Analysis of Hagihara Industries Inc (7856:TYO)

HAGIHARA INDUSTRIES INC. is a Japanese company active since 1962 in the manufacture and sale of raw yarns, synthetic fabrics and machinery for the textile industry. It has 1,380 employees.

Valorization

L'entreprise nippone se négocie à un prix intéressant, de 12.2 fois les bénéfices récurrents, 1.22 fois la valeur comptable corporelle, 1.03 fois les ventes et 14.2 fois le free cash flow. Le dividend yield n'est certes pas énorme, avec 1.86%, mais il s'explique par un distribution ratio prudent de 22.8% par rapport aux bénéfices et de 26.5% par rapport au free cash flow. Hagihara a donc de la place pour continuer à augmenter son dividende dans le futur, comme il l'a régulièrement fait par le passé, sur un rythme annuel moyen de 9.86% ces cinq dernières années.

Balance sheet & Result

Just like the dividend, the profit, cash reserves and asset values are growing over the long term, which proves the solidity of the Japanese company's business model. Hagihara is clearly succeeding in creating value for its owners and this is reflected in the share price which has more than quadrupled in the last ten years.

Cash reserves are very comfortable, with a current ratio of 2.95 (and increasing) and a liquidity ratio of 2.3. Hagihara therefore has no problem meeting its current financial obligations. However, cash reserves should not continue to grow in this way, as this would start to represent a waste of resources. If they have too much money, let them pass it on to the shareholders!

There gross margin est en progression, à 29.6%, pour une marge de free cash flow correcte, à 7.25%. Le rendement des actifs est pas mal également, avec 7.25%, bien qu'en légère baisse. La rentabilité en cash flow des actifs est aussi assez bonne, à 9.35%.

As for debt, it is almost laughable, with a long-term debt-to-asset ratio of just 0.7%. Debt is just 0.37 times equity, and Hagihara would be able to pay it off in full in less than eight months using his free cash flow.

As for the number of shares in circulation, it is stable, or even slightly decreasing over the long term, which is obviously positive for the shareholder who thus avoids any dilution of his assets.

Conclusion

Hagihara operates in a fairly defensive sector, which is corroborated by a beta of only 0.5, which is always good to take when the markets are overheating.

The current price is slightly undervalued. I believe the stock should gain around 20% to reflect its intrinsic value.

So I just took a position on Hagihara.