May 9, 2024

Company name: Osaki Electric Co., Ltd.
Representative: Chairman and CEO
Yoshihide Watanabe(Code: 6644, TSE Prime Market)
Contact: Director and Managing Executive Officer
Head of Corporate Strategy Division
Ryuichi Ueno

Fostering Management Conscious of Capital Cost and Stock Price
Osaki Electric Co., Ltd. (Tokyo) is taking action to foster management conscious of cost of capital and stockprice.
1. Current situation
Thus far under a rolling Mid-Term Management Plan, OSAKI Group has worked on key initiatives to increase
enterprise value. The year-end stock price, in fact, rose again in Fiscal 2023 (ended March 31, 2024); however, PBR
has remained well below 1.0. Management believes this low PBR arises from ROE faltering below the cost of equity.
In addition, strategies and plans for sustainable growth do not appear to be fully appreciated by our shareholders
and investors. Taking account of the current situation, OSAKI Group will aim to increase enterprise value byexecuting the following initiatives.

Net sales
Operating income
Profit attributable toowners of parent
Operating income tonet sales ratio (%)
ROE (%)
Basic earnings per share(Yen)Net assets per share(Yen)
Stock price at the end ofthe period (Yen)PER (times)
PBR (times)(Millions of yen)
FY2022
FY202389,253
95,1472,226
5,874

FY201990,0693,691

FY202076,2552,684

FY2021
76,184
1,277

1,197

482

△658

1,319

2,407

4.1

3.5

1.7

2.5

6.2

2.5

1.0

-2.9

5.0

24.47

9.84

△13.42

27.86

51.36

956.44950.37936.60981.44

1,057.46

534

610

468

532

683

21.8
0.56

62.0
0.64

0.50

19.1
0.54

13.3
0.65

2. Enterprise value enhancement initiatives(1) Improving ROE
With regard to ROE, management will place top priority on surpassing the current cost of equity recognized as
5.2% and aim for 8% or more in the mid-term. Specific initiatives are as follows.
(a) Improved profitability
Successful implementation of our Mid-Term Management Plan will strengthen profitability. Specifically, in theJapan business, in addition to securing earnings from the deployment of second-generation smart meters, we will
work to expand earnings in the solutions business. In the Overseas business, the shift to sales of meters combinedwith head-end systems will improve profitability.
For further information about the Mid-Term Management Plan, please refer to today’s release “OSAKIFormulates Mid-Term Management Plan and Establishes its Corporate Purpose.”(b) Capital efficiency and optimal capital structure
Improved working capital efficiency and reduced non-operational assets through the sale of strategic
shareholdings will lead to overall improvement in capital efficiency.
In regard to shareholder returns, the company has adopted a dividend policy that employs the higher of either
DOE (dividend on equity ratio) of 2% or payout ratio of 30% as a guideline for a steady redistribution of profits toshareholders. The performance improvement goals also target an increase in dividend at the earliest possible time.
In addition, management will continually study the repurchase of stock based on a comprehensive assessment of
the stock price and financial condition of the company.
With regard to operating cash flow generated, the OSAKI Group will endeavor to make investments including
M&A deals to improve profitability and appropriate distributions as shareholder returns.
(2) Improving capital market valuation
We aim to foster an understanding of the initiatives for sustained growth among our stockholders and investors
and to increase market valuation. Towards these goals, we will execute management under principles ofsustainability and augment investor relations activities.

Fostering Management Conscious ofCapital Cost and Stock PriceMay 9, 2024

Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved1

Current situation■ Latest reported PBR is around 0.6 and remains below 1.0.
■ Management believes the low PBR arises from stagnant ROE.
■ PER remains below industry average, an inference of low expectations fromcapital markets towards future earnings growth.

ROE（％）(industry-average; 10.0)

PBR（times）（PBR=ROE×PER）
0.71

0.65

0.64
0.56
0.50

1818

1919

PER（times）
683

610
468

20

21

18.7

23(FY)

20

21 -1.4 22

23 (FY)

62.0(industry-average; 23.7)

532

22

2.9

2.5
1.0

(as of the end of FY)

534

3.8

0.54

Stock price (Yen)
689

5.0

1821.81919.1

20

2122

13.3
23 (FY)-34.9
Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved

2Underlying policy for improving ROE■ ROE has remained below the current cost of equity recognized as 5.2%.
【Target】
With regard to ROE, management will place top priority on surpassing

the cost of equity early and aim for 8% or more in the mid-term.
Actual12Mid-Term Management PlanROE（％）

10.0

106.5

Cost of equity
65.2％ *Calculation is based on CAPM.
8

2.5

42

3.8

1.0
-1.4

0-2

5.0

FY18

ROE ＝FY19FY20

Basic earnings tonet sales ratio

FY21×2.9FY22

FY23

Total asset turnover
ratio

4.0

FY24×FY25

FY26

Financial leverage■ OSAKI will aim to improve ROE by improved profitability and capitalefficiency.
Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved

3ROE improvement initiatives
Work on following measures to improve profitability andcapital efficiency(1) Profit model reform
Improved
profitability

Top-priority measure that essentiallycontributes to higher ROE▶ Strengthen business portfolio
management(2) Slim down the assets
ImprovingROE

Capitalefficiency

Improved working capital efficiency(4) Properuse of cash

Reduced non-operational assets(strategic shareholdings)(3) Shareholder Returns
Repurchase of stock
Optimalcapitalstructure

Dividend policy

Maintain capital adequacy ratio of around 50 percent

Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved4

(1) Profit model reform■ Successful implementation of our Mid-Term Management Plan (FY20242026) will strengthen profitability.

Key Strategic Pillars
Smartmeters &solutionsin JapanSupplying added value to social infrastructure centered onsmart meters
Supporting the streamlining of customers’ operations(digital transformation) by harnessing digital technology
Providing comprehensive Green Transformation Solutions
to achieve decarbonization
Transformation into profit-oriented business

Smartmeters &solutions
overseas

・ Provision of high value-added solutions tailored to market
characteristics
・ Reinforcing the commercial and industrial meter business・ Exit from low-profit markets
・ Organizational reforms
Building resilient Group Operations platform
Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved5

(1) Profit model reform
Japan: To secure steady earnings from the deployment of second-generation
smart meters scheduled for full-scale deployment in Fiscal 2026 andexpand earnings in the solutions business (green transformation
solutions, smart locks etc.).
Overseas: To improve profitability by shifting to sales of meters combined withhead-end systems and exit from low-profit markets.
【 Financial Targets 】
Actual(hundred million yen)

Mid-Term Management Plan

(％)

90

1080

970

860

750

640

530

4

Profit attributable toowners of parent

20

310

2

Operating Income
to net sales ratio

01

Operating Income(10)FY21

FY22FY23FY24

FY25

FY260For further information about the Mid-Term Management Plan, please refer to “OSAKI Formulates Mid-Term Management
Plan and Establishes its Corporate Purpose” released on May 9.
Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved6

(2) Slim down the assets
1) Improved working capital efficiency
Appropriate controls and reduction of domestic and overseas inventories, trade receivables,
and trade payables▶ Work to improve the cash conversion cycle▶

Reduce inventories by approximately 3 billion yen by the end of Fiscal 2026

2) Reduced non-operational assets
Reduced strategic shareholdings▶ Targeting a 30% reduction (around 2 billion yen) from the current level, to be
executed during the Medium-Term Management Plan (FY2024-26)

Cash flows generated will be used for growth investments, etc.,
to improve profitability.
Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved7

(3) Shareholder Returns
Dividend policy

Dividends▶ Distribution in accordance withperformance on the premise of stabledividends

・Issue stable dividends based on dividend policy
・Aim to increase dividends at an early stage▶ OSAKI dividend guideline considers thehigher of either DOE of 2% or payout
ratio of 30%

Repurchase of stock

Stock repurchased under the policy

OSAKI will continually study repurchasing based on
a comprehensive assessment of cash, working capital,performance, stock price, and pending investments.

Period：Feb 2022 to Jan 2023
Number of shares：2.5 million shares
Total amount：1.25 billion yen

The underlying policy is to limit treasury stock to 5%of issued shares and to retire shares without any use.

*Retirement of Treasury Stock:
1 million shares (May, 2024)(hundred million yen)
25Dividends

20Repurchaseof stock

15105

FY21-23 (Actual), FY24 (Plan)
Dividends: 20yen per share

Mid-Term Management Plan

Actual

8.4
4.0

実績

9.7

9.4

9.3

9.3

FY21

FY22

FY23

FY240

FY26

Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved8(4) Proper use of cash (FY24-26)
Appropriately distribute acquired cash for improved profitability andshareholder returns(Billions of yen)

Cash outflows

Cash inflows

Net cashWorking capital

6.1

About

（as of the end of FY23）

Operatingcash flow

About

24.0

6.0

Capital investment(Including investment in
the new business)
About

10.0

Investing for growth(M＆A、Capital tie-up)

12.0

～

sale of strategic
shareholdings
About

2.0

Shareholder Returns
Dividend*：4.0～

Repurchase of stock：Continual study*Including dividends to controlling shareholders

Investment in the existing
business domain
Japan：
Second-generation smart
meters, Solutions business

Overseas：
Smart meters combined withhead-end systems

Investment in the growthfieldsJapan：
Decarbonization
Support for customer’s digitaltransformation

Shareholder Returns
・Aim to increase dividends at anearly stage・Continually study the repurchaseof stock
Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved

9Operations policy (toward higher PER)■ PBR improvement also requires higher PER.
More favorable market assessment of future growth potential isnecessary to attain higher PER.

■ To win market approval, OSAKI Group will firmly implement new MidTerm Management Plan and engage in following initiatives:

1) Driving management undersustainability principles▶ Response to Climate Change▶ Execution and achievement of humancapital strategy▶ Strengthen corporate governance2) Augmenting investor
relations (IR) activities▶ Augment investor relations activities andshareholder relations activities▶ Expand disclosures via combined
reports and corporate website

Higher PER
Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved

10Mid-term Financial Targets
FY23

FY24

FY25

FY26

ActualForecast

Forecast

Forecast

95.1

90.0

95.0

100.0

5.9

4.7

5.5

9.0

Ratio to sales

6.2%

5.2%

5.8%

9.0%

Profit attributable toowners of parent

2.4

2.0

3.5

5.5

Ratio to sales

2.5%

2.2%

3.7%

5.5%

5.0%

4.0%

6.5%

10.0%

(Billions of yen)

Net sales
Operating income

ROE

Total in three years
Capital expenditures

1.9

About 10.0

Depreciation

2.3

About 8.5

R&D expenditures

3.5

About 10.0
Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved

11Appendix: PBR improvement logic tree
Improved PBR through higher ROE and PER

Improved
profitability

Profit model reform by implementing themid-term management plan

Improved working capital efficiency
HigherROE

Capitalefficiency

Optimalcapital
structure

Improved
PBR

HigherPER

Highercapital
marketvaluation

Reduced non-operational assets(decrease strategic shareholdings)

Shareholder returns（dividend policy, repurchase of stock）
Maintain optimum level of capital adequacy ratio

Firm implementation of Mid-Term Management
PlanManagement under principles of sustainability
Augmented investor relations activities
Copyright (C) 2024 OSAKI ELECTRIC CO., LTD. All Rights Reserved

12

OSAKI ELECTRIC CO., LTD.

TSE Prime Market
Code: 6644

■Figures in the document are for reference and include unaudited figures.
■Forward-looking figures are based on data and information available up to the date of its announcement
and may differ significantly from actual results.
■Please refrain from copying the data, contents and other information subjected to copy right.