Note: This document is a translation of the original Japanese version and provided for reference purposes only.
In the event of any discrepancy between the Japanese original and this English translation, the Japanese original
shall prevail.

November 30, 2023

Company: TODA CORPORATION
Representative: Seisuke Otani, President and Representative Director(Securities Code: 1860 TSE Prime Market)
Contact: Toshiyuki Kubodera, General Manager, Financial & IR Div.
(Phone: 03-3535-1357)

Action to Implement Management that is Conscious of Cost of Capital and Stock PriceTODA CORPORATION hereby announces that it has set out today the action to implement management thatis conscious of cost of capital and stock price.
1. Recognition of Current Situation
We believe it is necessary not only to strengthen our core business, but also to invest in new businessareas in order to enhance our corporate value over the medium- to long-term.

To achieve our target

earnings of ROE of 8% or more, we are strengthening our business portfolio through investments in growthand intangible assets and promoting the appropriate allocation of capital.
However, our ROE for the past three years has not exceeded 8% and the stock price at the end ofNovember was ¥844.3, with PBR of less than 1x.
We understand that the recent decline in ROE is mainly due to a temporary decrease in profits causedby soaring construction material prices. Furthermore, we also recognize that PBR of less than 1x waspartly due to insufficient explanations to investors regarding the business validity of the growth strategy
and efforts to improve capital efficiency.
Fiscal year ending
Net sales
Net income
Net income margin on sales
Asset turnoverROEStock priceNet assets per share
PBR¥ mil¥ mil%
ratio%
¥¥
times

March
2019
510,436
25,595
5.0
0.83
10.0
680
868.13
0.78

March
2020
518,683
25,845
5.0
0.80
9.6
629
883.35
0.71

March
2021
507,134
19,735
3.9
0.74
6.8
811
1,011.02
0.80

March
2022
501,50918,560
3.7
0.67
5.9
741
1,027.12
0.72

March
2023
547,155
10,995
2.0
0.69
3.5
691
1,023.64
0.67

2. Policy for Improvement
Based on the recognition of the current situation, we will work to improve PBR, aiming for ROIC of
5% or more and ROE of 8% or more by securing earnings in the core construction business, improving
capital efficiency through reallocation of assets and sales of cross-shareholdings, enhancing shareholder
returns, and strengthening IR activities.
Progress will be verified and disclosed annually.
3. Specific Initiatives(1) Pursuing growth and earning power Growth strategy and strategic investments to enhance corporate value Promotion of business portfolio management
 Business management using ROIC by segment as an internal indicator(2)

Improvement of capital efficiency
 Improvement of capital efficiency through reallocation of real estate assets etc (utilization ofprivate placement funds)
 Sales of cross-shareholdings (Medium-Term Management Plan target: more than ¥10 bil peryear)(3)

Optimal capital structure Maintain investment grade rating based on financial discipline (Medium-Term Management
Plan target: D/E ratio of 0.8x or less)(4)

Stable and continuous shareholder returns
 Implementation of stable shareholder returns (Medium-Term Management Plan target: DOE of
2.5% or more and Total Return Ratio of 40% or more) Timely and appropriate acquisition of own shares in a flexible manner(5)

Initiatives to enhance stakeholder satisfaction
 Proactive dialogue with investors etc (more than 60 meetings per year) Enhancing disclosure and communication to customers, partner companies, shareholders/investors, and employeesEndAction to Implement Management that is
Conscious of Cost of Capital and Stock Price

November 30, 2023
TODA CORPORATION
1Enhancing Our Corporate Value
Medium- to long-term growth strategies improve stakeholder value
Investment for further growth
to enhance corporate value
OptimalcapitalstructureCashgeneration
Growth andearning power/
Capitalefficiency
Shareholder returns

Investors

2

Recognition of Current Situation
PBR below 1x due to decline in capital efficiency (ROE)PBR (times)

Price Book-value Ratio

PBR ＝ PER × ROE
PBR1.0x(Forecast)

0.80

0.78

0.79

Fiscal year end
stock price（¥）
680

629

18190.67 （Stock priceas of end Sept）

20

6.8%

ROE

Return On Equity
195.9%
3.5%

20212223 （FY）

ROE＝Net income for the fiscal year ÷ Shareholders’ equity (Average at the beginning and end of fiscal year)* BS items in FY23 forecast use figures at the end of the previous fiscal year.

0.72

811(Forecast)

6.1%

180.71

9.6%

10.0%

741

691

2122

PBR＝Fiscal year end stock price（adjusted）÷ Net assets per share(Net assets and total number of shares used are those at the end of the fiscal year.)* FY23 forecast is based on the stock price as of end Sept 2023.
BS items in FY23 forecast use figures at the end of the previous fiscal year.

810

23（FY）

PER（times） 12.60

Ref.
Average of 83 construction
companies listed on TSE
Prime Market (Sept 2023)
Average PER 15.0x
Weighted PER 12.8x

19.39

Price Earnings Ratio

8.15 7.46
1819

12.81

12.26
2021（Forecast)

22

PER＝ Fiscal year end stock price（adjusted) ÷ Net income per share(Total number of shares is the average during the fiscal year excluding own shares.)* BS items in FY23 forecast use figures at the end of the previous fiscal year.

23（FY）

3

Estimation of Cost of Capital
Cost of shareholders' equity estimated at around 8.0%, weighted average
cost of capital (WACC) at around 4.5%. Continuously aim for ROE 8.0%+
and ROIC 5.0%+ through capital efficiency-conscious management.
ROIC

ROE

Return on Invested Capital

Return On Equity（in medium-term）

9.6%

10.0%

ROE
8.0%+

（in medium-term）

6.3%

6.7%

ROIC
5.0%+（Forecast）

6.1%

5.9%

1920

21

22

3.5%

Estimation by
CAPM method/
inverse of PER

3.5%
18

4.6%

※The cost ofshareholders' equity
is recognized to bearound 8.0%.

6.8%※WACC is recognizedto be around 4.5%.

23 （FY）

ROE＝Net income for the fiscal year ÷ Shareholders’ equity(Average at the beginning and end of fiscal year.)* BS items in FY23 forecast use figures at the end of the previous fiscal year.

1.9%
18192021222.1%（Forecast）

23 （FY）

ROIC = Operating income after tax ÷ Invested capital (interest-bearing debt + shareholders’ equity)* Invested capital is calculated as the average at the beginning and end of fiscal year, and theeffective tax rate is assumed to be 30.5%.

4Analysis of Current Situation

ROE enhancement requires pursuit of growth and earning power andimprovement of capital efficiency
Net incomeon salesNet income margin on sales
5.0%

5.0%

（Forecast）

3.9%

Net income
Net sales

3.7%

3.6%
2.0%

Pursuit of growthand earning power
FY18
FY22
5.0% → 2.0％

×
ROE

Return On Equity

Asset turnover

Asset turnover ratio (x)

0.83

0.80

Net sales
Total assets（Forecast）
0.74

×Financialleverage
Total assets
Shareholders’ equity

0.67

0.69

（Forecast）

Financial leverage (x)
2.40

2.43

1819

2.36

2.39

20

210.66

2.57

2.572223（FY）

Improvement ofcapital efficiency
FY180.83 →FY220.69

Optimalcapital structure
FY18FY222.40x → 2.57x* Net sales and net income in FY23 forecast are based on disclosed figures. Total assets and shareholders’ equity use figures as of the end of the previous fiscal year.

5Policy to Improve Return on Capital and Market Valuation
Aim to secure profitability in construction business, and improve capital efficiency throughsales of cross-shareholdings and use of private placement funds
Key points for improvement

Optimalcapital structure

Initiatives toenhance stakeholdersatisfaction

 Implementation of stable shareholder returns (Medium-Term Management Plantarget: DOE of 2.5% or more and Total Return Ratio of 40% or more) Timely and appropriate acquisition of own shares in a flexible manner Proactive dialogue with investors etc (60+ meetings per year) Enhancing disclosure and communication to customers, partner companies,
shareholders/investors, and employees

Improvement ofPER

Stable andcontinuous
shareholder returns

 Maintain investment grade rating based on financial discipline(Medium-Term Management Plan target: D/E ratio of 0.8x or less)Improvement of PBR

Improvement ofcapital efficiency

 Growth strategy and strategic investments to enhance corporate value Improvement of capital efficiency through reallocation of real estate assets etc(use of private placement funds etc)
(Sales of assets held: Medium-Term Management Plan target: ¥67 bil / 3 years)
 Sales of cross-shareholdings (Medium-Term Management Plan target: more than
¥10 bil per year) Promotion of business portfolio management
 Business management using ROIC by segment as an internal indicator

Improvement

Improvement of ROEPursuing growthand earning power

Policy and indicators

6

Internal Management using ROIC Reverse Tree
KSF（Key Successful Factors）
Orders• Selection and concentration of projects• Understanding customer needs and improving thevalue provided to customers

KPI
Construction orders received

Decomposition
Net sales

Customer satisfaction

Operatingincome（Operating income ratio）

Completed construction
contracts

Pursuing growthand earning power
Improvement

ofcapital
efficiency

Medium- toLong-term
Enhancement ofCorporate Value

Construction
capacity• Securing construction personnel and improving capacity• Strengthening supply chain• Production technology development• Expanding the use of BIM/CIM

Investment
anddevelopment• Securing real estate rental income• Securing real estate sales income• Evaluation of business using IRR etc

Construction
revenue• Ensure appropriate profits when receiving orders• Strengthening supply chain• VE/CD activities• Efforts to improve productivity• Promotion of front-loading

SG&A and
R&D
expenses• Reduction of redundant expenses• Technology development, CVC investment etc leading
to competitive advantage

Capitalefficiency• Optimization of payment terms• Effective use of business assets• Effective use/replacement of real estate, use of private
placement funds• Sales of cross-shareholdings

Income and expenses ofconstruction• Human capital investment, digital transformation
investment etc to improve corporate competitiveness• Addressing environmental, social and governanceissues (ESG etc)
• Quality and safety initiatives

CO2 reduction ratio

Brandvalue

Operating income
Net sales

Completed construction
contracts per capita

ROE
ROIC
Operating income
after tax
Interest-bearing debt
+ shareholders' equity

Net sales of investment anddevelopment business
Investment and development
business profit

Gross profit

Gross profit margin at time ofestimation
Gross profit margin ratio

SG&A ratio
Technology development
investment

Investments and sales

General andadministrative
expensesFinancial capital
Working capital turnover
Fixed capital turnover

Cross-shareholdings

Labor productivity perhour
Total accident frequency
rate/Accident frequency rate

Non-financial
capitalFactors contributing tomedium- to long-termcompetitive advantage

Investedcapital(Invested capitalturnover ratio/ days)
Net sales
Invested capital

Effective tax rate

7