Sanyei Corp(8119)
Margin improvement due to the liquidation of loss making business, Adjusted PER 8x, Net-Net, Dividend 3.8%
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Summary
Today, I will share the stock analysis for Sanyei Corp(8119), which has an OEM business and Brand business(*Self developed brand sales). The reason why I bought this stock as follow.
OEM business will get a stable profit in line with Ryohin Keikaku(7453) growth
About 50% Sanyei Corp sales come from OEM for Ryohin Keikaku.
Brand business will grow by the enhancement of EC channel & M&A.
The company liquidates some loss making brands, which improves the margin.
Current forward PER is 13x, but except for the one-off loss in the liquidation process for the loss making brand, adjusted PER is 8x.
Abundant cash is used for dividend hike and future growth incl. M&A.
Net cash ratio > 1.
Net cash ratio = (Current Asset + Investment Security * 0.7 - All liability) / Market cap
Dividend policy was changed in FY2025(*Payout ration target 30%-50%)
Current Dividend yields 3.8%
Business Backgroud
Understanding at a glance
Sanyei Corp was founded in 1946. Their business started an import/export wholesale. Currently they have two business segments.
OEM : 78% sales in FY2025
Main customer is Ryohin Keikaku(7453), which sales is about 50% of total Sanyei sales.
The business with Ryohin Keikaku started over 20 years ago. Ryohin Keikaku is the one of the most famous lifestyle brand in Japan. Their business has a high growth over the years. In line with it, Sanyei OEM order also grows.
Bellow image shows Ryohin Keikaku sales growth. 5 year CAGR 14.4%.
Except for COVID-19, the sales from Ryohin Keikaku has increased over the years in Sanyei. The sales ratio is as well. I’m a little concerned about sales concentration on Ryohin Keikaku. However, Long-term business relationship with Ryohin Keikaku shows Sanyei has a good capability of production management and quality control, which keeps ties with Ryouhin Keikaku and brings the new business opportunity, I hope.
Brand : 22% sales in FY2025
Sanyei has a business where they select overseas brand products and sell them in Japan. Also, they build a own brand.
Product line is furniture, cloth, home appliances, etc..
*More details. See Link.
Procurement, Production, Supply chain management, theses capabilities built up in OEM business can be also used in Brand business. They have a synergy.
For sales channel, they strengthen EC channel now.
EC sales is increasing year by year.(Link)
Total sales in FY2026 guidance is 40,000 million yen, EC related sales is 6,400 million yen, which accounts for 16% of total sales.
My Investment Thesis
OEM business makes a stable profit through Ryohin-Keikaku growth plan
According to the mid-term management plan, Ryouhin-Keikaku will increase the number of stores by 100 every year to 2030. Their strong point is simple, reliable, affordable products, not marketing centric. So, they need to a long-term, reliable OEM partner, which Sanyei will get a stable order from Ryouhin-Keikaku.
*Current the number of stores in Japan is 623. In their plan, it will be 1,500 in 2030. (Link)
Brand business will grow by EC channel and M&A.
Sanyei reconsiders the sales channel, which decreases physical stores and enhance the EC channel. The capability of the low cost production, the high speed logistics that Sanyei has built up OEM business, are competitive for EC business perspective. (Link)
Reduction of high cost physical stores improves the margin.(*Operating margin in FY2020 was 3.19%, FY2025 was 5.26%) Brand business has a higher margin than OEM, so if Brand business grows, total margin will improve more.
Also, because they have a decent cash(*remember the net cash ratio > 1), M&A is one option for the future growth of Brand business. Actually, they bought the company which produces crime/disaster prevention products in EC channel in 2025. Because people in Japan have an attention to the disaster prevention, especially in earthquake, this business field expects a steady growth. According to the announcement(Link), Sanyei paid 1,500 million yen for this M&A. Considering the latest net profit of M&A company was 100 million, buyout PER is 15x, which seems not attractive cheap. However, the last 3 year net profit growth is 20 → 30 → 100 million. Based on this growth, the price is explainable. Anyway, M&A has much better than just piling cash on the balance sheet.
(*Note : Nankai Trough Earthquake Alert was executed last year. High growth(*100 net profit) included the effect that the earthquake alert urged people to buy disaster prevention goods. So, it’s less likely the high growth will continue in this year, but I agree that the demand for disaster prevention will increase in the long-term period.)
For M&A synergy perspective, Sanyei will use an existing capability for more efficient purchase, production, logistic, EC channel management. Looking at the Sanyei net profit in FY2026 is 600 million, added 100 million by M&A has a some impact for overall business performance. We need to monitor post M&A process.
Current valuation includes one-off loss for liquidating the loss making brand. Adjusted PER is 8x when excluding it. The liquidation process will be ended in this fiscal year.
Current PER for FY2026 is 13x. But it includes the 365 million yen special loss for liquidating the loss making brand. This restructuring process has continued for last 3 years, which will end in FY2026.(Link) To exclude the one-off loss, if you calculate adjusted PER using operating profit in FY2026 guidance, it’s 8x. Considering the future catalyst of business improvement mentioned above, this valuation is clearly cheap. Moreover, please remember again Sanyei’s the net cash ratio > 1.
Dividend policy was changed to improve the shareholder return
As I mentioned again, Sanyei has much cash to invest such M&A, to pay the dividend more. In FY2025, they changed the dividend policy which shows the target payout ratio 30%-50%.(Link) According to the dividend history, although dividend was cut in Covid-19, the recent dividend is increased.
Looking at the shareholder structure, over 60% shareholders are individual investors. Also, there is no insider controlling shareholder.(Link) Because individual investors are sensitive about dividend, Sanyei need to care about dividend growth & sustainability. Current dividend yield is 3.8%. It’s not bad for me.
Valuation
Net cash ratio = 1.38
Net cash ratio = (Current Asset + Investment Security * 0.7 - All liability) / Market cap
Expected PER is 13x, but adjusted PER is just 8x, excluding one-off loss.
Net cash + PER valuation indicates the upside margin 55%~91%
In this calculation, I use the operating profit to exclude the one-off loss effect.
This upside margin is based on the current business performance, if Sanyei can achieve the future growth especially by EC channel, M&A, the upside will increase. Look, the ‘assumed PER‘ is just 10x. It’s conservative in my valuation.
Note of Investment Security. Sanyei has 805,173 shares of Ryohin Keikaku, which is 2,487 million yen at the current stock price. It means the half of investment security value comes from Ryouhin-keikaku. Because of stock price up of Ryohin Keikaku, the Sanyei’s value of investment security on the balance sheet increases recently. It’s good news, but considering the long-term relationship with Ryohin Keikaku, it might be difficult for Sanyei to sell out. Anyway, it’s true that Sanyei has a valuable asset, so let’s count in the valuation.
Risk
Revise the relationship with Ryohin Keikaku and Sanyei. (*Remeber the sale concentration(over 50%) on Ryohin Keikaku.)
The new brand becomes unsuccess, loss making. (incl. M&A)
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