about 10%) share of the Chinese mold and die components market, serving 8,000 customers. Outside of China, inSoutheast Asia, the company established local subsidiaries in India in 2010 and in Malaysia, Singapore, and Vietnam in 2013,
followed by a joint venture in Indonesia in 2013 and a sales subsidiary in the US in 2016. Currently, the company generates
64% of revenue overseas. China accounts for 53% of total revenue and other regions account for 11%.
As companies in Japan have increasingly shifted manufacturing offshore, and under the impact of an aging population, labor
shortages, the lack of successors, and economic deterioration, the number of small and medium-sized mold and die
manufacturers in Japan is shrinking. Mold and die production value in Japan has been in long-term decline as a result, fallingfrom JPY1.96tn in 1991 to JPY1.48tn in 2021. Punch Industry was out in front of other companies in shifting the focus of its
growth to China. By harnessing its robust capital strength relative to other mold- and die-related manufacturers and pursuingongoing technology transfers between Japan and China, the company has established a solid base for manufacturing, sales,
and customer outreach in China, and now boasts the top share of the market there. Shared Research believes this overseas
business base, centered on China, is a strength for the company.

Weaknesses
Training up skilled technicians takes a significant amount of time, and the company’s
tardiness in rolling out state-of-the-art machine tools, robotics, and automated machinery
has slowed the growth of the business.
In the company’s manufacturing, each technician is in charge of a given facet of processing for decades, and the sense ofcraftsmanship acquired through the continued use of specific machinery and equipment underpins the kind of processingthat requires precision in fractions of millimeters. This lies behind the company’s focus on passing down skills, such as
through the Punch Academy. However, it takes years to train a new employee into a highly skilled technician (the company
says about five years of experience.) Punch Industry hires 10–20 new employees each year. However, many of its plants arelocated in regional areas, and the shrinking population of young people in those areas hinders increased hiring. The
company also loses a certain number of employees every year as they retire, and headcount has trended downward since
FY03/18, from 4,298 to 3,923 in FY03/23. Shared Research thinks the slow pace of the company’s business development
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stems from difficulty in recruiting new employees and the time it takes to train them, which prevents it from covering thedecline in technician headcount due to retirement.
Moreover, although advances in tools and tool materials have driven advances in mechanical techniques for cutting andpolishing, since the company has stressed the manual work skills of technicians, it lags behind somewhat in capitalizing on
the latest machinery and equipment (especially for cutting). The company says it also plans to use robotics and automatedmachines in its manufacturing process, and to this end plans to capitalize on the factory automation capabilities of ASCe,
which is why it acquired this subsidiary.
Competitor Misumi Group, which specializes in standard products that allow efficient manufacturing, has a CAGR forrevenue in its die components business of 7.9% since FY03/13, compared to 5.5% for the company (note that Misumi Group
has also scaled up this business through acquisitions). Shared Research believes that constraints on technician headcount anddelays in the use of automation and state-of-the-art machinery are hindering the pace of the company’s businessdevelopment.

The company was slow to expand into online sales of standard products, thus ceding
market share to early-bird competitors.
Misumi Group, which competes with Punch Industry in the area of mold and die components, is aggressively promoting ashift to digitalization (making IT-related outlays of JPY8.7bn in FY03/23). Its online sites allow users to search 80 sextillion(80bn x 1tn) product variations and generate more than 90% of its orders. It has built online platforms rooted in each region
worldwide, with sites in 12 languages serving 16 countries. It also launched a service called meviy that offers immediate
quotations and as fast as one-day shipment by simply uploading product design data (3D-CAD data). Revenue from the meviy
platform had grown to about JPY3.5bn in Q4 FY03/22.
Punch Industry generates about 60% of revenue from special-order products, which entail an in-person sales process. The
remaining 40% comes from standard products. Since about 70% of orders for standard products come in through the online
platform, this suggests that online orders generate about 30% of total revenue. In China, which accounts for more than halfof total revenue, the company’s migration to an online platform has been slow, and online orders still only represent around
20% of the total there. The company only added standard essential functions like a product search and a shopping cart to its
online sites in January 2023. Furthermore, the upgrade of the Chinese platform is still down the road.
Revenue from the die components business of Misumi Group, which has the top share of this market, had grown to
JPY79.1bn in FY03/23, nearly double that of Punch Industry. There is no difference between the two companies in terms of
the quality of standard products, and Punch Industry’s prices tend to be slightly lower. Shared Research thus believes that
Misumi Group’s success in gaining market share lies in part in its development of an online platform, supported by extensive
IT outlays, which has given it a significant leg up in terms of functionality, product variation, and global access. Furthermore,
down the road, the use of AI and augmented reality and automated machines may enable the selection of molds and diesand precision processing without human intervention. In such a future, Shared Research believes the expansion of online
sales of standard products could have a constraining effect on the company's growth.

The company lags behind competitors in the factory automation business, which it has
positioned as a growth area in the current medium-term business plan.
The company entered the factory automation component business after building its Chiba plant in 1996 to make standard
components for factory automation applications. It later withdrew from the standard product aspect of this business in 2011
after struggling with fierce price competition in Japan, choosing instead to focus on special-order components for factory
automation, an area in which it could better leverage its strengths. However, the current medium-term business plan projects
continued growth going forward in the factory automation sector, and the company has again made this business a strategic
focus. It aims to expand revenue from the factory automation business from JPY2.7bn in FY03/22 to JPY5.0bn in FY03/25.
(The focus of growth will be Punch Industry’s own special-order factory automation products and the products of ASCe, thecompany Punch Industry acquired, which mainly designs and manufactures factory automation equipment).
Competitor Misumi Group started out in the same plastic mold and press die components field as the company and later
expanded into the factory automation business (mainly standard products), which generated revenue of JPY121.9bn in
FY03/23. Misumi Group offers a wealth of standardized mechanical components for factory automation as well as locator
devices and measurement equipment. It also provides 3D-CAD data library software for factory automation designers.
At present, the factory automation business represents only a fraction of Punch Industry’s total revenue, but the factory
automation market itself is growing, fueled by the need to address labor shortages, achieve labor saving, boost productivity,
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and deal with rising personnel costs. The factory automation market is poised for continued worldwide growth. Having
withdrawn early on from manufacturing standard products, the company’s revenue in the factory automation business has
been sluggish, while its closest competitor has achieved significant growth in this area. Shared Research sees the company’s
lagging behind in the growing factory automation market, even as a competitor that started out in the same business has
been expanding revenue here, as a weakness. (Punch Industry is seeking to build market share in special-order factory
automation products, an area that Misumi Group is not focused on.)Punch Industry 6165
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Financial statements
Income statement
Income statement

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

FY03/23(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Revenue

29,43734,39336,75636,64941,02540,93635,34932,46239,35942,800

YoY

17.6%

16.8%

6.9%

-0.3%

11.9%

-0.2%

-13.6%

-8.2%

21.2%

8.7%

21,77625,031

26,57826,45729,367

29,464

26,161

23,37527,914

31,169

YoY

15.2%

14.9%

6.2%

-0.5%

11.0%

0.3%

-11.2%-10.6%

19.4%

11.7%

Cost ratio

74.0%

72.8%

72.3%

72.2%

71.6%

72.0%

74.0%

72.0%

70.9%

72.8%
11,631

Cost of revenue

Gross profit

7,661

9,362

10,178

10,192

11,658

11,472

9,187

9,087

11,445

YoY

24.9%

22.2%

8.7%

0.1%

14.4%

-1.6%

-19.9%

-1.1%

26.0%

1.6%

Gross profit margin

26.0%

27.2%

27.7%

27.8%

28.4%

28.0%

26.0%

28.0%

29.1%

27.2%

6,499

7,638

8,191

8,201

8,815

8,893

8,352

7,474

8,403

9,194

YoY

19.8%

17.5%

7.3%

0.1%

7.5%

0.9%

-6.1%

-10.5%

12.4%

9.4%

SG&A ratio

22.1%

22.2%

22.3%

22.4%

21.5%

21.7%

23.6%

23.0%

21.4%

21.5%

SG&A expenses

Operating profit

1,162

1,724

1,987

1,991

2,844

2,579

836

1,613

3,042

2,437

YoY

64.1%

48.4%

15.2%

0.2%

42.8%

-9.3%

-67.6%

93.0%

88.5%

-19.9%

Operating profit margin

3.9%

5.0%

5.4%

5.4%

6.9%

6.3%

2.4%

5.0%

7.7%

5.7%

143

105

124

150

136

140

121

294

130

Non-operating income
Non-operating expenses

169

258

213

444

267

248

172

243

231

164

211

1,047

1,617

1,667

1,874

2,732

2,547

713

1,677

3,008

2,394

YoY

27.3%

54.4%

3.1%

12.5%

45.7%

-6.8%

-72.0%

135.1%

79.4%-20.4%

Recurring profit margin

5.6%

Recurring profit

3.6%

4.7%

4.5%

5.1%

6.7%

6.2%

2.0%

5.2%

7.6%

Extraordinary gains

13

8

7

3

6

4

5

83

6

16

Extraordinary losses

63

13

18

47

221

901

3,337

745

166

335

Income taxes
Implied tax rate
Net income attributable to owners of the parent
YoY
Net margin

277

429

411

460

726

687

866

536

802

678

27.8%

26.6%

24.8%

25.1%

28.8%

41.6%

-33.1%

52.8%

28.2%

32.7%

721

1,188

1,249

1,376

1,789

960

-3,486

478

2,041

1,390

238.0%

64.9%

5.1%

10.1%

30.0%

-46.3%--

327.2%-31.9%

2.4%

3.5%

3.4%

3.8%

4.4%

2.3%

-

1.5%

5.2%

3.2%

Source: Shared Research based on company data

In terms of forex impact, the company generates significant revenue from its Chinese business, and if the yuan appreciates,
profits from Chinese subsidiaries increase on a yen basis. However, the company says the forex impact on operating profit is
not significant, as margins on products exported from China deteriorate to the same degree.

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Balance sheet
Balance sheet(JPYmn)FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

FY03/23

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

AssetsCash and deposits

1,528

3,303

3,236

3,280

3,771

3,580

3,390

4,092

4,816

5,213

Notes and accounts receivable

9,433

11,614

10,615

11,46812,096

10,989

9,943

9,630

11,235

11,379Inventories

4,426

4,664

4,229

3,965

4,791

5,041

3,341

3,992

3,721

3,787

Deferred tax assets

308

326

251

297

-

-

-

-

-

-

Other

173

239

217

409

606

407

298

429

485

485

Allowance for doubtful accounts

-115

-105

-164

-92

-57

-79

-68

-55

-48

-40

Total current assets

14,66819,37017,87619,15020,842

19,55917,792

18,061

21,28022,078

Buildings and structures

2,095

2,079

1,942

2,075

1,979

2,302

1,729

1,521

1,765

1,771

Machinery, equipment, and vehicles

3,930

4,744

4,457

5,320

5,624

5,891

3,835

3,254

3,607

3,893

Tools, furniture, and fixtures

298

374

361

393

531

562

509

410

433

459

Land

832

836

825

821

825

822

777

775

779

830

Construction in progress

33

133

110

54

976

385

231

61

168

Other

424

3

2

6

4

10

54

173

261

200

7,612

8,169

7,697

8,669

9,939

9,972

7,135

6,195

7,013

7,315

Goodwill

914

880

602

482

437

342

-

-

-

467

Other

886

910

720

761

721

659

345

175

178

229

Total intangible assets

1,799

1,790

1,322

1,243

1,158

1,002

345

175

178

695

Deferred tax assets

210

120

192

196

410

391

116

111

119

202

Other

182

175

251

194

212

231

189

161

185

Total tangible fixed assets

Investments and other assets

161

166

392

296

443

390

621

622

305

272

304

368

Total fixed assets

9,803

10,254

9,462

10,302

11,718

11,596

7,784

6,642

7,494

8,378

Total assets

24,471

29,62427,33829,45232,561

31,15525,577

24,703

28,77430,456

3,426

4,099

3,860

4,288

3,625

2,914

2,640

2,343

2,739

2,667

972

1,235

1,020

955

1,078

999

3,730

4,326

3,149

3,325

2,486

2,039

Liabilities
Notes and accounts payable
Electronically recorded obligations
Short-term debt

5,304

Income taxes payable

145

4,849

204

249

271

384

397

1,878

2,686

2,385

2,381

3,593

2,382

1,954

2,291

2,897

2,698

12,312

10,451

11,725

12,65011,531

9,280

9,455

10,001

9,181

Long-term debt

2,440

2,307

1,794

2,461

2,152

2,342

2,927

1,252

908

676

Long-term borrowings

2,440

2,307

1,794

2,461

2,152

2,342

2,927

1,252

908

676

Retirement benefit liability

738

523

859

909

966

979

1,080

1,084

1,145

1,244

Other

210

4,346

11,372

Other
Total current liabilities

238

3,551

232

220

558

276

234

181

522

476

449

476

413

303

Total fixed liabilities

3,736

3,106

2,887

3,551

3,736

3,890

4,549

2,811

2,466

2,223

Total liabilities

15,10815,41813,33815,276

16,386

15,421

13,82912,266

12,467

11,403

Capital stock

1,572

2,898

2,898

2,898

2,898

2,898

2,898

2,898

2,945

3,406

Capital surplus

1,301

2,627

2,627

2,627

2,627

2,627

2,631

2,591

2,512

2,968

Retained earnings

5,096

6,155

7,062

8,156

9,655

10,167

6,539

7,017

9,058

10,102

Net assets

Treasury stock
Accumulated other comprehensive income
Share subscription rights

-

-

-

-83

-83

-192

-155

-150

-136

-95

1,386

2,520

1,402

569

1,052

186

-210

44

1,886

2,627

-

Non-controlling interests

-

-

4

18

38

33

27

26

21

9

5

11

6

8

9

10

10

17

24

Total net assets

9,363

14,205

13,99914,176

16,175

15,734

11,747

12,436

16,307

19,053

Working capital

9,348

11,508

10,476

10,968

11,924

11,503

10,512

10,297

12,20912,753

Total interest-bearing debt

7,744

7,156

5,345

6,807

5,882

6,668

6,076

4,576

3,394

2,715

Net cash-6,216-3,853-2,109-3,527-2,111-3,089-2,686

-484

1,423

2,498

Source: Shared Research based on company data

Assets
Notes and accounts receivable make up half of current assets. This reflects the fact that the company’s average collection
sights (payment deadlines) are somewhat long, two months in Japan and four months in China. (Many mold and die
manufacturers are small and medium-sized businesses, and sights tend to be somewhat long.) Since lead times are short, thecompany does not keep a great deal of product inventory and manages its own credit. Therefore, it has almost no bad debt.
Tangible fixed assets consist mainly of plant structures, equipment, and tools. Asset impairment losses in recent years include
JPY848mn on fixed assets for the Vietnam plant in FY03/19, and in FY03/20, impairment losses totaling JPY3.3bn on fixed
assets at the Kitakami and Miyako plants in Japan and the plant in Vietnam and on goodwill at the Malaysian subsidiary. These
impairment losses have caused roughly a JPY800mn decrease in depreciation starting in FY03/21 versus the previous level.
The company holds few investment securities. When starting up operations in a new region or a new business, Punch
Industry has a corporate culture of creating a company on the ground with its own capital rather than investing in a joint
venture or making use of venture capital.

Liabilities
Interest-bearing debt decreased from JPY9.0bn in FY03/13 to JPY2.7bn in FY03/23, reflecting improvement in the financial
position. This is what prompted the company to set new payout ratio and dividend on equity ratio targets in January 2023.

Shareholders’ equity
The company targets an equity ratio of 60%. It issued JPY1.7bn in new shares in March 2014 and JPY2.7bn in March 2015.
The company also issues stock acquisition rights other than its stock option system, with the latest issue being in January
2022. (This was the fourth such issue, which raised JPY1.3bn. The rights exercise was completed in January 2023.) The

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company bought back JPY36mn of its own shares in November 2016 and JPY117mn in November 2018 (to ensure a flexible
capital policy and for use in covering stock option compensation).

Cash flow statement
Cash flow statement

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

FY03/23(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cash flows from operating activities (1)

1,195

1,805

3,187

1,785

3,394

3,185

2,490

2,943

2,941

2,560

Pre-tax profit

997

1,612

1,656

1,830

2,516

1,650

-2,619

1,014

2,848

2,075

Depreciation

1,170

1,316

1,433

1,407

1,597

1,730

1,675

969

972

1,130

46

97

89

76

75

78

75

-

-

25
298

Amortization of goodwill
Impairment losses

-

-

-

-

-

849

3,314

730

160

Change in retirement benefit liability

6

13

11

103

87

76

77

56

61

47

Change in provision for bonuses

52

81

6

32

18

-25

-201

3

128

-22

Change in provision for doubtful accounts

22

-25

18

25

-101

15

-16

-35

-17

12

Interest and dividend income

-21

-22

-34

-35

-46

-33

-44

-43

-53

-61

Interest expenses

141

111

92

89

105

133

163

107

54

62

Foreign exchange losses (gains)

-45

431

338

230

-195

113

47

-43

1

74

Change in trade receivables-313-1,143463-1,671

-212

440

777

434

-287

464

Change in inventories-150

Change in trade payables

-357

109

-279

-538

-444

343

277

-417

83

-167

182

46

616

205

-299

-296

-251

26

-566

Change in accounts payable - other, and accrued
expenses

-

680

-441

251

365

-393

-236

281

168

-276

Subsidies for employment adjustment

-

-

-

-

-

-

-5

-180

-21

-

-594

-916

-612

-932

-713

-734

-583

-297

-682

-784
-1,547

Other
Cash flows from investing activities (2)-1,252-1,180-1,159-2,770-2,336-3,253-1,789-670-1,100Net change in time deposits

-17

21

-

-10

-71

18

39

-106

-17

147

Purchase of tangible fixed assets-461-1,129-1,001-2,519-2,165-3,071-1,770-503-999-1,139Proceeds from sale of property, plant and equipment

360

14

15

11

10

32

7

10

11

12

Purchase of intangible assets

-113

-110

-126

-306

-113

-218

-83

-81

-73

-148

Other

-1,021

24

-47

55

4

-14

18

10

-21

-419

-58

625

2,028

-985

1,058

-68

702

2,273

1,842

1,014

Cash flows from financing activities

-370

1,014

-1,902

1,200

-739

74

-772

-1,685-1,601-756

Net change in short-term borrowings-1,846

-744

-922

556

-308

586

-1,405-338-412

Depreciation and amortization of goodwill(A)

1,216

1,414

1,522

1,483

1,672

1,808

1,750

969

972

1,155

Capital expenditures(B)-574-1,239-1,127-2,826-2,279-3,289-1,853-584-1,073-1,287

Change in working capital(C)

2,368

2,160

-1,032

492

1,928

-158

-1,206

-279

2,035

465

Simple FCF(NI+A+B-C)-1,006

-797

2,676

-459

-746

-363

-2,383

1,142

-95

793

Free cash flow (1+2)-668

Source: Shared Research based on company data

Cash flows from operating activities
With the exception of FY03/20, the company generally records stable cash flows from operating activities due to its
generally stable pre-tax profit and depreciation. The company incurred sizeable asset impairment losses in FY03/20,
resulting in a pre-tax loss. However, the impairment losses did not involve cash outlays, and were added back into operating
cash flow.

Cash flows from investing activities
The company continues to use cash for investing activities at a level of JPY1.0bn–JPY3.0bn, for ongoing investments in plantfacilities and machinery. It has not spent cash to acquire investment securities.

Cash flows from financing activities
The company continues to use cash for financing activities in line with its decrease in borrowings, as it has continued to draw
down interest-bearing debt.

Historical earnings
Full-year FY03/23 results
Summary
Revenue: JPY42.8bn (+8.7% YoY)
Operating profit: JPY2.4bn (-19.9% YoY)
Recurring profit: JPY2.4bn (-20.4% YoY)
Net income attributable to owners of the parent: JPY1.4bn (-31.9% YoY)
Revenue was JPY42.8bn (+8.7% YoY). With COVID-19 under control, economic activities resumed. Revenue also
benefited from forex gains due to the yen's depreciation, growing YoY in all regions.

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Gross profit was up 1.6% YoY to JPY11.6bn, but the gross profit margin was down 1.9pp to 27.2%. Although the company
raised selling prices, purchasing costs increased by a wider margin, causing the cost ratio to deteriorate. The surge in raw
material prices had wound down, but the prices are still on an uptrend. The company raised prices of standard products in
FY03/23 to pass through the cost increase, but this also had the effect of lowering sales volume to a certain degree.
SG&A expenses were up 9.4% YoY to JPY9.2bn. Higher personnel expenses accompanying revenue growth accounted forabout half of the increase in SG&A expenses. Utilities expenses increased on the back of surging electricity costs. In
addition, the company booked M&A-related expenses of about JPY50mn and goodwill amortization of about JPY24mn
related to its acquisition of ASCe. Capital expenditures were JPY1.4bn, up JPY201mn YoY.
Factors behind changes in operating profit: Revenue in the automotive sector in China held firm, providing a JPY1.0bn
boost to profit. The increase in the cost ratio was mainly attributed to soaring raw material and commodity prices, and this,combined with deterioration in profitability of Chinese group companies caused by the appreciation of the Chinese yuan
had a negative impact of JPY814mn on profit (majority of this was due to the impact of strong yuan). The increase in
SG&A expenses—due to higher expenses accompanying revenue growth, the impact of a strong yuan, and expenses
related to acquisition of shares in ASCe and goodwill amortization—pushed down profit by JPY790mn.
ROE was down 6.4pp YoY to 7.9%, and ROIC was down 3.3pp YoY to 8.1%. ROIC was greater than WACC (7.2%), yielding
a positive EVA spread of 0.9%.

Achievement versus full-year company forecast
The achievement rate versus the full-year FY03/23 forecast was 99.3% for revenue, 103.7% for operating profit, 104.1% forrecurring profit, and 123.0% for net income attributable to owners of the parent.

Business environment
The economic activity showed signs of recovery with COVID-19 under control. However, the business environment has
become increasingly harsh due to geopolitical risks and sharp growth in prices of raw materials, energy, and other resources.
The outlook remains clouded by global parts shortages and financial instability in the US and Europe stemming from failuresof US-based banks.

Revenue by region, industry
Revenue was JPY14.1bn in Japan (+0.6% YoY), JPY23.5bn in China (+11.9% YoY), and JPY5.2bn in other regions (+19.7% YoY).
In Japan, revenue in the precision equipment and food-related industries covered for the slump in the automotive industry.
The company posted higher revenue in China, on the back of ongoing strong performance in the automotive sector. Thatbeing said, revenue in China was affected by a temporary shutdown of production facilities due to a resurgence in COVID-19
cases in 2H. Revenue remained strong in other regions, including Singapore, Thailand, Vietnam, and Malaysia. In Europe
and the US, revenue continued to hold firm in the medical and beverages-related sectors.
By industry, the automotive sector accounted for JPY18.1bn of revenue (+10.0% YoY), electronic devices and semiconductors
accounted for JPY7.9bn (-2.2% YoY), consumer electronics and precision equipment accounted for JPY4.3bn (+2.9% YoY), andother sectors accounted for JPY12.5bn (+17.4% YoY). Revenue from the automotive sector was weak in Japan, while they
continued to be robust in China. While orders from Japanese automakers were sluggish, the company saw strong orders
from local automakers in China. Revenue from the electronic devices and semiconductor sector was lackluster, due to a drop
in smartphone-related demand. In consumer electronics and precision equipment, revenue from the consumer electronics
sector was sluggish, while revenue from the precision equipment sector remained brisk. Revenue from the factory
automation business fell 9.4% YoY to JPY2.5bn, due to a falloff of extraordinary demand that supported results in the previous
year. Excluding the impact of the extraordinary demand seen in FY03/22, sales of factory automation products are gradually
growing in tandem with an increase in customer count in Japan.

Other
The company says the transition to the new e-commerce site is proceeding on schedule. It is promoting personnel exchangewith ASCe, and is making plans to jointly exhibit products with ASCe at a trade show. The 3D Measurement Partners service
is gradually building up a sales track record.

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Progress in medium-term management plan
For initiatives to address key management issues set forth in the medium-term management plan, FY03/23 progress waseither in line with or exceeded plan for the following: revenue growth in Southeast Asia and Europe and the US; revenue
growth at the Vietnam plant; improvements in production efficiency; increase in the paid leave use ratio; and an increase in
the share of female managers. Areas where progress fell short of plan included revenue in the factory automation business;the share of orders received online; overseas procurement value; investment in overseas production facilities; revenue
from in-house production in Japan; reduction in total working hours; and capital expenditures. Overall, the company's
progress in executing the medium-term plan was significantly behind, and in addition to making up for the delays, thecompany believes it needs to update the plan, including by adding new growth strategies for the future.

Application for listing on the Standard Market
On May 12, 2023, the company decided to select and apply for listing on the Standard Market of the Tokyo Stock Exchange(TSE). The decision was made following a change in TSE regulations (effective April 1, 2023) that enabled the reselection ofmarket segments.
The Prime Market's listing maintenance criteria require market capitalization of tradable shares of JPY10.0bn. The
company had not satisfied the criterion, with its market capitalization of tradable shares at JPY7.9bn as of end-March
2023. It had, however, met all other criteria.
The company has seen a significant delay in the progress of its current medium-term business plan. In addition torecovering from this delay, the company recognizes the need to update its medium-term business plan to include its
new growth strategy. Accordingly, it has decided to focus its management resources on updating its medium-term planand implementing initiatives under the plan, rather than on meeting the listing maintenance criteria for the Prime
Market. The company has satisfied all criteria for listing on the Standard Market.

Cumulative Q3 FY03/23 results
Summary
Revenue: JPY32.7bn (+11.3% YoY)
Operating profit: JPY2.1bn (-19.0% YoY)
Recurring profit: JPY2.0bn (-22.0% YoY)
Net income attributable to owners of the parent: JPY1.1bn (-38.5% YoY)
Revenue was JPY32.7bn (+11.3% YoY). In addition to a general recovery trend from the pandemic, revenue benefited fromforex gains due to the yen’s depreciation. Revenue grew YoY in all regions.
Gross profit was up 3.1% YoY to JPY9.0bn but the gross profit margin was down 2.2pp to 27.6%. Although the company raised
selling prices for standard products, purchasing costs increased by a wider margin, causing the cost ratio to deteriorate.
SG&A expenses were up 12.2% YoY to JPY6.9bn, increasing in line with revenue growth. Costs were largely in line with
forecast.

Progress toward full-year company forecast
Progress in cumulative Q3 versus the full-year FY03/23 forecast was 75.9% for revenue, 88.7% for operating profit, 86.2%
for recurring profit, and 96.8% for net income attributable to owners of the parent. Results were roughly in line with theforecast as revised downward in December 2022.

Business environment
Restrictions on movement under the pandemic eased, and economic activity showed signs of a recovery. However, theoutlook remains clouded by rising geopolitical risks, soaring prices of raw materials and energy and other resources, global
shortages of components and materials, and the yen’s historic depreciation.

Revenue by region, industry
Revenue was JPY10.6bn in Japan (+1.8% YoY), JPY18.1bn in China (+15.3% YoY), JPY1.5bn in Southeast Asia (+15.2% YoY), andJPY2.5bn in Europe, the US, and other regions (+27.4% YoY). In Japan, overall sales volume was down following the

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company’s October 2022 price hikes (higher unit prices fueled revenue growth but put downward pressure on sales
volume). The company says customer reaction to the January 2023 renewal of its online site has been favorable. It says orders
in China started to slow down in 2H amid lockdowns in Shanghai.
By industry, the automotive sector accounted for JPY13.7bn of revenue (+11.8% YoY), electronic devices and semiconductors
accounted for JPY6.1bn (+0.1% YoY), consumer electronics and precision equipment accounted for JPY3.3bn (+6.1% YoY),
and other sectors accounted for JPY9.6bn (+21.2% YoY). Revenue from the factory automation business was JPY1.8bn (-14.1%
YoY). Lackluster smartphone production dampened recovery in electronic devices and semiconductors. The company says
the automotive business in China is brisk but recovery in Japan is slow.

Other
Punch Industry says the appreciation of the Chinese yuan boosted revenue by JPY3.1bn and operating profit by JPY100mn.
The company recorded an impairment loss of JPY122mn in Q3 as an extraordinary loss (for cumulative Q3 impairment lossesof JPY223mn), mainly for the plant and equipment it holds. The company left its full-year FY03/23 forecast unchanged.

1H FY03/23 results
Revenue: JPY21.7bn (+11.0% YoY)
Operating profit: JPY1.5bn (-13.1% YoY)
Recurring profit: JPY1.5bn (-12.2% YoY)
Net income: JPY906mn (-28.0% YoY)
Revenue in 1H was JPY21.7bn (+11.0% YoY). In addition to recovery from the pandemic, the yen’s depreciation had apositive forex impact and revenue in all regions was up YoY. In particular, products for the automotive sector in China
remained brisk and contributed to higher revenue.
Gross profit was JPY6.0bn (+3.1% YoY). The gross profit margin was 27.9% (-2.1pp YoY). The decline reflects deteriorationin the cost ratio due to the increase in purchasing costs over and above the price increases the company passed on to its
products, as well as deterioration in the profitability of group companies in China due to the yuan’s appreciation.
SG&A expenses were JPY4.5bn (+10.2% YoY). The SG&A ratio was 20.8% (-0.2pp YoY). The increase in SG&A expenses
reflects both higher revenue and the inflation of SG&A expenses at overseas subsidiaries due to exchange rate
fluctuations.
Higher revenue boosted operating profit by JPY643mn, while a higher cost ratio depressed profit by JPY458mn. An
increase in SG&A expenses also reduced operating profit by JPY415mn.

Progress toward full-year company forecast
Progress in 1H versus the full-year FY03/23 forecast was 48.9% for revenue (49.6% versus the full-year result in 1H
FY03/22), 49.6% for operating profit (58.1 %), 49.7% for recurring profit (57.7%) and 49.0% for net income attributable toowners of the parent (61.7%).

Revenue by region
In addition to the trend of recovery from the pandemic, the weaker yen generated a positive forex impact and revenue wasup YoY in all regions. Revenue was JPY7.0bn in Japan (+1.2% YoY), JPY12.1bn in China (+ 16.0% YoY), JPY986mn in Southeast
Asia (+17.2% YoY), and JPY1.6bn in Europe, the US, and other regions (+18.7% YoY). In Japan, higher revenue from precisionequipment and food and healthcare products made up for the slump in revenue from the automotive sector, causing theslight overall increase. In China, the automotive business remained brisk, generating higher revenue. Singapore, Thailand,
Vietnam, and Malaysia were the drivers of revenue growth in Southeast Asia. In Europe, the US, and other regions, brisk
revenue from healthcare products were behind the higher revenue.

Revenue by industry
The automotive sector accounted for revenue of JPY9.1bn (+12.4% YoY), electronic devices and semiconductors for JPY4.1bn(-0.3% YoY), consumer electronics and precision equipment for JPY2.2bn (+7.4% YoY), and other sectors for JPY6.2bn (+19.2%
YoY). In the automotive sector, revenue in Japan was sluggish but remained brisk in China, which caused the overall increase.
Performance in the electronic devices and semiconductors business was sluggish as semiconductor shortages caused a

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slowdown in the production of components, which led to the decrease in revenue. The consumer electronics and precisionequipment business saw higher revenue on the back of continued solid demand for precision equipment. In other sectors,
revenue from the food and healthcare sectors rallied, causing the increase.

Other
In October 2022, the company announced it would acquire a 100% stake in manufacturer ASCe and make this company a
subsidiary. ASCe has strengths in the in-house development of factory automation equipment for sectors including foodprocessing, automotive components, electronic devices, and healthcare. The company says the acquisition will generatesynergies through the effective utilization of both companies’ sales channels and technology exchanges.
In November 2022, the company entered into a distribution agreement with Trusco Nakayama (TSE Prime: 9830). As thefirst stage in the business on the Japan side, the company began taking online orders for 11 items in seven productcategories, including Trusco Nakayama parts and brake cleaners and nitrile gloves. On the China side, the company will
launch sales of all Trusco Nakayama maintenance, repair, and operation products, and will sell products other than mold anddie components to more than 10,000 customers in Japan and China.

Q1 FY03/23 results
Revenue: JPY10.2bn (+10.3% YoY)
Operating profit: JPY706mn (-11.4% YoY)
Recurring profit: JPY698mn (-8.3% YoY)
Net income: JPY428mn (-18.7% YoY)
Revenue was JPY10.2bn (+10.3% YoY). Revenue in all regions was up YoY buoyed by the recovery trend from thepandemic. In particular, performance of products for the automotive sector in China remained brisk, contributing torevenue growth.
Gross profit was JPY2.9bn (+4.9% YoY). The gross profit margin was 28.3% (-1.4pp YoY). The lower gross profit marginreflected deterioration in the cost ratio due to the increase in purchasing costs over and above the price hikes thecompany passed on to its products, as well as deterioration in the profitability of group companies in China due to theyuan’s appreciation.
SG&A expenses were JPY2.2bn (+11.5% YoY). The SG&A ratio was 21.4% (+0.3pp YoY). The higher SG&A ratio reflects
both higher revenue and the inflation of SG&A expenses at overseas subsidiaries due to exchange rate fluctuations.
Higher revenue boosted operating profit by JPY283mn, while a higher cost ratio depressed profit by JPY149mn. An
increase in SG&A expenses also reduced operating profit by JPY225mn.

Progress toward full-year company forecast
Progress in Q1 versus the full-year FY03/23 forecast was 23.1% for revenue (24.2% versus the full-year result in Q1
FY03/22), 22.8% for operating profit (26.2%), 22.8% for recurring profit (25.3%), and 23.1% for net income attributable toowners of the parent (25.8%).

Revenue by region
The recovery trend from the pandemic drove a YoY increase in revenue across all regions. Revenue was JPY3.5bn in Japan(+1.2% YoY), JPY5.5bn in China (+14.0% YoY), JPY471mn in Southeast Asia (+19.6% YoY), and JPY717mn in Europe, the US,
and other regions (+28.9% YoY). In Japan, higher revenue from precision equipment made up for sluggish revenue in othersectors, driving the overall increase. In China, the automotive business remained brisk, generating higher revenue.
Singapore, Thailand, and Malaysia were the drivers of revenue growth in Southeast Asia. Exports of products to thehealthcare sector in Europe, the US, and other regions also remained brisk, pushing up revenue.

Revenue by industry
The automotive sector accounted for revenue of JPY4.4bn (+13.0% YoY), electronic devices and semiconductors for JPY1.9bn(-1.0% YoY), consumer electronics and precision equipment for JPY1.1bn (+6.8% YoY), and other sectors for JPY2.8bn (+16.6%
YoY). In the automotive sector, revenue in Japan was sluggish but remained brisk in China, which caused the overall increase.
Revenue from the semiconductor sector remained solid, but semiconductor shortages caused a slowdown in the production

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of electronic components, putting a drag on revenue. Solid performance in the precision equipment sector drove higher
revenue for the consumer electronics and precision equipment business. In other sectors, revenue from the food sector
rallied, fueling the increase.

Revised full-year forecast
Q1 FY03/23, the company revised its 1H and full-year forecasts. The revised 1H forecast calls for revenue of JPY21.7bn(+JPY200mn from the previous forecast), operating profit of JPY1.5bn (-JPY130mn), recurring profit of JPY1.5bn (-JPY120mn),
and net income attributable to owners of the parent of JPY850mn (-JPY220mn). The revised full-year forecast calls forrevenue of JPY44.3bn (+JPY800mn), operating profit of JPY3.1bn (-JPY200mn), recurring profit of JPY3.1bn (-JPY200mn), andnet income attributable to owners of the parent of JPY1.9bn (-JPY250mn).
Q1 results saw a dramatic rise in costs of raw materials and resources, coupled with higher SG&A expenses on the back ofrevenue growth and deterioration in the export margins of overseas subsidiaries due to forex fluctuations. These factors
combined to push down profit. The company also expects greater impairment losses from Q2, amid deterioration in the cost
ratio stemming from procurement costs that rise higher than initially factored in. These factors lie behind the downward
revision of all levels of profit.

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Other information
History
Date
March 1975

Event
Company established as Kamba Shokai in Shinagawa-ku, Tokyo

August 1977

Company name changed to Punch Industry

August 1982
November 1983

Succeeded in mass production of high-speed steel ejector pins for plastic molds
Established Kitakami plant in Kitakami, Iwate Prefecture

December 1983

Launched nationwide sales of mold and die components

May 1989
October 1990

Established group company Miyako Punch Industry in Miyako, Iwate Prefecture (now Miyako plant)
Established Punch Industry (Dalian) in Dalian, China

October 1996
March 2006

Established the Chiba plant in Iioka, Chiba Prefecture (moved to Asahi, Chiba Prefecture in December 2001)
Acquired 100% stake in Pintec, made a wholly owned subsidiary

September 2010

Established Punch Industry India in Chennai, India

January 2011
August 2012

Established Hyogo plant in Kasai, Hyogo PrefectureEntered into capital and business alliance with Panther Precision Tools in Malaysia

December 2012
August 2013

Listed on the Second Section of the Tokyo Stock Exchange (TSE)Made Panther Precision Tools a wholly owned subsidiary

November 2013

Established Punch Industry Indonesia in Jakarta

March 2014
December 2015

Relisted stocks on the TSE First Section
Established Punch Industry Manufacturing Vietnam in Binh Duong

November 2016
April 2022

Established Punch Industry USA in Illinois
Relisted shares on the TSE Prime Market

Source: Shared Research based on company data

Company history
Yuji Morikubo founded the company in 1975 under the name Kamba Shokai. At the outset, the company sold high-speed
steel print pins, which are mold components used in printed circuit boards, for which it outsourced manufacturing. In 1977,
the company changed its name to Punch Industry and began in-house manufacturing, as it was unable to fully meet customer
needs through contract manufacturing alone. Initially, the company’s production facilities were located in a part of the houseof Morikubo’s parents, with seven or eight technicians carrying out production. At that time, the company had a strong
presence among customers in the consumer electronics industry, and production volume continued to grow as this sector
flourished.
A major turning point in the company’s business expansion was its development of high-speed steel ejector pins for plastic
molds in 1982. At the time, makers of electronic and electrical products were using SCM3 ejector pins made of chromium
molybdenum steel, but these had problems with accuracy and durability, and there was demand for better quality. Morikubo
poured his efforts into the development of an ejector pin using high-speed steel, which was not yet technically feasible,
going through a period of trial and error, as development hit several snags. Deciding what kind of heat treatment to apply tomake the high-speed steel tough enough to bend was particularly difficult. For this reason, the company enlisted the aid of auniversity research institute with expertise in metals and incorporated its knowledge of metals and heat treatment technology
into its production. As a result, the company succeeded in standardizing and mass-producing the world’s first high-speed steel
ejector pin by combining outside metal knowledge and technology with its own technology and expertise gained by making
high-speed steel print pins.
Compared to the 0.02mm accuracy of conventional SCM3 ejector pins, the company’s high-speed steel ejector pins
achieved a dimensional accuracy of 0.01mm. In addition, compared with chromium molybdenum steel, its pins had hightoughness and were hard to break. Offering improved accuracy and durability, the company’s high-speed steel ejector pins
replaced chromium-molybdenum steel pins in markets for plastic mold components requiring high accuracy, such as plastic
TV casings and mechanical computer components.
The company subsequently opened sales offices in various locations nationwide, building the Kitakami plant in 1983 and the
Miyako plant in 1989. (At the time, Miyako Punch Industry started making press die components for the first time). In 1991,
the company published a comprehensive catalog for its plastic mold and press die components and worked to expand its
production scale and framework. In 1990, seeking lower production costs, Punch Industry was one of the first Japanesemanufacturers to enter China and establish a local subsidiary. (At that time, the company mainly manufactured semi-finishedproducts in China). The company then began expanding its production network in China, while simultaneously working toraise the level of technological capabilities in China by training local employees. The outcome was the ability to manufacturefinished products in China. Around 2000, during a period of rapid growth in the Chinese economy and China’s entry into
the WTO, sales within China were deregulated, which fed into growth in the company’s sales there. The company further
expanded into India in 2010, Malaysia, Singapore, Vietnam, and Indonesia in 2013, and the US in 2016.

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Applied to be listed on the TSE Standard market
In May 2023, the company resolved at a board of directors' meeting to apply for listing on the TSE Standard Market andsubsequently filed the application, as it had a chance to re-select a market segment following a change in TSE regulations
effective April 1, 2023. As for reasons for selecting the Standard Market, the company stated that it did not meet the Prime
Market's listing maintenance criteria for market capitalization of tradable shares; that its progress in the medium-term
management plan VC2024 was significantly behind, requiring it to make up for the delay and update the plan, including byadding new growth strategies; and that it needed to concentrate management resources on executing the updated mediumterm management plan.
Shared Research believes that the company may consider listing on the Prime Market again, if it can expand its business andraise the market cap of its tradable shares, to meet the criteria for listing on the Prime Market.
Updates to medium-term business plan, voluntary retirement program, and dissolution of consolidated subsidiary
Amid an increasingly harsh operating environment, the company's progress in executing its medium-term plan, Value
Creation 2024, was significantly behind, and in addition to making up for the delays, the company decided it needed to
update the plan, including adding new growth strategies for the future. As such, in July 2023, the company
announced updates to its medium-term business plan (Value Creation 2024 Revival) and its plan to solicit voluntary
retirement and dissolve a consolidated subsidiary. Among the key initiatives outlined in the Value Creation 2024 Revival
plan is the realignment of domestic businesses. The company decided to consolidate production and sales bases, and solicit
voluntary retirement and dissolve a consolidated subsidiary, Pintec, to streamline operations.

Major shareholders (as of end-March 2023)
Major shareholders

Shares held

Shareholding ratio (%)

MT Kosan Co., Ltd.

3,804,900

15.57

CACEIS BANK S. A., GERMANY BRANCH - CUSTOMER ACCOUNT (standing proxy: The Hongkong andShanghai Banking Corporation Limited)

2,412,400

9.87

The Master Trust Bank of Japan, Ltd.(trust account)

1,672,300

6.84

Custody Bank of Japan, Ltd.(trust account)

1,068,700

4.37

Punch Industry Employees’ Stock Ownership Scheme

925,426

3.78

Yuji Morikubo

663,000

2.71

Tetsuji Morikubo

663,000

2.71

Michiko Kamba

431,000

1.76

ASG Japan Co., Ltd.

431,000

1.76

Okasan Securities Co., Ltd.

342,000

1.39

12,413,726

50.81

Total

Source: Shared Research based on company data

The largest shareholder, MT Kosan, is an asset management company, all of whose shares are owned by founder Yuji
Morikubo and his relatives.

Corporate governance (as of June 2023)
Form of organization and capital structure
Form of organization
Controlling shareholders

Company with Audit & Supervisory Committee
None

Directors
Number of directors per Articles of Incorporation
Number of directors
Directors’ terms per Articles of Incorporation
Chairperson of the Board of Directors

15
8
1 yearOutside directors

Number of outside directors

4

Number of independent outside directors
Number of members of Audit & Supervisory Committee

43

Number of outside members of Audit & Supervisory Committee
Number of independent outside members of Audit & Supervisory Committee

2
2

Other
Implementation of measures regarding director incentives
Eligible for stock options

Performance-linked remuneration, Other-

Participation in electronic voting platform
Providing convocation notice in English

Yes
Yes

Disclosure of directors' compensation

No individual disclosure

Policy to determine amount and calculation method of remuneration
Corporate takeover defenses

Yes
Yes

Source: Shared Research based on company data

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SDGs
The company has established a sustainability policy.
The policy states that the company will seek to achieve continuous growth and enhance corporate value through its
support of manufacturing worldwide. In this way, Punch Industry aims to be a company that helps protect the naturalenvironment and both the lifestyles of its employees and all individuals involved in its supply chain.

In July 2022, the company established a Sustainability Committee to step up initiatives to help bring about a sustainable
society. Chaired by the president and CEO, the committee sets basic policy on sustainability. It also identifies material issues,
forms action plans and targets for each issue, oversees their progress, deliberates on matters related to disclosure, and gives
business directives, regularly reporting and making proposals to the board of directors. Under the aegis of the Sustainability
Committee, the company has formed cross-divisional teams in three areas—carbon reduction, waste reduction, and humanrights—to manage progress in each task and speed up initiatives for each material issue.
Punch Industry’s social initiatives include accepting members of community for workplace training, cleanup activities, tree
planting, a campaign in Japan to collect and recycle plastic bottle caps, collecting special product stamps to subsidize schoolbudgets under the Bellmark Campaign, and collecting and donating used stamps to charity.

Top management
President and CEO Tetsuji Morikubo is the eldest son of founder and honorary chairman Yuji Morikubo.

ProfileMay 2003
February 2005

Joined the company
Worked at Punch Industry (Dalian)

November 2012
April 2013

General manager of Value Creation Office
General manager of Corporate Planning Office

December 2015

Assigned to Punch Industry Malaysia

December 2016
June 2018

Executive officer
Director, senior executive officer, head of Corporate Strategy

April 2019
June 2019

Chief strategy officer, head of Group Business Management
Representative director (current position), executive vice president

November 2019

President and CEO, head of Group Management (current position)

Source: Shared Research based on company data

Employees
Cons.

Number of employees
Japan
Overseas

ParentNumber of employees

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

FY03/23

3,761

3,833

3,836

3,959

4,298

4,282

4,020

4,006

3,979

3,923

985

993

1,004

1,024

1,047

1,062

1,062

1,029

1,002

981

2,776

2,840

2,832

2,935

3,251

3,220

2,958

2,977

2,977

2,942

911

917

927

945

968

982

985

954

927

897

Source: Shared Research based on company data

About 70% of employees (around 2,800 in FY03/22) work in the manufacturing division, with the remainder working in thesales and management divisions. The company employs roughly 3,000 people overseas, around three-quarters of total
headcount. Every year, the company hires about 20 new graduates in Japan at most, turning to mid-career hires to fillpositions made vacant when employees retire. The company says labor shortages are making it harder to recruit new
graduates, a problem compounded by the shrinking population of technical high school students in rural areas.

Shareholder returns
Dividends
FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

Dividends

10.0

12.5

12.5

13.0

16.8

16.8

2.0

2.0

13.0

FY03/23
19.5

Payout ratio

20.1%

19.1%

22.1%

20.8%

20.5%

38.1%

-1.2%

9.1%

13.9%

32.2%

Source: Shared Research based on company data

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The company’s policy is to pay stable, ongoing dividends while securing the internal reserves needed for future businessdevelopment and to shore up the management structure. It pays dividends after comprehensively assessing consolidated
business performance, its financial position, profit levels, the payout ratio, and other factors.
In January 2023, the company revised its capital and shareholder return policies, setting a new consolidated payout ratio ofat least 30% and a dividend on equity ratio of at least 3% (calculated by dividing total dividends paid by average
shareholders' equity of the current and previous fiscal year). The change reflected the fact that, until FY03/22, the parent
company held relatively few retained earnings, but began receiving more dividends from group companies in FY03/23.
Given the surplus in retained earnings, the company decided to enhance returns. The company says its financial position has
been improving in recent years, with the equity ratio trending upward. Consequently, the company says that if it exceeds its
target equity ratio of 60%, it may consider enhancing returns and pursuing share buybacks to further strengthen shareholder
returns and capital efficiency.

ROE, ROIC
FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

FY03/22

FY03/23

9.6%

10.1%

8.9%

9.8%

11.8%

6.0%

-25.5%

4.0%

14.2%

7.9%

2.4%

3.5%

3.4%

3.8%

4.4%

2.3%

-

1.5%

5.2%

3.2%

Financial leverage (equity multiplier)

3.0

2.3

2.0

2.0

2.0

2.0

2.1

2.1

1.9

1.7

Total asset turnover

1.3

1.3

1.3

1.3

1.3

1.3

1.2

1.3

1.5

1.4

ROE
Net margin

Source: Shared Research based on company data

ROE tends to fluctuate in line with the unstable net income margin. Financial leverage and overall asset turnover are
relatively stable. The company targets ROE of 10% or above.

Management that emphasizes ROIC
The current medium-term business plan calls for management that emphasizes ROIC, with the aim of enhancing corporate
value by targeting ROIC of at least 10%, in excess of capital spending (targets EVA spread of over 3–4%). In the ROIC tree,
as a measure to improve net operating profit after taxes, the company’s goal is to boost revenue by capturing more orders,cultivating new customers, and expanding overseas sales, while cutting costs through global procurement, more efficient
production, lower failure costs, and greater operational efficiency. In terms of improving working capital turnover, the goal is
to improve the cash conversion cycle by collecting receivables at an early stage, paring down inventories, and setting
appropriate payment dates. Another goal is to improve both tangible fixed asset turnover (through pre-investment screening
and post-investment monitoring) and intangible asset turnover (through IT-driven business reforms). With regard to ROIC
management, the first thrust is to improve asset turnover and screen investments in fixed assets, but the company says thishas just gotten underway and efforts to implement this across the group are ongoing. In FY03/23, ROIC was 8.1%, and EVA
spread was 0.9%.

Other information
Company name, logo

Source: Company website

The name Punch Industry signifies the company’s original printed circuit board hole punch product as well as the sense ofbeing a company overflowing with power and vitality. The company’s website says that the clenched fist in the logo
represents its molding punch and pin products and its growing power, while the slanted line represents a streak of lightning,
expressing the company’s eagerness to bring innovation to the industry. The company has also summed up its corporate
identity with the phrase “Punch Spirit: Returning to the Spirit of the Founder,” which encapsulates the key ideas ofchallenge, ingenuity, and open-mindedness.

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Profile
Company Name

Head OfficePunch Industry Co., Ltd.

6-22-7 Minami-oi Shinagawa-ku, Tokyo 140-0013

Phone

Listed On

81-3-3474-8007

Tokyo Stock Exchange, Prime Market

EstablishedExchange Listing

1975-03-29

2012-12-20
Fiscal Year-End
Mar

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