Management Based on Awareness ofCapital Cost and Share Price
June 12, 2024
Senior Vice President & CFO
Hiroyuki Sekizawa© NEC Networks & System Integration Corporation 2024

Progress of “Shift up 2024” Business Plan
Shift up 2024(¥ Bn.)

359.5
Net sales 310.3

365.0

320.8
29.0
25.1

23.2

22.8

FY22/3

FY23/3

Profit growth speed returned to theplan, though the figures are a year
behind the target
Strategy started working with severe capex
control by telecom carriers and wage hike（Appeared results in DXS leading other areas)

Operatingincome1Summary

FY24/3 FY25/3e© NEC Networks & System Integration Corporation 2024

Initiatives for the Sustainable Enhancement of Corporate Valueand Shareholder Value
Advancing activities in line with basic strategies formulated in 2019(first disclosed in Annual Report 2019)

Strategic tree

Basic Approach(1) Improving financial value
based on ROE(2) Enhancing non-financial
value with a focus onhuman capital
Enhancing corporate value andshareholder value through theabove virtuous circle

Financial value･ROE

Corp. value･PBR･Equity spreadNon-financialvalue･PER

Shareholders’equity costExpectedgrowth rate2© NEC Networks & System Integration Corporation 2024

Growth rate &profitability

Portfoliomanagement

Capital efficiency
Non-financial capitalto support growth strategy & to reduce biz risk

Constructivedialogue

Current Situation (Changes from the Past)* PBR/PER = Annual average share price ÷ BPS/EPS

Return on capital and the evaluation by the market were improved significantly by focusing on thebasic strategies.

PBR (Times)
Significant improvement from 1
time to 2 times＝ROE (%)

Steady improvement in return oncapital and expanded equity spread* Cost of shareholders‘ equity

3×PER (Times)

Improved evaluation by the market
as a systems integrator(SIer)

Estimate based on CAPM, etc.
(around 6%)
Value expected by investors(around 8%)

2.0

10.4

20.2

1.2

8.7

14.3

© NEC Networks & System Integration Corporation 2024

* PBR/PER = Annual average share price ÷ BPS/EPS(FY2024/3 values)

Current Situation (Comparison with Other Companies)

PBR improvement is still on the way.
Aim for a further improvement in return on capital and evaluation by the market.

＝PBR (Times)

2.92.63.0

18.0

SIer

2.8

14.3

PER (Times)

20.2

15.5

19.4

21.7

AB
SIer

C

1.0

1.0

DE

Telecom
construction© NEC Networks & System Integration Corporation 2024

15.7

13.3
7.8

NESIC

SIer

19.1

16.3

10.4

NESIC
4SIer

14.1

2.0×

ROE (%)

A

B
SIer

C

D

6.5

E

Telecom
construction

NESIC

A

B
SIer

C

DE

Telecom
construction

Toward an Improvement in ROE
Aiming to achieve ROE exceeding the level of a SIer by improving profitability and asset efficiency

ROE=Net margin

×Total asset
turnover×The Equity
MultiplierOperating margin

FY24/3
FY25/3eTentative target *1

10.4%

4.3%

( 7.0% )1.3

1.9approx.

12%

4.9%

( 7.9%)

1.3

1.9approx.

16%

6%

( 10% )

1.4

1.9（=SIer)
Average for SIer *2

15.5%

6.7%

1.4

1.8

(Company A to Company C)*1 Assumption base*2 The average values for a systems integrator are simple averages for the respective indicators. Accordingly, ROE is not consistent with the value
obtained with the above mathematical expression.
5© NEC Networks & System Integration Corporation 2024

(1) Improvement of Profit Margin on Sales (1)Accelerating initiatives for enhancing profit growth capability

DXSNWSESSA hybrid business combining existing businesses with DX
Center-based offsite BPO (use of Symphonict and AI)
Focusing efforts on the next growth-- Social infrastructure (including space/national security), next-generation NW areas(including O-RAN and local 5G)

Resource optimization (including fire-fighting network and road ICT)
Sophistication and enhancement of added value(workstyle innovation and DX at work sites in the public sector,
initiatives for green society (to be practiced by the company))

6© NEC Networks & System Integration Corporation 2024

(1) Improvement of Profit Margin on Sales (2)Aiming for an exclusive position, which is neither one of system integrators nor one of acommunication facility construction company, with synergy between DX x next-generation networkand social implementation capability

Only one
Spiral-type growth model+ Synergies among segments

DXS

NWS

(DX know-how) (Beyond 5Gtechnology)

ESS(Socialimplementationcapability)
7© NEC Networks & System Integration Corporation 2024

Synergy examples（DX×ESS）
DX in public areas, such as using Digital Twin
to visualize flows of people at a station/airport（NWS×ESS）
Smart security services for electriccompanies using local 5G technologies（DXS×NWS×ESS）:Advanced high-resolution monitoring
services for key facilities (visual AI x highspeed communication x construction)

(2) Improvement in Asset Efficiency (Asset Turnover Ratio)
Improvement activities made steady progress despite the impact of component shortages and longterm, large-scale projects. The efficiency of accounts receivable and inventories was improved inresponse to deterioration of asset efficiency due to an increase in long-term, large-scale projects.
▐ Improvement in asset efficiency- Strengthening accounts receivable management-- Receiving advances and intermediate payments,and others

98- Strengthening inventory management-- Promoting just-in-time delivery and shortening
waiting time

93
88

90
86

Impact of component
shortages, etc.

19/3
8

20/3

21/3

22/3

23/3

© NEC Networks & System Integration Corporation 2024

24/3

Improvement

96

Changes in CCC (Days)▐ Awareness reform- Inclusion in internal performance evaluation- Considering measures by holding workshops- Enhancing training, raising awarenessby using comic strips, etc.

(3) Portfolio Management
Optimizing the portfolio by screening businesses based on ROIC x future growth potentialHigh

Establishing hurdle rate by taking
capital costs into consideration

DXS

ROIC

Indicators that include capital efficiency
among factors

Progressive expansion

Consideration ofregrowth

NWSESS
Structuralreforms/withdrawals

LowLow

Growth in sales

Reinforcement ofprofitability

High

Indicators that include growth potential amongfactors
9© NEC Networks & System Integration Corporation 2024

Screening by business divisions, SBUs, andaffiliates constituting the segmentOptimizing and improving the portfolio

(4) Cash Allocation/Financial Leverage
Planning to provide shareholder returns exceeding the planned level. Proactively considering
investment in growth.
Period of the medium-term
management plan(¥ Bn.)

Raising the DOE level from the viewpoint of TSR(Cumulative total for FY23/3 to FY25/3)

Shareholder return

Operating CF

22.5

22.0
*

46.0

52.0
* Affected by a delay inprofit planning

Investment(Investment CF ... Normal/M&A,etc.)

43.5

50.0

(10.0 billionyen invested)

End of March 2022

Cash in hand balance80.0(Usageguide)

10

Value assumed underthe medium-term
management planxx.x

Ensuring security

60.0

60.0

Value assumed now

XX.XFunds© NEC Networks & System Integration Corporation 2024

Use

- 5.0%

5.3% (Starting in FY25/3)- Dividend planned to be increased for the 18th
consecutive fiscal year

Enhancing growth investment based onbusiness strategy- Invested in companies related to DX, local 5G, and carbon
neutrality- Also considering M&A proactively toward achieving
growth with effects of financial leverage(5) Expanding Non-financial Capital and Enhancing Constructive Dialogue
Strengthening activities for improving PER by reducing the cost of shareholders’ equity and increasing
the anticipated growth rate

Expanding non-financial capitalStrengthening constructive dialogue(Implementation of sustainability management)⚫ Issues- Development of highly skilled professionals
 Creating opportunities to gain practicalexperience (consulting/DX)- Improvement of engagement
 Activation of communication, dispersion of load,transfer of authorities, fair evaluation- Enhancing the capability of implementing
non-financial strategies
 Introducing non-financial indicators tocompensation for directors
11© NEC Networks & System Integration Corporation 2024

⚫ Enhancing information disclosure that
contributes to investment decisions(e.g. orders backlog by segment and gross margin to sales)-Reflecting discussions with analysts and institutional
investors-Driving visualization with data management in the future⚫ Holding briefings, etc. that will lead tounderstanding of our businessess

NEC Networks & System Integration Corporation will be committed to increasing
customer value by redesigning future communications from the user's perspective.

nesic12© NEC Networks & System Integration Corporation 2024Searchhttps://www.nesic.co.jp/english/ir/