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Action to Implement Management that is Conscious of Cost of Capital and Stock Price

１．Current State Analysis

ISEKI’s price book-value ratio (PBR) has continuously remained below 1, standing at 0.34 as of December 31, 2023. We have broken down PBR into its components return on equity (ROE) and price earnings ratio (PER), and arranged factors contributing to each of these through analyses using “comparisons over time with other companies in the same industry,” “opinions gathered from investors the Company is engaged with,” and other methods.

(1) ROE
Changes in ROE over time show it has not reached the Mid-term Management Plan target of 8%. Factors contributing to this underperformance have been identified as the low net profit margin and total asset turnover. We believe that product-specific profit margins and SG&A ratio are among factors affecting the net profit margin, and inventories, capacity utilization rates, and other metrics are among factors affecting total asset turnover. Additionally, we have found that institutional investors, with whom we are in regular contact, perceive our cost of equity to be approximately 8%.

(2) PER
PER has not risen above a multiple of 10 since 2020. We attribute this to insufficient disclosure about our growth prospects, strengths, profitability, and other information as well as discrepancies between projections and actual performance.

２．Striving to Improve PBR

Given the challenges identified in the current state analysis, we will steadily proceed to advance measures set forth in Project Z, which is also under way, in our aim to achieve a PBR of 1 or greater by 2027.

Vision (2027)

Direction for improvement

(1) Improve profitability
(2) Enhance asset efficiency
(3) Allocate cash for growth
(4) Enhance IR activities & ESG initiatives

Measures for improvement

Project Z measures

Core themes

• Fundamental structural reform: Optimization of production and development, and intensification of domestic sales
• Growth strategy

IR activities and ESG initiatives

• Expand and advance dialogue and information disclosure
• Strengthen governance structure

３．Dialogue with Shareholders and Investors

To achieve sustainable growth and enhance corporate value over the medium- and long-term, we believe that the understanding of our shareholders and investors is essential. We will thoroughly explain our management policies, engage in a constructive dialogue, and strive to build trusting relationships that endure over the long-term.
Officers in charge of business administration departments (Investor Relations Section, Corporate Planning Department, Financial Department, and General Affairs Department) oversee these dialogues and strive to actively engage with shareholders, investors, and other stakeholders during financial results briefing sessions and other opportunities.