3064 monotaro 2014 12 q1 report 2014 05 26 english · in fact, the company is going for prospective...
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1
URL: www.walden.co.jp
Written by Yoshiyuki Muroya
E-mail: yoshiyuki_muroya@walden.co.jp
Phone:+81 3 3553 3769
MonotaRO (3064)Consolidated FY Sales OP RP NP EPS DPS BPS
(Million Yen) (Yen) (Yen) (Yen)
FY12/2012 28,742 2,925 2,941 1,689 28.2 8.0 91.0
FY12/2013 34,556 3,885 3,901 2,289 37.7 12.0 119.5
FY12/2014CoE 42,647 4,210 4,197 2,444 40.1 14.0 -
FY12/2013 YoY 20.2% 32.8% 32.6% 35.5% - - -
FY12/2014CoE YoY 23.4% 8.4% 7.6% 6.8% - - -
Consolidated Half Year Sales OP RP NP EPS DPS BPS
(Million Yen) (Yen) (Yen) (Yen)
Q1 to Q2 FY12/2013 15,991 2,061 2,074 1,336 - - -
Q3 to Q4 FY12/2013 18,565 1,823 1,826 952 - - -
Q1 to Q2 FY12/2014CoE 20,084 1,898 1,893 1,101 - - -
Q3 to Q4 FY12/2014CoE 22,563 2,312 2,304 1,343 - - -
Q1 to Q2 FY12/2014CoE YoY 25.6% (7.9%) (8.7%) (17.6%) - - -
Q3 to Q4 FY12/2014CoE YoY 21.5% 26.7% 26.1% 41.0% - - -
Consolidated Quarters Sales OP RP NP EPS DPS BPS
(Million Yen) (Yen) (Yen) (Yen)
Q1 FY12/2013 7,739 954 956 658 - - -
Q2 FY12/2013 8,251 1,107 1,118 677 - - -
Q3 FY12/2013 8,596 943 945 474 - - -
Q4 FY12/2013 9,968 880 881 478 - - -
Q1 FY12/2014 10,831 1,217 1,229 735 - - -
Q1 FY12/2014 YoY 39.9% 27.6% 28.6% 11.7% - - -
Source: Company Data, WRJ Calculation
1.0 Executive Summary (26 May 2014)
Reacted Not Much
MonotaRO, running Internet store of indirect materials (diverse consumables but for raw materials), e.g.,
tools, mainly for small-&-medium-sized corporates, maintains high sales growth rates. In our analysis of
sales with the Company (more than 70% accounted for by inventory merchandises to cope with day
shipment, 126,000 in number as of the end of Q1 FY12/2014) on a 12-month moving average basis, the
Company’s sales growth rates are rather accelerating most recently. In early April 2014, sales with the
Company temporarily saw slack growth in reaction to hurried purchases of merchandises by own customers
towards the end of March 2014 ahead of April 2014 introduction of consumption tax rate hike. But this did
not persist, having resulted in monthly sales in April 2014, a touch better than assumptions of Company
forecasts. Meanwhile, the Company has been getting ready for starting up a new distribution center to cope
with ongoing increases in prospective demand for some time and this new operation is expected to start up
on a full-fledged basis in July 2014. Basically, in Q2 is the Company to start suffering from add-on costs in
line with this, while benefiting from sequentially improving efficiency in shipment of merchandises in Q3
and Q4 also in line with this. In fact, the Company is going for prospective sales ¥100,000m, more than
doubled from the current levels as a midterm milestone target, suggesting that there is still a great room to
2
cultivate in the mainstay domestic market in Japan. On top of this, there are meaningful developments in
regards to developments of overseas markets, as found in most recent trends such as steady sales growth in
Korea and increasing contribution to earnings from the United States.
In Q1 FY12/2014, sales came in at ¥10,831m (up 39.9% YoY), operating profit ¥1,217m (up 27.6%) and
operating profit margin 11.2% (down 1.1% points). Steady increases in the number of incoming new
customers resulted in persistently increasing number of registered accounts, while sales per registered
account increased. Monthly sales in Mach came in at levels 20% higher than assumptions of Company
forecasts, driven by hurried purchases of own merchandises by customers ahead of consumption tax rate
hike and by those of fiscal-yearend-related demand. Meanwhile, operating profit margin came in at 11.2%
(down 1.1% points), as a result of gross profit margin 28.9% (down 1.9% points) and the ratio of SG&A
expenses to sales 17.7% (down 0.8% points). Due to yen’s depreciation, the Company saw increasing
procurement prices for both imported merchandises and those procured domestically. Meanwhile, surging
sales of national-brand merchandises, newly introduced, are increasing exposure to themselves in the
Company, on the expense of private-brand merchandises which carry gross profit margin than
national-brand ones. Still, surging sales as a whole was a key positive factor to have decreased the ratio of
SG&A expenses to sales.
Company forecasts in FY12/2014 have remained unchanged, calling for prospective sales ¥42,647m (up
23.4% YoY), operating profit ¥4,210m (up 8.4%) and operating profit margin 9.9% (down 1.4% points). Here
do they assume collective add-on costs ¥550m (equating to 1.3% of sales) associated with new distribution
center. As mentioned earlier, the Company is to book costs like those, basically starting in Q2, while
redundantly in a sense is the Company to book costs associated with existing distribution center at the same
time as far as Q2 is concerned. Due mainly to this, Company forecasts are going for increasing sales but
decreasing earnings in H1. Still, recent trading has been more buoyant than initially expected as mentioned
earlier.
IR Representative: Tomoko Yamazaki (+81 6 4869 7190 pr@monotaro.com)
3
2.0 Company Profile
Internet Store to Support Procurement by Manufacturers, etc.
Company Name MonotaRO Co., Ltd.
Company Website (Japanese only)
IR Information
Share Price
Established 19 October 2000
Listing 6 December 2006, Tokyo Stock Exchange First Section (Ticker: 3064)
Capital ¥1,829m (As of the end of March 2014)
No. of Shares 61,540,000 shares, including 532,026 treasury shares (As of the end of March 2014)
Main Features A major US indirect material company (W.W. Granger Inc.), the parent company
Main customers: small-&-mid-sized corporates belonging to sectors, e.g.,
manufacturing, construction & engineering, etc.
Persistently replacing small-sized retailers of tools, hardware stores, traders of
automotive parts, Internet stores, etc.
Businesses Ⅰ. Sales of Factory-Use Indirect Materials
Top Management Representative Executive President: Masaya Suzuki,
Director and Chairman: Kinya Seto
Shareholders Grainger Group 50.8%, State Street 6.0% (As of the end of December 2013)
Headquarters Amagasaki-city, Hyogo-pref. JAPAN
No. of Employees Consolidated: 192, part-time and temporary employees: 579 (As of the end of March
2014)
Source: Company Data
3.0 Recent Trading & Prospects
Q1 FY12/2014 Results
In Q1 FY12/2014, sales came in at ¥10,831m (up 39.9% YoY), operating profit ¥1,217m (up 27.6%),
recurring profit ¥1,229m (up 28.6%) and net profit ¥735m (up 11.7%), while operating profit margin 11.2%
(down 1.1% points). On a parent basis, sales came in at ¥10,751m (up 38.9%), operating profit ¥1,269m (up
28.5%) and operating profit margin 11.8% (down 1.0% points). Thus, consolidated performance with the
Company hinges on that of the parent company to a large extent.
Based on a simple calculation basis, consolidated add-ons are ¥80m in sales and negative ¥51m in operating
balance, totally attributable to those from the only consolidated subsidiary in Q1, which is based in Korea
(NAVIMRO Co., Ltd., established in January 2013 while locally run by similar business model as on a
parent basis), as far as we could gather. Although this subsidiary remains insignificant in terms of impacts
to the consolidated accounts, we recognize sequentially increasing sales with this. Meanwhile, details of
business performance on a parent basis are as follows:
4
Compared with some 20,000 in FY12/2013 for monthly average number of incoming new customers, the
Company saw as much as some 22,100 in Q1, having resulted in the number of registered accounts
1,186,714 (up 25.4%) as of the end of Q1. On top of this, increasing sales per registered account led to sales
increases with the Company higher than those of the number of registered accounts. In our estimate, sales
per registered account came in at ¥2,851 (up 6.7% YoY) in January 2014, ¥2,871 (up 3.0%) in February and
¥3,578 (up 21.0%) in March.
The results in March were far larger than equivalents over the year and over the month, driven by hurried
purchases of merchandises by own customers ahead of consumption tax hike, as far as we could gather.
Meanwhile, the results in April, when the hurried purchases are gone, came in at ¥2,889 (down 2.2%),
having come down marginally over the year while sharply over the results in March when the hurried
purchases prevailed. More importantly, however, the results in April were roughly unchanged from those of
January and February, suggesting that reaction to the hurried purchases was already gone.
In estimating sales per registered account, we simple divide sales during the specified period by the average
number of registered accounts during the specified period and thus registered accounts not utilized during
the specified period are included as denominator. As a result, we believe sales per registered account on a
utilization basis or in reality are far higher than the levels already mentioned here.
In regards to large corporates conjunction, sales rose as much as 2.2 times over the year, having accounted
for some 4% of sales with the Company. The number of customers on this side came in at 140 as of the end of
Q1 versus 120 as of the end of Q4 FY12/2013. The Company does not disclose details on this side, e.g., the
number of registered accounts, etc., but we have an impression that the number of registered accounts on
this side was increasing more rapidly than the Company as a whole, while having seen higher sales per
registered account. Thus, we believe this side had a lot to do with increasing sales per registered account
with the Company.
In the first place, large corporates conjunction represents sales of own merchandises through purchasing
management systems run by large corporates, being in conjunction with the Company’s electronic
merchandise catalogue. Meanwhile, now the Company is looking to introduction own purchasing
management systems, negotiating with 10 candidates of large corporates.
5
Parent Monthly Sales Trends (On a 12-Month Moving Average Basis)
1,8
89
1,9
39
1,9
81
2,0
26
2,0
75
2,1
12
2,1
65
2,2
08
2,2
48
2,3
03
2,3
49
2,3
86
2,4
16
2,4
42
2,4
75
2,5
18
2,5
55
2,5
82
2,6
32
2,6
60
2,7
06
2,7
59
2,8
09
2,8
73
2,9
42
3,0
05
3,1
24
3,1
78
+2
5.8
%
+2
6.8
%
+27
.1%
+27
.9%
+28
.4%
+2
7.5
%
+2
8.6
%
+2
8.8
%
+28
.7%
+2
9.2
%
+29
.3%
+28
.9%
+2
7.9
%
+26
.0%
+2
5.0
%
+2
4.3
%
+2
3.1
%
+2
2.2
%
+2
1.6
%
+20
.4%
+2
0.4
%
+19
.8%
+19
.6%
+20
.4%
+2
1.8
%
+23
.0%
+2
6.2
%
+2
6.2
%
0.0%
10.0%
20.0%
30.0%
0
1,000
2,000
3,000
4,000
Janu
ary
-12
Fe
bru
ary
-12
Marc
h-1
2
Ap
ril-
12
Ma
y-1
2
Ju
ne-1
2
July
-12
Au
gu
st-1
2
Sep
tem
b…
Oct
ob
er-
12
No
vem
be
…
De
cem
be
…
Janu
ary
-13
Fe
bru
ary
-13
Marc
h-1
3
Ap
ril-
13
Ma
y-1
3
Ju
ne-1
3
July
-13
Au
gu
st-1
3
Sep
tem
b…
Oct
ob
er-
13
No
vem
be
…
De
cem
be
…
Janu
ary
-14
Fe
bru
ary
-14
Marc
h-1
4
Ap
ril-
14
Ma
y-1
4
Ju
ne-1
4
Sales (Million Yen, On a 12-Month Moving Average Basis) YoY (%)
Parent Sales Trends Per Working Day (On a 12-Month Moving Average Basis)
94
95
98
10
0
10
2
10
4
10
6
10
8
11
0
11
2
11
4
11
6
11
7
12
0
12
2
12
3
12
5
12
7
12
9
13
0
13
3
13
5
13
8
14
2
14
5
14
8
15
4
15
7
+25
.8%
+25
.6%
+26
.5%
+2
6.8
%
+2
6.7
%
+26
.5%
+2
6.6
%
+2
7.1
%
+2
7.7
%
+2
7.0
%
+26
.5%
+2
6.2
%
+2
5.2
%
+2
5.4
%
+2
4.6
%
+23
.3%
+2
3.1
%
+2
2.3
%
+2
1.6
%
+2
1.0
%
+2
0.4
%
+2
0.7
%
+2
1.5
%
+22
.4%
+23
.8%
+24
.2%
+26
.9%
+2
7.4
%
0.0%
10.0%
20.0%
30.0%
0
50
100
150
200
250
Jan
uary
-12
Feb
ruary
-12
Marc
h-1
2
Ap
ril-
12
Ma
y-1
2
June
-12
July
-12
Aug
ust
-12
Sep
tem
be
r-12
Oct
ob
er-
12
Nove
mb
er-
12
Dece
mb
er-
12
Jan
uary
-13
Feb
ruary
-13
Marc
h-1
3
Ap
ril-
13
Ma
y-1
3
June
-13
July
-13
Aug
ust
-13
Sep
tem
be
r-13
Oct
ob
er-
13
Nove
mb
er-
13
Dece
mb
er-
13
Jan
uary
-14
Feb
ruary
-14
Marc
h-1
4
Ap
ril-
14
Ma
y-1
4
June
-14
Sales (Per Working Day, Million Yen, On a 12-Month Moving Average Basis) YoY (%)
Parent Sales per Registered Account
2,8
76
3,1
00
3,2
13
3,0
70
2,9
59
3,0
35
3,0
85
2,7
88
2,7
85
3,2
04
3,0
97
2,8
56
2,6
71
2,7
86
2,9
57
2,9
53
2,7
93
2,7
15
3,0
32
2,5
32
2,7
40
3,1
43
3,0
03
2,9
70
2,8
51
2,8
71
3,5
78
2,8
89
+4
.1%
+1
1.2
%
+2
.8%
+6.0
%
+8
.8%
(0.6
%)
+8.5
%
+4
.0%
+0.2
%
+4
.7%
(0.5
%)
(3.9
%)
(7.1
%)
(10
.1%
)
(8.0
%)
(3.8
%)
(5.6
%)
(10.6
%)
(1.7
%)
(9.2
%)
(1.6
%)
(1.9
%)
(3.0
%)
+4
.0%
+6
.7%
+3
.0% +2
1.0
%
(2.2
%)
(40.0%)(30.0%)(20.0%)(10.0%)+0.0%+10.0%+20.0%+30.0%
2,000
2,500
3,000
3,500
4,000
4,500
Janu
ary
-12
Fe
bru
ary
-12
Ma
rch
-12
Apri
l-1
2
Ma
y-1
2
Jun
e-1
2
July
-12
Au
gust-
12
Se
pte
mb
er-
12
Oct
obe
r-1
2
No
vem
ber-
12
De
cem
ber-
12
Janu
ary
-13
Fe
bru
ary
-13
Ma
rch
-13
Apri
l-1
3
Ma
y-1
3
Jun
e-1
3
July
-13
Au
gust-
13
Se
pte
mb
er-
13
Oct
obe
r-1
3
No
vem
ber-
13
De
cem
ber-
13
Janu
ary
-14
Fe
bru
ary
-14
Ma
rch
-14
Apri
l-1
4
Ma
y-1
4
Jun
e-1
4
Sales per Registered Account (Yen) YoY (%)
Source: Company Data, WRJ Calculation
6
Gross profit Margin, SG&A Expenses / Sales and Operating Profit Margin (On a Parent Basis)
28.2% 28.5% 28.1% 27.8% 27.8% 27.9% 27.6%30.5% 30.8% 30.7% 29.8% 29.5% 28.9%
18.1% 17.9% 18.6%21.2%
18.0% 17.0% 17.7%20.4%
18.1% 16.7%18.2%
20.0%17.1%
10.1% 10.5% 9.5%6.6%
9.8% 10.9% 9.9% 10.1%12.8% 14.0%
11.6%9.5%
11.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%Q
1FY
12
/20
11
Q2
FY1
2/2
01
1
Q3
FY1
2/2
01
1
Q4
FY1
2/2
01
1
Q1
FY1
2/2
01
2
Q2
FY1
2/2
01
2
Q3
FY1
2/2
01
2
Q4
FY1
2/2
01
2
Q1
FY1
2/2
01
3
Q2
FY1
2/2
01
3
Q3
FY1
2/2
01
3
Q4
FY1
2/2
01
3
Q1
FY1
2/2
01
4
Gross Profit Margin (%) SG&A Expenses / Sales (%) Operating Profit Margin (%)
Source: Company Data, WRJ Calculation
Meanwhile, historical trends of gross profit margin suggest that the levels once started getting meaningfully
higher than the previous levels in Q4 FY12/2012. According to the Company, this is the timing when the
Company successfully reinforced launches of high gross-profit-margin private-brand merchandises.
However, most recently, this trend has been rather inverted, as mentioned earlier.
The other thing is that the Company makes it a rule to update and release its merchandise catalogue
towards the end of September every year, while the newest one was released on 29 September 2013, i.e.,
“RED BOOK Volume 9 (General Catalogue for Indirect Materials)”, incorporating 301,600 merchandises in
12 separate volumes. As in the past years, the Company saw increasing SG&A expenses as well as their
ratio to sales in Q4 FY12/2013, due to expenses associated with the catalogue.
At the same time, gross profit margin marginally adjusted because of changes in merchandise mixture due
to release of the new merchandise catalogue that enhanced sales of national-brand merchandises which
were listed in there. Enhanced sales of national-brand merchandises decreased the Company’s exposure to
private-brand merchandises which carry relatively higher gross profit margin than national-brand ones. To
date, this trend has persisted, as mentioned earlier. On top of this, yen’s depreciation also started negatively
affected to gross profit margin, staring in H2 FY12/2013, while this has been the case so far, also as
mentioned earlier.
7
Income Statement (Cumulative, Quarterly)
Income Statement Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act
Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 YoY
(Million Yen) 12/2013 12/2013 12/2013 12/2013 12/2014 12/2014 12/2014 12/2014 Net Chg.
Sales 7,739 15,991 24,587 34,556 10,831 - - - +3,091
Cost of Sales 5,354 11,075 17,117 24,146 7,697 - - - +2,343
Gross Profit 2,385 4,915 7,470 10,410 3,134 - - - +748
SG&A Expenses 1,431 2,853 4,465 6,525 1,916 - - - +485
Operating Profit 954 2,061 3,004 3,885 1,217 - - - +263
Non Operating Balance 1 13 15 15 12 - - - +10
Recurring Profit 956 2,074 3,020 3,901 1,229 - - - +273
Extraordinary Balance 131 131 (30) (40) 0 - - - (132)
Pretax Profit 1,088 2,206 2,989 3,860 1,229 - - - +141
Tax Charges etc. 429 869 1,178 1,570 494 - - - +64
Net Profit 658 1,336 1,810 2,289 735 - - - +76
Sales YoY +15.7% +16.9% +18.3% +20.2% +39.9% - - - -
Operating Profit YoY +44.9% +44.8% +41.6% +32.8% +27.6% - - - -
Recurring Profit YoY +45.4% +44.1% +40.8% +32.6% +28.6% - - - -
Net Profit YoY +75.2% +61.4% +46.4% +35.5% +11.7% - - - -
Gross Profit Margin 30.8% 30.7% 30.4% 30.1% 28.9% - - - (1.9%)
SG&A / Sales 18.5% 17.8% 18.2% 18.9% 17.7% - - - (0.8%)
Operating Profit Margin 12.3% 12.9% 12.2% 11.2% 11.2% - - - (1.1%)
Recurring Profit Margin 12.4% 13.0% 12.3% 11.3% 11.4% - - - (1.0%)
Net Profit Margin 8.5% 8.4% 7.4% 6.6% 6.8% - - - (1.7%)
Tax Charges etc. / Pretax Profit 39.5% 39.4% 39.4% 40.7% 40.2% - - - +0.7%
Income Statement Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY
(Million Yen) 12/2013 12/2013 12/2013 12/2013 12/2014 12/2014 12/2014 12/2014 Net Chg.
Sales 7,739 8,251 8,596 9,968 10,831 - - - +3,091
Cost of Sales 5,354 5,721 6,041 7,029 7,697 - - - +2,343
Gross Profit 2,385 2,529 2,555 2,939 3,134 - - - +748
SG&A Expenses 1,431 1,422 1,612 2,059 1,916 - - - +485
Operating Profit 954 1,107 943 880 1,217 - - - +263
Non Operating Balance 1 11 2 0 12 - - - +10
Recurring Profit 956 1,118 945 881 1,229 - - - +273
Extraordinary Balance 131 0 (162) (10) 0 - - - (132)
Pretax Profit 1,088 1,118 782 871 1,229 - - - +141
Tax Charges etc. 429 440 308 392 494 - - - +64
Net Profit 658 677 474 478 735 - - - +76
Sales YoY +15.7% +18.0% +21.0% +25.2% +39.9% - - - -
Operating Profit YoY +44.9% +44.7% +35.0% +9.6% +27.6% - - - -
Recurring Profit YoY +45.4% +43.0% +34.0% +10.7% +28.6% - - - -
Net Profit YoY +75.2% +49.8% +16.0% +5.8% +11.7% - - - -
Gross Profit Margin 30.8% 30.7% 29.7% 29.5% 28.9% - - - (1.9%)
SG&A / Sales 18.5% 17.2% 18.8% 20.7% 17.7% - - - (0.8%)
Operating Profit Margin 12.3% 13.4% 11.0% 8.8% 11.2% - - - (1.1%)
Recurring Profit Margin 12.4% 13.6% 11.0% 8.8% 11.4% - - - (1.0%)
Net Profit Margin 8.5% 8.2% 5.5% 4.8% 6.8% - - - (1.7%)
Tax Charges etc. / Pretax Profit 39.5% 39.4% 39.4% 45.1% 40.2% - - - +0.7%
Source: Company Data, WRJ Calculation
8
Balance Sheet (Quarterly)
Balance Sheet Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY
(Million Yen) 12/2013 12/2013 12/2013 12/2013 12/2014 12/2014 12/2014 12/2014 Net Chg.
Cash & Deposit 2,516 3,270 3,405 4,248 3,176 - - - +660
Accounts Receivables 3,030 3,091 3,191 3,760 4,600 - - - +1,570
Inventory 2,845 3,072 2,964 3,023 3,322 - - - +477
Other 1,328 1,302 1,890 1,627 1,697 - - - +369
Current Assets 9,720 10,736 11,451 12,660 12,797 - - - +3,076
Tangible Assets 186 181 277 404 475 - - - +288
Intangible Assets 773 828 839 870 914 - - - +141
LT Investment Securities etc. 262 276 591 570 553 - - - +291
Fixed Assets 1,222 1,285 1,708 1,845 1,943 - - - +721
Total Assets 10,942 12,022 13,160 14,505 14,740 - - - +3,798
Accounts Payable 2,207 2,152 2,253 2,667 3,558 - - - +1,351
Short Term Debt 1,300 1,300 1,388 1,388 1,388 - - - +88
Other 1,267 1,720 2,343 2,731 1,738 - - - +470
Current Liabilities 4,775 5,173 5,985 6,787 6,686 - - - +1,911
Long Term Debt 0 0 179 179 179 - - - +179
Other 148 147 159 182 137 - - - (11)
Fixed Liabilities 148 147 338 361 316 - - - +168
Total Liabilities 4,923 5,320 6,324 7,149 7,003 - - - +2,079
Shareholders' Equity 5,969 6,645 6,760 7,255 7,641 - - - +1,672
Other 49 56 75 100 96 - - - +46
Total Assets 6,018 6,701 6,836 7,355 7,737 - - - +1,719
Total Liabilities & net Assets 10,942 12,022 13,160 14,505 14,740 - - - +3,798
Equity Capital 5,969 6,645 6,768 7,282 7,661 - - - +1,692
Interest Bearing Debt 1,300 1,300 1,568 1,568 1,568 - - - +268
Net Debt (1,216) (1,970) (1,836) (2,680) (1,608) - - - (391)
Equity Capital Ratio 54.5% 55.3% 51.4% 50.2% 52.0% - - - (2.6%)
Net-Debt-Equity Ratio (20.4%) (29.7%) (27.2%) (36.9%) (21.0%) - - - (0.7%)
ROE 46.0% 44.1% 39.4% 35.9% 39.4% - - - (6.6%)
ROA 34.5% 35.6% 33.0% 30.3% 33.6% - - - (0.8%)
Days for Inventory Turnover 48 49 45 39 39 - - - -
Inventory Turnover 7.5 7.4 8.2 9.3 9.3 - - - -
Quick Ratio 116% 123% 110% 118% 116% - - - -
Current Ratio 204% 208% 191% 187% 191% - - - -
Source: Company Data, WRJ Calculation
Cash Flow Statement (Cumulative)
Cash Flow Statement Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act
Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 YoY
(Million Yen) 12/2013 12/2013 12/2013 12/2013 12/2014 12/2014 12/2014 12/2014 Net Chg.
Operating Cash Flow na 728 na 2,354 na - - - -
Investing Cash Flow na (379) na (972) na - - - -
Operating CF + Investing CF na 348 na 1,381 na - - - -
Financing Cash Flow na (197) na (274) na - - - -
Source: Company Data, WRJ Calculation
9
FY12/2014 Company Forecasts
FY12/2014 Company forecasts have remained unchanged, calling for prospective sales ¥42,647m (up 23.4%
YoY), operating profit ¥4,210m (up 8.4%), recurring profit ¥4,197m (up 7.6%) and net profit ¥2,444m (up
6.8%), while operating profit margin 9.9% (down 1.4% points). Meanwhile, prospective divided per share has
also remained unchanged at ¥14.0, implying payout ratio 34.9%, up ¥2.0 from ¥12.0 in FY12/2013, implying
payout ratio 31.8%. Thus, payout ratio is to rise over the year.
Quarterly Sales and Operating Profit Margin
6,6
86
6,9
90
7,1
04
7,9
60
7,7
39
8,2
51
8,5
96
9,9
68
10
,83
1
9,2
52
11
,28
1
11
,28
1
9.9%10.9%
9.8% 10.1%12.3%
13.4%11.0%
8.8%11.2%
7.4%
10.2% 10.2%
0.0%
5.0%
10.0%
15.0%
0
5,000
10,000
Q1
FY1
2/2
01
2
Q2
FY1
2/2
01
2
Q3
FY1
2/2
01
2
Q4
FY1
2/2
01
2
Q1
FY1
2/2
01
3
Q2
FY1
2/2
01
3
Q3
FY1
2/2
01
3
Q4
FY1
2/2
01
3
Q1
FY1
2/2
01
4
Q2
FY1
2/2
01
4
Q3
FY1
2/2
01
4
Q4
FY1
2/2
01
4
Sales (Million Yen) Operating Profit Margin (%)
Source: Company Data, WRJ Calculations (Quarterly forecasts in Q3 and Q4 FY12/2014, based on half year Company
forecasts pro rata)
In regards to H1, the Company is going for prospective sales ¥20,084m (up 25.6%), operating profit ¥1,898m
(down 7.9%) and operating profit margin 9.5% (down 3.4% points). Company forecasts assume inevitable
adjustments for earnings in H1, as full-fledged booking of expenses associated with new distribution center
to start up its operations in July 2014 is to start coming out basically in Q2. Still, Q1 results were better
than expected and thus it should be spotted that this could be also the case in H1. In regards to sales, the
Company achieved 53.9% in Q1 out of prospective figure in H1 versus 48.4% in Q1 in terms of FY12/2013
results.
FY12/2014 Company forecasts assume add-on costs from new distribution center (collective ¥550m),
comprising those of depreciation charges (¥110m), rents for facilities (¥370m) and moving expenses (¥70m).
Meanwhile, in Q2 when the Company is in the process of changeover to new distribution center from
existing equivalent for its operations, there is a period for the Company to pay rents for both facilities. At the
same time, it is too early for the Company in Q2 to benefit from high efficiency of shipments in new
distribution center, estimated to be better 20% than existing equivalent. Thus, Company forecasts assume a
major adjustment of short-term earnings in Q2.
10
Going forward, however, the Company is expected to see sequentially improving earnings in H2 or Q4 in
particular, in line with improving benefits from new distribution center. Currently, capability with the
Company to store merchandises as inventory equates to some 126,000 in the number, while that of new
distribution center is expected to reach 300,000 to 400,000, at the end of the day. In regards to capability as
of the end of FY12/2014, the Company is going for 200,000.
Long-Term Prospects
The Company has a midterm milestone target ¥100,000m for annual turnover, while calling for consistently
edging up operating profit margin as a long-term trend, going forward. In FY12/2013, sales came in at
¥34,556m, operating profit ¥3,885m and operating profit margin 11.2%. There should be, still, a great room
to cultivate, even after achieving sales ¥100,000m pa, when it is reviewed that the Company estimates the
amounts of the domestic market for MRO in Japan to which it is exposed equate to ¥5.0 trillion to ¥10.0
trillion pa. On top of this, the Company’s accounts have been incorporated results of its overseas operations
most recently, while the Company has started disclosing detailed plans, etc. in the future and thus future
growth potentials in a long-term view are now getting even higher than before.
Long-Term Trends for Prospective Earnings
14,209 17,685 22,23928,742
34,55642,647
100,000
6.4%7.4%
9.0%10.2%
11.2%9.9%9.9%
0.0%
5.0%
10.0%
15.0%
20.0%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
FY1
2/2
00
9
FY1
2/2
01
0
FY1
2/2
01
1
FY1
2/2
01
2
FY1
2/2
01
3
FY1
2/2
01
4
Sales (Million Yen)
Operating Profit Margin (%)
Source: Company Data, WRJ Calculation
According to the statistics by Ministry of Internal Affairs and Communication, the number of corporates
whose headcounts are lower than 300 in Japan stands at 5.43m (2012 Economic Consensus for Business
Activity). On top of this, many sole traders which are not included in there, as well as large corporates whose
headcounts are 300 and/or more, have been customers with the Company in reality. Given the fact that the
number of registered accounts with the Company stood at no more than 1,186,714 as of end of Q1 FY12/2014
and that a customer holds more than a single registered account to a reasonable extent, it is the case that
the number of registered accounts with the Company could be some 10 times larger than the current level,
according to the Company.
11
Meanwhile, edging up operating profit margin, as a long-term trend, is expected to materialize by
diminishing ratio of SG&A expenses to sales, combined with gradual improvements of gross profit margin.
The former is expected to be driven basically by persistent increases in sales, while the latter merchandise
mixture improvements.
To merchandise mixture improvements, improving profit margin of private-brand merchandises originally
carrying high gross profit margin has been contributing, while the Company has been reinforcing
national-brand merchandises most recently, looking to enlarging target customer base. In regards to a
long-term direction, on the other hand, the Company intends to gradually increase its exposure to “long-tail”
merchandises while beefing up private-brand merchandises.
“Long-tail” merchandises are those whose inventory turnover is low, implying high risks for them to be
stored as inventory and, more importantly, this is why they carry high gross profit margin. The Company
believes, as a result of persistent increases in sales and the number of customers as a whole, the number of
merchandises, generally speaking, regarded as so-called “long-tail” to be stored as inventory with lowered
risk, is destined to sequentially increase. In fact, the Company plans to store them as inventory and make
them correspond to day shipment in the pursuit of prospective sales increases of those merchandises in a
long-term view.
New Distribution Center
Source: Company Data
On top of the domestic developments discussed so far, overseas developments are expected to increase their
contributions to prospective earnings in a long-term view. In the United States where the market is 3 times
larger in amounts than the domestic market in Japan, the Company runs a business to collect royalties by
means of advising for an Internet store operator to deal with tools and other MRO-related merchandises. In
detail, since 2010, the Company has started offering own knowhow to Zoro Tools Inc., a 100% subsidiary of
W.W. Granger Inc. (United States) which is the Company’s parent company. Most recently, Zoro Tools Inc.
has turned profitable and the Company has started collecting royalties, starting in F12/2013.
12
The other overseas issue is that the Company is running a business in Korea, where the Company carries
out operations effectively the same as in the domestic market in Japan, given high similarities in market
structure and merchandises to trade between the two countries. Effective market to be developed in here is
estimated at only one tenth in amounts compared with the domestic market in Japan, but high similarities
of merchandises to trade minimize risks associated with storing inventory, which is one of the biggest risks
at the initial stage of new operations.
The overall picture is that the Company entered overseas businesses with no risks, by means of just
advising, first of all. Then, to date, given a visibility, the Company has started being involved with low risk
operations overseas. It appears that the Company is now heading for steady progress in overseas
developments in line with its scrupulously-planned agenda. Currently, the Company is on the verge of
starting up new operations in Europe, Southeast Asia, China and India. The Company is in the process of
developing suitable business models, countries to countries, in the pursuit of long-term growth potentials
with the Company.
4.0 Business Model
The Benefits as the Forerunner
The Company’s business is to run Internet store “MonotaRO, a procurement supporter for manufacturers,
etc.” Since the establishment in October 2000, the Company has been involved with retailing on Internet,
mainly supplying small-&-medium-sized corporates, supplying manufacturers (47% of sales with the
Company in FY12/2013, down 3% points YoY), automotive aftermarket (15%, up 1% point), construction &
engineering (17%, up 1% point) and other (21%, up 1% point) by sector. The Company has materialized
higher variety in its portfolio for merchandises to trade than any other peers, while the platform offers high
capability for searching, etc., on top of well enclosing customers at the same time. With all these positive
factors, the Company has developed its own business operations as the forerunner in the market.
“RED BOOK Volume 9 (General Catalogue for Indirect Materials)”:
Composition Ratio of the Number of Merchandises to Trade in the 12 Categories
4%
11%
26%
9%8%5%
10%
6%
6%
5%3%
6%Office SuppliesCutting, Polishing / Production & Processing Equip.FA & Mechanical ComponentsAutomobile, Truck, Motorcycle Equip.Construction EquipmentScience & Research SuppliesSafety & Health Protection Equipment & SignsSprays, Adhesives, Work Tools, Electric & Pneumatic ToolsScrews, Bolts, NailsPackaging, Tapes, Logistics & Cleaning SuppliesBicycle, Motorcycle Equip.Electrical Materials, Control Equipment
Source: Company Data, WRJ Calculation
13
The key characteristics of the Company’s business model is to offer diverse merchandises at a fixed price
each for retailing, while providing customers with high convenience. When small-&-medium-sized
corporates, or the mainstay customer base for the Company, are defined as those with headcounts up to 100,
they accounted for 85% of sales with the Company in FY12/2013, while 12% related to those with
headcounts between 101 and 1,000. The remaining 3% was accounted for by large corporates with
headcounts more than 1,000. In other words, the Company has not penetrated into large corporates very
much to date, but progresses have been made, as discussed in regards to “large corporates conjunction”.
According to “Results Summary” of Q1 FY12/2014, the number of overall merchandises to trade stands at
7.000,000 and 126,000 for inventory merchandises corresponding to day shipment. In a long-term view, the
Company intends to persistently increase the numbers for the both in order to relentlessly and persistently
pursue convenience for customers. Meanwhile, “RED BOOK Volume 9 (General Catalogue for Indirect
Materials)”, which was released on 29 September 2013 as the most recent one, comprises national-brand
merchandises as many as 301,600.
“RED BOOK Volume 9 (General Catalogue for Indirect Materials)”:
(The Number of Merchandises to Trade & Major Constituents of the 12 Categories)
Category Number Major Constituents
Office Supplies 12,400 Office Supplies, OA / PC Supplies, Inks & Toners, Lighting and Batteries
Cutting, Polishing / Production & Processing Equip. 34,000 Cutting Tools, Abrasives, Measuring Equipment and Welding Equipment
FA & Mechanical Components 78,500Compressors, Couplers, Pneumatic Equipment, Horses, Tubes, Bearings, Conductivity
Instruments, Machine Parts, Materials (Cutting Board, Plate, Round Bar, Pipe and
Sheet),Hydraulic Equipment and Hydraulic Hoses (High-Pressure Hoses)
Automobile, Truck, Motorcycle Equip. 26,600Oils, Chemicals, Repairs, Car Wash & Cleaning, Sheet Metals & Paints, Car Supplies,
Maintenance Tools & Storages, Electric & Pneumatic & Hydraulic Tools, Garage Equipment &
Transportation, Tires, Suspensions, Auto Parts and Electrical & Harnesses
Construction Equipment 25,000Air-Conditioning and Electric Facilities Materials, Paint & Curing & Interior Equipment, Pumps &
Blow ers, Piping & Water Treatment Facility Equipment Parts, Housing Equipment, Building
Materials & Exterior and Construction Hardw are
Science & Research Supplies 13,600
Glass & Plastic & Metal Containers, Volumeter & Dispensing & Syringe & Pipetter & Dropper,
Water-&-Soil-Testing-Related (pH、etc.), Pure Water Production & Pure-Water-Related, Agitation
& Pulverization & Mixing-Related, Fractional Distillation & Separation & Extraction & Filtration, Bio-
&-Food (Bacteria)-Related Supplies, Cleaning & Sterilization & Health & Disposal, Heating &
Cooling & Cool Box, Research-Related & Laboratory Supplies, Clean room Booth, Analysis &
Environment & Measurement Instruments and Storage & Equipment & Storage & Transport
Supplies
Safety & Health Protection Equipment & Signs 30,000 Gloves, Masks, Glasses, Safety Shoes, Work Clothes, Safety Equipment and Safety Signs
Sprays, Adhesives, Work Tools, Electric & Pneumatic
Tools18,200
Work Tools, Electric Tools, Engine Tools, Pneumatic Tools, Sprays & Oils & Greases, Adhesives
& Repair Materials, Soldering-Related & Electrostatic Discharge Equipment
Screws, Bolts, Nails 18,300Bolts, Nuts, Washers, Screw s, SPREW Helisert, Adjuster Bolt, Plug-Retaining Ring Pin, Anchor
Bolt, Screw for Building Materials, Nails Rivet Staple, Tools and Supplies Set
Packaging, Tapes, Logistics & Cleaning Supplies 15,500Cleaning Supplies & Detergents, Logistics & Storage Equipment, Tapes, Packing Supplies and
Seasonal Supplies
Bicycle, Motorcycle Equip. 10,500 Bicycle, Motorcycle Equip.
Electrical Materials, Control Equipment 19,000 Electrical Materials, Control Equipment
301,600
Source: Company Data
14
Front Covers for 12 Volumes of “RED BOOK Volume 9 (General Catalogue for Indirect Materials)”
Office SuppliesCutting, Polishing / Production &
Processing Equip.FA & Mechanical Components
Automobile, Truck, Motorcycle
Equip.Construction Equipment Science & Research Supplies
Safety & Health Protection
Equipment & Signs
Sprays, Adhesives, Work Tools,
Electric & Pneumatic ToolsScrews, Bolts, Nails
Packaging, Tapes, Logistics &
Cleaning SuppliesBicycle, Motorcycle Equip.
Electrical Materials, Control
Equipment
Source: Company Data
15
Disclaimer
Information here is a summary of “IR Information” of the Company, compiled by Walden Research Japan,
from a neutral and professional standing point, in the form of a report. “IR Information” of the Company
comprises a) contents of our interview with the Company, b) contents of presentations for institutional
investors, c) contents of timely disclosed information and d) contents of the homepage etc.
Company Name: Walden Research Japan Incorporated
Headquarters Office:#1110 4-12-4 Hatchobori, Chuo-ku, Tokyo 104-0032, JAPAN
URL: www.walden.co.jp
E-mail: info@walden.co.jp
Phone:+81 3 3553 3769
Copyright 2014 Walden Research Japan Incorporated
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