MEDIUM-TERM MANAGEMENT PLAN 2024

May 13, 2021
Meidensha Corporation
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Table of Contents
1. REVIEW
2. The concept ofMedium-term Management Plan 2024
3. Medium-term Management Plan
Corporate Strategy

3/18

1. Review: Progress of FY2018-2020 (Previous Medium-term Management plan)

Strengthen profitability of core business and prepared for future growth
Delay in progress of T&D business strategy.

・ Record high earnings in FY2019
by Strengthen profitability of core business→ Led by the public infrastructure and O&M businesses
High profit margins continued in the semiconductor equipment
business

・ Under targets in the final fiscal year (due to COVID-19)
・ The increase in T&D business profitability is only halfdone
・ Lower than expected demand for semiconductor products

Achievements

Achievements

Corporate Strategy

Reconsid
eration

Quantitative targets

Reconsider
ation

Achievements:
Reconsideration:

・ Investment in growth businesses→ Capital participation in local companies andestablishment of local hubs (USA, Vietnam) in the
T&D business→ Increased investment in the EV business (Japan,
China)・ Business expansion to new areas of growth→ NPI: New company using pure ozone technology→ ELMODIS: Partnership to promote digital solutions

・ Still room for improvement in smart
factory/workplace initiatives
・ Expansion of substation business markets
located west of India, including Africa→ PML (lawsuit issue)
・ Expansion of electronic equipment business field→ Creation and commercialization of products tocome after VC

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2. The concept of Medium-term Management Plan 2024
(1) Situational overview

4/18

 Society is calling for companies to work harder to address global challenges, and this trend is likely tostrengthen in the future.
 Technological innovation led by digitalization will accelerate further. Cross-industry collaboration also will
advance.
Highly probable changesof the times

ClimatechangeDigitalization

Diversification

Important global trends and keywords for Meidensha■Climate change countermeasures (Green New Deal, etc.)■Sustainable growth that balances the environment andsocioeconomics■Collaboration and co-creation with other industries■Development of a diversified society (infrastructure, cities, etc.)■Diversification of attitudes toward employment and values■Innovation from diverse human resources and experience
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2. The concept of Medium-term Management Plan 2024

5/18

(2) Positioning and thinking

 Generate results from initiatives to increase growth and earning power, and realize “high-quality” growth.
 Respond to changes of the times and promote ESG-focused management to build a new society.
FY2018-20

FY2015-17

V120

Medium-termManagement Plan
2020

HOP

Powerful STEP

Establishinggrowth areas

Medium-term Management
Plan 2024

Strengthening theearnings base
Growthinvestments

Finding new areas

Realization of“high-quality”
growthPromotingmanagementambidexterity

Climate change countermeasures (carbon neutral)
Highly probablechanges of the times

FY2025Next and ensuingmanagement plans

JUMP
Promoting ESG
management

Establishing anearnings base

FY2021-24

Digital transformation (DX)
Different communities, human diversity
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Ideal state of being/
VisionWork to build a newsociety throughhonesty to the earth,society, and people,
and through thepower of co-creation

2. The concept of Medium-term Management Plan 2024

6/18

(2) Positioning and thinking

In light of the effects of COVID-19, the period is 4 years (1 + 3 years). Quantitative targets inthe final fiscal year are based on the assumption that COVID-19 will subside, and specificstrategies will be established for recovery in the initial year and for after COVID-19.
FY2021 (with COVID-19):
Phase of establishing a concrete strategy for FY2022-24 while recoveringfrom the effects of COVID-19
Respond to urgent issues

Consider for next fiscal year and beyond

Realization ofhigh-quality
growth・ Review supply chains
・ Increase profitability,etc.

・ Change the business model for after COVID19・ Consider partnerships

Promotion of
ESG
management

・ Strengthen internal
control・ Set KPIs (FY2030 goals)

・ Consider specific measures for KPIs
・ Review evaluation system, etc. (corporate
reform)Promotion ofmanagementambidexterity

・ Get newly establishedcompanies on track

・ Consider specific measures for KPIs
・ Look for next generation businesses (afterEV)

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FY2022-24(after COVID-19)

ESG-focusedmanagement andbusiness strategy(execution phase)3. Medium-term Management Plan Corporate Strategy

7/18(1) Quantitative targets, ESG indicators, etc.

Quantitative targets (FY2024)
Orders¥300 billion
Net sales¥300 billion
Operating profit¥18 billion
Operating Margin
6.0%
Net profit¥12 billion
Overseas sales¥73 billion
ROIC
8.0%
ROE
10.0%

Investment (cumulative over 4 years)
Capital investments ¥60 billion(Growth investments¥20 billion)

R&D investments¥40 billion

Financial indicators: raise rating (A ratinglevel)Net worth¥120 billion
Dividend payout ratio stable at 30.0%

ESG indicators
Second Meiden Environmental Vision: Target for cutting greenhouse gases by 2030
(vs. FY2019)
Emissions from business activities (Scope 1 + 2): 30% reduction
Emissions from product use (Scope 3):
15% reduction
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3. Medium-term Management Plan Corporate Strategy

8/18(2) Strengthen business management capabilities: Organizational reform

The objectives of organizational reform are (1) clarification of responsibilities andauthority, (2) quick decision-making and generation of business synergies, (3)quick response to environmental changes and diverse needs.
Main clientsBusiness groups
Power
Infrastructure
Business Group

Public, Industrial &Commercial Sector
Business Group

Mobility & Electrical
Components
Business Group(Electric power production &substation business)(Social systems business)(EV business)(Railway systems business)(Electric power/energy
business）(Water infrastructurebusiness)(Mobility T&S business: formerly
the dynamometer business)(Electric motor solutions business)(Electronic equipment business)

IPP, PPS, etc.
Electric power companies,
etc.
Public agencies, municipal
governments
Private sector (railroads,
broadcasters)
Other
Automakers
EV-related businesses,
etc.

Field Service Engineering
Business Unit Group
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Private sector(Semiconductors,
industrial equipment, etc.)

3. Medium-term Management Plan Corporate Strategy

9/18(2) Strengthen business management capabilities: Business reform and capacity-building

Establish committees and projects, and strengthen necessary management bases
along with new trends of the times.
Business reform and function optimization throughdigitalization

Management
bases/structure

Review processes and core systems
Strengthen inter-organizational collaboration(group and large factory system)

Organize the functions of group companies
Stronger product competitiveness, ambidextrous R&D

Manufacturing
capabilities/R&D

Build low-cost, high-quality mass
production lines
Reduce cost of made-to-orderproduction
Accomplish the Second Meiden Environmental Vision

Promotion of ESG and development of innovative
solutions
Corporate
culture/personnel
training/innovation

Use diverse human resources
Implement carbon neutral measures
Build an organization that supports innovation
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■ Increase the efficiency andproductivity of indirect divisions（FY2024 target)
SG&A no more than 19% of net
sales(FY2021: 20%)
■ Increase added value andcontrol/reduce fixed costs(FY2024 target)
Gross profit margin 25% or more
(FY2021: 24%)
■ Reduce GHG(FY2030 target vs. FY2019)
Scope 1+2: 30% reduction
Scope 3:15% reduction■ Female executives (proper)(FY2024 target) at least 1

3. Medium-term Management Plan Corporate Strategy

10/18(3) Business Group strategies

Power Infrastructure
Business Group

Quantitative targets

Electric power production and substation equipment business:
produce investment results and expand business size

India
■ Expand business in India and into west of India■ Supply products to Japan and ASEAN

Orders
Net sales
Operating profit

FY2024(FY2021)¥58.0 billion (¥51.5 billion)¥55.5 billion (¥47.5 billion)¥2.0 billion (¥-1.0 billion)

Electric power/energy business
ASEAN/China■ Expand business in the Vietnam market■ Maintain top share in Singapore market and capture
O&M demand

North America■ Capture demand for environmental measures andexpand business via the new company

Japan■ Strengthen the mother factory function■ Enhance and expand sales of specialty products with anenvironmental theme

Use diversified society and carbon neutrality as anopportunity to expand businessElectric power■ Participation in new T&D networks project by thepower companies etc.
■ Next-generation substation system + eco-friendly
developments using DX
Renewable energy■ Hydropower maintenance (remote maintenance,labor-saving)■ Expand windpower business (expand O&M)
■ Expand small and medium-sized hydropower generation
businesses

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3. Medium-term Management Plan Corporate Strategy

11/18(3) Business Group strategies

Public, Industrial & Commercial Sector
Business Group
Public infrastructure related businessContribute to diversified society and the environment
through technology, products, services, and solutions
using DX
■ Expand the business scope (partnerships and PPP
businesses)■ Develop water and sewer facility products that consider
the environment■ Save labor on maintenance and management by usingDX■ Enhance earnings power in the ceramic membranebusiness

Social systems related businessContribute to decarbonization and a resilient society
through products and maintenance■ BCP products (mobile power source vehicles) andincreased servicing■ Increase the value provided by applying ICT technology
products■ Strengthen overseas EPC project risk management forJapanese companies

Quantitative targets
Orders
Net sales
Operating profit

FY2024(FY2021)¥95.8 billion (¥79.5 billion)¥92.8 billion (¥91.3 billion)¥5.6 billion (¥3.8 billion)

Railway systems businessSupport railroad infrastructure, contribute to carbon
neutrality
In Japan■ Propose labor-saving measure:(Expand Overhead Catenary System sales, measures
without patrol inspection, etc.)■ Expand sales of specialty products (impedance bonds,
etc.)
Overseas■ Reduce project risk and increase earning power■ Efforts in new projects (ASEAN)■ Strengthen collaboration with Japanese trading companies
and engineering firms

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3. Medium-term Management Plan Corporate Strategy

12/18(3) Business Group strategies
Power Infrastructure Business Group and Public,
Industrial & Commercial Sector Business Group
Generate new value through synergies between the Power Infrastructure Group and the Public, Industrial &Commercial Sector Business Group, and build resilient and sustainable regional bases.
◆ Case study 1
Joint demonstration experiment for smart rainwater
management using IoT (Moriya City)◆ Case study 2
Demonstration experiment for flood-control support service(Tsukubamirai City)◆ Case study 3
Demonstration experiment for a virtual power plant (VPP)
that uses technology for reusing EV batteries (The
Chugoku Electric Power Co., Inc. and Mazda Motor
Corporation)
General household

VPP image

Provide electric power
adjusted for supply/demandand frequency
Electric powertransmission anddistribution company

Aggregator*1
Provide electric power
demand to avoid renewableenergy output suppression

Factory

Renewable energy
company

Integrate and regulate
diverse power sources

Municipal government

Provide the DR and electric
power required at the sametime and volume
Retail electricity supplier

Regulate electric power
demand for peak cuts andrenewable energy use
Customer

Contributions to the global
environment

Agreement signing ceremony(Moriya City)

Agreement signing ceremony(Tsukubamirai City)••

Promote the use ofrenewable energy
Save energy, etc.

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••

Contributions to the regional
community
Local production andconsumption of energy
Independent source of electric
power in case of disaster, etc.

3. Medium-term Management Plan Corporate Strategy

13/18(3) Business Group strategies

Mobility & Electrical Components
Business GroupElectric motor solutions businessContribute to saving energy, human resources, and laborthrough motorization and digitalization■ Motors/inverters:
Maintenance/servicing solution using IoT (partnershipwith Elmodis)■ Industrial vehicles: FL market share and expansion toelectric construction equipment and other fields■ Industrial Logistics Systems: Expand collaboration with
SI and robot makers

Electronic equipment businesses
Contribute to future enrichment through the digitalizationof society■ VC products: Expand sales to North America
Develop and expand sales of custom
products■ X-ray tube/source: Shift to large current and high voltage

Quantitative targets
FY2024(FY2021)
Orders¥100.0 billion (¥65.3 billion)
Net sales¥100.0 billion (¥65.9 billion)
Operating profit¥8.1 billion (¥1.5 billion)

Mobility T&S (Testing & Solution) Businesses
Contribute to the promotion of next-generation mobility
development through product engineering■ EV testing equipment (high-speed motor testing
equipment) + HILS* package sales■ EV motor certification testing■ Expansion of vehicle development engineering that uses
model-based development (MBD) to the fullest■ Expand sales of electrified products to China and the U.S.
* HILS (Hardware-In-the-Loop-Simulation)
Equipment simulator that quantifies engine function and vehicle behavior
for development purposes

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3. Medium-term Management Plan Corporate Strategy

14/18(3) Business Group strategies

Mobility & Electrical Components
Business Group<Annual production volume of motors and inverters>

EV business: Contributes to the spread of electric vehicles

Annual production

for a decarbonized society

Locations in Japan (Numazu,
Nagoya, Kofu)

790,000■ Local production for local consumption
business development and share
expansion(Generate results from capital
investments)

Location in China (Hangzhou)

200,000*(Max 340,000)* Scheduled to start production in FY2021 for 100,000 (max 170,000).
Scheduled to start production in FY2023 for the remaining 100,000(max 170,000).

<Historical net sales>■ Strengthen next-generation mobility
products(Cooling technology, high-speed,
noiseless technology)■ Smaller, lighter, more efficient e-Axles■ Cultivation of new customers (China+ Japan)■ Increase production capacity to abusiness scale of 100 billion yen

1,000

Nominated
FY2022: 90%, FY2023: 80%, FY2024: 60%

500

Medium-term
Medium-termManagement
Management
Plan 2024
Plan 2024

Results
Results

271

374

385

FY22

FY23

1,000

459

500

FY24

FY25

・・・

0
FY16

FY17

FY18

FY19

FY20

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FY21

FY28

3. Medium-term Management Plan Corporate Strategy

15/18(3) Business Group strategies

Field Service Engineering
Business Group

Quantitative targets
FY2024(FY2021)
Orders¥42.0 billion (¥39.5 billion)
Net sales¥41.0 billion (¥39.4 billion)
Operating profit¥6.0 billion (¥5.8 billion)

Provide smart solutions service with afocus on life cycle engineering (LCE)■ Integration of one-stop
service and environmental
preservation(energy savings and GHG
reduction)

Solve equipment problems

One-stop service

Solve potential customer issues

Walk-through-2017■ Promotion of smart security(remote maintenance,
status monitoring, etc.)■ Creation of a workplace that
can train young engineers anduse experienced engineers

Optimally solve customer issues with all equipment

Smart solutions

-2030

-2020

EvolveDeepen
Are there any
problems?

Is this a problem?

We will provide support in
optimizing all of yourequipment

Environmental
improvement

Equipment
optimization

Actually, yes, it is aproblem.

Active sales style

Passive sales style
Water

Diagnose

Save energy

Side-by-side withcustomers
Facility management

Lock in customers
GHG reduction

Personnel training

Coordinate maintenance andmanagement• Improvements for SBT WB2.0• Facility management• Cross-industry collaboration• Inspection optimization• Repair plan

BCP technology

Gas
Machinery
Look for partners

Assess potential issues mainly in electric equipment

Expand to solution service for all equipment

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Agent for equipment maintenanceand management

3. Medium-term Management Plan Corporate Strategy

16/18(4) Promote management ambidexterity

Shift earnings obtained in existing fields to investment in new fields, and accelerate thecreation of a new society.
Promotion of managementambidexterity by shifting earnings
obtained in existing businesses to active
exploration of and investment in new
fieldsCreate new value that supports a new society(Targets: Net sales of ¥5 billion in 2024)

Products
andservicesthat
contributeto carbon
neutrality

New
Peripheral

Cultivate the existing
peripheral area

Existing

1. Organization of the innovation process
2. Training of diverse personnel to handle
new development
3. Exploration and co-creation of new social
needs

Excitement

Existing

Peripheral

BCP
businessthat
contributes
to a safe
and securesociety

Excitement

Three-pronged structure supporting
innovation to strengthen bothindividuals and the organization

MarketEstablish a budget for investment in new
fields, and develop and commercializeorganizational and individual ideas

Services thatsave humanresources andincrease
efficiency
through theuse of digitalsolutionsNew

Technology, products, and services

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Providenew valuethat
excites
people3. Medium-term Management Plan Corporate Strategy

17/18(5) Promotion of ESG management

Imagine the society aimed for in 2030, and establish an ideal state of being/vision. Back-calculate whatshould be done this year, and deepen management and business strategy by focusing on ESG management.
Hypothetical social changes
Climate change
Digitalization
Diversification

Meidensha’s ideal society
・ A resilient society where humans live in harmony withnature・ A society that feels safe, prosperous, and exciting・ A society where different communities and people cancoexistMeidensha’s DNA (strengths)
Honesty, responsibility, social
contribution

DNA that must not be lost
Innovative spirit, independence

Ideal state of being,
visionWork to build a new society through honesty to the earth, society, and people,
and through the power of co-creation
Focus areas toward
the ideal society

ImportantvaluesRenewableenergyE
Sustainability

Sustainableinfrastructure

S

Green
mobility

G

S
DiversificationSmartindustry

Honesty andresponsibility

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E

FutureorientedS3. Medium-term Management Plan Corporate Strategy(6) Cash Flow Allocation

18/18

Growthinvestments

Invest in EV business, wind power replacement, etc.

Generalinvestments

Investments in the renewal of existing production equipment,
environmental measures, etc.

Financialstrategy

4-Year cumulative operating cash flow:¥70-75 billion

Shareholder
returns

Investment
strategy

Invest in growth and make shareholder returns after improving financial
soundness.

Expansion of net worth: ¥120 billion

Increase corporate value through businessContinue stable dividend(dividend payout ratio at 30% level)

Reduction and effective use of assets

Net D/E ratio: 0.25-0.30X

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