COMPANY RESEARCH AND ANALYSIS REPORTNPR-RIKEN CORPORATION
6209
Tokyo Stock Exchange Prime Market

20-Aug.-2024
FISCO Ltd. Analyst

Masanobu Mizuta

FISCO Ltd.
https://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Developing the Automobile and Industrial Machinery Parts Business and Piping Products Business. ........

01

2. In FY3/24, effectively large gains in sales and profit.....................................................................................

01

3. For FY3/25, expects small decline in profit, but it may exceed the forecast. ...............................................

02

4. Aiming for ROE above shareholder capital costs. ........................................................................................

02

5. Expect full-fledged synergies.......................................................................................................................

02■Company overview--------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Company overview................................ ......................................................................................................

03

2. History................................................... ......................................................................................................

04■Business summary--------------------------------------------------------------------------------------------------------------------------------------------------- 06
1. Business summary. . ............................... ......................................................................................................

06

2. Characteristics and strengths......................................................................................................................

07

3. Risk factors and measures. . .........................................................................................................................

08■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 09
1. Outline of results for FY3/24........................................................................................................................

09

2. Financial condition................................. ......................................................................................................

11■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 12• FY3/25 consolidated results outlook...... ......................................................................................................

12■Growth strategy----------------------------------------------------------------------------------------------------------------------------------------------------------- 14
1. Market environment.....................................................................................................................................

14

2. 1st midterm management plan (FY2024 to FY2026). ...................................................................................

15

3. Business strategy.. .......................................................................................................................................

16

4. Shareholder return policy....................... ......................................................................................................

19

5. Sustainability management..........................................................................................................................

21

6. FISCO’s view.. ........................................ ......................................................................................................

21

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/■ SummaryHolding company that integrates the managements of RIKEN and
Nippon Piston Ring. In FY3/24, finished with effectively large gains insales and profit
NPR-RIKEN CORPORATION <6209> (the “Company”) is a holding company established through a management
merger on October 2, 2023 between major piston ring companies RIKEN CORPORATION and Nippon Piston Ring
Co., Ltd. (hereinafter “NPR”). The Company will pursue synergies under an integrated governance while leveraging
the long-cultivated brands of both companies, aiming for sustained growth and to raise corporate value.
1. Developing the Automobile and Industrial Machinery Parts Business and Piping Products Business
The Company’s segments are the Automobile and Industrial Machinery Parts Business, Piping Products Business,
and Other Business (thermal engineering business, electro-magnetic compatibility (EMC) business, and products
sales). Mainstay products in the Automobile and Industrial Machinery Parts Business are piston rings and valve
seat inserts, which are engine parts, along with various engineered plastic products, casting components, andprecision components. They are developed for automobiles, ships, and industrial machinery. Mainstay productsin the Piping Products Business are pipefittings and other piping components. In May 2023, the major pipefitting
company NIPPON PIPE FITTING CORPORATION (formerly JFE Pipe Fitting Mfg. Co., Ltd.) was made a subsidiaryto make the Company the top pipefitting company in the domestic industry. In Other Business, the Company groupdevelops, manufactures, and sells PYROMAXTM, a metallic heating element, and PYROMAX-SUPERTM, a ceramicheating element which are developed proprietarily, for the thermal engineering business. This business is involved
in heat units, industrial furnaces and other heating equipment that utilize these products. It also develops the EMC
business, which is involved in the manufacture and sale of anechoic chambers and other products. In February
2024, SHINWA VANES CO., LTD. was made a subsidiary to expand RIKEN’s thermal engineering business andbusiness for the semiconductor industry.

2. In FY3/24, effectively large gains in sales and profit
In its consolidated results based on its financial summary for FY3/24, the Company reported net sales of¥138,586mn, operating profit of ¥8,764mn, ordinary profit of ¥11,635mn, and profit attributable to owners of parentof ¥26,324mn. As for extraordinary profit, gain on bargain purchase of ¥19,182mn was recorded for acquisition ofstock in NIPPON PIPE FITTING and from the NPR-RIKEN merger. From a corporate merger accounting perspective,
RIKEN was the acquiring company, so the figures on the financial summary for FY3/24 do not reflect six monthsof results, from April to September 2023, for NPR. For this reason, comparing with totaled figures that reflect 12months of both RIKEN and NPR, net sales increased 16% to ¥168.6bn, operating profit increased 51% to ¥10.6bn,
ordinary profit increased 35% to ¥13.7bn, profit attributable to owners of parent went up 355% to ¥27.9bn, andprofit attributable to owners of parent excluding the gain on bargain purchase rose 42% to ¥8.7bn, so there werelarge gains in both sales and profits. Contributing factors included a recovery in automobile production volume,the effect of yen deprecation on foreign exchange markets, new consolidation of NIPPON PIPE FITTING, which
was made a subsidiary by RIKEN in May 2023, and other factors that led to higher sales, plus product prices being
adjusted based on material and energy prices, and further streamlining measures.

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01 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Summary

3. For FY3/25, expects small decline in profit, but it may exceed the forecast
The Company’s consolidated results forecasts are net sales of ¥171,000mn, operating profit of ¥10,400mn,
ordinary profit of ¥12,700mn, and profit attributable to owners of parent of ¥8,000mn. Foreign exchange gains
in non-operating income are not taken into account and in extraordinary income, the gain on bargain purchaserecorded in the previous fiscal year will drop. Comparing totaled figures for FY3/24 that reflect 12 months of results
for both RIKEN and NPR, net sales is expected to be up 1% YoY, operating profit down 2%, ordinary profit down
7% and profit attributable to owners of parent excluding the gain on bargain purchase recorded last term down 8%.
The assumed exchange rates are ¥145 = $1 and ¥155 = €1 (last year’s results were ¥140 = $1 and ¥152 = €1).
Sales will increase as a result of consolidating SHINWA VANES, which became a subsidiary in February 2024, butwith automobile production volume uncertain and strategic investment in growth fields, a small decline in profit isexpected. Considering that based on current exchange rates, the yen is weaker than the Company’s assumption,
there is the strong sense that the Company’s forecasts are conservative, and we at FISCO believe that results could
exceed them.
4. Aiming for ROE above shareholder capital costs
The Company formulated its 1st midterm management plan (fiscal 2024 to fiscal 2026) in February 2024, and its
targets for the final year of the plan, FY3/27, are net sales of ¥180.0bn, ordinary profit ratio of 9% or higher andROE of 8% or higher. Further, regarding the targets for 2030 Vision, for FY3/31, the Company is targeting net
sales of ¥200.0bn, an ordinary profit ratio of 12% or higher and ROE of 10% or higher. The Company is aiming
for ROE in excess of shareholder capital costs by reforming the business portfolio, including business integration(scheduled to be completed in April 2026), creating synergies, and optimizing the balance sheet. As for businessstrategy, toward business portfolio reform, the Company categorized its business into the piston ring business,
which seeks to strengthen profitability, fundamental business (sintered products, engineered plastic products,
casting components and precision components for automobiles and industrial machinery, and piping products
for construction and industrial machinery) and the next core business (existing businesses in growth fields, newproducts, new businesses), which aims to expand sales scope and become a core business, and will promotebusiness strategies for each of these categories. Regarding shareholder returns, the Company is targeting a payout
ratio of 40% or higher (currently around 30%), and a total payout ratio of 70% or higher on a three-year average(currently around 30%), which includes acquiring treasury shares. It plans to buy back ¥10.0bn of its own shares
over three years to increase the level of returns to shareholders. For FY3/27, it is expecting a dividend on equity
ratio (DOE) ratio of around 3%.
5. Expect full-fledged synergies
The market surrounding engine components for automobiles has become difficult because of the trend toward
electric vehicles, but the Company assumes that an immediate push to electrification is quite unlikely. In addition
to the potential for slowing in electric vehicles, it also assumes a scenario in which internal combustion engines(ICEs) survive. In addition, in the Company’s automobile and industrial machinery component-related business,
which is led by piston rings, it is thought that through an appropriate business strategy the Company can survive
and acquire a good level of stable earnings. Considering this point, we at FISCO believe that investors in general
are somewhat pessimistic about the market for automobile engine components. Going forward, the synergies fromthe management merger can be expected to become full-fledged, so the progress on its 1st midterm management
plan will be watched.

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02 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Summary

Key Points
RIKEN and NPR merge to form a holding company
In FY3/24, effectively large gains in sales and profits• For FY3/25, expects small decline in profit, but it may exceed the forecast• Aiming for ROE above shareholder capital costs• Expecting full-fledged synergies from the merger••

Results trends
Net sales (left)

（\bn)
200.0

Operating profit (right)
168.6

160.0

（\bn)
15.0

171.0
12.0

144.9
129.2
10.6

120.0
7.7

80.0

10.4

9.0

6.0

7.1

40.0

3.0

0.0
FY3/22(ref)FY3/23(ref)FY3/24(ref)FY3/25 (E)0.0

Note: Figures prior to FY3/24 reflect 12 months of results from RIKEN and NPR. Figures are rounded to the nearest 100
million.
Source: Prepared by FISCO from the Company’s results briefing supplementary materials■ Company overview
A major manufacturer of piston rings
1. Company overview
The Company is a holding company (established by way of a joint stock transfer) for RIKEN and NPR, major
manufacturers of piston rings, which merged on October 2, 2023. The Company will pursue synergies under an
integrated governance while leveraging the long-cultivated brands of both companies, aiming for sustained growth
and to raise corporate value.

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03 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Company overview

As of the end FY3/24, the head office is located in Chiyoda-ku, Tokyo and head office functions are split between
the Tokyo head office (Chiyoda-ku, Tokyo) and the Saitama head office (Saitama City, Saitama). The Company’s total
assets are ¥218,580mn, its net assets are ¥149,166mn, its equity ratio is 64.2%, its number of shares outstandingis 28,141,360 (including 3,159 shares of treasury stock), and its number of consolidated employees is 7,036 (3,882
domestic, 3,154 overseas). The Company’s Group includes the Company, which is the holding company, theoperating companies RIKEN and NPR, 16 domestic affiliates, 19 overseas affiliates and 5 equity-method affiliates,
and it develops production and sales sites globally.
NPR-RIKEN Group

Source: Reprinted from the Company’s results briefing materials

2. History
RIKEN’s history started with the invention of a manufacturing method for piston rings in 1926 (patents acquired invarious countries) by Dr. Keikichi Ebihara of the Okochi Research Laboratory of the Institute of Physical and Chemical
Research. In 1927, to commercialize the invention, Rikagaku Kogyo was established and started mass productionof piston rings for the first time in Japan. After name changes, splits and mergers, in 1941 RIKEN Industries Co. wasfounded. Next, following reorganization after the war, in 1949 the company was relaunched as Riken Kashiwazaki
Piston Ring Industries Co. (renamed Riken Piston Ring Industries Co. in 1950) and Riken Kumagaya Cast Iron Co.
(renamed as Kumagaya Cast Iron Co. in 1951). In 1952, its shares were listed on the Tokyo Stock Exchange (TSE)and in 1979 it changed its name to RIKEN CORPORATION. It carried out overseas expansion starting in the 1960s
and supplies a broad range of products to major automakers around the world.
NPR’s history began with the establishment of Suzuki Seisakusyo in 1912 by Tomonori Suzuki, who studied thetechnologies of marine engines on his own. He started to design and make hot bulb marine engines, rice polishingmachines and other products. Suzuki keenly sensed the need for domestic production of piston rings and devoted
himself to their manufacture. He completed prototypes of piston rings in 1931 and changed the name of thecompany to Nippon Piston Ring Seisakusyo. In 1934 the company was publicly listed and it opened a factory in
Kawaguchi City in Saitama Prefecture. An air raid in 1945 destroyed the head office building and the factory closed
temporarily at the end of the war. It relisted its shares on the TSE in 1949. In the 1970s, it began strengthening
overseas expansion and now supplies products to major automakers around the world.

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04 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Company overview

Both companies, since their establishment as piston ring manufacturers, have contributed to the development of
the global automobile industry for many years, but amid what’s been called a once in a century restructuring of
the auto industry, to tackle the various issues facing both companies, the pursuit of synergies under an integrated
governance while utilizing the brands of both companies built up over many years would be the optimal choice forrealizing the sustained growth of both companies and increasing their corporate value. Based on this understanding,the companies merged their managements on October 2, 2023 and established a holding company that listed its
shares on the TSE Prime market (RIKEN and NPR, which became wholly owned subsidiaries, delisted on September
28, 2023).
History
RIKEN
Date

Event

1926

Dr. Keikichi Ebihara of the Okochi Research Laboratory of the Institute of Physical and Chemical Research invented a manufacturing method
for piston rings (Acquired patents in various countries.)

1927

Established Rikagaku Kogyo to commercialize the inventions of the Institute of Physical and Chemical Research.
Succeeded in mass production of piston rings for the first time in Japan.

1941

Established Riken Industries Co. after renaming, corporate split-up, merger with other companies and so on.

1949

After the post-war reorganization, the Riken Industries Co. was relaunched as Riken Kashiwazaki Piston Ring Industries Co. (renamed as
Riken Piston Ring Industries Co. in 1950) and Riken Kumagaya Cast Iron Co. (renamed as Kumagaya Cast Iron Co. in 1951). This marked
the founding of RIKEN CORPORATION.

1952

Listed on Tokyo Stock Exchange.

1979

Changed the corporate name to RIKEN CORPORATION.

2023

Acquired shares of NIPPON PIPE FITTING CORPORATION to make it a subsidiary.
Delisting of RIKEN CORPORATION due to consolidation with Nippon Piston Ring Co., Ltd. through the establishment of a Joint Holding
Company.

Nippon Piston Ring (NPR)
Date

Event

1912

Tomonori Suzuki who learned technology of marine engine on his own opened Suzuki Seisakusyo.

1931

Suzuki completed prototypes of piston rings, and changed the company name into Nippon Piston Ring Seisakusyo. (Became a publiccompany in 1934.)

1949

Listed on the Tokyo Stock Exchange.

2014

Acquired the business of metal injection molding from Sumitomo Metal Mining Co., Ltd.
Acquired the business of dental implant from ISHIFUKU Metal Industry Co., Ltd.

2022

Acquired all shares of Normeca Asia Co., Ltd., making it a subsidiary.

2023

Delisting of Nippon Piston Ring Co., Ltd. due to consolidation with RIKEN CORPORATION through the establishment of a Joint Holding
Company.

NPR-RIKEN CORPORATION
Date

Event

2023

RIKEN CORPORATION and Nippon Piston Ring Co., Ltd. established NPR-RIKEN CORPORATION by means of share transfer and listed its
shares on the Tokyo Stock Exchange Prime Market.

2024

RIKEN CORPORATION acquired the shares of SHINWA VANES CO., LTD.
Formulated the 1st midterm management plan.

Source: Prepared by FISCO from the Company’s website and securities report.

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05 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/■ Business summary
Mainstay products are automobile engine components-related
1. Business summary
The segment categories post-merger are the Automobile and Industrial Machinery Parts Business, Piping Products
Business, and Other Business (thermal engineering business, EMC business, and products sales).
The mainstay products in the Automobile and Industrial Machinery Parts Business are piston rings and valve seat
inserts, etc., which are engine components. The Company also develops industrial machinery parts and parts formarine engines centering on sintered products, engineered plastic products, and casting components related toautomobile engines, transmissions, drive, and the chassis.
Mainstay products in the Piping Products Business are pipefittings and other piping components. In May 2023,
RIKEN made the major pipefitting company NIPPON PIPE FITTING a subsidiary and became the top pipefitting
company in the domestic industry.
In Other Business, the Company group develops, manufactures, and sells PYROMAXTM, a metallic heating element,
and PYROMAX-SUPERTM, a ceramic heating element, which are developed proprietarily for the thermal engineeringbusiness. This business is involved in heater units, industrial furnaces and other thermal processes that utilize theseproducts. It also develops the EMC business, which is involved in the manufacture and sale of anechoic chambers
and other products. In February 2024, SHINWA VANES CO., LTD., which has strength in small and mid-size heater
units in the low temperature domain for semiconductor manufacturing equipment, was made a subsidiary to expand
RIKEN’s thermal engineering business.
Sales shares for FY3/24 (based on the financial results) are 76.5% Automobile and Industrial Machinery Parts
Business, 12% Piping Products Business and 11.2% Other Business. Looking at segment trends prior to themerger between RIKEN and NPR shows that both companies are focused on automobile parts related areas suchas piston rings.

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06 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Business summary

Segment trends prior to the merger
RIKEN
(¥mn)
FY3/20FY3/21

FY3/22

FY3/2384,53069,72078,37286,382

Automobile and Industrial Machinery Parts Business

71,50957,59965,487

72,904

Others

16,055

14,202

15,48816,089Adjustment-3,034-2,081-2,602-2,611

Operating profit

5,234

2,728

5,122

4,676

Automobile and Industrial Machinery Parts Business

3,831

1,726

3,570

3,023

Others

1,416

1,049

1,856

1,618

-13

-47

-304

34

FY3/20FY3/21

FY3/22

FY3/23

Net sales

Adjustment
NPR

(¥mn)
54,88145,27650,78358,524

Products for automobiles business

47,34038,77343,88349,853

Products for marine engines and other products business

2,247

2,168

2,356

2,241

Others

5,293

4,333

4,543

6,429

1,829

-165

2,627

2,385

Products for automobiles business

2,487

-24

2,632

2,515

Products for marine engines and other products business

-213

137

371

298

Others

132

146

177

87

Adjustment

-577

-424

-553

-516

Net sales

Operating profit

Source: Prepared by FISCO from the companies’ financial results

Company’s strengths include its precision processing, surface
treatment, materials and metals powder metallurgy technologies
2. Characteristics and strengths
The main roles of piston rings include functions to seal gas leaks in an engine’s combustion chamber, control
lubricating oil (engine oil), transfer combustion heat that escapes, and minimize piston abrasion. They are usedwithin the combustion chamber in the harsh conditions of a temperature of 300˚C, and perform important functions
related directly to engine performance. Therefore, in actuality there are only five companies in the world (one in
the U.S., one in Germany, and three in Japan), including RIKEN and NPR, which are able to provide high-quality
piston rings. Special technical capabilities are required, including lowering friction, raising abrasion resistance,high-performance, high-quality materials, and surface processing, but both companies have strength in advanced
precision processing, surface treatment, and materials technology. In addition, the Company has unique strengths
in powder metallurgy technologies and engineered plastics technologies. Its main customers are the world’s major
automakers, starting with Toyota Motor Corporation <7203> and Honda Motor Co., Ltd. <7267>, and it supplies
a wide variety of products.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Business summary

Domestic and overseas business partners of the Automobile and Industrial Machinery Parts Business

Source: Reprinted from the Company’s results briefing materials

3. Risk factors and measures
A risk factor is that the number of vehicles produced may decrease due to changes in demand and the impact ofinfectious diseases, disasters, etc. However, the global automobile market will grow slowly, due in part to vehicle
use expanding in emerging countries. So rather than a change in the number of vehicles produced, a risk factor
for the Company at the current time is the impact of medium- to long-term environmental regulations (greater fuelefficiency of engines, declining use of gasoline engines, support for cleaner engines, spread of EV, etc.) driven by
global movement toward decarbonization. The Company intends to promote technology development as engines
evolve, including better fuel economy gasoline engines and next-generation engines like hydrogen and alternative
fuels and intends to reform its business portfolio with a focus also on expanding business in non-ICE fields basedon trends in vehicle electrification.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/■ Results trends
In FY3/24, effectively large gains in sales and profit
1. Outline of results for FY3/24
In its consolidated results based on its financial summary for FY3/24, the Company reported net sales of¥138,586mn, operating profit of ¥8,764mn, ordinary profit of ¥11,635mn, and profit attributable to owners ofparent of ¥26,324mn. As for non-operating income, interest and dividend income was ¥873mn, share of profit ofentities accounted for by equity method was ¥1,465mn, and foreign exchange gains were ¥348mn. In extraordinary
income, a gain on bargain purchase of ¥19,182mn associated with acquisition of stock in NIPPON PIPE FITTING andfrom the merger of RIKEN and NPR was recorded. Regarding extraordinary losses, there were impairment lossesof ¥933mn. Compared to forecasts (revised on February 14, 2024; net sales of ¥137,000mn, operating profit of¥8,000mn, ordinary profit of ¥10,500mn and profit attributable to owners of parent of ¥30,000mn), profit attributableto owners of parent was below the forecast because gain on bargain purchase decreased from the estimate (around¥21,000mn), but net sales, operating profit and ordinary profit all came in above forecasts.
From a corporate merger accounting perspective, RIKEN was the acquiring company, so the figures on the financialsummary for FY3/24 do not reflect six months of results, from April to September 2023, for NPR. For this reason,comparing totals that reflect the full 12 months of results from both RIKEN and NPR, net sales for FY3/24 increased
16% YoY to ¥168.6bn, operating profit was up 51% to ¥10.6bn, ordinary profit gained 35% to ¥13.7bn, and profit
attributable to owners of parent increased 355% to ¥27.9bn. Excluding gain on bargain purchase, profit attributableto owners of parent increased 42% to ¥8.7bn, so there were large increases in both sales and profits. Along with arecovery in automobile production volume, the effects of yen depreciation, and newly consolidating NIPPON PIPE
FITTING, which was made a subsidiary by RIKEN in May 2023, all of which boosted sales, adjusting prices basedon material and energy prices and progress in streamlining also made a contribution.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION

20-Aug.-2024

6209 Tokyo Stock Exchange Prime Market

https://www.npr-riken.co.jp/en/ir/

Results trends

Outline of results for FY3/24(¥bn)
FY3/23
Totals of bothcompanies

FY3/24
Financial statements basis
Forecast

Results% of net
sales

Forecast

Results% of netsales

Amount144.9

100.0%

137.0

138.6

100.0%

1.6

Operating profit

7.1

4.9%

8.0

8.8

6.3%

Ordinary profit

10.1

7.0%

10.5

11.6

Profit attributable to owners of parent

6.1

4.2%

30.0

Profit attributable to owners of parent
excluding gain on bargain purchase

6.1

4.2%

125.0

Net sales

Combined rate of both companies
YoY

Results% of netsales

Amount101.1%

168.6

100.0%

23.7

16%

0.8

109.6%

10.6

6.3%

3.6

51%

8.4%

1.1

110.8%

13.7

8.1%

3.5

35%

26.3

19.0%

-3.7

87.7%

27.9

16.5%

21.7

355%

6.3

7.1

5.2%

0.8

113.4%

8.7

5.2%

2.6

42%

84.7%

-

108.1

76.5%

-

-

135.4

79.0%

10.4

8%

%

%

By segment
Net sales
Automobile and Industrial
Machinery Parts Business
Piping Products Business

4.6

3.1%

-

17.4

12.3%

-

-

17.4

10.2%

12.8

275%

Other

17.9

12.1%

-

15.8

11.2%

-

-

18.5

10.8%

0.6

4%

Automobile and Industrial
Machinery Parts Business

5.8

4.6%

-

6.5

6.0%

-

-

8.6

6.4%

2.8

48%

Piping Products Business

0.2

4.3%

-

0.6

3.2%

-

-

0.6

3.4%

0.3

131%

Other

1.5

8.4%

-

1.2

7.7%

-

-

1.2

6.5%

-0.3

-17%

Operating profit

Notes: F igures of financial statement basis for FY3/24 are reference figures because they exclude NPR’s results from April to September 2023
FY3/24 forecasts are the figures revised on February 14, 2024
The percentage for operating profit by segment shows the ratio compared to the net sales of each segment. Figures are rounded down to the nearest 100mn.
Source: Prepared by FISCO from the Company’s financial results and results briefing materials

Regarding net sales by region*, in Japan, net sales increased 23% YoY to ¥84.2bn (50% share of total net sales),partially as a result of newly consolidating NIPPON PIPE FITTING. In China, net sales decreased by 1% to ¥10.4bn(6%) on the impact of sluggish sales of Japanese automakers. In other parts of Asia, demand was firm as net sales
grew by 3% to ¥27.4bn (16%). In North America, orders recovered as the semiconductor shortage dissipated andnet sales grew by 16% to ¥23.6bn (14%). And, in Europe, demand was firm, with sales growing by 11% to ¥13.6bn(8%). In other regions, sales were up 38% to ¥9.4bn (6%).
*	Figures reflect 12 months of results for both RIKEN and NPR

Analyzing the increase and decrease factors in operating profit*, the sales increase boosted profit by ¥2.3bn,
exchange rate changes, by ¥0.8bn, and sale price adjustments, by ¥1.4bn. Increases in raw material and energy
costs lowered operating profit by ¥1.1bn, increases in personnel expenses, by ¥0.4bn, increases in deprecation
and R&D expenses, by ¥0.4bn. Rationalization measures increased profit by ¥1.5bn and increases in administration
expenses, etc. lowered it by ¥0.5bn.
*	Figures reflect 12 months of results for both RIKEN and NPR

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10 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Results trends

Analysis of increase and decrease factors in operating profit for FY3/24(¥bn)
Sales price adjustments
Exchange rate changes

12.0

Increase in sales+1.4

Raw material
and energy
costs

-1.1

Rationalization
Personnel
expenses Depreciation
+1.5
R&D

-0.4

+0.8

+2.3

10.0

Other costs

-0.5

-0.4

10.6

8.0

6.0

Increase in operating profit of ¥3.6bn

7.1
FY2022
Results[Reflects 12 months of results for both RIKEN and NPR]FY2023Results

Source: Reprinted from the Company’s results briefing materials

By segment*, in the Automobile and Industrial Machinery Parts Business, net sales increased 8% YoY to ¥1,354mn,
operating profit (before adjustments for corporate expenses; the same hereafter) increased 48% to ¥8.6bn. Sales
increased from a recovery in automobile production volume and the yen depreciating on exchange markets, while
sale price adjustments and ongoing rationalization measures also had a positive impact. In the Piping Products
Business, as a result of newly consolidating NIPPON PIPE FITTING, net sales increased 275% to ¥17.4bn andoperating profit went up by 131% to ¥0.6bn. In the Other Business category, net sales increased by 4% to ¥18.5bn
and operating profit fell by 17% to ¥1.2bn.
*	Figures reflect 12 months of results for both RIKEN and NPR

Company’s finances are sound
2. Financial condition
Total assets at the end of FY3/24 increased by ¥26,009mn YoY* to ¥218,580mn in connection with M&A (NIPPONPIPE FITTING and SHINWA VANES became subsidiaries). Total liabilities increased ¥9,943mn to ¥69,413mn. Thiswas mainly due to an increase in other liabilities. Interest-bearing debt (long- and short-term borrowings) decreasedby ¥3,320mn to ¥19,785mn as a result of utilizing cash and deposits within the Group. Net assets increased by¥16,066mn to ¥149,166mn. As a result, the equity ratio dipped 0.5 percentage points (pt) to 64.2%. A slight dropin the equity ratio is not at the level that would cause concern, and looking at the cash flow situation, in FISCO’sview the Company’s finances are sound.
*	Simple sum of RIKEN and NPR

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11 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Results trends

Financial statements (simplified)(¥mn)
FY3/24

FY3/23
Both companies combined

Results

Change192,571

218,580

26,009(Current assets)

98,975

104,348

5,373(Non-current assets)

93,594

114,232

20,638

Total assets

Total liabilities(Current liabilities)(Non-current liabilities)
Net assets(Shareholders’ equity)
Equity ratio

59,47069,413

9,943

41,47944,6683,189

17,99024,745

6,755

133,100

149,166

16,066111,971

120,530

8,559

64.7%

64.2%

-0.5ptSource: Prepared by FISCO from the Company’s securities report and results briefing materials

Cash flow statements (simplified)(¥mn)
FY3/24
Cash flows from operating activities

18,496

Cash flows from investing activities-13,548

Cash flows from financing activities-8,615

Cash and cash equivalents at end of period

22,261

Source: P repared by FISCO from the Company’s securities reportand results briefing materials■ Outlook
For FY3/25, expects small decline in profit, but it may exceed theforecast• FY3/25 consolidated results outlook
In its consolidated results forecasts for FY3/25, the Company is predicting net sales of ¥171,000mn, operating
profit of ¥10,400mn, ordinary profit of ¥12,700mn, and profit attributable to owners of parent of ¥8,000mn. Foreignexchange gains in non-operating income are not taken into account and in extraordinary income, the gain on bargain
purchase recorded in the previous fiscal year will drop. Comparing totaled figures for FY3/24 that reflect 12 monthsof results for both RIKEN and NPR, net sales is expected to be up 1% YoY, operating profit down 2%, ordinary profit
down 7% and profit attributable to owners of parent excluding the gain on bargain purchase recorded last term down
8%. The assumed exchange rates are ¥145 = $1 and ¥155 = €1 (last year’s results were ¥140 = $1 and ¥152 = €1).

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12 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Outlook

FY3/25 consolidated results outlook(¥bn)
FY3/24
Financial statements
basis

Compared to bothcompanies combined

FY3/25Both companies
combined

Results% of net
sales

Results% of net
sales

Forecast% of net
sales

Change %Change %138.6

100.0%

168.6

100.0%

171.0

100.0%

2.4

1%

Operating profit

8.8

6.3%

10.6

6.3%

10.4

6.1%

-0.2

-2%

Ordinary profit

11.6

8.4%

13.7

8.1%

12.7

7.4%

-1.0

-7%

Profit attributable to ownersof parent

7.1

5.2%

8.7

5.2%

8.0

4.7%

-0.7

-8%

US$/¥

140

-

140

-

145

-

5

-

Euro/¥

152

-

152

-

155

-

3

-

Net sales

Exchange rate

Note: Profit attributable to owners of parent for FY3/24 excludes gain on bargain purchase. Figures are rounded to the nearest 100 million.
Source: Prepared by FISCO from the Company’s results briefing materials

SHINWA VANES became a subsidiary in February 2024, which resulted in increased sales on a consolidated basis,but considering the uncertainty in automobile production volume and strategic investment in growth fields, theforecast for profit is a small decrease. Analyzing the increase and decrease factors behind the ¥0.2bn decrease inoperating profit, a drop in sales is expected to decrease profit by ¥1.2bn, exchange rate changes to increase it by¥0.3bn, sale price adjustments to increase it by ¥0.5bn, increases in raw material and energy costs to decrease
it by ¥0.7bn, an increase in personnel expenses to decrease it by ¥0.7bn, an increase in depreciation and R&D
expenses to lower it by ¥0.5bn, and progress in rationalization measures to raise it by ¥2.0bn. Capital investment
is expected to increase by ¥2.3bn YoY* to ¥10.0bn, depreciation to increase by ¥0.2bn to ¥9.5bn, and R&D
expenses to rise by ¥0.3bn to ¥4.7bn. Capital investment will focus on introducing facilities with an awareness of
cost competitiveness, the next core businesses, meaning new products and new businesses in growth fields, andenvironmental investment related to carbon neutrality. Regarding R&D expenses, the Company intends to commit
management resources to better fuel economy technologies to contribute to carbon neutrality, on evaluations ofhydrogen fuels, bio-fuels, and e-fuel engines, development for converting engines to run on hydrogen, and new
products and new business development. Considering the fact that in current foreign exchange the yen is weaker
than the Company’s assumptions, the Company’s forecast leaves a strong conservative impression, and we at
FISCO believe that results could exceed the forecast.
*	FY3/24 figures reflect 12 months of results from both RIKEN and NPR.

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13 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION

20-Aug.-2024

6209 Tokyo Stock Exchange Prime Market

https://www.npr-riken.co.jp/en/ir/

Outlook

FY3/25 results forecasts and analysis of increase and decrease factors in operating profit
(¥bn)

12.0

Decrease in sales, etc.

Sales priceExchange adjustments
ratechanges
+0.5

-1.2

+0.3

10.0

8.0

Raw material
and energy
costs
Personnel
expenses

-0.7

-0.7

Rationalization
Depreciation
R&D

+2.0

-0.5

10.4

10.6
Decrease in operating profit of ¥0.2bn

6.0

FY2023Results[Reflects 12 months of results for both RIKEN and NPR]FY2024
Forecast

Source: Reprinted from the Company’s results briefing materials■ Growth strategy
Despite market environment changes, current engines are expected
to survive
1. Market environment
The global auto market is expected to see demand growth centering on emerging countries, but to respond to global
warming and energy problems, environmental regulations and vehicle electrification are expected to accelerate andinternal combustion engines to decline over the medium- to long-term.
At the same time, development is proceeding on hydrogen engines and e-fuel engines that run on synthetic fuelmade from hydrogen produced using renewable energy. Comparing the CO2 emissions of EVs and HEVs (HybridElectric Vehicles) from well to wheel, it has been shown that HEVs with 50% thermal efficiency engines, on which R&D
is underway, are competitive with EVs. This suggests the possibility that HEVs will be an option in next-generation
mobility. In addition, even more recently, in March 2023, the European Union changed its previous policy that would
have banned new car sales of cars with gasoline engines in 2035. They will now be tolerated past 2035 if the engines
use synthetic fuel made from CO2 and hydrogen. Moreover, how to process EV batteries after they are used has
become an issue, and the U.S. and EU have raised import tariffs on EVs made in China, so it has been pointed outthat vehicle electrification may slow.

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14 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Growth strategy

Management environment summary: auto market(mn/year)

ICE/EV global production volume forecast
ICE production volume (including HEV, PHEV and range extenders, etc.)
EV production volume (including FCV)

Source: Reprinted from the Company’s 1st midterm management plan materials

With these as background conditions, the Company will promote technology development aimed at engine evolution,
including better fuel economy gasoline engines and responding to next-generation engines that use hydrogen andalternative fuels, will focus on expanding business in non-ICE areas given the trend toward EVs, and move forward
on reforming its business portfolio.

Aiming for ROE above shareholder capital costs
2. 1st midterm management plan (FY2024 to FY2026)
The Company formulated its 1st midterm management plan (FY2024 to FY2026) in February 2024. Its midterm
management policies are: 1) Generate synergies through consolidation; 2) Reform business portfolio; and 3)
Strengthen sustainability management and develop a foundation for growth. Numerical targets for the final year of
the plan, FY3/27, are net sales of ¥180.0bn, an ordinary profit margin of 9% or higher, and an ROE of 8% or higher.
Incidentally, the targets under 2030 Vision for FY3/31 are net sales of ¥200.0bn, an ordinary profit margin of 12%
or higher and ROE of 10% or higher.
As for midterm quantitative targets, the Company will engage in business portfolio reform, including businessintegration (scheduled to be completed in April 2026), synergy creation and balance sheet optimization with the aimof achieving an ROE above shareholder capital costs. As for management integration synergies, one can cite, in termsof net sales, expanding share of existing business through utilizing each other’s brand power and sales networks,
and enhancements to the product lineup, providing diverse solutions by establishing technical proposal-based sales
systems and responding to hydrogen and other alternative fuels, and creating and commercializing new products.
As for cost synergies, the Company is planning ¥3.0bn in FY3/27 (in business divisions, reduced procurement
costs through joint purchasing, consolidating logistics sites, optimizing production at domestic and overseas sites
to reduce manufacturing costs by ¥1.4bn; in management divisions, corporate function integration, IT infrastructure
integration, and other reductions to SG&A expenses for ¥1.6bn). In addition, the Company will promote reductions
to shareholder capital costs by steadily carrying out its midterm strategies and enhancing IR activities. Regarding
cash allocations, cash of ¥63.0bn to be generated over the three years (operating cash flow of ¥60.0bn + sales ofassets like cross-held shares of ¥3.0bn) will be appropriately allocated for further growth and shareholder returns.
Specifically, the Company is planning cash outflow of ¥20.0bn for shareholder returns, ¥40.0bn for growth investment, including capital investment and M&A, and an increase of ¥3.0bn from previous levels for R&D.

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15 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Growth strategy

Midterm management plan
Midterm
management
policy1. Generate synergies through consolidation
2. Reform business portfolio
3. Strengthen sustainability management and develop
a foundation for growth

Midterm
quantitative targets

Realization of a higher return on equity (ROE) than cost of equity bysynergy creation, business portfolio reform and balance sheet
optimization

Net sales ¥168.6bn
Ordinary profit ratio 8.1%
ROE 6.2%

Midterm management policy period

2030 Vision

Net sales ¥180.0bn
Ordinary profit ratio 9% or higher
ROE 8% or higher

Net sales ¥200.0bn
Ordinary
Ordinary
profitprofit
ratio 12% or higher
ROE ratio
10% or higher*Reflects 12 months of results for both RIKEN
and NPR (excluding gain on bargain purchase)

Capitalstrategy
Shareholder
returns

Operating cash flow
¥60.0bn+
Asset sales of ¥3.0bn(cross-shareholdings,
etc.)■Shareholder returns of ¥20.0bn
Payout ratio of 40% or more; three-year total payout ratio of 70% or
more■Strategic investment of ¥43.0bn
Growth investment of ¥40.0bn (capital investment, M&A)
R&D expenses: increase ¥3.0bn compared to before

Raise ROE, strengthen shareholder returns, and promote sustainability for a PBR of 1x
Source: Reprinted from the Company’s results briefing materials

Develop next core business into third pillar
3. Business strategy
As for business strategy, toward business portfolio reform, the Company categorized its business into the piston
ring business, which seeks to strengthen profitability, fundamental business (sintered products, engineered plastic
products, casting components and precision components for automobiles and industrial machinery, and piping
products for construction industry) and the next core business (existing businesses in growth fields, new products,
new businesses), which aims to expand sales scope and become a core business, and will promote businessstrategies for each of these categories. Regarding the piston ring business and fundamental businesses, the ICE
components market will contract over the long term due to vehicle electrification, but a certain level of medium- tolong-term demand is expected when including commercial, industrial, and shipping applications. Also, based on
the fact that the repair market (approx. ¥1.5bn in automobiles are owned globally) will trend steadily for a long
period of time, and stable earning sources will expand through the business integration effects. Regarding next
core businesses, the Company will aim for sales and profit expansion over the medium- to long-term by investing
management resources into growth areas.
(1) Piston ring businessIn the piston ring business, the Company’s FY3/27 targets are net sales of ¥67.5bn, an operating profit marginof 10% or higher (FY3/24 forecasts as of announcement of the plan are net sales of ¥64.9bn and an operating
profit margin of 7%). As the global No. 1 supplier of piston rings the Company will reinforce sales expansion in
non-passenger vehicles where engines will remain (commercial, industry, repair, and shipping applications), createsynergies from the business integration, and fundamentally improve productivity to promote improvement in the
profit ratio, and it will promote the development of innovative product technologies for carbon neutrality, including
accommodating hydrogen and alternative fuels.

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16 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Growth strategy(2) Fundamental businesses
For fundamental businesses, the Company’s FY3/27 targets are net sales of ¥80.0bn, an operating profit marginof 7% or higher (FY3/24 forecasts as of announcement of the plan are net sales of ¥79.0bn and an operating
profit ratio of 5%). By expanding share in fields of proficiency, the Company will make up for the decline in engine
production, and through streamlining and revising the product mix, the Company will promote improvements tothe profit ratio. For precision machined parts for automobiles and industrial machinery (sintered products like valve
seat inserts, engineered plastic products for sealing automobile transmissions, precision processed parts like cam
shafts, and casting components), the Company will reinforce competitiveness and will identify and dig deeply
into competitive market products with the aim of being a top niche supplier globally. In piping products for theconstruction industry, making NIPPON PIPE FITTING a subsidiary and becoming the top company in the domestic
industry for pipefittings, the Company will accommodate increased need for prefabrication and piping componentsthat save labor given the shortage of plumbers and will increase its presence in the construction sector.
(3) Next core businesses
The FY3/27 targets for next core businesses are net sales of ¥18.0bn and an operating profit margin of 10% or
higher (FY3/24 forecasts as of announcement of the plan are net sales of ¥5.8bn and an operating profit marginof 4%). The Company will expand business in growth areas (semiconductors, electric drives, carbon neutral
measures) and will promote business development with a sense of speed by strengthening resources. It will also
work to expand the business portfolio bearing the next generation by utilizing M&A and other means. Specificbusiness fields include the thermal engineering business, EMC business, METAMOLDTM* business and other new
products and new businesses (electric drive unit products, highly functional engineered plastic products, noise
countermeasure products, medical device products).
*	METAMOLDTM is the registered trademark for NPR’s metal injection molding product.

The thermal engineering business manufactures and sells PYROMAXTM, a metallic heating element, and PYROMAX
SUPERTM, a ceramic heating element which are developed proprietarily. Using these products the Company
can handle everything from heater units to industrial furnaces. Through synergies with SHINWA VANES, which
RIKEN made a subsidiary in February 2024, the Company will apply products to a wide range of industrial fields.
In particular, it will develop heater units for semiconductor manufacturing equipment, create a full lineup, andpromote development and production capacity reinforcements to accommodate carbon neutrality.
In the EMC business, the Company provides design, installation management, and after-sales service for anechoic
chambers, which are needed for EMC testing*1 by automakers and electronic device manufacturers. Demand for
new and renovated anechoic chambers is increasing because of the mounting need for EMC testing against the
backdrop of CASE*2 progress and communications technology development. Going forward the Company will
promote the development and sale of facilities and products that secure “electromagnetic compatibility,” whichmeans neither receiving nor giving off electromagnetic influence in relation to electronic devices and the like. In
FY3/24, the Company delivered Japan’s first large anechoic chamber compliant with CISPR 16-1-4, the latest
international standards.
*1	Testing to confirm that electromagnetic waves given off by an electronic device do not have a negative impact on otherdevices or that when electromagnetic waves given off by another device are received the device does not malfunction.
*2	CASE is an acronym for Connected, Autonomous, Shared & Services, Electric.

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17 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Growth strategy

In the METAMOLDTM business, the Company develops metal injection molding (MIM), which is applied to complexly shaped parts used in a wide range of applications, including automobiles, aerospace, and industrial andmedical devices, and is promoting expanded sales for industrial equipment, including electric power steering
for automobiles and ball screw circulation pieces for SCARA robot. Through metal injection molding, complexly
shaped parts with high precision and high strength can be supplied at a low cost, so this competitive advantage
will be utilized. The Company also plans to build an efficient, targeted marketing system, greatly strengthen projectacquisition capability, and develop for CASE-related parts, robots, sensors, and the medical field.
In other new products and new businesses, the Company is developing products for electric drive units, such as
ultra-thin actuators and ultra-light wave reducers that are more compact and lighter for applications in industry,
nursing care and medical robots, and to respond to expansion in the next-generation mobility and robot markets,
the Company will develop and expand sales of highly functional engineered plastic products that utilize technology
to join different materials together, develop and expand sales of magnetic material products that act as a countermeasure to magnetic hindrance utilizing technology cultivated in the EMC business, promote the developmentof products for medical devices implanted in the body using biocompatible materials, and aims to expand sales
and profits over the medium- to long-term and make them core businesses. In highly functional engineered plastic
products, the Company commercialized plastic gears for which a metal part was insert-molded. Mass production
was started for motor-assist bicycles.
Support for progressive electronic device companies using advanced EMC technologies

Source: Reprinted from NPR-RIKEN’s website

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18 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Growth strategy

In medical equipment, the Company is rolling out NiFreeT TM (registered trademark). This is a new medical-use
material of a titanium-tantalum alloy, is highly biocompatible being nickel-free and non-magnetic. It can also
be retained within the body and it is less expensive than the precious metals conventionally used in medical
equipment (platinum). NiFreeT was initially developed in-house by the Company for use with piston rings asa shape-memorizing alloy, but it was then re-classified as a medical-use material because it is nickel-free andpresents excellent processability. The Company is working to commercialize it as quickly as possible for applicationin implantable medical devices such as dental screws, guidewires, catheter reinforcements and medical devices
centered on orthopedics. In addition, the Company is conducting new product development with Medtronic<MDT>, one of the world’s major medical device manufacturers, as a part of its implanted medical device joint
development project.
The Company is also promoting the hydrogen related business keyed on hydrogen engines. In the previous fiscal
year, the Company augmented its bench room for evaluation of actual hydrogen engines and it now can evaluate
everything from small-sized engines to large engines for trucks and construction equipment, and in FY3/25
the plan is to make it possible to evaluate endurance over long periods by augmenting its hydrogen storage
facility. Moreover, the Company launched a project to retrofit the small trucks used at the Kashiwazaki plant withhydrogen engines and conduct testing while using them for actual business activities. In addition, there are plans
for a hydrogen station to be built in Kashiwazaki, Niigata Prefecture. With hydrogen engine development as afoothold, the Company aims to contribute to local energy production and consumption and to realizing a carbon
neutral society.

Raising shareholder returns, targeting a three-year average total
return ratio of 70% or higher during 1st midterm management plan
period
4. Shareholder return policy
The Company positions returning profits to shareholders as one of its important management issues and whileconsidering the balance between investment for growth and to raise corporate value and financial soundness, it willcontinue to pay a stable dividend. The Company will also flexibly acquire treasury stock and conduct shareholder
returns with an awareness of capital efficiency and the total payout ratio. This is its basic policy. And based onit, the 1st midterm management plan calls for a payout ratio of 40% or higher (currently around 30%) and a total
payout ratio on average over three years, including treasury stock acquisition, of 70% or higher (currently around30%). The Company is aiming to buy back its stock over three years targeting ¥10.0bn and will work to lift its levelof shareholder returns. This is expected to give the Company a DOE at the 3% level in FY3/27.

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19 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Growth strategy

Cash allocation

Cash inflow

Cash outflow

Asset sales

Shareholder
returns¥20.0bn(cross-shareholdings, etc.)¥3.0bnStable and continuous return to shareholders
Dividend payout ratio: 40% or more (currently about 30%)
Total payout ratio: 70% or more (average of 3 years)

Purchase of treasury shares: ¥10.0bn

Strategic investment

Operatingactivities cashflows
¥60.0bn

R&D
Up ¥3.0bn

Resource allocation to growing areas(¥3.0bn rise from the current level)

Growthinvestment(capital
investment)(M&A)¥40.0bn

Expand business portfolio
Maintain and expand profit baseDX-related investment
Environment-related investment to reduce CO2

Planned for midterm management plan period: FY2024 to FY2026
Source: Reprinted from the Company’s 1st midterm management plan materials

The dividend for FY3/24 included a regular dividend of ¥45.00 and a commemorative dividend of ¥25.00 for a total
dividend (lump-sum payment at the end of the fiscal year) of ¥70.00. The payout ratio was 6.4%, but a gain frombargain purchase boosted profit attributable to owners of parent, so this was an irregular figure. RIKEN paid aninterim dividend of ¥21.00 for a total of ¥91.00. The effective payout ratio calculated based on profit attributableto owners of parent excluding the gain on bargain purchase would be 36.0%. The dividend forecast for FY3/25 is¥115.00 for the full year (¥45.00 at the end of 1H, and ¥70.00 at fiscal year-end) for a planned payout ratio of 40.4%.
In May 2024, in an off-floor purchase transaction of treasury stock (ToSTNeT-3), the Company acquired 1,368,400
shares (total acquisition price of ¥3,999mn), and including this the total payout ratio for FY3/25 will be 90%.
Trends in total payout ratio

(¥bn)
(¥bn)

12.0
10.0
8.0

RIKEN (dividend)
NPR (dividend)
NPR-RIKEN (dividend)
NPR-RIKEN (purchase of treasury shares)
Total payout ratio

7.2

6.0
4.0
2.0

1.8

1.8

FY2021Results

FY2022
Results

2.6

FY2021Results (ref.)FY2024
Forecast

Reference: Reference figures including RIKEN’s FY2023 interim dividend in line with net profit stated on the financial summary
Source: Reprinted from the Company’s results briefing materials

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20 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

NPR-RIKEN CORPORATION
6209 Tokyo Stock Exchange Prime Market

20-Aug.-2024
https://www.npr-riken.co.jp/en/ir/

Growth strategy

5. Sustainability management
To support the sustainable growth of companies and society, the Company has set forth six major items in its
sustainability management (Reinforcement of carbon neutrality initiatives, Promotion of diversity, equity and inclusion,
Contribution to local communities, Improvement of corporate governance, Improvement of employee engagement
and human resource development strategy, and Creation of safe and secure workplace), and is promoting sustainability management on this basis.
Six major items for sustainability management

Six major items for sustainability management
Environment

Reinforcement of carbon neutrality initiatives
Promotion of DE&I

SocialContribution to local communities
Governance

Humancapitalinvestment

Improvement of corporate governanceImprovement of employee engagement andhuman resource development strategy
Creation of safe and secure workplaces

Source: Reprinted from the Company’s 1st midterm management plan materials

As for sustainability targets (KPI), for FY3/27, the Company is aiming to reduce GHG emissions by 39% comparedto FY3/14 (by 51% by FY3/31), raise the ratio of female managers to 3% or higher domestically and 7% or higher
consolidated, raise the ratio of men taking childcare leave to 50% or higher, raise the ratio of employees putting
the code of conduct, formulated in FY3/24, into action to 80% or higher, and increase investment in employee
human resources development by 30% on a consolidated basis compared to FY3/23. Regarding strengthening
initiatives for carbon neutrality, the Company intends to change cupola furnaces to electric furnaces, upgrade tohigh-efficiency facilities, deploy solar power, develop a compact wind-power generation system, procure renewableenergy, purchase green electricity certificates, and utilize J-credits (carbon offset).

Expecting full-fledged synergies from the merger
6. FISCO’s view
The market surrounding automotive engine parts has become extremely challenging due to the trend toward electricvehicles, but as stated above, there is only a small possibility that electrification will proceed all at once. Along withthe possibility that the shift to electric vehicles will slow, there are ICE survival scenarios that can be assumed. In
addition, it is believed that the Company’s Automobile and Industrial Machinery Parts Business, starting with pistonrings, will enable it to beat out the competition through appropriate business strategy and be able to acquire stableearnings for a long period of time. Considering such points, we at FISCO believe that the stance of investors toward
the market surrounding automotive engine parts is somewhat pessimistic. Full-fledged synergies from the merger
can be expected going forward, so focus will be on the Company’s progress on its 1st midterm management plan.

We encourage readers to review our complete legal statement on “Disclaimer” page.

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