The Hitachi Group’s Growth Strategy

Outline of the 2021 Mid-term Management Plan
In May 2019, Hitachi announced its new Mid-term Management Plan, covering the three years from April 2019.

Key Points in Hitachi’s New Mid-term Management Plan
We believe there are three factors that could accelerate growth.

Aiming to be a global leader in the Social Innovation Business, Hitachi

The first of these is aggressive investment, including in M&A. We areis focused on moving into a “growth mode” during the period covered

increasing investment 4x–5x from the previous Mid-term Managementby the 2021 Mid-term Management Plan.
Hitachi since its founding has contributed to improvements inPlan to ¥2.0–¥2.5 trillion. Second, to ensure implementation of thispeople’s quality of life by focusing on the social innovation business tokind of large-scale investment, we will, while maintaining financial

resolve issues confronting society.

discipline, utilize financial leverage, and improve management

During the period covered by the 2021 Mid-term Management Plan,awareness of capital costs by introducing ROIC as a management

Hitachi will continue to advance the Social Innovation Business,indicator. Finally, we will expand our digital solutions offerings on aplacing an emphasis on improving social, environmental, andglobal scale, centered on Lumada, and accelerate innovation througheconomic value for its customers.

enhanced collaboration with our customers.

Goals

Improve the quality of people's lives, raise customers' corporate value and achieve a sustainable society

Social Value
Accelerate customer’s innovation withadvanced IT solutions
Provide stable, high-efficiency energy and its
management systems
Increase the efficiency of customer’s
production and processing systems, andprovide the supply of safe, secure city water,and sewage water systems

Environmental Value

Economic Value

Reduce CO2 emissions through the value
chain

Reallocate of economic value added tostakeholders

Enhance efficiency in the use of water

Improve profits at customer companies

Enhance efficiency in the use ofresources

Enhance employee compensation
Share earnings with partners, others

Design smart cities to be more convenientand environmentally-friendly
Provide with safe, comfortable transportation
systems and services

Increasing the three values of social, environmental and economic by five-sector business and technology solutions

IT solutions

Energy solutions

Industry solutions

Mobility solutions

Smart Life solutions

Solutions

Solutions

Solutions

Solutions

Solutions

Accumulation of customer cases

Lumada platform (system for converting data into value)
OT

IT

Products

Source of value (competitive advantage)

Lumada-Based Model for Providing Solutions

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Focused on Five BusinessDomains

Providing and Enhancing Solution Cores

Global Development of Solution Cores

Lumada provides solutions as a cyber-physical system

Hitachi is improving social, environmental, and economicWe have established five business sectors

connecting the digital to the real by leveraging Hitachi’s years

value for customers by creating and providing rapid

where we can simultaneously improve theof experience in OT, IT, and products. The accumulation ofsolutions through the combination of solution cores

three types of value: IT, Energy, Industry,

customer cases allows us to develop and build up solution

based on customer needs and issues as clarified throughSmart Life, and Mobility.

cores that can be used throughout the Company.

collaborative creation efforts.

Hitachi Integrated Report 2019

Aggressively Invest in
Key Areas of Focus
Targeting investment

Introduce ROIC
to Boost Capital
Efficiency

Expand Our
Decarbonization
BusinessStrengthen Lumada

Including for M&A, ofThe 2021 Mid-term¥2.0–¥2.5 trillion over theManagement Plan

Hitachi is supporting

We are promoting

We will use collaborative

and accelerating open

the expansion of ournext three years. (vs. ¥0.5

creation with ourintroduces ROIC as ainnovation throughdecarbonization businesscustomers to expand

trillion over the three years

KPI as part of our effort

collaboration with start-in line with our long-term

the provision of digitalin the 2018 mid-term Plan)

to improve management

up firms, universities, andenvironmental targets

solutions, centered on

In addition to acquiring theawareness of capital

activities at “Kyōsō-no-ABB power grid business,efficiency.

Mori.”

we intend to invest in theIn order to enable

Based on our 2021

IT and Industry sectors.

largescale investment,

human resources

Hitachi will further

Hitachi will utilize financial

strategy, we areleverage to reduce thepromoting the hiring,weighted average cost oftraining of diverse humancapital (WACC).

resources and the creation

strengthen to an
unprecedented degree
R&D and human

P.34

Lumada.

of diverse organizations.

resources development.

Capital Allocation
Strategy

AccelerateInnovation

Financial andCapital Strategy

P.36

Accelerate Innovation

P.38

Environmental Vision and theDecarbonization
P.46
BusinessStrengthen Lumada

P.48

Performance targets (consolidated)
FY2018 results
Revenues¥9,480.6 billion

FY2019 forecast¥9 trillion

Adjusted operating income (Adjusted operating income ratio)¥754.9 billion (8.0%)¥765.0 billion (8.5%)

EBIT (EBIT margin)¥513.9 billion (5.4%)¥750.0 billion (8.3%)*1

Operating cash flows (3-year cumulative)¥1,966.7 billion

FY2021 targets
CAGR more than 3%
More than 10%——

More than ¥2.5 trillion
More than 10%

ROIC

8.5%

10.3%

ROA

3.3%

—

Overseas revenue ratio

51%—

FY2018 results

FY2019 forecast

FY2021 targets¥2,121.6 billion¥2,060.0 billion¥2,600.0 billion—
More than 60%

Performance targets by sector
SectorItem
Revenues

ITEnergy *1 *3

Adjusted operating income(Adjusted operating income ratio)¥230.1 billion (10.8%)¥220.0 billion (10.7%)¥338.0 billion (13.0%)

ROIC

19.6%

15.9%

15.0%

Revenues¥456.6 billion¥384.9 billion

Adjusted operating income(Adjusted operating income ratio)¥35.9 billion (7.9%)¥24.9 billion (6.5%)

5.8%

ROIC

Industry *1 *3

7.5%¥843.6 billion

Adjusted operating income(Adjusted operating income ratio)¥58.2 billion (6.9%)¥58.4 billion (7.0%)¥91.0 billion (9.1%)

ROIC

9.0%

10.1%

10.8%

¥1,238.1 billion¥1,155.0 billion

Adjusted operating income(Adjusted operating income ratio)¥100.2 billion (8.1%)¥96.2 billion (8.3%)

ROIC

13.6%

11.6%

¥1,816.0 billion

Revenues

Smart-life *2

More than ¥170.0 billion(More than 10%)

Revenues

Revenues

Mobility *1

6.0%¥839.6 billion

More than ¥1,700.0 billion

Adjusted operating income(Adjusted operating income ratio)¥93.4 billion (5%)

ROIC

10.0%

*1 It includes the control system business reported on IT sector.

*2 It includes the healthcare business of Hitachi High Technologies.

¥1,723.2 billion¥119.0 billion (7%)
10.0%

¥1,000.0 billion¥1,270.0 billion¥124.8 billion (9.8%)
13.1%
More than ¥2,100.0 billion
More than ¥210.0 billion(More than 10%)More than 15%*3 Figures for FY2018 except one-time expenses.

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