COMPANY RESEARCH AND ANALYSIS REPORTSAKAI HEAVY INDUSTRIES, LTD.
6358
Tokyo Stock Exchange First Section

30-Sept.-2021
FISCO Ltd. Analyst

Noboru Terashima

FISCO Ltd.
https://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

30-Sept.-2021

6358 Tokyo Stock Exchange First Section

https://www.sakainet.co.jp/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Outline of results for FY3/22 1Q............. ......................................................................................................

01

2. Outlook for FY3/22.. .....................................................................................................................................

01

3. Medium- to long-term growth strategy.. ......................................................................................................

01■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 02■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Business description. . ..................................................................................................................................

03

2. Characteristics and strengths......................................................................................................................

04

3. Market share and competitors.....................................................................................................................

04■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 05
1. Outline of results for FY3/22 1Q............. ......................................................................................................

05

2. Trends by region..........................................................................................................................................

06

3. Financial condition................................. ......................................................................................................

06■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 07• Outlook for FY3/22.. .....................................................................................................................................

07■Medium- to long-term growth strategy------------------------------------------------------------------------------------------------ 07
1. Business strategy.. .......................................................................................................................................

08

2. Capital Strategy...........................................................................................................................................

08■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 09

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

30-Sept.-2021

6358 Tokyo Stock Exchange First Section

https://www.sakainet.co.jp/en/ir/█ Summary
A manufacturer specializing in road rollers for road paving andother road construction equipment. Its domestic market shareis the highest in the industry at over 70%, and it aims to grow by
expanding its overseas market share
Sakai Heavy Industries, Ltd. <6358> (herein after also referred to as “the Company”) is a manufacturer specializing
in road rollers for road paving and other road construction equipment. It has a long history in this field, and boasts
the industry’s highest market share in Japan at over 70%. In recent years, the Company has been focusing on
developing overseas markets, especially in North America and Southeast Asia.
1. Outline of results for FY3/22 1Q
In the consolidated results for FY3/22 1Q, net sales increased 33.4% year on year (YoY) to ¥6,089mn, operating
profit increased 451.0% YoY to ¥202mn, ordinary profit was ¥214mn (compared to a ¥52mn loss in the year-earlier
period), and profit attributable to owners of parent was ¥154mn (versus a ¥122mn loss in the year-earlier period).
Both net sales and operating profit increased significantly YoY due to the fact that both were heavily impacted by
the COVID-19 pandemic in the same period of the previous fiscal year, and it seems that both were slightly higher
than the Company’s forecasts. In addition, results in Japan as well as overseas recovered to strong levels.
2. Outlook for FY3/22
For FY3/22 consolidated results, the Company is forecasting net sales of ¥23,500mn (+8.7% YoY), operating profitof ¥900mn (+28.3%), and ordinary profit of ¥800mn (+21.4%), and maintains its initial forecast for profit attributableto owners of parent of ¥520mn (versus ¥4mn in FY3/21). While the impacts of the COVID-19 pandemic remain
uncertain, in Japan, the Company expects demand related to civil engineering and roads to remain firm due todisaster prevention and mitigation efforts as well as the national resilience plan, among other factors. In the U.S.,
massive infrastructure upgrades under the American Jobs Act are being discussed, and a recovery is expected.
In Asia, demand is recovering due to economic measures in China and ASEAN nations, and in Indonesia, where
demand had been weak, a bottoming out is expected. As a result, despite expecting an increase YoY in SG&A
expenses, the Company is forecasting an increase in operating profit in conjunction with higher sales.
3. Medium- to long-term growth strategy
In June 2021, the Company released its “Medium-Term Management Policy” which runs through FY3/26. The
ultimate goal is to increase corporate value and shareholder value, and in order to achieve this the Company will
promote a “business growth strategy” and an “efficient capital strategy.” In terms of numerical targets, the Company
is aiming for net sales of ¥30bn, operating profit of ¥3.1bn, ROE of 8% in FY3/26, and will aim to maintain a stabledividend payout ratio of 50% (DOE of 4%). In line with this policy, the Company has announced a dividend payout
ratio of 100% for FY3/22 (annual dividend = ¥120), but at FISCO we think that there is a possibility that the Company
will increase the dividend if it seems that results will exceed the forecasts. In this way, it is commendable that theCompany has released a clear capital policy targeting an improvement in ROE, and is carrying out shareholder
returns in line with this policy.

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

30-Sept.-2021

6358 Tokyo Stock Exchange First Section

https://www.sakainet.co.jp/en/ir/

Summary

Key Points
Japan’s leading manufacturer of road rollers with a long history. Domestic market share is over 70%, and theCompany aims to grow by expanding its overseas market share• Domestic demand is firm and overseas demand is recovering, so although the Company has left its initial
FY3/22 forecasts unchanged, 1Q results exceeded the forecasts• As medium-term numerical targets, the Company is aiming for net sales of ¥30bn, operating profit of ¥3.1bn,
and ROE of 8% in FY3/26•

㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕

(¥mn)

(¥mn)

㻟㻜㻘㻜㻜㻜

㻟㻘㻟㻡㻣

㻟㻘㻢㻜㻜

㻞㻡㻘㻜㻜㻜

㻟㻘㻜㻜㻜㻞㻜㻘㻜㻜㻜

㻞㻘㻠㻜㻜㻝㻡㻘㻜㻜㻜

㻞㻥㻘㻡㻜㻠

㻝㻘㻤㻜㻜㻞㻠㻘㻣㻣㻡
㻞㻞㻘㻣㻠㻠㻌

㻝㻜㻘㻜㻜㻜

㻝㻘㻠㻝㻠㻞㻝㻘㻢㻞㻠㻌

㻥㻡㻥㻌

㻡㻘㻜㻜㻜

㻞㻟㻘㻡㻜㻜㻌
㻝㻘㻞㻜㻜
㻥㻜㻜㻌

㻢㻜㻜

㻣㻜㻝㻌
㻜

㻜
㻲㼅㻟㻛㻝㻤

㻲㼅㻟㻛㻝㻥

㻲㼅㻟㻛㻞㻜

㻲㼅㻟㻛㻞㻝

㻲㼅㻟㻛㻞㻞㻌㻱

Source: Prepared by FISCO from the Company’s financial results█ Company profile
The top manufacturer of road rollers with a long history
The Company is a specialized manufacturer of road rollers for paving roads and other road construction equipment,
and is the top manufacturer in Japan, with a market share of above 70%. In 1970, the Company established ajoint venture in Indonesia, as part of its effort to expand overseas business at an early stage. As of March 31,
2021, the Company has four domestic subsidiaries and five overseas subsidiaries (U.S., China, three in Indonesia).
The Company listed its shares on the Second Section of the Tokyo Stock Exchange in 1964, and its shares werereclassified to the First Section of the Tokyo Stock Exchange in 1981.

We encourage readers to review our complete legal statement on “Disclaimer” page.

02 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

30-Sept.-2021

6358 Tokyo Stock Exchange First Section

https://www.sakainet.co.jp/en/ir/█ Business overview
The top manufacturer of road rollers with a domestic market shareof over 70%. Will seek growth by offering high value-added andexpanding overseas market share
1. Business description
The Company’s main business is the manufacture and sale of road rollers used in road paving and other applications,and road roller-related net sales account for approximately 95% of all net sales. The term “road roller” actually covers
quite a wide range of machines in terms of capabilities and size, among other features. The Company has roughly
20 platforms alone for road rollers, and when different variations are added the total number of products is in the70-80 range. There is also a wide range in sizes, from one ton to 20 tons (for large civil engineering projects). The
core price range is from ¥5mn (medium-size rollers) to ¥10mn (large rollers).
In terms of net sales by region*, in FY3/21 net sales in Japan were ¥13,042mn (60.3% of total net sales), net sales
in North America were ¥3,245mn (15.0%), net sales in Asia were ¥4,854mn (22.5%), net sales in the Middle East,
Russia, and the CIS were ¥32mn (0.2%) and net sales to other markets totaled ¥449mn (2.0%).
*	Net sales by region is the amount of products actually sold to customers, and differs from the reportable segment “Net
Sales by Location” in the financial results.

㻾㼍㼠㼕㼛㻌㼛㼒㻌㼚㼑㼠㻌㼟㼍㼘㼑㼟㻌㼎㼥㻌㼞㼑㼓㼕㼛㼚㻌㼕㼚㻌㻲㼅㻟㻛㻞㻝㻹㼕㼐㼐㼘㼑㻌㻱㼍㼟㼠㻘㻌㻾㼡㼟㼟㼕㼍㻘㻌㻯㻵㻿 㻜㻚㻞㻑㻻㼠㼔㼑㼞 㻞㻚㻜㻑

㻭㼟㼕㼍
㻞㻞㻚㻡㻑

㻺㼛㼞㼠㼔㻌㻭㼙㼑㼞㼕㼏㼍
㻝㻡㻚㻜㻑

㻶㼍㼜㼍㼚
㻢㻜㻚㻟㻑

Source: Prepared by FISCO from the Company's results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

30-Sept.-2021

6358 Tokyo Stock Exchange First Section

https://www.sakainet.co.jp/en/ir/

Business overview

2. Characteristics and strengths
As mentioned above, the Company is a specialized manufacturer of road rollers and other road construction
equipment, and the Company has the following special characteristics and strengths.
(1) Long history as a specialized manufacturer
The Company’s greatest strength is its long history as a specialized manufacturer of road rollers and other road
construction equipment. In other words, by deploying a global niche strategy through selection and concentration
the Company has increased its level of expertise and accumulated its own unique technologies.
(2) Technological capabilities
When it comes to hardening and paving roads, the necessary pressure, torque, and other variables (compaction
technology) differ depending on the specific land, land quality, soil, and other conditions. Therefore, roadwork
companies often require different types of road rollers to match individual worksites (ground, etc.). Because theCompany has been a specialized manufacturer of road roller and other road construction equipment for many
years, it boasts a high level of technological capabilities with respect to compaction technology, and it is not easy
for its competitors to catch up to it.
(3) Credibility
Credibility backed by experience engineering and track record is also a strength of the Company. The technology
to ensure underground compaction quality is a black box, and is not something that is easy for late-arriving
manufacturers and non-specialized manufacturers to copy. For example, asphalt mixture brought in at hightemperatures must be worked on within a limited time, and if the work is of poor quality, it must be redone
which involves a large price. Also, work quality issues for roads and embankments are slow to emerge, andthe compaction quality at the time that work is completed tends to be a black box. For this type of experienceengineering, the Company’s brand which customers have used for many years and the long-term insight due tovariety of worksite experiences are strengths, and these are points that have earned the trust of many customers.
3. Market share and competitors
According to data from the Japan Construction Equipment Manufacturers Association, in FY2020 domestic
construction equipment shipment value was ¥2.2tn, and road roller and other road construction equipment (theCompany’s main products) account for 2.8% of this amount. The Company has a share of over 70% in this roadequipment market, making it the top manufacturer in Japan. Competitors include companies such as Hitachi
Construction Machinery Co., Ltd. <6305>, but none of these companies are specialized manufacturers. Some
overseas manufacturers have entered the market in Japan, but none have much of a presence. In Japan, theCompany’s earnings rise and fall along with the ups and downs of the market.
In the global market, although there are no accurate statistics, the Company’s market share (on a units produced
basis) is estimated to be in the 6-7% range. However, this is on a global basis, and if we limit the scope to the mainmarkets that the Company operates in (Japan, ASEAN, North America), the Company’s market share is around20%. The Company’s main competitors in the global market include Caterpillar <CAT>, FAYAT, Deere <DE>, andVolvo, but none of these companies are manufacturers that specialize in road rollers.

We encourage readers to review our complete legal statement on “Disclaimer” page.

04 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

30-Sept.-2021

6358 Tokyo Stock Exchange First Section

https://www.sakainet.co.jp/en/ir/█ Results trends
Both sales and profits increased significantly in FY3/22 1Q, and evenexceeded the Company’s forecasts. Both the domestic and overseas
businesses are recovering from the impacts of the COVID-19
pandemic and are performing well
1. Outline of results for FY3/22 1Q
In the consolidated results for FY3/22 1Q, net sales increased 33.4% YoY to ¥6,089mn, operating profit increased
451.0% YoY to ¥202mn, ordinary profit was ¥214mn (compared to a ¥52mn loss in the year-earlier period), andprofit attributable to owners of parent was ¥154mn (versus a ¥122mn loss in the year-earlier period).
Both net sales and operating profit increased significantly YoY due to the fact that both were heavily impacted
by the COVID-19 pandemic in the same period of the previous fiscal year, and it seems that both were slightly
higher than the Company’s forecasts. In addition, results in Japan as well as overseas recovered to strong levels.
The gross margin declined 2.4pp YoY to 23.7%, but this was due to the change in the product mix and the factthat sales in the year-earlier period were relatively high margin sales. As a result, gross profit was ¥1,443mn (up21.3%). Meanwhile, SG&A expenses increased 7.6% YoY due to the increase in business travel and networking/entertainment expenses resulting from more sales activity than in the year-earlier period as well as an increase inpersonnel expenses. However, the SG&A expense ratio declined to 20.4% from 25.3% in the year-earlier period.
As a result, each profit line increased significantly.
Analyzing the change factors for operating profit, the increase in sales had a positive ¥397mn impact, the increasein the cost of goods sold ratio had an impact of minus ¥144mn, and the increase in SG&A expenses had an in
impact of minus ¥87mn (shipping expenses had a minus ¥19mn impact, technology and research expenses had
a positive ¥18mn impact, personnel expenses had a positive ¥11mn impact, and other expenses had a positive¥39mn impact).
Overview of FY3/22 1Q consolidated results(¥mn)
FY3/21 1Q
Results

FY3/22 1Q% of net sales

Results

Change% of net sales

Amount%Net sales

4,565

100.0%

6,089

100.0%

1,523

33.4%

Gross profit

1,190

26.1%

1,443

23.7%

253

21.3%

Selling, general andadministrative expenses

1,153

25.3%

1,241

20.4%

87

7.6%

Operating profit

36

0.8%

202

3.3%

165

451.0%

Ordinary profit

-52

-1.2%

214

3.5%

267

-

Profit attributable toowners of parent

-122

-2.7%

154

2.5%

276

-

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

30-Sept.-2021

6358 Tokyo Stock Exchange First Section

https://www.sakainet.co.jp/en/ir/

Results trends

2. Trends by region
In looking at FY3/22 1Q sales by region, on the whole, sales are on a recovery trend from the impacts of the COVID19 pandemic. In Japan, net sales were ¥2,765mn (up 13.9% YoY), as a result of strong performance in road and civilengineering projects, as well as other public investment-related projects, despite continued impacts from COVID-19.
Overseas net sales increased 55.4% YoY to ¥3,323mn, due to the recovery in demand for construction machinery in
key markets. Net sales in North America were ¥1,376mn (up 85.0%), due to the recovery in demand for construction
machinery, which had been slowing down, amid firm construction investment, as well as an increase in market share(from 3.5% to 5.0% according to Company estimates). Net sales in Asia were ¥1,782mn (up 32.0%), as demand
recovered in Thailand, Vietnam, South Korea, China and elsewhere due to the rejuvenation of the economy, while
there were signs of a bottoming out in Indonesia. In other regions, net sales increased 289.1% to ¥163mn, basedon the relative strong performance in Australia, New Zealand and Latin America.
Net sales by region(¥mn)
FY3/21 1Q

FY3/22 1Q

ChangeResults% of total

Results% of total

Amount

Japan

2,427

53.2%

2,765

45.4%

338

13.9%

Overseas

2,138

46.8%

3,323

54.6%

1,185

55.4%

743

16.3%

1,376

22.6%

632

85.0%

1,350

29.5%

1,782

29.3%

431

32.0%

2

0.1%

2

0.0%

-0

-17.3%

North America
Asia
Middle East, Russia, CIS
Other
Total

%

41

0.9%

163

2.7%

121

289.1%

4,565

100.0%

6,089

100.0%

1,523

33.4%

Source: Prepared by FISCO from the Company’s financial results

Stable financial condition, ample cash and deposits of ¥7,629mn
3. Financial condition
In terms of the Company’s financial condition as of June 30, 2021, current assets were ¥23,089mn (up ¥161mn fromthe end of the previous fiscal year). The main factors included a ¥645mn increase in cash and deposits, a ¥546mn
decrease in notes and accounts receivable – trade, and a ¥282mn decrease in inventory assets. Non-current assets
were ¥12,026mn (down ¥147mn). The main factors included a ¥112mn increase in property, plant and equipment,
and a ¥221mn decrease in investments and other assets. As a result, total assets were ¥35,115mn (up ¥14mn YoY).
As of June 30, 2021, cash and deposits stood at a high level of ¥7,629mn.
Meanwhile, total liabilities were ¥13,097mn (up ¥34mn from the end of the previous fiscal year). The main factors
among current liabilities included a ¥430mn increase in payables (notes and accounts payable – trade and electronically recorded obligations – operating), an ¥82mn decrease in short-term borrowings, and a ¥103mn decline
in non-current liabilities. Total net assets stood at ¥22,017mn (down ¥20mn), with the main factors including a¥61mn decline in retained earnings due to dividend payments, a ¥295mn increase in foreign currency translation
adjustment, and a ¥170mn decrease in valuation difference on available-for-sale securities. As a result, the equity
ratio as of June 30, 2021, was 62.6% (versus 62.7% at the end of the previous fiscal year).

We encourage readers to review our complete legal statement on “Disclaimer” page.

06 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

30-Sept.-2021

6358 Tokyo Stock Exchange First Section

https://www.sakainet.co.jp/en/ir/█ Outlook
Left the initial FY3/22 forecast of 8.7% increase in net sales and a
28.3% increase in operating profit unchanged• Outlook for FY3/22
For FY3/22 consolidated results, the Company has left its initial forecast of net sales of ¥23,500mn (+8.7% YoY),
operating profit of ¥900mn (+28.3%), ordinary profit of ¥800mn (+21.4%) and profit attributable to owners of parentof ¥520mn (versus ¥4mn in FY3/21) unchanged.
While the impacts of the COVID-19 pandemic remain uncertain, in Japan the Company expects demand related tocivil engineering and roads to remain firm due to factors including the government’s ¥15tn national resilience plan
to speed up countermeasures for disaster prevention and mitigation. In the U.S., massive infrastructure upgrades
under the American Jobs Act, which will invest US$2.25tn over an eight-year period are being discussed, and arecovery is expected. In Asia, demand is recovering due to economic measures in China and ASEAN nations, and inIndonesia, where demand had been weak, a bottoming out is expected. As a result, despite expecting an increase
YoY in SG&A expenses, the Company is forecasting an increase in operating profit in conjunction with higher sales.
Consolidated outlook for FY3/22(¥mn)
FY3/21

FY3/22

ChangeResults% of net sales

Forecast% of net sales

21,624100.0%

23,500100.0%

1,875

8.7%

Operating profit

701

3.2%

900

3.8%

198

28.3%

Ordinary profit

659

3.0%

800

3.4%

140

21.4%

4

0.0%

520

2.2%

515

-

Net sales

Profit attributable toowners of parent

Amount%Source: Prepared by FISCO from the Company’s financial results█ Medium- to long-term growth strategy
As its medium-term growth strategy, the Company will seek to growits overseas market share, expand overseas business domains,and create added value by developing next-generation businesses.
FY3/26 targets include net sales of ¥30bn and operating profit of¥3.1bnIn June 2021, the Company released its “Medium-Term Management Policy” which runs through FY3/26. The
ultimate goal is to increase corporate value and shareholder value, and in order to achieve this the Company will
promote a “business growth strategy” and an “efficient capital strategy.” In terms of numerical targets, the Company
is aiming for net sales of ¥30bn, operating profit of ¥3.1bn, ROE of 8% in FY3/26, and will aim to maintain a stabledividend payout ratio of 50% (DOE of 4%).

We encourage readers to review our complete legal statement on “Disclaimer” page.

07 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

30-Sept.-2021

6358 Tokyo Stock Exchange First Section

https://www.sakainet.co.jp/en/ir/

Medium- to long-term growth strategy

1. Business strategy(1) Domestic market: Create added value through stabilization and developing next-generation businesses
The domestic market for road rollers is already in its mature phase and the Company’s market share is large.
Therefore, the Company will aim to grow by adding new value to existing products (high-performance, etc.), inother words, by developing next-generation businesses.
(2) Overseas markets: Increase market share and expand business domains
In overseas markets, there are many regions (countries) where demand is increasing, and there is significant roomfor growth given the Company’s low market shares. Therefore, the Company will seek growth through the two
strategies of more fully cultivating existing markets and expanding its business domains.
(3) Numerical targets
As medium- and long-term numerical targets, the Company aims for net sales of ¥26.5bn, operating profit of¥2.0bn, and ROE of 5.5% in FY3/24, and net sales of ¥30.0bn, operating profit of ¥3.1bn, and ROE of 8% in
FY3/26.

㻹㼑㼐㼕㼡㼙㻙㼍㼚㼐㻌㼘㼛㼚㼓㻙㼠㼑㼞㼙㻌㼠㼍㼞㼓㼑㼠㼟㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕

(¥bn)

(¥bn)

㻟㻡㻚㻜

㻟㻚㻝

㻟㻜㻚㻜

㻟㻚㻡
㻟㻚㻜

㻞㻡㻚㻜

㻞㻚㻡

㻞㻚㻜

㻞㻜㻚㻜

㻞㻚㻜

㻝㻡㻚㻜

㻞㻢㻚㻡

㻟㻜㻚㻜

㻞㻝㻚㻢

㻝㻜㻚㻜
㻡㻚㻜

㻝㻚㻡
㻝㻚㻜
㻜㻚㻡

㻜㻚㻣

㻜㻚㻜

㻜㻚㻜
㻲㼅㻟㻛㻞㻝

㻲㼅㻟㻛㻞㻠
㻌㻔㼜㼘㼍㼚㻕

㻲㼅㻟㻛㻞㻢
㻌㻔㼜㼘㼍㼚㻕

Source: Prepared by FISCO from the Company’s Medium-Term Management Policy

2. Capital Strategy
As its basic policy for capital strategy, the Company will return profits to shareholders at a level that supports theCompany’s objective of ROE of 8%, and will increase shareholder value (improve capital efficiency). As a final target
for FY3/26, the Company will strive to achieve ROE of 8% and a 50% dividend payout ratio. This would be DOE(ratio of dividends to equity) of 4%.
Generally, two things need to be improved in order to increase ROE. One is of course increasing profit attributable toowners of parent, while the other is suppressing shareholders’ equity (not increasing shareholders’ equity more thannecessary). In order to increase operating profit, the Company plans to promote the business strategies discussed
above, but at the same time, in order to keep from increasing shareholders’ equity more than needed, the Company
plans to execute a dividend policy in which, if ROE falls below 3%, the dividend payout ratio will be 100%, if ROE is
between 3% and 6%, the DOE will be 3%, and if ROE is above 6%, the dividend payout ratio will be 50%.

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

30-Sept.-2021

6358 Tokyo Stock Exchange First Section

https://www.sakainet.co.jp/en/ir/

Medium- to long-term growth strategy

Basic capital policy approach

Source: Medium-Term Management Policy

In terms of share buybacks, through FY3/26 the Company will consider flexible share buybacks with an upper limitof ¥0.5bn to ¥2.0bn. With respect to investment securities, the Company will review investment securities from theperspective of business strategy. Also, concerning growth investment, the Company will consider utilizing leveragewith an emphasis on return on capital (ROIC).

█ Shareholder return policy
The Company plans to pay an annual dividend of ¥120.0 (up ¥40.0
YoY) in FY3/22. Depending on financial results, there is a chance this
dividend might be increased
The Company works to secure a stable management base over the long term, and also places importance on thecontinuation of stable dividends, and makes it a basic policy to distribute results that are supported by businessperformance and a sound financial structure. Based on this basic policy, the Company decides dividends andconducts share buybacks. As discussed above, the Company’s medium-term shareholder return policy is as follows.
If ROE falls below 3%, the dividend payout ratio will be 100%, if ROE is between 3% and 6%, the DOE will be 3%,
and if ROE is above 6%, the dividend payout ratio will be 50%. With respect to share buybacks, the Company isconsidering flexible share buybacks with an upper limit of ¥0.5bn to ¥2.0bn by FY3/26.
The Company paid an annual dividend of ¥100.0 in FY3/20, and an annual dividend of ¥80.0 in FY3/21. For FY3/22,
the Company has announced a dividend payout ratio of 100% (annual dividend = ¥120.0), but at FISCO we think that
there is a possibility that the Company will increase the dividend if it appears that results will exceed the forecasts.
Concerning share buybacks, the Company has announced that it will buy back up to a maximum of 130,000 shares(¥500mn) by December 2021, and as of July 15, the Company has purchased 130,000 shares (¥340mn).
The Company’s stance of announcing a clear plan to improve ROE and carrying out shareholder return plans in linewith that plan is commendable.

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

30-Sept.-2021

6358 Tokyo Stock Exchange First Section

https://www.sakainet.co.jp/en/ir/

Shareholder return policy㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻕(¥)

㻝㻜㻜㻚㻜㻑

㻝㻡㻜㻚㻜㻝㻜㻜㻚㻜㻑

㻥㻝㻚㻜㻑

㻝㻞㻜㻚㻜

㻤㻜㻚㻜㻑

㻥㻜㻚㻜

㻢㻜㻚㻜㻑

㻡㻝㻚㻢㻑

㻢㻜㻚㻜

㻝㻞㻜㻚㻜㻌
㻝㻜㻜㻚㻜㻌

㻝㻜㻜㻚㻜㻌

㻠㻜㻚㻜㻑㻝㻜㻜㻚㻜㻌

㻤㻜㻚㻜㻌
㻟㻜㻚㻜

㻞㻜㻚㻜㻑
㻞㻞㻚㻡㻑

㻜㻚㻜

㻜㻚㻜㻑
㻲㼅㻟㻛㻝㻤

㻲㼅㻟㻛㻝㻥

㻲㼅㻟㻛㻞㻜

㻲㼅㻟㻛㻞㻝

㻲㼅㻟㻛㻞㻞㻌㻱

Note: The Company consolidated ten shares into one share effective October 1, 2017. Figures for FY3/18 have been revised
retroactively.
FY3/21 dividend payout ratio is not shown due to the fact that it was 8,602.2%.
Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

10 10

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
The intellectual property rights, including the copyrights to the main text hereof, the data
and the like, belong to FISCO, and any revision, reprocessing, reproduction, transmission,
distribution or the like of this report and any duplicate hereof without the permission of FISCO
is strictly prohibited.
FISCO and its affiliated companies, as well as the directors, officers and employees thereof,
may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-13-3 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (IR Consulting Business Division)
Email: support@fisco.co.jp