COMPANY RESEARCH AND ANALYSIS REPORT

SUN-WA TECHNOS CORPORATION
8137
Tokyo Stock Exchange First Section

13-Jul.-2018
FISCO Ltd. Analyst

Hiroyuki Asakawa

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

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Increased income further in 2H and posted sharply higher sales and profits in FY3/18. ..............................

01

2. Expects healthy business conditions to continue, targeting higher sales and profits in FY3/19 too.............

01

3. Making healthy progress in the current medium-term management plan Challenge 1500;
focus on the outcome in FY3/19............ ......................................................................................................

01■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 02
1. Background........................................... ......................................................................................................

02

2. Business overview................................. ......................................................................................................

04■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 05
1. Review of FY3/18 results.............................................................................................................................

05

2. Divisional and regional trends................ ......................................................................................................

07■Overview and progress of the medium-term management plan---------------------------------- 09
1. Overview of the medium-term management plan. .......................................................................................

09

2. Medium-term management plan targets and progress. ...............................................................................

10

3. Progress of the engineering business.... ......................................................................................................

11

4. Progress on the global SCM solutions business. .........................................................................................

14■Business outlook-------------------------------------------------------------------------------------------------------------------------------------------------------- 15
1. Outlooks for demand industries...................................................................................................................

16

2. Business segments outlooks................. ......................................................................................................

17■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 20■Information security------------------------------------------------------------------------------------------------------------------------------------------------ 21

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

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html██SummaryLikely to deliver higher sales and profits again
in FY3/19 on continuation of robust demand
Has established operations to support longer-term sustainable growthby strengthening the financial base
Sun-Wa Technos Corporation <8137> (hereinafter, “the Company”) is an independent trading company that specializes in technology products. The Company has steadily expanded its businesses by leveraging coverage of threemajor areas (electrical machinery, electronics, and general machinery) and two-way trade in which it sells equipment
and materials for manufacturers’ production lines and then procures the products made by these manufacturers.
In recent years, it has been focusing on engineering business and global SCM solutions.
1. Increased income further in 2H and posted sharply higher sales and profits in FY3/18
The Company reported sharply higher sales and profits in FY3/18 at ¥146,759mn in net sales (+25.9% year on
year (YoY)) and ¥4,135mn in operating income (+37.2%). While the Company raised forecasts three times during
the period, it still overshot the final view. Robust conditions in the various demand industries, which fueled upbeat
results in 1H, continued in 2H, and income expanded further during 2H. Key positive trends were capital investments
by local smartphone manufacturers in China, reinforcement of semiconductor production capacity in Japan andoverseas, and capital investments by the automotive industry in preparation for EV and ADAS (advanced driving
assistance system).
2. Expects healthy business conditions to continue, targeting higher sales and profits in FY3/19 too
The Company forecasts for higher sales and profits in FY3/19 at ¥157,500mn in net sales (+7.3% YoY) and ¥4,450mn
in operating income (+7.6%). Despite the prospect of sluggish growth in sales volume in the smartphone industry,
manufacturers are continuing to invest in automation that targets cost savings at production sites and this activity
benefits the Company. Strong demand for automation investments exists in automotive-related industries and otherareas too. Continuation of investments to increase output capacity in the semiconductor industry, without impact
from final-product memory price trends, provides a tailwind to the Company as well. In flat panel displays (FPDs),
we expect steady increase in OLED production lines. Vibrant activity is continuing in the Company’s major demandindustries. We think these trends are likely to last for a while.
3. Making healthy progress in the current medium-term management plan Challenge 1500;
focus on the outcome in FY3/19
The Company is implementing Challenge 1500, its ninth three-year medium-term management plan, with FY3/19
as the final year. It transitions to the next medium-term plan in FY3/20 and has started the process of formulating
the new plan. While we expect the current upbeat business environment to continue over the medium term in thenext plan’s period, the outcome in FY3/19, which sets the starting line for the new plan, is extremely important topresenting a vibrant growth scenario that capitalizes on these conditions. In past medium-term plans, the Company
missed goals in the final fiscal year due to overlap with bottoms in the demand cycle. Challenge 1500 targets ¥4.5bn
in ordinary income. We see a reasonable possibility of attaining this goal as things currently stand and will be closely
monitoring progress.

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

01 21

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

SUN-WA TECHNOS CORPORATION

13-Jul.-2018

8137 Tokyo Stock Exchange First Section

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

Summary

Key Points
Rapid growth in sales of automotive parts and materials in the electronics division
Aiming for steady attainment of Challenge 1500 goals in engineering and global SCM solutions businesses• Plans to continue initiatives in engineering business aimed at creation of added value and expansion of profitability
•
•



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Source: Prepared by FISCO from the Company’s financial results██Company profile
Unique independent trading company handing three different typesof products - electrical machinery, electronics,
and general machinery
1. Background
The Company traces its roots to a self-run business created by the late Tokuro Yamada in July 1946 that leveraged
his experience selling electrical machinery in China since before the war. It was incorporated in November 1949 as
YAMADA KOGYO CORPORATION and concluded a distributor contract with YASKAWA Electric Manufacturing Co.,
Ltd. (currently, YASKAWA Electric Corporation <6506>), marking the full-fledged start of the Company’s history.
While the Company is a major sales distributor of YASKAWA Electric, it went beyond this relationship to conclude
sales distributor contracts with other leading electric equipment and machinery manufacturers as an independent
trader of technology products, expanding products that it handled and the customer base, and broadening businessscope. The Company established a position as a unique trading company that specializes in technology products,
handling three different types of products (electric machinery, electronics, and general machinery) that it continues
to hold today.

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

02 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Company profile

In overseas activities, the Company rapidly broadened its network of local entities from the 1990s in response
to offshore moves by customer firms spurred by yen appreciation, trade friction, and other factors. Following thelaunch of entity in Singapore in 1995, it proceeded to build an overseas subsidiary network in major Asian countries,
Europe, and North America. It recently established local entities in Indonesia, Vietnam, Mexico and the Philippines
as countries with strong growth potential.
The Company listed its shares on the OTC market in May 1982, moved to the Second Section of the Tokyo Stock
Exchange in April 2003, and advanced to the First Section in March 2005.
History
November 1949
December 1952
November 1960
October 1966
March 1969
July 1970
November 1970
September 1971
June 1974
November 1977
May 1978July 1978
November 1979
May 1981
May 1982
June 1990
April 1993
May 1995
December 1997
April 1998

Domestic business development
Established YAMADA KOGYO CORPORATION
Sales agent contract with Osaka Transformer Co., Ltd.
(now DAIHEN Corporation)
Sales agent contract with NIPPON GEAR Co., Ltd.
Agent contract with Origin Electric Co., Ltd.
Distributor contract with Toyo Carrier Engineering Co., Ltd(now Toshiba Carrier Corporation)
Exclusive contract with Tateisi Electric Manufacturing Co.
(now, OMRON Corporation)
Established Yamada Kucho Co., Ltd.
(now SUN-WA-TRINITY CORPORATION)
Sales agent contract with NIKKISO CO., LTD.’s equipment
sales division
Started sales of YE DATA INC. products
Established Yamada Kogyo Kenkyusho
Agent contract with Sumitomo 3M Limited
Special agent contract with STANLEY ELECTRIC CO., LTD.
Special agent contract with Nemic-Lambda Co., Ltd.
(now TDK-Lambda Corporation)
Sales agent contract with SANKI ENGINEERING CO., LTD.
Listed shares on the OTC market
Established Yamada Butsuryu Co., Ltd.
(now SUN-WAN LOGISTICS CO., LTD.)
Changed to the current company name

Established SUN-WA TECHNOS (SINGAPORE) PTE. LTD.
Established SUN-WA TECHNOS (HONG KONG) CO., LTD.
Established Sun-Wa Technic Europe Co., Ltd. (now SUN-WA
TECHNOS EUROPE GmbH; Dusseldorf)
Established SUN-WA TECHNOS AMERICA, INC. (Chicago)
Established SUN-WA TECHNOS TAIWAN CO., LTD. (joint venture)
Established SUN-WA TECHNOS (MALAYSIA) SDN. BHD.
Dissolved SUN-WA TECHNOS TAIWAN CO., LTD. (joint venture) andestablished SUN-WA TECHNOS TAIWAN CO., LTD. (subsidiary)
Established SHANGHAI SUN-WA TECHNOS CO., LTD.
Opened the Shenzhen Representative Office

July 1998
November 1998
April 2000
January 2001
December 2001
September 2002
April 2003
March 2005
October 2006
January 2009
August 2013

Listed on the TSE Second Section
Listed on the TSE First Section
Established SUN-WA TECHNOS ASIA (THAILAND) CO., LTD.
Established SUN-WA TECHNOS (SHENZHEN) CO., LTD.
Opened the Hanoi Representative Office of SUN-WA TECHNOS(HONG KONG) in Vietnam
Opened the Hong Kong Logistics Center
Opened Taichung Representative Office of SUN-WA TECHNOSTAIWAN
Established PT. SUN-WA TECHNOS INDONESIA
Established SUN-WA TECHNOS MEXICO S.A. DE C.V. and SUNWA TECHNOS (PHILIPPINES), INC.

October 2013
March 2014
October 2014
September 2015
December 2015
January 2016

Overseas business development

Moved the head office to 3-chome Kyobashi, Chuo Ward
Merged the electronics division into the headquarters

May 2016
April 2017

Opened the Los Angeles Branch of SUN-WA TECHNOS(AMERICA), INC.
Established SUN-WA TECHNOS (VIETNAM) CO.,LTD.

Opened the Nagoya Office (upgraded from a branch) andYokohama Branch (upgraded from a sales site)
Source: Prepared by FISCO from Company materials

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

03 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Company profile

Production-line capital investments are a growth driver
Broadly and deeply covers three major areas, aims to acquire
capital investment demand in a broad range of industries
2. Business overview
The Company is an independent trading company that specializes in technology products and stands out in its
coverage of three product fields - electric machinery, electronics, and general machinery. Product information andunderstanding tends to be broad and superficial when a single company handles three separate fields because of thedifferences in users, demand drivers and timing. However, the Company derives its strength from pursuit of “broadand deep” interactions. This approach stems from having numerous employees with engineering backgrounds as atechnology-oriented trading firm. Another factor is that the Company has accumulated knowledge and experiencein each of the three fields through processes carried out over a lengthy period, as it began in general machinery andelectrical machinery fields as a sales agent for YASKAWA Electric and DAIHEN <6622> and then added electronic
components as “two-way transactions.”
The electrical machinery division handles AC servo motors, programmable controllers, linear motors and othermotors, inverters, and vacuum chamber robots. The general machinery division covers semiconductor production
equipment, industrial robots, clean room robots for conveying liquid crystal displays (LCDs), and medical equipment.
The electronics division handles connectors, semiconductors, sensors, LEDs, LCDs, and CPU boards.
List of products handled by Sun-Wa Technos by business division
ElectricalmachineryAC servo motors, programmable controllers, linear motors and various other motors, inverters, power conditioners, clean room robots
and vacuum chamber robots for semiconductor manufacturing equipment, power substations and other products, and electricalengineering work

Generalmachinery

Semiconductor manufacturing equipment, industrial robots, clean room robots for conveying liquid crystal displays, conveyors, wind- andhydro-power equipment, air conditioners and kitchen equipment, various inspection devices, medical equipment, and other productsElectronics

Power supplies, connectors, semiconductors, sensors, miniature fans, LEDs, LCDs, personal computers for industrial use, circuit boards
for central processing units, memory modules, and other products

Source: Prepared by FISCO from Company materials

We explain the relationship among the three divisions using LCDs as an example. LCD manufacturing plants are
outfitted with various production systems. The general machinery division delivers a production system (such as a
glass transport robot) to the customer company. The electrical machinery division, meanwhile, sells motors, control
equipment, and other parts to the manufacturer of the glass transport robot. Additionally, the electronics divisionsells LCD panels manufactured by the LCD plant to TV and monitor assembly manufacturers and other customers.
The Company has developed a business model that covers the entire commercial flow from upstream (production
equipment parts and materials) to downstream (end products) for a single product, such as LCD panels, due to its
promotion of businesses that extend across three fields. Another feature of its business is “two-way transactions.”
The Company refers to transactions that involve acquisition of products (such as LCD panels in the above-mentioned example) for trading purposes from customers to which it delivered manufacturing equipment as “two-way
transactions.”

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

04 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Company profile

General machinery and electrical machinery division both rely on capital investments by corporate customers as ademand driver. Electronics division, meanwhile, might sound as if it mainly handles general-use electronic parts (suchas light electric products and LCD panels used in mobile terminals) as products. Nevertheless, theses items are
actually just a very small portion of the Company’s electronics division, and it primarily supplies materials and parts
to the factory automation and industrial machinery industry (products covered by the electrical machinery division)and automotive industry. We hence think capital investments are effectively the main demand driver in this businesstoo. These three businesses are similar as capital investment fields. We believe separation as segments is useful
because timing of demand occurrence differs in the capital investment cycle and production and inventory cycle.
Customers and demand drivers for each business division
Products handledElectricalmachinery

Electrical components forcustomers’ products

Generalmachinery

Production lines of customer
companies

Electronics

Components produced bycustomer companies

Source of demand

Drivers of demand, macroeconomic
indicators

Plants of customer companies

Capital investment by manufacturers,
machinery orders, and other measures ofindustrial expansion

Manufacture of final products

Consumer spending, industrial production
index, etc.

Source: Prepared by FISCO from Company materials██Results trends
Posted sharply higher sales and profits on overall healthy momentum
in demand industries
1. Review of FY3/18 results
The Company reported sharply higher sales and profits in FY3/18 at ¥146,759mn in net sales (+25.9% YoY),¥4,135mn in operating income (+37.2%), ¥4,349mn in ordinary income (+35.3%), and ¥3,085mn in net income
attributable to owners of the parent (+94.8%).
While the Company raised forecasts at each of its quarterly announcement (from 1Q to 3Q), its results ultimately
overshot the final view in sales and the various profit items. We attribute this outcome to vibrant capital investment
activity (capacity reinforcement, labor-saving, automation, and other investments) beyond expectations in a broad
range of demand industries, rather than the Company taking an overly cautious stance in the period-start outlook.

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

05 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Results trends

FY3/18 results(¥mn)
FY3/17

FY3/18
1Q
2Q
Initial forecasts announcement announcement
forecasts
forecasts

Results

Final guidance

Results

Growth rate
(YoY)

Growth rates
versus final
guidance

116,611

126,000

130,000

139,000

144,500

146,759

25.9%

1.6%

Operating income

3,014

3,200

3,350

3,500

3,800

4,135

37.2%

8.8%

Operating income margin

2.6%

2.5%

2.6%

2.5%

2.6%

2.8%

-

-

Ordinary income

3,215

3,450

3,650

3,800

4,200

4,349

35.3%

3.5%

Net income attributableto owners of the parent

1,584

2,150

2,300

2,650

2,900

3,085

94.8%

6.4%

Net sales

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

The Company’s results rapidly recovered from 2H FY3/17, and sales reached an all-time quarterly high at close to¥40bn in 4Q. This trend continued in FY3/18 and both 1H sales and net income recorded all-time highs on a 1H
basis. Robust momentum carried into 2H as well, facilitating the results noted above.
The direct and primary reason is vibrancy in the industrial electronics and mechatronics industry, which is closely
tied to the Company’s core business. This industry has a broad range of demand drivers, including smartphones,
automobiles, semiconductors, and industrial machinery. Within these areas, while demand in the smartphoneindustry has slowed to some extent because of weaker growth in sales volume, upbeat trends have continued in
automotive, semiconductor, and industrial machinery industries. As explained earlier, this wide-ranging expansionof demand steadily contributed to growth in the Company’s results because of its involvement in three different
areas – electrical machinery, electronics, and general machinery.

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

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

06 21

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

SUN-WA TECHNOS CORPORATION

13-Jul.-2018

8137 Tokyo Stock Exchange First Section

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

Results trends

While FY3/18 results seemed nearly perfect, decline in gross margin is an issue. Gross profit margin dropped from
12.2% in FY3/17 to 11.5% in FY3/18, mainly due to growth in sales to the automotive industry. While the Company
increased sales of electronic parts and electronic devices to the automotive industry in FY3/18, profitability tends tobe lower than in transactions with other demand industries. Large transaction scale means that this business adds
to profits as an absolute amount. Its impact on profitability, however, is negative. We expect transactions with theautomotive industry to continue growing at a healthy pace. Nevertheless, it is important to realize how the effectcan be viewed differently depending on the perspective.

Trends in various margins
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㻟㻚㻣㻑

㻠㻚㻜㻑

㻞㻚㻢㻑

㻞㻚㻟㻑

㻞㻚㻢㻑

㻞㻚㻤㻑

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻞㻚㻜㻑㻜㻚㻜㻑㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

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

Sales are rapidly growing for on-board productsin the electronics division
2. Divisional and regional trends
Net sales trend by division(¥mn)
FY3/18
1Q

2Q

1H

3Q

4Q

2H

Full-year

6,056

6,333

12,390

6,858

7,918

14,77627,166

YoY

57.0%

20.5%

35.9%

49.9%

12.4%

27.1%

31.0%

Electronics

23,68026,65850,33928,591

31,50660,097

110,436

YoY

38.2%

36.2%

37.1%

40.5%

9.5%

22.4%

28.7%

1,617

3,001

4,619

1,254

3,283

4,537

9,156

-3.0%

19.2%

10.4%

-33.1%-17.8%-22.7%-8.9%

31,35535,99367,34836,70442,707

79,411

146,759

38.4%

31.6%

34.7%

37.0%

7.3%

19.2%

25.9%

Electrical machinery

General machinery
YoY
Total net sales
YoY

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

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

07 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Results trends

Below we summarize results trends by business segments.
Electrical machinery division reported ¥27,166mn in sales (+31.0% YoY). Key increases were electrical productsales to semiconductor production equipment (SPE) and industrial machinery manufacturers and electrical productsales to OLED production equipment.
Electronics division posted ¥110,436mn in sales (+28.7% YoY). Major gains were electronic devices and parts sales
to the industrial machinery industry and electronic parts sales to the automotive industry.
General machinery division recorded ¥9,156mn in sales (-8.9% YoY). While sales of production equipment grew to
the FPD industry, they slipped to the industrial machinery industry. The latter setback, however, was a backlash toa special large-scale deal from the previous fiscal year, and demand remained healthy on an ordinary basis.
Results trends by geographical market(¥mn)
FY3/18

Japan

1Q

2Q

1H

3Q

4Q

2H

Full-year

Net sales

24,09828,28752,38529,01433,60362,617

115,002

YoY

34.4%

22.3%

27.6%

32.1%

15.1%

22.4%

24.7%

154

781

935

484

914

1,398

2,333

-

-6.7%

24.5%

86.2%

-20.8%

-1.1%

7.8%

Operating income
YoY
Operating income
margin

Asia

0.6%

2.8%

1.8%

1.7%

2.7%

2.2%

2.0%

Net sales

8,110

9,624

17,73410,005

11,752

21,75739,491

YoY

40.5%

58.6%

49.7%

50.5%

3.0%

20.5%

32.1%

338

336

674

424

391

815

1,489

139.7%

101.0%

118.3%

109.9%

27.8%

60.4%

82.4%

4.2%

3.5%

3.8%

4.2%

3.3%

3.7%

3.8%

Operating income
YoY
Operating income
marginUS andEuropeNet sales

2,306

1,452

3,758

2,290

2,817

5,107

8,865

YoY

120.9%

71.2%

98.6%

95.6%

-13.6%

15.3%

40.2%

185

-22

162

18

130

148

310

-

-

868.1%

-

-

-

-

8.0%

-1.5%

4.3%

0.8%

4.6%

2.9%

3.5%

Operating income
YoY
Operating income
marginSource: Prepared by FISCO from the Company’s results briefing materials

We also look at results trends by sales region. Japan delivered higher sales and profits at ¥115,002mn in sales(+24.7% YoY) and ¥2,333mn in operating income (+7.8%). Sales rose in electronic parts for the automotive industry
and electrical machinery and electronic parts and devices for the industrial machinery industry. General machinery
also increased sales to the FPD industry. While sales of production facilities used in industrial machinery industry
weakened, this outcome was backlash from a major deal in the previous fiscal year as mentioned above.
Asia posted sharply higher sales and profits at ¥39,491mn in sales (+32.1% YoY) and ¥1,489mn in operating income(+82.4%). Sales climbed for electronic parts and electrical machinery products used in industrial machinery industry.
Regionally, we think the Company expanded business in China.

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08 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Results trends

Europe and US booked ¥8,865mn in sales (+40.2% YoY) and ¥310mn in operating income (roughly 22-fold gain).
Sales of electrical machinery products used in OLED production facilities increased in business with the FPD industry.
Additionally, sales of electronic parts to industrial machinery and amusement industries strengthened. We believe
one-time demand contributed to some of the income gain.
Divisional and regional trends
Japan
Electricalmachinery

Electronics

Asia
Generalmachinery

Electricalmachinery

Electronics

×

○

○

US and Europe
Generalmachinery

Electricalmachinery

Electronics

Generalmachinery○

Automotive industry
Semiconductor industry○

Industrial machinery industry○

FPD industry

○

○

○

○
○

Smartphone industry○

Amusement industry
Source: Prepared by FISCO from Company’s financial results and interviews██Overview and progress ofthe medium-term management plan

Aiming for steady attainment of Challenge 1500 goals
in engineering and global SCM solutions businesses
1. Overview of the medium-term management plan
The Company formulates three-year medium-term management plans and strives for longer-term growth throughsteady implementation of the plan. Longer-term growth strategies hence are essentially equivalent to the medium-term management plan.
The Company is currently implementing Challenge 1500, its ninth three-year plan that covers FY3/17-19. The plan
aims to deepen and advance results from the previous JUMP 1200 medium-term plan that ended in FY3/16. The“Challenge 1500” name embodies management’s aim to establish a solid foundation for realizing ¥150bn in net
sales in FY3/20, the Company’s 70th anniversary.

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09 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Overview and progress of the medium-term management plan

The Company is pursuing three business strategies aimed at achievement of medium-term plan goals – “systems,
equipment, and parts/components sales business,” “engineering business,” and “global SCM solutions business.”“Systems, equipment, and parts/components sales business” overlaps with the three existing divisions. The engineering business and global SCM solutions business deserve attention as strategies that are vital to realizing uniquegrowth in the medium-term plan. Details are given below. We understand the engineering business as a catalyst to
expand income by organically linking and achieving synergies in the Company’s three existing divisions. The global
SCM solutions business has a role of cutting across the three existing divisions, similar to the engineering business,and offers an opportunity with its potential to develop into a standalone business division in the future.
Four basic policies and three business strategies in Challenge 1500

Source: Prepared by FISCO from Company materials

Healthy progress through the second year of the medium-term
management plan, striving to reach final-year goals in FY3/19
2. Medium-term management plan targets and progress
Next, we compare management (results) goals in Challenge 1500 with results up to now. The Company beat
forecasts in FY3/17, the first fiscal year of the plan, thanks to rapid recovery and expansion in the second half of theperiod. It significantly exceeded targets, even after three upward revisions, in FY3/18, the second year. Sales werealready above the final fiscal-year goal of ¥137,000mn, and ordinary income came close to the final goal as well.
In FY3/19, the final year of the plan period, the Company forecasts for ¥157,500mn in sales and ¥4,500mn inordinary income. The sales target is well above the initial plan goal in light of FY3/18 results and the subsequentbusiness environment. Ordinary income, meanwhile, is unchanged from the medium-term plan goal at ¥4,500mn.
We see two reasons for this stance. One is the impact of a change in the forex rate assumption from ¥117/$ in theplan to the recent ¥110 rate. The other is retention of the existing goal to demonstrate management’s resolve toattain it in light of the having missed final-year goals in previous medium-term plans.

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10 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Overview and progress of the medium-term management plan

Challenge 1500 management targets(¥mn)
FY3/17

FY3/18

FY3/19Managementtargets

Results

Managementtargets

Results

Managementtargets

Results
forecasts

117,000

116,611

126,000

146,759

137,000

157,500

Operating income

2,800

3,014

3,500

4,135

4,300

4,450

Operating income margin

2.4%

2.6%

2.8%

2.8%

3.1%

2.8%

Ordinary income

3,000

3,215

3,700

4,349

4,500

4,500

Ordinary income margin

2.6%

2.8%

2.9%

3.0%

3.3%

2.9%

Forex assumption (JPY/USD)

117

116.5

117

113

117

110

Net sales

Source: Prepared by FISCO from Company materials

While details are reviewed below, we think the Company is likely to achieve its FY3/19 forecasts. The main focus
is actually the extent to which it exceeds ¥4,500mn because FY3/19 results and sentiment during the year lay thegroundwork for the next medium-term management plan. The Company started formulation of the next medium-term
management plan (three-year plan beginning in FY3/20) in FY3/19, and we expect progress during FY3/19 and final
results to heavily influence whether the next plan has a strong impact.

Plans to continue initiatives in engineering business aimed
at creation of added value and expansion of profitability
3. Progress of the engineering business(1) Business overview
The engineering business at the Company is a sales approach for “proposing products from the three divisionsof electrical machinery, electronics, and general machinery as system solutions, rather than standalone items.”
We can use the example of a food supermarket to help explain the positioning of the engineering business.
Up to now, the Company had been selling ingredients, such as meat, fish, and vegetables, to customers. The
engineering business, meanwhile, involves preparing these individual ingredients for delivery to customers. The
extent of processing can vary from selling a prepared item to a meal box. The Company does not book sales as
the engineering business and related income is allocated to the electrical machinery, electronics, and generalmachinery divisions.

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11 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Overview and progress of the medium-term management plan

Engineering business

Source: Company website

Deployment of robots (industrial robots), a strong area, offers a typical case of the engineering business. Robots
began with development and deployment in the automotive industry and subsequently spread to the entire industrial community. Although robot deployment is entering a full-fledged adoption stage outside of the automotive
industry, these new users often are unable to sufficiently harness robots after installations. In the engineeringbusiness, the Company seeks to expand income by helping customers to smoothly deploy robots and realize theirbenefits with internal engineers to formulate system concepts and external system integrators to build systems.
Improvement in profitability is a benefit anticipated from expansion of the engineering business. Using the previous
example, effort spent on processing box meals and prepared foods creates added value and leads to expansionof profitability. It can also elicit maintenance demand and might generate repeat orders. We think this type of
related demand and spillover effect is a major contribution of engineering business.
(2) Update on progress
The Company has been making necessary investments to accelerate the engineering business. Using the example
cited above, it has been expanding capabilities, including external hires of human resources to handle the roleof processing ingredients into prepared items and meals. It restructured in April 2015, establishing the factory
automation sales headquarters (now, the FA system sales department), the industrial solutions headquarters(industrial solutions department), and engineering department and accelerating proposals and sales that cut
through the three product types.
The Company has also sought to further strengthen the organization in FY3/18. It merged the mechatronics
sales and machinery systems sales departments to create the FA system sales department in April 2017. This
reorganization aims to enhance comprehensive capabilities by combining electrical and general machinery.
Furthermore, in October 2017, it reorganized the engineering department into the sections of robot promotion, IoT
promotion, monitoring and control promotion, automated recognition promotion, electrical equipment technology,
and technology services.

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12 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Overview and progress of the medium-term management plan

It is difficult to develop a methodology for quantitatively identifying progress in engineering business because ofvarious definitions and large changes in values depending on the definition. The Company previously expressed
it as “system integration (SI) procurement results,” but switched the definition this time to “transaction value in asale that combines two or more products.” If SI procurement results equated to processing fees for box meals,
the new definition might become the price of a box meal itself. This value dropped YoY to ¥7,217mn in FY3/18,
mainly due to backlash from non-recurrence of the major deal included in the previous fiscal year.

㼀㼞㼑㼚㼐㻌㼕㼚㻌㼑㼚㼓㼕㼚㼑㼑㼞㼕㼚㼓㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼟㼍㼘㼑㼟㻔¥㼎㼚㻕㻭㼎㼛㼡㼠㻌
¥㻤㻚㻞㼎㼚

㻥㻤㻭㼎㼛㼡㼠㻌
¥㻢㻚㻢㼎㼚

㻭㼎㼛㼡㼠㻌
¥㻣㻚㻞㼎㼚

㻣
㻢
㻡
㻠

㻟
㻞
㻝
㻜
㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤

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



The Company has not provided forecasts on the sales outlook for engineering business in FY3/19. Engineeringbusiness is effectively a sales method in the Company’s case, as explained earlier, and whether something comesunder it is determined in hindsight. We think this aspect interferes with budgeting. Given this point, we see apossibility of substantial growth in engineering business sales in FY3/19 due to the Company’s outlook for rapid
growth in general machinery division with an 81.3% YoY increase to ¥16,600mn (details reviewed below). Generalmachinery products primarily consist of production facilities used in manufacturing and are fundamentally built toorder (business deals hence have a high degree of certainty). Furthermore, production facilities involve more thanjust moving goods from one location to another and require system integration, including software. This businessis an excellent match with the Company’s engineering business.
The Company does not disclose details regarding profits in the engineering business. Nevertheless, we think
expansion of engineering transactions is likely to generate higher profit margin than just selling individual productson their own. Standalone business is similar to just selling meat and vegetables as ingredients. Sales as engineering business, meanwhile, are comparable to selling a curry meal that uses meat and vegetables. Processing
charges for making the curry (or the curry roux portion) adds to profit and results in higher earnings and profit
margin. We believe this is why the Company focuses on engineering business and it is an important perspective
in our investment opinion.

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13 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Overview and progress of the medium-term management plan

Within reach of ¥10bn in net sales thanks to the tailwind ofincreased customer outsourcing needs
4. Progress on the global SCM solutions business(1) Business overview
The Company prepared for global SCM solutions during JUMP 1200, the previous medium-term management
plan, and officially started this business in the current medium-term plan period. Going back further, however,
the Company had already been offering procurement agent, logistics agent, and delivery management services
for some time. The global SCM solutions business is an advanced version of these past services that leverages
the Company’s overseas network (13 overseas local entities and 25 global sites) to create a profitable business.
We think the global SCM solutions business can be implemented in a variety of ways. One example is described
here. The Company delivers other items required by the customer at the same time, regardless of whether they
are the Company’s catalog products or not, in addition to the ordered product when delivering products basedon an order from the customer. It intends to operate this service as a profitable business, obtaining margin oneach of the products.
Conceptual image of global SCM solutions business

Source: Company website

Motivation for and significance of promoting global SCM solutions business rest in the Company’s accumulationof related knowhow over a lengthy history, in contrast to large manufacturers with shortages of personnel in global
logistics, inventory management, materials procurement, and others, despite (or because of) their size. Major
companies have sought to reduce this area in past business structure reforms and restructuring processes. At thesame time, larger companies place greater emphasis on efficient production operations and frequently transfer
businesses across country borders. We believe very substantial latent demand exists for the Company’s global
SCM solutions business as a result.
(2) Update on progress
Global SCM solutions business has been steadily growing, similar to the engineering business. It booked about¥4.1bn in FY3/17 sales and reached roughly ¥7.2bn in FY3/18. The Company projected ¥6.7bn in the period-startplan, but the actual result was even higher. FY3/19 forecasts call for about ¥9.7bn. Management is aiming for¥10bn in sales in global SCM solutions business as a near-term goal, and this is coming within visibility.

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14 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Overview and progress of the medium-term management plan㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼓㼘㼛㼎㼍㼘㻌㻿㻯㻹㻌㼟㼛㼘㼡㼠㼕㼛㼚㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼟㼍㼘㼑㼟㻔¥㼎㼚㻕㻝㻞㻭㼎㼛㼡㼠㻌¥㻥㻚㻣㼎㼚㻝㻜㻭㼎㼛㼡㼠㻌¥㻣㻚㻞㼎㼚㻤㻢㻭㼎㼛㼡㼠㻌¥㻠㻚㻝㼎㼚㻠㻞㻜㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤

㻲㼅㻟㻛㻝㻥㻌㻱

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

We believe expansion of the global SCM solutions business is clearly positive for the Company. A major reason is
because it reliably generates profit due to accumulated knowhow over many years amid rising demand for these
services. Nevertheless, profit margin appears to be lower than in the Company’s other businesses and rapid
growth in related sales is likely to reduce overall profitability. We think improving profitability is an important issue for
the Company and will be focusing on balance in expansion of business scale and securing margin as a key point.

██Business outlook
Possibility of beating profit targets if the sales outlook is attained
The Company forecasts for ¥157,500mn in sales (+7.3% YoY), ¥4,450mn in operating income (+7.6%), ¥4,500mn
in ordinary income (+3.5%), and ¥3,150mn in net income attributable to owners of the parent (+2.1%) in FY3/19.

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

15 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Business outlook

Overview of FY3/19 forecasts(¥mn)
FY3/18

FY3/191H results

2H results

Full-year
results

Net sales

67,34879,411

Operating income

1,773

2,362

Operating income
margin2.6%

Ordinary income
Net income attributableto owners of the parent

1H

2H

Forecasts

Growthrate (YoY)

146,759

78,500

4,135

2,250

3.0%

2.8%

1,951

2,398

1,359

1,726

Full-year

Forecasts

Growthrate (YoY)

Forecasts

Growthrate (YoY)

16.6%

79,000-0.5%

157,500

7.3%

26.9%

2,200

-6.9%

4,450

7.6%

2.9%

-

2.8%

-

2.8%

-

4,349

2,300

17.9%

2,200

-8.3%

4,500

3.5%

3,085

1,600

17.7%

1,550

-10.2%

3,150

2.1%

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

We believe the Company is capable of reaching its target of ¥157,500mn in sales considering trends in the various
demand industries. In profits too, we expect fulfillment of targets if the sales outlook is attained. The Company
projects 2.8% in FY3/19 operating margin, unchanged from the previous year. This stance seems somewhat
conservative. Nevertheless, we think it makes sense to take a cautious view, similar to the Company, at least thestart of the fiscal year, because of the prospect of continuation in gross-margin decline on change in product mix
in FY3/17.
1. Outlooks for demand industries(1) Industrial machinery
The Company broadly sells servomotors and control devices from electrical machinery and electronic parts,
devices, and materials from electronics. The main application is factory automation equipment. We expect
continued growth in shipments to the industrial machinery industry in light of robust capital investment demandin China, Asian countries, and other regions.
(2) Smartphones
Demand slowed in FY3/18 because of the impact of weaker growth in sales volume and other factors. However,volume does not appear to have dropped enough to undercut capital investments by smartphone manufacturers.
While investments to increase output are unlikely, we expect continuation of automation and labor saving outlays
with the aim of lowering production costs through enhanced manufacturing efficiency in FY3/19 as well.
(3) Automotive
The Company handles two major commercial flows. One is selling electronic parts and devices under the electronics division. This business expanded in FY3/18 as explained earlier, and we expect further expansion at thesame pace in FY3/19 on advances in automotive electronics, such as ADAS and EV. The other is selling control
devices, servomotors, and other products from the electrical machinery division to manufacturing lines. Thisbusiness has also been receiving robust demand from automation and labor saving projects. We think it is likely
to sustain strong results in FY3/19 too (this includes cases of indirect delivery to the automotive industry throughthe industrial machinery industry).

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16 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Business outlook(4) Semiconductors
The Company mainly sells products in Japan, Taiwan, and South Korea. Sales in this business are predominantly
electrical machinery and electronic parts and devices to SPE manufacturers, rather than chip manufacturers. We
advise against excessive concern about reported declines in 3D NAND flash memory and other semiconductor
chip prices because these are essentially commodities with high price volatility. The semiconductor industry is
likely to remain a strong source of demand due to structural changes, such as growing use of IoT and advancesby China’s semiconductor industry.
(5) FPD
While LCD panel business seems to have peaked out, we think demand from OLED panel production equipment
will be growing. Japanese companies currently hold a lead in OLED production equipment too, and we think theCompany should benefit as long as this structure lasts.
Net sales outlook by division(¥mn)
FY3/11

FY3/12

FY3/13

FY3/14

FY3/15

FY3/16

FY3/17

FY3/18

FY3/19 E
29,90023,62824,49522,22224,75922,66019,06920,73627,166

YoY

156.2%

3.7%

-9.3%

11.4%

-8.5%

-15.8%

8.7%

31.0%

10.1%

Electronics

54,79056,90558,62869,64380,47377,59385,819110,436

111,000

YoY

36.2%

3.9%

3.0%

18.8%

15.6%

-3.6%

10.6%

28.7%

0.5%

6,864

8,306

7,412

6,975

8,141

9,084

10,055

9,156

16,600Electrical machinery

General machinery
YoY
Total net sales
YoY

15.6%

21.0%

-10.8%

-5.9%

16.7%

11.6%

10.7%

-8.9%

81.3%

85,28389,706

88,264

101,378

111,276

105,748

116,611

146,759

157,500

54.0%

5.2%

-1.6%

14.9%

9.8%

-5.0%

10.3%

25.9%

7.3%

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

The Company presents the following outlook for its business segments in light of prospects and business environments in demand industries described above.
2. Business segments outlooks(1) Electrical machinery
The Company projects a 10.1% YoY increase to ¥29,900mn. We think the FY3/19 outlook is weaker thanmomentum in the previous fiscal year due to factoring in exhaustion of smartphone-related equipment demand tosome extent in 2H FY3/18, including the impact of slower smartphone sales volume. Nevertheless, the Company
should be capable of realizing its target of double-digit sales growth because of robust SPE demand and demand
for automated and labor saving investments across industries.
(2) Electronics
The Company expects a 0.5% YoY gain to ¥110,000mn. Electronics division exhibits a similar demand trend to
the electrical machinery division because its main items are used in electrical machinery products. We think theoutlook for flat sales, in contrast to double-digit sales growth projected for electrical machinery, takes into accountthe possibility of excess inventories at customers. Accelerated orders placement beyond real demand occurred
amid extremely tight market conditions for parts and materials in FY3/18, and adjustment might take place toaddress this portion. While such concern could also be unnecessary, we do not see any basis to reject it outrightat the start of the fiscal year. Separately, accelerated orders risk does not exist in the automotive industry with
its rigorous just-in-time management. The 0.5% growth target hence seems moderately cautious considering
healthy momentum in the automotive industry.

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

17 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Business outlook(3) General machinery
The Company expects an 81.3% YoY increase to ¥16,600mn. This outlook takes into account sales of production
equipment to major semiconductor and food manufacturers. Segment sales are likely to climb sharply as planned,
assuming no delivery delays, because these are built-to-order systems (rather than forecast production). If anything, our concern is the possibility of a steep YoY decline in FY3/20 sales due to backlash from non-recurrenceof these large deals. Nevertheless, the Company expresses confidence in sustaining or expanding the generalmachinery division’s broadened scope in light of change in deal size from ¥100-200mn as the standard level inpast years to deals exceeding ¥1bn, with some frequency, in recent years, including support from promotion ofengineering business. While prospects are not completely certain because capital investment trends at customers
directly affect segment deals, we think this division has arrived at a turning point in terms of customer scale, business deal scale, broadening of covered areas, and increased difficulty and will be closely monitoring developments.
The Company’s primary concern in FY3/19 is increase in logistics costs and resulting pressure on earnings. Thisappears to be one of the major sources of anticipated flat operating margin (YoY) in FY3/19. However, we are notthat worried about this point because of room for improvement. The Company placed more emphasis on top-line(sales) growth than cost savings up to now. This was the driving force in lifting sales above the medium-term
management plan goal in FY3/18. We believe the Company is capable of absorbing anticipated cost increases
in FY3/19 given its clarification of a policy this time to focus on cost reductions.
Summary income statement(¥mn)
FY3/19FY3/15

FY3/16

FY3/17

FY3/181H

Full-year E

Net sales

111,276

105,748

116,611

146,759

78,500157,500

YoY

9.8%

-5.0%

10.3%

25.9%

16.6%

7.3%

Gross profit

13,98813,256

14,255

16,883

-

-

12.6%

12.5%

12.2%

11.5%

-

-

10,516

10,812

11,24012,747

-

-

YoY

11.1%

2.8%

4.0%

13.4%

-

-

Ratio of SG&A expenses to sales

9.5%

10.2%

9.6%

8.7%

-

-

3,471

2,444

3,014

4,135

2,250

4,450

YoY

8.1%

-29.6%

23.3%

37.2%

26.9%

7.6%

Operating income margin

3.1%

2.3%

2.6%

2.8%

2.9%

2.8%

3,761

2,645

3,215

4,349

2,300

4,500

9.4%

-29.7%

21.6%

35.3%

17.9%

3.5%

2,466

1,690

1,584

3,085

1,600

3,150

Gross profit margin
SG&A expenses

Operating income

Ordinary income
YoY
Net income attributable to owners of
the parent
YoY

13.8%

-31.5%

-6.3%

94.8%

17.7%

2.1%

EPS (¥)

171.83117.76113.64222.6599.73

196.35

Dividend (¥)

26.00

28.00

28.00

30.00

17.00

34.00

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

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

18 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html

Business outlook

Summary balance sheet(¥mn)
FY3/14

FY3/15

FY3/16

FY3/17

FY3/1866,23145,32949,23946,85755,507

Cash and deposits

6,937

7,584

6,359

6,759

8,596

Notes and accounts receivable

33,07534,41933,00634,14139,756

Current assets

8,369

9,509

8,581

9,309

11,381

Tangible fixed assets

4,038

3,879

3,788

3,056

3,005

Intangible fixed assets

76

243

240

222

168

4,254

5,386

4,553

6,030

8,207

Total assets

53,69858,74855,43964,816

77,613Current liabilities

30,73532,37028,691

36,596

43,077

Notes and accounts payable - trade25,91727,496

24,732

31,182

34,298

Short-term loans payable, etc.

2,528

2,782

2,317

2,489

5,722

4,309

4,426

4,484

4,581

6,542

2,205

2,100

2,400

2,300

3,500

Shareholders’ equity

16,80718,92920,217

21,03423,731

Capital stock

2,553

2,553

2,553

2,553

2,553

Capital surplus

1,958

1,958

1,958

1,958

1,958

Retained earnings

12,35014,472

15,761

16,95019,647

Non-current assets

Investments and other assets

Non-current liabilities
Long-term loans payable

-53

-54

-54

-427

-428

Net assets

18,654

21,951

22,26323,63727,993

Total liabilities and net assets

53,69858,74855,43964,816

77,613

Treasury shares

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

Cash flow statement(¥mn)
FY3/14

FY3/15

FY3/16

FY3/17

FY3/18Cash flow from operating activities-1,374

Cash flow from investing activities

-127

1,353

-60

1,679

-2,221

-444

-384

-235

Cash flow from financing activities

29

769

-470

-654

-818

3,962

Cash and cash equivalent conversion difference

236

209

-125

-224

66

Cash and cash equivalent change

-496

647

-1,225400

1,837

Cash and cash equivalent period-start balance

6,949

6,453

7,100

5,875

6,275

Cash and cash equivalent period-end balance

6,453

7,100

5,875

6,275

8,112

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

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

19 21

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

SUN-WA TECHNOS CORPORATION

13-Jul.-2018

8137 Tokyo Stock Exchange First Section

http://www.sunwa.co.jp/ir/index.html██Shareholder return policy
Announced a ¥4 dividend hike in FY3/19 to ¥34
The Company’s basic policy is to provide returns to shareholders in the form of dividends. Management prioritizes
providing stable, continuous dividends, as demonstrated in its track record to date. While the Company does not
sharply raise dividends in response to temporary rapid profit expansion, it has steadily increased them in keepingwith earnings growth.
The Company decided to pay a ¥30 dividend (¥14 at interim, ¥16 at period-end) in FY3/18, an increase of ¥2 YoY.
Dividend payout ratio based on ¥222.65 EPS worked out to 13.5%. In FY3/19, it announces for a ¥34 dividend (withan interim dividend of ¥17 and a period-end dividend of ¥17), an increase of ¥4. Payout ratio using the ¥196.35 EPS
target comes to 17.3%. The Company expects higher sales and profits in FY3/19, as explained earlier. We think it
decided to raise the dividend in light of the healthy profit expansion trend.
While some observers might find the payout ratio to be low since it is less than 20% in FY3/18 and FY3/19, theCompany’s payout ratio historically has fundamentally been in the 10% range. Declines in FY3/16 and FY3/17 net
profits were responsible for lifting the payout ratio above 20% in those years.
Prioritization of dividend stability has been apparent in the Company’s past dividends and shareholder returns.
Nevertheless, management is very aware of shareholder returns and is likely to consider various measures in the
future. The Company has mentioned its 70th-year anniversary in November 2019 as a near-term event.

㻱㼍㼞㼚㼕㼚㼓㼟㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻘㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼍㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻱㼍㼞㼚㼕㼚㼓㼟㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻕㻔¥㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㻔㼘㼑㼒㼠㻕㻞㻡㻜㻚㻜㻜
㻞㻟㻚㻤㻑㻞㻜㻜㻚㻜㻜

㻞㻠㻚㻢㻑

㻟㻜㻚㻜㻑

㻞㻞㻞㻚㻢㻡
㻝㻥㻢㻚㻟㻡

㻞㻠㻚㻜㻑㻝㻣㻝㻚㻤㻟
㻝㻣㻚㻟㻑㻝㻡㻜㻚㻜㻜

㻝㻡㻚㻝㻑

㻝㻤㻚㻜㻑
㻝㻝㻣㻚㻣㻢

㻝㻟㻚㻡㻑㻝㻝㻟㻚㻢㻠

㻝㻜㻜㻚㻜㻜
㻡㻜㻚㻜㻜

㻝㻞㻚㻜㻑

㻞㻢㻚㻜

㻞㻤㻚㻜

㻞㻤㻚㻜

㻟㻜㻚㻜

㻟㻠㻚㻜

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤

㻲㼅㻟㻛㻝㻥㻌㻱

㻜㻚㻜㻜

㻢㻚㻜㻑
㻜㻚㻜㻑

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

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

20 21

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

SUN-WA TECHNOS CORPORATION
8137 Tokyo Stock Exchange First Section

13-Jul.-2018
http://www.sunwa.co.jp/ir/index.html██Information security
Utilizes a wide range of measures to manage customer information
As a listed company, the Company is keenly aware of the need for information security to combat cyber-terrorism andother threats. It adopts a wide range of measures that leverage strong IT-related knowledge as a technology-centric
trading company. We think losses and leaks of private information and credit card numbers are the primary risks
in information security in the minds of investors. From this perspective, the Company’s risk exposure related to
information security is relatively low because it does not operate B-to-C business.

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

21 21

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