Shared Research logo
  • Home
  • All Companies
    All Companies
    Companies
    Recently viewed
    Browse companies...
  • English日本語
  • Log in
  • Sign up
Overview
My Comments
My Notes

EPCO 2311

エプコ
Recent Updates
2022-05-20
Monthly results for April 2022
2022-05-12
Q1 12/22 flash update
2022-03-09
Full-year FY12/21 report update
Get in touch
12th floor, OLINAS Tower, 4-1-3 Taihei, Sumida-ku, Tokyo
https://www.epco.co.jp/
03-6853-9165
Summary
The main businesses of EPCO Co., Ltd. are the D-TECH (Design Tech) business and the H-M (House Management) business.
Construction & Engineering
Key dates
2021-11-25
Coverage initiation
Full Report
2022-05-20
Q1 12/22 flash update
2022-05-12
Full-year FY12/21 flash update
2022-02-15
Download

Executive summary

Overview

The main businesses of EPCO Co., Ltd. are the D-TECH (Design Tech) business and the H-M (House Management) business. The D-TECH business focuses on providing design services for water supply and drainage facilities (mainly water and drainage pipes, toilet water purifying equipment, rain gutters) for builders of low-rise housing (detached houses, multi-unit housing with two floors or less). The H-M business involves call-center operations related to housing maintenance on behalf of house builders. The company also launched the E-Saving (Energy Saving) business in FY12/20 to offer construction/installation services related to residential energy conservation. In this business, the company installs energy-saving equipment in collaboration with Tokyo Electric Power Company Holdings, Inc. (TSE1: 9501).

In FY12/21, the D-TECH business accounted for 47.9% of revenue and 64.4% of operating profit before adjustments; the H-M business accounted for 28.7% of revenue and 37.2% of operating profit before adjustments; the E-Saving business accounted for 16.9% of revenue and 3.3% of operating profit before adjustments; and the System Development business accounted for 6.6% of revenue and posted an operating loss of JPY38mn.

In the D-TECH business, the company designs water supply and drainage facilities for house builders such as Panasonic Homes. It also estimates component costs and prefabricates components (components are pre-processed at a plant so that only assembly is required at construction sites). The company creates facility design drawings based on design drawings for houses provided by house builders, and matches designs to the house structure and climate conditions (freezing in winter, for example). In-house engineers have been working to save labor at all stages from receiving project orders to delivery, such as by enhancing design drawing drafting software. Through efficient design drawing drafting and prefabrication, EPCO can provide house builders with advantages such as lower construction costs, uniform construction quality, and faster delivery. The company started the D-TECH business in 1998 as the industry’s first equipment supply chain management service, and by FY12/21 had formed business relationships with most leading custom-built house builders in Japan.

The D-TECH business does design work for about 100,000 housing units per year on average (of which about 80,000 are for water supply and drainage facilities). Revenue per unit ranges from JPY25,000 to JPY28,000. About 70% of units designed are for custom-built homes and about 30% are for multi-unit housing. The company leads the industry, designing facilities for 14% of all low-rise housing starts (FY12/20). Some other component manufacturers, such as Maezawa Kyuso Industries (TSE1: 6485), make use of prefabrication to offer similar services, but EPCO says there is no other company that deals in components and equipment from multiple manufacturers from a neutral standpoint and provides them for low-rise housing.

In the H-M business, the company carries out call-center operations on behalf of house builders, including response to general home-repair inquiries and arrangements for repair services. For some of the houses for which the company designed facilities in the D-TECH business, it also carries out management on consignment in the H-M business. As such, the D-TECH business has contributed to growth in housing units under management in the H-M business. The company had approximately 1.6mn housing units under management (+14.3% YoY) in FY12/21. Fee structures differ depending on customers (mainly house builders), but annual revenue per unit under management ranges from JPY800 to JPY900. The company says that no customers have cancelled service since the business started.

The H-M business arranges repair work efficiently by leveraging design drawings generated by the D-TECH business, house-specific lists of components and materials that need upgrading, and the history of repairs (“house history”) to identify details of the problem and the components needed for repair. There are numerous call-center agents in Japan, such as transcosmos inc. (TSE1: 9715) and Relia, Inc. (TSE1: 4708), but no other company offers services leveraging design data.

In the E-Saving business, the company is promoting sales of Enecari and Enecari Plus, flat-rate subscription services for residential energy-saving devices. By paying a monthly fee, homeowners can use solar power systems, storage batteries, IH cooking heaters, and other energy-saving devices with no upfront cost. Depending on electricity usage, the total cost savings from usage fees, utilities, and income from electricity sales after the introduction of Enecari are lower than their utility costs before using the service. Under Enecari Plus, TEPCO Energy Partner retains ownership of the energy-saving devices for the duration of the contract. Therefore, residents do not receive income from the sale of electricity, but they can use the Enecari Plus electricity plan, which is based on the installation of a dedicated water heater, and can reduce their usage fees and total utility costs compared to Enecari. ENE’s, a consolidated subsidiary that performs electrical installation work, and TEPCO HomeTech (an equity-method affiliate in which EPCO holds 49.0% ownership), a joint venture between EPCO and TEPCO Energy Partner, are working together to promote Enecari. 

Earnings trends

In FY12/21, revenue came to JPY4.7bn (+7.2% YoY), operating profit was JPY438mn (-0.9% YoY), recurring profit was JPY371mn (-20.3% YoY), and net income attributable to owners of the parent was JPY658mn (+50.2% YoY). Revenue increased YoY on the back of higher revenue in the H-M business and a full-year contribution from ENE's, which became a subsidiary in FY12/20. Operating profit declined due to upfront costs incurred in the development of new services in the D-TECH and H-M businesses.

The company's forecast for FY12/22 calls for revenue of JPY5.1bn (+8.7% YoY), operating profit of JPY460mn (+5.1% YoY), recurring profit of JPY501mn (+35.1% YoY), and net income attributable to owners of the parent of JPY366mn (-44.4% YoY). The company expects revenue to rise in the D-TECH, H-M, and E-Saving businesses due to the contribution of new services. The company also expects operating profit to increase due to higher revenue, although upfront costs will be recorded in the D-TECH and H-M businesses as in FY12/21.

In February 2021, the company announced a medium-term business plan covering FY12/21–FY12/25. The plan targets revenue of JPY10.0bn in FY12/25 (CAGR of 20.8% from FY12/21), operating profit of JPY1.8bn (42.4%), and recurring profit of JPY2.0bn (52.4%). It expects ROE to reach 20.0% in FY12/25 (14.1% in FY12/21). The company aims to boost performance by developing a cloud-based building information modeling (BIM) service in the D-TECH business, strengthening cross-selling between the D-TECH and H-M segments, and increasing the number of installations in the E-Saving business in line with expanding sales of Enecari. The company also foresees higher equity in earnings of affiliates, with the increased performance in an equity-method affiliate TEPCO HomeTech.

Strengths and weaknesses

Shared Research sees three strengths of EPCO: (1) Building on its ongoing automation of design work, the company boasts the industry’s largest share in water supply and drainage facilities design for low-rise housing; (2) its cloud-based BIM service has the potential to raise service price per unit in the D-TECH business; and (3) the company has set itself apart in the H-M business by leveraging design drawings generated in the D-TECH business. The company’s three major weaknesses are: (1) The D-TECH business is over-concentrated on custom-built homes, an area in which the slowdown in housing starts is even more pronounced than in overall housing starts in Japan; (2) personnel expenses are increasing at its design bases in China; and (3) the company tends to underestimate risks in new businesses. (See “Strengths and weaknesses” section below for details.)

Key financial data

Income statementFY12/12FY12/13FY12/14FY12/15FY12/16FY12/17FY12/18FY12/19FY12/20FY12/21FY12/22
(JPYmn)Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Est.
Revenue2,7083,3003,0513,1323,2703,4383,8994,1514,3814,6965,105
YoY---7.5%2.7%4.4%5.1%13.4%6.4%5.5%7.2%8.7%
Gross profit1,1411,6071,4031,1641,2561,3001,5651,6801,4661,462
YoY---12.7%-17.1%8.0%3.4%20.5%7.3%-12.8%-0.2%
Gross profit margin42.1%48.7%46.0%37.2%38.4%37.8%40.1%40.5%33.5%31.1%
Operating profit580840323-13292556579560442438460
YoY---61.6%--501.3%4.2%-3.2%-21.1%-0.9%5.1%
Operating profit margin21.4%25.5%10.6%-2.8%16.2%14.8%13.5%10.1%9.3%9.0%
Recurring profit59282936870402511468598465371501
YoY---55.6%-81.1%476.0%27.3%-8.4%27.6%-22.1%-20.3%35.1%
Recurring profit margin21.9%25.1%12.1%2.2%12.3%14.9%12.0%14.4%10.6%7.9%9.8%
Net income355469212100308352289428438658366
YoY---54.9%-52.8%208.4%14.1%-17.7%47.9%2.3%50.2%-44.4%
Net margin13.1%14.2%6.9%3.2%9.4%10.2%7.4%10.3%10.0%14.0%7.2%
Per-share data (split-adjusted; JPY)
Shares issued (year-end; '000)4,6584,6584,6584,6584,6584,6589,3169,3169,3169,316
EPS39.752.523.711.234.639.532.548.049.273.941.2
EPS (fully diluted)----------
Dividend per share-------30303232.0
Book value per share292.0337.7346.2327.5327.0336.1336.6355.6479.5566.7
Balance sheet (JPYmn)
Cash and cash equivalents2,0412,2391,8851,6672,1712,0661,7531,4981,6422,148
Total current assets2,6102,9522,5932,6172,7522,7122,4732,2842,4813,061
Tangible fixed assets152135182159144132339349538475
Investments and other assets1774095563232984836967332,1862,692
Intangible fixed assets587678225191206228253197149
Total assets2,9983,5723,4093,3263,3853,5333,7363,6195,4026,377
Accounts payable2682267774056
Short-term debt----------
Total current liabilities346515282352436514720438604666
Long-term debt----------
Total fixed liabilities4338314534221512524660
Total liabilities3885543133974705367354511,1281,326
Net assets2,6103,0183,0962,9282,9152,9973,0013,1694,2735,051
Total interest-bearing debt----------
Cash flow statement (JPYmn)
Cash flows from operating activities283574151174802521423463513230
Cash flows from investing activities-431-270-361-1373-362-395-114-412483
Cash flows from financing activities-268-224-244-246-260-245-245-245-268-267
Financial ratios
ROA (RP-based)19.7%25.2%10.5%2.1%12.0%14.8%12.9%16.3%10.3%6.3%
ROE14.0%16.7%6.9%3.3%10.6%11.9%9.7%13.9%11.8%14.1%
Equity ratio87.0%84.5%90.8%88.0%86.1%84.8%80.3%87.5%79.1%79.2%
Source: Shared Research based on company data
Notes: Figures may differ from company data due to differences in rounding methods.
The company changed its accounting period in FY12/12. The transitional FY12/12 period covers only 11 months.
In January 2018, the company conducted a 2-for-1 stock split of its common shares. Per share data in the above table are adjusted to reflect the split. 

Recent updates

Monthly results for April 2022

2022-05-20

EPCO Co., Ltd. announced its monthly results for April 2022.

Monthly results for FY12/22
FY12/22 (Cumulative)
(JPYmn)JanFebMarAprMayJunJulAugSepOctNovDec
Revenue3607421,1751,579
YoY3.2%-8.4%1.4%4.2%
Design Service162320500686
YoY-4.1%-12.6%-6.5%-4.9%
BIM related551321
Maintenance Service135274429569
YoY3.1%-0.7%5.4%7.8%
CRM----
Energy Saving Service61146244322
YoY27.1%-13.1%13.0%22.0%
THT361315
Equity in earnings of affiliates-8-1010
FY12/22 (単月)
(JPYmn)JanFebMarAprMayJunJulAugSepOctNovDec
Revenue360381433404
YoY3.2%-17.4%24.1%13.5%
Design Service162158180186
YoY-4.1%-19.8%6.5%0.0%
BIM related5088
Maintenance Service135139155140
YoY3.1%-4.1%18.3%15.7%
CRM----
Energy Saving Service61859878
YoY27.1%-29.2%104.2%62.5%
THT3372
Equity in earnings of affiliates-8-211-1
Monthly results for FY12/21
FY12/21 (Cumulative)
(JPYmn)JanFebMarAprMayJunJulAugSepOctNovDec
Revenue3498101,1591,5151,8672,2722,6763,0613,4703,8684,2594,696
YoY--14.9%12.6%11.9%10.6%10.5%10.5%10.0%9.9%8.3%7.2%
Design Service1693665357219061,1111,3091,4971,6981,8892,0752,249
YoY---7.3%-4.5%-2.1%-0.3%0.5%1.2%1.6%1.3%1.3%0.9%
BIM related0189910111215151823
Maintenance Service1312764075286517919361,0761,2121,3441,4761,654
YoY--33.9%33.7%33.7%35.0%34.9%34.8%34.4%33.1%32.3%34.7%
CRM------------
Energy Saving Service48168216264308368429486559633706792
YoY---428.0%234.8%155.6%113.4%95.2%79.2%74.9%49.6%49.7%
THT017789202529374244
Equity in earnings of affiliates-5-6-6-17-29-37-44-55-64-79-88-94
FY12/21 (Monthly)
(JPYmn)JanFebMarAprMayJunJulAugSepOctNovDec
Revenue349461349356352405404385409398391437
YoY---10.1%6.0%8.6%5.2%9.8%11.0%6.2%8.7%-5.3%-2.2%
Design Service169197169186185205198188201191186174
YoY---16.3%4.5%8.8%8.5%5.3%6.2%4.7%-1.5%1.1%-2.8%
BIM related017101113035
Maintenance Service131145131121123140145140136132132178
YoY--32.3%33.0%33.7%41.4%34.3%34.6%30.8%22.2%24.5%58.9%
CRM------------
System Development4812048484460615773747386
YoY----4.0%4.8%15.4%7.0%18.8%15.9%48.0%-33.6%50.9%
THT0160111154852
Equity in earnings of affiliates-5-10-11-12-8-7-11-9-15-9-5
Source: Shared Research based on company data

Trends and outlook

Quarterly trends and results

Quarterly results
CumulativeFY12/21FY12/22FY12/22FY12/22
(JPYmn)Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4% of Est.1H Est.% of Est.FY Est.
Revenue1,1592,2723,4714,6961,17948.1%2,44923.1%5,105
YoY14.9%10.6%10.0%7.2%1.7%7.8%8.7%
Gross profit3546971,1141,462305
YoY-10.8%-3.3%4.7%-0.2%-13.8%
Gross profit margin30.5%30.7%32.1%31.1%25.9%
SG&A expenses2524917571,025282
YoY3.2%-4.6%-1.5%0.1%11.8%
SG&A ratio21.8%21.6%21.8%21.8%23.9%
Operating profit1022063574382314.5%1585.0%460
YoY-33.3%0.0%21.0%-0.9%-77.5%-23.4%5.1%
Operating profit margin8.8%9.1%10.3%9.3%1.9%6.5%9.0%
Recurring profit1051873203713826.0%1457.5%501
YoY-44.6%-25.0%-3.4%-20.3%-63.9%-22.4%35.1%
Recurring profit margin9.0%8.2%9.2%7.9%3.2%5.9%9.8%
Net income57951756583434.2%999.3%366
YoY-57.9%-44.7%-18.1%50.2%-40.2%4.3%-44.4%
Net margin4.9%4.2%5.0%14.0%2.9%4.0%7.2%
Quarterly performanceFY12/21FY12/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
Revenue1,1591,1131,2001,2251,179
YoY14.9%6.4%9.1%-0.1%1.7%
Gross profit354343417349305
YoY-10.8%6.0%21.5%-13.3%-13.8%
Gross profit margin30.5%30.8%34.7%28.5%25.9%
SG&A expenses252239266268282
YoY3.2%-11.6%4.7%4.9%11.8%
SG&A ratio21.8%21.4%22.2%21.9%23.9%
Operating profit1021041518123
YoY-33.3%95.3%69.5%-45.0%-77.5%
Operating profit margin8.8%9.4%12.6%6.6%1.9%
Recurring profit105821335138
YoY-44.6%36.3%62.6%-61.9%-63.9%
Recurring profit margin9.0%7.4%11.1%4.2%3.2%
Net income57388048334
YoY-57.9%3.7%89.7%115.3%-40.2%
Net margin4.9%3.4%6.7%39.4%2.9%
Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Results by segment
CumulativeFY12/21FY12/22FY12/22FY12/22
(JPYmn)Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4% of Est.1H Est.% of Est.FY Est.
Revenue1,1592,2723,4714,6961,17948.1%2,44923.1%5,105
YoY14.9%10.6%10.0%7.2%1.7%7.8%8.7%
Design Service5351,1111,7002,25050543.8%1,15321.1%2,389
YoY-7.2%-0.3%1.7%1.0%-5.7%3.8%6.2%
Maintenance Service4087921,2121,65443052.4%82024.6%1,749
YoY-5.7%-0.5%3.5%1.9%5.5%3.5%5.7%
H-M3246489891,3467021,502
YoY6.3%10.3%9.6%9.6%8.4%11.6%
System Development83145223309118247
YoY-34.5%-30.7%-16.9%-21.9%-18.6%-20.0%
Energy Saving Service21636856079224451.4%47525.3%965
YoY-155.4%78.8%49.7%13.1%29.0%21.8%
Operating profit1022063574382314.5%1585.0%460
YoY-33.3%0.0%21.0%-0.9%-77.5%-23.4%5.1%
Net income margin8.8%9.1%10.3%9.3%1.9%6.5%9.0%
Design Service1132584104994810.0%477
YoY-10.9%20.4%22.9%7.7%-57.8%-4.4%
Net income margin21.1%23.2%24.1%22.2%9.4%20.0%
Maintenance Service691121882505719.4%293
YoY-36.5%-34.5%-15.1%-16.8%-17.3%17.0%
Net income margin16.9%14.1%15.5%15.1%13.2%16.8%
H-M77146222288289
YoY-13.6%-2.5%-6.0%-12.1%0.3%
Net income margin23.8%22.5%22.5%21.4%19.2%
System Development-8-34-34-384
YoY-----
Net income margin----1.6%
Energy Saving Service9612261546.1%32
YoY---91.8%65.8%23.3%
Net income margin4.1%1.7%2.2%3.3%6.0%3.3%
Adjustments-89-170-253-337-96-342
Equity in earnings of affiliates1-25-45-72821.1%40
YoY-97.7%---975.7%-
QuarterlyFY12/21FY12/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
Revenue1,1591,1131,2001,2251,179
YoY14.9%6.4%9.1%-0.1%1.7%
Design Service535575589550505
YoY-7.2%7.1%5.8%-1.2%-5.7%
Maintenance Service408385420442430
YoY-5.7%5.7%12.0%-2.3%5.5%
H-M324323342356
YoY6.3%14.6%8.3%9.3%
System Development83627885
YoY-34.5%-24.9%31.4%-32.4%
Energy Saving Service216152191233244
YoY-5.8%13.4%7.6%13.1%
Operating profit1021041518123
YoY-33.3%95.3%69.5%-45.0%-77.5%
Net income margin8.8%9.4%12.6%6.6%1.9%
Design Service1131451528948
YoY-10.9%65.5%27.6%-31.3%-57.8%
Net income margin21.1%25.2%25.8%16.2%9.4%
Maintenance Service6943766357
YoY-36.5%-31.0%49.4%-21.5%-17.3%
Net income margin16.9%11.1%18.2%14.2%13.2%
H-M77697666
YoY-13.6%14.0%-11.9%-28.0%
Net income margin23.8%21.2%22.4%18.5%
System Development-8-260-3
YoY----
Net income margin----
Energy Saving Service9-361415
YoY--115.0%-15.8%65.8%
Net income margin4.1%-3.0%6.0%6.0%
Adjustments-89-81-83-85-96
Equity in earnings of affiliates1-26-21-278
YoY-97.7%---975.7%
Source: Shared Research based on company data
Notes: Figures may differ from company data due to differences in rounding methods.
The company changed its segmentation in Q1 FY12/22, integrating the System Development business into the House Management (H-M) business and changing the names of the D-TECH, H-M, and E-Saving businesses to Design Service, Maintenance Service, and Energy Saving Service respectively. Figures in this table are based on the revised segmentation.
Design Service business
CumulativeFY12/21FY12/22
(JPYmn)Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4
Revenue5351,1111,7002,250505
YoY-7.2%-0.3%1.7%1.0%-5.7%
Existing business5271,0971,6802,218487
YoY-8.0%-1.2%1.5%0.4%-7.6%
Facility design (water supply/drainage, electricity)4288961,3951,849
YoY-1.6%5.8%9.5%7.8%
Architectural design69138189240
YoY-34.3%-30.7%-34.1%-35.1%
Energy design306396129
YoY-9.1%-1.6%2.1%5.2%
BIM related (new business)812173017
YoY300.0%200.0%13.3%76.5%112.5%
Operating profit11325841049948
YoY-10.9%20.4%22.9%7.7%-57.8%
Net income margin21.1%23.2%24.1%22.2%9.4%
Existing business152330537657
YoY-0.7%20.9%27.9%13.7%
Net income margin28.8%30.1%32.0%29.6%
BIM related (new business)-39-72-128-158
YoY----
Net income margin----
QuarterlyFY12/21FY12/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
Revenue535575589550505
YoY-7.2%7.1%5.8%-1.2%-5.7%
Existing business527570583538487
YoY-8.0%6.1%7.0%-2.8%-7.6%
Facility design (water supply/drainage, electricity)428468499454
YoY-1.6%13.6%16.9%2.7%
Architectural design69695151
YoY-34.3%-26.6%-42.0%-38.6%
Energy design30333333
YoY-9.1%6.5%10.0%15.1%
BIM related (new business)8451317
YoY300.0%100.0%-54.5%550.0%112.5%
Operating profit1131451528948
YoY-10.9%65.5%27.6%-31.3%-57.8%
Net income margin21.1%25.2%25.8%16.2%9.4%
Existing business152178207120
YoY-0.7%48.3%40.8%-24.1%
Net income margin28.8%31.2%35.5%22.3%
BIM related (new business)-39-33-56-30
YoY----
Net income margin----
Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
(Reference) Housing starts in Japan
Cumulative20202021
(Units)Jan–MarJan–JunJan–SeptJan–DecJan–MarJan–JunJan–SeptJan–Dec
Housing starts194,175398,683608,214815,340190,999412,010636,673856,484
YoY-9.9%-11.2%-10.9%-9.9%-1.6%3.3%4.7%5.0%
Owner-occupied homes59,921124,286191,246261,08861,930133,845210,675285,575
YoY-8.3%-13.7%-12.4%-9.6%3.4%7.7%10.2%9.4%
Rental73,330149,416229,836306,75369,595153,296239,513321,376
YoY-9.6%-10.8%-10.4%-10.4%-5.1%2.6%4.2%4.8%
Built for sale59,438121,941182,392240,26858,311122,097182,368185,633
YoY-11.8%-8.9%-9.9%-10.2%-1.9%0.1%0.0%-22.7%
QuarterlyFY12/20FY12/21
(Units)Jan–MarApr–JunJul–SeptOct–DecJan–MarApr–JunJul–SeptOct–Dec
Housing starts194,175204,508209,531207,126190,999221,011224,663219,811
YoY-9.9%-12.4%-10.1%-7.0%-1.6%8.1%7.2%6.1%
Owner-occupied homes59,92164,36566,96069,84261,93071,91576,83074,900
YoY-8.3%-18.2%-9.9%-0.9%3.4%11.7%14.7%7.2%
Rental73,33076,08680,42076,91769,59583,70186,21781,863
YoY-9.6%-11.9%-9.7%-10.4%-5.1%10.0%7.2%6.4%
Built for sale59,43862,50360,45157,87658,31163,78660,2713,265
YoY-11.8%-6.0%-11.7%-11.4%-1.9%2.1%-0.3%-94.4%
Source: Shared Research based on “Building Starts” statistics published by Ministry of Land, Infrastructure, Transport and Tourism.
Maintenance Service business
CumulativeFY12/21FY12/22
(JPYmn)Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4
Revenue4087921,2121,654430
YoY-5.7%-0.5%3.5%1.9%5.5%
House builders307325
YoY22.8%5.9%
Energy companies100104
YoY85.2%4.0%
Costs3396811,0241,404373
YoY4.6%8.8%7.9%6.2%10.1%
Operating profit6911218825057
YoY-36.5%-34.5%-15.1%-16.8%-17.3%
Operating profit margin16.9%14.1%15.5%15.1%13.2%
QuarterlyFY12/21FY12/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
Revenue408385420442430
YoY-5.7%5.7%12.0%-2.3%5.5%
House builders307325
YoY22.8%5.9%
Energy companies100104
YoY85.2%4.0%
Costs339342344379373
YoY4.6%13.3%6.1%1.8%10.1%
Operating profit6943766357
YoY-36.5%-31.0%49.4%-21.5%-17.3%
Operating profit margin16.9%11.1%18.2%14.2%13.2%
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Q1 FY12/22 results

  • Revenue: JPY1.2bn (+1.7% YoY)
  • Operating profit: JPY23mn (-77.5% YoY)
  • Recurring profit: JPY38mn (-63.9% YoY)
  • Net income*: JPY34mn (-40.2% YoY)
    *Net income attributable to owners of the parent. 

In the housing industry, the number of housing starts in Q1 grew 4.9% YoY. However, due to higher housing prices accompanying a rise in the prices of construction materials in general, the number of housing starts for owner-occupied homes has continued to decline YoY from November 2021 onward, falling 6.9% YoY in Q1.

Overall revenue rose YoY on revenue growth in the Maintenance Service and Energy Saving Service businesses, despite a drop in revenue in the Design Service business.

Operating profit declined YoY due to lower profit in the Design Service and Maintenance Service businesses. Recurring profit and net income were also down YoY due to the drop in operating profit, even though equity in earnings of affiliates amounted to JPY8mn (versus JPY1mn in Q1 FY12/21).

The company changed its segmentation in Q1 FY12/22, integrating the System Development business into the H-M business and changing the names of the D-TECH, H-M, and E-Saving businesses to Design Service, Maintenance Service, and Energy Saving Service respectively. YoY comparisons are based on FY12/21 results adjusted to the new segmentation.

Results by segment are as follows.

Design Service business
  • Revenue: JPY505mn (-5.7% YoY)
  • Operating profit: JPY48mn (-57.8% YoY)

Revenue was down YoY. Housing starts for owner-occupied homes, the company's main business area, declined 6.9% YoY, and the number of the company's design contracts also declined.

Operating profit decreased YoY. Expenses grew as the company continued to invest in a business model using building information modeling (BIM). For example, it increased the number of design personnel in Japan and China (Shenzhen). Meanwhile, yen depreciation increased design expenses in China.

Maintenance Service business
  • Revenue: JPY430mn (+5.5% YoY)
  • Operating profit: JPY57mn (-17.3% YoY) 

Revenue was up YoY. The number of housing units under management and the number of customer calls received continued to climb, driven by contracts from existing customers, leading to greater revenue from inbound call-center service. In addition, the number of projects commissioned by energy-related companies such as TEPCO HomeTech (joint venture of EPCO and TEPCO Energy Partner, Inc.) increased.

Profit declined YoY due to personnel and equipment expenses in preparation for the opening of the Kanazawa Operation Center.

Energy Saving Service business
  • Revenue: JPY244mn (+13.1% YoY)
  • Operating profit: JPY15mn (+65.8% YoY) 

Revenue and profit both rose due to an increase in construction contracts received by consolidated subsidiary ENE's from TEPCO HomeTech and major housing companies with which the company has sales ties.

FY12/22 company forecast

Est.FY12/21FY12/22
(JPYmn)1H Act.2H Act.FY Act.1H Est.2H Est.FY Est.
Revenue2,2722,4254,6962,4492,6565,105
YoY10.6%4.2%7.2%7.8%9.5%8.7%
Cost of revenue1,5751,6593,234
YoY18.0%5.0%10.9%
Cost-to-revenue ratio69.3%68.4%68.9%
Gross profit6977651,462
Gross profit margin30.7%31.6%31.1%
YoY-12.5%-1.5%-6.9%
SG&A expenses4915341,025
YoY-4.6%4.8%0.1%
SG&A-to-revenue ratio21.6%22.0%21.8%
Operating profit206232438158302460
YoY0.0%-1.8%-0.9%-23.4%30.4%5.1%
Operating profit margin9.1%9.6%9.3%6.5%11.4%9.0%
Recurring profit187184371145356501
YoY-25.0%-14.9%-20.3%-22.4%93.4%35.1%
Recurring profit margin8.2%7.6%7.9%5.9%13.4%9.8%
Net income9556365899267366
YoY-44.7%111.3%50.2%4.3%-52.6%-44.4%
Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods. 
Company forecast by segment
Forecast by segmentFY12/21FY12/22
(JPYmn)1H Act.2H Act.FY Act.1H Est.2H Est.FY Est.
Revenue2,2722,4254,6962,4492,6565,105
YoY10.6%4.2%7.2%7.8%9.5%8.7%
D-TECH1,1111,1392,2501,1531,2362,389
YoY-0.3%2.3%1.0%3.8%8.5%6.2%
H-M6486981,3467028001,502
YoY10.3%8.8%9.6%8.4%14.6%11.6%
E-Saving368424792475490965
YoY155.4%10.1%49.7%29.0%15.6%21.8%
System Development145164309118129247
YoY-30.7%-11.9%-21.9%-18.6%-21.2%-20.0%
Operating profit206232438158302460
YoY0.0%-1.8%-0.9%-23.4%30.4%5.1%
Operating profit margin9.1%9.6%9.3%6.5%11.4%9.0%
D-TECH258241499477
YoY20.4%-3.1%7.7%-4.4%
Operating profit margin23.2%21.2%22.2%20.0%
H-M146142288289
YoY-2.5%-20.2%-12.1%0.3%
Operating profit margin22.5%20.4%21.4%19.2%
E-Saving6202632
YoY-2.7%91.8%23.3%
Operating profit margin1.7%4.7%3.3%3.3%
System Development-34-4-384
YoY----
Operating profit margin---1.6%
Adjustments-170-168-337-342
Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods. 
Company forecast for D-TECH business
Forecast for D-TECH businessFY12/21FY12/22
(JPYmn)1H Act.2H Act.FY Act.1H Est.2H Est.FY Est.
Revenue1,1111,1392,2501,1531,2362,389
YoY-0.3%2.3%1.0%3.8%8.5%6.2%
Existing business1,0971,1212,2201,0901,1352,225
YoY-1.2%1.8%0.4%-0.6%1.3%0.2%
Facility design (water supply/drainage, electricity)8969531,8499019321,833
YoY5.8%9.7%7.8%0.6%-2.2%-0.9%
Architectural design13810224098110208
YoY-30.7%-40.4%-35.1%-29.0%7.8%-13.3%
Energy design636612960122182
YoY-1.6%11.9%4.9%-4.8%84.8%41.1%
BIM related (new business)12183063101164
YoY200.0%38.5%76.5%425.0%461.1%446.7%
Operating profit258241499477
YoY20.4%-3.1%7.7%-4.4%
Operating profit margin23.2%21.2%22.2%20.0%
Existing business330327657
YoY20.9%7.2%13.7%
Operating profit margin30.1%29.2%29.6%
BIM related (new business)-72-113-185
YoY---
Operating profit margin---
Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods. 

The company's forecast for FY12/22 calls for revenue of JPY5.1bn (+8.7% YoY), operating profit of JPY460mn (+5.1% YoY), recurring profit of JPY501mn (+35.1% YoY), and net income attributable to owners of the parent of JPY366mn (-44.4% YoY).

EPCO expects revenue to rise YoY due to the contribution of new services in the D-TECH, H-M, and E-Saving businesses. The company also expects operating profit to rise in the D-TECH and H-M businesses due to higher revenue, although there will be an increase in upfront costs for new services.

The company expects equity in earnings of affiliates to be JPY40mn (loss of JPY72 million in FY12/21); equity in earnings of affiliates by TEPCO HomeTech is seen increasing as it returns to profitability.

Equity-method earnings from TEPCO HomeTech is expected to be JPY51mn (versus equity in losses of affiliates of JPY94mn in FY12/21). In FY12/21, the company posted a loss due to the impact of joint venture partner TEPCO Energy Partner's self-imposed restrictions on business activities and delays in the delivery of equipment. In FY12/22, the company expects to return to profitability, as the factors that led to the loss in FY12/21 have been resolved and the external environment is conducive to receiving orders due to increasing need for residential solar power systems and storage batteries.

D-TECH business

The company forecasts revenue of JPY2.4bn (+6.2% YoY) and operating profit of JPY477mn (-4.4% YoY).

The company expects revenue to increase YoY. While existing businesses will remain generally flat year-on-year, the company forecasts an increase in D-TECH business revenue due to higher BIM-related (new business) revenue. For FY12/22, the company anticipates 800,000 housing starts (-5% YoY), but based on trends in orders from its primary customers, it expects only a 0.9% drop in revenue for its mainstay facility design (water supply, drainage, and electrical). Energy design, which prepares solar panel distribution diagrams, expects double-digit revenue growth on the back of subsidies provided by local government for the promotion of solar power generation equipment use. In BIM related business, the company expects to increase revenue from consulting services for BIM implementation by housing companies.

  • Existing businesses: JPY2.2bn (+0.2% YoY)
    • Facility design (water supply and drainage, electricity): JPY1.8bn (-0.9% YoY)
    • Architectural design: JPY208mn (-13.3% YoY)
    • Energy design: JPY182mn (+41.1% YoY) 
  • BIM related (new business): JPY164mn (+446.7% YoY)

The company expects operating profit to drop in existing businesses, although losses in BIM related business will narrow.

Existing businesses are expected to report lower profits due to lower revenue and higher personnel costs stemming from the increase in headcount in Q4 FY12/21 (October–December 2021).

In the BIM related business, the company expects to record JPY269mn in operating expenses, including personnel costs. In FY12/22, the company will continue to improve its staffing structure to be able to respond to design requests from major housing companies as it did in FY12/21. As of end-FY12/22, the company expects to have a total of 53 BIM-related personnel (36 at end-FY12/21), including six consultants (five at end-FY12/21) for proposal-based sales, five engineers (five at end-FY12/21), and 42 operators (26 at the end of FY12/21). The company plans to complete its BIM related staffing structure by increasing the number of employees in FY12/22, and from FY12/23 onward, headcount is expected to increase only in line with changes in the number of units designed.

H-M business

The company forecasts revenue of JPY1.5bn (+11.6% YoY) and operating profit of JPY289mn (+0.3% YoY).

The company expects the YoY increase in revenue of 11.6%, or up JPY156mn, to be driven by growth in orders mainly from major housing companies of approximately JPY60mn, an increase in orders through TEPCO HomeTech of approximately JPY60mn, and an increase in orders through medx of approximately JPY40mn.

medx: Joint venture established in February 2022 by the company and Mitsui & Co. According to the company, leveraging Mitsui's sales network will enable it to strengthen the development of new customers for its cloud-based CRM and BIM services. The company thinks that its services can also be enhanced by taking advantage of Mitsui's business network. medx plans to develop CRM platform services and carbon-neutral data integration services for the housing industry. The CRM platform service combines the company's cloud-based CRM service with corporate sales promotion functions. The carbon-neutral data integration service incorporates carbon dioxide emissions data into the company's cloud-based BIM service to calculate construction-related carbon emissions.

The company expects operating profit to fall YoY due to upfront costs of JPY46mn (+15.0% YoY) for the launch of cloud-based CRM service and a one-time cost of JPY67mn for the opening of the Kanazawa Operation Center.

Kanazawa Operation Center: The company will open this facility in April 2022. It will allow the company to secure more seats for increasing the number of operators and strengthen its business continuity plan (BCP) by having multiple locations. The maximum number of seats will be 40, and the center will focus on H-M business operations.

E-Saving business

The company expects revenue to be JPY965mn (+21.8% YoY), and operating profit JPY32mn (+23.3% YoY).

Revenue from existing customers with whom the company has had business relationships since before ENE's became a consolidated subsidiary (March 2020) is expected to remain flat YoY but revenue from TEPCO HomeTech is forecast to increase.

In FY12/21, revenue from TEPCO HomeTech were weak because TEPCO Energy Partners, which is responsible for sales of the Enecari subscription service for energy-saving devices to existing homes, refrained from sales activities. In addition to lifting of this restraint, revenue from TEPCO HomeTech is expected to increase as the company will promote sales of its new Enecari Plus service.

Voluntary suspension of sales activities by TEPCO Energy Partner: Relia, Inc. to which TEPCO Energy Partner outsourced its telephone sales activities for electricity and gas subscriptions, was found to have committed inappropriate business acts from June 2018 to April 2020. As a result, TEPCO Energy Partner received a business improvement advisory from the Electricity and Gas Market Surveillance Commission in September 2020. Further, in June 2021, the Consumer Affairs Agency issued a directive to TEPCO Energy Partner to suspend operations related to the electricity and gas telephone sales activities from June to December 2021. In accordance with these administrative sanctions, in 2021, TEPCO Energy Partner refrained from all telephone solicitations, not only for electricity and gas but also for energy subscriptions.

Like Enecari, Enecari Plus is a subscription service for energy-saving devices, but TEPCO Energy Partners retains ownership of the devices during the contract period. However, Enecari Plus offers a special electricity plan based on the installation of an EcoCute residential natural refrigerant CO2 heat pump water heater, which reduces the total amount of usage fees and utility costs compared to Enecari.


According to the company, delays in the delivery of water heaters due to semiconductor shortages have caused installation delays since Q4 (October–December 2021) FY12/21. The company expects to eliminate these delays in Q2 (April–June 2022) FY12/22 by promoting direct transactions with product manufacturers and diversified procurement from multiple suppliers from FY12/22 onward.

Equity in earnings of TEPCO HomeTech is expected to be JPY51mn (equity in losses of JPY94mn in FY12/21) due to the expansion of Enecari and Enecari Plus contracts.

Medium- to long-term outlook

In February 2021, the company announced a medium-term business plan covering FY12/21–FY12/25. The plan targets revenue of JPY10.0bn in FY12/25 (CAGR of 20.8% from FY12/21), operating profit of JPY1.8bn (+42.4%), and recurring profit of JPY2.0bn (+52.4%). It expects ROE to reach 20.0% in FY12/25 (14.1% in FY12/21).

Under the plan, EPCO aims to boost performance by developing a cloud-based building information modeling (BIM) service in the D-TECH business, strengthening cross-selling between the D-TECH and H-M segments, and increasing the number of installations in the E-Saving business in line with expanding sales of Enecari and Enecari Plus. The company also foresees an earnings contribution from equity in earnings of affiliates with performance growth in TEPCO HomeTech.

Medium-term business plan (FY12/21–FY12/25)
FY12/20FY12/21FY12/25
JPYmnAct.Act.TargetsCAGR
Revenue4,3814,69610,00020.8%
Operating profit4424381,80042.4%
Operating profit margin10.1%9.3%18.0%
Recurring profit4653712,00052.4%
Recurring profit margin10.6%7.9%20.0%
Loss (earnings) in share of affiliates12-72200-
DOE11.8%14.1%20.0%
Source: Shared Research based on company data
Notes: Figures may differ from company data due to differences in rounding methods.
CAGR indicates the compound annual growth rate from FY12/21 to FY12/25.
Targets by segment
FY12/20FY12/21FY12/25
JPYmnAct.Act.TargetsCAGR
Revenue4,3814,69610,00020.8%
D-TECH2,2282,2504,30017.6%
H-M1,2281,3463,80029.6%
E-Saving5297921,90024.4%
System Development395309-
Operating profit4424381,80042.4%
Operating profit margin10.1%9.3%18.0%
D-TECH4634991,11822.3%
Operating profit margin20.8%22.2%26.0%
H-M3282881,02637.4%
Operating profit margin26.7%21.4%27.0%
E-Saving142611444.8%
Operating profit margin2.6%3.3%6.0%
System Development-27-38
Operating profit margin--
Adjustments-336-337
Source: Shared Research based on company data
Notes: Figures may differ from company data due to differences in rounding methods.
CAGR indicates the compound annual growth rate from FY12/21 to FY12/25.

D-TECH business

The company expects to achieve revenue of JPY4.3bn (CAGR of 17.6% from FY12/21) and operating profit of JPY1.1bn (+22.3%) in FY12/25. By rolling out its internally developed cloud-based BIM service, the company plans to increase the volume of housing units designed and the service price per unit.

Cloud-based BIM service

The cloud-based building information modeling (BIM) service represents an evolution of the company’s existing facility design service using CAD2BIM software developed in-house. The company offered trials of the new BIM service to some existing customers in FY12/22 and plans a full-fledged rollout within the year.

As of February 2022, the company has expanded its BIM-related staff, and in FY12/22, it plans to augment its staffing structure to provide full BIM design services, including drafting assistance for design, structure, and facilities, in addition to CAD2BIM.

About BIM

Building information modeling (BIM) incorporates attributes such as building names, floor space, specifications and performance of materials and components, and finishing processes into computer-generated 3D CAD design drawings. It is not limited to planning, basic design, implementation design, and construction stages, but can also be used to centrally manage information for use in facility management, renovation, and other operation and management stages. In BIM, all data comprising a single model is linked, so if some part of the data is changed, the system automatically adjusts all floor plans, elevation views, cross sections, roof plans, floor space tables, volume tables, and others.

Leading house builders are spearheading the introduction of BIM in the housing construction industry. The degree to which a company has incorporated BIM can be classified into four categories.

Level 0: Use of 2D CAD design drawings

Level 1: In addition to 2D CAD design drawings, use of 3D CAD design drawings without attribute data

Level 2: Use of 3D CAD design drawings with attribute data

Level 3: Use of BIM models for building operation and management

EPCO says that many house builders are at Level 0, most leading house builders are at Level 1, and major general contractors and design firms are at Level 2. The company notes that introducing BIM requires inputting 3D and attribute data into the design, which increases the workload at the design stage and incurs higher design costs. It sees this as hindering the introduction of BIM for many companies.

Features of the cloud-based BIM service

The company is using its proprietary software, CAD2BIM, to provide services that are more advanced than conventional facility design. CAD2BIM automatically converts 2D CAD design drawings into 3D design drawings. It can also automatically import attribute data into the design drawings of water supply and drainage facilities the company has designed. This enables house builders to make use of BIM data without incurring higher design costs.

Because the company’s BIM service generates 3D design drawings, it is possible to prefabricate all water supply and drainage facilities (components and materials are pre-processed at a plant so that only assembly is required at construction sites). Using conventional 2D CAD design drawings, water supply facilities can be prefabricated, because flexible resin pipes are used and it is not necessary to confirm whether the pipes interfere spatially with one another. Drainage facilities use steel pipes, however, therefore it is necessary to confirm spatial interference in advance. This makes prefabrication using 2D CAD design drawings difficult. The company’s BIM service draws on 3D design drawings created by CAD2BIM, so it is possible to check pipe interference virtually and thus prefabricate drainage facilities.

Advances in prefabrication make it possible to save labor at construction sites, cut delivery costs, and reduce component and materials costs by circumventing intermediate distributors, which means lower construction costs for house builders.

Labor saving: With conventional services, it is necessary to process, adjust, and assemble components for drainage facilities on site. As prefabrication eliminates the need for on-site processing and adjustment, construction only involves assembly, thus saving labor and reducing on-site construction costs.

Lower delivery costs: For drainage facilities, the contractor typically orders components from a distributor and delivers each component to the construction site. With prefabrication, it is possible to procure components without going through a distributor and to deliver the water supply and drainage facilities to the construction site as a single assembly kit.

Reduction in component costs through circumventing intermediate distributors: A further advantage of prefabrication is the ability to source components directly from the manufacturer or a component trading company without going through a distributor. Circumventing such distributors keeps down component costs.

The company plans to raise service price per unit by transitioning to the cloud-based BIM service (see discussion below). It says that even after raising service price per unit, the costs to house builders for drainage facilities, from design to construction, can be cut by about 15%, thanks to the reduction in on-site processing and construction costs.

EPCO says it is also developing a full-scale BIM design consignment service targeting leading house builders, which includes the design of building frames. In July 2021, the company appointed Kim Jungheon as an executive officer. Kim has experience in building in-house infrastructure to integrate BIM into architectural design processes at New Constructor’s Network, AIS Sogo Sekkei, and Nikken Sekkei, as well as at Autodesk, the largest BIM software developer. EPCO will step up the pace of development of its full-scale BIM design services by appointing Kim general manager of its BIM unit. Moreover, the company is augmenting its staff of BIM-related operators and other personnel, and expects to be ready to provide full BIM design services to major housing companies by end-Y12/22.

Revenue in the D-TECH business

The company expects to achieve revenue of JPY4.3bn in FY12/25 (CAGR of 17.6% from FY12/21). It assumes the design of water supply and drainage facilities for 130,000 housing units (+10.2%) and a service price per unit of JPY33,000 (+3.5%).

Revenue targets for the D-TECH business
FY12/20FY12/21FY12/23FY12/25
JPYmnAct.Act.TargetsTargets
Revenue2,2282,2503,4004,300
CAGR--22.9%17.6%
Existing customers2,2282,2182,8002,800
CAGR--12.3%6.0%
CAD (Existing service)2,2282,2181,0001,000
CAGR---32.9%-18.1%
Units designed ('000)80804040
Revenue per unit (JPY)27,85227,73025,00025,000
Cloud-based BIM service17301,8001,800
CAGR----
Units designed ('000)--4040
Revenue per unit (JPY)--45,00045,000
New customers6001,500
CAGR--
Units designed ('000)2050
Revenue per unit (JPY)30,00030,000
Source: Shared Research based on company data
Notes: Figures may differ from company data due to differences in rounding methods.
CAGR indicates the compound annual growth rate from FY12/20 results.
Housing units designed (water supply and drainage facility design)

The company’s medium-term plan calls for the design of water supply and drainage facilities for 130,000 housing units in FY12/25 (CAGR of 12.9% from FY12/21). The company expects the number of housing units designed for leading builders of custom-built homes and other existing customers to hover around 80,000 units per year from FY12/20 to FY12/25. Although the number of housing units designed for existing customers will remain flat, the company anticipates an overall increase in units designed in the D-TECH business (50,000 units in FY12/25) due to the acquisition of new customers.

Of the 80,000 water supply and drainage facilities designed annually for existing customers, the company will convert 40,000 to BIM design by FY12/23.

In terms of cultivating new customers, the company aims to design facilities on consignment for 50,000 housing units in FY12/25. In addition to augmenting initiatives targeting multi-unit housing, the company will advance into the area of detached houses. Among house builders that handle multi-unit housing and detached houses, the company’s sales activities will focus on house builders with which it has Enecari distribution contracts.

Service price per unit

Service prices per unit (revenue per unit) in the plan differ depending on the type of service and customer attributes. The average service price per unit in FY12/25 is expected to be JPY33,000 (CAGR of 4.1% from FY12/21).

The price per unit of the cloud-based BIM service for existing customers is JPY45,000. The prices for existing 2D CAD design drawing-based services range from JPY25,000 to JPY28,000. This will increase by about JPY20,000 when switching to the BIM service.

The company has set the service price per unit of the BIM service for new customers at JPY30,000. New customers are house builders that handle multi-unit housing and detached houses. The price is lower for them than for existing customers (mainly builders of custom-built homes) because the design of water supply and drainage facilities in multi-unit housing and detached houses is becoming more standardized compared to custom-built homes.

Operating profit in the D-TECH business

The medium-term plan calls for operating profit of JPY1.1bn (CAGR of 22.3% from FY12/21) and an operating profit margin of 26.0% (+3.8pp from FY12/21) in FY12/25. The cloud-based BIM service allows greater automation than existing 2D CAD design drawing-based services, which will enable the company to contain growth in the number of designers and boost the operating profit margin.

H-M business

The company expects to achieve revenue of JPY3.8bn (CAGR of 29.6% from FY12/21) and operating profit of JPY1.0bn (+37.4%) in FY12/25. The company aims to enhance convenience for house builders, homeowners, and repair contractors by rolling out a cloud-based customer relationship management (CRM) service and continuously upgrading its features. Building on greater convenience, the company plans to promote cross-selling with the D-TECH business and increase the number of housing units under management. It will also work to cultivate new customers, such as detached house builders and house builders associated with railway companies.

From FY12/22 onward, medx (established in February 2022), a joint venture with Mitsui & Co., Ltd. as described below, will bolster its services and expand its sales target to accelerate growth.

Cloud-based CRM service

In addition to facilitating communication (receiving repair requests, scheduling repair work, reporting on completed repairs) between EPCO, homeowners, and repair contractors, the cloud-based customer relationship management (CRM) service collects, analyzes, and shares “house history” data—building and facility design drawings, history of scheduled inspections and repairs—and distribute various information to homeowners. Trial operation of the service for existing customers is due to start in FY12/21.

Features of the cloud-based CRM service

The cloud-based CRM service can streamline communication by means of a smartphone app. Previously, EPCO’s call centers mainly accepted repair requests from homeowners and put in repair requests to the contractors by phone, after which the repair contractor and the homeowner scheduled the repair work also by phone. With the CRM service, homeowners can install a smartphone app and the customer centers of repair contractors can install the CRM system to share information and boost communication efficiency.

The CRM service also allows EPCO to gather and analyze house history data and share it with house builders and equipment manufacturers. By importing house history accumulated to date into the CRM service and analyzing it, the company will be able to grasp the breakdown incidence for each type of equipment. Over the longer term, the company is aiming to predict the timing of repair issues through AI-based analysis.

The company plans to distribute trouble-shooting support content through the CRM homeowner app, as well as provide inspection and disaster-related information from house builders. The company will draw on BIM data from the D-TECH business to inform its trouble-shooting support, distributing repair methods for the equipment in use by the homeowner. It also plans to develop an application for repair workers, distribute BIM data-based repair procedures, and enhance communication efficiency between repair contractor reception staff and workers.

The company plans to offer some paid service options, such as an app for repair contractor workers and sharing AI analysis of house histories with house builders and equipment manufacturers.

Expansion of service and sales coverage by medx

medx is a joint venture established in February 2022 by the company and Mitsui & Co. medx plans to develop a CRM platform service for the housing industry and a carbon-neutral data integration service.

The CRM platform service is based on the company's cloud-based CRM service and incorporates sales promotion functions by companies leveraging Mitsui's knowledge and business network to fortify its functions. In addition to housing companies that deal in detached houses and have a relationship with the company, medx intends to utilize Mitsui's sales network to provide services to condominium management companies, housing equipment manufacturers, and companies that provide lifelines such as electricity, gas, and railroads. In cases where medx provides CRM platform services, the company will be contracted to provide call center-related services, thereby accelerating H-M business growth.

The carbon-neutral data integration service incorporates carbon dioxide emissions data into the company's cloud-based BIM service to calculate construction-related carbon emissions. The company will provide services to companies mandated to comply with the Task Force on Climate-Related Financial Disclosures (TCFD) Scope 3 (calculation of supply chain CO2 emissions).

Revenue in the H-M business

The company expects to achieve revenue of JPY3.8bn (CAGR of 29.6% from FY12/21) in FY12/25. The revenue target is based on 4,000 housing units under management in FY12/25 (+25.7%) and revenue per housing unit under management of JPY950 (+3.1%).

Revenue targets for the H-M business
FY12/20FY12/21FY12/23FY12/25
JPYmnAct.Act.TargetsTargets
Revenue1,2281,3461,8003,800
CAGR--15.7%29.6%
Housing units under management ('000)1,4001,6002,0004,000
Revenue per unit (JPY)877841900950
Existing customers1,2281,3461,2001,200
CAGR---5.6%-2.8%
Housing units under management ('000)1,4001,6001,4001,400
Revenue per unit (JPY)877841857857
Cross selling with D-TECH business6001,600
CAGR--
Housing units under management ('000)6001,600
Revenue per unit (JPY)1,0001,000
New customers1,000
CAGR-
Housing units under management ('000)1,000
Revenue per unit (JPY)1,000
Source: Shared Research based on company data
Notes: Figures may differ from company data due to differences in rounding methods.
CAGR indicates the compound annual growth rate from FY12/21 results.
Number of housing units under management

In FY12/25, the company expects to have 4,000 housing units under management (CAGR of 25.7% from FY12/21). The company will only take design services on consignment in the D-TECH business and cross-sell management services to house builders that do not have dealings with the H-M business. It expects this to fuel growth in housing units under management. The company will also focus on cultivating new customers, such as detached house builders and builders associated with railway companies, to grow housing units under management.

EPCO aims to increase the number of housing units under management to 1.6mn by FY12/25 by promoting cross-selling with the D-TECH business. The company says the majority of house builders for whom it conducts consignment design in the D-TECH business do not outsource their call-center operations to the company but handle them in-house. For companies that handle call-center operations in-house, outsourcing these operations would result in staff redundancies, which makes them reluctant to use EPCO’s services. The company aims to increase H-M contracts from house builders by adding greater value for them through its cloud-based CRM service. The company says that there are 4.2mn housing units for which the D-TECH business did design work for which call-center operations are not outsourced to its H-M business. The company’s goal is to manage 1.6mn housing units on consignment by FY12/25.

The company will focus on cultivating new customers, such as detached house builders and house builders associated with railway companies, to increase housing units under management. Leveraging the added value mentioned above, such as distributing key information to homeowners, the company aims to receive consignment service orders for 1.0mn housing units from new customers by FY12/25.

The number of housing units under management from existing customers usually grows in line with the sales activities by house builders (EPCO’s customer). EPCO’s target is conservative, however, and does not assume any increase in housing units under management in FY12/20 and beyond.

Revenue per housing unit under management

In FY12/25, the company expects to achieve annual revenue of JPY950 per housing unit under management (CAGR of 3.1% over FY12/21). The underlying assumptions for this target are as follows for existing customers and new customers (including cross-selling with the D-TECH business).

The medium-term plan sets revenue per housing unit under management from existing customers at JPY857 in FY12/25 (CAGR of +0.5% from FY12/20)—roughly unchanged from FY12/20.

The plan sets revenue per housing unit under management from new customers at JPY1,000 in FY12/25. The company plans to provide some services as paid options, such as an app for repair workers and the sharing of AI analysis on house histories with house builders. As a result, it expects revenue per housing unit under management from new customers to be higher than from existing customers.

Operating profit in the H-M business

The company expects to achieve operating profit of JPY1.0bn (CAGR of 37.4% from FY12/21) and an operating profit margin of 27.0% (+5.6pp versus FY12/21) in FY12/25. In FY12/21, the company recorded expenses related to the opening of the Kanazawa Operation Center and the development of cloud-based CRM services, which led to the decline in the operating profit margin. By FY12/25, these effects will have tapered off, and the company plans to return to an operating profit margin on par with that of FY12/20.

E-Saving business

The company expects to achieve revenue of JPY1.9bn (CAGR of 24.4% from FY12/21) and operating profit of JPY114mn (+44.8%) in FY12/25. The plan also calls for a JPY200mn investment return (+76.6%; loss of JPY72mn in FY12/21) on its stake in equity-method affiliate TEPCO HomeTech, which is growing. The company also expects higher revenue and profits through stronger sales of the Enecari and Enecari Plus services in line with growth in housing construction.

Enecari and Enecari Plus

Enecari is a service that allows homeowners to use solar power systems, storage batteries, IH cooking heaters, and other energy-saving devices with no upfront cost by paying a monthly fee. After the contract period (10 or 15 years) ends, users can continue to use the equipment at no monthly charge (which are essentially installment payments for the equipment). Also, during the contract period, users can receive a warranty on the equipment and installation as well as natural disaster insurance. By using Enecari, homeowners can prepare against disasters and, depending on power usage, may find that combined Enecari usage fees and utility costs are lower than their utility costs before introduction. (For details, see the Overview of Enecari in the Business section.)

In February 2022, the company began accepting applications for its new Enecari Plus service. Like Enecari, Enecari Plus is a subscription service for energy-efficient devices, but TEPCO Energy Partners retains ownership of the devices during the contract period. However, Enecari Plus offers a special electricity plan based on the installation of an EcoCute residential natural refrigerant CO2 heat pump water heater, which reduces the total amount of usage fees and utility costs compared with Enecari. TEPCO HomeTech will earn revenue from installation work in Enecari Plus as well as Enecari.

Performance targets for the E-Saving business

The company expects revenue of JPY1.9bn (CAGR of 24.4% from FY12/21) and operating profit of JPY114mn (+44.8%) in FY12/25.

Amid global efforts to realize a carbon-neutral society, related initiatives are gaining momentum in Japan as well. In August 2021, the Ministry of Economy, Trade and Industry and the Ministry of Land, Infrastructure, Transport and Tourism started discussions to set a goal of installing solar power systems in about 60% of homes by 2030. EPCO will also work with TEPCO HomeTech to focus on expanding sales of Enecari by leveraging the strong brand recognition of the Tokyo Electric Power Company (TEPCO) group.

TEPCO Holdings announced its Fourth Comprehensive Special Business Plan in August 2021. A major initiative in the retail business under the plan is to propose solar power systems centered on Enecari, including storage batteries and home electrification. In the 10-year period from FY03/22 to FY03/31, TEPCO aims to increase the amount of new electric power demand by more than 9.7bn kWh and electrification service contracts by more than 820,000.

In the E-Saving business, the company expects to serve 2,400 housing units in FY12/25, half of which will be existing homes and half of which will be new homes. The company targets revenue per unit of JPY792,000 in FY12/25.

Revenue targets for the E-Saving business
FY12/20FY12/21FY12/23FY12/25
JPYmnAct.Act.TargetsTargets
Revenue5297929501,900
CAGR--9.5%24.4%
Housing units with installation1,2002,400
Existing homes6001,200
New homes6001,200
Revenue per unit (JPY'000)792792
Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding methods.
CAGR indicates the compound annual growth rate from FY12/21 results.
The company made System House Engineering (now ENE’s) a consolidated subsidiary in March 2020. Results of the E-Saving business in FY12/20 reflect nine months of contributions from ENE’s.
Equity in earnings of affiliates

The plan calls for JPY200mn in equity in earnings of affiliates in FY12/25 (CAGR of 76.6% from FY12/20). The company expects the increase to come from earnings expansion in equity-method affiliate TEPCO HomeTech. 

In FY12/25, TEPCO HomeTech is targeting installation for 12,000 housing units, half of which will be existing homes and half of which will be new homes.

The company targets revenue per unit of JPY833,000 in FY12/25. Revenue per unit varies depending on the type of device: JPY1.0mn for solar power system, JPY1.0mn for storage batteries, and JPY500,000 for EcoCute, a residential natural refrigerant heat pump water heater.

Revenue targets for TEPCO HomeTech
FY12/20FY12/23FY12/25
JPYmnAct.TargetsTargets
Revenue3,7005,00010,000
CAGR-10.6%22.0%
Housing units with installation6,00012,000
Existing homes3,0006,000
New homes3,0006,000
Revenue per unit (JPY'000)833833
Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding methods.
CAGR indicates the compound annual growth rate from FY12/20 results.

Business

Business description

The company’s main business areas are the D-TECH business and H-M business. The former focuses on water supply and drainage facility design for low-rise housing (detached houses, multi-unit housing with two floors or less). The H-M business carries out call-center operations related to housing maintenance on consignment. The company also launched an E-Saving business in FY12/20 to offer construction services related to residential energy conservation. In this business, the company installs energy-saving devices in collaboration with Tokyo Electric Power Company Holdings (TEPCO, TSE1: 9501).

In FY12/21, the D-TECH business accounted for 47.9% of revenue and 64.4% of operating profit before adjustments; the H-M business accounted for 28.7% of revenue and 37.2% of operating profit before adjustments; the E-Saving business accounted for 16.9% of revenue and 3.3% of operating profit before adjustments; and the System Development business accounted for 6.6% of revenue but posted an operating loss of JPY38mn.

Results by segment
By segmentFY12/12FY12/13FY12/14FY12/15FY12/16FY12/17FY12/18FY12/19FY12/20FY12/21
(JPYmn)Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.
Revenue2,7083,3003,0513,1323,2703,4383,8994,1514,3814,696
YoY---7.5%2.7%4.4%5.1%13.4%6.4%5.5%7.2%
D-TECH1,9052,3811,9911,9502,2332,3242,4582,5262,2282,250
YoY---8.2%-2.1%2.8%4.0%5.8%2.8%-11.8%1.0%
% of total70.3%72.2%65.3%62.3%68.3%67.6%63.0%60.9%50.9%47.9%
H-M4876247347428438861,1141,1831,2281,346
YoY--15.3%1.1%5.1%5.1%25.8%6.2%3.8%9.6%
% of total18.0%18.9%24.1%23.7%25.8%25.8%28.6%28.5%28.0%28.7%
E-Saving529792
YoY-49.7%
% of total12.1%16.9%
System Development256440194229327441395309
YoY28.2%71.9%23.5%18.1%42.8%34.9%-10.4%-21.9%
% of total8.4%14.0%5.9%6.7%8.4%10.6%9.0%6.6%
Operating profit580840323-13292556579560442438
YoY