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

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section

8-Jan.-16

伪伪Key Measures of Management Plans Progressing
Steadily
Sun-Wa Technos Corporation (8137) is an independent trading company that specializes intechnology products. One of the strengths of the company is that it has three business divisions ofelectrical machinery, electronics, and general machinery. Another strength is the company’s two-way
trade in which it sells equipment and materials for manufacturers’ production lines, then sells the
products made by these manufacturers. By utilizing these strengths, the company has expanded its
businesses.

Important disclosuresand disclaimers appear
at the end of this document.

Given swift changes in various respects, the company is transforming itself to materialize sustainablegrowth, the focus being efforts to reinforce its engineering business. The goal is to bolster its businessposition by providing total solutions that optimally combine the systems of the three businesses,
rather than their individual products.

FISCO Ltd. Analyst
Hiroyuki Asakawa

FY3/16 is the last year of JUMP 1200, a medium-term management plan. The key basic policies
and initiatives of this plan are to strengthen engineering capabilities. The main measures areprogressing steadily. That said, some aspects of performance have not unfolded as anticipated,
and the company has fallen short of targets. In 1H FY3/16, revenues rose but earnings declined,
prompting management to lower its full-year forecasts.
Notwithstanding the downward near-term projection, we do not have major concerns about thecompany’s medium-term growth potential. That is because the company has globally competitive
suppliers and sales partners, while management is steadily implementing its measures with amedium- to long-term viewpoint without being affected by short-term concerns. The company isscheduled to announce its successor medium-term management plan in May 2016. We will keep
close tabs, with a sense of anticipation, on the growth scenario, numerical targets, and specificpolicies that the plan puts forward.

伪伪Check Point
・ Realigning existing departments and setting up new ones to reinforce engineering business・ Maintaining sales growth pace and continuing to post new highs
・ Integrating three businesses is a top-priority change for management㻺㼑㼠㻌㻿㼍㼘㼑㼟㻌㼍㼚㼐㻌㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㻵㼚㼏㼛㼙㼑(¥mn)
㻝㻞㻜㻘㻜㻜㻜

㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕㻟㻘㻞㻤㻥㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻌㼟㼏㼍㼘㼑㻕
㻟㻘㻠㻣㻝
㻟㻘㻞㻝㻝
㻞㻘㻤㻜㻜

㻝㻜㻜㻘㻜㻜㻜
㻞㻘㻞㻢㻥㻤㻜㻘㻜㻜㻜

㻤㻥㻘㻣㻜㻢

㻟㻘㻢㻜㻜
㻟㻘㻜㻜㻜
㻞㻘㻠㻜㻜

㻢㻜㻘㻜㻜㻜
㻠㻜㻘㻜㻜㻜

(¥mn)

㻝㻜㻝㻘㻟㻣㻤

㻤㻤㻘㻞㻢㻠

㻝㻝㻝㻘㻞㻣㻢

㻝㻝㻞㻘㻜㻜㻜

㻝㻘㻤㻜㻜
㻝㻘㻞㻜㻜

㻞㻜㻘㻜㻜㻜㻢㻜㻜㻜㻜㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢㻱

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

伪伪Sun-Wa Technos yesterday, today, and tomorrow
Realigning existing departments and setting up new ones toreinforce engineering business

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section

8-Jan.-16(1) Sun-Wa Technos yesterday
Sun-Wa Technos is an independent trader of technology products. Its three main businesses areelectrical machinery, electronics, and general machinery. This triple business structure dates back to
the company’s start with its machinery and electrical machinery divisions as a distributor for Yaskawa
Electric Corp. (6506). Sun-Wa Technos thereafter began supplying Yaskawa Electric with selenium
rectifiers, electronic components manufactured by Origin Electric Co., Ltd. (6513), a customer ofYaskawa Electric. This led to the launch of the electronics business and a distinctive business modelin which operations are linked through two-way trade.
Overview of Sun-Wa Technos from foundation to the present day

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

Source: Compiled by FISCO Ltd.

(2) Sun-Wa Technos today
The company developed steadily by leveraging its three business and two-way trade capabilities.
The situation is such that it now has to restructure its operations. One such development is that
customer demand is shifting away from individual products, industrial robots being one example,
to systems and solutions, such as combinations of industrial robots and control equipment. Suchchanges are accelerating constantly, notably through corporate customers expanding overseas,
rivals emerging in developing nations (to supply such customers as Yaskawa Electric and Omron
Corp. (6645)), transforming the operating climates of the company itself, as well as of its suppliers
and buyers.

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

■■Sun-Wa Technos yesterday, today, and tomorrow

Engineering business

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section

8-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

Source: Company supplied materials

The company is tackling this situation by reinforcing its engineering business. As mentioned earlier,management aims to broaden business opportunities by combining systems beyond its threebusiness framework to offer total solutions to its customers. The company renewed and integrated
its organization in April 2015 to underpin that approach. It established industrial solutions andengineering departments and created an automotive products sales department and biomedical
applications promotion office to cater to specific customer needs. The industrial solutions department
gathers intelligence from product suppliers and other external sources and coordinates projects
overall. The engineering department spearheads design, proposals, and installations. In Q2 FY3/16,
the company dissolved subsidiary SUN-WA TESCOM CORPORATION, which handled engineering
operations, sending its engineers to the engineering department of headquarters.
Examples of efforts to reinforce and change sales structure in line withstrengthening of engineering business

Source: FY3/15 earnings presentation materials

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

■■Sun-Wa Technos yesterday, today, and tomorrow

Focusing negotiations and management on markets and fields
offering high growth potential(3) Sun-Wa Technos tomorrow

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
SectionEfforts in engineering operations have been fruitful in the U.S. and China. In Asia, it is worth notingthat just under ¥600mn of a projected ¥2,600mn in net sales for Sun-Wa Technos (Thailand) in
FY3/16 were for the engineering department, which is driving that subsidiary’s overall revenue
growth. Similar developments are starting to occur at PT. Sunwa Technos Indonesia, which began
operations in October 2014, and at the Hanoi Representative Office, which is slated to become asubsidiary.
Sales at Sun-Wa Technos Asia (Thailand)

8-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

Source: 1H FY3/16 earnings presentation materials

The engineering business employs a sales technique of proposing system solutions rather than
individual products. Sales are consequently allocated among the three business divisions. It istherefore hard to identify the impact of efforts to reinforce the engineering business. Management istherefore apparently looking to reclassify sales breakdowns. Once that happens, contributions fromreinforced engineering operations will become clear, and we anticipate a virtuous cycle from futurebusiness opportunity expansions stemming from invigorated sales department activities.
As well as in the engineering business, the company is going beyond various operational boundaries
to expand market-oriented business opportunities. A good example is negotiations management
focused on markets and fields offering high growth potential. The company manages negotiations
in what it has classified into four fields, and the monetary value of areas subject to negotiations is
growing year by year. Although management has not disclosed what percentage of those amounts
translate into actual sales, the company cannot get orders without starting negotiations. We
believe that the trend in expanding the scale of negotiations implies effectiveness in terms of future
performance trends and the sale structure leading up to them and changes in awareness (here,
including in terms of reinforcing engineering operations).
Value of Transactions Negotiated in Four Growth Markets(unit: ¥bn)
Planned for FY3/16 and following years
As of Nov.
As of May
As of Nov.
MarketAmountAmount
2014
2015
2015
New energy
4.5
7.8
4.0
5.7
7.5
Energy saving
1.7
3.0
3.0
7.8
12.2
Medical treatment and home care
0.3
1.1
2.0
2.0
2.3
Social infrastructure
0.1
0.8
0.5
1.1
2.0
Total
6.6
12.7
9.5
16.6
24.0
Source: Compiled by FISCO Ltd. based on earnings presentation materials
FY3/14

FY3/15

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

伪伪Progress under current medium-term management plan
Maintaining sales growth pace and continuing to post new highs

SUN-WA TECHNOSCORPORATION

FY3/16 is the final year of JUMP 1200, a three-year medium-term management plan. That initiativeis the source of measures that include previously mentioned efforts to transform the sales structure
and reinforce its growth market approach.
Outline and progress of JUMP 1200

8137 Tokyo Stock Exchange First
Section

8-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

FY3/16 is the final, and milestone, year of the current medium-term management plan. We will detail
why later, but the company has lowered its full-year forecasts in view of results for 1H. The company
has maintained its revenue growth pace and again posted record highs, but growth rates haveslowed significantly. Management has reduced its operating income projection from the ¥4,400mn
initially targeted under its medium-term management plan, to ¥2,800mn, while lowering the ordinary
income forecast from ¥4,700mn, to ¥3,000mn.
Medium-term management plan targets(unit: ¥mn)
FY3/2016
Initial
RevisedTargets Results Targets Forecasts Results Targets
forecasts forecasts
Net sales
98,000 101,378 110,000 110,000 111,276 120,000 119,000 112,000
Operating income
3,100
3,211
3,700
3,600
3,471
4,400
3,500
2,800
Ordinary income
3,400
3,438
4,000
3,800
3,761
4,700
3,800
3,000
Net income
2,000
2,168
2,500
2,350
2,466
2,850
2,500
2,000
Source: Compiled by FISCO Ltd. based on earnings presentation materials and earnings reports
FY3/2014

FY3/2015

Such downward revisions reflect changes in the external operating climate and other factors
to a considerable extent, but they also make us wonder why there were not more elements thatmanagement could leverage to offset these factors through internal efforts. In that regard, we thinkthat the company will comprehensively assess challenges after the end of FY3/16 and reflect themin the next medium-term management plan.

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

■■Sun-Wa Technos yesterday, today, and tomorrow

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section

8-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

Although the company lowered its forecasts for the final year of its plan, one positive achievement
under the current plan, in our view, is that management has managed costs honestly and skillfully.
We say “honestly” because management has, as usual, ensured that its measures for hiring talent for
the future and increasing wages have proceeded according to plans notwithstanding sluggish sales
growth. Also, management has accounted properly for debt stock and other line items so they do
not become problematic down the track. We say “skillfully” because management has capably kept
costs at close to planned levels despite operating income declining. Such solid management policies
and administrative department capabilities may not seem spectacular but form part of the bedrockfor the company’s growth, so management’s unwavering efforts are very encouraging for the future.

伪伪Our Thoughts on a New Medium-term Management Plan
Integrating three businesses is a top-priority change for management
The company plans to launch its new three-year management plan from FY3/17. Work on the plan isunderway, but details will not be available until the official announcement, scheduled for May 2016.
That said, the direction of the new plan seems quite clear. For a start, the plan will probably
retain much of the direction and thrust of JUMP 1200. At the same time, the plan will probably
accommodate changes in the operating climate. Our experience in interacting with the company
through visits, attendances at results briefings, and in other respects suggest that the new mediumterm management plan will be about breaking away from its three-business structure and integrating
those businesses. We have already seen moves in that direction under the current plan’s goal ofreinforcing engineering operations.
One key point in terms of numerical targets will be whether the company can again post record
results. Another vital factor will be the timing of all this. It will also be important to see whether thecompany’s focus on measures in such respects as reinforcing engineering operations and overseas
companies or in undertaking growth market businesses will bear fruit. That is because these points
will be central to the three-year management plan after the upcoming one. Just as JUMP 1200
targets consolidated sales of ¥120bn, we think that the next plan will also focus on revenue scale.
Another focus will be whether the next plan also includes profitability benchmarks.

伪伪Business Trends
Posting record 1H sales on gains in factory automation andother industrial equipment offerings and overseas operations(1) 1H FY3/16 Consolidated Results
In 1H FY3/16, consolidated net sales increased 7.2% yoy to ¥54,457mn, operating income
decreased 8.7% yoy to ¥1,417mn, ordinary income decreased 9.7% yoy to ¥1,545mn, and net
income decreased 6.8% yoy to ¥1,033mn. Sales rose for mainstay factory automation and otherindustrial equipment offerings and among overseas subsidiaries, enabling the company to post
1H high. Earnings declined because the gross margin shrank, while SG&A expenses rose, largely
because of higher personnel costs.

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

■■Business Trends

1H FY3/16 Results
FY3/15
IH results

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section

8-Jan.-16

2H results

Full-year
results
111,276
13,98812.6%
10,516

IH initial
forecasts
58,000-(unit: ¥mn)

FY3/16
IH results

YoY

Net sales
50,78460,49254,457+7.2%
Gross profit
6,500
7,488
6,748
+3.8%
Gross profit margin
12.8%
12.4%
12.4%
SG&A expenses
4,948
5,568
5,331
+7.7%
Ratio of SG&A
9.7%
9.2%
9.5%
9.8%
expenses to sales
Operating income
1,552
1,919
3,471
1,600
1,417
-8.7%
Operating income
3.1%
3.2%
3.1%
2.8%
2.6%
marginOrdinary income
1,710
2,051
3,761
1,750
1,545
-9.7%
Net income
1,108
1,358
2,466
1,150
1,033
-6.8%
EPS (¥)
77.23
94.60
171.83
80.10
71.97
‐
Source: Compiled by FISCO Ltd. based on earnings presentation materials and earnings reports

vs plan-6.1%-11.4%-11.7%-10.2%-10.1%Breakdown of 1H FY3/16 Sales by Industry

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

㻞㻣㻚㻤㻑

㻟㻠㻚㻜㻑

㻲㼍㼏㼠㼛㼞㼥㻌㼍㼡㼠㼛㼙㼍㼠㼕㼛㼚㻌㼍㼚㼐㻌㼛㼠㼔㼑㼞㻌㼕㼚㼐㼡㼟㼠㼞㼕㼍㼘㼑㼝㼡㼕㼜㼙㼑㼚㼠㻿㼑㼙㼕㼏㼛㼚㼐㼡㼏㼠㼛㼞㼟㻌㼍㼚㼐㻌㼘㼕㼝㼡㼕㼐㻌㼏㼞㼥㼟㼠㼍㼘㼐㼕㼟㼜㼘㼍㼥㼟
㻭㼙㼡㼟㼑㼙㼑㼚㼠㻭㼡㼠㼛㼙㼛㼎㼕㼘㼑㼟㻵㼚㼒㼛㼞㼙㼍㼠㼕㼛㼚㻌㼍㼚㼐㻌㼠㼑㼘㼑㼏㼛㼙㼙㼡㼚㼕㼏㼍㼠㼕㼛㼚㼟㻾㼛㼎㼛㼠㼟㻌㼍㼚㼐㻌㼙㼛㼡㼚㼠㼑㼞㼟㻿㼛㼏㼕㼍㼘㻌㼕㼚㼒㼞㼍㼟㼠㼞㼡㼏㼠㼡㼞㼑
㻜㻚㻞㻑
㻝㻚㻢㻑
㻝㻚㻣㻑
㻞㻚㻞㻑
㻞㻚㻟㻑
㻞㻚㻟㻑

㻤㻚㻤㻑

㻹㼍㼏㼔㼕㼚㼑㻌㼠㼛㼛㼘㼟㻱㼚㼢㼕㼞㼛㼚㼙㼑㼚㼠㻌㼍㼚㼐㻌㼑㼚㼑㼞㼓㼥㻹㼑㼐㼕㼏㼍㼘㻌㼑㼝㼡㼕㼜㼙㼑㼚㼠

㻤㻚㻜㻑
㻟㻚㻢㻑

㻣㻚㻡㻑

㻿㼑㼏㼡㼞㼕㼠㼥
㻻㼠㼔㼑㼞㼟

 presentation materials
Source: Compiled by FISCO Ltd. based on earnings
Both revenues and earnings were lower than targeted. This was principally because sales of mainstay
factory automation and other industrial equipment were less than projected. This meant that theforecasts were ultimately too high, and the prime direct cause was that demand for smartphone
related factory automation and other industrial equipment did not expand as much as hoped.
Although there were some changes in popular model lines, the external dimensions remained thesame, which meant that these changes did not drive demand for upgrading factory automation andother industrial equipment production lines.
In the electrical machinery business, sales decreased 2.2% yoy to ¥10,108mn. This reflected lower
sales of control equipment for solar power systems, which offset higher sales of servo motors forsemiconductor manufacturing equipment. Sales of the electronics business increased 11.0% yoy
to ¥40,469mn. The main factors here are that sales of electronic parts rose steadily for industrial
equipment and automotive equipment and for industrial robots. Sales of the general machinery
business were down 3.1% yoy to ¥3,880mn. This was because a downturn in sales of equipmentfor LCD production lines outweighed an increase in sales of production facilities for the automotive
sector.

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

■■Business Trends

Breakdown of 1H FY3/16 Sales by Business Segment




㻣㻚㻝㻑
㻝㻤㻚㻢㻑

SUN-WA TECHNOSCORPORATION

㻱㼘㼑㼏㼠㼞㼕㼏㼍㼘㻌㻹㼍㼏㼔㼕㼚㼑㼞㼥㻱㼘㼑㼏㼠㼞㼛㼚㼕㼏㼟

8137 Tokyo Stock Exchange First
Section㻳㼑㼚㼑㼞㼍㼘㻌㻹㼍㼏㼔㼕㼚㼑㼞㼥

8-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

㻣㻠㻚㻟㻑

Source: Compiled by FISCO Ltd. based on earnings presentation materials

In Japan, sales rose just 1.2% yoy, although there were gains in sales of servo motors for semiconductor
manufacturing equipment and in sales of electronic parts for industrial and automotive equipment.
Segment operating income was down 5.0% yoy owing to higher personnel and operational expenses.
In the Asia segment, sales jumped 26.5%, reflecting higher sales offer electronic parts for industrial
equipment, industrial robots, and amusement equipment. Operating income for this segment fell
9.7% yoy, however, reflecting increased wages at operations in Shanghai and increased spendingin Thailand to boost personnel. In the U.S. and Europe, sales were up 17.0% yoy, on the strength ofhigher sales of production facilities for the automotive sector and increased sales of electronic partsfor servo motors, but operating income dropped 79.1% yoy, largely because of increased labor costs.
Breakdown of Net Sales and Operating Income by Geographical Market

Japan

FY3/15
1H
2H
Net sales
39,622
42,127
Operating income
975
1,153
Operating income margin
2.5%
2.7%
Net sales
12,91620,098Operating income
553
707
Operating income margin
4.3%
3.5%
Net sales
1,475
1,956
Operating income
36
51
Operating income margin
2.4%
2.6%
Net sales
1,161
1,398
Operating income-20
9Operating income margin
-1.7%
0.6%
Sales adjustment-4,390-5,087
Operating income adjustment
8-3
Net sales
50,78460,492
Operating income
1,552
1,919
Operating income margin
3.1%
3.2%
Source: Compiled by FISCO Ltd. based on earnings reports
Asia

The U.S.
andOthersEuropeTotal

Full year
81,7492,128
2.6%
33,014
1,260
3.8%
3,431
87
2.5%
2,559
-11
-0.4%
-9,477
5
111,2763,471
3.1%

FY3/16

1H
40,093925
2.3%
16,336
500
3.1%
1,726
7
0.4%
1,102
-5
-0.5%
-4,800-10
54,457
1,417
2.6%(unit: ¥mn)
YoY
1.2%
-5.0%
26.5%
-9.7%
17.0%
-79.1%
-5.1%
7.2%
-8.7%
-

The overall cost picture for Q2 FY3/16 was that from the outset of the term management prioritizedforward investments for the year overall to drive growth in the years ahead. Spending in Q2 was asplanned, most of it being for personnel expenses. Human resources is the greatest operating asset
for a trading house that does not have manufacturing facilities. So, the company set about bolstering
its overseas business units while boosting training of engineering-related personnel. Management
also endeavored to enhance motivation for existing employees in Japan and abroad by raising
wages. The company plans to keep expanding its overseas operations from next fiscal year. Wages
should continue to trend upward. Given the company’s stance of steadily implementing management
plans from medium and long-term perspectives without being affected by short-term results, suchspending should prove effective in the next phase of demand expansion.

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

■■Business Trends

Ample potential for factory automation equipment demand topick up again(2) Company forecasts for FY3/16

SUN-WA TECHNOSCORPORATIONThe company revised downward its forecasts for FY3/16 results. The new forecasts are a 0.7%
y-o-y increase in consolidated net sales to ¥112,000mn, a 19.4% decrease in operating income to¥2,800mn, a 20.2% decrease in ordinary income to ¥3,000mn, and an 18.9% decrease in ordinary
income to ¥2,000mn. The scale of revisions is greater for 2H than 1H.

8137 Tokyo Stock Exchange First
Section

FY3/16 Forecasts
FY3/158-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

1H
results

2H
results

Full-year
results Results

1H

FY3/16

2H
Initial Revised
forecasts forecasts
7.2% 61,000 57,543
3.8%
-

YoY

Full year
Initial Revised
forecasts forecasts-4.9% 119,000 112,000-

YoY(unit: ¥mn)
FY3/16
1H
InitialYoY
forecasts
0.7%
58,000-Net sales
50,784 60,492 111,276 54,457
Gross profit
6,500
7,488 13,988
6,748
Gross profit
12.8% 12.4% 12.6% 12.4%
marginSG&A
4,948
5,568 10,516
5,331
7.7%
expenses
Ratio of
SG&A
9.7%
9.2%
9.5%
9.8%
expenses
to salesOperating
1,552
1,919
3,471
1,417
-8.7%
1,900
1,383 -27.9%
3,500
2,800 -19.4%
incomeOperatingincome
3.1%
3.2%
3.1%
2.6%
3.1%
2.4%
2.9%
2.5%
marginOrdinary
1,710
2,051
3,761
1,545
-9.7%
2,050
1,455 -29.1%
3,800
3,000 -20.2%
incomeNet income
1,108
1,358
2,466
1,033
-6.8%
1,350
967 -28.8%
2,500
2,000 -18.9%
EPS (¥)
77.23
94.60 171.83
71.97
94.03
67.34 -28.8% 174.13 139.31 -18.9%
Source: Compiled by FISCO Ltd. based on earnings presentation materials and earnings reports

1,600

1,750
1,150
80.10

Management lowered its full-year forecasts because a failure to reach earnings goals in 1H has
exacerbated the situation in 2H. For example, demand has slowed in Japan and China in the factory
automation arena, the company’s prime demand source. The factory automation industry naturally
accounts for high proportions of sales in the machinery and electrical machinery businesses, aswell as in electronic parts (conversely, for a low proportion of sales for smart phones and other final
products). That industry thus exerts a great impact on the company's earnings.
Still, this situation could change in the near future. One reason is that the lifecycles of final products
are generally becoming shorter. In Q4 (January through March 2016), there is ample potential for arevival of demand for factory automation equipment in anticipation of new products, and neither thecompany nor its customers are discounting the possibility. As mentioned before, while the scope ofrevisions is greater for 2H, the new forecasts assume that sluggish levels of Q3 will continue into Q4.
In that respect, we believe that there is some upside potential for the full-year forecasts.
The company will continue spending on hiring in 2H, as it did in 1H. It also plans to integrate
dispersed sales teams through the relocation of headquarters. So, we consider it highly likely that
SG&A expenses will be even higher than in Q2. While management has lowered its forecasts forthe current year, it has not postponed expenses to balance them against earnings. Management’s
stance is to spend as needed in keeping with its initial plans. A major development in 2H will be theplanned relocation of headquarters in late December this year, through which the company aims tointegrate and absorb sales department units currently located in separate offices in Ota Ward andthereby enhance efficiency.
Yaskawa Electric and Omron both account for a large proportion of Sun-Wa Technos’ supplier andcustomer bases. Omron posted higher sales but lower earnings in 1H, and has reduced its forecast
for the full year. Yaskawa Electric generated record results in 1H, but has cut its sales projections
for the full term.

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

■■Business Trends

FY3/16 Forecasts for Yaskawa Electric and Omron

SUN-WA TECHNOSCORPORATION

Yaskawa Electric (6506)
FY3/15
FY3/16E
Initial
RevisedResults
forecasts
forecasts
Net sales
400,153435,000
420,000
Operating income
31,53236,50036,500Ordinary income
33,88437,00037,000Net income
24,81924,00024,000Source: Compiled by FISCO Ltd. based on earnings reports

8137 Tokyo Stock Exchange First
Section

8-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

FY3/15Results
847,252
86,951
87,38862,170(unit: ¥mn)
Omron (6645)
FY3/16E
Initial
Revisedforecasts
forecasts
900,000
860,000
90,00070,00089,00071,00066,50053,500

Summary Income Statement

Net sales
YOY
Gross profit
Gross profit margin
SG&A expenses
YOY
Ratio of SG&A expenses to sales
Operating income
YOY
Operating income margin
Ordinary income
YOY
Net income
YOY

FY3/11
85,28354.0%
10,867
12.7%
8,085
13.8%
9.5%
2,781
3.3%
2,875
1,694
-

FY3/12
89,706
5.2%
11,784
13.1%
8,495
5.1%
9.5%
3,289
18.2%
3.7%
3,403
18.3%
1,975
16.5%

FY3/1388,264-1.6%
10,968
12.4%
8,699
2.4%
9.9%
2,269
-31.0%
2.6%
2,519-26.0%
1,520-23.0%

FY3/14
101,378
14.9%
12,680
12.5%
9,469
8.9%
9.3%
3,211
41.5%
3.2%
3,438
36.5%
2,168
42.6%

FY3/15111,276
9.8%
13,98812.6%
10,516
11.1%
9.5%
3,471
8.1%
3.1%
3,761
9.4%
2,466
13.8%

(unit: ¥mn)
FY3/16E
112,000
0.7%
2,800-19.4%
2.5%
3,000-20.2%
2,000-18.9%

FY3/1339,758
7,433
27,866
4,459
7,497
4,074
42
3,381
47,25628,64824,784
2,250
1,614
4,258
2,486
1,772
13,6601,935
1,341
10,437-53646
41
14,34947,256

FY3/1445,3296,937
33,075
5,317
8,369
4,038
76
4,254
53,69830,73525,917
2,528
2,290
4,309
2,205
2,104
16,8072,553
1,958
12,350-53
1,847
18,65453,698(unit: ¥mn)
FY3/1549,2397,584
34,419
7,236
9,509
3,879
243
5,386
58,74832,37027,496
2,782
2,092
4,426
2,100
2,326
18,9292,553
1,958
14,472-54
3,022
21,951
58,748

Summary Balance Sheet

Current assets
Cash and deposits
Accounts receivable
Other
Non-current assets
Property, plant and equipment
Intangible assets
Investments and other assets
Total assets
Current liabilities
Notes and accounts payable - trade
Short-term loans payable, etc.
Other
Non-current liabilities
Long-term loans payable
Other
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Valuation gains or losses
Minority interest
Total net assets
Total liabilities and net assets

FY3/1029,936
4,730
21,504
3,702
6,930
3,919
78
2,932
36,86624,782
19,630
4,419
733
2,427
1,200
1,227
9,239
1,935
1,341
6,015
-52
380
36
9,655
36,866

FY3/1134,333
3,610
25,987
4,736
6,920
3,854
61
3,004
41,254
27,18921,960
3,100
2,129
3,072
1,800
1,272
10,677
1,935
1,341
7,454
-52
276
38
10,992
41,254

FY3/1235,741
4,171
27,094
4,476
6,798
3,808
44
2,945
42,53926,914
22,132
2,926
1,856
3,053
1,800
1,253
12,396
1,935
1,341
9,173
-53
137
37
12,571
42,539Cash Flow Statement

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Effect of exchange rate change on
cash and cash equivalents
Net change in cash andcash equivalents
Balance of cash andcash equivalents at term start
Balance of cash andcash equivalents at term end

FY3/10954-65675

FY3/1145-94-985

FY3/12
1,297
-215
-472

FY3/13
3,652
-110
-415

FY3/14-1,374-127769(unit: ¥mn)
FY3/15
1,353
-444
-470

21

-75

-50

135

236

209

1,587

-1,109

560

3,262

-496

647

2,649

4,236

3,126

3,687

6,949

6,453

4,236

3,126

3,687

6,949

6,453

7,100

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

伪伪Shareholder Return Policy
A record of boosting dividends according to earnings growth

SUN-WA TECHNOSCORPORATION
8137 Tokyo Stock Exchange First
Section

8-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

The company’s basic policy is to provide returns to shareholders in the form of dividends. Management
prioritizes providing stable, continuous dividends, as demonstrated in its track record to date. Whileremaining very aware of the need for stable dividends, the company has also increased them in
keeping with earnings growth.
For FY3/16, the company announced at the start of the term that it would increase dividends by ¥2
yoy to ¥28 per share. Although management lowered its full-time forecasts when announcing 1H
results, it retained its dividend projection. The dividend payout ratio based on revised earnings per
share is 20.1%. The company pays around ¥400mn annually in dividends, which is only around 2.6%of its ¥15,304mn in retained earnings as of the end of September 2015. The company continues tostockpile earnings every year, and we look for management to continue a balanced approach toproviding stable dividends and shareholder returns that are commensurate with earnings growth.

㻱㻼㻿㻘㻌㻰㼕㼢㼕㼐㼑㼚㼐㼟㻌㼍㼚㼐㻌㻰㼕㼢㼕㼐㼑㼚㼐㼟㻌㻼㼍㼥㼛㼡㼠㻌㻾㼍㼠㼕㼛(¥)
㻞㻜㻜㻱㻼㻿㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕㻰㼕㼢㼕㼐㼑㼚㼐㼟㻌㻼㼍㼥㼛㼡㼠㻌㻾㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻌㼟㼏㼍㼘㼑㻕㻰㼕㼢㼕㼐㼑㼚㼐㼟㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕

（㻑）
㻞㻡㻚㻜

㻞㻜㻚㻝㻌
㻝㻢㻜

㻞㻜㻚㻜

㻝㻢㻚㻤㻌
㻝㻡㻚㻝㻌

㻤㻜
㻝㻟㻞㻚㻟㻟
㻠㻜

㻝㻡㻚㻝㻌
㻝㻟㻚㻡㻌

㻝㻟㻚㻜㻌

㻝㻞㻜

㻝㻢㻞㻚㻥㻤

㻝㻡㻠㻚㻞㻞

㻝㻡㻚㻜㻝㻣㻝㻚㻤㻟
㻝㻟㻥㻚㻟㻝

㻝㻝㻤㻚㻣㻝

㻞㻜㻚㻜

㻞㻜㻚㻜

㻞㻜㻚㻜

㻞㻞㻚㻜

㻞㻢㻚㻜

㻞㻤㻚㻜

㻲㼅㻟㻛㻝㻝

㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢㻱

㻜

㻝㻜㻚㻜
㻡㻚㻜

㻜㻚㻜

Source: Compiled by FISCO Ltd. based on earnings reports

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

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
price and index information. The trademark and value of the “JASDAQ INDEX” are theintellectual properties of the Tokyo Stock Exchange, and therefore all rights to them belong
to the Tokyo Stock Exchange.
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.
All intellectual property rights to this report, including copyrights to its text and data, areheld exclusively by FISCO. Any alteration or processing of the report or duplicationsof the report, without the express written consent of FISCO, is strictly prohibited. Anytransmission, reproduction, distribution or transfer of the report or its duplications is also
strictly prohibited.
The final selection of investments and determination of appropriate prices for investment
transactions are decisions for the recipients of this report.
FISCO Ltd.