COMPANY RESEARCH AND ANALYSIS REPORT

Daikoku Denki Co., Ltd.
6430
Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
FISCO Ltd. Analyst

Ikuo Shibata

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

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Business overview................................. ......................................................................................................
2. Overview of FY3/21 results.................... ......................................................................................................
3. FY3/22 forecasts. . .................................. ......................................................................................................
4. Future strategic direction.............................................................................................................................

01
01
02
02

■Description of businesses--------------------------------------------------------------------------------------------------------------------------------- 03
1. Information System Segment. . ............... ......................................................................................................
2. Control System Segment....................... ......................................................................................................

04
05■Company strengths------------------------------------------------------------------------------------------------------------------------------------------------- 05
1. Growth model based on market expansion through innovation. ..................................................................
2. Strong network of pachinko halls........... ......................................................................................................
3. Stable profit base that supports investment for the future. ..........................................................................

05
06
07

■Industry environment--------------------------------------------------------------------------------------------------------------------------------------------- 08■Financial results trends---------------------------------------------------------------------------------------------------------------------------------------- 10
1. Performance over the past fiscal years.. ......................................................................................................
2. Overview of FY3/21 results..........................................................................................................................
3. Summary of FY3/21............................... ......................................................................................................

10
12
15

■Main activities--------------------------------------------------------------------------------------------------------------------------------------------------------------- 15
1. Held the MIRAIGATE 2020 Web Exhibition & Seminar. ................................................................................
2. Proposals of new products in line with the times, such as combatting the COVID-19 pandemic................

15
16■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 16
1. FY3/22 forecast...........................................................................................................................................
2. Policy for main activities..............................................................................................................................
3. FISCO analyst’s opinion...............................................................................................................................

16
17
18

■Future strategic direction----------------------------------------------------------------------------------------------------------------------------------- 18
1. Information System Segment. . ............... ......................................................................................................
2. Control System Segment.............................................................................................................................
3. Strengthening the R&D system.............. ......................................................................................................
4. Points of focus for the FISCO analyst.... ......................................................................................................

18
19
19
19

■Shareholder returns------------------------------------------------------------------------------------------------------------------------------------------------- 20

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

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/█ SummaryIn the FY3/21 results, sales and profits decreased significantly,
mainly due to the impact of COVID-19, but recovered from the 2H. In
FY3/22, a recovery is expected toward the 2H alongside the market’s
revitalization.
1. Business overview
Daikoku Denki Co., Ltd. <6430> (hereafter, “the Company”) has two main businesses: one that develops, manufactures and sells computer systems for pachinko (Japanese slot machines) parlors and halls, and the otherthat develops, produces and sells display and control units for pachinko and pachislot machines. The Company
holds the leading market share, approximately 36.6%, of the Japanese market for hall computers, reflecting an
information management method that is the de facto standard for the industry. Furthermore, the industry’s leading
membership-based information provision service Daikoku Denki Strategic Information System (DK-SIS) to support
the operations of pachinko hall associations forms a network of 3,337 pachinko halls and supports the Company's
business foundation.
Japan’s pachinko market has been shrinking over the years. In response, the Company has been working to reform
its businesses over the medium to long term. Reforms include developing a next-generation hall computer andshifting to a business model more reliant on services that provide recurring revenue. However, with the series ofrevisions to regulations (including controlled ball payouts, measures against gambling addiction, and replacementwith machines complying with the new regulations) having brought the industry to a major turning point, earnings
right now remain difficult due to the impact of future uncertainty, along with the impact of the COVID-19 pandemic.
Meanwhile in June 2019, the Company released the AI hall computer “X (Kai),” the first of its kind in the industry, as
it started in earnest on its efforts targeting future business expansion. Toward a new era with machines complying
with the new regulations, the Company is aiming to increase its market share and boost profitability while helping
hall operators improve efficiency, save labor and halls’ ability to attract customers.
2. Overview of FY3/21 results
In the FY3/21 results, sales and profits decreased significantly due to the impact of COVID-19, with net sales
declining 29.4% year-on-year (YoY) to ¥23,228mn and operating income falling 65.7% to ¥490mn. During the
COVID-19 pandemic, pachinko halls’ management conditions have become even more severe, including due to theeffects of having to temporarily close halls and reduce opening hours. In addition, as the schedule for the removal ofmachines compliant with the old regulations has been pushed back, which has invited an extreme fall in the desire
to conduct capital investment and the postponement of capital investment. Therefore, results in the Information
System Segment fell greatly. In the Control System Segment as well, against the backdrop of factors including
various game machine manufacturers postponing sales of new titles due to the impact of COVID-19, sales of display
and control units declined YoY. Profits decreased alongside the major decline in sales, but they were supported by
the Company-wide review of costs and so were higher than forecast.

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01 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Summary

3. FY3/22 forecasts
For the FY3/22 results, the Company is forecasting increases in sales and profits, with net sales to rise 11.9% YoY
to ¥26,000mn and operating income to grow 73.2% to ¥850mn. The severe business environment will continue
due to the prolonging of COVID-19 and the shortage of semiconductors, but sales are expected to recover to acertain extent from the recovery of pachinko hall capital investment from the 2H. In particular, in advance of theinstallation deadline of the end of January 2022 for machines compliant with the old regulations, the outlook is theirreplacements with machines compliant with the new regulations will contribute to the revitalization of the gamemachines market. Therefore, it is necessary to be aware that the forecasts are for results to be concentrated in
the 2H. For profits, the Company plans to actively invest (upfront investment) in the Information System Segment,
but the forecast is still for operating income to increase significantly from the effects of the higher sales and theimprovement to the earnings structure.
4. Future strategic direction
In the Company’s view, regulatory revisions and other changes in conditions surrounding the pachinko industry will,in the medium to long term, represent a good opportunity for the industry to evolve into one that enjoys even wider
public support. The Company’s policies are focused particularly on expanding market share with its industry-first
AI hall computer “X (Kai)” and other next-generation products, as well as on creating new value through its data
analytics and planning and development capabilities, which will contribute to industry growth while also leading to
improved growth and profitability for the Company itself. In the medium- to long-term view, we at FISCO are also
keeping a close watch on the Company’s efforts to revitalize the industry as a whole, and its M&A action both inand outside the industry.
Key Points
Sales and profits decreased in FY3/21 due to the continuation of a severe industry environment, which
overlapped with the strong impact of COVID-19, but profits were still higher than forecast and maintained theannual dividend of ¥40.
• In FY3/22, sales and profits are forecast to increase from the anticipated recovery of pachinko hall capital
investment from the 2H• In advance of the installation deadline of the end of January 2022 for machines compliant with the oldregulations, the outlook is their replacements with machines compliant with the new regulations will contributeto the market’s revitalization• In anticipation of a new era with machines complying with the new regulations, the Company aims to increase
its market share and improve profitability by helping pachinko halls improve their operating efficiency and savelabor, as well as by providing new value leveraging data•

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

02 20

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

Daikoku Denki Co., Ltd.

25-Aug.-2021

6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

https://www.daikoku.co.jp/en/ir/

Summary

Results trends
Net sales (left)（¥mn）

Operating income/loss (right)（¥mn）

50,000

2,000
1,527

40,00030,0001,048

20,00040,714

1,600

1,431

1,192
1,200
850
800
34,09331,16632,922490
26,00010,000400
23,22800
FY3/17

FY3/18

FY3/19FY3/20FY3/21

FY3/22 (E)Source: Prepared by FISCO from the Company's financial results█ Description of businesses
Focuses on hall computers and peripheral equipment for pachinkohalls. Aims to further expand its top market share in the industry bypromoting the industry’s first AI hall computer
While emphasizing development, production and sales of computer systems for pachinko halls, the Company also
develops, manufactures and sells display and control units for pachinko and pachislot machines.
As a pioneer in the development of hall computers, which assist in the management of pachinko halls, and holderof the top market share in the Japanese market, the Company won halls’ trust and satisfied pachinko players byproposing a management method which puts emphasis on data management, introducing innovative peripheral
equipment for its hall computers and providing the industry’s leading membership-based information provision
service.
The Company’s share of the hall computer market is 36.6%, and in particular, its market share of large-scale hallswith at least 501 machines is 59.2%.
The Company’s two main businesses are the Information System Segment and Control System Segment, but theInformation System Segment provided 75.1% of its net sales (FY3/21 results) and has been the main source ofstable profit in the past few years.

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03 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Description of businesses

1. Information System Segment
The Information System Segment offers a complete line of information equipment and services necessary to support
operational management at pachinko halls. It sells hall computers, which are the core of the system used atpachinko halls, and peripheral equipment, such as prize management and information disclosure systems. The
segment also offers MIRAIGATE Service (MG Service), a hall management support service, through a server, andthe membership-based information provision service DK-SIS, which is the leading service in Japan that provides
strategic information about associated halls.
Hall computers are the core systems for supporting pachinko hall operations. These computers display the operating
conditions and sales of each machine in a hall. These computers are supported by peripheral equipment, suchas prize management and information disclosure systems, and also serve as the foundation of the MG Service.
Introducing a hall computer provides the advantage that peripheral equipment and support services can be sold asa package deal. The Company has been aiming to transition to a business model that provides recurring revenue
by collecting membership fees for the MG Service after sales in addition to information equipment sales.
In June 2019, the Company released industry-first AI hall computer “X (Kai),” its first launch in 12 years since therelease of the hall computer “CII”. Based on the concept of a “hall computer that teaches,” the main feature of this AI
hall computer is that it will guide pachinko hall operators to the optimal solutions by utilizing the Company’s big dataand having AI automatically analyze the data. By helping pachinko hall operators improve their operating efficiency,
save labor and halls’ ability to attract customers, it aims to expand its market share and increase its profitability.
Hall computers and main peripheral equipment

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

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04 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Description of businesses

2. Control System Segment
The Control System Segment produces and sells displays and control units, as well as components used forpachinko and pachislot machines for game machine manufacturers. Applying the knowledge obtained from analyzing
data from pachinko machines as a hall computer manufacturer for many years, the segment serves as a development
partner for the content as well, moving beyond the scope of a machine manufacturer by proposing specs basedon the trends of popular models and acquiring copyrights for popular characters. In particular, from 2H FY3/21, theCompany plans to leverage the hardware and software technologies it has cultivated to advance bundled contractdevelopment of pachislot machines and expand the business domain of the products it sells, thereby ramping up
the pachislot business in earnest.

█ Company strengths
Track record of creating new opportunities for the industry andprovides added value for hall management in various aspects
1. Growth model based on market expansion through innovation
Since its establishment, the Company has consistently planned and developed new categories of goods andservices, thereby cultivating the pachinko market and achieving growth. It has not just developed machines withsuperior functions but emphasized the importance of data management and the necessity for information disclosure.
Thus, it has been able to provide added value to various aspects of pachinko hall management.
Launched in 1974, the Company’s first hall computer enabled the managers of pachinko halls to introduce a hallmanagement method based on data management. Previously, pachinko halls accumulated only basic data, but with
the introduction of hall computers, data-based hall management became the de facto standard. In subsequent years,
the Company has been consecutively introducing industry-first information equipment with revolutionary functionsin the pachinko industry. One such piece of equipment was the Data Robo terminal, which provides information
about different models of pachinko and pachislot machines to the players of these machines. This equipment has
increased the satisfaction of pachinko players and the efficiency of pachinko hall management, and hereby improved
the profitability of pachinko halls.
In June 2019, the Company released the industry’s first AI hall computer, “X (Kai).” This AI hall computer will greatly
help pachinko hall operations, for which shortage of manpower is an issue, by improving operating efficiency andreducing necessary labor by having AI automatically analyze big data that the Company possesses.

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05 20

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

Daikoku Denki Co., Ltd.

25-Aug.-2021

6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

https://www.daikoku.co.jp/en/ir/

Company strengths

2. Strong network of pachinko halls
Another advantage the Company has is its membership-based information provision service, DK-SIS. This service
creates an information network connecting the Company and member pachinko halls, and processes and analyzes
the daily operational information of pachinko halls recorded by hall computers and gives feedback to hall managers
to help their operations. It enables the managers to conduct effective hall operation utilizing valuable external information, including nationwide pachinko machine information and operational data broken down by machine model.
At the same time, this strong network made up of members also supports the Company’s business foundation.
Additionally, it occupies an industry think-tank role, contributing to improving the Company’s brand as a leading
company, and is utilized in strategic proposals and sales activities to game machine manufacturers. Membership
totaled 3,337 halls at the end of March 2021 with 1.44mn managed machines (36.0% share in managed machines).
While member volume has peaked amid a recent decline in overall pachinko halls, DK-SIS enjoys a large share inmanaged machines, mainly at large sites. Also, recently it has been focusing on spreading the use of Market-SIS,
which is a commercial area analysis service that analyzes from various angles factors such as customer numbers,
operating rates, occupancy rates, and support rates of halls and machines managed within commercial areas. It
is being highly evaluated as a tool to ascertain the flow of people (player trends) and that contributes to improving
halls’ ability to attract customers.

Trends in the number of DK -SIS managed units and share
Number of managed units (left)
Share of number of managed units (right)（10,000 units）
160

40.0%

140
120

35.0%
32.1%

32.9%

34.3%

35.1%

36.0%
30.0%

100
80

25.0%
145

146

147

147

144

20.0%

60

15.0%

40

10.0%

20

5.0%

0

0.0%
FY3/17

FY3/18

FY3/19FY3/20FY3/21（year-end）Source: Prepared by FISCO from the Company's results briefing materials

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06 20

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

Daikoku Denki Co., Ltd.

25-Aug.-2021

6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

https://www.daikoku.co.jp/en/ir/

Company strengths

3. Stable profit base that supports investment for the future
The Company’s main source of competitiveness is its proactive upfront investment eyeing future growth, including
its R&D expenses. Over the past few years, it has developed unique pachislot machines, a next-generation hall
computer (and peripheral equipment), and other products to drive its sales and profit growth hereafter. The stablerevenue stream provided by the high-margin Information System Segment makes this investment possible. In
particular, MG services promoted by the Company as a recurring revenue business model have grown and enabled
funding of R&D at a high level while maintaining stable segment income, and investment risk has been limited. The
Company’s ability to balance large profits from its existing businesses with heavy investment in businesses for future
growth allows it to produce value on a continuing basis. Since FY3/18, the ratio of R&D expenses to net sales has
been trending at roughly 3.5% because of a lull in major investment in the next-generation hall computer, etc. Goingforward, the Company intends to proactively invest its R&D expenses in fields including data analysis features related
to AI hall computer “X (Kai),” which has already been introduced in the market.

R&D expenses and ratio of R&D expenses to net sales
R&D expenses (left)

Ratio of R&D expenses to net sales (right)

(¥mn)
6,000

11.3%

12.0%

5,000

10.0%
7.5%

4,000
3,000

8.0%
6.0%

4.6%

5,330

3.9%

2,000

3.6%

3.5%

4.0%

3,060
1,000

2.0%

1,578

1,206

1,170

FY3/19FY3/20

819

0

0.0%
FY3/16

FY3/17

FY3/18

FY3/21

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

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07 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Company strengths

Sales of MG services
(¥mn)
5,000
4,143
4,000

4,312

4,454

4,672

4,500

3,832

3,000

2,000

1,000

0
FY3/16

FY3/17

FY3/18

FY3/19FY3/20FY3/21

Note: The FY3/21 values are the Company’s forecasts
Source: Prepared by FISCO from the Company’s results briefing materials and other materials





█ Industry environment
The sense of uncertainty remains due to COVID-19, but with theapproach of the installation deadline for machines compliant with theold regulations, the outlook is for the gradual revitalization of the market
Japan’s pachinko industry has been experiencing a challenging environment over the past few years, reflecting
the decline in the overall number of pachinko players, a trend toward playing games with low rental costs for balls,
increases in Japan’s consumption tax, and other factors. The self-regulatory action taken by the industry in 2015(tightening restrictions on both pachinko and pachislot machines with strong gambling elements) left the wholeindustry in a slump in 2016 as it started to grapple with the problem of collecting and removing all pachinko machinesthat may perform differently from certified standards. Since the official announcement on September 4, 2017, of
the Regulations Regarding the Certification of Game Machines and Examination of Models (enforced on February
1, 2018; hereafter, “new regulations”) *, the situation has remained in a state of flux due to a pessimistic view anduncertainty toward the industry. As for pachislot machines in particular, the certification of mainstay models withstrong gambling elements which had been the breadwinners for the management of pachinko halls had expiredat the end of December 2019 (deadlines for removal), and this will have a considerable impact on pachinko halls’
business. This, combined with the impacts of the COVID-19 pandemic (business suspensions, shortened operating
hours, etc.) since the start of 2020, has led to a continually difficult environment.
*	Among the new regulations are restrictions on the maximum number of balls that can be paid out and clearly defined
standards for “controlled machines.” However, although more than three years have passed since the enforcement of the
new regulations, there is still a large number of machines conforming to the previous regulations that continue to operate.
Pachinko hall operators are worried that their earnings will decline and they will be faced with difficult decisions about
the timing of equipment replacement and other matters. This has likely prolonged their diminished investment appetite(cautious stance).

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08 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Industry environment

On the other hand, the deadline for completely removing machines conforming to the previous regulations was
extended for one year (until the end of January 2022) due to the COVID-19 pandemic, and the replacement ofmachines with those complying with the new regulations is expected to progress gradually in stages. As gamemachines with new game features (“play time,” etc.)* are being released based on the revisions to the Criteria forInterpretation of Technological Standards enacted in January 2020 and consequent internal regulations of theJapan Pachinko Machine Industry Association, many popular models of pachinko machines are appearing, so it isexpected that the replacement of these machines will lead to activation of the market. With this, there are hopesthat the market will be revitalized by the demand for replacement of game machines. Alongside this, by the end of
March 2021, 65% of pachinko machines had been replaced with machines compliant with the new regulations, but
only 50% of pachislot machines had been replaced (from a survey by the Company). Going forward, as machinesconforming to the previous regulations are removed and machines complying with the new regulations are introduced
to the market in the future, it is believed that investment (to draw in customers) as pachinko halls compete to survive
will be sparked, and it is also expected that the efforts to save labor will be activated to resolve the labor shortagein the operation of pachinko halls and that there will also be investments made to address the move to eliminatesmoking in pachinko halls as a part of the Health Promotion Law that went into full effect in April 2020.
*	“Play time” is a system (rescue measure) whereby the machine enters a shortened time mode (a function that efficiently
rotates balls without reducing the number of balls up to a certain number of times) if the player does not have a big win
in a specified number of rotations during normal play (low probability). With the recent industry regulations, new functions
such as “play time” have been added, and the breadth of game features of game machines has expanded significantly.

According to surveys by the National Police Agency, the number of pachinko halls in Japan declined at an averageannual rate of 3.6% from 2012 to 2020. In particular, there is a noticeable decline in new hall openings due to theimpact of the new regulations and other factors. In the end of December 2020, the number of halls was 9,035 (-604
YoY), and the Company served 36.6% of these halls. Its customer halls are often high-end, large pachinko halls thatare the top performers in their respective local markets, which exceed the market average in size*. The customer
base hence is fairly resilient to economic fluctuations and possesses healthy investment resources. As the Company
moves toward a new era with machines complying with the new regulations, we expect an excellent opportunity for
it to expand business once investment appetites recover, mainly at large halls.
*	The Company’s share of the large-scale halls (at least 501 machines) market is even higher at 59.2%.

Market scale, the number of halls, and the Company’s share of the hall computer market

Source: The Company’s results briefing materials

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09 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Industry environment

Meanwhile, although the number of game machines is on a downward trend (the decline in pachinko machines
is particularly striking), the number of machines per hall is increasing, indicating that halls are becoming larger.
As discussed above, larger pachinko halls that command economies of scale are the Company’s main segment,
therefore this trend should benefit the Company with its ability to realize robust investment return through advanced
functionality and added value.

Number of pachinko and pachislot machines in Japan
Pachinko (left)
Pachislot (left)
No. of game machines installed per hall (right)(10,000 units)
500
411.9

427.7

418.7

435.3

（units）
443.2

400

300

400.0
283

274

263

255

243

200

100

500.0

300.0

200.0

169

168

166

163

157

2016

2017

2018

2019

2020

0

100.0

0.0

Source: Prepared by FISCO from the Current Status of Entertainment and Amusement Businesses, etc., and the Statusof Measures for Crimes relating to Entertainment and Amusement Businesses, etc., 2020, by the Public Security
Division of the Security Bureau, the National Police Agency, and from Company materials█ Financial results trends
As the industry enters a period of transition, earnings have been on
a downward curve, but the Company is establishing a foundation forsustainable growth eyeing the future
1. Performance over the past fiscal years
Looking back at past results, the Company’s sales shrank YoY because of restrained consumer spending and theimpact of the Great East Japan Earthquake in FY3/11. Its results rebounded afterwards, even though the pachinko
industry continued to contract. This recovery was mainly led by the Information System Segment, which holds highmarket shares for its products. Net sales in this segment reached consecutive record highs from FY3/13 to FY3/15,
supporting the Company’s overall performance. However, net sales have been weak since FY3/16 due to the impactsof negative factors in the industry (self-regulatory action, collecting and removing of machines, and uncertainty related
to new regulations), as well as the impacts of the COVID-19 pandemic and other factors since the start of 2020.

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

10 20

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

Daikoku Denki Co., Ltd.

25-Aug.-2021

6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

https://www.daikoku.co.jp/en/ir/

Financial results trends

Net sales by segment
Information System Segment(¥mn)

Control System Segment

60,00050,00027,184 20,889 16,950
12,98640,00021,36930,00013,515
9,322

11,05920,00010,00023,492 25,741

31,685

6,740

6,598
5,775

36,065 37,104 34,076
27,260 24,827 24,474 26,354

17,4620
FY3/11 FY3/12 FY3/13 FY3/14 FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 FY3/20 FY3/21
Source: Prepared by FISCO from the Company’s results briefing materialsThe Information System Segment has become the source of profits, and has maintained high profit margins as theCompany’s performance recovered. Reflecting increasing investment in R&D for next-generation products from
FY3/14 to FY3/17, profit margins have declined, but considering the size of the investment, margins are still high.
However, although R&D for next-generation products has run its course for the meantime since FY3/18, profit
margins have not completely returned to the previous high levels due to factors including the stagnation in net
sales. Meanwhile, steady progress in the conversion to a recurring revenue business model, including growth in MG
services, has been supporting income.

Operating income margin by segment
Information System Segment

Control System Segment

25.0%
18.6%

20.0%

15.0%

16.9%

13.0%

11.4%

10.8%

10.0%
5.0%

19.2%

11.0%

9.8%

6.7%

5.4%

11.1%

11.8%

11.1%

7.2%
4.7%

2.9%

1.2%

0.0%

-5.0%
-10.0%-15.0%

-2.3%

-0.3%

-6.5%
-10.2%-11.5%
FY3/11 FY3/12 FY3/13 FY3/14 FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 FY3/20 FY3/21

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

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11 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Financial results trends

In terms of financial indicators, the Company’s equity ratio, a measure of financial stability, has been rising, reflecting
the accumulation of retained earnings, reaching a high level of 74.6% in FY3/21. The current ratio, which indicatesthe ability to make payments in the short term, was 267.1%, mainly due to large holdings of cash and deposits, as
the Company’s robust financial base is a strength not only for business continuity, but also as a source for powering
future growth. ROE, a measure of capital efficiency, has been low since FY3/15 due to a deterioration of net income.
The Company suffered losses in FY3/15 due to the bankruptcy of a manufacturer customer and in FY3/16 due to thedevaluation of parts and materials for its pachislot machines as industry restrictions were placed on risky machines.

Eq u i ty r a ti o a n d R O E
Equity ratio (left)

ROE (right)

80.0%
67.1%

70.0%
60.0%

59.8%
52.9%

55.1%

62.1%

71.2%

74.6%

20.0%

15.0%

10.5%

40.0%

6.3%

14.5%

10.0%
2.7%

30.0%

30.0%

25.0%

62.3%

53.7%

50.0%

20.0%

60.0%

68.4%

1.7%

2.7%

4.3%

3.5%

2.0%

-1.3%

5.0%
0.0%

-5.5%

10.0%

-5.0%

0.0%

-10.0%
FY3/11 FY3/12 FY3/13 FY3/14 FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 FY3/20 FY3/21

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

The FY3/21 results declined significantly, mainly due to the impact
of COVID-19, but they recovered from the 2H and profits were higher
than forecast
2. Overview of FY3/21 results
In the FY3/21 results, sales and profits decreased significantly due to the impact of COVID-19, with net sales
declining 29.4% YoY to ¥23,228mn, operating income falling 65.7% to ¥490mn, ordinary income decreasing 41.1%
to ¥986mn, and net income attributable to owners of the parent declining 42.3% to ¥612mn. However, results
recovered from the 2H and profits were higher than forecast.
Management conditions for pachinko halls become even more severe with the ongoing severe market environment
overlapped with the impact of COVID-19 (including halls’ temporary closures and reduced opening hours). In
addition, the schedule for the removal of machines compliant with the old regulations was pushed back, which
invited an extreme fall in the desire to conduct capital investment and the postponement of capital investment.
Therefore, results in the Information System Segment fell greatly. In the Control System Segment as well, against
the backdrop of factors including various game machines manufacturers postponing sales of new titles due to theimpact of COVID-19, sales of display and control units declined YoY.

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12 20

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

Daikoku Denki Co., Ltd.

25-Aug.-2021

6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

https://www.daikoku.co.jp/en/ir/

Financial results trends

Profits decreased alongside the major decline in sales, but they were higher than forecast supported by theCompany-wide review of costs. In particular, the Company significantly reduced SG&A expenses with a completionof a round of R&D expenses (down ¥350mn YoY), reductions in personnel expenses (down ¥280mn) and businesstrip expenses because of COVID-19 (down ¥150mn).
Financially, total assets were down 3.8% on the end of the previous fiscal period to ¥41,084mn, mainly due tothe decreases in accounts receivables and other trade receivables because of the lower sales, and in depreciation expenses of property, plant and equipment. Conversely, shareholders’ equity increased slightly, up 0.8% to¥30,662mn, due to the accumulation of retained earnings, so the equity ratio rose to 74.6% (71.2% at the end of theprevious period). The Company has also secured cash and deposits of ¥15,739mn and its current ratio is 267.1%,
so there are no concerns about its financial soundness.
Overview of FY3/21(¥mn)
FY3/20Results

FY3/21

Ratio tosales

32,922

Results

ChangeRatio tosales%
changeInitialforecast

vs. forecast

Ratio tosales

Achievement
rate-9,693-29.4%

28,000-4,771

83.0%

Information System Segment

26,35480.0%

17,46275.1%-8,892-33.7%

21,00075.0%-3,537

83.2%

Control System Segment

6,598

20.0%

5,775

24.9%

-822

-12.5%

7,000

25.0%

-1,224

82.5%

-31

-

-9

-

21

-

-

-

-

-

Gross profit

12,040

36.6%

9,388

40.4%

-2,652-22.0%

10,50037.5%-1,111

89.4%

SG&A expenses

10,608

32.2%

8,897

38.3%

-1,711-16.1%

10,10036.1%-1,202

88.1%

Operating income (loss)

1,431

4.3%

490

2.1%

-941

-65.7%

400

1.4%

90

122.7%

3,104

11.8%

1,939

11.1%

-1,164-37.5%

1,700

8.1%

239

114.1%

78

1.2%

-15

-0.3%

-93

-

600

8.6%

-615

-

-1,751--1,433-317--1,900-466-

Ordinary income (loss)

1,674

5.1%

986

4.2%

-688

-41.1%

500

1.8%

486

197.4%Net income (loss) attributable toowners of the parent

1,061

3.2%

612

2.6%

-448

-42.3%

300

1.1%

312

204.2%

Depreciation

2,212

6.7%

1,967

8.5%

-244

-11.1%

2,119

7.6%

-151

92.8%

Net sales

Adjustment

Information System Segment
Control System Segment
Adjustment

23,228

FY3/21YoY
End of FY3/20

End of FY3/21

Total assets

42,702

41,084-1,617-3.8%

Total equity

30,40630,662255

0.8%

Equity ratio

71.2%

74.6%

3.4pt

-

%
changeSource: Prepared by FISCO from the Company's financial results and results briefing materials

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13 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Financial results trends

The results by segment were as follows.
(1) Information System Segment
Results decreased significantly, with net sales declining 33.7% YoY to ¥17,462mn and segment income falling
37.5% to ¥1,939mn. The Company focused on introductions of the “X (Kai)” AI hall computer (system upgradefrom existing hall computers) and on sales of the latest products linked to it. But during the COVID-19 pandemic,
the impact of halls’ temporary closures and reduced opening hours and players refraining from visiting halls caused
pachinko halls’ management conditions to become even more severe, and this overlapped with the extreme fallin the desire to conduct capital investment and the postponement of capital investment following the schedule
for the removal of machines compliant with the old regulations being pushed back by one year. Therefore, sales
declined significantly. In particular, while the impact of COVID-19 was basically within the expected scope, it seems
that the impact of pushing back the removal schedule was greater than anticipated. In addition, sales of MG
services, which have contributed to improving earnings, declined slightly YOY due to the temporary suspensionof services (approximately 1 month) during the periods when halls were temporarily closed. But even so, they canbe highly evaluated on the point of supporting earnings*. Additionally, as “play time” machines have become morecommon, sales of information-disclosure terminals compliant with “play time” machines (REVOLA, IL-X3) havetrended steadily since the year-end sales competition through proposals at the MIRAIGATE 2020 Web Exhibition& Seminar. In addition, the number of introductions of “X (Kai),” the AI hall computer useful for managing data from“play time” machines, has recovered up to 90% compared to the previous year, which can be viewed as a goodsign of things to come. Profits decreased alongside the decline in sales, but they were still significantly higher thanforecast as they were supported by highly profitable MG services, and also from the holding of online exhibitions
and seminars, the utilization of mobile, and the reductions of various costs. The segment income margin wasmaintained at the high level of 11.1% (11.8% in the previous period).
*	In particular, it is aiming to steadily increase the shares of the “X (Kai)” AI hall computer and of Market-SIS (a part of MG
services), which is a commercial area analysis service that will become a mainstay service in the future and that is being
highly evaluated as a tool to ascertain the flow of people (player trends) and that contributes to halls’ ability to attract
customers in commercial zones.

Regarding the operating status of pachinko halls (4 yen pachinko, 20 yen pachislot), although it was sluggish
at around 50% YoY in April–May 2020 when the state of emergency was declared, it recovered thereafter, andhas been around 80% since July. Although there is a sense that the recovery trend is plateauing at the moment,
demand for replacement of game machines is expected to be energized going forward, as game machines withnew game features (“play time,” etc.) are gradually introduced to the market and high-capacity pachinko machines
begin to appear.
(2) Control System Segment
Net sales decreased 12.5% YoY to ¥5,775mn and the segment loss was ¥15mn (income of ¥78mn in the previous
period). Various game machines manufacturers postponed sales of new titles due to the impact of COVID-19,
which included halls’ temporary closures and reduced opening hours. But even in this situation, the Company was
still able to secure sales at a certain level, including sales of parts and from contracted small-scale development
projects, but infrastructure sales (display and control units), which are the core sales, declined YoY. Profits were
pushed down by the decline in sales and also as highly profitable infrastructure sales slumped, so a segment loss
was recorded. However, the restrictions on activities due to COVID-19 are gradually being eased and the various
game machine machines are conducting fully fledged development of new game machines, including of “playtime” machines. The Company is progressing measures in line with these developments, including reallocating
resources and reviewing processes, while at the same time it is progressing measures for the future, including
expanding the business areas for the outsourced development of pachislot machines and sales products, andconducting survey research toward reducing the costs of display units.

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14 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Financial results trends

3. Summary of FY3/21
Based on the above and to summarize FY3/21, the challenging industry environment combined with the impact of
the COVID-19 pandemic resulted in a continuation of weak operating results. To restate the current situation, there
has not been a recovery in willingness to make capital investments in pachinko halls, nor significant progress in theshift to pachinko and pachislot machines that comply with the new regulations. Amid this, the Company has notbeen able to introduce the AI hall computer “X (Kai)” in earnest or sell the latest related equipment. However, if welook at the Company’s activities, it has been working towards market penetration of the AI hall computer “X (Kai)”and “Market-SIS” (commercial area analysis service), as well as promoting contracted development of pachislot
machines. These efforts appear to be going well, so the groundwork laid by the Company can be seen as a positive
heading into the future. In particular, at the MIRAIGATE 2020 Web Exhibition & Seminar discussed below, the numberof attendees was double that of a normal year, and the Company was able to confirm large potential demand forits services. Also, in the market there has been gradual progress with the development and introduction of “playtime” machine models. These developments represent an opportunity for business expansion in the Company’s
Information System Segment and Control System Segment, and we view the recovery of its operating results as
only a matter of time.

█ Main activities
MIRAIGATE 2020 Web Exhibition & Seminar had twice the usual
number of attendees, the Company confirmed large potential
demand
1. Held the MIRAIGATE 2020 Web Exhibition & Seminar
Each year, the Company participates in various exhibitions and seminars held nationwide to provide proposals, suchas on new products and on services that are useful for hall management (data utilization, etc.) For the Company,
these events are important places for conducting sales and building relations. In 2020, it held an online event(September 1st to 15th) on a trial basis for the first time from the viewpoint of measures for COVID-19, and it had
a total of 5,508 participants, which is twice the scale of a typical year. Participation was likely facilitated by being
held online, but even so, within the ongoing severe industry environment, this can be understood as showing thegreat expectations and potential demand for the Company’s products and proposals. The themes of this event
were “play time,” “reduce personnel and save labor,” and “with COVID-19,” and it made proposals for the industry’s
new normal. Also, at the same time it held the DK-SIS seminar and made proposals such as for market analysis
during COVID-19 and methods to recover results in the future. In March 2021, it held the second online seminar,
which had 4,370 participants.

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15 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Main activities

2. Proposals of new products in line with the times, such as combatting the COVID-19 pandemic
The Company also released new products and services in line with the times one after another. These included
measures to help halls prevent COVID-19 infections*1, reduce personnel and save labor*2, and handle the prohibitionof smoking in halls*3. These efforts have not only supported hall business management, but have also built a basefor sales of information disclosure equipment and penetration of the AI hall computer “X (Kai).”*1	To help prevent the spread of the COVID-19, the Company has added a function to call lamps to notify players of themachines that have been cleaned and disinfected and lights up the lamps to notify staff of the machines that need to bedisinfected.
*2	T he Company released wearable device WW-01 for hall staff to use. With a large LCD screen, it conveys various
information, such as call notices from players, abnormalities or unauthorized access to game machine data, etc., via
vibration and on-screen display for every instance.
*3	W hen leaving machines to smoke, players can use the seat-leaving operation on machines, such as the BiGMO
PREMIUM, REVOLA and VEGASIA machines. They can smoke with peace of mind while keeping track of their smoking
time on the “DiSMO” signage installed in the “Smoking Ark” smoking booth. Staff can respond quickly with an incoming
voice notification from a game machine when a player has exceeded the smoking time limit.

█ Outlook
The outlook for FY3/22 is for sales and profits to increase from themarket’s revitalization due to replacements with machines compliant
with the new regulations and the recovery of pachinko hall capital
investment
1. FY3/22 forecast
For the FY3/22 results, the Company is forecasting sales and profits to increase, with net sales to rise 11.9% YoY
to ¥26,000mn, operating income to grow 73.2% to ¥850mn, ordinary income to increase 1.3% to ¥1,000mn, andnet income attributable to owners of the parent to rise 6.1% ¥650mn.
The severe business environment is continuing due to the prolonging of COVID-19 and the shortage of semiconductors, but sales are forecast to recover to a certain extent due to the recovery of pachinko hall capital investment
from the 2H. In particular, in advance of the installation deadline of the end of January 2022 for machines compliant
with the old regulations, the outlook is that their replacements with machines compliant with the new regulations
will contribute to the revitalization of the game machines market. Therefore, it is necessary to be aware that theforecasts are for results to be concentrated in the 2H. Also, based on the prolonging of COVID-19, it seems that theCompany’s policy is to further improve the earnings structure so it is able to generate profits even if hall operations
do not return to their former level.
For profits, the Company plans to actively invest (upfront investment) in the Information System Segment, but theforecast is still for operating income to increase significantly from the effects of the higher sales and the improvement
to the earnings structure. The operating income margin is also expected to improve to 3.3% (2.1% in the previous
period).

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16 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Outlook

FY3/22 forecast(¥mn)
FY3/21ResultFY3/22

Ratio to sales

Forecast

23,228Net sales

YoY change

Ratio to sales

26,000% change
2,771

11.9%

Information System Segment

17,46275.1%

19,500

75.0%

2,037

11.7%

Control System Segment

5,775

24.9%

6,500

25.0%

724

12.5%

-9

-

-

-

-

-

Gross profit

9,388

40.4%

10,400

40.0%

1,011

10.8%

SG&A expenses

8,897

38.3%

9,550

36.7%

652

7.3%

Operating income

490

2.1%

850

3.3%

359

73.2%

1,939

11.1%

1,850

9.5%

-89

-4.6%

-15

-0.3%

600

9.2%

615

-

Adjustment-1,433--1,600--166-

Ordinary income

986

4.2%

1,000

3.8%

13

1.3%

Net income attributable to ownersof the parent

612

2.6%

650

2.5%

37

6.1%

Adjustment

Information System Segment
Control System Segment

Source: Prepared by FISCO from the Company's financial results and results briefing materials

2. Policy for main activities
The Company’s policy is to aim to recover results at an early stage and also to focus on activities with an eye to the
future, while responding expediently to changes of conditions.
(1) Information System Segment
It will continue to promote introductions of the “X (Kai)” AI hall computer and to spread the use of Market-SIS, acommercial area analysis service, that will be a mainstay service in FY3/22. At the same time, it is thought that it
will also work to enhance maintenance services and on further strengthening relations with halls.
(2) Control System Segment
Its policy is to shift the main axis of sales from pachislot machines to pachinko machines, which are currently
performing favorably. Future measures include expanding the business areas, such as through sales of theCompany’s own pachislot housing* (a sales strategy focusing on hardware) and strengthening the profitability ofoutsourced software development projects (improve work efficiency, etc.)*	W ith the aim of effectively utilizing (OEM), the molds, etc., owned by the Company

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17 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Outlook

3. FISCO analyst’s opinion
The FISCO analyst’s opinion is that while it will be necessary to continue to pay attention to the impact of COVID-19,
with the approaching deadline for installations of machines compliant with the old regulations, we can expect
the market to be revitalized. In particular, from the steady spread of “play time” machines and the large potential
demand for the Company’s products (and services), we think it is highly likely that the Company’s results will entera fully-fledged recovery process. We also judge that the Company’s results forecasts are at fully achievable levels,
when considering its conservative view on the operations rate of halls. The points to focus on will be the progress
made in the spread of the “X (Kai)” AI hall computer and the Market-SIS service, and also the measures with aneye to the future, such as launching new MG services and expanding the business areas in the Control System
Segment. In particular, its developments for specific products (and services) would seem worthy of attention as
showing the direction it is aiming for in the future. Also, assuming that the COVID-19 pandemic is approaching its
end, alongside the normalization of the market, we estimate that investment and M&A in order to be one of thesurvivors in the pachinko halls industry will accelerate and the movement toward an industry reorganization willrapidly advance, which could be an important turning point for the Company. Therefore, it will be necessary tofollow-up on developments in the future from these kinds of viewpoints.

█ Future strategic direction
In addition to increasing market share with the AI hall computer “X(Kai),” the Company aims to generate new value utilizing its data
analytics and planning and development capabilities
In the Company’s view, regulatory revisions and other changes in conditions surrounding the pachinko industry will,in the medium to long term, represent a good opportunity for the industry to evolve into one that enjoys even wider
public support. The Company’s policies are focused particularly on expanding market share with its AI hall computer“X (Kai)” and other next-generation products, as well as creating new value through its data analytics and planningand development capabilities, which will contribute to industry growth while also leading to improved growth andprofitability for the Company itself.
1. Information System Segment
The Company’s policy is to promote introduction of the “X (Kai)” AI hall computer, and at the same time, to contributeto the earnings of pachinko halls by market launching products installed with various content compatible withnew styles of playing, such as the “play time” machines. Moreover, by progressing MG services (in particular, theMarket-SIS commercial area analysis service), it will support pachinko halls’ improved competitiveness and laborsaving, and realize both customer acquisitions and the stabilization of results.

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

18 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/

Future strategic direction

2. Control System Segment
In addition to the growing demand for reduced development costs for pachinko and pachislot machines, demand
for new proposals to address future changes in the market environment is rising, and as planning capabilities
have become increasingly important, the Company intends to closely coordinate the efforts of its Control System
Segment and Information System Segment in order to further differentiate itself from competitors, assure rapid
response to changes in the market environment, and raise operating efficiency. In particular, the Company will revise
its development system, further improve operating efficiency, and use the hardware and software technologies it
has cultivated over the years to advance bundled contract development of pachislot machines and expand thebusiness domain of the products it sells (start the pachislot business in earnest), as well as utilize the Information
System Segment’s DK-SIS data and Fan-SIS data* to promote project proposals that generate new gaming value.
*	A service to collect data of player trends using the CII FACE authentication system from halls that have introduced it
nationwide, which enables player trends for the market as a whole to be ascertained.

3. Strengthening the R&D system
On April 1, 2020, the Company newly established the R&D Department (changed to the R&D Office from 2021) toconduct tasks including basic research into new technologies and investigations of new businesses from a mediumto long-term perspective. With the goal of providing technological support for business expansion in the future, it is
responsible for building a technological foundation for introductions of the latest technologies within the Company,
including AI technologies. It is also progressing open innovation and working on accumulating technologies andbuilding alliances outside of the Company.
4. Points of focus for the FISCO analyst
Even though the pachinko industry is approaching a major turning point that renders the Company’s surrounding
profit conditions uncertain from a medium- to long-term perspective, the successful launch of AI hall computer“X (Kai)” aimed at future growth, in addition to its high-value-added next-generation products, will give it a majoradvantage over its competitors. In particular, we see the Company’s MG services and value proposals leveraging
its unique services and data analysis putting it in a strong position to meet the changing needs of the industry. Even
assuming the pachinko market continues to contract for a while longer, we believe it will be possible for the Company
to sustain growth with the help of a full-scale rollout of a high-value-added lineup of next-generation products that willcapture replacement demand among existing pachinko hall operators. Additionally, polarization is likely to proceedfurther in the pachinko hall industry with firms with extensive capital resources surviving. These conditions are likely
to work favorably for the Company in its efforts to increase market control with the AI hall computer “X (Kai)” andraise market share.
We believe that for the time being, it is necessary to cautiously assess net sales growth, which is readily affected by
the external environment, but we should also focus on improvement in profitability through development of products
and services that respond to changes in market conditions and expansion of MG services. From a medium- tolong-term perspective, we also anticipate results from the Company’s efforts to revitalize the industry as a whole, as
it faces a new age with the complete transition to machines complying with the new regulations. We will also keep
watch on the Company’s efforts to engage directly with pachinko and pachislot players, amusement fans and new
fan segments (including provision of member information via a smartphone app and initiatives that bring people tohalls) as well as with pachinko halls and game machine manufacturers. Furthermore, as the Company completesa round of major investment in next-generation hall computers and begins collecting on that investment, we needto also monitor its M&A moves, including those outside the industry. Because the Company’s expertise in utilizing
data can be extended in other areas, we believe M&A will be an important strategy, both for securing a new sourceof profits and distributing risk.

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

19 20

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

Daikoku Denki Co., Ltd.
6430 Tokyo Stock Exchange First Section and Nagoya Stock Exchange First Section

25-Aug.-2021
https://www.daikoku.co.jp/en/ir/█ Shareholder returns
Plans to continue to pay a ¥40 annual dividend in FY3/22, likely tohave room to raise the dividend over the future accompanying profit
growthDue to the impact of COVID-19, profits decreased significantly in FY3/21, but even so the Company maintained
the dividend per share at ¥40 (interim dividend ¥10, period-end dividend ¥30). In FY3/22 as well, it plans to once
again pay an annual dividend per share of ¥40. Its policy is to determine a dividend increase in line with results, so
we can expect there to be plenty of room for it to increase the dividend in the future alongside the growth of profits.
The Company had introduced a shareholder benefits program with the aims of increasing the appeal of investing
in its shares and promoting shareholders holding them over the medium- to long term. However, as the businessenvironment is expected to continue to be uncertain in the future and as profits have decreased significantly due
to the impact of COVID-19, it abolished this program in FY2020. Going forward, its policy is to prioritize dividends
in order to return profits to shareholders.

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

20 20

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
The intellectual property rights, including the copyrights to the main text hereof, the data
and the like, belong to FISCO, and any revision, reprocessing, reproduction, transmission,
distribution or the like of this report and any duplicate hereof without the permission of FISCO
is strictly prohibited.
FISCO and its affiliated companies, as well as the directors, officers and employees thereof,
may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-13-3 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (IR Consulting Business Division)
Email: support@fisco.co.jp