Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Responses toward realization of management consciousof capital costs and stock prices
Based on the issues we identified in our analysis of the current situation, we aim to achieve a PBR of 1.0x or more by 2027
through the steady implementation of a host of measures under Project Z and by bolstering IR activities and ESG initiatives.

Key analysis results and direction of improvement
Perspectives of current analysis

Profitability

Consolidated operating margin

5% or more

Vision for 2027

8% or more
ROE

Toward realization ofmanagement conscious ofcapital costs andstock prices

ROEPBR

1.0x or more

Key analysis results● Net profit margin and operating margin are low compared with othercompanies and have not satisfied investors’ expectations● Failed to generate return on capital surpassing investors’ anticipatedcost of equity

Asset
efficiency
Capitalstrategies
including( financialleverage )2% or more

PBR
Growthpotential

compared with other companies, progress in sales and profits has been
limited, keeping the non-current asset turnover ratio low.
● Inventory turnover period is lengthening compared with other companies● The ratio of overseas net sales to total sales is inferior to that of other companies● Shareholder returns such as dividend payout ratio are low compared with othercompanies

Changes in PBR, ROE, and PER over time (current analysis)

PER

Our PBR has remained below 1.0x, standing at 0.34x as of December 31, 2023. We broke down PBR into its component parts, ROE and PER, andorganized the factors for each of these indicators through comparison with other companies in the same industry over time and the gathering ofopinions from investors connected with the company.

Information
disclosure/
dialogue● Inadequate disclosure of profitability and strength differences between

domestic and overseas operations● Significant differences between plans and actual results negatively impact

plan credibility● Governance (oversight function) needs reinforcement❶ ROE
Based on changes in ROE over time, the Company failed to reach the target figure of 8% set forth in the Mid-term Management Plan. We havedetermined that this was due to the low net income margin and low total asset turnover ratio. Our view is that the net income margin is affectedby the profit margin and selling, general and administrative expenses ratio for each product, while the total asset turnover ratio is impacted byfactors such as inventory volume and facility utilization rate. The understanding of our institutional investors with whom we have daily contact isthat our cost of equity is generally around 8%.

❷ PER
Our PER has been less than 10x since 2020. We view this as being attributable to a dearth of information disclosure regarding factors such as
growth, strengths, and profitability, as well as a discrepancy between plans and actual results.

1.0

5%

4.2%
1.6%

6.2%

5.1%

1.1%

0%

Accelerate the upgrading of profit management and1│ Improvement of profitability2

P31–32
We will improve profitability and asset efficiency to generate−8.8%
2017/122018/122019/122020/122021/122022/12

40.0

22.9

0.0
2019/122020/122021/122022/122023/12

−20.0

4│

32.6

20.0

ISEKI Report 2024

3│ Cash allocation for growth

operating cash flows. We will invest this cash in structuralreforms and growth, return profits to shareholders, andreduce interest-bearing debt.

52.2

60.0

29

2023/12841.50.34x

2018/12

investment decisions based on hurdle rates and inventory
reduction.

PER (times)

2017/12

P25–28We will endeavor to improve asset efficiency by making│ Asset efficiency

0.0%

0.50.0

implement fundamental structural reforms and growthstrategies through Project Z to enhance profitability.

−5%
−10%

Bolstering ofIR activitiesand ESG
initiatives

Toward improving PBR

ROE (%)
ROE target for 2025 (final year of the Mid-term Management Plan): 8%.

Cashallocation
for growthfinancial soundness● Inadequate disclosure of action targets to achieve management objectives

Capital cost

Assetefficiency● Sales and profit growth rates are low compared with other companies● Debt redemption period is long, requires attention from the perspective of10%

Improvementofprofitability● While the share of operating cash flows allocated to investment is highDOE

PBR (times)

Direction ofimprovement

9.8

6.4

2021/122022/12

Bolstering of IR activities
and ESG initiatives

We will upgrade and augment activities toward promoting
understanding of our growth strategies and lowering theP77–78

cost of capital.

−5.5
2017/122018/122019/122020/122023/12

ISEKI Report 202430