Translation
Notice: This document is an excerpt translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy
between this translated document and the original Japanese document, the latter shall prevail.
Company name:
Stock exchange listing:
Representative:
Inquiries:

Denyo Co., Ltd.
Tokyo
President
Director & Managing Executive Officer
Chief Executive Administration Division

May 9, 2024
(Stock code: 6517)
Takanori Yoshinaga
Makoto Tanabe

TEL +81-3-6861-1111

Notice Regarding Formulating the Medium-term Management Plan
Denyo group, has established a new long-term vision for FY2035 and formulated a three-year medium-term
management "Denyo 2026", covering from the fiscal year ending March 31, 2025 to the fiscal year ending March
31,2027, and announced the plan here.
Description
Ⅰ. Long-term vision for FY2035
Endeavor to serve society through the provision of power sources to realize a sustainable society
and increase corporate value while addressing different issues regarding sustainability.
Targets for FY2035
A. Financial targets
Target for FY 2035
100.0 billion yen

Consolidated net sales
Ordinary income

12.0 billion yen(ordinary income margin: 12%)

8%

ROE

B. Non-financial targets
Item

Targets

33%

Decarbonized products
Reduction of Scope 1 and 2 emissions*1 50%

Percentage of female managers

*2

15%

*1 Applicable to the group companies in Japan, calculated using the emission intensity per unit ofconsolidated net sales.
*2 Applicable to Denyo Co., Ltd. only1

Ⅱ. Overview of Medium-term Management Plan “Denyo 2026”
A. Basic Policy
Invest in growth to realize the long-term vision which contributes to the prosperity of society
and push ahead with the construction of a management base.
B. Key Management Targets
1. Financial targets
Target for FY 2026
Consolidated net sales
Ordinary income
ROE

80.0 billion yen
8 billion yen(ordinary income margin 10%)
7%

Total payout ratio

Approximate 40%

2. Non-financial targets
Item

Targets
3.0 billion yen

Sales of decarbonized products

For details, please refer to the attached document.

End of Text

2

Medium-term Management Plan FY2024-FY2026

2026
Denyo Builds the Future with Technology

May 9, 2024
President Takanori Yoshinaga

All Rights Reserved. Copyright Denyo Co., Ltd.

Stock Code : 6517

New Medium-term Management Plan

Denyo2026(FY2024-FY2026)

All Rights Reserved. Copyright Denyo Co., Ltd.

1

Business Overview
As a pioneer in outdoor power sources, we supply engine-driven
generators, welders, compressors and other products to Japanand to at least 150 other countries and regions.
Engine generators

Engine welders• Engine-driven welders used
Featuresoutdoors

Applications• Used for welding steel materials in
piping, bridge, pipeline and otherconstruction work

Enginecompressors
1%
Engine welders
6%• These are generators that can betransported with trucks. As a kind of
portable power plant, they stably supply
Featureshigh quality electricity at any location.
• An extensive lineup of products with
outputs ranging from 1 kVA to 1,100 kVA

Others9%Engine compressors• Compressing air to supply
compressed air⚫ Mobile generators• Civil engineering, construction, port,
harbor and other worksites
Applications •Main business(products)⚫ Stationary power generators

Features • Allowing air tools to be used in any

place since they require no powersource• Rock drills and machinery for soil
improvement
Applications

Enginegenerators
84%• General-use and standby generators installedon the rooftops of buildings and in basements

Features • Manufacturing and sales of standby generators
used as backup power sources mainly in theevent of a power failure• Used in spray concrete work
Company
name• Generators for disaster resilience
Installed in department stores, hotels andother buildings where the general publicgathers and used as backup power sources forsprinklers and other fire-fighting equipment

Denyo Co.,Ltd.
Applications

Establishment

July 1948

Number of596 (1,408) as of March 31,
employees
2024(consolidated)
All Rights Reserved. Copyright Denyo Co., Ltd.

Outdoor events• Broadcasting trucks and many othersituations• Generators for non-disaster power
failures
Installed in office buildings, factories,
hospitals and other facilities and used as
backup power sources for electric equipment2External Environment (Market Needs)
The need for the stable supply of electricity to various devices is increasing
on many different worksites around the world in environments ranging fromdeserts to very cold regions.
External
environment

Deterioration of
aging urban
infrastructure indeveloped countries

Progress in theurbanization of
emerging countries

Social issues we
can help resolve

Increase in
infrastructurereconstruction indeveloped countries

Increase in
infrastructure
construction in
emerging countries

Climate change
and natural
disasters

Increase in resource
development work

Ubiquitization ofelectric vehicles(EVs)

Ongoing shift to
information andcommunication
technologies (ICT)

Increase in demand for backup powersources (for factories, hospitals, mobile
phone base stations, data centers,
evacuation centers and other facilities)
following an increase in electricity demandContribution to the prosperity of society through the provisionof power sources
Product strengths

High quality
High durability
Low noise
Low gas emissions

Brand power

Mobile engine
generator

All Rights Reserved. Copyright Denyo Co., Ltd.

Engine welder

Engine compressor

Backup power source

3External Environment (Changes in Market Environment)

We are conducting multi-faceted research and development
based on many different simulations to address the risks
involved in the shift to a decarbonized society.
Addressing the risks involved in
the shift to a decarbonized society
Research and development of battery
products and innovative products

Research and development of
products whose features are better
than the features of existing products

Engine generator, welder and compressor

Backpack-type Battery
battery welder floodlight

Dedicated
Hydrogen
Generator

Fuel-cell
mobilegenerator

Small generators and welders

Medium-sized and large
generators and welders

Shift to battery-poweredmodels

Shift to hydrogen fuelproducts

Support for biofuels
and synthetic fuels

We have skills, experience and a track record in meeting the wide-ranging needs

Our strengthsof customers and workers for at least 70 years since our foundation as a pioneerin the field of outdoor power sources.

All Rights Reserved. Copyright Denyo Co., Ltd.

4

VisionLong-term vision for
FY2035 established.
Contribution to the prosperity ofsociety through the provision of safe
and secure power sources based on
the benefits for three parties
principle.

Management
Philosophy

Management
Vision• Aim to be the global No. 1 brand of high•quality
創造力と不断の技術革新を通じて、高品質
power sources with creativity andパワーソースのトップランナー（グローバル
constant
technological innovation

No1ブランド）を目指す• Aim
to be a vital organization in which
every
employee strives for self• 社員一人ひとりが自らを高め、責任を持っ
improvement and acts responsibly.
て行動する活性化組織を目指す

Long-term vision
for FY2035
Endeavor to serve society through the provisionof power sources to realize a sustainable society
and increase corporate value while addressing
different issues regarding sustainability

Financial • Consolidated net sales: 100.0
billion yen
targets• Ordinary income: 12.0 billion yen(ordinary income margin: 12%)• ROE: 8%• Decarbonized products: 33%
Nonfinancial • Reduction of Scope 1 and 2
emissions: 50%
targets• Percentage of female
managers: 15%

Medium-term Management Plan
「Denyo2026」
Invest in growth to realize the long-term vision which contributes to the prosperityof society and push ahead with the construction of a management baseQualitative target

Quantitative targets

Strive to preserve the global environmentin accordance with the Basic Policy on
Sustainability and carry out sincere andfair business activities to achieve
management that earns the trust ofsociety for the long term

• Consolidated net• Total payout ratio:
sales: 80.0 billion yen
Approximately 40%• ordinary income• Sales of decarbonizedmargin: 10%
products: 3.0 billion yen• ROE : 7%

Business strategies
Core areas

All Rights Reserved. Copyright Denyo Co., Ltd.

Growth areas

Areas in which we willtake on new challenges

Increasingorganizational capacity5Position of Medium-term Management Plan Denyo 2026
Strengthen investments for growth and our management baseand carry out measures in different areas steadily with a view
towards the long-term vision for FY2035
Long-term vision

2026 Four categories of initiatives
Core
areas

Areas where we should secure stable profit

Target for
FY2035
Consolidated net sales:

100.0 billion yen
Growthareas

Areas that will grow as an extension of existing
markets and products and where we aim to increase
profit from a short- and medium-term perspective

Ordinary income:12.0 billion yen
ROE:

Areas in which
we will take on
new challenges

Increasingorganizational
capacity

８%

Untapped markets in the global south and areas
where we will aim to grow leveraging innovative
products and where we aim to increase profit froma long-term perspective

Area where we will improve production anddevelopment functions and human resources andinformation systems that support continuous growth

All Rights Reserved. Copyright Denyo Co., Ltd.

Maintain continuous growth to build
a profit base for reaching the next stage

6

Our Market Shares and Growth Strategies
We will inject funds gained in core areas into our growth areas and areasin which we will take on new challenges to foster businesses which canbe expected to grow stably.
High

Innovative products

Untapped markets in
the global south

Accelerationof growthAsiaregionMarket growth rate

Other
regions

Inject funds
for growthNorth
AmericaregionCompressors in Japan

Stationary
generators
in Japan

Welders in Japan
Market share in
Japan：70％

Market share in Japan：55％

Market share in Japan：24％

Low

Mobileenginegenerators
in JapanMarket share

Low
Core areas

Growth areas

High

Areas in which we will take on new challenges※Size of each circle indicates the scale of sales. (Image)※The market shares represent five-year averages based on data collectedby Denyo Co., Ltd. The share of the stationary generator market in Japanis the share of the generators for the disaster resilience market.

All Rights Reserved. Copyright Denyo Co., Ltd.

7

Business Strategies
Construction-related
markets in Japan(mobile generators, welders
and compressors)

Core Areas

Maintain and increase the market shares held by top-brandproducts such as mobile engine generators, welders andother products in the Japanese market to secure stable profit.

Develop and introduce new products to increase market share as well as the number of customers.
Enhance the education system to increase sales strength.
Enrich the service structure continually using the large repair base in East Japan and another base inWest Japan which will begin operating in January 2025.

Leading market share
Share of the mobile engine
generator market in Japan

Share of the engine weldermarket in Japan

Investment in constructionin Japantrillion yen

Investment in construction in
Japan
70
69
68
66
62

60.0

70％

55％
0.0
FY2019 FY2020 FY2021 FY2022 FY2023(Estimate)※Five-year averages based on data collected by Denyo Co., Ltd.

(Estimate)(Estimate)

Source: Ministry of Land, Infrastructure, Transport and Tourism:
Estimate of Construction Investment FY2023

Ensuring stable earnings
All Rights Reserved. Copyright Denyo Co., Ltd.

8

Business Strategies
Stationary generator
market in Japan

Growth Areas

Seek to increase our market share mainly in emergency
generators.

Production capacity:
Approx. 30% increase

Step up collaboration between the threegroup companies in Japan
Maximize the investment effect of the
Nishihatsu’s new head office plant,scheduled to come into operation in thesecond half of FY2024 to manufacture andsell generators for disaster resilience

New head office plantof Nishihatsu Co., Ltd.

Overseas markets

Generators fordisaster resilience

Increase profit in maintenance

Enhance and expand the overseas sales and service networks
to disseminate the Denyo brand.
miillion yen

Overseas markets
Breakdown of sales by region

40,000Cultivate markets deeply with existingproducts.
Promote sales of newly developed products inexisting markets to cultivate these markets.

30,00020,000Strengthen the sales and service network in
Asia, in the Middle East and elsewhere to
respond to new needs.

10,0000
FY2023

America

All Rights Reserved. Copyright Denyo Co., Ltd.

FY2026Asia

Others9

Business Strategies
Untapped markets
in the global south

Areas in Which We Will
Take on New Challenges

Enter untapped regions that are expected to grow.
Conduct research and studies with aview toward expanding into untapped
regions.

Discuss the region to expand into andthe form of the expansion including
M&A.

Innovative products

Aim to implement innovative products in society(Hydrogen mixed combustion
generators, Fuel cell mobile
generators, and Others)
million yen

Trend in sales ofdecarbonized products

3,000
2,500

target3.0 billion+ inovative
products

2,000

Continue and accelerate developmentof innovative products.
Prepare sales, service and production
structures

1,500
1,000
500
0

Hydrogen mixed
combustion generators

Boom lifts
Battery floodlights

All Rights Reserved. Copyright Denyo Co., Ltd.

Battery welders

10Business Strategies
Development andproduction

Increasing Organizational
Capacity

Build a structure for stable production
Quickly create products that meet customers’ requests.
Introduce machinery and automation in the production process.
Improve the environment of the manufacturing workplaces andtake BCP measures.

IT system

Construct systems that achieve both enhanced
productivity and efficiency and security.
Improve and construct core systems.
Strengthen information security and BCP measures.

Human resources

Create a structure which enables the careeradvancement of diverse human resources
Advance the human resources development program.
Improve the workplace environment, including renovation andconstruction to replace aging office buildings or relocate fromthem.

All Rights Reserved. Copyright Denyo Co., Ltd.

11

Key Management Targets
Non-financial targets are clearly defined as constituent key managementtargets and the total payout ratio target is added to the financial targets.
Financial targets

Non-financial targets

1

Consolidated
Net Sales Plan

８０.0 billion yen

1

Sales of decarbonizedproducts

３.0 billion yen

2Ordinary
income8.0 billion yen

2

SCOPE１,２

５０％ reduction

3

ＲＯＥ

7.0％

3

Percentage offemale managers

１５％

4

Total payout
ratio

Approximately ４０％(ordinary income margin:

10.0% )

Consolidated
Net Sales

73,140

Sales of decarbonizedproducts

Medium-termManagement Plan
FY202680,000Ordinary
income

7,378

8,000

ROE

7.3％

7.0％

Total payout
ratio

25.9％

40.0％

Value or percent
change6,860
622

1.5 billion yen

Percentage of female
managers

billion yen

15％

３.0

increase

15％ or morebillion yen

1.5

2.4％

FY2023

All Rights Reserved. Copyright Denyo Co., Ltd.

*2

*1 A target of the long-term vision for FY2035 applicableto the group companies in Japan, calculated using theemission intensity per unit of consolidated net sales.
*2 A target of the long-term vision for FY2035
applicable to Denyo Co., Ltd. only

unit：million yen

FY2023
results*1

FY2026FY2023

FY2035

14.1％
12

Breakdown of Consolidated Net Sales Target
By productBy region
unit：million yen

unit：million yen

FY2023

FY2026（Results）（Targets）

Value
ChangePercent
ChangeFY2023

FY2026（Results）（Targets）

Value
ChangePercent
ChangeGenerators

61,48766,500+5,013+8.2%

Domestic Sales

38,38941,900+3,511+9.1%

Welders

4,437

5,500

+1,063+24.0%

North/Central
America

25,23026,500+1,270+5.0%Compressors

693

1,000

+307

+44.3%

Asia

6,642

7,700

+1,058+15.9%

Others*

6,521

7,000

+479

+7.3%

Others*

2,877

3,900

+1,023+35.6%

Total

73,14080,000+6,860

+9.4%

Total

73,14080,000+6,860+9.4%*Others refers to Europe, theMiddle East and other regions.

*Others refers to components,
boom lifts and other products.

unit：million yen

unit：million yen⚫ Generators

66,500⚫ Welders

5,500

4,437

61,487

FY2023

41,900⚫ North/Central
America

26,50025,23038,389FY2024FY2025

FY2026⚫ Compressors

FY2023

FY2024FY2025

FY20261,000

FY2025

FY2026FY2024FY2025

FY20267,700

FY2023

FY2024FY2025

FY20233,900

FY2025

FY2026Introduce new products and carry out effective
sales activities to expand sales of generators,
welders and other products.

All Rights Reserved. Copyright Denyo Co., Ltd.

2,877

6,642

FY2024FY2023

FY2026⚫ Others

7,000
6,521

FY2024FY2023⚫ Asia⚫ Others

693

FY2023⚫ Domestic Sales

FY2024FY2025

FY2026FY2023

FY2024FY2025

FY2026

In Japan, increase sales of stationary
generators and innovative products.
Overseas, step up marketing and enhance andexpand the sales and service networks toincrease sales.
13Actions to Implement Management Conscious of the Costof Capital and Stock Price (Analysis)Price book-value ratio (PBR) remains below 1 due to the stagnationof capital profitability.
Trends in PBR and ROE
in the past ten years

PBR

Capitalprofitability

Marketassessment

ROE：5.7 ％(March 2023 results)

PBR：0.66x

1

10
Cost of shareholders’ equity is assumed
to be in the range of 6.5% to 7.0%.

0.8

8

0.6

6

0.4

4

0.2

2

0

0

PBR

IssuesROE

ROE

Cost of shareholders’ equity⚫ An imbalance between the increase in shareholders’ equity
and profit growth affects capital profitability.
⚫ It is necessary to increase ROE in order to improve the PBR.

All Rights Reserved. Copyright Denyo Co., Ltd.

14

Actions to Implement Management Conscious of the Costof Capital and Stock Price (Strategies)

Carry out growth strategies and address financial strategies
with a view toward increasing ROE.
⚫ Accelerate expansion in overseas markets while stably profiting in theJapanese market in the core areas

Growthstrategies⚫ Develop and promote sales of innovative products and other products⚫ Increase profitability by introducing machinery and automation in the
production process⚫ Maximize the investment effect of the Nishihatsu’s new head office plant

Financialstrategies⚫ Strengthen shareholder returns
Return profit at an approximate total payout ratio of 40% by flexibly
acquiring treasury shares in accordance with our progressive dividend policy⚫ Reduce cross-shareholdings
At least 3 stocks, during the period of this medium-term management Plan

(As of the end of March 2024, we owned 28 listed stocks.)

All Rights Reserved. Copyright Denyo Co., Ltd.

15

Cash Allocation in the Three Years of the Medium-termManagement Plan
We will proactively invest in growth and implement shareholder return using thetotal cash flow from operating activities and cash on hand in the three years of
the Medium-term Management Plan.
Reduce cross-shareholdings
・Borrowing etc 15.0 billion

CapitalInvestment

Cash flows
fromoperating
Activities

15.0 billion

21.0 billion

3.0 billion

R&D
investment

M&A

5.0 billion
Shareholder
returns

6.5 billion
Cash on hand

24.0 billion
Cash on hand

17.0 billion

Investments andshareholder returns
Growthinvestments
Capital investment

Shareholder
returns(at an approximate total
payout ratio of 40%)

Dividend

We are planning to build a new plant,
open a service base and invest in therationalization of production facilities.

Based on the continuation of
the progressive dividend policy,
we will allocate results in overall
consideration of performance,
the payout ratio and other factors.

R&D investment

Acquisition of treasury shares

3.0 billion yen

We will acquire treasury sharesin consideration of liquidity.

15.0 billion yen

M&A

5.0 billion yen＊Cash flows from operating activities are calculated using this formula: Operating
income (added with investments in research and development) + Non-operating
income or loss - Income taxes + Depreciation +/- Increase or decrease in working
capitalAll Rights Reserved. Copyright Denyo Co., Ltd.

16

Capital Investment and R&D Investment
Capital investment

R&D investment

We will invest capital mainly in bases in Japan
with a view toward building a foundation forcontinuous growth.

Research and develop products that employ
new technologies, products that answer market
needs and innovative products

Active capital investment
Construction of a new head office plant of Nishihatsu Co.,
Ltd. a subsidiary of Denyo
Investments in increasing production capacity and therationalization of the Fukui Plant and other investments
Construction of a service base in West Japan

Fuel Cell
Power Vehicles

Fuel-cell mobile
generator

Investment in information systems

Capital investment results
and plans

Denyo2023

1st year

Denyo2026

2nd year

3rd year

All Rights Reserved. Copyright Denyo Co., Ltd.

3,000

million yen

Completion of Nishihatsu’s
new head office plant isscheduled in FY2024.

6,950

Hydrogen mixed
combustion
generators

R&D investment results and plans

15,000

million yen

Dedicatedhydrogengenerator

1,850

Denyo2023
Concept drawing of theservice base in West Japan

1st year

Denyo2026

2nd year

3rd year17

Shareholder Returns Policy
We are aware that it is important to increase the profit returned to shareholders while
investing in research and development and investing capital to maintain and increase
product competitiveness as well as striving to improve earning strength and financial
strength. We will continue our progressive dividend policy and flexibly acquire treasury
shares to allocate results at an approximate total payout ratio of 40%.

Trends in annual dividend per share,
payout ratio and total payout ratio

yen
90
60.0%

80
70
60
50

31.6%

30.8%

25.4%

22.9%

14.5%
20.4%

20
14.5%

14.8%

14.5%

15.6%

18

22

24

28

35.6%

30.8%

20.4%

30

25.9%
28.5%

28.0%
23.7%

22.4%

Approximately40%

32.2%

30.4%

40
23.5%

Total payout ratio

44.9%

43.8%

25.9%

25.4%

10
30

30

40

42

46

47

47

50

64

0
FY2011FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026

dividend per share

All Rights Reserved. Copyright Denyo Co., Ltd.

payout ratio

total payout ratio

18

Previous Medium-term Management Plan

Summary of Review of Denyo 2023
(FY2021–FY2023)

All Rights Reserved. Copyright Denyo Co., Ltd.

19

Review of Denyo 2023
Summary of results

Consolidated net
sales target achieved

unit：million yen

Sector
73,140Ordinary income:6.2 billion yen
10.1%

10.3
%

40,000

8.1%
7.4%

7.3%

7.3%

Shipments of mainstay mobile
generators remained high. However,some action will be needed for somemodels.

Ordinary income:marginStrategies
in thedomestic
market

○10.0％ or more

ROE:6.5％
Overseas sales grew mainly in the
United States amid the weakening of
the yen.

5.7%

Strategies
in overseas
markets

4.6%◎

FY2019 FY2020 FY2021 FY2022 FY2023
ordinary income margin

ROE

During the period of the plan, the circumstances weredifficult as raw materials prices rose due to the COVID19 pandemic and there were restraints on supply
following shortages of components. In response, wetransferred the increased costs to the selling prices,
exchanged materials between group companies andprovided support for production. The net sales andordinary income and ROE targets were exceeded.

All Rights Reserved. Copyright Denyo Co., Ltd.

Activities for the development of new
products for overseas and thestrengthening of the sales networks inindividual countries advanced.
In the future, we should carry out sales
activities for new products and enhance
the after-sales service network.

0

Consolidated net sales

There was some progress in thedevelopment of the education systemfor emergency generators.
The large repair base in East Japanbegan operating and the construction ofa large repair base in West Japan began.

6.7%
20,000

Achievements and issues

Targets

61.0 billion yen +α

55,006 55,168
9.9%

Assessment

Consolidated net
sales:

64,31162,88760,000

Summary by sector

Reinforcing
theoperatingfoundations○

Hydrogen mixed combustion generators
were released.
Good progress was made in thedevelopment of other innovative
products. Improvement of the sales,
service and production structures is an
issue to be addressed in the future.
Construction of Nishihatsu’s new head
office plant for generators for disaster
resilience began. It is scheduled to start
operating in the second half of FY2024.

20

Review of Denyo 2023
Review by productSummary by region

unit：million yen

unit：million yen

80,00073,14064,31162,88755,00660,00080,00073,14064,31162,88755,16855,006 55,168

60,00040,00040,00020,00020,0000

0FY2019FY2020

FY2021

FY2022

FY2023

FY2019FY2020

FY2021

FY2022

FY2023*Others refers to components, boom lifts and other products.

Domestic Sales
North/Central America
Asia
Others**Others refers to Europe, the Middle East and other regions.

Regarding generators, sales, chiefly of large models,
were solid in Japan. In the US market there was a
massive leap forward which helped us surpass ourtarget.

In Japan, although the shortage of parts disrupted
the production of some products such as welders,mobile generators grew on the back of solid
construction demand, and the target was achieved.

Brisk sales of boom lifts and other products wereachieved while sales of welders and compressors
were weak.

Sales to overseas markets increased significantly as
we captured the expansion of demand in the US
rental market.

Generators

Welders

Compressors

All Rights Reserved. Copyright Denyo Co., Ltd.

Others*21

Notes on Our Outlook
This material contains assumptions and outlooks for the
future and forecasts based on plans as May 9, 2024.
Actual results may differ materially from projected values
due to future economic changes and competition.

This material is prepared for the purpose of providing
information and is not meant to solicit investment insecurities issued by the Company.
Investors are responsible for making their own final
investment decision.

Notice: This document is an excerpt translation of the original Japanese document and is
only for reference purposes. In the event of any discrepancy between thistranslated document and the original Japanese document, the latter shall prevail.

All Rights Reserved. Copyright Denyo Co., Ltd.

22