Company holds small meeting

Research evidence excerpt

Company holds small meeting

components. Given the above, we do not think demand will rapidly improve. If the shift to

electric vehicles, which is currently slowing, ramps up, it will likely reduce demand even

more for engine-related components. If the current demand environment persists, we

would expect the company to continue with its current equipment. However, if demand

falls even more due to a shift to electric vehicles or a decline in Japanese automakers’

market share, we believe the company could take steps to improve production efficiency

by reducing production capacity or partnering with sector peers. If the shift to electric

vehicles makes headway, a resulting increase in sales of magnetic materials could offset

a decline in structural materials. We expect the company to protect its profits by adapting

to the environment. The company is constantly working on improving profitability as

there seems to still be room to optimize worker allocation and to improve productivity

by using AI to automate work currently done by people. While it should not be easy for

these efforts to contribute to profit growth in the short term, we expect benefits to emerge

under the company’s next medium-term plan.

3) Sales growth for products in growth markets

Automotive products previously accounted for a lot (about 70%) of the business, but

this ratio is currently about 60% due to profit growth fueled by higher sales in growth

fields, which shows that Daido Steel is becoming less dependent on the auto industry

amid a gradual decline in demand from this industry. Management aims for growth

market products to account for 25% of the mix in FY30, and we think this will be

one of the targets under the next medium-term plan. In particular, our eyes are on