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Medium-Term Business Strategy

Cost of Capital-Conscious Management

Cost of Capital-Conscious Management (Cost of Capital, ROI Index, Market Valuation)

Deepen "management conscious of cost of capital and stock price" based on the financial policy of the medium-term business strategy

Topic Present Vision
Cost of Capital
  • Cost of equity: 7-10%

    -Calculated by CAPM

    -Variable due to differences in timing and assumptions used in calculations, so cost of equity is taken as the range

Reduce the cost of shareholders' equity by promoting business portfolio transformation while also utilizing interest-bearing debt

Provide stable and continuous shareholder returns

ROI index ROE 5-year* average: 9.7%

-Exceeds or equals cost of equity

FY2024 target is to achieve ROE of 10% or more above cost of capital

Market valuation P/B ratio 5-year* average: 1.1x
Most recent: 0.9x

Aiming to continuously increase shareholder value in accordance with the CS B2024 financial policy

Aim for early improvement of P/B ratio by improving profitability and promoting business portfolio transformation through continuous growth investment

  • From FY2018 to FY2022

Our view of "management with an awareness of cost of capital and stock price" and our future initiatives are as follows.

Cost of Capital

The current cost of equity is estimated around 7% to 10%. It is calculated based on CAPM, but since it varies depending on the timing of calculation and different assumptions, it is taken as a range.

Going forward, we will continue to transform our business portfolio and reduce the cost of equity while also utilizing interest-bearing debt. We will also provide stable and continuous shareholder returns.

ROI index

ROE has averaged 9.7% over the past five years, and we believe it exceeds or is at the same level as the cost of equity. The target for FY2024, the final year of our medium-term business strategy "CS B2024," is an ROE of 10%, which is higher than the cost of capital, and we continuously aim to achieve a level of ROE maintaining an equity spread.

Market valuation

PBR has averaged 1.1 times in the past five years, but has remained at about 0.9 times in the recent past. We will seek to improve PBR as early as possible by advancing business portfolio transformation through the improvement of profitability and continued growth investments.

In accordance with the financial policy of our medium-term business strategy "CS B2024," we will further promote the management of our operations with an awareness of the cost of capital and capital returns in order to meet the expectations of our stakeholders, achieve sustainable growth, and enhance our corporate value.

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