DX also promoted by the government 3 DX-related stocks in the spotlight

DX was accelerated by the Corona disaster, but many investors have actually seen the business efficiency gains from IT technology through the penetration of telework and videoconferencing.

DX is now an essential part of business, and the market for DX has expanded to include customer relations, organisational operations, ways of working and the creation of digitally-enabled business models. And as governments will continue to encourage DX promotion, DX-related businesses will see significant business opportunities.

The DX market is expected to continue to expand, with growth in the manufacturing and financial industries both domestically and internationally driving market expansion. DX-related stocks will be one of the trends to watch for some time to come.

The data in the table on this page are current as of 10 Nov 2023.

・ITbook HD (1447) - 19.53% (6 months)

The company's main businesses are ground investigation and improvement and IT consulting, and it has strength in the public sector.

ITbook, an IT consulting company, and Something HD, a ground survey and improvement company, merged in October 2018; IT consulting is seeing an increase in DX projects from local governments and companies, while ground survey and improvement, system development and human resources businesses are also performing well.

The company announced its financial results on 14 November, with consolidated recurring profit for 2Q FY2024 rising to a surplus of JPY 11m (compared with a deficit of JPY 238m in 2Q FY2024) and a V-shaped recovery in performance.

As the company continues to pay no dividend, a chart-focused short-term stance is likely to be required.

▶▶Reasons for attention

The company is still involved in policy-related business and has strength in the public sector, so there are high expectations for the share price in the future.

・Ainess (9742) +11.26% (6 months)

Promoting DX business with greatest strength in comprehensive administrative systems for local governments.

An independent SI with strength in WebRings (WR), a comprehensive administrative information system for local governments, and a tie-up with Mitsubishi Research Institute.

Aiming to reach 280 organisations in the immediate future (currently 250). Forecast PER of 18.74x, actual PBR of 0.88x and forecast dividend yield of 3.27% are also undervalued.

Trading should be short term, such as by carefully targeting the pushback after a rally in anticipation of a rebound.

▶▶Reasons for attention

The company has started providing DX human resources education support services and will continue to develop its DX business, so there are high expectations for growth in line with current trends.

・IT4 (4743) +22.30% (6 months)

Developed a system that has realised public accounting of school meal expenses, which had been a nationwide issue.

System development was sluggish in terms of orders in the first half of the year, but is firm, mainly in the financial sector, and the automatic telephone system for call centres is developing demand from non-banks.

Consolidated recurring profit grew by 6.2% year-on-year to ¥1.72 billion in Q2 FY2024, and progress towards the full-year plan of ¥3.46 billion reached 49.8%, higher than the five-year average of 42.1%.

A good, debt-free company with continued growth in sales and profits. The company's forecast PER of 11.88x, actual PBR of 1.66x and forecast dividend yield of 3.83% are not overvalued.

▶▶Reasons for attention.

The company receives many orders from municipalities and government-ordinance-designated cities, which matches the direction of DX in rural areas, and we expect this trend to continue.

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