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

Nagaileben
7447 Tokyo Stock ExchangeFirst Section

14-Nov.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Noboru Terashima

伪伪Net sales and each profit item exceeded the initial
targets, and record highs were achieved
Nagaileben <7447> (hereafter, also “the Company”) is the leading manufacturer of medical gowns inJapan, with a domestic market share of over 60%. In the consolidated results for FY8/16 announced
by the Company, net sales increased 2.4% y-o-y to ¥16,537mn, operating profit rose 2.9% to¥4,950mn, recurring profit decreased 3.0% to ¥4,937mn, and net profit attributable to the ownersof the parent company increased 1.1% to ¥3,262mn. The reason for the decline in recurring profit
was that while a foreign exchange gain of ¥226mn was recorded in FY8/15, this became a foreignexchange loss of ¥70mn in FY8/16 due to the appreciation of the yen. There were no major changes
to the industry environment or market structure and net sales and each profit item exceeded theirinitial targets, and record highs were achieved.
The forecasts for the full-year consolidated results for FY8/17, which is currently underway, are fornet sales to increase 2.8% y-o-y to ¥17,000mn, operating profit to rise 3.1% to ¥5,106mn, recurring
profit to climb 4.3% to ¥5,150mn, and net profit attributable to the owners of the parent company
to increase 8.2% to ¥3,528mn. The Company is particularly aiming to expand sales of healthcare
wear, its mainstay products. In terms of expenses, domestic processing charges are forecast to
increase, but this increase will be absorbed by the rise in the overseas production ratio, so the plan
is to maintain the same profit margin as in the previous fiscal year. The ongoing favorable industry
environment is expected to continue, so it is highly likely that the Company will achieve its forecasts.
Based on the FY8/16 results, the Company has announced targets for FY8/19 in its new Mid-termManagement Plan, of net sales of ¥18,000mn and operating profit of ¥5,400mn. It is consideredthat the Company will aim to achieve these targets through expanding overseas production andstrengthening advanced-functions products with high margins.
The Company is also actively returning profits to shareholders. In FY8/15, in addition to the usual
annual dividend of ¥50, it paid a commemorative dividend of ¥50 on the occasion of its 100th
anniversary, and implemented a share buyback of 1 million shares through a tender offer (¥1,500mn).
In FY8/16 also, it paid an annual dividend of ¥50 (for a dividend payout ratio of 52.5% on a nonconsolidated basis). It has already announced that it will once again pay an annual dividend of ¥50
in FY8/17, but based on its pledge of a dividend payout ratio (on a non-consolidated basis) of above
50%, it may increase this dividend if profits exceed the forecast. So the Company merits praise forits commitment to returning profits to shareholders.

伪伪Check Point• Sales and profits increased in FY8/16 from the steady acquisition of new projects• Sales and profits are expected to increase in FY8/17 from the launches of high-value-added
products• Announced mid-term targets of net sales of ¥18.0bn and operating profit of ¥5.4bn

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

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㻌㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕(¥mn)
㻝㻤㻘㻜㻜㻜
㻠㻘㻢㻠㻞

Nagaileben
7447 Tokyo Stock ExchangeFirst Section

㻠㻘㻤㻣㻟

㻠㻘㻥㻞㻟

㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻌㼍㼤㼕㼟㻕

㻠㻘㻤㻝㻟

㻠㻘㻥㻡㻜

㻡㻘㻝㻜㻢

(¥mn)
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14-Nov.-16

㻜Important disclosuresand disclaimers appear
at the end of this document.

㻜㻲㼅㻤㻛㻝㻞

㻲㼅㻤㻛㻝㻟FISCO Ltd. Analyst
Noboru Terashima㻲㼅㻤㻛㻝㻠

㻲㼅㻤㻛㻝㻡

㻲㼅㻤㻛㻝㻢

㻲㼅㻤㻛㻝㻣㻌㻱



伪伪Company profile
Going forward, its policy is to focus on expanding sales ofadvanced-function products(1) Description of businesses
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 themarket for medical gowns for nurses.
Company history
1915
1950
1969
1977
1978
1980
1982
1988
1989
1994
1995
1996
1999
2001
2002
2004
2005
2006
2014
2015

Founded business specializing in medical gowns in Kanda-Jinbocho in Tokyo, Japan, as Nagai Shoten,
privately owned by Koji Nagai.
Liquidated Tokyo Eisei Hakui Co. Ltd. Koji Nagai and Tatsuro Sawanobori jointly established Nagai
Shoten Co. Ltd.
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.
Built second product center in Kameido, Tokyo. Established a partnership with a US company, G.D.
Searle & Company, and established Japan Surgical Apparel Co. Ltd. in Hiroshima to expand sales of new
surgical apparel products for hospitals.
Established technology partnerships with Angelica Corp (US) and Toray Industries, Inc. Developed andreleased medical gowns made with a new fabric for leasing.
Changed name to Nagai Co. Ltd. Opened a sales office in Takamatsu, Kagawa Prefecture. Concluded alicense agreement with designer Kansai Yamamoto.
Concluded a license agreement with designer Yukiko Hanai.
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. becominga group headquarters for sales.
Newly built Nagai Luminous, a manufacturing plant for high-grade products, in Akita Prefecture.
Started overseas production toward the global division of labor.
Changed name from Nagai Co. Ltd. to Nagaileben Co. Ltd. Built a new logistics center in Akita Prefecture.
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.
Concluded an agreement with French designer Andre Courreges.
Opened a sales office in Nagoya, Aichi Prefecture. Concluded a license agreement with designer Atsuro
Tayama.
Listed on the Second Section of Tokyo Stock Exchange.
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.
Acquired ISO 9001. Listed on the First Section of Tokyo Stock Exchange. Absorbed Hokkaido Nagai Co.
Ltd. and established the Hokkaido branch
Acquired ISO 14001. Concluded a license agreement with designer Keita Maruyama.
Concluded a brand agreement with designer Minako Yokomori.
Relocated to a new head office building in Kajicho, Chiyoda Ward, Tokyo.
Held ceremony to commemorate its 100th anniversary.

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

■■Company profile

Nagaileben
7447 Tokyo Stock ExchangeFirst Section

14-Nov.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Noboru Terashimaa) Sales breakdown
All of the Company’s products are medical gowns and related products. The contribution to sales
by item (FY8/16) is 58.5% from healthcare wear, 16.1% from doctors’ wear, 9.8% from patient wear,
9.5% from surgical wear, 3.6% from utility wear, 1.3% from other products, and 1.2% from shoes.
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, are relatively lower.
In terms of each region’s contribution to sales (FY8/16), eastern Japan accounts for 51.6%, westernJapan 36.8%, central Japan 10.4%, and overseas 1.2%. While coverage is nationwide, sales inwestern Japan and overseas remain low, indicating the potential for future expansion.
In terms of the contribution to sales by product (function) (FY8/16), advanced-function products
constitute 52.7%, standard-function products 37.5%, mass-produced products 5.4%, and DC brandproducts 4.4%. As an example, in nursing wear products, when classified by price range, mass
produced products are under ¥5,000, standard-function products are ¥5,000-7,500, advanced
function products are ¥7,500-10,000, and DC brand products are over ¥10,000, with the higher
the price, the greater the profit margin. Going forward, the Company plans to particularly focus on
expanding sales of advanced-function productsb) 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 and other facilities. As a result, direct 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 laundryoutsourcing. The lease term is typically 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 casesof it being slightly before or after (a delay), so sometimes a slight shifting occurs for the net sales(y-o-y) for each quarter.
Looking at the Company’s production structure, based on FY8/16 performance, internal production
and at partner plants constitute an aggregate of 98.6% (51.2% domestically and 47.4% overseas),with purchased products accounting for 1.4%. Overseas production predominantly takes place inIndonesia, Vietnam, and China, but the Company owns no plants and the goods are produced at theplants of its local partners, which mitigates investment risk and reduces costs.

Provides products with excellent functionality and designs(2) Characteristics and strengths
The Company is a specialized manufacturer of medical gowns, and one of its strengths is that it has
in place an integrated system to undertake every aspect of this business, from design through to raw
material procurement, manufacturing, and sales. In its product planning, it can accurately understandcustomer needs and reflect them in its products. Specifically, the Company sells products that areeasy to wear and easy to work in while incorporating anti-static, antibacterial, and other functions, aswell 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.
Furthermore, in addition to its large number of affiliated plants, the Company has the necessaryfinancial resources to be able to constantly maintain product item inventories that extend into thethousands 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 toearn it the strong trust of its customers. On the sales side, it has a network of close to 1,000 agentsnationwide, and while its sales capabilities are robust, the Company itself keeps down its sales
expenses as much as possible.

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

■■Company profile

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 ismaintaining profitability with a gross profit margin of 46.8% (actual results for FY8/16). The fact that
it is both highly profitable and has a high market share demonstrates that most of its customers are
satisfied with its products and services, which is the Company’s greatest strength

Nagaileben
7447 Tokyo Stock ExchangeFirst Section

14-Nov.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Noboru Terashima

By concentrating its business resources in the niche market of medical gowns, the Company canefficiently manage every aspect of its business, from design through to manufacturing and sales.
Moreover, although it is a niche market, there remains room for further development, as it has
relatively low shares of the peripheral markets for patient wear, surgical wear, and other items. The
Company has explicitly stated that the medical gown business could grow for some time and that it
will take active steps to develop the peripheral markets(3) Corporate policies
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 tosociety. It has undertaken the following specific initiatives toward achieving these goals and intends
to remain an enterprise that contributes to society and to the healthcare industrya) A robust management approach
The Company is pursuing stable medium- and long-term growth by exploring principles.
b) Social responsibilities
1) 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, andelsewhere overseas.
2) Fostering opportunities for women
The Company is creating workplaces in which women can play key roles, including in the medical
and apparel arenas.
3) Environmental initiatives
The Company secured ISO 14001 certification in 2005. It is also helping to address environmental
issues by expanding sales of its COMPELPAK, which reduces medical waste4) Support for children
The Company endeavors to educate and enlighten to make careers in the medical field more
attractive to children, including by having the popular character, Miffy, visit pediatric wards and bylending children’s’ coats to medical institutions.
c) Returns to shareholders
The Company actively returns profits to shareholders by providing stable dividends and maintaining
a dividend payout ratio of at least 50% on a non-consolidated basis. It also flexibly repurchases its
own shares when the share price is considered to be undervalued.

伪伪Results trends
Sales and profits increased in FY8/16 from the steadyacquisition of new projects(1) Summary of the FY8/16 consolidated resultsa) Profit-and-loss conditions
In the consolidated results for FY8/16, net sales increased 2.4% y-o-y to ¥16,537mn, operating
profit rose 2.9% to ¥4,950mn, recurring profit fell 3.0% to ¥4,937mn, and net profit attributable to theowners of the parent company climbed 1.1% to ¥3,262mn. Net sales and each profit item exceeded
their initial targets, and record highs were achieved.

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

■■Results trends

Summary of the FY8/16 consolidated results

Nagaileben
7447 Tokyo Stock ExchangeFirst Section

14-Nov.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Noboru Terashima

FY8/15
Amount Percentages
16,150
100.0
7,532
46.6
2,719
16.8
4,813
29.8
5,088
31.5

Net sales
Gross profit
SG&A expenses
Operating profit
Recurring profit
Net profit attributable to the3,225
owners of the parent company
Source: the Company’s financial results summary(Unit: ¥mn, %)FY8/16
Amount Percentages Changey-o-y16,537
100.0
387
+2.4
7,735
46.8
202
+2.7
2,784
16.9
65
+2.4
4,950
29.9
137
+2.9
4,937
29.9
-151
-3.0

20.0

3,262

19.7

36

+1.1

In terms of market trends, there had been concerns about the effects from the revised medical
fees and drug prices from the spring of 2016. But the effect from the medical fees themselves was+0.49%, so no particularly major impact was seen, and both the market environment and the industry
environment were basically stable. In this sort of environment, due to the Company steadily capturing
delayed large-scale renewal demand and smoothly acquiring new projects, and additionally from theeffects of the price hikes to some products implemented from 2H of the previous fiscal year, net sales
increased 2.4% y-o-y.
Gross profit increased ¥202mn y-o-y. On analyzing the factors behind this, the increase factors were¥233mn from the higher sales and price hikes, and ¥97mn from the effects of the rise in the overseas
production ratio (45.6%→47.4%). Conversely, the decrease factors were ¥22mn from the higher raw
material prices and processing charges and ¥115mn from the increase in costs due to the exchange
rate (the appreciation of the yen). As a result, the gross profit margin improved to 46.8% (comparedto 46.6% in the previous fiscal year). Conversely, SG&A expenses increased 2.4% to ¥2,784mn,
but this was mainly due to increases in expenses related to the Company’s centennial anniversaryof ¥34mn, which was factored into forecasts from the beginning, and pro-forma standard taxationof ¥50mn, and the amount was basically as initially forecast. As a result, operating profit rose 2.9%
y-o-y to achieve a record high.
In contrast, recurring profit decreased 3.0% y-o-y, but this was mainly due to the effects of a foreignexchange loss recorded in costs in non-operating profit, which again was factored into the forecasts
from the beginning. A foreign exchange gain of ¥226mn was recorded in FY8/15, which was fromthe dollar-denominated deposits held in order to hedge against the effects of a weak yen in costsof sales. But in FY8/16, this became a foreign exchange loss of ¥70mn, because although dollardenominated deposits were reduced, the yen appreciated significantly. Due to this, recurring profit
declined y-o-y, but the result still exceeded the initial forecast. In extraordinary profit and loss, there
were no major fluctuations or unexpected events, but the corporate tax amount decreased following
the lowering of the tax rate, so net profit attributable to the owners of the parent company increased
1.1% y-o-y to ¥3,262mn. Taken as a whole, the results can be said to be basically in line with theforecasts.
Net sales by item
FY8/15

Amount
Healthcare wear
9,429
Doctors’ wear
2,604
Utility wear
670
Patient wear
1,451
Surgical wear
1,560
Shoes
211
Other products
222
Total
16,150Source: the Company’s financial results summary

y-o-y

-0.1
-2.6
-9.8
+7.2
+2.3
-10.9
-7.0
-0.4

(Unit: ¥mn, %)FY8/16
Amount
y-o-y
9,674
+2.6
2,654
+2.0
601
-10.3
1,613
+11.1
1,574
+0.9
204
-3.1
213
-3.9
16,537+2.4

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

■■Results trends㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㼎㼥㻌㼕㼠㼑㼙㻌㻔㻲㼅㻤㻛㻝㻢㻌㻕㻌㻥㻚㻡㻑㻝㻚㻞㻑 㻝㻚㻟㻑㻴㼑㼍㼘㼠㼔㼏㼍㼞㼑㻌㼣㼑㼍㼞
Doctors’ wear

Nagaileben㻥㻚㻤㻑㼁㼠㼕㼘㼕㼠㼥㻌㼣㼑㼍㼞

7447 Tokyo Stock ExchangeFirst Section㻼㼍㼠㼕㼑㼚㼠㻌㼣㼑㼍㼞㻟㻚㻢㻑㻿㼡㼞㼓㼕㼏㼍㼘㻌㼣㼑㼍㼞㻡㻤㻚㻡㻑

14-Nov.-16㻿㼔㼛㼑㼟㻻㼠㼔㼑㼞㻌㼜㼞㼛㼐㼡㼏㼠㼟㻝㻢㻚㻝㻑

Important disclosuresand disclaimers appear
at the end of this document.

Source: the Company’s financial results briefing materials


FISCO Ltd. Analyst
Noboru TerashimaIn net sales by item, healthcare wear increased 2.6% y-o-y to ¥9,674mn, doctors’ wear rose 2.0%
to ¥2,654mn, utility wear decreased 10.3% to ¥601mn, patient wear climbed 11.1% to ¥1,613mn,
surgical wear increased 0.9% to ¥1,574mn, shoes declined 3.1% to ¥204mn, and other products
decreased 3.9% to ¥213mn.
In the mainstay healthcare wear, due to the switching of some renewal demand and the delay in therecording of sales in Q1, net sales were significantly down y-o-y. However, following the recovery ofthe delayed projects and the steady acquisition of the targeted renewal demand from Q2 onwards,
sales for the full fiscal year recovered to increase 2.6%. The same trend was seen in doctors’ wear
and healthcare wear, of a recovery from Q2 onwards from the portions that sales declined in Q1,
including from the strong performance of the new product lineup, and their results improved y-o-y.
Surgical wear was basically unchanged y-o-y, with the COMPELPAK laundry sterilization plant
having reached full capacity. Patient wear increased significantly, by double digits, including due tothe contributions of the new product lineup. In utility wear, the trend of shifting from individual supply
to that of common goods continued and sales declined y-o-y, but this result was within the scope ofthe forecast and was not surprising. Sales of shoes and other products also declined, but as theirmonetary contributions are small, the impact of these declines on the overall results were small.
Net sales by region
FY8/15

AmountEastern Japan
8,357
Central Japan
1,774
Western Japan
5,842
Overseas
176
Total
16,150Source: the Company’s financial results briefing materials

y-o-y

-1.2
+1.7
+0.0
+5.4
-0.4

(Unit: ¥mn, %)FY8/16
Amount
y-o-y
8,539
+2.2
1,717
-3.2
6,080
+4.1
200
+14.1
16,537+2.4

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

■■Results trends㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㼎㼥㻌㼞㼑㼓㼕㼛㼚㻌㻔㻲㼅㻤㻛㻝㻢㻌㻕㻌㻝㻚㻞㻑㻱㼍㼟㼠㼑㼞㼚㻌㻶㼍㼜㼍㼚

Nagaileben㻟㻢㻚㻤㻑7447 Tokyo Stock ExchangeFirst Section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㻡㻝㻚㻢㻑㻻㼢㼑㼞㼟㼑㼍㼟

14-Nov.-16

Important disclosuresand disclaimers appear
at the end of this document.

㻝㻜㻚㻠㻑
Source: the Company’s financial results briefing materials


FISCO Ltd. Analyst
Noboru TerashimaIn net sales by region, in eastern Japan sales increased 2.2% y-o-y to ¥8,539mn, in central Japanthey decreased 3.2% to ¥1,717mn, in western Japan they rose 4.1% to ¥6,080mn, and overseas
they climbed 14.1% to ¥200mn. Although sales were slightly down y-o-y in eastern Japan up to theend of 1H, in 2H they recovered, particularly in Q3, which is the demand period, increasing 4.2%
compared to 2H in the previous fiscal year and ultimately achieving record high net sales for thefull fiscal year. Market scale is small in central Japan and it is significantly affected by the numberof projects. In FY8/16, there was a delay in the period of projects and this caused sales to decline
y-o-y, but this is not considered to be a cause for concern. In western Japan, market share trended
steadily upward thanks to the steady acquisition of renewal projects and new projects, and the target
was achieved and once again record high net sales were recorded. While the scale of sales fromoverseas is still small, the Company’s products are becoming known for their quality and functionality
and the number of repeat customers is steadily increasing, and as a result, overseas sales achieved
double-digit growth.
Net sales by product
FY8/15

AmountDC brand products
846
Advanced-function products
8,090Standard-function products
6,252
Mass-produced products
960
Total
16,150Source: the Company’s financial results briefing materials

y-o-y

-9.9
+3.8
-3.2
-5.6
-0.4

(Unit: ¥mn, %)FY8/16
Amount
y-o-y
720
-14.8
8,720
+7.8
6,199
-0.9
896
-6.6
16,537+2.4

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7

■■Results trends㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㼎㼥㻌㼜㼞㼛㼐㼡㼏㼠㻌㻔㻲㼅㻤㻛㻝㻢㻕㻌
㻡㻚㻠㻑

㻠㻚㻠㻑

㻰㻯㻌㼎㼞㼍㼚㼐㻌㼜㼞㼛㼐㼡㼏㼠㼟

Nagaileben㻭㼐㼢㼍㼚㼏㼑㼐㻙㼒㼡㼚㼏㼠㼕㼛㼚㻌㼜㼞㼛㼐㼡㼏㼠㼟

7447 Tokyo Stock ExchangeFirst Section㻟㻣㻚㻡㻑㻿㼠㼍㼚㼐㼍㼞㼐㻙㼒㼡㼚㼏㼠㼕㼛㼚㻌㼜㼞㼛㼐㼡㼏㼠㼟

14-Nov.-16

Important disclosuresand disclaimers appear
at the end of this document.

㻡㻞㻚㻣㻑

Source: the Company’s financial results briefing materials


FISCO Ltd. Analyst
Noboru Terashima㻹㼍㼟㼟㻙㼜㼞㼛㼐㼡㼏㼑㼐㻌㼜㼞㼛㼐㼡㼏㼠㼟

In net sales by product, DC brand products decreased 14.8% y-o-y to ¥720mn, advanced-function
products increased 7.8% to ¥8,720mn, standard-function products fell 0.9% to ¥6,199mn, and massproduced products decreased 6.6% to ¥896mn. In advanced-function products, which is the market’s
volume zone and in which the Company is most focusing its efforts toward expanding sales, sales
steadily increased from capturing customers who already use standard-function products. Althoughsales of DC brand products and mass-produced products were down, their sales scales are small sothese results are not a particular cause for concern.

Sales and profits expected to increase in FY8/17 from thelaunch of high-value-added productsb) Financial position
The Company’s financial position continues to be stable. Total assets at the end of FY8/16 were¥38,857mn, down ¥151mn compared to the end of the previous fiscal year. Current assets were¥29,083mn, a decline of ¥628mn, with the main factors being increases in cash and deposits of¥830mn and in notes and accounts receivable of ¥177mn, but a decrease in securities of ¥1,518mn
following the redemption of investment trusts, including MMF. Fixed assets were ¥9,774mn, up¥477mn, primarily due to an increase of ¥620mn in investments and other assets following therecording of ¥900mn in time deposits exceeding 1 year.
Total liabilities were ¥4,355mn, up ¥142mn compared to the end of the previous fiscal year. The main
factors included an increase in bills and accounts payable of ¥162mn and a decrease in corporate
tax payable of ¥1mn. Total net assets were ¥34,501mn, a decline of ¥293mn. This was mainly due
to reductions in retained earnings of ¥62mn following the payment of dividends, and in the deferred
gain/loss on hedges of ¥276mn. As a result of these factors, the shareholders’ equity ratio was
88.8%, falling very slightly from 89.2% at the end of the previous fiscal year.

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

■■Results trends

Summary of the consolidated balance sheet

Nagaileben
7447 Tokyo Stock ExchangeFirst Section

14-Nov.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Noboru Terashima

Cash and deposits
Notes and accounts receivable
Securities
Inventories
Current assets, total
Tangible fixed assets
Intangible fixed assets
Investments and other assets
Fixed assets, total
Total assets
Bills and accounts payable
Corporate tax payable
Total liabilities
Retained earnings
Treasury stock
Deferred gain/loss on hedges
Net assets, total
Total liabilities and net assets
Source: the Company’s financial results summary

End of FY8/15
18,673
4,689
1,518
4,199
29,711
7,605
71
1,619
9,296
39,008
1,399
1,151
4,213
35,040-4,902276
34,79539,008End of FY8/16
19,504
4,866
4,348
29,083
7,476
57
2,240
9,774
38,857
1,561
1,149
4,355
34,978-4,902034,501
38,857(Unit: ¥mn)
Change+830+177-1,518
+148
-628
-128
-14
+620
+477
-151
+162
-1
+142
-62
-0
-276
-293
-151

c) Cash flow conditions
In FY8/16, cash flow from operating activities was ¥3,565mn. The main income items were therecording of net income before income taxes of ¥4,934mn, depreciation and amortization of ¥331mn,
and an increase in accounts payable of ¥162mn, while the main expenditure items included increases
in notes and accounts receivable-trade of ¥180mn and in inventory assets of ¥148mn. Cash flowused in investing activities was ¥1,997mn, which was primarily due to spending on fixed deposits(net) of ¥2,000mn and on the acquisition of tangible fixed assets of ¥151mn. Cash flow used infinancing activities was ¥3,324mn, with the main item being ¥3,324mn for the payment of dividends.
As a result, cash and cash equivalents during this fiscal period declined ¥1,787mn, and the balanceof cash and cash equivalents at the end of the fiscal period was ¥6,704mn. The Company does
not have any interest-bearing debt, and in addition, it holds ¥4,902mn of treasury stock (4,989,551
stocks). Therefore, as before it has an abundance of cash on hand.
Summary of the consolidated cash flow statement

Cash flow from operating activities
Net income before income taxes
Depreciation and amortization
Change in notes and accounts receivable-trade
Change in inventory assers
Change to accounts payable
Cash flow from investing activities
Acquisition of tangible fixed assets
Change in fixed deposits (net)Cash flow from financing activities
Change to cash and cash equivalents
Balance of cash and cash equivalents at period end
Source: the Company’s financial results summary

FY8/15

2,727
5,115
360
-55
-364
-118
143
-204
200
-3,211-179
8,491(Unit: ¥mn)
FY8/16
3,565
4,934
331
-180
-148
162
-1,997-151-2,000-3,324-1,787
6,704(2) The FY8/17 consolidated results forecast
The full year consolidated result forecasts for FY8/17 are for net sales to increase 2.8% y-o-y to¥17,000mn, operating profit to rise 3.1% to ¥5,106mn, recurring profit to climb 4.3% to ¥5,150mn,
and net profit attributable to the owners of the parent company to increase 8.2% to ¥3,528mn. There
will be no revisions to medical fees, and the market and the industry environment are expected tocontinue to be stable and trend basically unchanged. In this sort of environment, the Company plansto achieve higher sales by increasing its shares of each market through launching highly functional
and advanced high-value-added products.

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

■■Results trends

Consolidated results forecast

Nagaileben
7447 Tokyo Stock ExchangeFirst Section

14-Nov.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Noboru Terashima

FY8/16
Amount Percentages
16,537
100.0
7,735
46.8
2,784
16.9
4,950
29.9
4,937
29.9

Net sales
Gross profit margin
SG&A expenses
Operating profit
Recurring profit
Net profit attributable to the
3,262
owners of the parent company
Source: the Company’s financial results summary

19.7(Unit: ¥mn, %)FY8/17 forecast
Amount Percentages Changey-o-y
17,000
100.0
463
+2.8
7,945
46.7
210
+2.7
2,839
16.7
55
+2.0
5,106
30.0
156
+3.1
5,150
30.3
213
+4.3
3,528

20.8

266

+8.2

Gross profit is expected to climb ¥210mn, with the positive factors forecast to be increases of ¥321mn
from the higher sales and price hikes, and ¥52mn from the rise in the overseas production ratio,
and the negative factors being ¥70mn from the effects of the higher raw materials and processing
charges, and ¥71mn from the effects of the exchange rate (FY8/16 ¥99.8 / dollar→FY8/17 ¥103.8 /dollar) on costs. As a result, the gross profit margin is forecast to remain basically unchanged y-o-y,
at 46.7% (46.8% in the previous fiscal year).
In addition, SG&A expenses are forecast to be ¥2,839mn (up 2.0% y-o-y), including due to theanticipated pro-forma standard taxation of ¥83mn. Therefore, operating profit is expected to be¥5,106mn, which will once again be a record high. Moreover, as the effects of the exchange rate on
costs in non-operating profit will be zero, both recurring profit and net profit attributable to the ownersof the parent company are forecast to increase y-o-y.
Net sales forecasts by item
FY8/16

Amount
Healthcare wear
9,674
Doctors’ wear
2,654
Utility wear
601
Patient wear
1,613
Surgical wear
1,574
Shoes
204
Other products
213
Total
16,537
Source: the Company’s financial results summary

y-o-y

+2.6
+2.0
-10.3
+11.1
+0.9
-3.1
-3.9
+2.4

(Unit: ¥mn, %)FY8/17 forecast
Amount
y-o-y
9,950
+2.8
2,710
+2.1
550
-8.6
1,740
+7.9
1,650
+4.8
200
-2.3
200
-6.4
17,000+2.8

In net sales by item, healthcare wear is forecast to be ¥9,950mn (up 2.8% y-o-y), doctors’ wear
¥2,710mn (up 2.1%), utility wear ¥550mn (down 8.6%), patient wear ¥1,740mn (up 7.9%), surgicalwear ¥1,650mn (up 4.8%), shoes ¥200mn (down 2.3%), and other products ¥200mn (down 6.4%).
Strong increases in sales are expected in healthcare wear and doctors’ wear from the activationof their markets following the launches of new high-value-added products. The utility wear market
is shrinking and its sales are forecast to continue to decline. The major increase in patient wear
sales is set to continue from the effects of new product launches against the backdrop of the strong
demand in this market. Higher sales are also expected in surgical wear from eliminating the cap at
the COMPELPAK laundry sterilization plant and through developing new customers.
Net sales forecasts by regions
FY8/16

AmountEastern Japan
8,539
Central Japan
1,717
Western Japan
6,080
Overseas
200
Total
16,537
Source: the Company’s financial results briefing materials

y-o-y

+2.2
-3.2
+4.1
+14.1
+2.4

(Unit: ¥mn, %)FY8/17 forecast
Amount
y-o-y
8,680
+1.7
1,800
+4.8
6,300
+3.6
220
+9.5
17,000+2.8

The forecasts for net sales by region are ¥8,680mn in eastern Japan (up 1.7% y-o-y), ¥1,800mn incentral Japan (up 4.8%), ¥6,300mn in western Japan (up 3.6%), and ¥220mn overseas (up 9.5%).

We encourage readers to review our complete legal statement on “Disclaimer” page.
10

■■Results trends

In eastern Japan, the Company expects sales to continue to increase from it steadily capturing
demand for renewal projects by proposing new high-value-added products. In central Japan andwestern Japan, the Company is aiming to achieve sales growth y-o-y 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 and focus on expanding sales. The plan
is to increase sales in every region and to achieve record highs for net sales.

Nagaileben
7447 Tokyo Stock ExchangeFirst Section

14-Nov.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Noboru Terashima

Net sales forecasts by product
FY8/16

AmountDC brand products
720
Advanced-function products
8,720Standard-function products
6,199
Mass-produced products
896
Total
16,537
Source: the Company’s financial results briefing materials

y-o-y

-14.8
+7.8
-0.9
-6.6
+2.4

(Unit: ¥mn, %)FY8/16 forecast
Amount
y-o-y
680
-5.7
9,260
+6.2
6,200
0.0
860
-4.1
17,000+2.8

The net sales forecasts by product are ¥680mn for DC brand products (down 5.7%), ¥9,260mn
for advanced-function products (up 6.2%), ¥6,200mn for standard-function products (0.0%), and¥860mn for mass-produced products (down 4.1%).
Sales of DC brand products will be underpinned by the Miffy and Liberty brands, but the severemarket conditions are set to continue for all other brands and therefore sales are expected to decline.
The new lineups of advanced-function products have been favorably received by the markets andare trending strongly, and the Company plans to continue to promote its high-value-added strategy.
The downward trend in mass-produced products is forecast to continue, but the plan is to pursue thetransfer of these customers to functional products, including from other companies’ projects.

伪伪Mid-term Management Plan targets and outlook
Announced mid-term targets of net sales of ¥18.0bn andoperating profit of ¥5.4bn(1) Mid-term Management plan
The Company initially announced targets for FY8/18 of sales of ¥17,500mn and operating profitof ¥5,300mn in its Mid-term Management Plan. But based on the FY8/16 results, it has newly
announced the plan’s mid-term targets for FY8/19, of net sales of ¥18,000mn and operating profitof ¥5,400mn.

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㼕㼠㼑㼙㻴㼑㼍㼘㼠㼔㼏㼍㼞㼑㼁㼠㼕㼘㼕㼠㼥

Doctors’㻼㼍㼠㼕㼑㼚㼠

㻿㼡㼞㼓㼕㼏㼍㼘

㻲㼅㻤㻛㻝㻥㻌㻔㼠㼍㼞㼓㼑㼠㼟㻕㻌㻲㼅㻤㻛㻝㻢㻌㻔㼞㼑㼟㼡㼘㼠㼟㻕㻌㻿㼡㼞㼓㼕㼏㼍㼘
㻝㻜㻑㻿㼡㼞㼓㼕㼏㼍㼘
㻝㻝㻑㻿㼔㼛㼑㼟㻌・㻻㼠㼔㼑㼞㻌㼜㼞㼛㼐㼡㼏㼠㼟㻞㻑㻌㻼㼍㼠㼕㼑㼚㼠
㻝㻜㻑㻿㼔㼛㼑㼟㻌・㻻㼠㼔㼑㼞㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㻿㼔㼛㼑㼟㻌・㻻㼠㼔㼑㼞㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㻞㻑㻼㼍㼠㼕㼑㼚㼠
㻝㻞㻑㼁㼠㼕㼘㼕㼠㼥 㻠㻑㻴㼑㼍㼘㼠㼔㼏㼍㼞㼑㻡㻤㻑

Doctors’㻝㻢㻑㼁㼠㼕㼘㼕㼠㼥
㻞㻑㻴㼑㼍㼘㼠㼔㼏㼍㼞㼑㻡㻣㻑

Doctors’㻝㻢㻑

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

■■Mid-term Management Plan targets and 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㻻㼢㼑㼞㼟㼑㼍㼟

㻲㼅㻤㻛㻝㻥㻌㻔㼠㼍㼞㼓㼑㼠㼟㻕㻌㻻㼢㼑㼞㼟㼑㼍㼟
㻞㻑㻲㼅㻤㻛㻝㻢㻌㻔㼞㼑㼟㼡㼘㼠㼟㻕㻌㻻㼢㼑㼞㼟㼑㼍㼟㻌㻝㻑

Nagaileben
7447 Tokyo Stock ExchangeFirst Section㼃㼑㼟㼠㼑㼞㼚㻌㻶㼍㼜㼍㼚㻌㻟㻣㻑

14-Nov.-16

Important disclosuresand disclaimers appear
at the end of this document.

㻱㼍㼟㼠㼑㼞㼚㻌㻶㼍㼜㼍㼚㻡㻞㻑㼃㼑㼟㼠㼑㼞㼚㻌㻶㼍㼜㼍㼚㻌㻟㻥㻑㻱㼍㼟㼠㼑㼞㼚㻌㻶㼍㼜㼍㼚㻠㻤㻑㻯㼑㼚㼠㼞㼍㼘㻌
㻶㼍㼜㼍㼚㻌
㻝㻝㻑㻯㼑㼚㼠㼞㼍㼘㻌㻶㼍㼜㼍㼚㻌㻝㻜㻑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㼜㼞㼛㼐㼡㼏㼠FISCO Ltd. Analyst
Noboru Terashima㻭㼐㼢㼍㼚㼏㼑㼐㻙㼒㼡㼚㼏㼠㼕㼛㼚㻌㼜㼞㼛㼐㼡㼏㼠㼟㻹㼍㼟㼟㻙㼜㼞㼛㼐㼡㼏㼑㼐㻌㼜㼞㼛㼐㼡㼏㼠㼟㻿㼠㼍㼚㼐㼍㼞㼐㻙㼒㼡㼚㼏㼠㼕㼛㼚㻌㼜㼞㼛㼐㼡㼏㼠㼟㻰㻯㻌㼎㼞㼍㼚㼐㻌㼜㼞㼛㼐㼡㼏㼠㼟㻲㼅㻤㻛㻝㻢㻌㻔㼞㼑㼟㼡㼘㼠㼟㻕㻌㻹㼍㼟㼟㻙㼜㼞㼛㼐㼡㼏㼑㼐㻌㻰㻯㻌㼎㼞㼍㼚㼐㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㻠㻑㼜㼞㼛㼐㼡㼏㼠㼟㻌㻡㻑㻿㼠㼍㼚㼐㼍㼞㼐㻙㼒㼡㼚㼏㼠㼕㼛㼚㻌 㻭㼐㼢㼍㼚㼏㼑㼐㻙㼒㼡㼚㼏㼠㼕㼛㼚㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㻡㻟㻑㻟㻤㻑㻲㼅㻤㻛㻝㻥㻌㻔㼠㼍㼞㼓㼑㼠㼟㻕㻌㻹㼍㼟㼟㻙㼜㼞㼛㼐㼡㼏㼑㼐㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㻠㻑㻰㻯㻌㼎㼞㼍㼚㼐㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㻟㻑㻿㼠㼍㼚㼐㼍㼞㼐㻙㼒㼡㼚㼏㼠㼕㼛㼚㻌 㻭㼐㼢㼍㼚㼏㼑㼐㻙㼒㼡㼚㼏㼠㼕㼛㼚㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㻡㻤㻑㻟㻡㻑

Source: the Company’s financial results briefing materials(2) Future business strategies
The operating environment surrounding the Company should be favorable for some time. According
to data released by the Japanese Nursing Association and the Ministry of Health, Labour and Welfare,the number of nurses in Japan is projected to increase from 1.57 million in 2013 to a maximum of
2.06 million in 2025. Moreover, the number of care workers is forecast to increase from 1.77 million
in 2013 to 2.53 million in 2025. In this operating environment, the Company plans to achieve its MidTerm Management Plan by implementing the following strategies.

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

■■Mid-term Management Plan targets and outlook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㻕㻌㻺㼡㼞㼟㼑㼟

㻯㼍㼞㼑㻌㼣㼛㼞㼗㼑㼞㼟

㻟㻜㻜
㻞㻡㻟

㻞㻡㻜

Nagaileben

㻞㻜㻢
㻞㻜㻜

7447 Tokyo Stock ExchangeFirst Section

㻝㻣㻣
㻝㻡㻣

㻝㻡㻜

㻝㻜㻜

14-Nov.-16

㻡㻜Important disclosuresand disclaimers appear
at the end of this document.

㻜㻞㻜㻝㻟㻌㻔㼞㼑㼟㼡㼘㼠㻕㻞㻜㻞㻡㻌㻔㼒㼛㼞㼑㼏㼍㼟㼠㻕

Source: the Japanese Nursing Association and the Ministry of Health, Labour and Welfare
FISCO Ltd. Analyst
Noboru Terashimaa) Marketing Strategy to boost sales• Aim to increase share by further uncovering demand in the core markets, including the current
mainstay markets for nurses and care workers.
• In addition to the existing mainstay healthcare wear products, further develop the peripheral
markets, including patient wear and surgical wear.
• Open-up new markets by utilizing the Company’s technological expertise in materials and apparel
manufacturing, and its sales network.
b) Production strategy to ensure a stable supply• In the context of the tightening of the domestic labor market, respond to wage increases among
domestic manufacturers and further strengthen the production system.
• Strengthen measures for materials manufacturers and trading companies, and improve new
product development capabilities.
• Further bolster the quick response system and the ability to respond rapidly to small-lot, multiproduct orders.
c) Strategy toward stable profitability• Further promote the shift from domestic production to overseas production.
• Actively utilize special tax measures, including EPA and FTA.
• Secure business profitability through flexibly revising prices in response to fluctuations in production
costs, including from exchange rates.

伪伪Shareholder Returns Policy
Is highly aware of returns to shareholders and maintaining
capital efficiency
The Company’s shareholders’ equity ratio reached 88.8% at the end of FY8/16, and it is financiallystable. Additionally, considering the Company’s business conditions, it seems highly unlikely thatits profits will rapidly deteriorate, so continued stable earnings are expected. As a result, as its
distribution of earnings outside the Company (particularly dividend payments) is low and profits willaccumulate in shareholders’ equity each year, return on equity (ROE) will decline; which is to say,capital efficiency will decline. But in addition to paying dividends commensurate with the growth inprofits, the Company actively and comprehensively returns profits to shareholders, including throughshare buybacks, and as a result has maintained a high ROE (9.4% in FY8/16).

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

■■Shareholder Returns Policy

Nagaileben
7447 Tokyo Stock ExchangeFirst Section

14-Nov.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Noboru Terashima

The Company will thus maintain a stable financial position while pursuing solid shareholder returns.
In FY8/15, it supplemented the normal dividend of ¥50 per share with an additional ¥50 per shareto commemorate its centennial. This raised the total annual dividend to ¥100 per share, for a nonconsolidated 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 the completed
FY8/16 also, it paid an annual dividend of ¥50 for a dividend payout ratio of 52.5% on a nonconsolidated basis.
Trends in the dividend payout ratio and the total return ratio
Total dividend amount
Share buybacks
Dividend payout ratio*
(¥mn)
(¥mn)
(%)
FY8/01475
0
27.4
FY8/02475
0
29.3
FY8/03
530
1,697
29.7
FY8/047440
36.5
FY8/051,1170
56.9
FY8/061,1170
53.4
FY8/071,1170
53.1
FY8/08
1,083
1,077
56.6
FY8/09
1,040
1,220
57.3
FY8/101,127
051.4
FY8/11
1,205
226
52.0
FY8/121,205
055.1
FY8/13
1,541
229
51.3
FY8/141,712
054.4
FY8/15
3,324
1,500
107.5
FY8/16
1,662
0
52.5*: on a non-consolidated basis
Source: the Company’s financial results briefing materials

Total returns ratio*
(%)
27.4
29.3
124.6
36.5
56.9
53.4
53.1
111.2
122.2
51.4
61.7
55.1
58.7
54.4
153.8
52.5

In every year in the last 10 years, the dividend payout ratio (on a non-consolidated basis) has
exceeded 50%. For FY8/17 also, the Company has announced an annual dividend of ¥50 for adividend payout ratio of above 50% on a non-consolidated basis, and it may also increase thedividend if profits exceed the forecast. In such ways, the Company is demonstrating that it is highly
aware of returning profits to shareholders and maintaining capital efficiency, which merits praise.

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

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