Company Research and Analysis Report
FISCO Ltd.
http://www.fisco.co.jp

DAIKEN MEDICAL CO., LTD. 伪伪With eight straight years of sales and recurring profit
7775 Tokyo Stock Exchange
increases, company aims to expedite growthFirst Section
18-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

Daiken Medical develop and manufactures medical equipment and holds the top shares of theJapanese markets for aspiration devices and disposable infusion pumps. The company is strong
in developing original, convenient products and has maintained high growth by concentrating on
high-margin disposable medical products.
In the fiscal year that ended in March 2014, i.e., in FY3/14, the company raised its sales by 8.0%
year-to-year (y-o-y) and its recurring profit by 12.1% y-o-y, marking the eighth straight yearof increases in both and achieving record highs in both. This growth was led by greater sales of
the company’s main products, such as QinPot aspirators and Syrinjectors with PCA (patientcontrolled analgesia) devices. Both products expanded their market shares. For FY3/15, thecompany expects these products to propel sales growth of 6.3% y-o-y and recurring profit
growth of 10.6% y-o-y.
For FY3/19, the company targets sales of \30bn. It plans to achieve this target by increasing
sales of its existing products, launching sales of new products, and entering new fields of
medical equipment business. It projects especially strong growth from the improvement ofdisposable infusion pumps and electrical pumps that incorporate micro electrical mechanicalsystems (MEMS), making them smaller and less costly than its current products. It is also
applying MEMS technology to develop equipment to drain body fluids, a new business area forthe company, and it plans to sell all these new products in the US and Europe, as well as inJapan.
The company has recently developed a pharyngeal cooling apparatus called COOPDECH i-Cooland is developing a system to quickly identify the bacterium causing pneumonia. The company
expects these new products to contribute to faster sales and profit growth from FY3/16.
The company aims to maintain a dividend payout ratio of 40%. Toward this end, it increased
its dividend payment for FY3/14 by \2.5 y-o-y, making it \24.0 per share, and it plans to lift
its dividend payment for FY3/15 by \3.0, making it \27.0. Furthermore, the company awards a
QUO Card worth \1,000 to each holder of a minimum lot of 100 shares as of the end of every
fiscal year.

伪伪Check Point
・ Company holds the top shares of the Japanese markets for aspiration devices anddisposable infusion pumps, its main product lines
・ Strong sales of aspiration devices and disposable infusion pumps supported an eighthconsecutive annual increase in sales and recurring profits in FY3/14
・ By new customer development, the company will strive for continued growth in
FY3/15・ New products expand the company's growth potential

We encourage readers to review our complete legal statement on “Disclaimer” page.
1

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（¥mn）

㻿㼍㼘㼑㼟

（¥mn）

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7775 Tokyo Stock ExchangeFirst Section

18-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

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㻲㼅㻟㻛㻝㻡㻱伪伪Description of Businesses
Company holds the top shares of the Japanese markets for
aspiration devices and disposable infusion pumps, its main
product lines
Daiken Medical holds the top shares of the Japanese markets for its two main productlines, aspiration devices and disposable infusion pumps, reflecting its strength in developing
innovative products to improve user’s convenience. The company undertakes trial production
and maintains a production line for small product quantities, but it outsources mass production
to manufacturers in Japan and overseas. This production scheme allows the company torespond rapidly to changes in demand. The company concentrates on developing high valueadded disposable medical equipment and on expanding its share of the Japanese market forthis equipment, thereby growing fast and maintaining high profitability.
From FY3/10 to FY3/14, the company’s sales composition or weighting in aspiration devices
grew steadily, reaching 60.6% in FY3/14. Over the same period, its sales weighting in disposable
infusion pumps declined slightly, but it remained 24.6% in FY3/14. Thus, the product lines ofaspiration devices and disposable infusion pumps accounted for 85% of total sales and provided
most of the company’s profits.

We encourage readers to review our complete legal statement on “Disclaimer” page.
2

■■Description of Businesses㻿㼍㼘㼑㼟㻌㻯㼛㼙㼜㼛㼟㼕㼠㼕㼛㼚㻌㻾㼍㼠㼕㼛㻌㼎㼥㻌㻼㼞㼛㼐㼡㼏㼠㻘㻌㻲㼅㻟㻛㻝㻜㻌– 㻲㼅㻟㻛㻝㻠㻝㻜㻜㻚㻜㻑DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

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18-Jul.-14

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Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㼐㼕㼟㼜㼛㼟㼍㼎㼘㼑㻌㼕㼚㼒㼡㼟㼕㼛㼚㼜㼡㼙㼜㼟㼍㼟㼜㼕㼞㼍㼠㼕㼛㼚㻌㼐㼑㼢㼕㼏㼑㼟㻜㻚㻜㻑㻲㼅㻟㻛㻝㻜

㻲㼅㻟㻛㻝㻝

㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

(1) Aspiration devices
Provides more than 60% of total sales
Daiken Medical sells two main brands of aspiration devices, the FitFix brand and the QinPot
brand. The FitFix brand, developed in 1990, was the first plastic equipment in Japan used tovacuum blood and other bodily fluids from a surgical site and solidify these fluids within aconfined system. Prior to the development of this device, bodily fluids were vacuumed into
glass bottles, which were washed and reused. This practice exposed surgical patients to therisk of contamination. By using FitFix aspirators, hospitals eliminated this risk and reduced thework of surgical staff. Because of these advantages, FitFix aspirators now accounts for 70% ormore of all surgical aspirators used in Japan.
FitFix Aspirators

We encourage readers to review our complete legal statement on “Disclaimer” page.
3

■■Description of Businesses

The QinPot brand, developed in 2004, is used to remove small quantities of bodily fluids, suchas sputum, from inpatients on hospital wards. The QinPot brands also solidifies the extracted
bodily fluids and stores them in disposable plastic bags for incineration. The growth potential of
QinPot aspirators depends on their greater adoption as a prime aspiration device.
QinPot Aspirators

DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section㻿㼔㼍㼞㼑㼟㻌㼛㼒㻌㻶㼍㼜㼍㼚㼑㼟㼑㻌㻹㼍㼞㼗㼑㼠㻌㼒㼛㼞㻌
Sharesof Japanese Market for Hospital㻴㼛㼟㼜㼕㼠㼍㼘㻌㼃㼍㼞㼐㻌㻭㼟㼜㼕㼞㼍㼠㼛㼞㼟㻌㼍㼟㻌㼛㼒㻌㼠㼔㼑㻌㼑㼚㼐㻌
Ward Aspiration Devices as of the end of㼛㼒㻌㻹㼍㼞㼏㼔㻌㻞㻜㻝㻠
March 2014㻾㼕㼢㼍㼘㻌㼜㼞㼛㼐㼡㼏㼠㼟㻝㻜㻚㻜㻑㻰㼍㼕㼗㼑㼚㻌㻹㼑㼐㼕㼏㼍㼘㻌㼜㼞㼛㼐㼡㼏㼠㼟
㻞㻣㻚㻣㻑

18-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.

㼓㼘㼍㼟㼟㻌
㼎㼛㼠㼠㼘㼑㼟㻢㻞㻚㻟㻑

FISCO Ltd. Analyst
Yuzuru Sato

Source: Daiken Medical Co., Ltd.
㻿㼛㼡㼞㼏㼑㻦㻌㻰㼍㼕㼗㼑㼚㻌㻹㼑㼐㼕㼏㼍㼘㻌㻯㼛㻚The company estimates that there were about 300,000 aspiration devices installed in hospitalwards in Japan at the end of FY3/14, of which 62% were still glass bottle aspirators. By the endof FY3/14, the company had introduced a cumulative total of 76,000 QinPot devices (10,000
more than the total a year earlier) replacing the glass products. The company achieved a 27.7%
share of the market in terms of installed aspirators by the end of FY3/14. Given the sanitationand convenience advantages offered by QinPot aspirators, the company expects them to takea majority share of the market eventually, just as FitFix aspirators now dominate the market
for surgical aspirators.
(2) Disposable infusion pumps
The Syrinjectors brand of disposable infusion pumps administers small, steady amounts ofanalgesics or other pain killers through intravenous catheters to patients after surgery. Usually,
they are used in hospitals or medical clinics, but occasionally, they are used by patients at theirhomes, under the supervision of a physician.
Daiken Medical has the highest share of the Japanese market for disposable infusion pumps.
This share rose steadily to 38.1% in March 2013 because of the advanced functions of theinjectors and the superior operability of their new patient-controlled analgesia (PCA) devices.

We encourage readers to review our complete legal statement on “Disclaimer” page.
4

■■Description of Businesses

Shares of the Japanese Market for㻿㼔㼍㼞㼑㼟㻌㼛㼒㻌㼠㼔㼑㻌㻶㼍㼜㼍㼚㼑㼟㼑㻌㻹㼍㼞㼗㼑㼠㻌㼒㼛㼞㻌㻰㼕㼟㼜㼛㼟㼍㼎㼘㼑㻌
Disposable
Infusion Pumps as of March 2013㻵㼚㼒㼡㼟㼕㼛㼚㻌㻼㼡㼙㼜㼟㻌㼍㼟㻌㼛㼒㻌㻹㼍㼞㼏㼔㻌㻞㻜㻝㻟

DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

18-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.

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㻯㼛㼞㼜㻚
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COOPDECH Syrinjectors with PCA devices㻰㼍㼕㼗㼑㼚㻌
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Source: M arket Prospects for General-use
Equipment, 2013 by the Yano Research㻿㼛㼡㼞㼏㼑㻦㻌㻹㼍㼞㼗㼑㼠㻌㻼㼞㼛㼟㼜㼑㼏㼠㼟㻌㼒㼛㼞㻌㻳㼑㼚㼑㼞㼍㼘㻙㼡㼟㼑㻌
Institute㻱㼝㼡㼕㼜㼙㼑㼚㼠㻘㻌㻞㻜㻝㻟㻌㼎㼥㻌㼠㼔㼑㻌㼅㼍㼚㼛㻌㻾㼑㼟㼑㼍㼞㼏㼔㻌㻵㼚㼟㼠㼕㼠㼡㼠㼑(3) Other product lines

FISCO Ltd. Analyst
Yuzuru Sato

Daiken Medical also produces syringe pumps and other electrical pumps for medical equipment,
equipment for hospital personnel to wash their hands, such as equipment for sterilizing water,and other medical equipment, such as breath warmers and endobronchial blocker tubes. These
products account for small proportions of the company’s total sales and profits, so they are
not addressed in this report.
COOPDECH
Syringe Pumps

Hand-washing Equipment for
Hospital Use

COOPDECH
Breath Warmers

Company develops products that satisfy practical needs(4) R&D, production, and sales
Daiken Medical employs 28 researchers at its Product Development Research Center in Izumi
City, Osaka Prefecture, and at its New Market Development Division established in 2011 in
Kanagawa Science Park. In cooperation with medical doctors, these researchers conduct R&D
jointly with many universities and companies.
The Izumi Assembly Center manufactures new products, but the company outsources mass
production to manufacturers in Japan and overseas. One of the overseas contractors is a
Thailand subsidiary of a Japanese manufacturer that produces part of the FitFix aspirators,
the QinPot aspirators, and the Syrinjectors with PCA devices. In FY3/14, about 40% of thecompany’s products were manufactured overseas.

We encourage readers to review our complete legal statement on “Disclaimer” page.
5

■■Description of Businesses

The company has 10 sales offices located in major markets in Japan, which sell directly tohospitals. By maintaining close relationships with hospitals, sales personnel learn the needs of
hospitals and ensure that these needs are met by products under development.
Izumi Product Development
Research Center

Izumi Assembly Center

Kanagawa Science ParkDAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

18-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

伪伪Business Trends
Strong sales of the main products supported eight years of sales
and recurring profit increases(1) Results in FY3/14
In FY3/14, Daiken Medical’s consolidated sales grew by 8.0% y-o-y to \7,635mn, its operating
profit advanced by 10.2% to \1,389mn, its recurring profit increased by 12.1% to \1,401mn, andits net profit rose by 11.9% to \881mn. Sales, operating profit and recurring profit set record
highs for the eighth straight year.
Consolidated Results (\mn), FY3/13 – FY3/14（¥mn）
FY3/13Results
vs. sales
Co. f
Results
Sales
7,068
7,550
7,635
Gross profit
3,505
49.6%
3,923
Cost of sales
3,562
50.4%
3,711
SGA costs
2,244
31.8%
2,533
Operating profit
1,260
17.8%
1,395
1,389
Recurring profit
1,250
17.7%
1,400
1,401
Net profit
787
11.1%
880
881
Note: Company forecasts are upward revisions as of January 2014

FY3/14vs. sales
51.4%
48.6%
33.2%
18.2%
18.4%
11.5%

y-o-y
8.0%
11.9%
4.2%
12.9%
10.2%
12.1%
11.9%

vs.Co. f
1.1%
-0.4%
0.1%
0.2%

Sales of aspiration devices and disposable infusion pumps led overall sales growth. Sales ofaspiration devices grew by 7.9% y-o-y to \4,629mn. In volume, sales of QinPot aspirators
increased by 10,000 units y-o-y to a cumulative total of 76,000 units, while sales of disposable
liners for these main body grew by 20.8% y-o-y to 2,502,000 units. Thus, sales of QinPot main
body and disposable liners advanced by 18.1% y-o-y to \1,184mn. Sales of FitFix aspirators
increased by 4.7% y-o-y to \3,445mn, in part, due to an increase in the number of surgicaloperations performed in Japan as the country’s population ages.

We encourage readers to review our complete legal statement on “Disclaimer” page.
6

■■Business Trends㻿㼍㼘㼑㼟㻌㻔¥㼙㼚㻕㻌㼛㼒㻌㻭㼟㼜㼕㼞㼍㼠㼕㼛㼚㻌㻰㼑㼢㼕㼏㼑㼟㻘㻌㻲㼅㻟㻛㻝㻝㻌– 㻲㼅㻟㻛㻝㻠㻲㼕㼠㻲㼕㼤㻌㼍㼟㼜㼕㼞㼍㼠㼛㼞㼟(¥mn)

㻽㼕㼚㻼㼛㼠㻌㼍㼟㼜㼕㼞㼍㼠㼛㼞㼟

㻡㻘㻜㻜㻜

㻠㻘㻢㻞㻥
㻠㻘㻞㻥㻞

DAIKEN MEDICAL CO., LTD.

㻠㻘㻜㻜㻜7775 Tokyo Stock ExchangeFirst Section

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㻟㻘㻥㻞㻟
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㻤㻣㻜㻌
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18-Jul.-14㻟㻘㻜㻡㻟㻌

㻟㻘㻞㻥㻜㻌

㻟㻘㻠㻠㻡㻌

㻞㻘㻤㻤㻡㻌

㻲㼅㻟㻛㻝㻝

㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻝㻘㻜㻜㻜

Important disclosuresand disclaimers appear
at the end of this document.

㻜

FISCO Ltd. Analyst
Yuzuru Sato㼂㼛㼘㼡㼙㼑㻌㻿㼍㼘㼑㼟㻌㻔㼠㼔㼛㼡㼟㼍㼚㼐㻌㼡㼚㼕㼠㼟㻕㻌㼛㼒㻌㻸㼕㼚㼑㼞㼟㻌㼒㼛㼞㻌㻽㼕㼚㻼㼛㼠㻌㻭㼟㼜㼕㼞㼍㼠㼛㼞㼟㻘㻌㻲㼅㻟㻛㻝㻝㻌– 㻲㼅㻟㻛㻝㻠（㼀㼔㼛㼡㼟㼍㼚㼐）㻟㻘㻜㻜㻜㻞㻘㻡㻜㻞㻌
㻞㻘㻡㻜㻜㻞㻘㻜㻣㻜㻌㻞㻘㻜㻜㻜㻝㻘㻡㻜㻜㻝㻘㻣㻞㻥㻌
㻝㻘㻝㻥㻝㻌㻝㻘㻜㻜㻜㻡㻜㻜㻜㻲㼅㻟㻛㻝㻝

㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

Sales of disposable infusion pumps grew by 7.7% y-o-y to \1,876mn in FY3/14. Spurredby replacement demand for a new type of PCA devices introduced in early 2012, sales ofSyrinjectors with PCA devices increased by 15.9% y-o-y in volume to 385,000 units and by
15.4% y-o-y in value to \1,483mn.

We encourage readers to review our complete legal statement on “Disclaimer” page.
7

■■Business Trends㻿㼍㼘㼑㼟㻌㻔¥㼙㼚㻕㻌㼛㼒㻌㻰㼕㼟㼜㼛㼟㼍㼎㼘㼑㻌㻵㼚㼒㼡㼟㼕㼛㼚㻌㻼㼡㼙㼜㼟㻘㻌㻲㼅㻟㻛㻝㻝㻌– 㻲㼅㻟㻛㻝㻠㼣㼕㼠㼔㻌㻼㻯㻭㻌㼐㼑㼢㼕㼏㼑㼟(¥mn)

㼣㼕㼠㼔㼛㼡㼠㻌㻼㻯㻭㻌㼐㼑㼢㼕㼏㼑㼟

㻞㻘㻜㻜㻜

㻝㻘㻤㻣㻢
㻝㻘㻢㻣㻞

DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

18-Jul.-14

㻝㻘㻡㻜㻜

㻝㻘㻢㻢㻝

㻝㻘㻣㻠㻟
㻟㻥㻞

㻠㻡㻣

㻡㻟㻡

㻠㻤㻟

㻝㻘㻝㻟㻢

㻝㻘㻝㻣㻤

㻝㻘㻞㻤㻢

㻲㼅㻟㻛㻝㻝

㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

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㻡㻜㻜

㻝㻘㻠㻤㻟

㻜

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato（㼀㼔㼛㼡㼟㼍㼚㼐）㻲㼅㻟㻛㻝㻠

㼂㼛㼘㼡㼙㼑㻌㻿㼍㼘㼑㼟㻌㻔㼠㼔㼛㼡㼟㼍㼚㼐㻌㼡㼚㼕㼠㼟㻕㻌㼛㼒㻌㻿㼥㼞㼕㼚㼖㼑㼏㼠㼛㼞㼟㻌㼣㼕㼠㼔㻌㻼㻯㻭㻌㼐㼑㼢㼕㼏㼑㻘㻌㻲㼅㻟㻛㻝㻝㻌㻙 㻲㼅㻟㻛㻝㻠

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In recent years, the sales weightings of high value-added products, such as QinPot aspirators
and Syrinjectors with PCA devices, have risen, while production costs have fallen accompanying
an increase in overseas production. Thus, the gross profit margin has risen. In FY3/14, this riseoffset an increase in SGA costs, mainly the costs of personnel and R&D. Thus, consolidated
operating profit grew by 10.2% y-o-y, and the operating profit margin rose by 0.4ppt y-o-y to
18.2%.

We encourage readers to review our complete legal statement on “Disclaimer” page.
8

■■Business Trends㻳㼞㼛㼟㼟㻌㻼㼞㼛㼒㼕㼠㻌㻹㼍㼞㼓㼕㼚㻘㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㻼㼞㼛㼒㼕㼠㻌㻹㼍㼞㼓㼕㼚㻘㻌㻲㼅㻟㻛㻝㻝㻌– 㻲㼅㻟㻛㻝㻠㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㻼㼞㼛㼒㼕㼠㻌㻹㼍㼞㼓㼕㼚㻳㼞㼛㼟㼟㻌㻼㼞㼛㼒㼕㼠㻌㻹㼍㼞㼓㼕㼚
㻝㻥㻚㻜㻑

㻡㻞㻚㻜㻑
㻡㻝㻚㻠㻑

DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

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18-Jul.-14
㻠㻤㻚㻜㻑

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

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㻝㻠㻚㻜㻑㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

Sales (\mn) by Product Line and Main Product, FY3/11 – FY3/15E
FY3/11

FY3/12

FY3/13

FY3/14（¥mn）
FY3/15E

Sales
Aspiration devices
FitFix aspirators
QinPot aspirators
Disposable infusion pumps
Syrinjectors with PCA devices
Syrinjectors without PCA devices
Electrical pumps
Hand-washing equipment
Other products
Total

3,500
2,885
615
1,672
1,136
535
146
652
271
6,242

3,923
3,053
870
1,661
1,178
483
77
633
219
6,515

4,292
3,290
1,002
1,743
1,286
457
107
672
252
7,068

4,629
3,445
1,184
1,876
1,483
392
105
770
253
7,635

5,021
3,626
1,394
1,967
1,640
327
214
649
267
8,120

Sales growth rate
Aspiration devices
FitFix aspirators
QinPot main body
Disposable infusion pumps
Syrinjectors with PCA devices
Syrinjectors without PCA devices
Electrical pumps
Hand-washing equipment
Other products
Total

13.2%
11.6%
21.3%
7.3%
12.7%
-2.7%
27.6%
-6.7%
-0.6%
8.8%

12.1%
5.8%
41.5%
-0.6%
3.7%
-9.8%
-46.9%-2.9%-19.2%
4.4%

9.4%
7.8%
15.2%
4.9%
9.2%
-5.5%
39.0%
6.3%
15.0%
8.5%

7.9%
4.7%
18.1%
7.7%
15.4%
-14.0%
-2.3%
14.5%
0.5%
8.0%

8.5%
5.3%
17.8%
4.9%
10.5%
-16.6%
103.6%-15.8%
5.3%
6.3%

Financial stability and profitability remain high(2) Financial Condition
At the end of FY3/14, total assets came to \8,233mn, which was \269mn more than the total
a year earlier. This growth stemmed entirely from increases in current assets, such as salesreceivables, cash and deposits, and inventories. On the other hand total liabilities decreasedby \163mn in FY3/14, because of a drop in interest-bearing debt. Total equity increased by\432mn due to an increase in retained earnings.

We encourage readers to review our complete legal statement on “Disclaimer” page.
9

■■Business Trends

The major financial indicators of the company improved in FY3/14, as its equity ratio rose, its
gross debt-equity ratio fell, and its net cash grew by \388mn to \1,183mn. Its ROA, ROE andoperating profit margin rose y-o-y.
Summary Balance Sheet (\mn), FY3/12 – FY3/14

DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

18-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

FY3/12Current assets
Cash and deposits
Inventories
Fixed assets
Total assets
Current liabilities
Fixed liabilities
Interest-bearing debt
Total liabilities
Total equity
Measures of financial stability
Current ratio(ratio of current assets to current liabilities)
Equity ratio (ratio of total equity to total assets)
Gross debt-equity ratio(ratio of interest-bearing debt to total equity)
Measures of profitability
ROA (ratio of recurring profit to total assets)
ROE (ratio of net profit to total equity)
Operating profit margin

FY3/13

FY3/14

5,119
1,656
1,053
2,695
7,814
2,454
960
1,839
3,414
4,400

5,387
1,911
919
2,576
7,964
2,274
619
1,116
2,894
5,069

5,666
1,960
968
2,566
8,233
2,451
280
776
2,731
5,501

208.6%

236.8%

231.2%

56.3%

63.6%

66.8%

41.8%

22.0%

14.1%

12.9%
9.5%
15.6%

15.8%
16.6%
17.8%

17.3%
16.7%
18.2%

（¥mn）
change
y-o-y
278
49
48
▲9
269
176
▲ 339
▲ 339
▲ 163
432

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（¥mn）

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10

伪伪Company Forecasts for FY3/15
Aims to maintain growth by developing new customers

DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

For FY3/15, Daiken Medical projects a 6.3% y-o-y rise in sales to \8,120mn, an 11.9% increasein operating profit to \1,555mn, a 10.6% upturn in recurring profit to \1,550mn, and a 12.1% risein net profit to \988mn. Although it plans to increase spending on sales promotions and R&D,
it expects sales growth to offset these increases and foresees a rise in the operating profit
margin to 19.2%.
(1) Existing products

18-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

The company intends to sell another 10,000 QinPot aspirators, mainly to hospitals with 300 or
more beds, thereby raising the cumulative number of installed QinPot aspirators to 86,000 andraising the company’s share of the Japanese market for installed hospital ward aspirators by
3.4ppts to 31.1%. These sales, plus sales of disposable liners for QinPot aspirators are seenlifting overall sales of QinPot aspiration aspirators by 17.8% y-o-y.
By attracting new customers, the company aims to increase its sales of Syrinjectors with
PCA devices by 10.5% y-o-y in FY3/15. Since it introduced a new type of PCA devices inearly 2012, many customers who had been using the company’s former type of PCA devices
have switched to its new type of PCA devices. Thus, the proportion of the company’s total
shipments of Syrinjectors with PCA devices accounted for by Syrinjectors with the new typeof PCA devices has risen rapidly, to almost 60% by the end of FY3/14, and the company has
not aggressively sought new customers for its Syrinjectors with the new type of PCA devices.
Now that a large portion of its existing customers has switched to Syrinjectors with new
type of PCA devices, the company intends to invite new customers for these injectors moreaggressively in FY3/15.
As mentioned earlier, the company’s share of the Japanese market for Syrinjectors with
PCA devices is just over 40%, so there is space to expand this share. The official price ofSyrinjectors with PCA devices was raised slightly by the Japanese government for the twoyears from April 1, 2014. This price rise should also contribute to sales growth.

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We encourage readers to review our complete legal statement on “Disclaimer” page.
11

■■Company Forecasts for FY3/15(2) New products
Pharyngeal cooling device (“COOPDECH i-Cool”)

DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

18-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

In cooperation with Okayama University, Daiken Medical has recently developed a pharyngeal
cooling device called COOPDECH i-Cool. This apparatus is the first in the world for cooling thebrain of a cardiopulmonary arrest patient before his or her heartbeat resumes. The company
developed this system based on the observation that people eating ice cream often complainof pain in the head. The standard medical practice now is to apply coolant sheets to the entire
body of a cardiopulmonary arrest patient after his or her heartbeat resumes to lower his or
her body temperature and reduce brain damage. However, the application of this procedure isdelayed until the heartbeat resumes, and the procedure takes a long time to cool the brain.
The company has shown that the use of its COOPDECH i-Cool system before the heartbeat
resumes increases the survival rate of cardiovascular arrest patients and reduces brain
damage after resuscitation more than the conventional treatment. The company is consideringdeveloping a portable version of the COOPDECH i-Cool system to be installed in ambulances.
The Japanese Ministry of Health, Labour and Welfare approved the production and sale of the
COOPDECH i-Cool system in February 2014, and the company has received many inquiries
about the system from hospitals. However, the company does not expect sales of this system togrow rapidly until the government approves the reimbursement of its cost by health insurance
plans, and it estimates that it will take about a year to gain this approval. The company targets
system sales of \1bn five years from now, mainly to the emergency rooms of hospitals. As
there are about 120,000 cardiopulmonary arrests per year in Japan, the company estimates thepotential market for its system to be at least \10bn.
Diagram of COOPDECH i-Cool System

We encourage readers to review our complete legal statement on “Disclaimer” page.
12

■■Company Forecasts for FY3/15

Double-lumen tubes for differential lung ventilation

DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

18-Jul.-14

Daiken Medical has also recently developed double-lumen tubes for differential lung ventilation
during lung or chest surgical operations when a single lung is temporarily non-functional. Thesetubes maintain their location or position better than other surgical tubes, and their insertion
depth can be easily adjusted. Therefore, doctors do not have to reinsert endoscopes to adjust
their position. The company estimates the Japanese market for such tubes to be worth about\1bn per year. It has applied for numerous patents on these tubes and has received partial
regulatory approval of them. It is awaiting the results of field tests of the tubes by several
universities, and it is reviewing the cost of producing these tubes. Based on this information, it
plans to improve the tubes and resubmit applications for regulatory approval. The company isalready promoting these tubes at seminars held jointly with associations of medical specialists,
and the tubes appear to be gaining increasing support from the medical community.
COOPDECH Double lumen tube

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

Summary Income Statement (\mn), FY3/11 – 3/15E
FY3/11
6,242
8.8
3,270
52.4
1,997
32.0
974
16.6
15.6
951
16.2
15.2
915
14.3
14.7
360
39.4
555
13.8
8.9

Sales
y-o-y
Cost of Sales
vs. sales
SGA cost
vs. sales
Operating profit
y-o-yvs. sales
Recurring profit
y-o-yvs. sales
Pretax profit
y-o-yvs. sales
Income taxes
Effective tax rate
Net profit
y-o-yvs. sales

FY3/12
6,515
4.4
3,354
51.5
2,145
32.9
1,014
4.1
15.6
1,014
6.6
15.6
1,002
9.5
15.4
598
59.7
404
-27.2
6.2

FY3/13
7,068
8.5
3,562
50.4
2,244
31.8
1,260
24.3
17.8
1,250
23.2
17.7
1,252
25.0
17.7
464
37.1
787
94.9
11.1

FY3/14
7,635
8.0
3,711
48.6
2,533
33.2
1,389
10.2
18.2
1,401
12.1
18.4
1,382
10.4
18.1
501
36.3
881
11.9
11.5

（¥mn,%）
FY3/15E
8,120
6.3
1,555
11.9
19.2
1,550
10.6
19.1
988
12.1
12.2

[Per-share and Other Date]
Avg. no. of shares outstanding
14,665
14,77014,844
15,101(thousand)
EPS (\)
37.85
27.36
53.05
58.37
65.26
DPS (\)
11.00
11.50
21.50
24.00
27.00
BPS (\)
281.25297.12337.20363.35
Dividend payout ratio
29.1
42.0
40.5
41.1
41.4
Note: T he company made a 2-for-1 stock split on July 1, 2013. The average number of shares
outstanding and the per-share data for FY3/11 – 3/13 have been adjusted to reflect this split.

We encourage readers to review our complete legal statement on “Disclaimer” page.
13

伪伪Growth Strategy
Expanding growth potential with new products

DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

Daiken Medical targets consolidated sales of \30bn in five years. It expects sales of its two
main product lines to grow by \500mn annually in aggregate, and it plans to further sales growthby developing more new products, entering new fields of medical equipment, and participatingin overseas markets on a full scale.
(1) New products with the MEMS technology

18-Jul.-14

Important disclosures*1	Micro electro mechanical systems
are disclaimers
integrations appear
of mechanicalandcomponents, sensors, actuators,
atelectronic
the end of
this document.
circuits
and otherelements on a single board.
Examples of such systems now in
use include
high-speed sensors
FISCO
Ltd. Analyst
and gyrosensors in ink jet printerYuzuruheads, Sato
automobiles and cellular
phones. The use of these systems
is expected to grow rapidly in manyindustries, including electronics,
medicine, robots and automobiles.
*2	Drainage devices pump blood andother bodily fluids out of the chest
cavity following thoracic surgery,thereby preventing the collapse or
re-expansion of the lungs.

The company’s centerpiece new products will incorporate the technology of the micro electro
mechanical systems (MEMS)*1, allowing them to be smaller and less costly than current
products. Daiken Medical plans to develop new products based on this technology in the
medical equipment fields in which it is currently engaged and in other fields.
Working jointly with other companies possessing the MEMS technology, the company has
already completed basic research on the industry’s first drainage device*2 for thoracic surgery
patients based on this technology. The company estimates that the Japanese market fordrainage devices is now worth \5.4bn. By taking a growing share of this market, the company
aims to expand its sales.
The company intends to develop and commercialize many other products based on the MEMS
technology in its current product areas and new areas. It may also market these products
aggressively overseas, thereby increasing its overseas sales rapidly from the current level of2 – 3% of total sales.
(2) Rapid identification system for the bacterium causing pneumonia
In conjunction with Tokyo Medical University, Daiken Medical is also developing a system for the
rapid identification of the bacterium causing pneumonia. Pneumonia is the third-largest causeof death in Japan, and one reason for this morbidity is that between three days and a week isrequired to identify the bacterium causing the disease, and the disease cannot be treated until
its cause is known because treatments vary depending on the cause. Therefore, the company
is trying to develop a system to identify many of the bacteria that cause pneumonia within 30
minutes. If it succeeds in developing and commercializing such a system, the demand for it islikely to be huge.
These new products, particularly products based on the MEMS technology, should increase thegrowth potential of the company over the medium term. We believe that the company is likely
to enter a new growth stage in FY3/16.

We encourage readers to review our complete legal statement on “Disclaimer” page.
14

伪伪Returns to Shareholders
Company plans consecutive dividend increases accompanying
profit growth

DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

For FY3/14, Daiken Medical aimed to maintain a dividend payout ratio of 40% or more. Toward
this end, it increased its dividend payment for FY3/14 by \2.5 y-o-y, making it \24.0 per share,and it plans to lift its dividend payment for FY3/15 by \3.0, making it \27.0. Furthermore, thecompany awards a QUO Card worth \1,000 to each holder of a minimum lot of 100 of its shares
as of the end of every fiscal year.

18-Jul.-14㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㻿㼔㼍㼞㼑㻌㻔¥㻕㻌㼍㼚㼐㻌㻰㼕㼢㼕㼐㼑㼚㼐㻌㻼㼍㼥㼛㼡㼠㻌㻾㼍㼠㼕㼛㻘㻌㻲㼅㻟㻛㻝㻝㻌– 㻲㼅㻟㻛㻝㻡㻱㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㻿㼔㼍㼞㼑（¥）

Important disclosuresand disclaimers appear
at the end of this document.

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FISCO Ltd. Analyst
Yuzuru Sato㻰㼕㼢㼕㼐㼑㼚㼐㻌㻼㼍㼥㼛㼡㼠㻌㻾㼍㼠㼕㼛

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Note: T he company made a 2-for-1 stock split on July 1, 2013. The dividends per share for FY3/11 –FY3/13 have been adjusted to reflect this split.

伪伪Peer Analysis
High growth power and stable profitability
The table below compares Daiken Medical with seven other Japanese manufacturers ofdisposable medical equipment in terms of growth, profitability and share price valuations.
Based on company forecasts for fiscal years ending in 2014, The company forecasts a recurring
profit margin of 19.1%, which positions it in the higher margin group. This high profitability stems
from the company’s large market shares in its main product lines, which provide high added
value. The recurring profit growth projected by the company for FY3/14 is about averagefor the peer group. However, the company’s average recurring profit growth over the last
seven fiscal years is far higher than the averages for its peers. With high growth power andprofitability, the company also has the highest PER in the group. Given the prospects for higher
growth power in coming years, the company’s share price is likely to rise.

We encourage readers to review our complete legal statement on “Disclaimer” page.
15

■■Peer Analysis

Peer Comparison
Rec. profit
payout 7-yr avg. growth
EPS DPS PER
Sharemargin
ratio
ratio
(\)
(\) (X)
Price
\mn
y-o-y
\mn
y-o-y
Sales Rec. profit（％）（％）
Daiken Medical (7775)
8,120
6.3%
1,550
10.6%
19.1% 65.26 27.0 29.6
41.4%
9.0%
18.8% 1,930
JMS (7702)
56,000
4.0%
1,400
17.9%
2.5% 16.41
8.0 18.0
48.8%
3.3%
3.4%
295
Hogy Medical (3593)
36,950
6.2%
9,410
3.9%
25.5% 390.99 112.0 14.6
28.6%
3.5%
5.7% 5,720
Kawasumi Labs (7703) 28,200
2.1%
1,300
135.5%
4.6% 32.80 15.0 19.4
45.7% -1.5%-10.0%
635
Asahi Intec (7747)
26,578
33.1%
5,519
14.9%
20.8% 130.69 29.9 33.0
22.9% 10.6%
13.4% 4,315
Medicit (7749)
14,805
1.9%
3,064
-5.4%
20.7% 204.82 57.0 14.6
27.8%
3.3%
0.3% 2,995
Mani (7730)
10,831
15.9%
3,834
17.2%
35.4% 219.16 66.0 26.6
30.1%
2.9%
1.0% 5,840
Create Medic (5187)
10,124
2.5%
930
-2.4%
9.2% 63.95 35.0 15.3
54.7%
2.3%
-6.9%
980
Note: F igures shown are company forecasts for FY3/15, except those for Mani for FY8/14 and those for Create Medic for FY12/14.
Share prices are closing prices on July 17, 2014.
Sales

DAIKEN MEDICAL CO., LTD.
7775 Tokyo Stock ExchangeFirst Section

Rec. profit

18-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato伪伪Risks
Business risks are low
We foresee five possible risks to the company’s business, but none of these appears highly
probable.
・Product liability
If any defect were discovered in one of the company’s products or one of its products harmed
a user, the company could be held legally responsible. It may have to recall the defective or
dangerous product, and it would probably incur extraordinary losses as a result. Its businessmay also slow or decline.
・Dependence on single productThe company’s heavy dependence on a single product line, aspiration equipment, which
provides more than 60% of its total sales, makes it susceptible to severe price competition inthis line, which could erode sales and profits.
・Patent expiry
Most of the company’s products are patented, protecting them temporarily from competition.
When the patents expire, however, new competitors could produce these products, adversely
affecting the company’s business.
・Natural disasters
All the company’s syringe injectors are produced at the Assembly Center in Osaka. If thiscenter were damaged by a natural disaster, the company’s business would be hurt. Furthermore,
all the company’s QinPot aspiration equipment is produced by contractors in Thailand. If the
production facilities of these contractors were damaged by a natural disaster or the politicalsituation in Thailand deteriorated, the company’s business could be adversely affected.
・Regulated price fall
The Japanese Ministry of Health, Labour and Welfare is gradually lowering the official prices
for medical products and services to control overall medical costs. If the official prices for thecompany’s products were sharply reduced, its business would be hurt.

We encourage readers to review our complete legal statement on “Disclaimer” page.
16

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