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Daiseki

Daiseki 9793

ダイセキ
Daiseki Co.,   Ltd.
Recent Updates
2022-05-12
Full-year FY02/22 report update
2022-04-07
Full-year FY02/22 flash update
2022-01-21
Q3 FY02/22 report update
Get in touch
1-86 Funamicho Minato-ku Nagoya-shiAichi, Japan 455-8505
http://daiseki.co.jp/index.html
052-611-6322
Summary
Environmental services company with strength in industrial waste disposal. Growing organically and through M&A. Strong balance sheet and cash flow generation.
Diversified Consumer Services
Key dates
2010-06-18
Coverage initiation
Full Report
2022-05-12
Full-year FY02/22 flash update
2022-04-07
Q3 FY02/22 flash update
2022-01-07
1H FY02/22 flash update
2021-10-01
Q1 FY02/22 flash update
2021-06-30
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Executive summary

Business overview

Daiseki is an environmental specialist company whose main focus is industrial waste recycling. The parent company’s main business is intermediate processing of liquid wastes (waste oil, wastewater, sludge) and their separation into reusable components (such as recycled heavy oil and cement materials) that can then be resold. The company has established a recycling-centered processing system based on its proprietary technology, with a recycling rate of 88.3% in FY02/21. Subsidiaries include Daiseki Eco. Solution Co., Ltd. (TSE PRM: 1712), in which Daiseki holds a 53.9% stake at the end of Feb 2021, whose main businesses are soil decontamination and plasterboard recycling. Daiseki MCR, whose main business is refining and selling lead recovered from used batteries, and System Kikou, which provides cleanup services for large oil tanks and also does industrial piping installation/maintenance.

Of Daiseki Co.'s consolidated results for FY02/22 (sales of JPY56.9bn, operating profit of JPY12.9bn, OPM 22.8%), Daiseki Co. (JPY32.9bn, JPY9.4bn, 28.6%) accounted for 57.8%, the largest share of the company's total sales. Daiseki Eco. Solutions (JPY17.1 bn, JPY2.1bn, 12.3%) is the second largest at 30.0% of total sales. Daiseki MCR (JPY3.2bn; JPY706mn; 21.9%) and System Kikou (JPY3.6bn; JPY688mn; 19.0% YoY) accounted for 5.7% and 6.4%, respectively. Within the group, Daiseki Co. has the highest OPM, and continues to drive consolidated earnings growth.

With growing social demands for environmental protection as global interest in carbon neutrality heightens, companies are now promoting ESG management initiatives. Moreover, environmental regulations in Japan, particularly those related to the processing of industrial waste, have become increasingly stringent, and the company's clients, mainly manufacturers in Japan, have become more environmentally conscious. Daiseki Co. specializes mainly in treatment technologies for industrial waste recycling and has broad-ranging expertise as an environmental specialist. The company has increased its industrial waste treatment market share in Japan by providing safe, secure, and proper treatment of accepted industrial waste, reducing the amount of CO2 emissions, and enhancing social credibility. As a result, Daiseki Co. has expanded to a scale where it operates nationwide with 41 offices throughout the group, including six offices owned by Daiseki Co.

In June 2018, Daiseki unveiled its long-term management vision. Dubbed Vision 2030, the plan sets out specific targets that are aligned with the sustainable development goals set forth in the United Nation’s 2030 Agenda for Sustainable Development (adopted September 2015). As efforts to become carbon-neutral are being strengthened worldwide and corporate environmental management is becoming a social requirement, the company is promoting its corporate philosophy of contributing to society by creating a better environment. Under Vision 2030, the company is targeting FY02/31 sales of JPY150.0bn (roughly a 3.0x increase over FY02/18), operating profit of JPY25.0bn (roughly a 2.8x increase over FY02/18), and an ROE of 15% (versus 9.9% in FY02/18).

Earnings trends

In FY02/22, the company reported sales of JPY56.9bn (+10.4% YoY), operating profit of JPY12.9bn (+26.3% YoY), recurring profit of JPY13.1bn (+25.5%), and net income attributable to owners of the parent of JPY8.4bn (+28.4% YoY). EPS was JPY164.0, and annual dividend per share was JPY60.0 (payout ratio of 36.5%). The pace of recovery in orders for industrial waste processing slowed somewhat in 2H, but recycled fuel sales, soil contamination treatment, and lead recycling grew, leading to sales and all profit categories from the operating profit line down reaching record highs. Profitability improved owed to price revisions and other factors, with the OPM of 22.8% (+2.9pp YoY) at its second highest on record.

For FY02/23, the company forecasts sales of JPY61.0bn (+7.3% YoY), operating profit of JPY14.0bn (+8.2% YoY), recurring profit of JPY14.1bn (+7.5% YoY), net income attributable to owners of the parent of JPY8.8bn (+5.1% YoY), and EPS of JPY174.0. The company plans to pay an annual dividend of JPY60.0 per share, unchanged YoY, for an expected payout ratio of 34.4%. Daiseki (the parent) is expected to drive consolidated earnings growth with increases in orders for industrial waste processing and recycled fuel sales, and Daiseki Eco. Solution Co., Ltd.'s soil contamination treatment business is also expected to expand. The company plans to renew record sales and profits for the second year in a row on the back of profitability improvements driven by price revisions and cost cuts. OPM is forecast to reach its second highest on record at 23.0%.

The company updated its medium-term management plan in April 2022.
Having achieved the targets for FY02/23 released in April 2021 one year ahead of plan, it raised its previous targets for FY02/23 and FY02/24. Targets for the newly added FY02/25 are sales of JPY69.0bn, operating profit of JPY16.3bn, and net income attributable to owners of the parent of JPY10.2bn; the company plans an ROE of 11.3%. Sales and profits are expected to renew their respective record highs in all three years of the medium-term plan. Further, OPM target of 23.6% for FY02/25, if achieved, will be a new record high in 17 years. The company aims to expand earnings while continuing to make substantial capital investments for future growth in response to increased demand for industrial waste processing, soil contamination treatment, and its recycling business (such as fuel and lead).

Strengths and weaknesses

Shared Research sees Daiseki as having three main strengths. First, its many years of experience and reliable reputation as a listed company; second, management’s pragmatic focus on medium-term earnings growth; and third, the parent company’s focus on liquid waste processing. On the flip side, we also see three notable weaknesses. First, domestic industrial production holds back the company’s growth; second, the long lead time needed for the permitting of new plant construction and expansion of existing plants; and third, the limited number of attractive opportunities for mergers and acquisitions. (For more detailed discussion, see “Strengths and weaknesses” section later in this report.)

Key financial data

Income statementFY02/14FY02/15FY02/16FY02/17FY02/18FY02/19FY02/20FY02/21FY02/22FY02/23
(JPYmn)Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Est.
Sales42,10045,73850,80944,23249,18551,31354,08851,53056,86761,000
YoY16.9%8.6%11.1%-12.9%11.2%4.3%5.4%-4.7%10.4%7.3%
Gross profit12,29812,90813,08812,36714,48415,18917,12416,32419,23821,400
YoY19.7%5.0%1.4%-5.5%17.1%4.9%12.7%-4.7%17.9%11.2%
Gross profit margin29.2%28.2%25.8%28.0%29.4%29.6%31.7%31.7%33.8%35.1%
Operating profit7,2987,3027,8497,1208,7779,10710,86510,24212,94014,000
YoY35.0%0.1%7.5%-9.3%23.3%3.8%19.3%-5.7%26.3%8.2%
Operating profit margin17.3%16.0%15.4%16.1%17.8%17.7%20.1%19.9%22.8%23.0%
Recurring profit7,4007,4367,9557,2288,9149,19911,02510,45113,11814,100
YoY33.2%0.5%7.0%-9.1%23.3%3.2%19.8%-5.2%25.5%7.5%
Recurring profit margin17.6%16.3%15.7%16.3%18.1%17.9%20.4%20.3%23.1%23.1%
Net income3,9424,0353,8474,1325,8336,1107,0446,5218,3768,800
YoY30.4%2.4%-4.7%7.4%41.2%4.7%15.3%-7.4%28.4%5.1%
Net margin9.4%8.8%7.6%9.3%11.9%11.9%13.0%12.7%14.7%14.4%
Per-share data (split-adjusted; JPY)
Outstanding shares at year-end('000 shares) 45,12545,12545,12545,12543,00043,00043,00043,00051,000-
EPS72.974.771.579.8113.7119.1137.2127.0164.0174.0
Dividend per share18.320.023.324.233.338.346.746.760.060.0
Book value per share9541,0121,0511,0991,1891,2671,3641,4401,502-
Balance sheet
(JPYmn)
Cash and deposits23,11624,96228,83027,25628,18331,53528,78333,85234,149
Securities1,3001,801----1,310403300
Total current assets34,77338,55440,19439,24039,84942,17942,09345,35146,457
Tangible fixed assets29,79832,12230,15533,16337,35443,34549,95750,40452,807
Investments and other assets7,9777,6996,2678,0529,05311,05410,24610,43311,375
Intangible assets1,6901,4221,021938850786722637562
Total assets64,57170,67770,35072,40377,20385,52492,05095,75699,264
Notes and accounts payable3,2963,8113,5213,8773,4203,6984,1953,5423,796
Short-term debt8601,5001,1392,0994491,6952,2561,7821,536
Total current liabilities8,07510,4859,1479,2288,81412,19712,06010,86812,302
Long-term debt--7254255009622,1782,3251,618
Total fixed liabilities1,3601,5731,9191,6661,7552,3693,6764,1703,518
Total liabilities9,43512,05811,06710,89510,57014,56715,73715,03915,821
Total net assets55,13658,61859,28361,50866,63370,95776,31380,71783,443
Total interest-bearing debt8601,5001,8642,5249492,6574,4344,1073,154
Cash flow statement
(JPYmn)
Cash flows from operating activities6,0935,2417,5095,8139,9389,5809,6339,78411,699
Cash flows from investing activities933-2,493-2,829-4,452-6,237-8,396-11,964981-3,827
Cash flows from financing activities-841-484-3,702-1,934-2,957-347-450-3,049-7,620
Financial ratios
ROA (RP-based)11.9%11.0%11.3%10.1%11.9%11.3%12.4%11.1%13.5%
ROE7.9%7.6%7.0%7.4%9.9%9.7%10.4%9.1%11.2%
Equity ratio79.8%77.3%77.7%77.9%79.0%76.0%76.1%77.3%76.5%
Source: Shared Research based on company data.
Note: The company conducted a 1:1.2 stock split effective September 1, 2021.

Trends and outlook

Monthly trends

Daiseki Co. monthly sales, year-on-year performance
MarAprMayJunJulAugSepOctNovDecJanFebTotal
FY02/12Act.2,0461,9861,9962,3192,2512,0831,9281,9721,8912,0341,7231,77824,011
FY02/13Act.2,1002,1122,1761,9691,9382,1041,9551,9881,9842,0661,6961,71523,808
FY02/14Act.2,1142,0422,1302,0412,1582,1702,0192,1682,1392,2831,8521,95325,074
FY02/15Act.2,4182,2522,1512,1922,2832,2712,2522,2992,1492,3341,9121,94126,459
FY02/16Act.2,3512,3232,1472,3082,3042,2302,1032,2922,0232,2471,7871,89526,016
FY02/17Act.2,1662,1252,1332,1292,2752,2262,2192,2222,1402,2781,8701,97725,746
FY02/18Act.2,4972,3602,3752,3672,3892,4522,3282,4552,4422,6312,1732,30428,778
FY02/19Act.2,7422,5252,6502,6652,6652,7952,6832,8502,7682,8792,4032,49732,127
FY02/20Act.2,9872,8572,8162,6492,9002,8082,7432,9392,9262,9462,4792,49033,545
FY02/21Act.2,8762,7652,5512,4952,5992,4662,4902,6582,5862,7252,2492,39830,862
FY02/22Act.2,9512,6802,6782,7632,7742,7102,7232,8212,7353,0632,4622,51432,881
MarAprMayJunJulAugSepOctNovDecJanFebTotal
FY02/12Act.12.7%9.1%10.2%32.9%21.9%9.0%6.1%7.6%-4.3%2.4%9.2%3.9%9.9%
FY02/13Act.2.6%6.3%9.0%-15.1%-13.9%1.0%1.4%0.8%4.9%1.6%-1.6%-3.5%-0.8%
FY02/14Act.0.7%-3.3%-2.1%3.7%11.4%3.1%3.3%9.1%7.8%10.5%9.2%13.9%5.3%
FY02/15Act.14.4%10.3%1.0%7.4%5.8%4.7%11.5%6.0%0.5%2.2%3.2%-0.6%5.5%
FY02/16Act.-2.8%3.2%-0.2%5.3%0.9%-1.8%-6.6%-0.3%-5.9%-3.7%-6.5%-2.4%-1.7%
FY02/17Act.-7.9%-8.5%-0.7%-7.8%-1.3%-0.2%5.5%-3.1%5.8%1.4%4.6%4.3%-1.0%
FY02/18Act.15.3%11.1%11.3%11.2%5.0%10.2%4.9%10.5%14.1%15.5%16.2%16.5%11.8%
FY02/19Act.9.8%7.0%11.6%12.6%11.6%14.0%15.2%16.1%13.3%9.4%10.6%8.4%11.6%
FY02/20Act.8.9%13.1%6.3%-0.6%8.8%0.5%2.2%3.1%5.7%2.3%3.2%-0.3%4.4%
FY02/21Act.-3.7%-3.2%-9.4%-5.8%-10.4%-12.2%-9.2%-9.6%-11.6%-7.5%-9.3%-3.7%-8.0%
FY02/22Act.2.6%-3.1%5.0%10.7%6.7%9.9%9.4%6.1%5.8%12.4%9.5%4.8%6.5%
Source: Shared Research based on company data
Daiseki Co. monthly gross profit margin
MarAprMayJunJulAugSepOctNovDecJanFebTotal
FY02/12Act.39.3%36.8%34.6%32.1%35.4%34.2%36.3%37.7%36.8%36.2%33.4%28.7%35.2%
FY02/13Act.38.7%38.5%35.9%35.0%33.7%34.1%35.7%35.6%35.3%33.8%32.3%25.9%34.8%
FY02/14Act.36.4%37.1%37.4%36.6%35.6%36.5%37.1%36.8%35.1%35.9%32.4%29.6%35.7%
FY02/15Act.38.2%37.5%36.9%39.2%37.6%37.7%36.2%36.5%37.9%36.1%33.2%30.9%36.7%
FY02/16Act.36.0%36.5%35.5%35.5%35.5%34.4%34.4%36.4%34.1%35.2%31.1%31.7%34.9%
FY02/17Act.37.3%37.5%36.8%36.6%37.6%35.8%36.8%38.2%37.2%37.7%33.5%33.3%36.6%
FY02/18Act.39.0%39.3%40.0%38.6%38.4%37.1%36.4%39.6%36.8%39.0%33.2%31.4%37.5%
FY02/19Act.39.7%37.9%38.8%39.5%38.4%38.0%38.8%39.0%37.7%38.9%33.5%32.6%37.9%
FY02/20Act.40.0%36.6%37.5%39.2%39.6%40.7%37.3%40.8%41.0%39.2%35.9%35.1%38.7%
FY02/21Act.41.9%38.9%38.5%38.7%41.0%40.4%37.8%40.1%39.8%41.3%38.3%37.1%39.6%
FY02/22Act.43.0%41.1%41.1%42.7%41.0%41.1%40.0%40.8%40.2%42.4%39.1%37.6%41.0%
Source: Shared Research based on company data
Note: Includes gross profit on soil contamination cleanup sales to Daiseki Eco. Solution; GPM tends to decrease in months when sales are high.
Daiseki Co. sales and GPM
Source: Shared Research based on company data

Quarterly trends and results

CumulativeFY02/20FY02/21FY02/22FY02/22
(JPYmn)Q1Q1-Q2Q1-Q3Q1-Q4Q1Q1-Q2Q1-Q3Q1-Q4Q1Q1-Q2Q1-Q3Q1-Q4% of Est.FY Est.
Sales13,55726,89241,17354,08813,45125,87338,70451,53014,03829,04143,42056,867100.5%56,600
YoY9.3%2.4%5.8%5.4%-0.8%-3.8%-6.0%-4.7%4.4%12.2%12.2%10.4%9.8%
Gross profit4,3298,53513,27317,1244,1408,04412,23116,3244,7169,98614,83519,238101.3%19,000
YoY13.1%10.6%14.1%12.7%-4.4%-5.8%-7.9%-4.7%13.9%24.1%21.3%17.9%16.4%
Gross profit margin31.9%31.7%32.2%31.7%30.8%31.1%31.6%31.7%33.6%34.4%34.2%33.8%33.6%
SG&A expenses1,5613,0634,6686,2591,5773,0534,5496,0821,5923,1574,7326,29798.4%6,400
YoY5.1%1.7%2.3%2.9%1.0%-0.3%-2.5%-2.8%1.0%3.4%4.0%3.5%5.2%
SG&A ratio11.5%11.4%11.3%11.6%11.7%11.8%11.8%11.8%11.3%10.9%10.9%11.1%11.3%
Operating profit2,7675,4718,60510,8652,5624,9907,68110,2423,1236,82910,10312,940102.7%12,600
YoY18.1%16.3%21.8%19.3%-7.4%-8.8%-10.7%-5.7%21.9%36.9%31.5%26.3%23.0%
Operating profit margin20.4%20.3%20.9%20.1%19.0%19.3%19.8%19.9%22.2%23.5%23.3%22.8%22.3%
Recurring profit2,8125,5548,72611,0252,6825,1407,84810,4513,1466,90410,20613,118102.5%12,800
YoY19.4%17.1%21.9%19.8%-4.6%-7.5%-10.1%-5.2%17.3%34.3%30.0%25.5%22.5%
Recurring profit margin20.7%20.7%21.2%20.4%19.9%19.9%20.3%20.3%22.4%23.8%23.5%23.1%22.6%
Net income1,8113,5645,5917,0441,4973,1344,8796,5212,0034,3186,4098,376102.1%8,200
YoY14.4%15.9%19.2%15.3%-17.3%-12.1%-12.7%-7.4%33.8%37.8%31.4%28.4%25.7%
Net margin13.4%13.3%13.6%13.0%11.1%12.1%12.6%12.7%14.3%14.9%14.8%14.7%14.5%
QuarterlyFY02/20FY02/21FY02/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
Sales13,55713,33514,28112,91513,45112,42212,83112,82614,03815,00314,37913,447
YoY9.3%-3.7%12.9%4.0%-0.8%-6.8%-10.2%-0.7%4.4%20.8%12.1%4.8%
Gross profit4,3294,2064,7383,8514,1403,9044,1874,0934,7165,2704,8494,403
YoY13.1%8.2%21.1%8.2%-4.4%-7.2%-11.6%6.3%13.9%35.0%15.8%7.6%
Gross profit margin31.9%31.5%33.2%29.8%30.8%31.4%32.6%31.9%33.6%35.1%33.7%32.7%
SG&A expenses1,5611,5021,6051,5911,5771,4761,4961,5331,5921,5651,5751,565
YoY5.1%-1.6%3.6%4.6%1.0%-1.7%-6.8%-3.6%1.0%6.0%5.3%2.1%
SG&A ratio11.5%11.3%11.2%12.3%11.7%11.9%11.7%12.0%11.3%10.4%11.0%11.6%
Operating profit2,7672,7043,1342,2602,5622,4282,6912,5613,1233,7063,2742,837
YoY18.1%14.5%32.6%10.8%-7.4%-10.2%-14.1%13.3%21.9%52.6%21.7%10.8%
Operating profit margin20.4%20.3%21.9%17.5%19.0%19.5%21.0%20.0%22.2%24.7%22.8%21.1%
Recurring profit2,8122,7423,1722,2992,6822,4582,7082,6033,1463,7583,3022,912
YoY19.4%14.9%31.3%12.7%-4.6%-10.4%-14.6%13.2%17.3%52.9%21.9%11.9%
Recurring profit margin20.7%20.6%22.2%17.8%19.9%19.8%21.1%20.3%22.4%25.0%23.0%21.7%
Net income1,8111,7532,0271,4531,4971,6371,7451,6422,0032,3152,0911,967
YoY14.4%17.6%25.3%2.5%-17.3%-6.6%-13.9%13.0%33.8%41.4%19.8%19.8%
Net margin13.4%13.1%14.2%11.3%11.1%13.2%13.6%12.8%14.3%15.4%14.5%14.6%
Source: Shared Research based on company data
By companyFY02/20FY02/21FY02/22FY02/22
Cumulative (JPYmn)Q1Q1-Q2Q1-Q3Q1-Q4Q1Q1-Q2Q1-Q3Q1-Q4Q1Q1-Q2Q1-Q3Q1-Q4% of Est.FY Est.
Total sales (consolidated)13,55726,89241,17354,08813,45125,87338,70451,53014,03829,04143,42056,867100.5%56,600
YoY9.3%2.4%5.8%5.4%-0.8%-3.8%-6.0%-4.7%4.4%12.2%12.2%10.4%9.8%
Daiseki Co. (parent)8,66117,02025,62933,5458,19315,75423,48930,8628,31016,55924,84032,88196.2%34,180
YoY9.4%6.1%5.3%4.4%-5.4%-7.4%-8.3%-8.0%1.4%5.1%5.8%6.5%10.8%
% of consolidated sales63.9%63.3%62.2%62.0%60.9%60.9%60.7%59.9%59.2%57.0%57.2%57.8%60.4%
Daiseki Eco. Solution3,5247,03210,66614,0484,2007,40611,05514,9064,2649,09913,28217,08297.6%17,500
YoY5.8%-9.9%-2.1%-1.0%19.2%5.3%3.6%6.1%1.5%22.9%20.1%14.6%17.4%
% of consolidated sales26.0%26.1%25.9%26.0%31.2%28.6%28.6%28.9%30.4%31.3%30.6%30.0%30.9%
Hokuriku Daiseki207394602817184340513689207418655872109.0%800
YoY-8.4%-8.4%-6.1%-3.7%-11.1%-13.7%-14.8%-15.7%12.5%22.9%27.7%26.6%16.1%
% of consolidated sales1.5%1.5%1.5%1.5%1.4%1.3%1.3%1.3%1.5%1.4%1.5%1.5%1.4%
Daiseki MCR7261,4622,2442,9876511,3712,1122,8787641,5842,4303,230109.5%2,950
YoY-2.0%-3.8%2.7%4.9%-10.3%-6.2%-5.9%-3.6%17.4%15.5%15.1%12.2%2.5%
% of consolidated sales5.4%5.4%5.5%5.5%4.8%5.3%5.5%5.6%5.4%5.5%5.6%5.7%5.2%
System Kikou6891,4502,8313,7235381,5472,2983,1437071,7992,8323,62094.8%3,820
YoY69.7%58.3%85.4%67.0%-21.9%6.7%-18.8%-15.6%31.4%16.3%23.2%15.2%21.5%
% of consolidated sales5.1%5.4%6.9%6.9%4.0%6.0%5.9%6.1%5.0%6.2%6.5%6.4%6.7%
Eliminations-252-467-799-1,035-316-546-763-950-217-419-621-819-
Operating profit (consolidated)2,7675,4718,60510,8652,5624,9907,68110,2423,1236,82910,10312,940102.7%12,600
YoY18.1%16.3%21.8%19.3%-7.4%-8.8%-10.7%-5.7%21.9%36.9%31.5%26.3%23.0%
Operating profit margin20.4%20.3%20.9%20.1%19.0%19.3%19.8%19.9%22.2%23.5%23.3%22.8%22.3%
Daiseki Co. (parent)2,3044,6477,0218,8962,2184,2676,3348,2212,4494,8767,2039,412103.5%9,090
YoY8.4%8.3%7.7%7.3%-3.7%-8.2%-9.8%-7.6%10.4%14.3%13.7%14.5%10.6%
Operating profit margin26.6%27.3%27.4%26.5%27.1%27.1%27.0%26.6%29.5%29.4%29.0%28.6%26.6%
Daiseki Eco. Solution3246411,0101,2373294587891,2064821,2931,8242,102100.1%2,100
YoY18.7%7.4%38.7%37.8%1.4%-28.6%-21.9%-2.5%46.5%182.3%131.2%74.3%74.1%
Operating profit margin9.2%9.1%9.5%8.8%7.8%6.2%7.1%8.1%11.3%14.2%13.7%12.3%12.0%
Hokuriku Daiseki203856731832476221467291116.7%78
YoY5.3%0.0%12.0%7.4%-10.0%-15.8%-16.1%-15.1%16.7%43.8%53.2%46.8%25.8%
Operating profit margin9.7%9.6%9.3%8.9%9.8%9.4%9.2%9.0%10.1%11.0%11.0%10.4%9.8%
Daiseki MCR28111191882256163283152314515706248.6%284
YoY366.7%----21.4%409.1%37.0%50.5%590.9%460.7%216.0%149.5%0.4%
Operating profit margin3.9%0.8%5.3%6.3%3.4%4.1%7.7%9.8%19.9%19.8%21.2%21.9%9.6%
System Kikou106165447531-421139052833331532688120.1%573
YoY---365.8%-27.9%-12.8%-0.6%-56.9%36.4%30.3%8.5%
Operating profit margin15.4%11.4%15.8%14.3%-0.7%13.6%17.0%16.8%4.7%18.4%18.8%19.0%15.0%
Eliminations-16-33-48-62-21-35-44-60-17-32-44-60-
By companyFY02/20FY02/21FY02/22
Quarterly (JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
Total sales (consolidated)13,55713,33514,28112,91513,45112,42212,83112,82614,03815,00314,37913,447
YoY9.3%-3.7%12.9%4.0%-0.8%-6.8%-10.2%-0.7%4.4%20.8%12.1%4.8%
Daiseki Co. (parent)8,6618,3598,6097,9168,1937,5617,7357,3738,3108,2498,2818,041
YoY9.4%2.9%3.7%1.7%-5.4%-9.5%-10.2%-6.9%1.4%9.1%7.1%9.1%
% of consolidated sales63.9%62.7%60.3%61.3%60.9%60.9%60.3%57.5%59.2%55.0%57.6%59.8%
Daiseki Eco. Solution3,5243,5083,6343,3824,2003,2063,6493,8514,2644,8354,1833,800
YoY5.8%-21.6%17.7%2.5%19.2%-8.6%0.4%13.9%1.5%50.8%14.6%-1.3%
% of consolidated sales26.0%26.3%25.4%26.2%31.2%25.8%28.4%30.0%30.4%32.2%29.1%28.3%
Hokuriku Daiseki207187208215184156173176207211237217
YoY-8.4%-8.3%-1.4%3.9%-11.1%-16.6%-16.8%-18.1%12.5%35.3%37.0%23.3%
% of consolidated sales1.5%1.4%1.5%1.7%1.4%1.3%1.3%1.4%1.5%1.4%1.6%1.6%
Daiseki MCR726736782743651720741766764820846800
YoY-2.0%-5.4%17.6%11.9%-10.3%-2.2%-5.2%3.1%17.4%13.9%14.2%4.4%
% of consolidated sales5.4%5.5%5.5%5.8%4.8%5.8%5.8%6.0%5.4%5.5%5.9%5.9%
System Kikou6897611,3818925381,0097518457071,0921,033788
YoY69.7%49.2%126.0%27.1%-21.9%32.6%-45.6%-5.3%31.4%8.2%37.5%-6.7%
% of consolidated sales5.1%5.7%9.7%6.9%4.0%8.1%5.9%6.6%5.0%7.3%7.2%5.9%
Eliminations-252-215-332-236-316-230-217-187-217-202-202-198
Operating profit (consolidated)2,7672,7043,1342,2602,5622,4282,6912,5613,1233,7063,2742,837
YoY18.1%14.5%32.6%10.8%-7.4%-10.2%-14.1%13.3%21.9%52.6%21.7%10.8%
Operating profit margin20.4%20.3%21.9%17.5%19.0%19.5%21.0%20.0%22.2%24.7%22.8%21.1%
Daiseki Co. (parent)2,3042,3432,3741,8752,2182,0492,0671,8872,4492,4272,3272,209
YoY8.4%8.2%6.5%5.8%-3.7%-12.5%-12.9%0.6%10.4%18.4%12.6%17.1%
Operating profit margin26.6%28.0%27.6%23.7%27.1%27.1%26.7%25.6%29.5%29.4%28.1%27.5%
Daiseki Eco. Solution324317368227329129331417482811531278
YoY18.7%-2.1%181.3%33.8%1.4%-59.3%-10.1%83.5%46.5%528.7%60.4%-33.3%
Operating profit margin9.2%9.0%10.1%6.7%7.8%4.0%9.1%10.8%11.3%16.8%12.7%7.3%
Hokuriku Daiseki201818171814151521252619
YoY5.3%-5.3%50.0%-5.6%-10.0%-22.2%-16.7%-11.8%16.7%78.6%73.3%26.7%
Operating profit margin9.7%9.6%8.7%7.9%9.8%9.0%8.7%8.5%10.1%11.8%11.0%8.8%
Daiseki MCR28-17108692234107120152162201191
YoY366.7%----21.4%--0.9%73.9%590.9%376.5%87.9%59.2%
Operating profit margin3.9%-2.3%13.8%9.3%3.4%4.7%14.4%15.7%19.9%19.8%23.8%23.9%
System Kikou1065928284-421517913833298201156
YoY--362.3%-32.8%-264.4%-36.5%64.3%-38.6%12.3%13.0%
Operating profit margin15.4%7.8%20.4%9.4%-0.7%21.3%23.8%16.3%4.7%27.3%19.5%19.8%
Eliminations-16-17-15-14-21-14-9-16-17-15-12-16
Source: Shared Research based on company data

Full-year FY02/22 results (out April 5, 2022)

Overview

Full-year FY02/22 results are as follows.

  • Sales: JPY56.9bn (+10.4% YoY, previous forecast: JPY56.6bn)
  • Operating profit: JPY12.9bn (+26.3% YoY, JPY12.6bn)
    • OPM: 22.8% (+2.9pp YoY, 22.3%)
  • Recurring profit: JPY13.1bn (+25.5% YoY, JPY12.8bn)
  • Net income attributable to owners of the parent: JPY8.4bn (+28.4% YoY, JPY8.2bn)]
  • EPS was JPY164.0. The company plans to pay a year-end dividend per share of JPY32.0, for an annual dividend per share of JPY60.0 (previous forecast: JPY60.0, dividend paid in FY02/21: JPY56.0). Expected payout ratio based on this dividend plan is 36.5% (previous forecast: 37.4%, results in FY02/21: 36.7%).

FY02/22 results were in line with the previous forecast (this plan was revised upward from the initial plan on October 1, 2021). The company's industrial waste treatment orders recovered at a slightly slower pace in 2H due to a temporary slump in the industrial production index caused by reduced automobile production and other factors. Sales of recycled fuel, soil contamination treatment, and lead recycling, however, all grew. As a result, sales and all profits, including operating profit, reached record highs for the first time in two fiscal years. Moreover, profitability improved through price revisions and cost reductions, resulting in an OPM of 22.8% (+2.9pp YoY), the second highest level on record, close to the 23.3% recorded in FY02/08. This was the result of Daiseki Co. revising its treatment prices and raising the price of recycled fuel oil, Daiseki Eco. Solutions' penetration of consulting sales, and higher lead prices at Daiseki MCR, while company-wide cost reductions also contributed to the success of the project.

The company positioned its FY02/22 performance as an escape from FY02/21, when the pandemic forced temporary stagnation. In FY02/21, sales and profits declined due to the impact of COVID-19 (production shutdowns by customers, restrictions on the company's sales activities, and lower resource prices). In FY02/22, the effects of the pandemic were not completely resolved, and the impact of automobile production cuts and other factors remained in some areas. However, the company recognizes that the resumption of sales activities, as well as price revisions and higher resource prices bolstered by an improved external environment, have put it back on the growth trajectory that began in FY02/19, and it reaffirmed that there will be no change in its growth scenario through 2030.

On September 1, 2021, the company conducted a 1.2-for-1 stock split of its common shares. Considering this stock split, the annual dividend forecast of JPY60.0 per share in essence indicates a dividend increase of JPY10.4 per share based on the number of outstanding shares in the previous year (FY02/21).

Achieved medium-term management plan approximately one year ahead of schedule

The company updates its three-year medium-term management plan every April when it announces its financial results. In the medium-term management plan announced in April 2021, the company established the following earnings plan for the period from FY02/22 through FY02/24 (only major items are shown).

  • Plan for FY02/22 (as of April 2021)
  • Sales JPY56.6bn, operating profit JPY 11.4bn, OPM 20.1%, ROE 9.6%
  • Plan for FY02/23 (as of April 2021)
  • Sales JPY61.5bn, operating profit JPY12.6bn, OPM 20.5%, ROE 10.1%
  • Plan for FY02/24 (as of April 2021)
  • Sales JPY66.5bn, operating profit JPY13.5bn, OPM 20.3%, ROE 10.1%

In April 2021, when the company announced these targets, the effects of the re-emergence of COVID-19 had not yet subsided, and the medium-term management plan was also conservative. Although it is necessary to take such circumstances into account, as a result, all profits categories, profit margin, and ROE in FY02/22 achieved the FY02/23 plan one year ahead of schedule. On the other hand, sales were generally in line with the company's plan (no sales were brought forward one year), which means that profitability improved more than the company had expected. For the new medium-term management plan, please refer to the "Medium-term management plan" section.

Q4 FY02/22 (December 2021–February 2022)

Q4 results (December 2021–February 2022) are as follows.

  • Sales: JPY13.4bn (+4.8% YoY)
  • Operating profit: JPY2.8bn (+10.8% YoY)
    • OPM: 21.1% (+1.1pp YoY)
  • Recurring profit: JPY2.9bn (+11.9% YoY)
  • Net income attributable to owners of the parent: JPY2.0bn (+19.8% YoY)

Sales were up by only single digits (+4.8% YoY), but all profit categories from the operating profit line down maintained double-digit growth. OPM of 21.1% was up YoY, but was down compared to OPM in Q1 (March–May 2021) of 22.2%, in Q2 (June–August 2021) of 24.7%, and in Q3 (September–November 2021) of 22.8%. Sales increased YoY for four consecutive quarters and operating profit for five consecutive quarters.

Daiseki Co. (parent)

Daiseki Co. Trend of Results (JPYmn)
Daiseki Co. (parent)FY02/20FY02/21FY02/22FY02/22
Quarterly (JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4% of Est.FY Est.
Sales8,6618,3598,6097,9168,1937,5617,7357,3738,3108,2498,2818,04196.2%34,180
YoY9.4%2.9%3.7%1.7%-5.4%-9.5%-10.2%-6.9%1.4%9.1%7.1%9.1%10.8%
Gross profit3,3033,3313,4252,9243,2663,0323,0412,8803,4753,4363,3443,212100.6%13,390
YoY7.3%5.9%7.0%6.6%-1.1%-9.0%-11.2%-1.5%6.4%13.3%10.0%11.5%9.6%
Gross profit margin38.1%39.8%39.8%36.9%39.9%40.1%39.3%39.1%41.8%41.7%40.4%39.9%39.2%
Operating profit2,3042,3432,3741,8752,2182,0492,0671,8872,4492,4272,3272,209103.5%9,090
YoY8.4%8.2%6.5%5.8%-3.7%-12.5%-12.9%0.6%10.4%18.4%12.6%17.1%10.6%
Operating profit margin26.6%28.0%27.6%23.7%27.1%27.1%26.7%25.6%29.5%29.4%28.1%27.5%26.6%
Recurring profit2,3512,3742,4221,9162,2712,0862,1151,9122,5012,4752,3842,278105.1%9,170
YoY8.1%8.4%5.6%7.5%-3.4%-12.1%-12.7%-0.2%10.1%18.6%12.7%19.1%9.4%
Recurring profit margin27.1%28.4%28.1%24.2%27.7%27.6%27.3%25.9%30.1%30.0%28.8%28.3%26.8%
Net income1,6331,6331,6641,3181,3421,4461,4741,3091,7361,7131,6631,603106.3%6,320
YoY4.7%7.9%4.5%0.2%-17.8%-11.5%-11.4%-0.7%29.4%18.5%12.8%22.5%13.4%
Net margin18.9%19.5%19.3%16.6%16.4%19.1%19.1%17.8%20.9%20.8%20.1%19.9%18.5%
Source: Shared Research based on company data
Summary of full-year results (12 months)

Full-year results for FY02/22 were as follows.

  • Sales: JPY32.9bn (+6.5% YoY; previous plan: JPY34.2bn)
  • Operating profit: JPY9.4bn (+14.5% YoY; JPY9.1bn)
  • OPM: 28.6% (+2.0pp; 26.6%)

The previous plan was the initial plan announced in April 2021. Daiseki Co. maintained its original plan for one year.

Sales increased 6.5% YoY due to an increase in the volume of industrial waste received, price revisions, and higher prices for recycled fuel oil, but did not meet the target set in the previous plan. This was due to the decline in production activities following the state of emergency declarations, particularly the impact of reduced production of automobiles due to a shortage of components. In fact, the volume of industrial waste received remained at 1,080 thousand tons (+1.3% YoY), falling short of the 1,160 thousand tons received in FY02/20. As a result, sales increased, but did not reach the JPY33.5bn (record high) achieved in FY02/20.

Meanwhile, operating profit increased 14.5% YoY, reaching a record high for the first time in two fiscal years, and each of the company's other profit categories set new records as well, while also exceeding the previous plan. Despite the fact that sales did not reach a record high, operating profit did, due to: 1) higher profit margins from the promotion of price revisions, 2) comprehensive cost management (e.g., improved recycling rate), and 3) higher recycled fuel oil prices. These measures resulted in the operating profit margin rising 2.0pp YoY to 28.6%, setting a new record in terms of profitability.

The company recognizes that the higher profit margins resulting from price revision promotion in particular contributed to this result. The company's recycling technology is attracting renewed attention as environmental regulations are becoming increasingly stringent and more demands are being placed on general businesses regarding the handling of wastewater treatment. Given this, the company understands that the profitability improvement effect of the widely disseminated price revision was greater than anticipated. According to the company, the price revision is expected to have a sustainable effect since it will be accepted by general businesses in FY02/23 and beyond. In terms of comprehensive cost management, the company successfully curbed the outsourced processing cost ratio by improving the recycling rate, while also enhancing facility efficiency and thoroughly managing variable costs. Concerning the increase in the price of recycled heavy oil, the company expects to see a greater effect in FY02/23 because this price follows the price crude oil with a time lag of three to four months.

Summary of Q4 (December–February, 3 months) results

The results for the most recent Q4 (December 2021–February 2022, three months) were as follows.

  • Sales: JPY8.0bn (+9.1% YoY)
  • Operating profit: JPY2.2bn (+17.1% YoY)
  • OPM: 27.5% (+1.9pp YoY)

Although sales were partially affected by the re-emergence of COVID-19—more pronounced from the beginning of January 2022—sales and profits increased due to the penetration of the effects of profitability improvement. The OPM of 27.5% was lower than the 29.5% in Q1 (March–May), 29.4% in Q2 (June–August), and 28.1% in Q3 (September–November), but represents a new record for Q4. Daiseki Co. tends to have the lowest profit margin in Q4 during the year, due to the number of operating days and effects specific to the end of the period.

Index of industrial production and Daiseki parent sales
Source: Shared Research based on company data
Sales by location
Sales by locationFY02/20FY02/21FY02/22FY02/22
Quarterly (JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4% of Est.FY Est.
Daiseki Co. (parent)8,6618,3598,6097,9168,1937,5617,7357,3738,3108,2498,2818,04196.2%34,180
YoY9.4%2.9%3.7%1.7%-5.4%-9.5%-10.2%-6.9%1.4%9.1%7.1%9.1%10.8%
Nagoya2,3832,3362,4342,3232,3022,0692,1302,1392,2872,3562,3172,19193.7%9,766
YoY3.5%-1.9%2.2%4.5%-3.4%-11.4%-12.5%-7.9%-0.7%13.9%8.8%2.4%13.0%
% of total27.5%27.9%28.3%29.3%28.1%27.4%27.5%29.0%27.5%28.6%28.0%27.2%28.6%
Hokuriku1,0751,1041,0589631,1051,0269919211,1241,0921,05998299.0%4,299
YoY12.0%12.0%5.0%8.2%2.8%-7.1%-6.3%-4.4%1.7%6.4%6.9%6.6%6.3%
% of total12.4%13.2%12.3%12.2%13.5%13.6%12.8%12.5%13.5%13.2%12.8%12.2%12.6%
Kansai1,4731,4271,3661,1011,3531,2451,1991,0651,3121,1891,2741,24091.2%5,500
YoY9.3%-1.8%-5.3%-15.4%-8.1%-12.8%-12.2%-3.3%-3.0%-4.5%6.3%16.4%13.1%
% of total17.0%17.1%15.9%13.9%16.5%16.5%15.5%14.4%15.8%14.4%15.4%15.4%16.1%
Kyushu1,5501,4291,5761,6341,6031,4741,4151,4411,6391,6181,5941,682103.7%6,298
YoY7.6%3.9%16.1%17.3%3.4%3.1%-10.2%-11.8%2.2%9.8%12.7%16.7%6.2%
% of total17.9%17.1%18.3%20.6%19.6%19.5%18.3%19.5%19.7%19.6%19.2%20.9%18.4%
Kanto1,7911,7291,8021,5831,5491,4911,7261,5611,6871,7201,7531,66296.1%7,098
YoY8.5%4.3%-1.4%-6.3%-13.5%-13.8%-4.2%-1.4%8.9%15.4%1.6%6.5%12.2%
% of total20.7%20.7%20.9%20.0%18.9%19.7%22.3%21.2%20.3%20.9%21.2%20.7%20.8%
Chiba38633136830827725327224325927228028089.5%1,219
YoY79.5%21.7%30.5%9.6%-28.2%-23.6%-26.1%-21.1%-6.5%7.5%2.9%15.2%16.7%
% of total4.5%4.0%4.3%3.9%3.4%3.3%3.5%3.3%3.1%3.3%3.4%3.5%3.6%
Source: Shared Research based on company data
Industrial production index and Daiseki Co. (parent) sales (excluding sales to DES)
Source: Shared Research based on Ministry of Economy, Trade and Industry data
Crude Oil CIF price trends