Keihan Group’s Long-Term Strategic Concept
May 9, 2018

Keihan Holdings Co., Ltd.

Table of Contents

01 Reflections on the past
Reflecting on the previous management vision
Reflecting on the previous medium-term
management plan “Bravely Pursuing Creation”

02 Update of the management vision
Changes in the business environment
considered important by the Keihan GroupNew management vision
Initiatives toward realization of the new
management vision
Overall structure of the Keihan Group’s
long-term strategic concept

2
3
5

7
8
9
10
11

03 Long-term management strategy(until FY2027)
Medium-term management plan
(FY2019–2021)
Long-term management strategy
Overview
Main strategies
Preparations for the management vision
Image
Medium-term management plan
Business strategies
Idea of fund usage
Shareholder return policy, capital policy
Quantitative target
Medium-term management plan
Income plan, segment information
Contribution to the achievement of SDGs

12
13
14
19
20
21
30
32
33
34
35

1

01 Reflections on the past2

Reflecting on the previous management vision
Overview of the previous vision “Our Challenge to
Keihan as First Choice”[Background of establishment of the vision]
The Keihan Group’s management vision “Our Challenge
to Keihan as First Choice” was established in 2006 withthe aim of transitioning from a “successful company”
to a “large and successful company”, with an eye
toward FY2021.

[Basic policy]“To create a Keihan Group worthy of being chosen bymore customers, with a mission of supporting andenriching people’s lives.”

Expand Keihan area and improve its
attractivenessEstablish the Keihan brand
Maintain and improve customer
confidence
Intensify sales ability from thecustomer viewpoint
Aggressive and vigorous business tie-ups“Our Challenge
to Keihan
as First Choice”

With the aim of becoming a “large andsuccessful company”, we aggressively
expanded business mainly in the real estate,retail distribution and hotel businesses.

We established a resilient managementfoundation through management reforms, despite
events that had a significant effect on our initial
growth strategy, namely the financial crisis in 2008
and the Great East Japan Earthquake in 2011.

We improved profitability by flexibly
responding to changes in the businessenvironment and achieved our initial targetof JPY20 billion in consolidated net income.

3

Reflecting on the previous management vision(Past 10 years)
Stabilized the management foundation through management reforms. Adapted to the external
environment and transitioned to a growth phase.
(Millions of yen; profits use the left axis, operating revenue uses the right axis)
Operating income by segment
Transportation
Retail distribution
Other businesses

Not only did profitability improve,
but also capital efficiency andfinancial position

Real estate
Leisure & service

Operatingrevenue
OperatingincomeProfit attributableto owners ofparent

FY2009FY2018

JPY

JPY

JPY

JPY

Change260.7 bn 322.2 bn 1.2x
14.6 bn
JPY

31.4 bn 2.1x
JPY

7.4 bn22.7 bn 3.0x

ROE

5.7％

10.8％

Up
5.1 p

D/E ratio

2.3x

1.4x

Down
0.9 p

4

Reflecting on the previous medium-term management
plan “Bravely Pursuing Creation”
Took on challenges toward growth in the second foundation stage, including the transition to a holding company in 2016.
Each business made efforts toward strengthening the management foundation, with various measures progressing smoothly.

Main Strategies

Qualitative targets

Main actions taken

Achieve new growth through the creation of
tourism opportunities“THE THOUSAND KYOTO” project—a new hotel in front of Kyoto Station
Opening of KYOTO TOWER SANDO, Kyoto Tower as a global baseRevitalize the areas along the Keihan
Railway lines—efforts to redesign the areas
along the Keihan Railway lines

Redevelopment of Hirakatashi Station and its surrounding areas• Upgraded Hirakatashi Station

Create contents to enhance the “value ofliving”

Creation of contents under the theme, BIOSTYLE• Promoted a commercial complex project in Shijo-Kawaramachi, Kyoto

Establish a “steadfast group management”
style• Shifted to a holding company structure

Strengthen Each Business and Management
Foundation• Introduced PREMIUM CAR—special carriages with reserved seats• Upgraded Gion-shijo Station• Opened Keihan Yodo Logistics Yard
• Established Keihan Private REIT, Inc.
• Acquired Zero Corporation as a consolidated subsidiary• Upgraded the KEIHAN MALL
• Opened FREST NAGAO• Opened HOTEL KEIHAN YODOYABASHI

5

Reflecting on the previous medium-term management
plan “Bravely Pursuing Creation”
All of the quantitative targets to be achieved at all costs were achieved.
Stable profits were generated through commitments toward growth which led to greater revenue as well as
external factors such as an increase in inbound demand. Operating revenue and operating income reachedrecord highs during the previous medium-term management plan period.
FY

2015

FY

2016

FY

2017

FY

2018

Figures in brackets are initial plan figures

Operatingrevenue
OperatingincomeEBITDA(Operating income + depreciation)

Net interest-bearing
debt / EBITDA multiple(Times)ROE

JPY

294.9 bn

JPY

JPY

300.1 bn 302.9 bn

JPY

JPY

JPY

29.4 bn

31.5 bn

32.3 bn

JPY

JPY

JPY

46.5 bn

49.0 bn

50.4 bn

6.1x
10.1

％

6.1x
11.9

％

5.9x
11.6

％

322.2 bn

JPY

(JPY302.6 bn)

31.4 bn

JPY(JPY22.1 bn)

Operating revenue
Main factors for increase(compared to FY2015)+JPY27.3 bn

Captured inbound demand
Demand captured in each business,incl. passenger revenue of Keihan
Electric Railway+JPY4.0 bn

JPY(JPY41.1 bn)

Growth of real estate business
OMM* becoming a wholly
owned subsidiary, acquisition ofbuildings for lease, growth of the+JPY8.0 bn
sales business, etc.

5.9xExpansion of the hotel businessNew hotel opening,+JPY1.5 bnrenovation of hotels, etc.

50.5 bn(8.1x)

10.8％

Business expansion through M&A
Acquisition of+JPY13.0 bn
Zero Corporation as a subsidiary, etc.

(6% or more)*Osaka Merchandise Mart (currently Keihan Building Co., Ltd.)6

02 Update of the management vision7

Changes in the business environment considered
important by the Keihan GroupOf the changes in the business environment expected in the long term until around 2050, the following matters are consideredparticularly important by the Keihan Group.
Saturation of thedomestic market

The period of “quantitative expansion” will end due tothe drop in population in Japan and areas along
Keihan Railway lines• New value creation will become necessary for growth• More women, elderly, and foreigners will participate in
the labor force, leading to workstyle diversification

Devastating impact
of technology
evolution

Rapid development of IoT and AI, expansion of asharing economy, and development of genome
science are expected• Consumers’ values and lifestyles will change
dramatically, forcing a review of the ways of conducting
business• The era of 100 years of life will arrive, leading toincreased interest in food, exercise, and health toextend healthy life expectancy

Urbanization of Asiaand other areas

Urbanization will proceed around the world, in Asia inparticular, creating a huge middle class that will leadthe world’s consumer market• Businesses dependent on the “population bonus” will
shift to Asian markets• As Japan’s large urban areas face competition withemerging urban areas in Asia, Osaka and Kyoto will
expand their network with Asia mainly in the
medical/health industries and tourism

Climatechange andnaturaldisasters

Changes
expected in
Kansai area

The importance of responding to natural
disaster and earthquake risks due to global
warming will rise
• The need for disaster prevention functions
and BCP (business continuity plan) will risein public services, such as railways, andhousing/buildings, etc.
• Products, services, and businesses thatsolve social issues such as environment
protection will gain more empathy from
customers
2024 Opening of IR (integrated resort) in
Yumeshima, Osaka
2025 OSAKA-KANSAI JAPAN EXPO 2025
2031 Opening of the Naniwasuji Line
2037 Extension of the Linear Chuo
Shinkansen to Osaka
2046 Extension of the Hokuriku
Shinkansen to Osaka(*Concept or plan)• Due to the IR, Expo, and the developmentof the railway network, the non-resident
population will see stable and continuous
increase, energizing the Kansai economy.
Exchanges with the Tokyo and Nagoya
areas will also proceed, creating a newmega urban area.

⇒ Although the policy of aiming for “a big and good company” and “Keihan as First Choice” of the previous vision will notchange, the Keihan Group will face a balanced contraction if it only responds to changes simply as an extension from thecurrent situation.
⇒ Even under the drastically changing future business environment, we intend to upgrade our management vision to take on thechallenge to “create value” and “expand globally” by capturing opportunities one step ahead of the changes so that the Groupcan continue to achieve growth.

8New management vision

Be the beautiful Keihan areas and the global Keihan group

We will create value for towns and tourism and disseminate them to theworld so that the areas along Keihan Railway lines which are rich in history,
culture, and landscape will be chosen by more people as areas where theywant to live and visit beyond countries and time.
We will create a beautiful life cycle in areas along Keihan Railway lines thatbrings fullness to the mind and body and contributes to the realization of asustainable society, and spreads the ring of empathy to the world.
We will attract many inbound tourists to the areas along our lines and takeon the challenge to expand our business Asia-wide.
9

Initiatives toward realization of the new management vision
We will commence initiatives toward the realization of the management vision with “safety and challenge” as thebasic policy and based on a back-casting* approach from the future targeted state

Safety*Back-casting: A method of setting targets for a future point in time and thinking
what should be done now by looking back from the future.

①We will provide safety and security to all customers as universal values
For the Keihan Group, “safety and security are universal values provided to all customers and are the foundation of our existence.
Through the endless efforts of all employees, we will improve both the quality of safety and efficiency, and hand them down to the next generation.
We will also make preparations for protecting customers from disasters.

②We will enhance the appeal of the areas along the Keihan Railway lines from a global perspective and attract
many customers from around the world to the areas

Challenge

The areas along the Keihan Railway lines are full of attractions, such as a rich history, culture, and landscape including the Flow of Water that lead from Lake Biwa to
Osaka Bay and the Fifty-seven Stages of the Tokaido, which leads from Kyoto, a city that represents Japan’s culture, to Osaka through four post towns, and traditionalmonozukuri (manufacturing) as well as cutting-edge life sciences. By also taking on a global perspective, the Keihan Group will disseminate these attractions to theworld through community building in cooperation with the communities and the creation of tourism contents, in an effort to contribute to attracting many customers fromaround the world.

③We will develop and provide products and services that create customers’ “experience value” and “social
value”
Products and services that create customers’ “experience value” and contribute to the realization of both well-being and a sustainable society will be the qualities
offered by the Keihan Group in the future. The Keihan Group will take on the challenge for “quality innovation” in products, services, and businesses in order to createsuch value.

④We will respond to the digital revolution and transform our concept of products, services, and businesses
With the rapid development of ICT constantly in mind, we will utilize ICT to improve safety, security and efficiency, enhance customers’ experience value, and develop
services that efficiently use social resources such as sharing services. We will also transform the existing structure of products, services, and businesses if needed.

⑤We will evolve from “Keihan Group of Japan” to “Keihan Group of Asia”
We will develop areas along the Keihan Railway lines as well as the business of the Keihan Group from a broader perspective of Keihan Railway lines and the KeihanGroup within Asia. We will aggressively attract inbound tourists, businesses, students, investments, and companies from around the world to the areas along the
Keihan Railway lines and develop the Keihan Group’s business in Asia.

10

Overall structure of the Keihan Group’s
long-term strategic concept
Management Principles
The Keihan Group will create a comfortable living environment and contribute to society by establishinga network of dreams, hope, and trust

Management vision(Vision for 2050)

We declare that we will commence
initiatives to address issues from a backcasting approach so that the KeihanGroup can continue to grow amid thedrastic changes of the external
environment expected until around 2050.

Be the beautiful Keihan areas and the global Keihan group

Long-term management strategy(Target: FY2027)

For achieving the management vision, we
will aim to establish a foundation as acorporate group that continuously grows
into the future, with the target year being
FY2027, when major large projects will
be completed.

Medium-term management plan (FY2019–2021)“Create Living, Community, andExcitement”
In the growth stage of which we made our first step in the previous medium-term management
plan “Bravely Pursuing Creation,” we will take on the challenge of creating new exciting value
for customers’ lives and the communities in areas along the Keihan Railway lines.

A specific three-year action plan andnumeric targets based on the long-term
management strategy.

11

03 Long-term management strategy (until FY2027)
Medium-term management plan (FY2019–2021)“Create Living, Community, and Excitement”

12Overview of the long-term management strategy
The main strategies carried out by the Keihan Group toward FY2027
Theme

Basic policy

Priority measures

Redevelop
Keihan areas

Make the areas along the Keihan
Railway lines beautiful throughurban revitalization with railway
stations at the core

Regain the glory of Osaka’s east
to west axis and carry out
community building starting fromrailway stations

Co-create
tourism opportunity

Create tourism opportunities withthe community and promote global
exchange

Strengthen tourism and inboundbusiness mainly in Kyoto

Create relatable
contents

Create products, services, andbusinesses that customers canrelate to

BIOSTYLE-Aim for Keihan as First Choice-Preparations for the management vision
Create area portfolios

Focus on business development in Kyoto and contributeto the re-creation of Kyoto
Expand business to outside the areas along the Keihan
Railway lines (domestic and overseas growth markets)

Promote innovations with an eye to the next generation

Create services and improve productivity by
utilizing ICT technologies
Promote new businesses
13Main strategy (1) Redevelop Keihan areas[Basic policy]
Promote community building centered around railway stations, taking advantage of the area’s history,
culture, and industries, to revitalize appealing and beautiful areas along the Keihan Railway lines andincrease residents and visitors to the areas along the lines by connecting the areas with a traffic network① Regain the glory of Osaka’s east to west axis
Osaka’s east to west axis, which runs from Kyobashi, the gateway
to Kyoto and close to Osaka Castle, via Nakanoshima, which aims
to become the center of regenerative medicine, to the bay area
where an IR is planned, is a historical and important urban axis for
Osaka’s next generation.
We will aim to complete the development of Yodoyabashi andKyobashi during the period of the long-term management strategy
and develop Nakanoshima concurrently.
Subsequently, we will contribute to the creation of new urban appealof Osaka by aiming to redevelop Temmabashi, the founding placeof the Keihan Group, and extend the Nakanoshima Line.

Shin-Osaka

To Kyoto

Kita
Kyobashi
Yodoyabashi Temmabashi
Nakanoshima

Osaka Castle

USJ

MinamiYumeshima② Carry out community building starting from railway stations
Concentrate urban functions near stations and carry out continuous community
Regionality, history
building in cooperation with local companies and communities, taking advantage of Make stations a Make stations a Make stations afamiliar place
comfortable
fun placethe characteristics of the areas such as the history and culture, in an attempt toplacediversify the appeal of the areas along the Keihan Railway lines.
Communication
Promote community building that can only be done by a railway group by using
Commurailway stations not simply as a place for getting on and off trains but a place
ActiveExSafety
Pride
nity,
ness
changeSecurity
brand
integrated with the community where people gather and communicate.
Community building that fosters communities
Expand the initiatives, starting from Hirakatashi Station.
Create a unique “face”
of the area

Create a warm space

Create reasons for people tovisit stations not only to “geton trains”

14Main strategy (1) Redevelop Keihan areas[Main initiatives of the medium-term management plan]
Regain the glory of
One of the largest office districts in Osaka, and a hub between
Yodoyathe north to south axis, Midosuji, and the east to west axis.
Osaka’s east to west axis
bashi

Umeda

Yodoyabashi
Nakanoshima

Namba

Planning development that leverages the Company’s assets
such as the Keihan Midosuji Building.

Kyobashi

The largest terminal of the Keihan lines. With the revitalization
plan of the station building as a trigger, we will aim to create
a community capable for serving as the Higashi gateway toOsaka’s east to west axis by improving the circulation ofpeople in the community, including surrounding areas suchas Osaka Business Park and Osaka Castle.

Nakanoshima

Development plan of the 4-chome district, including the concept of the center ofregenerative medicine and the Agora concept.
Directly linked to Kansai International Airport in the future due to the Naniwasuji Line plan
Based on the above concepts, promote the revitalization of the area, including theutilization of the company’s land.

KyobashiCommunity building starting from railway stations
By 2018, we will revitalize Hirakatashi Station, which is the thirdlargest station of the Keihan lines in terms of the number of users,
and make it an appropriate “face” of a core city that features
history and regional characteristics.
We will start full-scale redevelopment of the Company’s land
directly linked to the station, coinciding with the decision of theurban plan scheduled in FY2019.
We will mainly revitalize the areas along Osaka’s east to west
axis, starting with railway stations and expanding to surrounding
areas, according to the regional characteristics, and aim toachieve synergy effects with community building of urban centers.

Image of the upgrade of
Hirakatashi Station

Image of Hirakatashi Station and its surroundings(proposal by the Company)

15

Main strategy (2) Co-create tourism opportunity[Basic policy]
In the growing tourism market, use the Keihan Group’s comprehensive strengths and create tourism opportunities
together with the communities.
Provide and disseminate attractive tourism experiences mainly in Kyoto in an effort to increase visitors from otherareas of Japan and from abroad.
① Develop the three major tourism areas of Kyoto—Area in front of Kyoto
Station, Shijo-Kawaramachi, and Sanjo
洛北Rakuhoku
Open THE THOUSAND KYOTO, a hotel developed as part of efforts to make the area infront of Kyoto Station a global base, during the period of the medium-term management
plan, and open a flagship commercial complex of BIOSTYLE in Shijo-Kawaramachi, thelargest commercial area in Kyoto.
Concentrate tourism, commerce, and transportation functions in front of Sanjo station
during the period of the long-term management strategy, and develop the area as the basefor tourism of Higashiyama.

② Establish the golden route for tourism of Kyoto
Connect Kyoto’s major tourism points of Rakuhoku, Higashiyama, and Fushimi/Uji, andcreate a golden route for tourism
In addition to developing Sanjo as a base of the Higashiyama area, the center of the route,redevelop Demachiyanagi, the gateway to Rakuhoku, and Chushojima, which isadjacent to the former Fushimi port.

Mt. Hiei
比叡山

Lake
びわ湖
Biwa

Arashi嵐山
yama

Demachiyanagi
Sanjo
東山
Higashiyama
Gion Shijo

Kyoto Station

Fushimi伏⾒
Chushojima
UjiDevelop a tourism route that connects
tourism resources concentrated in areas
along the Keihan Railway lines, and create
tourism contents③ Jointly create tourism opportunities along the Flow of Water
The Keihan Railway line retains the history and culture of the Yodo River boat transportation, which connected Kyoto (“Kei”) and Osaka(“Han”) and extended nationwide.
In recent history, the “Flow of Water” prospered with the opening of the Lake Biwa Canal that linked Kyoto andLake Biwa.
We will create tourism opportunities within the region using the rich living and culture of the areas along the
Keihan Railway lines fostered by the history of the Flow of Water, which originates from Mt. Hiei and Lake Biwa and runs through Kyoto
and Yodogawa, before arriving in the Osaka Bay area.

16

Main strategy (2) Co-create tourism opportunity[Main initiatives of the medium-term management plan]
Strengthen tourism and inbound business mainly in Kyoto
Around Kyoto Station

Shijo-Kawaramachi

The gateway to Kyoto,
which attracts more than
55 million tourists a year
from Japan and abroad.
The Keihan Group’s flagshiphotel, THE THOUSANDKYOTO, is scheduled to open in January 2019.
We will open two other new hotels near the station
to address global accommodation needs byproviding approx. 1,500 rooms in the area.

We will open a BIOSTYLE commercial complex in2019 and promote a new lifestyle from Kyoto.
Area in front of Sanjo Station
At the former site of KYOUEN in front of the station, we willdevelop a complex that will become the base for tourism ofHigashiyama and from where we will disseminate the culture ofJapan and Kyoto. We will also consider introducing
entertainment functions, in addition to concentrating tourism
and commerce functions.
We will aim to contribute to stress-free tourism of Kyoto byseeking to disperse tourists that concentrate in Kyoto Station.

Expand tourism routes that heighten theappeal of tourism in Kyoto

Mt. Hiei, Lake Biwa“a corridor of mountain, water and shine”

Restoration of the “Flow of Water” boattransportation

In areas along Rakuhoku,
Higashiyama, and Fushimi/Uji, we will
create tourism routes using richtourism resources, in cooperation withthe communities.
In the Arashiyama area, we will createeven more attractions centered around
Keifuku Arashiyama Station.

We will strengthen efforts to improve
the ability of circulation to tourism
route “a corridor of mountain, waterand shine”, which starts from
Kyoto/Yase and leads
to Lake Biwa via
Mt. Hiei, Otsu and
Sakamoto.

In the “Flow of Water”, which offers
rich history, culture, and landscape, wewill create tourism opportunities byrevitalizing boat transportation of the
Yodo RIver and operating
full-scale passage of boats
on Lake Biwa Canal.

17

Main strategy (3) Create relatable contents[Basic policy]
Aim to become a Keihan Group that creates products, services, and businesses that improve the value of living ofcustomers and contribute to solving social issues such as the environment, thereby allowing the Group to be
empathized with and chosen by customers.

Develop products and services that enable us to share values with customers
The maturing and saturating domestic market requires products and services that enable customers and companies toshare values (empathize).
The Keihan Group aims to improve the “life quality” of customers as well as sharing values with customers withproducts, services, and businesses that contributes to solving social issues of achieving a sustainable society.
BIOSTYLE is a lifestyle aimed at achieving a healthy, beautiful, and high-quality life and contributing to a recyclingoriented society. As the main initiative, we will establish BIOSTYLE as the Keihan Group’s new brand.

[Main initiatives in the medium-term management plan]
BIOSTYLE - Aiming for Keihan as First Choice A new commercial complex is scheduled to open in ShijoKawaramachi, Kyoto as a flagship facility that proposes
BIOSTYLE in food, beauty, and accommodation. (2019)
We will expand into
manufacturing retail thatdevelops original products such as
cosmetics in order to propose newvalue mainly in organic products.
Expand business originating from
Shijo-Kawaramachi(Small-scale stores and e-commerce)

Initiatives by the entire Group
Incorporate BIOSTYLE in the products and services ofeach business of the Keihan Group and aim to offer
products and services that customers can relate to.

Image

Energy-saving railroadcar, 13000 series[Keihan Electric Railway]

ZEH(Net Zero Energy House)[Zero Corporation]

Sale of organic vegetableand processed goods[Biomarket]

18

Preparations for the management vision[Promote innovations with an eye
to the next generation][Create area portfolios]
Strengthen business development in Kyoto
Without focusing only on the tourism business, the four corebusinesses will place emphasis on business development andcontribute to the revitalization of Kyoto as a local company.
Seek to expand business opportunities of the Keihan Group.
In addition to inbound tourism, promote businesses targeting
inbound residents such as researchers and students, andutilize overseas personnel in order to carry out the overseas
strategy effectively.
Expand business to outside the areas along the Keihan Railway
lines and to overseas growth markets
While carrying out the main strategies as the top priority, utilizeknow-how gained in areas along the Keihan Railway lines andexpand business to other parts of Japan such as the Tokyo
metropolitan area as well as to abroad, expanding thebusiness areas of the Keihan Group.
Overseas, which is a growth market, develop mainly the realestate and retail distribution businesses. Inject the Group’s
managerial resources while determining the direction.
<Areas of expansion>• Emerging countries wherehigh economic growth isexpected (mainly ASEAN 5)• Europe, US, and Australia
where maturity and stable
growth are expected<Overseas asset size>
FY2018
Approx.
JPY3.0 bn

FY2027 target
Approx.
JPY50.0 bn

Create services and improve productivity by utilizing ICT
technologies

Examine and forecast the future impact of ICT
technology innovations (robotics, self-driving, sharing
services, etc.) on the Keihan Group and promote
innovation of existing businesses. Improve safety andefficiency and develop newservices by actively utilizing theinnovations at each business.
Respond to changes in workstyle and lifestyle brought
about by environmental changes such as ICT
technology innovations, and aim to develop into a
Keihan Group that is chosen by both customers andworkers as a company with high productivity andcreativity.

Promote new businesses
Strengthen businesses and carry out alliances toward
expansion, and cooperate with other companies in ICT
technologies and fields such as sharing services tocreate new businesses.
Cultivate a public service market through active
participation in the
public-private
partnership (PPP)
business.
Yanagasaki Lakeside Park（Administrated by Keihan Gardening Co., Ltd.）

19

Image of the long-term management strategy

Capture the continuously increasing inbound demand into the Group’s business revenue

Expansion to areas outside
the Keihan Railway lines
and abroad

Lake Biwa, Mt. Hiei
Joint creation of tourism
opportunities in the“Flow of Water”

Osaka

Strengthen tourism andinbound businessBay area

Regain the glory of
Osaka’s east to west axis
Transportation

Retail distribution

Kyoto

Community building startingfrom railway stations
Business development across the Group

Establishment of BIOSTYLE

Real estate

Leisure & Service

20Medium-term management plan
Strategy for each business (Transportation)
Transportation[Basic strategy]
In preparation for the decrease in the population of the areas along the Keihan Railway lines and the workforce
that is expected in the future, improve profitability by creating new demand and enhancing the traffic network as
well as strengthen the management base by improving business efficiency, and fulfill the role of further
improving the brand value of safety and security, which is the basis of the Keihan Group.
FY2018 inbound revenue

Demand creation

JPY

1.1 bn*Strengthen the capturing of inbound demand
Enhance railway services that provide newexperience value
Revitalize stations along the Keihan Railway lines incoordination with community building

Strengthening of traffic network
Consider an extension plan for the
Nakanoshima LineStrengthen traffic network within Kyoto city

FY2021 inbound revenue

JPY

2.0 bn**Keihan Electric Railway’s
passenger revenue

Create demand by
attracting inbounddemand andproviding newexperience value

Improvement of safety and service; efficient operation
Safety measures such as platform doors in Kyobashi Station
Safety measures using ICT and improvement in maintenance efficiency
Examination of an efficient operation system for railways and buses
21Medium-term management plan
Strategy for each business (Transportation)[Main initiatives]
Improve safety and service

Revitalize stations along the Keihan Railway lines

Promote safety measures such as completing introduction of new
ATS in all Keihan Railway lines and commencing installation of
platform doors in Kyobashi Station (2020)
Upgrade Kibuneguchi Station of Eizan Electric Railway inresponse to the rapid increase in tourists
Develop usage environment for foreign tourists and upgrade toilets
in an effort to improve Customer Satisfaction

Strengthen capturing of inbound demand

Strengthen traffic network
In view of the future business environment, add depth to
examinations with the aim of extending the Nakanoshima LineStrengthen sales abroad such as
selling tickets to inbound tourists
Attract visitors to the Group’s
facilities such as Hirakata Park
Attract visitors to Yase and Mt. Hiei using
Eizan Electric Railway’s sightseeing car“Hiei”

Strengthen the traffic network by improving traffic nodes throughimprovement of the Kitano-Hakubaicho Station of the Keifuku
Electric Railroad line and operating
restaurant buses and tourist loop
buses with free boarding to promote
tourism in Kyoto and contribute toalleviating congestion of buses within
Inside the restaurant bus
the city

Enhance railway services that provide newexperience value

Utilize the extension of theexpressway network to enhancemedium distance buses that connect
Kyoto/Osaka and other cities

Expand the premium service and consider
introducing other new services that lead tothe creation of railway demand

Revitalize stations by adding unique characteristics, such as in
Hirakatashi Station, in an effort for “community building startingfrom railway stations”
Promote station and community building in coordination with themain strategies, primarily in Osaka’s east to west axis and its
surrounding areas as well as the Kyoto area

SKY BUS KYOTO

PREMIUM CAR

22

Medium-term management plan
Strategy for each business (Real estate)
Real estate[Basic strategy]

In both short-term turnover and long-term holding businesses, diversify development menus and contents to increase revenue
opportunities by utilizing diverse properties. In addition, purchase and develop properties in and outside areas along the
Keihan Railway lines and abroad that will be the foundation for development of each business of the Keihan Group, and fulfill
the role as the driver of the Group’s growth.
FY2018 asset size

JPY

FY2021 asset size

210 bn*JPY

Diversification of development menus
and contents

260 bn**Leasing service

Diversify short-term turnover-type businesses
Develop next-generation lease residences
Image of Kitahama Mid Tower

Expand a cyclical real estate business(purchase → possess, add value → sell → reinvest)

Expand business in andoutside areas along the
Keihan Railway lines andabroad as the driver of theGroup’s growth bydeveloping and utilizing
diverse properties

Development and utilization of diverse
properties
Develop businesses of condominiums andExpansion of business areas
detached housing in cities
Redevelop Toranomon 1-chome area
Develop and utilize real estate across the Group
Create new value through regeneration andParticipate in overseas business
utilization of existing stock

Image of Toranomon Hills
Business Tower(tentative name)23Medium-term management plan
Strategy for each business (Real estate)[Main initiatives]
Promote short-term turnoverbusinesses

While continuing to makeselective purchase of land in thecondominium business, cooperatewith subsidiary Zero Corporation
to strengthen the business ofdetached housing in cities
Carry out development of not only
residences but also hotels anddiversify development menus

Enhance business lineup

Effectively use real estate

In order to provide housing that suits
lifestyles and life stages, expand intoa next-generation lease residence
business that places emphasis on
the value of living
Strengthen the reform/renovation
business using existing stock(including Kyoto’s “machiya” houses)
also from a sustainability perspective
and contribute to the formation ofhigh-quality social stock

Before

After
Image

Strengthen profitability
by rebuilding existingbuildings such as theFushimi-Momoyama
Ekimae Building
Fushimi-Momoyama
Ekimae Building
Promote effective useof properties owned such as the
Keihan Higashi Rose Town, Science
City, and the Lake Biwa area
Promote thePurchasedevelopment andpurchase of real
Possess
Reinvest
estate, including
the above measures,Addto establish a cyclical Salevalue
business model

Expand business areas
In addition to participating in the redevelopment of the Toranomon 1-chome area(scheduled for completion in December 2019), strengthen real estate development
and purchase of buildings outside areas along the Keihan Railway lines
Aggressively expand into Asia’s growth markets (e.g. the office development businessin the Philippines and the condominium sale business in Bangkok, Thailand) as part ofthe overseas strategy

The Office Development
Project in Makati, thePhilippines (image)24

Medium-term management plan
Strategy for each business (Retail distribution)
Retail distribution [Basic strategy]
Amid changes in consumers’ values, develop new business formats and improve the value of products, services, andstores in order to propose a lifestyle that customers can relate to. At the same time, expand revenue by providing
commercial contents that contribute to the main strategies. Furthermore, improve profit margins by strengthening thestructure of existing businesses.
FY2018 operating margin

FY2021 operating margin

2.8%

3.7%

Improving value of stores
Develop and open new commercial facilities
Upgrade shopping malls in areas along the
Keihan Railway lines
Strengthen commerce within stations andunderneath railway tracks

Promotion of tourism commerce

Aim to propose alifestyle that
customers can relate
to as well as a highly
efficient operation
systemIncrease contents of Kyoto

Strengthening of the “food” businessRestructuring ofexisting businesses
Restructure the department
store business

Commercialize food manufacturing andprocessing, such as deli
Improve efficiency by establishing acentral kitchen

25Medium-term management plan
Strategy for each business (Retail distribution)[Main initiatives]
Open and upgrade new facilities inareas along the Keihan Railway lines
With the aim to become No.1 in theregion, upgrade facilities including
KEIHAN CITY MALL and KUZUHA MALL

KEIHAN CITY MALLKUZUHA MALL

Strengthen the “food” business
From foodstuff sales to restaurants,
position a wide range of “food” as animportant business and strengthen thehome-meal replacement business aswell as introducing a central kitchen
across the Group to provide safe andhigh-quality food. Aim to achieve
efficient operation at the same time.

Seek to expand business in and outside
areas along the Keihan Railway lines by
opening new supermarkets andincreasing contract PM business

Strengthen delivery business of organic
vegetables. Improve the brand toincrease members and sales.

Strengthen commerce within stations
and underneath railway tracks

Promotion of tourism commerce

In cooperation with community building
starting from railway stations, promotecommercial development integrated withthe station, from Hirakatashi Station(collaboration with Muji) as a start, andcontribute to revitalization of the region

Increase Kyoto’s contents after KYOTO
TOWER SANDO
and Fushimi Inari
Senbon Inari tostrengthen tourism
commerce
KYOTO TOWER SANDO

Restructure the department store
business
Develop proposal-type stores such as byexpanding independently structured
sales floors for apparel and sundries.

Moriguchi Store “Nanairofleur”

While utilizing previous know-how, create
a new lifestyle-proposal department
store format in cooperation with othercompanies⇒ Operate Muji on the second floor of
Keihan Department Hirakata Store(May 2018)

Image of the space in front of shop on thesecond floor of Hirakata Store

26

Medium-term management plan
Strategy for each business (Leisure & Service)
Leisure & Service [Basic strategy]
Capture the growth of the tourism market and expand revenue of the hotel business. Furthermore, fulfill thecentral role of sales/marketing of tourism products, which are handled cross-sectionally in the Keihan Group,
to attract customers to areas along the Keihan Railway lines and enhance tourism contents.
FY2018 no. of hotel rooms

FY2021 no. of hotel rooms

3,100*

5,200**Hotel business

Expanding the hotel business;creation of new business formats
Increase openings of HOTEL KEIHANDiversify the accommodation businesssegment

HOTEL KEIHANTSUKIJI GINZA GRANDEPlay a central role in joint
creation of tourism
opportunities, and achieve
further growth byaccelerating hotel openings

Enhancement of tourism contents
Revitalize the Yase, Mt. Hiei, andLake Biwa areas
Develop tourism contents at the “Flowof Water”

Strengthening of sales/marketing system
Strengthen sales marketing functions across the Group27

Medium-term management plan
Strategy for each business (Leisure & Service)[Main initiatives]

Open multiple hotels dedicated to accommodation mainly inlocations in front of stations of major government-designatedcities and aim to operate more than 15 directly owned hotelnationwide by FY2021(Future opening plan)
HOTEL KEIHAN TSUKIJI GINZA GRANDE: Autumn 2018
KYOTO HACHIJYO-GUCHI: Autumn 2018
YOTSUYA (tentative name): Jan. 2019
KYOTO SATATION SOUTH (tentative name): Spring 2020
NAGOYA SAKAE(tentative name): Spring 2020and more
HOTEL KEIHAN KYOTO STATION SOUTH(tentative name)Strengthen the sales/marketing system
Strengthen sales and marketing functions in the Tokyo
metropolitan area and East Japan in order to establish an optimal
sales system for promoting “joint creation of tourism opportunities”
across the entire Keihan Group, such as in the hotel and leisure &service businesses⇒ Keihan Group Sales Promotion Center
Opened the East Japan Office (April 2018)

Diversify the accommodation business segment
We will open a new hotelformat, CAFETEL KYOTOSANJO for Ladies in July 2018.
In addition to increasing the
opening of the same format,
we will expand into small-scale
smart hotels.

Image

Revitalize the Yase, Mt. Hiei, and Lake Biwa areas
Embark on developing the traffic system and reviewing thebusiness in Mt. Hiei. While strengthening cooperation with
Enryakuji Temple and other surrounding facilities, we will makeefforts to develop the appeal of the overall area including Lake
Biwa.
Eizan
Cable/Ropeway
Kyoto/Yase route

In Yase-Hieizanguchi,
create attractions as abase that links the Mt.
Hiei/Lake Biwa area
and Kyoto

Demachiyanagi

Eizan Railway

Increase openings of HOTEL KEIHAN

Mt. Hiei

Shiga/
Lake Biwa route

Sakamoto
Cable

YaseHieizanguchi

SakamotoHieizanguchi

BiwakoHamaotsu

Sanjo
Shichijo
Kyoto Station
TofukujiIshiyamadera

28

Medium-term management plan
Strategy for each business
Utilize new technologies and promote new businesses toward the future
In view of changes in the future social environment and business structure, encourage the use of newtechnologies such as IoT and AI, and promote new businesses such as cultivating the public service market.
Encouraging the use of technologies such IoT and AI
Introduce IoT and AI technologies and seek a low-cost operation in
hotels dedicated to accommodation and new format hotels
Aim for further improvement of efficiency andsophistication of operations of head officeadministrative divisions such as accounting
through automation using AI and robots
Make full-scale examinations toward improving
2D laser radar
security levels and maintenance-saving in the
Proof test with level crossing obstacle
railway division
detection device using a 2D laser radar

Keihan Bus’ participation in
self-driving proof tests
In Kansai Science City, Keihan
Bus participated in proof tests thatenabled driving test of self-drivingon a public road. The safety of thedriving system will be improved,with the aim of enabling practicaluse by local buses in the future.
Company D: Drive monitoring system

Promotion of public-private partnership (PPP) business
Through PPP business, expand the Group’s business domains as well as
making efforts to revitalize regions using public space and creating new
businesses⇒ From October 2018
Scheduled to participate as a member of the designated manager of
EXPO ’70 Commemorative Park in Osaka.

Company A:
Vehicle exterior sensing
Company E:
One-way method car-sharing

Company G: Road-tovehicle collaboration

Company F: Driver monitoring
Company B: Self-driving of bus
Company C: Vehicle interior sensing

Source: Public Foundation of Kansai Research Institute“Example of proof test involving different companies”

29Medium-term management plan
Idea of fund usage
Prioritize allocation of funds to investment for future growth① Aggressive investment for future growth
Operating cash
flows

Funding
Carry out funding mainly throughborrowings and bonds while managing
the net interest-bearing debt / EBITDA
multiple at the 6 times level toward
investment for growth

Set a total of JPY100 billion over three years as “strategic
investment” and carry out investment for growth that
contributes to the improvement of corporate value and the
Keihan brand mainly in the “three main strategies” of the longterm management strategy② Shareholder return
Continue stable dividend payment according to performance
while prioritizing investment for growth
Carry out flexible share buybacks from a capital efficiency
perspective
30

Medium-term management plan
Image of fund usage(Three-year total)

Investment for
maintenance/upgrade
JPY60 billion

Allocate funds to investment for
growth mainly in the three main
strategies

Funding, collection

Strategic investment for growth
JPY100 billion

Redevelop
ment

Co-creation Sustainability

Approx. JPY50 bn

Shareholder
returnWorking
capitalOperating cash flows
JPY130 billion

Create railway demand
Develop/purchase real estate
Strengthen retail distribution
Open hotels
and more* Set strategic investment capability for
M&A and overseas businesses

31Medium-term management plan
Shareholder return policy, capital policy

Continue stabledividend payment

Improve capitalefficiency

In addition to aiming for continuous growth and improvement of corporate value
through aggressive investment, continue stable dividend payment while taking into
consideration the level of equity capital and business performance in order to offer
shareholders return in accordance with performance⇒ We achieved targets in the previous medium-term plan and offered shareholder
return according to the business performance. Dividends on profits of FY2018
will be increased by JPY5 per share a year to JPY35. During the current
medium-term plan we will maintain dividends at this level or above.
We will maintain and improve ROE on a medium- to long-term basis throughaggressive investment and improved capital efficiency, as well as enhanceshareholder return
For the improvement of capital efficiency, we will carry out flexible share buybacks
by determining the timing and size based on comprehensive consideration of themarket environment and investment opportunities⇒ Share buybacks of a total of JPY20 billion were carried out in FY2016 and 2017.
We will continue to carry out buybacks flexibly according to the situation.
32

Quantitative targets

Management
indicators
EBITDA(Operating income + depreciation)

Net interest-bearing
debt / EBITDA multiple

ROE

Operating income

FY2018Results

FY2021Plan

JPY50.5 bn

JPY57.0 bn

JPY72.0 bn
or more5.9x

6x level

6x level

10.8％

8%

8%
or moreJPY31.4 bn

or moreJPY33.5 bn

FY2027
Target level

JPY43.0 bn
or moreImprove profitability and aim to achieve EBITDA in FY2027, a year in the process of growth,of JPY72.0 bn or more, a 40% increase from FY201833

Medium-term management plan
Income plan, segment information
2018

FY
Results

2019

FY
Forecast

FY

2020

FY

Plan

2021

Plan
（Billions of yen）

Operatingincome

322.2

322.5

326.0

337.0

■Transportation■Real estate■Retail distribution■Leisure & Service■Other business■Adjustments

92.2
113.1
100.7
31.2
1.8
−16.9

93.8
110.3
101.4
32.8
1.9
−17.7

93.0 ■
107.0 ■
104.0 ■
39.0 ■
2.0 ■−19.0 ■

95.0
108.0
108.0
44.0
2.0
−20.0

[Operating revenue by segment (FY2021)]

JPY337.0 bn[Operating income by segment (FY2021)]

Operatingincome

31.4

30.0

31.0

33.5

■Transportation■Real estate■Retail distribution■Leisure & Service■Other business■Adjustments

9.1
15.3
2.8
4.8
0
−0.7

9.7
14.7
3.0
2.1
0
0.5

9.5 ■
14.0 ■
3.0 ■
4.5 ■
0 ■
−0 ■

10.0
13.0
4.0
6.5
0
−0

Profit attributable toowners of parent

22.7

20.0

21.0

23.0

JPY33.5 bn

34

Contribution to the achievement of SDGs
Based on its management principles, the Keihan Group will contribute to the achievement of SDGs and aim for continuous
growth in harmony with society by creating products, services, and businesses that contribute to solving social issues mainly
through BIOSTYLE and strengthening business activities in consideration of ESG (environment, society, governance)

Management Principles of the Keihan GroupThe Keihan Group will create a comfortable living environment and contribute to society by establishing a network ofdreams, hope, and trust

Retail distribution

Co-creation

Develop businesses
that improve thequality of life andcontribute to therealization of asustainable society

Leisure & service

BIOSTYLE
Real estate

Redevelopment

Transportation■Promote management in consideration of ESG

Contribute to preventing global warming
Provide value trusted by customers such as “safety and security”
Contribute to continuous development of the community
Develop an environment and organization culture where employees
can exercise their strengths with peace of mind
・Initiatives in workstyle reforms
・Promote diversity (women’s active participation, etc.)
・Strengthen personnel development ・Promote health management

Ensure thorough compliance35

The plans in this material are based on information currently available and current
assumptions regarding uncertain factors that may affect future business performance.
Therefore, actual performance may differ from the plan due to various factors.