OSAKA -- Giant fossils decorate hallways and meeting rooms at the Osaka headquarters of sensor maker Keyence -- a reminder, the company says, that it too could become a fossil if it does not continue to evolve.

This continued adaptation has helped Keyence grow to become Japan's third-most-valuable listed company, behind only Toyota Motor and Sony Group, with a market capitalization of nearly 16 trillion yen ($141 billion).

Keyence reported a record 141.78 billion yen first-half net profit Thursday, a 68% year-on-year surge, but even more noteworthy was its 56% operating margin. The latter is the result of close relationships with customers that have yielded a wealth of data to mine for trends and new ideas, as well as generous investment in talent.

Investors have rewarded Keyence -- led by 47-year-old President Yu Nakata -- for distancing itself from the mass-production-reliant business model of other industry players and for a profit outlook that appears set to keep breaking records. Its market cap broke 10 trillion yen for the first time in May 2020 and temporarily topped 18 trillion yen in September.

Besides sensors, Keyence makes control equipment for factories, an area where it competes with Omron and Mitsubishi Electric, and digital microscopes, where rivals include Olympus.

Keyence reported 538.13 billion yen in net sales for the fiscal year ended March -- less than these competitors -- but its operating margin of 51% was more than five times Omron's. Sales and operating profit roughly tripled over a decade as the company tapped into growing demand for factory automation.

Keyence generated 56% of its sales overseas in fiscal 2020. China accounted for 16% of the total, after a 35% year-on-year jump, followed by the U.S. at 14%. "Its highly profitable business model has begun gaining ground overseas," said Tomoki Komiya of Mitsubishi UFJ Morgan Stanley Securities.

A Keyence executive attributes the company's high margins to "the strength of our products," adding that "70% of our products are world or industry firsts."

But this is not the only factor that has powered its growth. Keyence "is ahead of the pack in analyzing marketing and sales data," said Kaoru Kawamoto, a professor in the data science school at Shiga University.

Keyence has about 8,000 employees groupwide, roughly a third of Omron's staff. To use these limited resources efficiently, it outsources production rather than operate its own factories, while eschewing outside dealers in favor of working directly with buyers.

Staff members frequently visit customers' plants and warehouses to look into their concerns and see how they use Keyence products, then share this information with the development team.

"When we get in touch with them, they come right out to us," an executive at a parts maker in Nagano Prefecture said.

A specialized team of data scientists combs through this information to spot trends and develop ways to win orders more effectively. According to a Keyence employee, the company delved into this deeper analysis amid concern that rivals could catch up and reduce the information advantage provided by Keyence's direct-sales approach.

When Keyence was founded in 1972 as Lead Electric, factory automation equipment was typically sold through dealers. These dealers already had contracts with competing manufacturers, spurring Keyence to go it alone.

"Keyence's business model came about because it came into the market late," the president of a rival industrial equipment maker said.

High compensation has helped the company attract and retain the necessary talent for this strategy.

Employees received an average of $160,000 in fiscal 2020 -- the most of any company with 100 or more employees in the Nikkei 500 Stock Average and $6,700 above No. 2 employer Mitsubishi Corp. Keyence returns a share of operating profit to employees as bonuses four times a year, on top of monthly bonuses.

"To lift morale, we make sure employees are rewarded for their contribution to earnings," the company says.

Close relationships with customers have helped Keyence keep sending out orders the day it receives them, even as competitors grapple with a global chip shortage. The company had earlier decided to stock up on semiconductors in anticipation of rising demand.

"Customers really appreciate the same-day shipping at a time of strong demand, and that's helped it take some market share from competitors," Mitsubishi UFJ Morgan Stanley's Komiya said.

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