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Daiwa Industries' earnings show negative mix effects from inspection declines on gross margin, but strong SG&A cost control despite wage inflation pressures in Japan. On the other hand products are lifting in the mix over merchandise. Guidance points to operating profit acceleration later in the year. Inspection revenue would likely drive this in a recovery.
Daiwa Industries Ltd. remains a solid pick, with significant downside protection and potential upside driven by an anticipated capital plan disclosure. The latest earnings show a possible decline in inspection revenue, based on margin evolution, but sales have accelerated due to a deferred project now delivered, probably an equipment sale. Despite low EVs, careful study is needed; the company is family-controlled and conservative, but TSE's push for capital deployment should become a catalyst.
The company builds refrigeration equipment and vertical showcases for Japanese convenience stores and small restaurants, with stable, high-margin maintenance and inspection revenues. Valuation appeal: Cash and time deposits nearly equal market capitalization, making operations essentially free, with a theoretical 57% upside. The extreme discount exists due to family control and cash accumulation, but you should be planning to do something with that cash.
Daiwa Industries has a model to die for and its operating business come to free for investors. The company has a history of underestimating its own performance, and they don't expect profit growth despite high probability of improving mix effects. They still haven't released a capital plan, and that could be a catalyst for the substantial valuation case based on non-operating assets sitting idle but almost covering market cap.
No recent filings indexed.