Management with an Awareness of the Cost of Capital and Stock Price

Management Conscious of Cost of Capital and Stock Price

The Company conducts analysis and evaluation of return on capital and market valuation, determines policies and measures to realize corporate value enhancement, and strives to promote such policies and measures. In the current medium-term management plan "Further Evolution 2026" (December 2023-November 2026), we are conscious of return on capital exceeding the cost of capital, which is the return expected by the market, and have set a target of ROE of 12% or more for the final year as a quantitative plan.

Recognition of the Cost of Capital

We recognize that the cost of capital, which is the market's expected return, is around 8%, and we maintain a return on capital above that level. In addition, we recognize that ROE of 12% or more is appropriate for the company to continue to balance its portfolio of trading and stable businesses while pursuing financial soundness and capital efficiency.

The WACC (as we recognize it) is approximately 3.5%, the ROIC (as per our plan) for FY2024 to FY2026 is 4.9%, the cost of equity (as we recognize it) is approximately 8%, and the ROE (as per our plan) for FY2024 to FY2026 is 12.5% to 13.0%.

Efforts for Corporate Value Enhancement

This diagram presents key financial metrics, including PBR, ROE, ROA, financial leverage, PER, EPS growth ratio, cost of capital, and P/NAV, highlighting the company's management strategy aimed at sustainable profit growth and shareholder returns through optimizing the business portfolio, continuous investment in growth sectors, utilization of non-financial capital, maintaining financial discipline, and efficiently managing inventory and fixed assets, etc.

Enhancement of non-financial capital and proactive information disclosure

Strengthen non-financial capital by investing in human capital and improving brand value
Improve the corporate value by proactive information disclosure

Increase of Net Asset Value

Increase NAV by building up fixed assets through expansion of purchases of prime assets
Review composition of inventories and fixed assets to return unrealized profit with a plan

We will strive to enhance disclosure and engage in constructive dialogue with our shareholders and investors so that they can fully understand the achievements and details of these efforts.

Management with an awareness of the cost of capital and stock price (Published on January 12, 2024)