COMPANY RESEARCH AND ANALYSIS REPORT

Nagaileben co., Ltd.
7447
Tokyo Stock Exchange First Section

20-Feb.-2018
FISCO Ltd. Analyst

Noboru Terashima

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

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. FY8/18 1Q results.................................. ......................................................................................................

01

2. FY8/18 forecast...........................................................................................................................................

01

3. Actively returns profits to shareholders........................................................................................................

01■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 02• History................................................... ......................................................................................................

02■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Sales breakdown.........................................................................................................................................

03

2. Sales channels and production status... ......................................................................................................

04

3. Characteristics and strengths......................................................................................................................

04

4. Company policy (initiatives for CSR/ESG). ...................................................................................................

05■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 06• Summary of FY8/18 1Q consolidated results...............................................................................................

06■Business outlook-------------------------------------------------------------------------------------------------------------------------------------------------------- 08• FY8/18 full-year outlook......................... ......................................................................................................

08■Medium- to-long-term growth strategy----------------------------------------------------------------------------------------------- 13
1. Mid-term Management Plan.................. ......................................................................................................

13

2. Future business strategies..................... ......................................................................................................

13■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 14

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

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/██Summary
Leading manufacturer of medical gowns
with a domestic market share of over 60%
Nagaileben co., Ltd. <7447> (hereafter, also “the Company”) is the leading manufacturer of medical gowns in Japan,
with a domestic market share of over 60%. The Company boasts high profit margins and a solid financial condition.
1. FY8/18 1Q results
In the consolidated results for FY8/18 1Q announced by the Company, net sales increased 7.2% year on year (YoY)
to ¥3,068mn, operating profit rose 11.3% to ¥801mn, recurring profit increased 6.3% to ¥822mn, and net profit
attributable to the owners of the parent company increased 8.3% to ¥571mn. Further depreciation of the yen, an
increase in processing charges, and a shift to new products contributed to a slight YoY decline in gross profit margin.
However, the decline was within the envisaged range, and overall results were in line with forecast.
2. FY8/18 forecast
The forecasts for the full-year consolidated earnings for FY8/18 are left unchanged for net sales to increase 2.8%
YoY to ¥17,500mn, operating profit to rise 2.5% to ¥5,373mn, recurring profit to climb 2.0% to ¥5,448mn, and net
profit attributable to the owners of the parent company to increase 1.8% to ¥3,739mn. Medical treatment fees andnursing care fees are expected to be revised in the spring of 2018, with expected increases in the main portion of
medical treatment fees and nursing care fees. This is probably not a cause for concern with regard to the Company’s
results. The Company is aiming to expand sales, particularly of its mainstay healthcare wear products. It is also
forecasting that it will absorb the higher costs by the continuing rise in the overseas production ratio and othermeans, to maintain the increase in operating profit.
3. Actively returns profits to shareholders
Based on the results in the previous fiscal year (FY8/17), the Company announced that it had rolled over its plan up
to that time and set new medium-term management targets for FY8/20, of net sales of ¥18,500mn and operating
profit of ¥5,600mn. It would seem to be aiming to achieve these targets through expanding overseas production andstrengthening high value-added products that have significant profit margins. The Company is also actively returning
profits to shareholders. It has pledged a dividend payout ratio of above 50% (on a non-consolidated basis) and in
FY8/18, it plans to pay an annual dividend of ¥60. It has also declared that it will flexibly buy back its own shares,
and its approach toward returning profits to shareholders would seem worthy of praise.
Key Points
Operating profit for FY8/18 1Q was up 11.3% YoY, in line with forecast
Mid-term Management Plan target aims for operating profit of ¥5,600mn in FY8/20• Increased the annual dividend to ¥60 and is actively returning profits to shareholders, including by buying backits owns shares••

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

01 15

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/

Summary㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼚㼑㼠㻌㼟㼍㼘㼑㼟㻌㼍㼚㼐㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼏㼛㼚㼟㼛㼘㼕㼐㼍㼠㼑㼐㻕（¥㼙㼚）㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻝㻤㻘㻜㻜㻜
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㻡㻘㻞㻠㻞
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（¥㼙㼚）
㻡㻘㻟㻣㻟

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㻝㻡㻘㻢㻞㻡

㻝㻢㻘㻞㻝㻠

㻝㻢㻘㻝㻡㻜

㻝㻢㻘㻡㻟㻣

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㻲㼅㻤㻛㻝㻟

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㻲㼅㻤㻛㻝㻣

㻲㼅㻤㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company’s financial results██Company profile
Leading manufacturer of medical gowns
with a domestic market share of over 60%• History
Nagaileben is a specialist manufacturer of medical gowns for nurses, doctors, patients and others. Established in
1915 as Nagai Shoten, the Company has a rich history. Since then, it has expanded its operations nationally to
become a leading domestic manufacturer with a share of over 60% of the market for medical gowns for nurses.

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

02 15

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/

Company profile

History
1915

Koji Nagai started a privately owned business “Nagai Shoten” specializing in medical gowns in Kanda-Jinbocho, Chiyoda-ku, Tokyo

1950

Liquidated Tokyo Eisei Hakui Co. Ltd. Koji Nagai and Tatsuro Sawanobori jointly established Nagai Shoten Co. Ltd.

1969

Established a subsidiary, Nagai Hakui Kogyo Co. Ltd., in Akita Prefecture to expand the medical gowns manufacturing division. Tatsuro
Sawanobori was appointed President. Shifted focus of manufacturing and sales business specialization from multi-purpose white gowns to
medical gowns.

1977

Built second product center in Kameido, Tokyo. Established a partnership with a US company, G.D. Searle & Company, and establishedJapan Surgical Apparel Co. Ltd. in Hiroshima to expand sales of new surgical apparel products for hospitals.

1978

Established technology partnerships with Angelica Corp (US) and Toray Industries, Inc. Developed and released medical gowns made with a
new fabric for leasing.

1979

Changed name to Nagai Co. Ltd.

1980

Opened a sales office in Takamatsu, Kagawa Prefecture. Concluded a license agreement with designer Kansai Yamamoto.

1982

Concluded a license agreement with designer Yukiko Hanai.

1988

Established Emit Co. Ltd. as a spin-off from Nagai Co. Ltd. Thereafter, the two companies exchanged their names, with Emit Co. Ltd.
becoming a group management company, and Nagai Co. Ltd. becoming a group headquarters for sales.

1989

Newly built Nagai Luminous, a manufacturing plant for high-grade products, in Akita Prefecture.
Started overseas production toward the global division of labor.

1994

Changed name from Nagai Co. Ltd. to Nagaileben Co. Ltd. Built a new logistics center in Akita Prefecture.

1995

Started over-the-counter trading of the Company’s stock. Started development and sales of a second pillar product to respond to the aging
of society. Vice President Ichiro Sawanobori appointed President.

1996

Concluded a license agreement with French designer Andre Courreges.

1999

Opened a sales office in Nagoya, Aichi Prefecture. Concluded a license agreement with designer Atsuro Tayama.

2001

Listed on the Second Section of Tokyo Stock Exchange.

2002

Established a technology partnership with Standard Textile Company, Inc. (US) and Toray Industries, Inc. for surgical textiles.
Raised the status of the Nagoya sales office to a branch.

2004

Acquired ISO 9001. Listed on the First Section of Tokyo Stock Exchange. Absorbed Hokkaido Nagai Co. Ltd. and established the Hokkaido
branch.

2005

Acquired ISO 14001. Concluded a license agreement with designer Keita Maruyama.

2006

Concluded a brand agreement with designer Minako Yokomori.

2014

Relocated to a new head office building in Kajicho, Chiyoda Ward, Tokyo.

2015

Held ceremony to commemorate its 100th anniversary.

2016

Transitioned to a Company with Audit & Supervisory Committee

2017Concluded a joint development agreement with Shiseido Company, Ltd.

Source: Prepared by FISCO from Company materials██Business overview
Focusing on expanding sales of high value-added,
advanced-function products
1. Sales breakdown
All of the Company’s products are medical gowns and related products. The contribution to sales by item (FY8/17)
is 58.4% from healthcare wear, 15.7% from doctors’ wear, 3.3% from utility wear, 10.5% from patient wear, 9.6%
from surgical wear, 1.2% from shoes, and 1.3% from other products. Healthcare wear consists mainly of products
for nurses, and utility wear consists of aprons, cardigans, and other items worn as outer garments. Profit margins
for each item do not vary significantly, but the profit margins of purchased products, such as shoes and otherproducts, are relatively lower.

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03 15

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/

Business overview

In terms of each region’s contribution to sales (FY8/17), eastern Japan accounts for 52.9%, western Japan 35.7%,
central Japan 10.3%, and overseas 1.1%. While coverage is nationwide, sales in western Japan and overseas
remain low, indicating the potential for future expansion.
The product (function) categories were changed from FY8/17. The Company’s own brand of high-priced products,
together with the products previously in the DC brand, became the “high-end products” category, and products thatup to that time were called advanced-function products have been redefined and categorized as “high value-added
products.” The name of the standard-function products category was changed to “value-added products,” while
the mass-produced products category has been left unchanged.
In the new categories, the percentages of total net sales by product (FY8/17) are 7.0% from high-end products,
50.6% from high value-added products, 37.3% from value-added products, and 5.1% from mass-produced products. On looking at the approximate price-band classifications in nurse wear, mass-produced products are lessthan ¥5,000, value-added products are ¥5,000 to ¥7,500, high value-added products are ¥7,500 to ¥10,000, andhigh-end products are more than ¥10,000. The tendency is for higher prices to achieve greater profit margins, so
the Company is focusing on expanding sales of high-end products and high value-added products.
2. Sales channels and production status
The Company’s end users include nurses and doctors, with the purchasers of the products mainly being medical
facilities such as hospitals, nursing care facilities, and other such facilities. However, the Company does not conduct
direct sales, with 100% of sales being agency sales via medical equipment wholesalers that sell to these medical andother facilities. As a result, sales expenses are kept down, but the Company is still able to understand customers’
needs as the sales staff is constantly in contact with large hospitals and other facilities.
In most cases up until recently, medical gowns were laundered within the hospitals by the hospitals themselves, but
in recent years they have been switching to leasing alongside the spread in laundry outsourcing. The lease term istypically four years. Because this generates lease switching demand every four years, it seems to stably support
the Company’s earnings. However, the lease renewal cycle does not necessarily occur in the same time period as
the previous time and there are cases of it being slightly before or after, so sometimes a slight shifting occurs forthe net sales (YoY) for each quarter.
Looking at the Company’s production structure, based on FY8/17 performance, internal production and at partner
plants constitute an aggregate of 98.7% (50.6% domestically and 48.1% overseas), with purchased products
accounting for 1.3%. Overseas production predominantly takes place in Indonesia, Vietnam, and China, but theCompany owns no plants and the goods are produced at the plants of its local partners, which mitigates investment
risk and reduces costs.
3. Characteristics and strengths
The Company is a specialized manufacturer of medical gowns, and one of its strengths is that it has in place anintegrated system to undertake every aspect of this business, from planning through to raw material procurement,
manufacturing, and sales. In its product planning, it can accurately understand customer needs and reflect themin its products. Specifically, the Company sells products that are easy to work in while incorporating anti-static,
antibacterial, and other functions, as well as featuring excellent designs, and they have earned excellent reputations
among their users. At the same time, it deals directly with major synthetics manufacturers and textiles traders,
including Toray Industries, Inc. <3402>, with which it is jointly developing materials, so it is able to secure optimal
materials and products at low costs while selling them at appropriate margins.

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04 15

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/

Business overview

Furthermore, in addition to its large number of affiliated plants, the Company has the necessary financial resources
to be able to constantly maintain product item inventories that extend into the thousands of varieties, while also
being able to swiftly respond to a broad range of user needs, including for made-to-order products, through a rapid
production and sales system (the quick response system) that delivers the desired product on the specified day.
This has also helped to earn it the strong trust of its customers. On the sales side, it has a network of close to 1,000
agents nationwide, and while its sales capabilities are robust, the Company itself keeps down its sales expenses
as much as possible.
As a result, the Company’s share of the domestic market for medical gowns for nurses exceeds 60%, and it
maintains a firm position as the leading medical gown manufacturer in Japan. Additionally, it is maintaining profitability
with a gross profit margin of 47.5% (actual results for FY8/17). The fact that it is both highly profitable and has ahigh market share demonstrates that most of its customers are satisfied with its products and services, which is
the Company’s greatest strength.
By concentrating its business resources in the niche market of medical gowns, the Company can efficiently manage
every aspect of its business, from planning through to manufacturing and sales. Moreover, although it is a nichemarket, there remains room for further development, as the Company has relatively low shares of the peripheral
markets for patient wear, surgical wear, and other items. The Company has explicitly stated that the medical gownbusiness could grow for some time and that it will take active steps to develop the peripheral markets.
4. Company policy (initiatives for CSR/ESG)
The Company commemorated its centennial in 2015, by cultivating a corporate culture called Nagaism that is
focused on realizing interpersonal harmony, generating profits, and contributing to society. It has undertaken thefollowing specific initiatives for CSR/ESG.
(1) Expanding women’s roles: Supporting industries led by women
The Company’s products are for women working on the frontlines at hospitals and nursing care facilities, andits production facilities have many women involved in sewing work. The Company’s business operations create
many opportunities to expand the roles of women from a variety of life stages, which connects to supporting
working women.
(2) Contributing to communitiesa) Contributing to communities through production sites
The Company is creating employment and contributing to regional economies through its production operations
in Akita Prefecture in Japan, in Dalian in China, and also in Indonesia, Vietnam, and elsewhere overseas.
b) Medical kids projectThis project started from the idea of deepening interaction between hospitals and local communities and enablingchildren to attend hospitals or undergo hospitalization with ease of mind. Child-sized medical gowns resembling
those worn by doctors and nurses are lent to hospitals and a Miffy character makes hospital visits.
(3) Contributing to customers: Opened the ITONA® gallery, an oasis for nurses
The ITONA® gallery, Japan’s first communication space for nurses, was opened in 2015 to celebrate the centenaryof foundation and as a gesture of gratitude to nurses, the Company’s main customers.

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05 15

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/

Business overview(4) Social contributiona) Promotion of the employment of disabled persons
Subsidiary Nagai Hakui Kogyo Co. Ltd. was awarded by the Minister of Health, Labour and Welfare in September
2016 after being selected as an outstanding business in terms of contribution to the employment and promotionof people with disabilities.
b) Disaster support activities
Monetary donations, provision of medical gowns and presentation of wheelchairs and other items has been madethrough nursing associations or the Japanese Red Cross Society following the outbreak of SARS and natural
disasters including the Indonesian earthquake, the Great Hanshin Earthquake, the Great East Japan Earthquake
and the Kumamoto earthquakes.
(5) Environmental initiatives
The Company secured ISO 14001 certification in 2005. Cutting wastage from raw materials is reused for roofing
processing and other purposes. The Company has also developed and sells COMPELPAK®, a reusable productfor use on surgical front lines. By converting to a reusable product instead of the disposable type that had beenused until now, it enables medical waste to be reduced and contributes to solving environmental problems.

██Results trends
Operating profit increased 11.3% in FY8/18 1Q• Summary of FY8/18 1Q consolidated results(1) Profit-and-loss conditions
In the consolidated results for FY8/18 1Q, net sales increased 7.2% YoY to ¥3,068mn, operating profit rose
11.3% to ¥801mn, recurring profit rose 6.3% to ¥822mn, and net profit attributable to the owners of the parent
company climbed 8.3% to ¥571mn.
Summary of FY8/18 1Q consolidated results(¥mn, %)
FY8/17 1Q

FY8/18 1Q

Amount% of total

Amount% of total

ChangeYoY

Net sales

2,862

100.0

3,068

100.0

206

7.2

Gross profit

1,359

47.5

1,440

46.9

80

6.0

SG&A expenses

639

22.3

639

20.8

-0

-0.0

Operating profit

720

25.2

801

26.1

81

11.3

Recurring profit

773

27.0

822

26.8

48

6.3

Net profit attributable to the ownersof the parent company

527

18.4

571

18.6

43

8.3

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

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/

Results trends

The market environment and the industry environment were generally stable, as had been initially forecast. In thisenvironment, the Company secured renewal demand for its mainstay healthcare wear, while patient wear andsurgical wear—peripheral markets being focused on—were steady. Net sales and operating profit were in linewith the forecast.
The gross profit margin declined 0.6 of a percentage point to 46.9% (compared to 47.5% for FY8/18 1Q). This
reflects the impact of the yen’s depreciation (decline in cover from foreign currency forward exchange contracts)
as well as an increase in the ratio of domestic production due to the launch of new products (replacing otherlines). The Company’s practice is to manufacture products domestically when initially launching new products,
moving production offshore in phases as the volume increases. This causes a tendency for domestic production
to increase initially when replacing lines with new products. The decline in the gross operating profit for 1Q was
therefore within expectations and need not cause concern. From 2Q onwards, the gross profit margin is expected
to improve as offshore production is ramped up. The full-year gross profit margin forecast is 47.2%.
In net sales by item, healthcare wear increased 5.1% YoY to ¥1,651mn, doctors’ wear rose 3.6% to ¥412mn,
utility wear decreased 1.6% to ¥112mn, patient wear climbed 20.8% to ¥509mn, surgical wear increased 8.5%
to ¥299mn, shoes increased 1.6% to ¥31mn, and other products increased 2.6% to ¥51mn.
In the mainstay healthcare wear, orders trended favorably for the new high value-added products and sales grewsteadily. In doctors’ wear, sales conditions have been difficult for mass-produced products, but sales still increased
YoY thanks to the strong performance of high value-added, high-end products. Sales fell in utility wear, in which
the trend of the transition from individual supply to common goods is continuing, but this decrease was within
the expected range and is not a particular cause for concern.
In the peripheral markets, which have come to be focused on in recent years, sales continued to grow significantly
in patient wear due to the market’s favorable reception to the Company’s value-added products. This is occurring
against the backdrop of market expansion from the spreading use of hospitalization sets. Higher sales were also
secured in surgical wear, driven by the performance of COMPELPAK. Sales of these peripheral-market products
have recorded double-digit increases for three consecutive years. As the sales amount of shoes and otherproducts are small, their impact on the overall results was negligible.
Sales conditions by region and sales conditions by product are not disclosed for 1Q.

The financial position is solid, with cash at the end of
the period of ¥21.0bn and a shareholders’ equity ratio of 90.5%(2) Financial position
The Company’s financial position continues to be stable. Total assets at the end of FY8/18 1Q were ¥38,897mn,
down ¥2,054mn compared to the end of the previous fiscal year. Current assets were ¥30,238mn, a decrease of¥2,086mn. The main factors were decreases in cash and deposits of ¥1,737mn for the payment of dividends, adecrease in notes and accounts receivable of ¥1,220mn and an increase in inventories of ¥664mn. Fixed assets
were ¥8,658mn, up ¥31mn.

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

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/

Results trends

Total liabilities were ¥3,704mn, down ¥701mn compared to the end of the previous fiscal year. The main factors
included an increase in notes and accounts payable of ¥252mn and a decrease in income tax payable of ¥833mn.
Net assets were ¥35,192mn, a decrease of ¥1,352mn. This was mainly due to a decrease in retained earnings of¥1,423mn following the payment of dividends. As a result of these factors, the shareholders’ equity ratio at theend of FY8/18 1Q was 90.5%, increasing 1.3 percentage points from the end of the previous fiscal year.
Summary of the consolidated balance sheet(¥mn)
End of FY8/17

End of FY8/18
1Q

ChangeCash and deposits

22,762

21,024-1,737

Notes and accounts receivable

3,944

2,724

-1,220Inventories

4,311

4,976

664

Current assets

32,32530,238-2,086

Tangible fixed assets

7,256

7,226

-30

Intangible fixed assets

54

53

-1

1,315

1,378

63

Investments and other assets
Fixed assets

8,626

8,658

31

Total assets

40,951

38,897-2,054

Notes and accounts payable

1,428

1,681

252

Income taxes payable

1,091

258

-833

Total liabilities
Retailed earnings

4,405

3,704

-701

36,98935,565-1,423-4,902-4,902-

Net assets

36,54535,192-1,352

Total liabilities and net assets

40,951

38,897-2,054

Treasury shares

Source: Prepared by FISCO from the Company’s financial results██Business outlook
Higher profits are forecast in FY8/18 again,
with record highs expected• FY8/18 full-year outlook(1) Outlook of profit and loss
The Company’s forecasts have been left unchanged for the full-year consolidated result for FY8/18 are for net sales
to increase 2.8% YoY to ¥17,500mn, operating profit to rise 2.5% to ¥5,373mn, recurring profit to climb 2.0% to¥5,448mn, and net profit attributable to the owners of the parent company to increase 1.8% to ¥3,739mn. The
assumptions for the full fiscal year forecasts are described below, but the Company is forecasting that the grossprofit margin will fall slightly and the exchange rate is expected to be less than favorable, so it can be said thatthese are fairly firm forecast values.

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

08 15

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/

Business outlook

FY8/18 consolidated earnings outlook(¥mn, %)
FY8/17

FY8/18 forecast

Amount% of total

Amount% of total

ChangeNet sales

17,017100.0

17,500

100.0

482

YoY
+2.8

Gross profit

8,086

47.5

8,260

47.2

173

+2.2

SG&A expenses

2,843

16.7

2,886

16.5

42

+1.5

Operating profit

5,242

30.8

5,373

30.7

131

+2.5

Recurring profit

5,340

31.4

5,448

31.1

108

+2.0

Net profit attributable to the ownersof the parent company

3,673

21.6

3,739

21.4

66

+1.8

Source: Prepared by FISCO from Company materials

The Company is forecasting that the gross profit margin will fall slightly YoY to 47.2% (47.5% in FY8/17). Grossprofit is expected to climb ¥173mn, with the positive factors forecast to be increases of ¥221mn from higher sales,and ¥53mn from the rise in the overseas production ratio (FY8/17 48.1% –> FY8/18 48.8%), and the negative
factors being ¥15mn from the effects of the higher raw material prices and processing charges, etc., and ¥106mn
from the effects of the exchange rate (FY8/17 ¥104/dollar –> FY8/18 ¥110/dollar) on costs. However, with regards
to the exchange rate, it has already reserved a rate for practically the entire 1H of ¥108 to ¥109, so the actual
average rate may be lower than ¥110.
SG&A expenses are forecast to be ¥2,886mn (up 1.5% YoY), which was an increase accompanying an expansionof sales rather than an increase for a special reason. Therefore, operating profit is expected to be ¥5,373mn, which
will once again be a record high. In addition, if a higher-than-expected gross profit margin is achieved, operating
profit will highly likely be revised upward. Moreover, the forecast assumes that the effects of the exchange rateon costs in non-operating profit will be zero, and both recurring profit and net profit attributable to the owners of
the parent company are expected to increase YoY.
a) Net sales forecasts by item
Net sales forecasts by item(¥mn, %)
FY8/17
AmountFY8/18 forecast
YoY

AmountYoY

Healthcare wear

9,940

+2.8

10,210+2.7

Doctors’ wear

2,681

+1.0

2,750

+2.6

Utility wear

557

- 7.4

510

- 8.5

Patient wear

1,786

+10.7

1,920

+7.5

Surgical wear

1,634

+3.8

1,700

+4.0

203

- 0.8

200

- 1.5

214

+0.3

210

- 2.0

17,017+2.9

17,500+2.8

Shoes
Other products
Total

Source: Prepared by FISCO from Company materials

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

09 15

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

Nagaileben co., Ltd.

20-Feb.-2018

7447 Tokyo Stock Exchange First Section

https://www.nagaileben.co.jp/ir-en/

Business outlook㼀㼍㼞㼓㼑㼠㼑㼐㻌㼚㼑㼠㻌㼟㼍㼘㼑㼟㻌㼜㼑㼞㼏㼑㼚㼠㼍㼓㼑㻌㼎㼥㻌㼕㼠㼑㼙㻴㼑㼍㼘㼠㼔㼏㼍㼞㼑

Doctors’㼁㼠㼕㼘㼕㼠㼥

㻼㼍㼠㼕㼑㼚㼠

㻿㼡㼞㼓㼕㼏㼍㼘

㻿㼔㼛㼑㼟㻘㻌㼛㼠㼔㼑㼞㻌㼜㼞㼛㼐㼡㼏㼠㼟㻲㼅㻤㻛㻞㻜㻌㻔㼠㼍㼞㼓㼑㼠㼟㻕㻲㼅㻤㻛㻝㻣㻌㻔㼞㼑㼟㼡㼘㼠㼟㻕㻿㼔㼛㼑㼟㻘㻌㼛㼠㼔㼑㼞㻌㼜㼞㼛㼐㼡㼏㼠㼟㻝㻑㻿㼔㼛㼑㼟㻘㻌㼛㼠㼔㼑㼞㻌㼜㼞㼛㼐㼡㼏㼠㼟 㻞㻑㻿㼡㼞㼓㼕㼏㼍㼘
㻝㻜㻑㻿㼡㼞㼓㼕㼏㼍㼘
㻝㻞㻑㻼㼍㼠㼕㼑㼚㼠
㻝㻝㻑㼁㼠㼕㼘㼕㼠㼥㻌㻟㻑㻼㼍㼠㼕㼑㼚㼠
㻝㻟㻑㻴㼑㼍㼘㼠㼔㼏㼍㼞㼑㻡㻤㻑㻴㼑㼍㼘㼠㼔㼏㼍㼞㼑㻡㻣㻑㼁㼠㼕㼘㼕㼠㼥 㻞㻑

Doctors’㻝㻢㻑Doctors’㻝㻡㻑Source: Prepared by FISCO from Company materials

In net sales by item, healthcare wear is forecast to be ¥10,210mn (up 2.7% YoY), doctors’ wear ¥2,750mn (up2.6%), utility wear ¥510mn (down 8.5%), patient wear ¥1,920mn (up 7.5%), surgical wear ¥1,700mn (up 4.0%),
shoes ¥200mn (down 1.5%), and other products ¥210mn (down 2.0%).
In healthcare wear, the revitalization of the market from the launch of the new high value-added products andthe resulting steady increase in sales are expected to continue. In doctors’ wear, conditions will be severe formass-produced products, but the forecast is for high-end products to perform strongly and for results to trend
stably. The utility wear market is shrinking and sales are expected to continue to decrease. For patient wear, theCompany is forecasting that the major increase in sales will continue from the effects of new products, against
the backdrop of the strong growth in demand in this market. Higher sales are also expected in surgical wear fromraising the capacity at the COMPELPAK laundry sterilization plant of a partner company and through developing
new customers.
b) Forecasts for net sales by region
Forecasts for net sales by region(¥mn, %)
FY8/17
AmountFY8/18 forecast
YoY

AmountYoY

Eastern Japan

9,007

+5.5

9,190

+2.0

Central Japan

1,756

+2.3

1,810

+3.0

Western Japan

6,068

- 0.2

6,300

+3.8

184

- 8.2

200

+8.4

17,017+2.9

17,500+2.8

Overseas
Total

Source: Prepared by FISCO from Company materials

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

10 15

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/

Business outlook㼀㼍㼞㼓㼑㼠㼑㼐㻌㼚㼑㼠㻌㼟㼍㼘㼑㼟㻌㼜㼑㼞㼏㼑㼚㼠㼍㼓㼑㼟㻌㼎㼥㻌㼞㼑㼓㼕㼛㼚㻱㼍㼟㼠㼑㼞㼚㻌㻶㼍㼜㼍㼚㻯㼑㼚㼠㼞㼍㼘㻌㻶㼍㼜㼍㼚㼃㼑㼟㼠㼑㼞㼚㻌㻶㼍㼜㼍㼚㻲㼅㻤㻛㻝㻣㻌㻔㼞㼑㼟㼡㼘㼠㼟㻕㻻㼢㼑㼞㼟㼑㼍㼟

㻲㼅㻤㻛㻞㻜㻌㻔㼠㼍㼞㼓㼑㼠㼟㻕㻻㼢㼑㼞㼟㼑㼍㼟㻌㻞㻑㻻㼢㼑㼞㼟㼑㼍㼟㻌㻝㻑㼃㼑㼟㼠㼑㼞㼚㻌㻶㼍㼜㼍㼚㻟㻢㻑㼃㼑㼟㼠㼑㼞㼚㻌㻶㼍㼜㼍㼚㻟㻤㻑㻱㼍㼟㼠㼑㼞㼚㻌㻶㼍㼜㼍㼚㻡㻟㻑㻱㼍㼟㼠㼑㼞㼚㻌㻶㼍㼜㼍㼚㻠㻥㻑㻯㼑㼚㼠㼞㼍㼘
㻶㼍㼜㼍㼚㻝㻜㻑㻯㼑㼚㼠㼞㼍
㻶㼍㼜㼍㼚㻝㻝㻑

Source: Prepared by FISCO from Company materials

The forecasts for net sales by region are ¥9,190mn in eastern Japan (up 2.0% YoY), ¥1,810mn in central Japan(up 3.0%), ¥6,300mn in western Japan (up 3.8%), and ¥200mn overseas (up 8.4%).
In eastern Japan, the Company expects sales to continue to increase from securing demand for renewal projects
by proposing new high value-added products. In central Japan and western Japan, the Company is aiming
to achieve sales growth YoY by focusing on increasing market share through strengthening sales promotions.
Overseas results will be affected by exchange rates, but the Company plans to utilize its name recognition andfocus on expanding sales. The plan is to increase sales in every region and to achieve record highs for net sales.
c) Net sales forecasts by productNet sales forecasts by product(¥mn, %)
FY8/17
AmountFY8/18 forecast
YoY

AmountYoY

High-end products

1,191

+7.9

1,280

+7.4

High value-added products

8,612

+3.3

8,980

+4.3

Value-added products

6,343

+2.3

6,400

+0.9

869

- 3.1

840

- 3.4

17,017+2.9

17,500+2.8

Mass-produced products
Total

Source: Prepared by FISCO from Company materials

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

11 15

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/

Business outlook

Source: Prepared by FISCO from Company materials

The net sales forecasts by product are ¥1,280mn for high-end products (up 7.4% YoY), ¥8,980mn for highvalue-added products (up 4.3%), ¥6,400mn for value-added products (up 0.9%), and ¥840mn for mass-produced
products (down 3.4%).
In high-end products, conditions are severe for the DC brand, but the Company’s luxury brands, including 4D+
and Beads Berry, are performing strongly, so the forecast for high-end products as a whole is for sales to increase.
The high value-added products have been favorably received by the market and their sales are trending favorably,
and the Company plans to achieve even higher sales by continuing to promote its high value-added strategy.
The forecast is for sales of mass-produced products to decline, but the plan is to transfer their customers tovalue-added products, including to the products of other companies.
(2) Reorganization and streamlining of domestic plants
To strengthen the production structure going forward, the Company plans to merge two aging plants as a newplant adjacent to its logistics center. This move is designed to improve operation efficiency and facilitate quick
response. The project is scheduled for completion at the end of July 2018. The total investment amount of \799
million, with depreciation cost expected to be recognized from FY8/18.

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12 15

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/██Medium- to-long-term growth strategy
Mid-term plan targets for FY8/20 of operating profit of ¥5,600mn
1. Mid-term Management Plan
The Company initially announced targets for FY8/19 of net sales of ¥18,000mn and operating profit of ¥5,400mn
in its Mid-term Management Plan. But based on the FY8/17 results, it has newly announced the plan’s mid-termtargets for FY8/20, of net sales of ¥18,500mn and operating profit of ¥5,600mn. Net sales by item, region andproduct are as follows.

Plans to actively develop advanced-function,high value-added products
2. Future business strategies
The operating environment surrounding the Company should be favorable for some time. According to data releasedby the Ministry of Health, Labour and Welfare, the number of nurses in Japan is projected to increase from 1.57
million in 2013 to as many as 2.06 million in 2025. Moreover, the number of care workers is forecast to increase
from 1.71 million in 2013 to 2.53 million in 2025. In this operating environment, the Company plans to achieve its
medium-term growth by implementing the following strategies.

㻱㼟㼠㼕㼙㼍㼠㼑㼟㻌㼛㼒㻌㼒㼡㼠㼡㼞㼑㻌㼐㼑㼙㼍㼚㼐㻌㼒㼛㼞㻌㼚㼡㼞㼟㼑㼟㻌㼍㼚㼐㻌㼏㼍㼞㼑㻌㼣㼛㼞㼗㼑㼞㼟㻔㻝㻜㻘㻜㻜㻜㻌㼜㼑㼛㼜㼘㼑）㻺㼡㼞㼟㼑㼟

㻯㼍㼞㼑㻌㼣㼛㼞㼗㼑㼞㼟

㻟㻜㻜
㻞㻡㻟
㻞㻡㻜
㻞㻜㻢
㻞㻜㻜
㻝㻡㻣

㻝㻣㻝

㻝㻡㻜
㻝㻜㻜
㻡㻜
㻜
㻞㻜㻝㻟㻌㻔㼞㼑㼟㼡㼘㼠㼟㻕
Source: Prepared by FISCO from Company materials㻞㻜㻞㻡㻌㻔㼒㼛㼞㼑㼏㼍㼟㼠㻕（㼥㼑㼍㼞）

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

13 15

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

Nagaileben co., Ltd.
7447 Tokyo Stock Exchange First Section

20-Feb.-2018https://www.nagaileben.co.jp/ir-en/

Medium- to-long-term growth strategy(1) Marketing strategy to boost salesa)Aim to increase share by further uncovering demand in the core markets, including the current mainstay markets
for nurses and care workers.
b)In addition to the existing mainstay healthcare wear products, further develop the peripheral markets, including
patient wear and surgical wear.
c) Actively open up overseas markets (particularly Taiwan).
(2) Production strategy to ensure a stable supplya) In the context of the tightening of the domestic labor market, respond to wage increases and further strengthen
the production system.
b) Strengthen collaborations with materials manufacturers and trading companies, and improve new productdevelopment capabilities.
c) Further bolster the quick response system and the ability to respond rapidly to small-lot, multi-product orders.
(3) Strategy toward stable profitabilitya) Further promote the shift from domestic production to overseas production.
b) Actively utilize special tax measures, including EPA and FTA.
c) Promote the high value-added strategy a step further to secure business profitability██Shareholder return policy
The Company has pledged a dividend payout ratio (on a nonconsolidated basis) of above 50%, raised the dividend from ¥50 to ¥60
The Company’s shareholders’ equity ratio reached 89.2% at the end of FY8/17, and it is financially stable. Additionally,
considering the Company’s business conditions, it seems highly unlikely that its profits will rapidly deteriorate, so
continued stable earnings are expected. As a result, if its distribution of earnings outside the Company (particularly
dividend payments) is low, profits will accumulate in shareholders’ equity each year, and return on equity (ROE) will
decline; which is to say, capital efficiency will decline. But in addition to paying dividends commensurate with thegrowth in profits, the Company actively and comprehensively returns profits to shareholders, including through sharebuybacks, and as a result has maintained a high ROE (10.3% in FY8/17).
The Company will thus maintain a stable financial position while pursuing solid shareholder returns. In FY8/15, it
supplemented the regular dividend of ¥50 per share with an additional ¥50 per share to commemorate its centennial.
This raised the total annual dividend to ¥100 per share, for a non-consolidated payout ratio of 107.5%. It also spent¥1,500mn in repurchasing 1 million shares during the fiscal year, raising the total return ratio (non-consolidated basis)to 153.8%. In FY8/16, it paid an annual dividend of ¥50 for a dividend payout ratio of 52.5% on a non-consolidated
basis.
The Company has pledged a dividend payout ratio of above 50% on a non-consolidated basis. In the previous
fiscal year (FY8/17), it increased the annual dividend from ¥50 to ¥60, and it is also forecasting an annual dividendof ¥60 for FY8/18, which is currently underway. It may further increase the dividend if profits exceed their forecasts.

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

14 15

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

Nagaileben co., Ltd.

20-Feb.-2018

7447 Tokyo Stock Exchange First Section

https://www.nagaileben.co.jp/ir-en/

Shareholder return policy

Trends in the dividend payout ratio and the total return ratio
Total dividend
amount (¥mn)

Share buybacks(¥mn)

Dividend payout
ratio* (%)

Total return ratio*
(%)
27.4

FY8/01

475

0

27.4

FY8/02

475

0

29.3

29.3

FY8/03

530

1,697

29.7

124.6

FY8/04

744

0

36.5

36.5

FY8/05

1,117

0

56.9

56.9

FY8/06

1,117

0

53.4

53.4

FY8/07

1,117

0

53.1

53.1

FY8/08

1,083

1,077

56.6

111.2

FY8/09

1,040

1,220

57.3

122.2

FY8/10

1,127

0

51.4

51.4

FY8/11

1,205

226

52.0

61.7

FY8/12

1,205

0

55.1

55.1

FY8/13

1,541

229

51.3

58.7

FY8/14

1,712

0

54.4

54.4

FY8/15

3,324

1,500

107.5

153.8

FY8/16

1,662

0

52.5

52.5

FY8/17

1,994

0

55.2

55.2

* On a non-consolidated basis
Source: The Company’s results briefing materials㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼚㼛㼚㻙㼏㼛㼚㼟㼛㼘㼕㼐㼍㼠㼑㼐㻌㼎㼍㼟㼕㼟㻕
（㻑）
㻝㻞㻜㻚㻜

㻝㻜㻣㻚㻡㻌

㻝㻜㻜㻚㻜
㻤㻜㻚㻜
㻢㻜㻚㻜

㻡㻟㻚㻝㻌

㻡㻢㻚㻢㻌

㻡㻣㻚㻟㻌

㻡㻝㻚㻠㻌

㻡㻞㻚㻜㻌

㻡㻡㻚㻝㻌

㻡㻝㻚㻟㻌 㻡㻠㻚㻠㻌㻡㻞㻚㻡 㻡㻡㻚㻞

㻠㻜㻚㻜
㻞㻜㻚㻜
㻜㻚㻜

㻲㼅㻤㻛㻜㻣 㻲㼅㻤㻛㻜㻤 㻲㼅㻤㻛㻜㻥 㻲㼅㻤㻛㻝㻜 㻲㼅㻤㻛㻝㻝 㻲㼅㻤㻛㻝㻞 㻲㼅㻤㻛㻝㻟 㻲㼅㻤㻛㻝㻠 㻲㼅㻤㻛㻝㻡 㻲㼅㻤㻛㻝㻢 㻲㼅㻤㻛㻝㻣
Source: Prepared by FISCO from Company materials

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

15 15

Disclaimer
FISCO Ltd. (the terms “FISCO”, “we”, mean FISCO Ltd.) has legal agreements with theTokyo Stock Exchange, the Osaka Exchange,and Nikkei Inc. as to the usage of stock priceand index information. The trademark and value of the “JASDAQ INDEX” are the intellectual
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This report is based on information that we believe to be reliable, but we do not confirm or
guarantee its accuracy, timeliness,or completeness, or the value of the securities issued bycompanies cited in this report. Regardless of purpose,investors should decide how to use
this report and take full responsibility for such use. We shall not be liable for any result of its
use. We provide this report solely for the purpose of information, not to induce investment or
any other action.
This report was prepared at the request of its subject company using information provided
by the company in interviews, but the entire content of the report, including suppositions andconclusions, is the result of our analysis. The content of this report is based on informationthat was current at the time the report was produced, but this information and the content of
this report are subject to change without prior notice.
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The final selection of investments and determination of appropriate prices for investment
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FISCO Ltd.