COMPANY RESEARCH AND ANALYSIS REPORT

MonotaRO Co., Ltd.
3064
Tokyo Stock Exchange First Section

25-Mar.-2022
FISCO Ltd. Analyst

Hideo Kakuta

FISCO Ltd.
https://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

MonotaRO Co., Ltd.
3064 Tokyo Stock Exchange First Section

25-Mar.-2022
https://www.monotaro.com/main/ir/english/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. FY12/21 non-consolidated results...............................................................................................................

01

2. Consolidated outlook for FY12/22...............................................................................................................

02

3. Developing an organization to realize sustainability. ....................................................................................

02■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 03■Business outlook-------------------------------------------------------------------------------------------------------------------------------------------------------- 05■Topics------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ 06
1. The Inagawa DC, the Company’s largest DC, is scheduled to start operations in April 2022 . .....................

06

2. Developing an organization to realize sustainability. ....................................................................................

06

3. Enhancing the executive officer structure. ...................................................................................................

07■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 07

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

MonotaRO Co., Ltd.
3064 Tokyo Stock Exchange First Section

25-Mar.-2022
https://www.monotaro.com/main/ir/english/█ SummaryIn FY12/21, net sales and every profit item grew by more than
20% YoY. In FY12/22, investments in the future are expected totemporarily slow down the pace of growth in every profit item
MonotaRO Co., Ltd. <3064> (hereinafter “the Company”), headquartered in Amagasaki, Hyogo Prefecture, conducts
online direct marketing of maintenance, repair and operating (MRO) products. The main characteristics of MRO
products are that they encompass a wide range of items used in manufacturing processes without being purchasedin bulk. Some examples of MRO products are abrasives, drills, and work gloves. The nature of such materials ishighly individual for each industry. The MRO products market has a size of around ¥5-10 trillion, and the main sales
channels are door-to-door tool dealers, hardware stores, and auto parts dealers, among others. The online direct
marketing channel has a high growth performance, but it is relatively small. Peer companies in the same industry thatcarry MRO products online include TRUSCO NAKAYAMA CORPORATION <9830>, ASKUL Corporation <2678>,
MISUMI Group Inc. <9962>, and Amazon Japan G.K.
A key characteristic of the Company’s business model is that it sells MRO products at a single price. This policy
has won the Company strong support mainly from small and medium-sized companies, which are usually forced
to accept unfair prices from sellers due to market conventions. In this way, the Company has established a solid
position as a unique online direct marketing operator in a niche market. The Company serves a wide range of client
sectors. The manufacturing, building and construction, and automobile-related sectors represent more than 60%
of its business. In the past few years, the purchase management system business (business with large companies)
has also been growing rapidly. The Company handles more than 18 million items for a customer base of 6,779,000
accounts (as of December 31, 2021) and sells about 610,000 items available for same-day shipment (including
roughly 497,000 items for which the Company has its own inventories). The Company’s MRO product platform
is differentiated by factors such as long-tail products and cost effective private-brand (PB) products, productrecommendations on its website and short lead times. The Company has delivered exceptional financial results interms of profitability and stability, with an ROE of 33.1% (FY12/21) and an equity ratio of 61.9% (FY12/21), in addition
to high growth performance (maintaining an annual growth rate of around 20%).
1. FY12/21 non-consolidated results
In the FY12/21 non-consolidated results, net sales increased 20.2% year on year (YoY) to ¥182,472mn, operating
income rose 21.8% to ¥24,533mn, ordinary income grew 22.0% to ¥24,647mn, and net income increased 34.7%
to ¥17,701mn, so net sales and every profit item maintained growth of over 20%. Looking at net sales, in boththe mainstay online direct marketing business for companies (particularly those in the manufacturing industry)
and the purchase management system business (business with large companies), the sales price per order, thepurchase frequency, and the number of customers all increased. In terms of new customers, the Company acquired
1,278,000 accounts, but this number was slightly below its forecast. In the purchase management system business(business with large companies), the number of large companies the Company conducted business with increased
by 575 companies from the previous fiscal year-end and there was internal growth from existing companies (thenumber of accounts increased, leading to an increase in net sales per company). As a result, net sales in thepurchase management system business (business with large companies) increased by 42.9% YoY to ¥35,981mn.
The operating income margin rose 0.1 of a percentage point (pp) YoY, mostly in line with forecast, while operating
income rose 21.8% YoY.

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01 08

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

MonotaRO Co., Ltd.
3064 Tokyo Stock Exchange First Section

25-Mar.-2022
https://www.monotaro.com/main/ir/english/

Summary

2. Consolidated outlook for FY12/22
The outlook for FY12/22 full-year consolidated results are for net sales to increase 19.2% YoY to ¥226,073mn,
operating income to rise 1.0% to ¥24,380mn, ordinary income to grow 0.4% to ¥24,392mn, and net income
attributable to owners of the parent to decrease 2.8% to ¥17,067mn. Forecasts call for continued high growth innet sales, while every profit item is expected to remain mostly unchanged from the previous fiscal year. Net sales will
surpass ¥200bn for the first time. The Company expects high growth of 19.2% in net sales, which will be mostly on
par with growth of 20.6% in the previous fiscal year. The pace of profit growth is expected to slow due to a one-time
factor, specifically the impact of costs related to the opening of the Inagawa Distribution Center (DC), which will serve
as a foundation for future growth. FISCO believes that the opening of the Inagawa DC and the start of full-fledged
operation of new systems (product information management system, order management system) in the current
fiscal year are essential investments for the Company’s future, and that the temporary standstill in each profit item
will provide a stepping stone to the next phase of growth.
3. Developing an organization to realize sustainability
In order to step up efforts to achieve the SDGs and contribute to society, the Company set up a Sustainability
Committee under the Board of Directors in 2021 and determined five priority issues. Notably, the Company carries
massive amounts of MRO products on a daily basis, including private brand (PB) items, so several initiatives are
expected to have a substantial impact on society. Among these initiatives are efforts to reduce packaging materials
consumption and slow moving inventory as part of the “Realization of a recycling model of resources throughrecycling and waste reductions” and efforts to develop new environment-conscious products as part of the “Proposal
and development of environment-conscious products.”
Key Points
In FY12/21, net sales and every profit item for the full year grew by more than 20% YoY. The sales price perorder and the number of customers increased among mainstay manufacturing customers and major corporate
customers• In FY12/22 net sales are forecast to surpass ¥200bn for the full year. Every profit item is expected to be mostly
unchanged from the previous fiscal year, owing to investments in the future, including the start of operation of
the Inagawa DC, which will be the Company’s largest DC, and the start of full-fledged operation of new systems• The Inagawa DC, which will be the Company’s largest DC, is scheduled to start operations in April 2022. The
Company has developed an organization to realize sustainability.
•

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02 08

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

MonotaRO Co., Ltd.
3064 Tokyo Stock Exchange First Section

25-Mar.-2022
https://www.monotaro.com/main/ir/english/

Summary

Trends in net sales and operating income (consolidated)
Sales (left)

(¥mn)

(¥mn)

Operating income (right)

300,000

30,00024,129250,000

24,38025,00019,607200,000

20,00015,839150,000

13,79015,000226,073

100,000
50,000189,731
109,553

131,463

10,000157,3375,000

00FY12/18

FY12/19

FY12/20

FY12/21

FY12/22 E

Source: Prepared by FISCO from the Company’s financial results█ Results trends
In FY12/21, net sales and every profit item for the full year grew bymore than 20% YoY. The sales price per order and the number ofcustomers increased among mainstay manufacturing customers
and major corporate customers
In the FY12/21 non-consolidated results, net sales increased 20.2% YoY to ¥182,472mn, operating income grew
21.8% to ¥24,533mn, ordinary income rose 22.0% to ¥24,647mn, and net income increased 34.7% to ¥17,701mn.
Net sales and every profit item maintained high growth of more than 20%. Meanwhile, net sales and operating
income fell short of initial forecasts by 2.3% and 2.0%, respectively.
For net sales, growth surpassed 20% YoY as the sales price per order, the purchase frequency, and the number ofcustomers all increased both in the mainstay online direct marketing business for companies (particularly those in the
manufacturing business) and the purchase management system business (business with large companies). The reasons for the underperformance relative to forecasts were a shortfall in the number of new customers acquired against
forecast and a decrease in the growth rate of existing customers, such as building and construction businesses,
automobile maintenance businesses, and general individual customers. In terms of new customers, the Company
acquired 1,278,000 accounts, but this number was slightly below its forecast. In the purchase management systembusiness (business with large companies), the number of large companies the Company conducted business withincreased by 575 companies from the previous fiscal year-end and there was internal growth from existing companies(the number of accounts increased, leading to an increase in net sales per company). As a result, net sales in thepurchase management system business (business with large companies) increased by 42.9% YoY to ¥35,981mn,
3.7% higher than the initial forecast.

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03 08

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

MonotaRO Co., Ltd.
3064 Tokyo Stock Exchange First Section

25-Mar.-2022
https://www.monotaro.com/main/ir/english/

Results trends

The gross profit margin increased 0.2pp YoY to 28.8%. The main contributing factors were decreases in the delivery
cost ratio and various expense ratios and an increase in the amount of royalties received, which were countered bya decline in the product gross profit ratio mainly due to a decrease in the sales ratio of PB to imported products.
The SG&A expenses ratio decreased 0.1pp YoY to 15.3%. The main factors that contributed to the decrease in
the SG&A expenses ratio were a decrease in the personnel cost ratio and a decline in advertising expenses mainly
due to the streamlining of catalog costs, while there were increases in preparation costs for the start of operationof the Ibaraki Chuo Satellite Center (SC) and depreciation expense. As a result, the operating income margin rose
0.1pp, mostly in line with forecast, while operating income rose 21.8% YoY. Net income showed high growth of
34.7% YoY mainly because of the impact of preferential income tax treatment in connection with investment in new
distribution sites (¥625mn).
Non-consolidated income summary for FY12/21(¥mn)
FY12/21

FY12/20
Results

Forecasts

Results

151,798

186,759

25,179Gross Profit

Comparedtoforecasts

YoY

Reasons for change

182,472

20.2%[Online direct marketing business forcompanies (monotaro.com)]• The sales price per order increased,
as business with manufacturing
customers performed favorably• The number of customers increased(up by 1.27 million accounts)-2.3%[Online direct marketing business forcompanies (monotaro.com)]• Growth was below forecast mainly
due to a shortfall in the numberof customers acquired against
forecast, and a slowdown in orders
from customers in the building andconstruction businesses, automobile
maintenance businesses, and othersectors (including general individual
customers)

34,68035,981

42.9%• Business with large companies
maintained high growth in net
sales (up 42.9% YoY), due partly
to a snap-back from a decline indemand caused by the impact of the
COVID-19 pandemic last year

3.7%

• Growth in business with large
companies surpassed forecast (3.7%
above forecast)

43,47553,852

52,527

20.8%• The gross profit margin increased
0.2pp YoY• Delivery cost ratio and various
expense ratios decreased (up 0.2pp)• The product gross profit ratio
decreased (down 0.3pp) mainly due
to a decrease in the sales ratio of PB
to imported products• The amount of royalties received
increased, etc.

-2.5%

• The gross profit margin was mostly inline with forecast• The product gross profit ratio
decreased mainly due to a decline
in the gross profit ratio for domestic
products and the sales ratio ofimported products• The amount of royalties received
increased, etc.

SG&A expenses

23,32528,81027,99320.0%• The SG&A expenses ratio decreased
0.1pp YoY
• The personnel cost ratio decreased(down 0.2pp)• The advertising expense ratio
declined (down 0.1pp), mainly due tothe streamlining of catalog costs-2.8%• The SG&A expenses ratio was 0.1pp
below forecast• The depreciation expense ratio
decreased (down 0.1pp) due todelays in the start of operation of new
systems

Operatingincome20,14925,041

24,53321.8%• The operating income margin rose
0.1pp YoY due to improvements in
the gross profit margin and SG&A
expenses ratio-2.0%• The operating income margin was
mostly in line with forecast

Ordinary income

20,19425,022

24,64722.0%• The ordinary income margin rose
0.2pp YoY

-1.5%

• The ordinary income margin was
0.1pp above forecast

Net income

13,13917,36517,701

34.7%• The net income margin rose 1.0pp
YoY

1.9%

• Net income surpassed forecast due
partly to the impact of preferential
income tax treatment

Net Sales

Net salesof businesswith large
companies

Reasons for change

Source: Prepared by FISCO from the Company’s results briefing materials

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04 08

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

MonotaRO Co., Ltd.
3064 Tokyo Stock Exchange First Section

25-Mar.-2022
https://www.monotaro.com/main/ir/english/█ Business outlook
In FY12/22 net sales are forecast to surpass ¥200bn for the full
year. Every profit item is expected to be mostly unchanged from theprevious fiscal year, owing to investments in the future
For the FY12/22 full-year consolidated results, the Company’s forecasts are for net sales to increase 19.2% YoY to¥226,073mn, operating income to rise 1.0% to ¥24,380mn, ordinary income to grow 0.4% to ¥24,392mn, and net
income attributable to owners of the parent to decrease 2.8% to ¥17,067mn. Forecasts call for continued high growthin net sales, while every profit item is expected to remain mostly unchanged from the previous fiscal year. Net sales will
surpass ¥200bn for the first time. The pace of profit growth is expected to slow due to a one-time factor, specificallythe impact of costs related to the opening of the Inagawa DC, which will serve as a foundation for future growth.
The Company expects high growth of 19.2% in net sales, which will be mostly on par with growth of 20.6% in
the previous fiscal year. The Company’s annual forecasts are determined by predicting growth separately for the
online direct marketing business – new and existing and for the business with large companies, and then adding
them up. In online direct marketing business – new, the Company is forecasting mostly the same level of growth
as in the previous fiscal year, at 1.31 million accounts (versus 1.27 million accounts in the previous fiscal year). In
online direct marketing business – existing, the Company has factored in the fact that around 70% of the accounts
acquired in 2021 were from individual customers, and that purchases by individual customers tend to grow more
slowly from the second year onward. The Company will work to optimize customer acquisition through online andoffline (fliers and catalogues) channels from the perspectives of balancing Life Time Value and acquisition costs. In
the purchase management system business (business with large companies), the Company continues to forecasthigh growth, although growth in future fiscal periods will be more subdued than in the previous fiscal year, with net
sales forecast at ¥48,920mn (up 36.0% YoY). The Company will step up activities such as increasing the number ofpartner companies, expanding the number of sites in use, increasing the number of accounts, and boosting usage
per account. In the royalty business, sales of the Zoro business in the US and Europe are growing and the grossprofit margin and the SG&A expenses ratio are expected to improve, while royalties received are also forecast to
be higher than in the previous period.
The annual gross profit margin is forecast to decrease to 28.3% (down 0.2pp YoY). The product gross profit ratio is
expected to decline due to factors such as the impact of a decrease in the sales ratio of imported products and the
yen’s depreciation. The increase in purchasing prices triggered by global inflation is expected to have a negligible
impact on the product gross profit ratio because the Company will be able to pass on the higher purchase prices
to selling prices. The SG&A expenses ratio is expected to increase substantially to 17.5% (15.8% in the previous
fiscal year). Temporary logistics-related costs associated with the relocation of functions from the Amagasaki DC to
the Inagawa DC will contribute +1.0pp to the SG&A expenses ratio. In addition, the depreciation expense ratio willrise in connection with the start of operation of the Inagawa DC and new systems (PIM, OMS) (+0.5pp). As a result,
the Company is forecasting an operating income margin of 10.8% (down 1.9pp YoY) and an increase of 1.0% YoY
in operating income. Over many years, the Company had continued to achieve growth in each profit item of morethan 20% YoY. However, in FY12/22, the Company is expecting flat profit growth due to one-time costs arisingfrom the opening of the Inagawa DC, which will be the Company’s largest DC, and the transfer of functions fromthe Amagasaki DC. FISCO believes that the opening of the Inagawa DC and the start of the full-fledged operationof new systems (product information management system, order management system) are essential investments
for the Company’s future and that the temporary standstill in each profit item in FY12/22 will provide a steppingstone to the next phase of growth.

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 08

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

MonotaRO Co., Ltd.
3064 Tokyo Stock Exchange First Section

25-Mar.-2022
https://www.monotaro.com/main/ir/english/

Business outlook

FY12/22 consolidated business forecasts(¥mn)
FY12/21

FY12/22

Results

vs. sales

Forecasts

vs. sales

Net sales

189,731100.0%

226,073

100.0%

YoY
19.2%

Gross profit

54,04528.5%

63,934

28.3%

18.3%

SG&A expenses

29,91615.8%

39,554

17.5%

32.2%

Operating income

24,12912.7%

24,380

10.8%

1.0%

Ordinary income

24,302

12.8%

24,392

10.8%

0.4%

Net income attributable toowners of the parent

17,552

9.3%

17,067

7.5%

-2.8%

Source: Prepared by FISCO from the Company’s results briefing materials█ Topics
The Inagawa DC, which will be the Company’s largest DC, isscheduled to start operations in April 2022. The Company has
developed an organization to realize sustainability
1. The Inagawa DC, the Company’s largest DC, is scheduled to start operations in April 2022
As the Company achieves rapid growth, it is simultaneously advancing projects to construct distribution centers
and to build IT systems to create a more sophisticated supply chain and is preparing to build next-generation
infrastructure. The increase in net sales in FY12/22 is forecast to be ¥34,032mn (non-consolidated), and it is essential
to enhance both shipment capacity and inventory functions of its distribution centers to match this increase. In April
2022, it plans to start the first phase of operations of the Inagawa DC, which will serve as a main next-generation
distribution base in Hyogo Prefecture. Phase 1 operations will achieve a shipment capacity of 90,000 lines per day(equivalent to around ¥90.0bn in terms of the Company’s annual net sales). In November 2021, the constructionof the building was completed, and preparations such as interior work and installation of fixtures within the DC,
and transfer of inventories, are now under way. As with Kasama DC and Ibaraki Chuo SC in Ibaraki Prefecture, theInagawa DC will be a cutting-edge distribution facility that will deploy more than 800 units of automated guided
vehicle (AGV) systems, enabling efficient operations. In comparison with the Amagasaki DC, the Inagawa DC will
have around two times the inventory capacity and around three times the shipment capacity.
2. Developing an organization to realize sustainability
Since its founding in 2000, the Company has continued to drive technological innovation of its materials procurement
platform, with the aim of realizing its corporate philosophy: “To Innovate the Business Procurement Network.” These
efforts have been an integral part of the Company’s activities to achieve SDGs Goal 9, “Industry, Innovation andInfrastructure,” through its core business. In addition, the Company has long carried out activities such as providing
supplies during disasters and conducting volunteer work in local communities. In 2021, the Company formed aninternal project and established an organization and disclosed priority issues. As for the organization, the Company
has newly established a Sustainability Committee under the Board of Directors and set up Working Groups for eachpriority issue. The priority issues were defined as the following five prioritized action areas:

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06 08

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

MonotaRO Co., Ltd.
3064 Tokyo Stock Exchange First Section

25-Mar.-2022
https://www.monotaro.com/main/ir/english/

Topics1) Reduction of CO2 emissions as a measure against climate change
2) Realization of a recycling model of resources through recycling and waste reductions
3) Responsible sourcing and human rights
4) Diversity and inclusion
5) Proposal and development of environment-conscious products
In these ways, the Company has developed an organization that will formulate specific plans for sustainability, implement those plans and announce the outcomes. Notably, the Company carries massive amounts of MRO products ona daily basis, including private brand (PB) items, so several initiatives are expected to have a substantial impact onsociety. Among these initiatives are efforts to reduce packaging materials consumption and slow moving inventory,
which will be undertaken as part of Prioritized Action Area 2, and efforts to develop new environment-conscious
products, which will be undertaken as part of Prioritized Action Area 5.
3. Enhancing the executive officer structure
The Company has grown into a large organization with 2,908 employees (including part-time and dispatchedpersonnel; as of December 31, 2021) and faces a wide range of strategic issues in each business and function. For
this reason, the Company is working to enhance its executive officer structure. It plans to appoint two new executive
officers (A proposal is scheduled to be submitted to a Board of Directors meeting in March 2022).

█ Shareholder return policy
In FY12/21, the dividend will be increased by ¥2.5 to ¥11.5 per share.
The Prime Market was selected in response to the restructuring of
the Tokyo Stock Exchange
The Company adheres to a policy of paying a stable dividend in line with earnings. It has delivered dividend increases
since FY12/13 (dividend of ¥3.0 per share) and maintained a dividend payout ratio in the range of 32–35%. In
FY12/21, as initially forecast, it will pay an annual dividend of ¥11.5 per share (up ¥2.5 YoY; 1H dividend of ¥5.75,
period-end dividend of ¥5.75) for a dividend payout ratio of 32.5%. For FY12/22, the Company is forecasting anannual dividend of ¥13.5 per share (up ¥2.0 YoY; 1H dividend of ¥6.5, period-end dividend of ¥7.0), bringing theforecast dividend payout ratio to 39.3%. As the Company’s profit growth rate is high, dividends can be expected toincrease at a rapid pace in the future. Also, to increase the liquidity of its shares and expand the investor base, theCompany executed a 2-for-1 stock split on April 1, 2021.
The Company offers shareholder benefits in the form of private-brand product gifts for each shareholder holding 100
or more shares for at least six months at the end of the fiscal year (December 31) (worth ¥3,000 for six months or
longer, ¥5,000 for three years or longer, and ¥7,000 for five years or longer). The Company says that the shareholder
benefits have been favorably received, with a high rate of conversion to products.

We encourage readers to review our complete legal statement on “Disclaimer” page.

07 08

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

MonotaRO Co., Ltd.

25-Mar.-2022

3064 Tokyo Stock Exchange First Section

https://www.monotaro.com/main/ir/english/

Shareholder return policy

In April 2022, the Tokyo Stock Exchange (hereinafter, “TSE”) plans to restructure its current market divisions into
three market divisions: the Prime Market, Standard Market, and Growth Market. In July 2021, the Company received
a notification from the TSE regarding the results of a preliminary determination of compliance with continued listing
criteria for new market divisions, and the Company confirmed that it is in compliance with the continued listing
criteria of the Prime Market, which is one of the new market divisions. Based on this result, in September 2021,
the Company’s Board of Directors passed a resolution to select and apply for inclusion in the Prime Market. Goingforward, the Company plans to carry out designated procedures related to selection and application for inclusionin this new market division in accordance with the schedule prescribed by the TSE.

Dividends and consolidated dividend payout ratio
Annual dividend per share (left)
Consolidated dividend payout ratio (right)

(¥)

39.3%

16.0

14.0

40.0%
33.9%

33.9%

32.4%

32.5%

35.0%

12.0

30.0%

10.0

25.0%

8.0

20.0%
13.5

6.0
4.0

11.5
6.5

7.5

9.0

15.0%
10.0%

2.0

5.0%

0.0

0.0%
FY12/18

FY12/19

FY12/20

FY12/21

FY12/22 E

Note: A 2-for-1 stock split was conducted on October 1, 2018 and April 1, 2021. Figures shown for the amounts of dividends
have been retroactively adjusted
Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 08

Disclaimer
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