MINEBEA MITSUMI Inc. (6479) Earnings Call Transcript & Summary

Good afternoon. I am Kainuma. Usually, we have twice a year a presentation of financial results to introduce our company. But time is limited, and we were not able to communicate what we wanted to tell. And in January this year, a sell side analyst issued a report that MITSUMI's future growth drivers are not visible. So it seems that my way of explaining was not good. So today, as a special event, we ask for your participation on our presentation and also want to introduce to you what we are actually doing, development of products and sales products. I want you to touch them by yourselves and see by yourselves. We have arranged this opportunity today. So I hope you will enjoy. And I hope you will be able to take back with you the feeling of our actual growth capability. So today, this is the agenda for today, management policy, growth drivers and competitive advantages towards achieving sustainable corporate value enhancement. There are three parts in my presentation. And I, myself, I will cover number one and two. And number two will be presented by our CTO, Mr. Suzuki. There will be Q&A later. And he is very much familiar with technology than myself. So please ask questions directly to Mr. Suzuki to have a better understanding. Now as a summary, let me introduce briefly our management policy. Recently, we are saying we want to become an indispensable company by driving the world forward. That is what we say. Intentionally, since I became the President in various sectors, we have expanded the scope of sales of our products. You can see from the left, automotive and up to home appliance, there are various industrial sectors. And in there, by providing our products, we want to secure sustainable growth. And if there are many events in a certain market, that risk can be covered by other sectors towards growth. In the last 17 years, I have been working, keeping that in mind. And to a certain extent, we are having results up to the present. Next page. So this is also a summary. I became President on the 1st of April 2009. And I started my first year from JPY 225 billion, and you see growth. The content is greatly changing through growth. We're aiming at March 2029 to achieve net sales of JPY 2.5 trillion, operating income, JPY 250 billion. We are working hard towards this goal. Later, I would like to cover the details of these figures at the end. This, as I always mentioned, our growth strategy, we always had a growth strategy. One is organic growth. As global GDP grows, disposable income increases. And with that, more premium lifestyle, premium products will be required, and we will provide the key components. And by doing so, it is possible to achieve sustainable growth. Since building the company, 60 companies and since I assumed this position, 30 M&As were achieved. That is the core of our strategy. And recently, as a third point, developing products and supplying components for addressing social issues. From about 3 years ago, I have been using this sentence. So today, I want you to see the products that will solve social issues. So these three goals. In addition to that, we want we have a business structure that only us can do as represented by Eight Spears, various products and element technology accompanying that is available. And by combining that, we want to provide new products. We take more time than usual to introduce to you our integration products. So I call it 3 plus 1, 3 pillars plus 1. This is our growth strategy. And from here, I can say that many things start from here. So I don't think it's not necessary to repeat about Eight Spears. It's explained here. In a big market, we want to target a niche market, and niche products are things that will not disappear easily and our competitiveness, the source of competitiveness can be used and it is possible to integrate combined with other products. Those are the Eight Spears. Some people say this is too much. There may be criticisms. But today, I want you to see the sixth floor. And by doing that, I hope your concerns will be resolved. This is our future of Eight Spears, eight businesses, which we call core businesses. There are also core technologies accompanying that. And by combining those, we provide new products to the market. So I would like to repeat that I briefly gave you a general overview, and then I'd like to ask Mr. Suzuki to continue. Mr. Suzuki, over to you. Now I'd like to invite Mr. Suzuki to deliver his presentation.

Yes. This is Suzuki. Let me talk about the growth drivers and competitive advantages. Next, please. This slide shows, as Chairman Kainuma just mentioned, the organic and the resolution of social issues, products to resolve the societal challenges. These are what we are aiming for. And in addition to that, the areas that we expect to grow, the growth areas with high potential. One is AI server, another is humanoid robot and the fully autonomous driving commercial drones, these products that can address social issues with the [ center 1 plus 1 ] integration products, we are trying to take on this challenge. Next, please. Let me start from AI servers. This shows the market outlook of AI servers. I hate to preach to the choir, but using AI, the power demand will increase exponentially and AI server investment will accelerate. But there is this growth pain or challenges that come with this growth. First of all, the explosive growth of heat issues with GPU and the cooling challenge. And the motor rotation goes up, so noise problem and because the storage problem because of the explosive growth in data volume and as data needs to speed up, so the high speed communication demands and battery. These are the challenges that need to be addressed, which is obviously our business opportunity. So for the challenges that I mentioned earlier, we have various products. For example, for thermal heat dissipation measures and the liquid cooling systems and the leakage, liquid leakage. Through our various products, we can offer solutions. And this is the AI server as a whole. This is how our products are incorporated into AI servers. There are these many. So by showing this, we will appeal our potential to the clients and show that we can offer this one stop shop solution. And with that, this is the image of our growth. By 2029, JPY 100 billion is the target. And the breakdown of the business portfolio is shown in the pie chart on the right. Next, humanoid robots. Humanoid robot market, there are various views in the market. But in our case, we think by 2035, more than 10 million humanoid robot increase will be seen. By 2035, average 108% CAGR is expected. And these are the challenges for the humanoid robots to work like humans. Of course, the durability, reliability, power and the sensitivity that humans have and the noise and battery life are the challenges for humanoid robots to evolve further. And for these challenges, we have various products and key technologies. We can combine them and offer solutions. So these developments are ongoing. So this is like AI server and data center, humanoid robot has many of our machines and potentiality. We show that there is a big potential for us. So machine product sensing, motors, we will contribute to the ideal humanoid robot development. This shows the humanoid robot growth image, our image. Plan A and B are shown here. CAGR 47% and 65%. With these two cases, our image is JPY 100 billion and JPY 200 billion by FY '35 and '25. The product portfolio, this is the content, the breakdown by 2035. Next, commercial drones. I mentioned commercial drones here, mostly logistics. The commercial drones in logistics will grow at CAGR of around 10%. For drones, it flies. So there are regulations associated with that and delivery in case of delivery, commercial use, it has to be operated properly. So the autonomous operation needs to be fully established, and that is the challenge. Now as the solution required by the market, we have these potentials. Bearing and motor are easy examples and camera, actuator to operate cameras. You can see GNSS antennas here. This uses our high frequency technology to establish this GNSS antenna. It is like GPS. We it picks up the satellite signal to help the accurate operation. And on the lower half, you can see applications. Drones are electronically operated. So it needs to be charged. So charging station is shown by these markers and the chargers. We have inquiries and the developments are ongoing. And environmental sensors, it flies. So it is expected by the wind. So we are preparing for that situation. These are the examples, applications. As I mentioned earlier, we have pretty much all the key parts. And this is our growth image of the commercial drones, CAGR of 10%. We will grow together. And our product portfolio are shown on the right pie chart. Next is fully autonomous driving, mainly LiDAR sensor. Next, please. So this is autonomous driving Level 3, 4 and 5 growth outlook. CAGR of 48% is expected in San Francisco robot taxis are emerging. So we think this trend will accelerate. And these are the challenges. To prevent accidents, the space needs to be recognized, special recognition. This is the key for the sensing of autonomous driving, and we are trying to contribute to that and development is ongoing. And these are the key products. The upper half are LiDAR. The necessity of LiDAR. There are various views on this. But from the current technology, the high speed, long distance, 300 meter long distance sensing, for accurate sensing, we need these LiDAR technology. And we think that will be the growth point. And from the autonomous driving perspective, the cars will not just be driven, it will be a place to stay. So human machine interface and seats, comfort are the roles we need to pursue further. And this is an example of LiDAR. We have various types of LiDAR actuators. FDB, the motor that rotates without touching. So within the car, there are more layouts increasing LiDAR sensors. So this has contributed to reducing noise. And generally speaking, BLDC this image of a polygon to rotate the mirrors. Our cartridge bearings we can secure the bearing system. How disk pivot technology can also be applied and our super bearing, high precision bearing, which rotates smoothly can be used to achieve a silent state. And also LATM is our unique product. Polygons uses hexagonal mirrors, for example, but with the same resolution, space is recognized, but LATM will go back and forth flatly and also speed can be changed. If you want to look at the details, it will move slowly. If you can move fastly, it is possible to use at higher speed. So this is the LiDAR fully autonomous driving growth image. We believe this will start in a full-fledged manner. So we expect a CAGR of 30%. And at that timing, our portfolio, as you can see on the pie chart to the right, we assume this portfolio, and we are going on with developments for this purpose. Now I'd like to talk about integration products. Integration, which only we can do, what is the position of this product. So what is the method I'd like to explain the features and the differences. This slide explains almost everything about integration. In 2010, BMS, Electronics Mechanics Solution, this name was registered for trademark. And this indicates our direction of future developments. Electro Mechanics Solutions is what this is, various components are combined together. And by doing so, mechanics and electronics, both are used together to improve value added. And in 2017, the company was integrated with MITSUMI and we became MinebeaMitsumi. As you can see below from input to conversion, output and systems, the product lineup has been developed. And during this, to strengthen this trend, M&A was also advanced and in a very strong manner, the necessary elements have been arranged. And among the Eight Spears, our element technology is completed through vertical integration in case of bearings, for example, we can design the steel material or the grease oil or lubricants also can be handled. And for analog semiconductors in the preprocess and post process, we have these processes internally, and we do conduct design process in the company. And for motors, we have ball bearings and magnets are also made in house, and we do have semiconductor technology. So motor drivers can also be structured and developed in house. So we have vertical integration elements. So Eight Spears don't mean 8 types, but there are multiple parameters. And we use these parameters to provide the elements or the needs of our customers. So we can provide the best fit to the customers, and that's the strength of our integration. We are experienced in component manufacturers, module manufacturers and set manufacturer as I'll explain later by using ECA. Systems can also be built. We can face the customers from a best position. And in that sense, we have multiple variation in terms of technology and products that we can provide. That is a major feature of our company. This shows the integration products. One example, integration products from existing markets to new technologies, how can we grow from existing technologies to new technologies. We also have components and products within ourselves. Inner sourcing can be maximized. And by doing so, as I have mentioned, by changing parameters, we can make combinations to increase value. That is a major area of products. And by doing so, new functions, new user experience can also be provided. So that is the general image of our integration products activities. This is a wing handle. This is something to provide a new user experience. I would like to show a video later to show the image, our sensor technology and motor technology and handle technology, and though not included here, not a mere combination of this and is a switch to open. But for example, you cannot open when you are washing the car or when there is a wind. So to guarantee the correct movement, you must have close discussion with the customer. We are working this with BMW, a top German manufacturer. So fine tuning is made with the customer. And the ECA background is used for this technology. This is industrial power supply module. One of our Spear is power source. This is centered on adapters so far. The power device company joined our group. And in the company, high performance power device, power semiconductors are available. So we have to use that technology. We do have a power supply element technology. And by adding this new technology, we want to achieve a top efficiency in the industry, 96% to 97%. You may wonder if there is such a big impact. If you think of a loss, 4% loss goes down to 3% loss, which means loss declines by 25%. That's the level of impact. So AI servers consuming large power, if this is used, it is very effective. If you use of automotive use for electric purposes, you can enjoy this level of effects. This is a bed sensor system. Our product, our actuators are used in combination. At Osaka Expo, we displayed this product. A gauge is put under a bed to measure the weight. This is just like having four house meters under the bed. And the data is collected, and using the data, the vital measurement is taken. So you don't have to attach any equipment to get your vital signals. It's noninvasive, even without using cameras, your position of sleeping and also when you wake up with high precision sensors and using the output, unlock data from the sensors digitalized, input into a farm and then the data information can be used and the breath or the heartbeat of a person sleeping can be sensed. And depending on that situation, the angle of a bed can be changed, and the time to wake up comes, a relaxing or a fresh music can be played or a good smell can be sensed. This was displayed at the expo. It was very welcome. We had a lot of inquiries on when this will be available. Now another growth driver. The biggest area is automotive. In our Eight Spears, this is the fourth. AS, Access Solutions. It's Spear, but this is our integration field of our integration activity. It was we were originally the mechanical key manufacturer, and this becomes electrified. Of course, we knew that this trend was coming. So we used our key element of technology and products, integration parts. And that's why this became a part of our group. So this AS categories future will be shown in the video. Please take a look. Now in our growth, we have this kind of growth image to develop the growth market. So this is the wing handle how it is used. So with a finger, a light touch, you hold the wing handle and door gets unlocked. For this function, various products of ours are used. So this is how we offer our solutions. Next, please. So this is related to drone logistics in delivery, delivery box. So the variation of the location, it's not always the home. So maybe the car that is parked can be the delivery box. So our key element technology and solutions and antenna technology can be applied. And our technology, our product used, our technology and parts are used. And this can complete in a one stop shop fashion. After the delivery, of course, the notice comes. In the notice, the person can come. This is our step gate function. The bumper, there's one where you move the foot under the bumper, but it's not sensitive enough. This one is very sensitive. Now we are mass producing this compact spindle drive open the back door. This is the front door version, and it's already incorporated in our design. So this is available. We can offer this. Now this is the electric car charging port. You may think humans can open this. But once you are used to this, you cannot go back. So this is an automatic open actuator. Our grille shutter was the original product. This is an application of that. And for the charging, we added additional necessary function. Various products are contributing to this solution. Last example is AS, stands for Access Solution. Access is access to car. So this flow is made seamless. This is what we are trying to do. So the automatic car movement, automatic open of the doors. So for vehicles, there are various challenges, but we have the Tier 1 position and can gain various information. This is fed back to the development and studying various challenges to offer solutions. For autonomous driving, the safety, comfort, energy conservation and thermal, we have various products potential products in the lineup. Pillar-pillar display, pillar-to-pillar display. This will be incorporated in the next generation car. It is the front glass windshield display technology. And this backlight manufacturing has started. Other than that, we have the existing automotive onboard products. In addition to what we have, we're adding sensor and communication inquiries are coming. So we plan to add value. And this is inside the cabin. So it is moving from the driving space to relaxing space. So products and technologies are developed to achieve that goal. In automotive, we are aiming for new growth. planning to increase by JPY 210 billion. And the portfolio is on the right pie chart. As I showed you in the video, AS is accounting for a big portion. Next, please. The other growth drivers, we are trying to improve our profit margin as a company. So how we generate high margin products is the key. So this is the aircraft. Aircraft is a very stable business for us and is expected to grow by 8% CAGR going forward. There is a high entry barrier. So our precision machine components and accurate delivery are favored, and that is backing up our growth driver. Now this is our growth image. In 4 years' time, we plan to increase by JPY 50 billion sales, mechanical drive. Rod end, our original product is connected to complete ring rod. We acquired this through an M&A. Now we have this in house. So using these as a lever, we will continue growing. Next is home appliance, air conditioners. Air conditioners is growing rapidly. In power device, air conditioner related semiconductor is owned. So using that semiconductor, our content growth will be achieved. So air conditioner market is another focus market for us. In these home appliances, we are aiming for 10% growth and JPY 30 billion through the products in the pie chart on the right. And other businesses, these are for the future, medical market and industrial equipment market. Our technology development is moving in this direction. So I would like to declare this today. Our sensors are suitable to get the vital data using including bed sensors. We understand that from our technological development. And other than that, bearing and machine components, we have communication routes, channels. So we can capture customers' information quickly. And with our integration capability, we can deliver good products that meet their requirements. And industrial machinery, robots, it may come before humanoid robots. So sensors, grippers and arms, actuators, these developments are also ongoing. We have already installed this in house. On the sixth floor exhibition, you can see an example of that. And in this business as well, it takes time to enter into this market, but we want to achieve a growth of JPY 100 billion. And in this high margin market, we develop a variety of products. Now last but not the least, Mr. Kainuma, back to you.

So as we have introduced to you, there are many opportunities. So far, through our growth, there was a variety of technological innovations, video, old example of video or DVDs, 8 millimeters video, mobile phones, every time at each stage, technological innovation happened, leading to our growth. But only 1 or 2 products were used. Almost all of them were bearings for 8 millimeter videos and DVDs. Looking back, it was mainly bearings. And in case of mobile phones, backlights and switches started to be used, and there were about two parts used. But what we introduced to you today, with one innovation, it's not only one component that will be used, but there are so many business opportunities. In my career of over 30 years, I think this is a very epoch making era. However, it's not that everything will grow as we had expected. What is the CAGR? I think only god can imagine what will happen. So there may be upsides and downsides. Variety of scenarios possible. But based on the current best available information, how much sales can we expect? I try to calculate that. So let me introduce that. Next page. It's a busy chart. I apologize for that. In today's presentation, I said five pillars, starting from AI. And until fully autonomous driving and there are other automation, not including the five pillars, but conventional technology that we can expect growth in the future. I will try to separate into these two. By March 2029, if we see the best scenario, these are opportunities that we can expect in case of five pillars, JPY 140 billion; and for others, JPY 400 billion. So in total, about JPY 540 billion of growth opportunities can be expected. Of course, I don't mean that we are quite sure that this will be achievable. But in the current scenario, based on the figures we collected internally, if we use these figures, this is the sales increase that we can expect. So this is organic growth that we expect. And the next page, by March 2035, business scale in growth areas might be about JPY 300 billion with fully autonomous driving, LiDAR, JPY 100 billion; humanoid robots, JPY 100 billion to JPY 200 billion; and drones, JPY 20 billion. This is the image. And with this in 10 years, we expect a positive growth in terms of sales. Now in more concrete terms, the next page shows the image. For the four Spears plus others, how much would that be is shown here. As I have mentioned, by March 2029, bearings or the PT, including everything, about JPY 400 billion is projected and operating margin then would be 25% unlike semiconductors are facing difficulties now, but Shiga part is covered and the current growth, JPY 200 billion will be achieved margin of 30%, JPY 60 billion operating income; motors, JPY 440 billion; 12% Access Products. This year, about JPY 340 billion is projected. And this, we are receiving orders smoothly. So we expect JPY 420 billion. If we add all those, the image of the operating income is about JPY 270 billion. But as written below, from here, there are various adjustment items. Then in terms of operating income, projection would be about JPY 20 billion. This is the overall image. There may be company-wide expenses, common expenses deducted and also stress will be applied, which I will show towards the end. And next page, with the sales growth, this is operating margin improvement that we expect. And as represented by the Eight Spears, the elements here, we will focus on getting the high margin business. Then ROE was very high in the past, but now we will aim at ROE of 15% or more. And I believe this is within our reach in reality. And the last page, we want to become a company indispensable to drive the road. So by using the growth strategy that I introduced, by March 2029, we aim at a net sales JPY 2.5 trillion and operating income JPY 250 billion. But as I have repeatedly mentioned, in case there is a MITSUMI-scale M&A, without that, it may not be possible to achieve JPY 2.5 trillion. Former MITSUMI but there were changes in business portfolio in the past. But former MITSUMI now has a net sales of about JPY 540 billion expected. If there is this size of M&A, this is achievable. 10 years after I became the President, I assume there will be this scale of M&A on the following 10 years, and I mean this plan. But if that does not happen, net sales of JPY 2 trillion and operating income of over JPY 200 billion by deducting the corporate expenses of JPY 40 billion and applying stress, this is a scale that we project. So these are the figures that I'm introducing today. But in any event, development is advancing at a very fast speed. We have new business talks with new customers starting. So these are goals that I want to achieve as soon as possible and ask for your understanding and cooperation. Now I would like to have a Q&A. And then I would like you to experience our products. Thank you very much.

Now we will have a Q&A session. Institutional investors and analysts please ask your questions. [Operator Instructions] The front row in the center, please.

Goldman Sachs, Takayama is my name. I have three questions. First, year ending March '29, you have various products that will contribute to your growth. What will be the biggest contributor? Is it AI server? If you could elaborate, I would like to take a look at this slide and information once again. And what is the probability? What will contribute how much? If you could elaborate, please? So for JPY 200 billion, I want to know the biggest driver and the biggest contributor, the elements that will be understandable and feel that we are realistic.

So the way to look at this table, on the far left, PT, JPY 255.7 billion. This is this year last year's segment sales. So that is the year ending March '25. And AI server and bearing so AI server, humanoid robot, commercial, fully autonomous, the five pillar. So this will grow by JPY 250 billion, and the underlying premise is, as I mentioned earlier. So five pillars: AI server, JPY 100 billion; humanoid, JPY 10 billion; and drone, JPY 10 billion; and JPY 20 billion for drone AI server; PT, JPY 10 billion; motor, JPY 40 billion; and others, JPY 50 billion. So this is the growth opportunity. And on the right side, you can see other applications. In the same term in automotive, JPY 220 billion PT, plus JPY 20 billion. So Access, plus JPY 90 billion, net sales opportunity; and aircraft, JPY 50 billion; home appliance, JPY 30 billion; and others, JPY 10 billion. As I mentioned earlier, by product, there are different time lines. In case of data center, the growth boost is front loaded is in the short term. Humanoid drone, on the other hand, will take a little longer. So on the same time line, this is how the number looks like. So total JPY 140 billion plus, JPY 400 billion. So JPY 540 billion organic growth potential. So to answer your question, the biggest one is automotive, followed by AI server. These are where we see the biggest big business opportunity. And when you develop these numbers, it's still unforeseeable, but you need to quantify. And there are already growth you're seeing with your existing business. So depending on products, there are some with higher visibility, some with not so high visibility. What is the most visible part that you factor in? Which part is most certain if you add up the market assumption is difficult in some area, easier in others. In case of automobile, the development period is relatively longer than other sectors and the preparation needs to be made more. So visibility or the realizability of the business is relatively higher. So if you could take a look like that. And here, in this case, automobile and aircraft, aircraft build rate, aircraft build rate has solid data. And of course, supply chain parts shortage. And therefore, the aircraft manufacturers are manufacturing lower than the build rate. So how can we engage evolve with which program? We have solid rationale in this area. On the other hand, AI data center are very quick, faster. The changes are more volatile and quicker. So the numbers shown here are the assumptions for the market growth changes more and the firm numbers for year ending March '29, so the industry situation is different. And on the prior page, we show you the assumptions that we based behind the outlook. But in AI and data center, motor, HDD motor and other motors. In HDD motors, visibility is fairly high. On the other hand, the bottom part, which we think has the biggest growth potential. I will answer this first because I think you have this question. For example, the battery protection modules for the battery storage, battery based on customers' forecast, we came up with this number. So what is the probability of the growth here? There are many moving parts. But we have all these assumptions and add them all up, and we rounded up the numbers somewhat, but that is how we formulate this forecast.

Understood. And my second question to have increased net sales and increased operating income. My question is about this business model. I think that so far, there was most production of single items. And I think this will continue, but to manufacture small volumes of large variety of products. In that case, you maybe you have to start by consulting directly with the customers. And there may be a lot of such cases included. If you want to increase sales and income through that method, the way you make your teams and conduct sales activities and the way you try to have return on your investments, to achieve the JPY 200 billion, I think you have to change the culture within the company and the way to approach the customers may change and the people will have to change and the method might have to change. What do you think of that?

Well, it's not that everything is made in small lots of large variety of products, but we have sort of criticism or more support from others asking us to further increase the operating income margin. With only the business model that I mentioned before, it's not possible to increase the profit margin. We must be able to provide the customers the products that the customers require. That is the method that we have to market. Otherwise, we cannot increase greatly the per capita profit. And what we do is a company-wide change in awareness in terms of sales activities. All of the sales persons must be aware of their margin. We have introduced such a system. If how much profit did person A achieve last year? We have information about sales. But in the existing system, we didn't know how much profit was generated. But we had at Minebea software solutions included. And now we have 200 system engineers. As in house made products, they developed a sort of ERP by having a consultant. About 1 year was spent to work on this. And on a tentative basis, we have already started this operation. So to be able to see the profit and information, what I say, people selling bearings had only to sell bearings, but now they have to go to sell bearings. But if they have any information, that information must be notified to other salespersons. That must become an incentive. So this is a change in the system of sales or marketing. By making such improvements, we will be selective in the inquiries. High margin, high volume products will have priority. That is one thing. And another point is that, as I will introduce to you today, for example, LiDAR, the current cartridge bearings, why is it that everyone wants to have that product? If the access changes, the accuracy of LiDARs will change. They vibrate, they keep moving. So the level of vibration is very important. And that is where we can use our strength. As I said before, this started from the VTR to make smaller 8 millimeter video cartridges were developed for the first time. That is to reduce the accuracy to improve accuracy and reduce vibration in case of mechanical 8 millimeter videos. And the same thing is happening in LiDARs. And bearings, as you will see later. Robotics, all the bearings must be thin. If they are thinner, it seems to be more difficult to achieve the accuracy. Now so far, they were only used on here, but there is a big hole made in very thin bearings. From 1951, we have been making bearings, and we have our know how. So to give a simple answer to your question, to reform the awareness of everybody and accompanied with development or reform of the system. And if high margin products that only we can produce are used. For instance, in the case of door handles, we have a lot of that business now. From December or January, the new door handles, everything uses flash, but there's a lot of such door handles. We have motors, sensors. We have so many factories around the world. There are no other cases like us. This may be because of external environment, component manufacturers in Europe are facing difficulties. The same for China, EVs are also performing poorly. And if they borrow money, there is an interest rate of 8%. So for customers, more than ever, they come to companies like us. They more orders to us with a firm financial position. So it may be difficult to believe, but we are sure we can do this because I said motors JPY 200 billion before, but everyone was laughing at us. But as you can see, March 2025 is JPY 224 billion. So March 2025, JPY 235 billion for the term that has ended. So if we can pursue our strength, these figures can be achieved. We can make these figures. And the reason I mentioned from a variety of perspectives, we can explain this right now. So we are confident in making the investments. I think that is the best way to answer this question.

Any other questions? So to the window, the front row, please.

Goto from Mizuho Securities. I have two questions. Earlier, you talked about cartridge bearing, your superiority. In many product lines, you have strength that are different from your peers and therefore, growing. So your individual competitive advantage, I want to know more once again, one by one. So that's my first question.

PT, as you know, this is bearing, mainly bearing. And so we have the strength that I mentioned earlier in aircraft, club member. Unless you're a club member, the business cannot start. We started doing global business before others in India and Thailand, the factory in Thailand. We're mainly U.S. companies now, but there are no other companies that are developing the business like this. So as of now, our PT will continue growing going forward. And in addition, as I mentioned earlier, there are new products like the LiDAR. We have the plant in Cambodia that manufactures this now. So we think we have a good chance of growing here. The profitability is quite high. It is our core of the core business. So this part, I think we are all in agreement. And there are things we can say and cannot say. For example, filling the plants in Shiga, our situation is dramatically changing. And this helps us offer new products to our customers more quickly. In motor, we have the integration technology, which includes bearing and motor driver. Our true capability is now being recognized. We are enjoying the tailwind in the competitive landscape. So as I said earlier, in the year that just ended, motor, JPY 320 billion. When I became the President, it was total JPY 230 billion in total, but now motor alone is JPY 320 billion. And the strong part is our supply capability and our motor technology, which is focusing on the small sized precision motors. So we have honed our technology specifically in this area. So that is our strength, Access. I mentioned earlier. So this is where we are.

My second question is towards the year ending March '29, you are trying to achieve the net sales and operating income target. So what will the investment look like? Including investment, how will the profitability improve in the rotary and the net sales and operating income? How do you see the profit growth? How what the trajectory will look like?

ROE, this is the only number we're showing you now, the profitability. And I'm sorry, this will be somewhat quantitative, but we need to create capacity. So in aircraft, we already have plants in India and Thailand, large plants in these two countries. And in Cambodia, we have a new plant, which is starting its operation very soon. And in the Philippines, semiconductor and battery module plants are being completed very soon. So the factories that we had to prepare early on are pretty much ready. Now I don't think this will cover all these numbers yet, but a big part of the investment is already completed. Next, the production facility and equipment needs to be installed. We will do this one by one. And as explained in the cash allocation, the operating cash flow, about half of the operating cash flow CapEx will be continued. This will be within that range and be it AI server and other domain that I just explained, the customers that we have had as our key customers and in our co collaboration efforts, we are assuming that the margin will improve through these activities, existing activities. So by continuing this, without any financial burden, we will achieve these targets. I hope this answers your question.

Any other questions? The person over there.

My name is Sato from Morgan Stanley Securities. I have one question. Your company is some Nidec competes in some products and they face a variety of issues. In the future, to avoid such problems from happening, in your case, what are you doing to avoid such problems? And this may be a difficult question. Mr. Kainuma's successor, how are you developing your successors? Or do you plan to develop your successors going forward?

Well, I don't know if that is related to IR Day, but let me answer the question. About other companies, I'm not familiar with the content, so I don't know very well. But within ourselves, I myself, I feel unfortunate that we are not working so hard. It's only JPY 2 billion more than we need, but why we can't achieve that. I often feel that. But within the company, I think that something like that is not taking place within our company, but you may be just your view, what is the truth, you may wonder. But I believe to quite a large there's a quite large probability that such a thing is not happening. And about my successors, as I have always been saying, at the moment, high potential future leader or next leaders, there are three stages. To collect human resources within the company, and we are training them, educating them. So through these three layers, there's concentrated training. And from time to time, I myself or Mr. Yoshida or Mr. Iwaya, the Vice President, the three of us, the trainees come just next to us for training. It continues throughout the year. It's not that they are always with us, but to my place in total, I think about 50 people came to my place, maybe at Mr. Yoshida's place, there are more trainees meeting him. So the management posture and what we are being careful about, we are trying to show them directly. These are type of training that we are doing. But I always feel that it's not that you can do that just through training. It's not necessarily so. If you have a proper training system, education system, is that person successful as a leader of economic activities? That is not always true. So ultimately, it's up to the company as to whether there is such a leader available in the company or not. But what we can do is to show to the next generation what we can do, and we must wait and see. Of course, the people come from outside the company as well. So including those, I think we will decide the future leader.

Any other questions? From the corridor, second from the front, please.

Nomura Securities. So you talked about the year ending March '29 and the breakdown of the net sales. Access Solutions is JPY 90 billion net sales growth. There are two main products, flash handle and digital key. You talked about those two. Could you elaborate on how much contribution you're expecting from these two products? Now on that basis, one more question is this digital key. Will this be delivered to Tier 1 automotive manufacturers? The software and security are very difficult in these keys. So will you handle the entire system, or in Germany, there are continental and Tier 1 manufacturers. So the Tier 1 manufacturer will handle the system and you will manage the software that will make the system viable, how are you involved? How are you working on this project?

First of all, the breakdown of JPY 90 billion in the software will be explained by Suzuki san. So we do not disclose the breakdown of JPY 90 billion, I am sorry. But the majority is, as I've explained in the past, flash handle and CSV. It's hatchback open closed system. It is now electrified. So the hatchback and trunk room too and eLatch. Latch is now shifting from mechanical to electrical. So these are all integration products. And these combined the degree of integration, the more complex it becomes as the automotive business, as you know, the development cost happens first. So the required development cost, the upfront investment becomes bigger. The financial burden becomes bigger. So as Kainuma san said, our peers the competitors do not have strong technological or financial capability, especially in Europe. Not many others have a solid technology and financial capability. So the degree of integration, the products with a high degree of integration comes to us, which means higher unit profit, unit price and higher margin. So that is the background to these numbers.

And my second question to your second question, we are very flexible now. And the key element, technology are with us already. So we support from that standpoint. And when we there are negotiations with Tier 1 now. So as you mentioned in your question, the safety or the cyber or the OTA version, there are various points that we need to address. So we are addressing, exploring all this possibility, and we are flexible. We can meet their demand in all stages. So the general direction is for Access Solutions, are you trying to do everything as software, but that will become bigger development. So it really depends on the client. During COVID 19, there was chip shortage, semiconductor shortage. And now there is a heavy dependence on China. Japanese companies tend to want this domestically. So we are receiving strong inquiry. So in that case, we have a good prospect of doing this in collaboration. So if that is possible, we will try to do mainly that Tier 1, 2, 3 and 4.

So my second question to either Mr. Kainuma or Mr. Yoshida. Today, you introduced a lot of your products. I could have an understanding of your products. But for example, the development process or in terms of operation, in these areas for the next 3 years or 5 years, are there any changes that you plan and evolution that you plan? Could you tell me that? In terms of operation, what do you mean by that? For example, to strengthen production in Asia or have more local production or automation. In terms of automation to greatly increase automation, reduce manpower so that you can manufacture anywhere. If you manufacture the same thing, profit margin will not get that high if you keep making the same product. So for instance, to change the place you manufacture or to change the method you manufacture, how do you plan to increase the profit or increase your superiority with the same product? In terms of development process, sort of DX perspective. Is that what you mean? Yes, including DX. In your case, in case of motors, you're very strong at making developments in Europe and you get a lot of good business. That's my impression. But as Mr. Yoshida said, it seems that in Europe, competition getting more relaxed. So maybe you may be thinking of increasing development manpower.

In Europe, in terms of resources all over the world, we are trying to increase worldwide. But in each location, there are differences in roles. Europe and Japan are collaborating in making new developments. Part of development organization in Europe is my organization. And after making developments, for example, China or in the future, maybe India, in these places have a perspective of local production, local consumption. So the future challenge is to expand in this way and the so called security control of the like-minded countries, security control in places that you must be careful about, based on that to increase technological development.

If I may add, for example, as you mentioned, development in Europe is centered in Germany, then well, Germany, as a snapshot right now, their economic situation is bad. So hiring new engineers might be possible, but there may be a problem of cost. And we now have a satellite in Slovakia. So how to strengthen Slovakia or software there may be software required, then the development satellite could be made in India, for example, or in general, how to strengthen the overall human resources. From that perspective, the Philippines, there is abundant manpower available at a lower cost, then physically or maybe develop a development center, we are taking such measures to make such developments. They are all advancing in a combined manner. And in terms of operation, as a place for location for production from the U.S. and China, China is concluded in China. So for the Chinese customers, Chinese engineers strengthening sales, manufacturing in China and other places. Based on request of our customers, there may be developments. But in our case, our strength is the production capability in Southeast Asia. So among the requests from the customers, production in North America is being requested increasingly, but we must be careful about considering this. So that is our major movements. And under such a situation, how to increase our productivity, there are a variety of initiatives taken, promoting automation. And so I say automation with so many production sites and through M&A, we have many new colleagues. So before integration, each company has their own strength. So we want to extract those strengths and deploy those strengths horizontally and automation or increase utilization rate. In the same way, we want to be more comprehensive and in all ways, introduce various measures and strengthen our cross sectional organization to implement those measures. I don't know if I was able to answer your question. But we are working with a variety of initiatives in parallel.

It is time, so we will close the presentation and Q&A session. Thank you very much for your attendance and for your attention. [Statements in English on this transcript were spoken by an interpreter present on the live call.]