COMPANY RESEARCH AND ANALYSIS REPORT

SUN-WA TECHNOS CORPORATION
8137
Tokyo Stock Exchange First Section

10-Jul.-2020
FISCO Ltd. Analyst

Yuzuru SatoFISCO Ltd.
http://www.fisco.co.jp

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. In FY3/20, although sales and profits declined due to the fall in demand for capital investment,
growth for the automotive industry continued. ............................................................................................

01

2. Given the uncertain impact of the novel coronavirus,
the Company only announced a results outlook for 1H FY3/21...................................................................

01

3. Status of progress on NEXT1800, the new medium-term management plan. ..............................................

02■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. FY3/20 results overview......................... ......................................................................................................

03

2. Segment, industry and regional trends.. . ......................................................................................................

05

3. Outlook for FY3/21 results..................... ......................................................................................................

07■Progress of medium-term management plan--------------------------------------------------------------------------------- 09
1. New medium-term management plan NEXT 1800. ......................................................................................

09

2. Progress for “contribute to customer production activities by strengthening core businesses”...................

11

3. Progress for “expand global business capabilities to support market demand”. .........................................

15

4. Progress for “pursue new business fields to accelerate sustainable growth”.. .............................................

15

5. Progress for “initiatives to realize a sustainable society”..............................................................................

16

6. Growth of the automotive business.. ...... ......................................................................................................

17■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html█ Summary
Expansion Possible Ahead of Schedule with Demand for Industrial
Use Robots to Soar Due to COVID-19 Impact
SUN-WA TECHNOS CORPORATION <8137> (hereinafter, “the Company”) is an independent trading company
that specializes in technology products. Approximately 40% of its sales are to the factory automation and industrial
equipment industries, which are its mainstay fields. The Company has steadily expanded its businesses by leveraging
coverage of three major areas (electrical machinery, electronics, and general machinery) and two-way trade in which
it sells equipment and materials for manufacturers’ production lines and then procures the products made by thesemanufacturers. In recent years, it has been focusing on the engineering business and global SCM solutions.
1. In FY3/20, although sales and profits declined due to the fall in demand for capital investment, growth forthe automotive industry continued
In the Company’s FY3/20 results, net sales and profits declined, with net sales of ¥137,943mn (down 5.1% YoY)
and operating income of ¥1,846mn (down 45.8%). The main reason for the decline in results was that net sales tothe mainstay factory automation and industrial equipment industries fell by double digits YoY due to the cooling ofinterest in capital investment in the manufacturing industry. This was caused by the economic slowdown alongside
the protracted US-China trade friction, as well as the outbreak of the novel coronavirus pandemic from early in2020. Over the past few years, sales to the high-growth automotive (on-board products) industry had been strong,
growing at a double-digit YoY pace, aided by the increase in the ratio of cars equipped with advanced driving
assist systems (ADAS). Elsewhere, for the semiconductor industry, which had been continuing to make inventory
adjustments, there was some recovery seen in capital investment from 2H with a backdrop of increased demandfor 5G related products and data center demand. For the entire fiscal year, sales were roughly the same level as theprevious fiscal year. The operating margin declined from 2.3% in the previous fiscal year to 1.3%. This was mainly
due to the decline in net sales and the drop in the gross margin caused by the change in the sales composition ratio.
2. Given the uncertain impact of the novel coronavirus, the Company only announced a results outlook for
1H FY3/21
Regarding the business results for FY3/21, the impact of novel coronavirus pandemic on management is uncertain,
so the Company decided to only announce an outlook for 1H, leaving the outlook for the full fiscal year as undecided.
For 1H, the Company is forecasting net sales of ¥70,000mn (up 3.5% YoY), and operating income of ¥750mn (down
17.6% YoY). Sales to the automotive industry (on-board products), which were strong through FY3/20, are expected
to fall due to a dip in the number of finished vehicles produced. However, due to the recovery of semiconductor
capital investment and the resumption of capital investment in the Chinese market, overall sales are expected toincrease for the first time in two years. On the other hand, in terms of profits, given the fact that there are no special
factors to push up costs, we feel that there is room for the Company’s profits to be slightly higher than the forecast
values as long as the forecast net sales are achieved.

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01 19

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

SUN-WA TECHNOS CORPORATION

10-Jul.-2020

8137 Tokyo Stock Exchange First Section

http://www.sunwa.co.jp/en/index.html

Summary

3. Status of progress on NEXT1800, the new medium-term management plan
The Company has formulated NEXT 1800, a three-year medium-term management plan that started from FY3/20.
The plan’s key policies include: strengthening the engineering business in order to raise profitability, bolstering the
global SCM solutions business to expand its scale, investment and development of new businesses, and introductionof warehouse management systems (WMS) to increase the efficiency of logistics, all with the aim of increasing sales
and enhancing profitability. With respect to the engineering business, FY3/20 net sales were approximately ¥12bn,
which was less than 10% of total net sales, but the gross margin in the engineering business was higher than the
Company’s average. With the novel coronavirus pandemic, manpower-saving investment by manufacturers in various
industries is expected to progress going forward. Since the manufacturing lines of each company have different
specifications required, there is significant room for growth in the engineering business which proposes system
optimization. On the other hand, in the global SCM solutions business which procures parts for customers’ overseas
bases, inquiries are increasing as customers relocate manufacturing bases, and future growth is expected. The
Company started full-fledged operations of the Warehouse Management System (WMS) from April 2019. The WMS
is expected to make logistics costs visible for each order received, and should have the effect of reducing logistics
costs. Due to the effects of the global economic slowdown and the novel coronavirus pandemic, the Company got
off to a poor start in the first year of the medium-term management plan in terms of reaching the numerical targets(net sales of ¥180bn and operating income of ¥4.8bn in FY3/22). However, by implementing these priority measures,
the Company is seeking to build a management foundation for sustainable growth, and aims to achieve net salesof ¥250bn in FY3/26, which the Company has set as a long-term vision.
Key Points
Forecasts higher net sales and lower operating income in 1H FY3/21, but results could be higher than forecast
given the solid capital investment in the semiconductor industry and the recovery in sales to China• As a part of the NEXT 1800 medium-term management plan, the Company will build a management foundation
eyeing medium- to long-term sustainable growth• The plan is to grow the scale of both the engineering business and the global SCM solutions business, while
focusing on profitability•

Results trends（¥mn）

Net sales (left)（¥mn）

Operating income (right)

200,000

5,000
4,135

160,000

4,000

3,410
3,014

120,000

3,000

2,444
1,846

80,000146,759
105,748

145,410

116,611

137,943

40,000

0

2,000

1,000

0
FY3/16

FY3/17

FY3/18

FY3/19FY3/20 E

Source: Prepared by FISCO from the Company's financial results

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

02 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html█ Results trends
FY3/20 sales and profits declined due to the decline in demand fromthe mainstay factory automation and industrial equipment industries
1. FY3/20 results overview
The Company reported lower sales and profits for the second consecutive year in FY3/20, with ¥137,943mn in net
sales (-5.1% YoY), ¥1,846mn in operating income (-45.8%), ¥2,144mn in ordinary income (-40.9%), and ¥1,341mn
in net income attributable to owners of the parent (-49.0%). In 1H, the Company’s business was impacted by the
economic slowdown caused by the prolonged US-China trade friction and other factors, as well as the accompanying suppression of capital investment in the manufacturing sector. In 2H, as a recovery was taking place, the novel
coronavirus pandemic spread around the world at the start of 2020 and caused the cautious stance towards capital
investment to continue. Due to this, the Company, whose mainstay customer base is in the factory automation andindustrial equipment industries, felt the impact of the downturn.
FY3/20 results(¥mn)
FY3/19FY3/20

1H results

2H results

Full year
results

1H results

2H results

Full-year
Company
forecast

Full year
results

Net sales

72,16473,246

145,410

67,60870,335140,000

137,943

-5.1%

-1.5%

Operating income

2,129

1,281

3,410

909

937

1,600

1,846

-45.8%

15.4%

Versusforecast

YoY

3.0%

1.7%

2.3%

1.3%

1.3%

1.1%

1.3%

-

-

Ordinary income

2,312

1,315

3,627

1,036

1,108

1,900

2,144

-40.9%

12.8%

Net income attributableto owners of the parent

1,651

977

2,628

689

652

1,400

1,341

-49.0%-4.2%

Operating margin

Source: Prepared by FISCO from the Company's financial results

However, looking on a quarterly basis, in 4Q net sales increased 2.3% YoY to ¥38,077mn and operating income
increased 5.8% YoY to ¥826mn, as sales and profits increased for the first time in six quarters, as companies inthe semiconductor industry resumed capital investment. For this reason, in its market outlook at the start of 2020
the Company was expecting 2020 to be a year of recovery, but the outlook is now uncertain due to the novel
coronavirus pandemic.

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

03 19

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

SUN-WA TECHNOS CORPORATION

10-Jul.-2020

8137 Tokyo Stock Exchange First Section

http://www.sunwa.co.jp/en/index.html

Results trends

Quarterly results trends
Net sales (left)（¥mn）
45,000Operating income (right)

（¥mn）
1,800
38,077 1,600

37,23140,00035,0001,400

30,0001,200

25,000

826

781

1,000

20,000800

15,000600

10,000

400

5,000

200

0

0
1Q

2Q

3Q

4Q

1Q

FY3/18

2Q

3Q

4Q

1Q

2Q

FY3/193Q

4Q

FY3/20Source: Prepared by FISCO from the Company's financial results

As stated above, net sales declined 5.1% (¥7,467mn) YoY, while by business segment, net sales decreased 14.0%(¥3,432mn) in the electrical machinery segment, which had the biggest impact, while net sales declined 2.7%(¥2,970mn) in the electronics segment, and dropped 9.3% (¥1,066mn) in the general machinery segment, as all
three segments saw a decline in net sales. The reason for the only slight decrease in the electronics segment is thatsales to the automotive (on-board products) industry continued to increase by double digits. On October 30, 2019,
the Company announced a revised forecast of ¥140,000mn in net sales for FY3/20, but ultimately sales fell shortby 1.5% (¥2,057mn). This is seen as being due to the novel coronavirus pandemic.
Trends in net sales by business segments(¥mn)
FY3/19FY3/20

1H

2H

Full year

1H

2H

13,332

11,237

24,56910,565

10,572

21,137YoY

7.6%-24.0%-9.6%-20.8%-5.9%-14.0%

Electronics

53,55355,817

109,370

52,47053,930106,400

YoY

6.4%

-7.1%

-1.0%

-2.0%

-3.4%

-2.7%

5,278

6,192

11,470

4,571

5,833

10,404

Electrical machinery

General machinery
YoY
Total net sales
YoY

Full year

14.3%

36.5%

25.3%

-13.4%

-5.8%

-9.3%

72,16473,246

145,410

67,60870,335

137,943

7.2%

-7.8%

-0.9%

-6.3%

-4.0%

-5.1%

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

Operating income fell 45.8% (¥1,563mn) YoY. This was partly due to the fact that the gross profit margin declined
from 11.2% in the previous fiscal year to 10.5% in conjunction with the change in the sales composition ratio, in
addition to the decrease in sales. This was impacted by the fact that although sales to the factory automation andindustrial equipment industries dropped by double digits, low-profit-margin sales for the automotive (on-board
products) industry grew by double digits, and the sales composition ratio increased from 18.4% in the previous
fiscal year to 22.4%. The SG&A expense ratio increased from 8.9% in the previous fiscal year to 9.1% due to thedecline in sales, despite the efforts to reduce costs and improve operational efficiency. As a result, the operating
margin fell from 2.3% to 1.3%. This was 15.4% higher than the Company's revised forecast, as the effects of cost
reductions and work efficiency improvements were greater than expected.

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04 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Results trends

Trends in various margins
Gross margin
14.0%

12.4%

SG&A expenses ratio

12.6%

12.5%

12.5%

Operating margin

12.2%

11.5%

12.0%

11.2%
10.5%

10.0%
9.9%

8.0%

10.2%
9.3%

9.5%

3.2%

3.1%

9.6%

9.1%

8.9%

8.7%

6.0%
4.0%

2.6%

2.8%

2.6%

2.3%

2.3%
1.3%

2.0%
0.0%
FY3/13

FY3/14

FY3/15

FY3/16

FY3/17

FY3/18

FY3/19FY3/20Source: Prepared by FISCO from the Company's financial results

Despite the decline in sales to the mainstay factory automation andindustrial equipment industries, sales to the automotive (on-board
products) industry stayed strong, growing by double digits
2. Segment, industry and regional trends
The Company discloses net sales after breaking them down into the three business segments of electrical machinery,electronics, and general machinery, according to the products handled. In addition, the Company discloses net sales
and operating income as segment information by region, and discloses the sales composition ratio by industry andthe trends up or down as reference information.
(1) Trends in net sales by business segments
FY3/20 trends in net sales by region and industry
Japan
Electricalmachinery
Industrial machinery industry

Electronics

×

Asia
Generalmachinery

Electricalmachinery

Electronics

×

×

×

Europe/US
Generalmachinery

Electricalmachinery

Electronics

Generalmachinery×•

Automotive industry•

FPD industry

×

OLED-related industry
×

Amusement industry

Source: Prepared by FISCO from the Company's financial results and results briefing materials

The main products in the electrical machinery segment include servo motors, motion controllers, programmablecontrollers, inverters, and power conditioners. Sales to the industrial machinery industry decreased in Japan andAsia, falling 14.0% YoY to ¥21,137mn.

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

05 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Results trends

The main products in the electronics segment are wide ranging, including general electronics parts such as
capacitors, connectors, relays and switches, as well as fan motors, stepping motors, LEDs, power supplies,
and heat sinks. Although sales to the automotive (on-board products) industry increased in Japan, sales to theamusement industry decreased in Japan, and sales to the industrial machinery industry decreased in Asia, Europe
and the United States. Overall, sales were down 2.7% YoY to ¥106,400mn.
The main products in the general machinery segment include Yaskawa Electric's <6506> robots, as well as
conveyors and reduction gears. Sales decreased 9.3% YoY to ¥10,404mn, as the increase in sales of conveyors
for the FPD industry in Japan was offset by the decline in sales of equipment to the industrial machinery industry
in Japan.
(2) Trends in sales composition ratio by industry and sales increase/decrease
Table of sales composition ratio and increase/decrease by industry
Customers (industry)

FY3/18

FY3/19FY3/20

Ratio

YoY

Ratio

YoY

Ratio

Factory automation/industrial equipment

40.5%

•

40.4%

-

34.2%

×

Automotive (on-board products)

15.2%

•

18.4%

•

22.4%

•

Semiconductors/LCDs

12.0%

•

9.1%

×

9.5%

-

Social infrastructure

3.6%

•

3.4%

×

3.7%

•

Amusement

3.3%

×

4.0%

•

3.3%

×

Information/communications

3.6%

-

2.7%

×

2.3%

×

Medical equipment

1.2%

•

1.4%

•

1.6%

•

Environment/energy

1.3%

×

1.4%

•

1.3%

×

Food

0.2%

×

0.6%

•

0.6%

•

Security

0.2%

•

0.3%

•

0.1%

×

Other

18.9%

•

18.3%

-

21.0%

•

Total

100.0%

100.0%

YoY

100.0%

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

Looking at the highest sales composition ratios by industry, sales to the mainstay factory automation and industrial
equipment industries fell from 40.4% in the previous fiscal year to 34.2%. When sales are calculated on a trial basis
from the sales composition ratio, it is estimated that sales decreased by about 20% from the previous fiscal year.
Capital investment has generally cooled off, especially in Japan and Asia, and the Company has also been affectedby this. Some of the products in Other are indirectly sold to the factory automation and industrial equipment
industries, and the sales composition ratio for these industries, including these products, is in the 40% range.
For the automotive (on-board products) industry, which has the next highest sales composition ratio, the ratio
increased from 18.4% in the previous fiscal year to 22.4%, and sales increased by approximately 16%. The
electronic parts handled by the Company are mainly for so-called ADAS (advanced driver assistance systems)
such as automatic brakes and collision prevention devices, and the increase in the on-board installation rateof ADAS is a key factor for high growth. However, because the gross margin is low, an increase in the sales
composition ratio actually acts to reduce the profit margin.
The sales composition ratio for the semiconductor and LCD industries was generally flat YoY, increasing from
9.1% in the previous fiscal year to 9.5%, and net sales moved sideways. Sales were sluggish in the fiscal first half,
but in 2H major semiconductor manufacturers began to resume investment, and the Company recovered in 2H.

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

SUN-WA TECHNOS CORPORATION

10-Jul.-2020

8137 Tokyo Stock Exchange First Section

http://www.sunwa.co.jp/en/index.html

Results trends(3) Trends in net sales and profits by region
Trends by sales region and by segment(¥mn)
FY3/19

Japan

1H

2H

Full year

1H

2H

Full year

Net sales

57,65358,340115,993

53,88956,446110,335

YoY

10.1%

-6.8%

0.9%

-6.5%

-3.2%

-4.9%

1,065

874

1,939

529

756

1,285

13.9%

-37.5%-16.9%-50.3%-13.5%-33.7%

Operating income
YoY

1.8%

1.5%

1.7%

1.0%

1.3%

1.2%

Net sales

18,646

18,542

37,18816,243

18,211

34,454YoY

5.1%-14.8%-5.8%-12.9%

-1.8%

-7.4%

778

430

1,208

289

303

592

15.4%

-47.2%-18.8%-62.9%-29.5%-51.0%

Operating margin

Asia

Operating income
YoY

4.2%

2.3%

3.2%

1.8%

1.7%

1.7%

Net sales

4,204

3,880

8,084

3,746

2,652

6,398

YoY

11.9%

-24.0%-8.8%-10.9%-31.6%-20.9%

275

-21

254

35

-119

-84

YoY

69.7%

-

-18.3%-87.2%--

Operating margin

6.5%

-0.5%

3.1%

0.9%

-4.5%

-1.3%

Operating margin

Europe/US

FY3/20Operating income

Source: Prepared by FISCO from the Company's financial results

In Japan, net sales were ¥110,335mn (down 4.9% YoY) and operating income was ¥1,285mn (down 33.7%).
Although sales of electronic parts for the automotive (on-board products) industry and conveyors for the FPD
industry increased, sales of electrical machinery parts and equipment for the industrial machinery industry declined,
while sales of electronic parts for the amusement industry fell, resulting in a decline in both sales and profits. The
operating margin fell from 1.7% in the previous fiscal year to 1.2% due to the decrease in sales and the change
in the sales composition ratio.
In Asia, net sales were ¥34,454mn (down 7.4% YoY) and operating income was ¥592mn (down 51.0%). The
decline in sales of electrical machinery parts and electronic parts for the industrial machinery industry were thefactors behind the decline in sales and profits. Results were impacted by the economic slowdown and cooling of
capital investment in China, which accounts for just over 70% of net sales in the Asia region.
In Europe/US, net sales were ¥6,398mn (down 20.9% YoY) and operating loss was ¥84mn (compared to operating
income of ¥254mn in the previous fiscal year). Sales of electronic parts for the industrial machinery industry andsales of electrical machinery parts for the OLED industry both declined. Sales decreased in both the US andEurope, but sales to Europe fell sharply by more than 50%.

With solid capital investment in the semiconductor industry and arecovery in sales to China, FY3/21 1H results are expected to be on
par with FY3/20 2H results
3. Outlook for FY3/21 results
For FY3/21, it is unclear to what extent the novel coronavirus pandemic will affect capital investment by companies,
and it is difficult to make an appropriate and rational forecast at this time. Therefore, the Company has only
announced a forecast for 1H, and has left its full fiscal year forecast as undetermined. Specifically, for FY3/21 1H,
the Company is forecasting ¥70,000mn in net sales (+3.5% YoY), ¥750mn in operating income (-17.6%), ¥800mn
in ordinary income (-22.8%), and ¥500mn in net income attributable to owners of the parent (-27.5%).

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

07 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Results trends

FY3/21 results forecast(¥mn)
FY3/20Net sales
Operating income
Operating margin
Ordinary income
Net income attributable toowners of the parent

FY3/21

1H results

2H results

Full year results

1H Company
forecast

67,60870,335

137,943

70,000

3.5%

909

937

1,846

750

-17.6%

YoY

1.3%

1.3%

1.3%

1.1%

-

1,036

1,108

2,144

800

-22.8%

689

652

1,341

500

-27.5%

Source: Prepared by FISCO from the Company's financial results

Looking on a half-year basis, net sales are expected to be about the same level as in the second half of the previous
fiscal year. This is due to several negative factors. For example, as discussed above, at the beginning of 2020 theCompany had been expecting the recovery trend to continue, but with the impact of the novel coronavirus pandemic
an increasing number of companies have taken a cautious stance towards capital investment. In addition, it has
become highly likely that sales of electronic parts that go on-board vehicles will decline for a period of time due tothe decrease in the number of automobiles produced. However, it is not all bad news. In addition to the growing
demand for semiconductors for 5G and data centers, demand for PCs is increasing due to the growth of teleworking,and capital investment to increase the production of cutting-edge semiconductors is on a recovery trend. In fact,orders from semiconductor manufacturing equipment manufacturers seem to have been stronger than expected
since April. Orders from China, which had been sluggish, also recovered rapidly to the second highest level everin April. It seems that orders from solar cell manufacturers have begun to come in. Lockdowns are gradually been
lifted in China, Europe, and the United States, and production activities in the manufacturing industry are gradually
beginning to resume. Sales up to 2Q are basically visible, and the Company expects to be able to maintain thesame level of sales as in FY3/20 2H. Although the outlook for 2H is still uncertain, there is a possibility that capital
investment in the semiconductor industry will remain solid, and that industrial robots will begin to be used as amanpower-saving measure for companies.
Meanwhile, with respect to the factors behind the decline in operating income, we are not anticipating any special
increases in costs, and the Company’s forecast is believed to be conservative given the uncertain market environment. In fact, with regard to FY3/20 results, net sales were slightly lower than the Company’s forecast, but operating
income was higher than the Company’s forecast. The gross margin is also likely to improve due to a decline in thesales composition ratio for the automotive (on-board products) industry, and we at FISCO believe that if net sales
are achieved as forecast, there is a little bit of room for additional profit.
Two risk factors to watch are a second wave of the novel coronavirus outbreak in China and Western countries
resulting in a stoppage of companies’ production activities, and serious damage to China’s manufacturing industry
due to the re-flaring of US-China trade friction. Regarding the latter in particular, on May 15, the US government
announced a new export ban against telecommunications equipment giant Huawei*, and the Chinese government
responded by announcing that it will consider a response. The situation is tenuous, and a close eye must be kept
on related developments. The assumed exchange rate is ¥110/US$.
*	In May 2019, the US government announced an export ban against Huawei and related companies covering semiconductors and other electronic components. This action bans the supply of products that use manufacturing devices basedon US technology, even if they are foreign-made semiconductors.

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08 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html█ Progress of medium-term management

plan

In NEXT 1800, the medium-term management plan, the Company
is working to build the management foundation toward realizing
sustainable growth over the medium to long term
1. New medium-term management plan NEXT 1800
(1) Overview of the medium-term management plan
In May 2019, the Company announced NEXT 1800, its three-year medium-term management plan. The Company’s
medium- to long-term growth strategy is to use this three-year medium-term management plan as a signpost, andto position this as a period to build a management foundation that will allow the company to achieve sustainablegrowth over the medium- to long-term by steadily implementing the plan’s priority measures.
In its long-term management vision “Sun-Wa Vision 2025,” the Company calls for “strengthening core businesses
to build operations that contribute to advances in industrial activity in local societies as a total coordinator of
production sites and distribution and help in attaining the goal of ¥250bn in consolidated net sales in FY3/26.”
Similar to the Company’s previous medium-term management plans, NEXT 1800 is positioned as a three-year
action plan toward the realization of the corporate mission and Sun-Wa Vision 2025.
NEXT 1800 presents four items as fundamental policies, including “contribute to customer production activities
by strengthening core businesses.” It also highlights priority measures for each of the policies. We review thedetails of plan measures later in this report. In the core portion of income growth, the Company hopes to make
improvements and achieve further advances versus Challenge 1500, the previous medium-term management
plan, and realize a growth strategy with even higher certainty, while also carrying out initiatives for new businesscreation that lay the groundwork for growth over a longer term as a new initiative. Additionally, it places moreemphasis on themes with strong social content, such as work style reforms that enhance productivity by utilizing
ICT in a way that addresses changes in society, achievement of a corporate culture that stimulates interest inwork, and contributions to SDGs (sustainable development goals), than previously.
Fundamental policies in NEXT 1800
Contribute to customer production activities by strengthening core businesses★ Strengthen core businesses★ Promote collaboration with business partners to bolster solution proposals
Expand global business capabilities to support market demand★ Strengthen hiring of overseas local employees and organizational capabilities★ Consider establishment of new locations
Pursue new business fields to accelerate sustainable growth★ Strengthen investments in new business creation★ Cultivate managerial personnel by adopting an intrapreneurship program★ Create new value through SCM improvements
Initiatives to realize a sustainable society★ Foster a corporate culture that stimulates interest in work by boosting employee engagement★ Implement work style reforms that “enhance productivity” utilizing ICT★ Conduct initiatives that contribute to SDGs
★ Fulfill corporate social responsibility (promote CSR and compliance)
Source: Prepared by FISCO from the Company's results briefing materials

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

09 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Progress of medium-term management plan(2) Numerical management goals in the NEXT 1800 plan
Management goals in NEXT 1800, as suggested by the plan name, are ¥180,000mn in net sales, ¥4,800mn inoperating income, and ¥5,000mn in ordinary income in FY3/22, the final fiscal year.
In FY3/20, which was the first fiscal year of the plan, both net sales and profits fell short of the initial targets
due to the market environment being less favorable than initially assumed as a result of the impacts of both theprolonging of the US-China trade tensions and the novel coronavirus outbreak. In addition, in FY3/21, net sales
will likely only recover slightly, at least in the first half of the fiscal year, due to the novel coronavirus pandemic. It
is also possible that the Company will push back the timing of its goal for when it aims to achieve the numericalmanagement targets set for FY3/22.
Medium-term management plan numerical targets(¥mn)
Medium-term management plan NEXT 1800
FY3/19 results

FY3/2020
Managementtargets

Results

FY3/21
managementtargets

FY3/22
managementtargets

145,410150,000

137,943

165,000

180,000

Operating income

3,410

3,100

1,846

3,800

4,800

Operating margin

2.3%

2.1%

1.3%

2.3%

2.7%

Ordinary income

3,627

3,300

2,144

4,000

5,000

Ordinary margin

2.5%

2.2%

1.6%

2.4%

2.8%

Net sales

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

However, due to the spread of the novel coronavirus, the risk of production lines being forced to stop has emerged,
so there is a now a possibility that investment targeting manpower-saving, including the introduction of industrial
robots, will become more active than before in industries such as the manufacturing industry and the logistics
industry. In addition, when a company introduces industrial robots, it is necessary to construct a system suitablefor each manufacturing line, and as discussed later, this can be viewed as a growth opportunity for the engineeringbusiness. Furthermore, due to the impacts of US-China trade friction, the Company’s customers are beginningto move their factories from China to Southeast Asia and other regions, which presents business opportunities
for the Company to offer them its parts procurement capabilities.
Although the market environment has temporarily deteriorated due to the novel coronavirus pandemic, it canbe said that the possibility of seeing the changes as an opportunity and taking advantage of the opportunity torealize growth has increased. From a medium- to long-term perspective, capital investment is expanding alongsideeconomic growth while tracking the positive and negative economic cycles. It seems that the Company’s resultsover the years since FY3/00 have also trended similarly. In terms of the average annual growth rate over the 20
years from FY3/00 to FY3/20, net sales have grown at an average annual rate of 5.1%, while operating income hasgrown at an average annual rate of 3.4%. In the 18-year period up to FY3/18, which represents the most recent
peak in results, net sales grew by an average of 6.0% per year, and operating income grew at an average of 8.6%
per year. In order to achieve sales of ¥250bn, as targeted in the long-term vision for FY3/26, the pace of growth
will have to become faster than before, but at FISCO we believe that if the priority measures in the medium-term
management plan proceed smoothly, there is a good possibility of this happening.

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

10 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Progress of medium-term management plan

Medium- to long-term results
売上高（左軸）Net
sales (left)(¥mn)
200,000

営業利益（右軸）
Operating income (right)

（¥mn）
5,000
4,000

150,000
3,000
100,000

2,000
1,000

50,00000-1,000
00/3期
FY3/00

05/3期
FY3/05

10/3期
FY3/10

15/3期
FY3/15

20/3期
FY3/20Source: Prepared by FISCO from the Company's financial results

In the engineering business and global SCM solutions business,
the Company plans to expand the business scale while focusing on
profitability
2. Progress for "contribute to customer production activities by strengthening core businesses"
Among the four fundamental policies set out in the medium-term management plan, the theme of “contribute tocustomer production activities by strengthening core businesses” is the most important within the Company’s growthstrategy. Within this fundamental policy, the Company is focusing especially on the engineering business and theglobal SCM solutions business. Both of these businesses still only have annual sales of roughly ¥10bn, but theseare seen as important businesses for realizing sales growth and improved profitability going forward. The progress
made on each business is described below.
(1) Engineering business
The engineering business sells to customers what the Company itself combines and systemizes from the products
previously sold individually that are handled in each of the three respective business segments of electricalmachinery, electronics, and general machinery. In other words, the engineering business is not some sort ofseparate, new business, but it is a sales method in the trading company function. The background behind theCompany focusing on this business includes increasing functionality of factory automation equipment suchas industrial robots, as well as the associated diversification of customers’ needs. In this situation, selling only
individual products did not meet these needs and also tended to create a situation in which it was difficult forbusiness opportunities to grow. Also, the Company thought it would be possible to enhance profitability by adding
the value-added of engineering.

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11 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Progress of medium-term management plan

Overview of engineering business

Source: The Company’s website

In FY3/20, the engineering business posted net sales of approximately ¥12bn, and over the past few years thebusiness has been continuing to stably post sales above the ¥10bn level, which had been the near-term goal at
the time of the business launch. In FY3/20, the Company received orders for inspection equipment and conveyors
from the FPD industry, and received orders for assembly robots and mobile power source vehicles from the industrial machinery industry, among others. By focusing on areas of strength, gross margin also increased about one
percentage point YoY to the 13% range. Still, the profit margin fell well short of the initially assumed level (whichappears to have been in the 25-30% range), so this is something that will need to be addressed going forward.

Trend in net sales and gross margin in the engineering businessNet sales (left)
Gross margin (right)（¥bn）

Companywide gross margin (right)

16.0

16.0%
13.5

14.0

12.6
11.5

12.0

12.4

13.4%

13.1%

12.8%
10.0

12.0

14.0%
13.0%

12.2%

12.5%
8.0 12.0%

15.0%

12.0%
12.2%

6.0

11.5%

4.0

11.0%
11.2%
10.5%

2.0

10.0%
9.0%

0.0

8.0%
FY3/16

FY3/17

FY3/18

FY3/19FY3/20Source: The Company’s results briefing materials, FY3/20 data estimated by FISCO based on interviews with the Company

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

12 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Progress of medium-term management plan

The Company's gross margin is in the 10% range, but would likely be above 11% if electronic parts for the
automotive (on-board products) industry are excluded. Therefore, the added-value of the engineering business isabout 2%. The reason that the profit margin is falling short of the initial expectation is that the Company handles
few projects where is utilizes its past knowledge and experience to make proposals, and instead the majority of
its projects are simply orders received from customers. As a result, the Company has not been able to sufficiently
receive compensation for the value-added portion that it is capable of offering.
The Company’s engineering business has been described by comparing it to curry. That is to say, previously it soldthe meat, vegetables, and rice individually as the ingredients (an agency business). In contrast, the engineeringbusiness tries to use each of these ingredients to make and to sell curry rice, and the work to produce the curryroux and flavor the curry rice is the Company’s expertise and is what provides the value added. However, in thecurrent situation, the Company is not making and providing the curry using its own recipe, but rather it is making
curry each time based on the customers’ preferences, making it difficult to receive compensation for the costs
involved and suppressing the profit margin.
Based on this situation, from FY3/20 the Company began to revise the business model for the engineeringbusiness, and switched to a strategy that focuses on receiving orders with an emphasis on profitability, by turning
down orders for projects that do not utilize its past knowledge. As a result, while net sales were almost at thesame level as the previous fiscal year, the gross margin was successfully increased by about one percentage pointcompared to the previous fiscal year. However, in order to further improve the profit margin, we at FISCO think thatthe key is how to build a system that standardizes the know-how accumulated by the Company and provides it tocustomers as a service menu. As discussed above, it is expected that manpower-saving investments will progressin various industries such as electronic component assembly and the food industry, and that opportunities toacquire customers will expand. If the Company can provide services that meet the needs of customers and enable
them to feel a cost benefit it will lead not only to increased sales in the engineering business but also improved
profitability. The Company has 49 engineers working in this business, and for the time being the Company’s plan
is to expand the business with this team of engineers.
(2) Global SCM solutions business
The global SCM solutions business is rooted in the services that the Company has provided since the distancepast of procurement agent, logistics agent, and delivery management services. The various manufacturers thatare its main customers have been pursuing efficiency as major companies and progressing business structuralreforms and restructuring. In this process, they have targeted reducing personnel and bases in areas such as
global logistics, inventory management, and materials procurement, so the reality is that they currently haveshortages of personnel. The Company’s global SCM solutions business captures the outsourcing needs that arise
due to these shortages. By consolidating the electronic parts and equipment, etc., which the client manufacturers
had been procuring from various suppliers on their own up until this point, in the Company, customers can enjoy
such benefits as reduced procurement costs and shortened lead times.
Using the moving business as an example, conventional procurement agent and logistics agent services justmoving a person’s items from the former home to the new home. In global SCM solutions business, meanwhile,the service also extends to setting up televisions and PCs for immediate use after the move and procuring andinstalling antennas and Wi-Fi equipment. Engineering business corresponds to selection and procurement ofantennas and Wi-Fi equipment suited to the new area and wiring installation. The move might lead to morebusiness too if an order is received for landscaping and softscaping work. The Company is aiming to grow the
global SCM solutions business by utilizing the expertise it has accumulated over its long history as a technology
trading company and its strength of having a wide overseas network (26 bases worldwide).

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

13 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Progress of medium-term management plan

In FY3/20, net sales were approximately ¥8.6bn, which was lower than the roughly ¥9.2bn in the previous fiscal
year. This was mainly due to the deterioration in the market environment and the decline in overall net sales. In
terms of new projects, the Company received an order from a leading machining tool manufacturer for the SCM
business for factories in Europe and the US, as well as an order from an OA equipment manufacturer for the SCM
business for electronic parts for commercial printers. The Company launched the global SCM solutions division in
April 2019, and started working to expand the business, but profitability started to trend slightly lower, prompting
the Company to recently change the direction of its sales strategy. Previously, the Company was entrusted with
the SCM business at the request of the customer, so it was relatively profitable, but by setting a sales target as abusiness unit, the Company started actively going out to receive orders, which resulted in the Company startingto accept orders for low-profitability projects. For this reason, the Company is currently refraining from pro-active
sales activities and is returning to its traditional sales method of waiting for customers' requests.
Even so, at FISCO we believe that the outsourcing needs for global SCM will continue to grow. This is becausesome companies are starting to move factories from China to Southeast Asia, Latin America, or Japan, due tointensifying trade friction between the US and China. When relocating a factory, it is inefficient to build a local partsprocurement system independently from scratch. In fact, the number of inquiries to the Company is increasing,and it is expected that sales in this business will start to grow again if the market environment recovers. Thisbusiness is expected to grow in the future as it not only leads to the expansion of the scale of transactions withexisting customers, but also provides opportunities to acquire new customers. In addition, in order to strengthen
the competitiveness of its SCM services, the Company began reviewing and improving the global logistics
infrastructure at the same time as it established the business division. As part of that, the Company started
full-fledged operations of WMS in April 2019 to allow for the visualization of logistics costs.

Trends in net sales in the global SCM solutions business
（¥bn）
10.0

About ¥9.2bn
About ¥8.6bn

9.0

8.0
About ¥6.7bn

7.0
6.0
5.0
4.0

About ¥3.8bn

3.0
2.0
1.0
0.0
FY3/17

FY3/18

FY3/19FY3/20Source: Prepared by FISCO from the Company's results briefing materials

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

14 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Progress of medium-term management plan

Established a base in Ho Chi Minh City, Vietnam. Expected tocontribute in the global SCM solutions business3. Progress for “expand global business capabilities to support market demand”
With respect to this topic, the Company established a business base in Ho Chi Minh City, Vietnam in August 2019.
The Company opened an office in Vietnam in the major northern city of Hanoi in 2013, but over the past few years
more and more companies, particularly companies in the electronics industry, have been relocating factories toVietnam due to the soaring personnel costs and rising political risks in China, or opening completely new factories
there. In order to capture such demand, the Company opened a second office in Ho Chi Minh City, a major city in thesouth, to strengthen its sales platform. The office’s specific activities will include supporting Japanese companies,
discovering excellent local companies and products, and expanding sales channels in the ASEAN region. In addition,
the Company is expected to win orders in the global SCM solutions business.
In addition, in order to expand the global business, as a priority measure the Company is also working on developing
and promoting locally-hired employees as management personnel in order to fortify its organizational strength.
Currently, Japanese staff are stationed at all 26 overseas offices as managers. However, as the number of consolidated employees has increased to about 1,000, of which 400 are foreign nationals (of which about half are in China),
and personnel are globalizing, the Company feels that globalizing management-level staff will lead to a stronger
organization. As it is costly to bring in people with management skills from the outside, the Company’s policy is todevelop people from within the group, and the Company is starting a training program in Japan for management
candidates. If the globalization of management personnel progresses, we at FISCO believe that the Company will
be able to cultivate more non-Japanese customers, which currently account for only around 10% of sales (about
35% in the Chinese market), and overseas sales will grow even more.

Generate added value and create new business opportunities
through SCM improvement
4. Progress for “pursue new business fields to accelerate sustainable growth”
Regarding this, as discussed above, the Company started operating the WMS in April 2019, and is working to
improve logistics quality, strengthen traceability, make logistics costs visible, and improve productivity. The effects
have already begun to appear, such as inventory reduction, abatement of logistics costs, and a shortening of leadtimes, and the Company expects that the improvements will continue in FY3/21 and beyond. The advantages ofmaking logistics costs visible are briefly explained as follows. For example, if a product acquired for ¥1mn is sold for¥1.2mn, a gross profit of ¥200,000 is booked, but if the logistics costs are ¥300,000, the transaction will produce aloss. In the past, a Company was not able to ascertain such logistics costs for each project, but since the logistics
costs can be visualized for each project with the introduction of WMS, for such loss-making projects, a company
can consider methods to either lower the acquisition cost or lower the logistics costs, thereby making it a profitabletransaction. Continuing these efforts will lead to improved profitability.

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

15 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Progress of medium-term management plan

In addition, the Company has introduced an intrapreneur (in-house entrepreneur) system and is working on new
businesses at a pace of 2-3 new businesses per year. In FY3/17, the Company established the Eco-New Life
Support Division as part of efforts to promote opportunities for women to play an active role. This division sells
automated external defibrillators (AED) and LED lighting equipment targeting the lifestyle-related market, and sales
are growing year by year even though the scale is small. Most recently, the Company partially amended its articles ofincorporation in April 2020, adding a new rental business to the business of selling electrical machinery, machinery
equipment and tools, measuring instruments, and medical equipment. In addition to renting blood vessel age
measuring instruments to nursing homes, the Company plans to provide UV sterilization air purifiers to businesshotels. The use of robots may become widespread in the future even in the lifestyle area, and this can be consideredan opportunity to build a customer base in preparation for that time. On top of this, the Company’s policy is to look
into M&A deals that would be expected to generate synergies.

Plenty of room to cultivate new customers in regional areas bydeveloping sales bases utilizing ICT
5. Progress for “initiatives to realize a sustainable society”
For this theme, one of the targets is utilizing ICT to realize workstyle reforms that “improve productivity.” In July 2019,
the Company opened a sales base in Shikoku, and began allowing staff to telework on a trial basis. Conventionalsales bases require 4 to 5 people, comprising both sales staff (front office) and administrative staff (back office),and operating costs tend to be high. In the case of the Shikoku sales office, by having people from the Osakabranch office (the Shikoku office’s head office) cover back office operations via teleworking, only the front office staff(two people) work there on a full-time basis. Looking at the results for the first six months, sales increased, whilecosts were reduced by two-thirds compared to the normal level. While sales offices involve maintenance costs,
the Company confirmed that these costs can be absorbed by the reduction of personnel expenses and travel
expenses for administrative staff. Because sales have increased compared to before, productivity per person has
also improved.
The increase in sales is thought to be due to the fact that the Company was able to execute sales in closer
contact with customers than before. For a trading company focused on industrial equipment like the Company, it
is important to be able to quickly support customers’ needs (quality improvements, etc.). Therefore, it can be said
that establishing a sales base near customers provides a shortcut to winning orders. EC transactions have become
more common overseas in the field of factory automation and industrial equipment, but the fact that in-person sales
will continue to be the main style of sales in Japan is a reason why the Company opened this sales office.
Since the Shikoku sales office has been a success, the Company is considering similar moves with other regionalbases. The Company has established sales offices in the Tokyo metropolitan area, and the Chubu, Kansai, andKyushu areas. However, looking at other areas, the sales network is still undeveloped. There are no sales bases in
Hokkaido, and the Sendai sales office (4-6 members) covers all six prefectures in the Tohoku region, where a large
number of electronic device production sites are concentrated, but we conjecture that the Sendai sales office is not
actually able to adequately cultivate new customers. The same applies to the Hokuriku region and the Chugoku
region, as there is only one sales office for both regions. In the factory automation and industrial equipment field,
which represents the Company's targeted customers, there are many blue-chip companies scattered about in rural
areas. By establishing sales offices for these kinds of customers in the same model as the Shikoku sales office, we
at FISCO believe that the Company has plenty of room left to cultivate new customers.

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

16 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Progress of medium-term management plan

Net sales for the automotive industry will decline for a periodof time due to the production adjustments by finished vehicle
manufacturers, but the growth trend will continue over the medium
to long term.
6. Growth of the automotive business
The business for the automotive industry can be broadly divided into the electronic parts business for on-board
electronic equipment, and the production equipment business for automakers’ factories. Of these, the electronicequipment business for on-board electronic products has been growing at a rapid pace over the past few years, with
net sales in FY3/20 of ¥24,688mn, a 15.9% YoY increase, as performance remained strong. Looking at the results
since FY3/16, over these four years net sales have grown by almost six times, as sales have rapidly increased. For
FY3/21, as discussed above, there is a strong likelihood that sales will decline in the short term, as the numberof vehicles produced in Japan is expected to decline significantly from April onward. However, the technologicalevolution of automobiles is expected to continue in the future on the backdrop of the spread of EVs, the growing
use of autonomous driving technology, and the spread of MaaS (Mobility as a Service) triggered by the launch of
5G commercialization services. New systems are expected to be installed along with these technological advances,
and at FISCO we believe that the growth trend will continue over the medium to long term. The automotive businessalready accounts for more than 20% of the Company’s overall sales, which is second only to the factory automationand industrial equipment field, and it is expected to grow as a mainstay field that will continue to support an increasein the Company’s sales. The problem is that the profit margin is low, but at this point in time there are no concretemeasures for improvement. This is another business where it seems possible to add value by selling parts as
modules, rather than selling parts individually, but since it will take time to accumulate the technical expertise, thisis an issue to address in the future.

Trend in net sales for the automotive industry
Automotive (on-board products)（¥mn）

Automotive (equipment)

30,00024,68825,00021,29820,00017,49315,000
8,747

10,000
5,000

4,365

2,828

3,141

3,393

4,302

3,527

0
FY3/16

FY3/17

FY3/18

FY3/19FY3/20Source: Prepared by FISCO from the Company's results briefing materials

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

17 19

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

10-Jul.-2020
http://www.sunwa.co.jp/en/index.html

Progress of medium-term management plan

Summary income statement and key indicators(¥mn)
FY3/16

FY3/17

FY3/18

FY3/19FY3/20FY3/21 1H E

Net sales

105,748

116,611

146,759

145,410

137,943

70,000

YoY

-5.0%

10.3%

25.9%

-0.9%

-5.1%

3.5%

Gross profit

13,256

14,255

16,883

16,31814,421-Gross margin

12.5%

12.2%

11.5%

11.2%

10.3%

-

SG&A expenses

10,812

11,24012,747

12,908

12,574

-

YoY

2.8%

4.0%

13.4%

1.3%

-2.6%

-

SG&A expenses ratio

10.2%

9.6%

8.7%

8.9%

9.1%

-

2,444

3,014

4,135

3,410

1,846

750

-29.6%

23.3%

37.2%

-17.5%-45.8%-17.6%

2.3%

2.6%

2.8%

2.3%

1.3%

1.1%

2,645

3,215

4,349

3,627

2,144

800

-29.7%

21.6%

35.3%

-16.6%-40.9%-22.8%

Operating income
YoY
Operating margin
Ordinary income
YoY

1,690

1,584

3,085

2,628

1,341

500

YoY

-31.5%

-6.3%

94.8%

-14.8%-49.0%-27.5%EPS (¥)

117.76113.64222.65164.08

84.11

31.69

Dividend (¥)

28.00

28.00

30.00

34.00

34.00

17.00

Net income attributable to owners of the parent

Source: Prepared by FISCO from the Company's financial results

Summary balance sheet(¥mn)
FY3/16

FY3/17

FY3/18

FY3/19FY3/2046,85755,50765,85264,20962,713

Cash and deposits

6,359

6,759

8,596

10,005

12,052

Notes and accounts receivable

34,554

41,16846,07742,256

39,838

8,581

9,309

11,401

9,905

9,024

3,788

3,056

3,005

2,861

2,759

Intangible assets

240

222

168

143

193

Investments, etc.

4,553

6,030

8,227

6,900

6,072

Total assets

55,43964,816

77,254

74,11471,738Current liabilities

28,691

36,596

43,077

37,19935,402

Notes and accounts payable - trade

24,732

31,182

34,29831,427

29,108

Short-term loans payable, etc.

2,317

2,489

5,722

3,805

3,809

Other

1,642

2,925

3,057

1,967

15,550Current assets

Non-current assets
Property, plant and equipment

4,484

4,581

6,182

4,970

4,608

Long-term loans payable

2,400

2,300

3,500

2,900

2,900

Other

2,084

2,284

3,042

2,070

1,708

Total liabilities

33,176

41,17849,26042,16940,011

Shareholders' equity

20,217

21,03423,731

29,05629,552

Total accumulated other comprehensive income

2,045

2,603

4,262

2,888

2,174

Net assets

22,26323,63727,993

31,94431,726

Non-current liabilities

Source: Prepared by FISCO from the Company's financial results

Cash flow statement(¥mn)
FY3/16

FY3/17

FY3/18

FY3/19FY3/20Cash flow from operating activities

-60

1,679

-2,221

1,636

3,238

Cash flow from investing activities

-384

-235

29

-153

-200

Cash flow from financing activities

-654

-818

3,962

28

-945

Cash and cash equivalents at end of period

5,875

6,275

8,112

9,521

11,568Source: Prepared by FISCO from the Company's financial results

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

18 19

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

SUN-WA TECHNOS CORPORATION

10-Jul.-2020

8137 Tokyo Stock Exchange First Section

http://www.sunwa.co.jp/en/index.html

Progress of medium-term management plan

Financial indicators
FY3/16

FY3/17

FY3/18

FY3/19FY3/20Equity ratio

40.2%

36.5%

36.2%

43.1%

44.2%

Interest-bearing debt ratio

21.4%

18.0%

19.0%

25.8%

33.0%

ROE

7.6%

6.9%

12.0%

8.8%

4.2%

Net cash (¥mn)

1,642

1,970

-626

3,300

5,343

Source: Prepared by FISCO from the Company's financial results█ Shareholder return policy
Plans for FY3/21 dividend to be ¥34 per share, the same as theprevious year
The Company’s basic policy is to provide returns to shareholders in the form of dividends. Management prioritizes
providing stable, continuous dividends, as demonstrated in its track record to date. While the Company does not
sharply raise dividends in response to temporary rapid profit expansion, it has steadily increased them in keepingwith earnings growth.
For FY3/20, the Company left its dividend unchanged YoY at ¥34.0 (payout ratio = 40.4%), despite the decline inboth net sales and operating income. In addition, for FY3/21, despite the unclear outlook for the full year results, theCompany announced that the dividend would remain unchanged at ¥34.0. This shows just how much the Company
emphasizes stable, continuous dividends.

Earnings per dividend and payout ratio
Dividend (left)（¥）

Dividend payout ratio (right)

50.0

48.0%
40.4%
40.0%

40.0

32.0%
30.0

24.6%
20.7%

20.0

10.0

13.5%
28.0

30.0

FY3/17

FY3/18

34.0

24.0%
34.0

34.0

16.0%
8.0%

0.0

0.0%
FY3/19FY3/20FY3/21(E)Source: Prepared by FISCO from the Company's financial results

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

19 19

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
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however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
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by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
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◾ For inquiry, please contact: ◾

FISCO Ltd.
5-11-9 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (Financial information Dept.)
Email: support@fisco.co.jp