Capital Policy
Based on the factors below, we estimate our cost of equity at approximately 10% and intend to consistently maintain an ROE that exceeds this level.
Specifically, compared with our FY2025 ROE result of 16.6%, we target an ROE of 17% or higher for the fiscal year ending February 2028, the final year of our 4th Mid-Term Business Plan. Over the long term, our goal is to maintain an ROE of 15% to 18%, consistently above our cost of equity.
Our Approach to Cost of Equity
- Survey method
- Based on feedback from institutional investors, the majority estimate it at approximately 10%.
- CAPM method
- Risk-Free Rate (2.0%) + Beta (1.5) × Market Risk Premium (6.0%) ≈ 11.0%
- Earnings yield (the inverse of PER)
- Our P/E ratio has historically ranged from 9x to 11x, implying an earnings yield (1/P/E) of approximately 9% to 11% (1/11 ≈ 9%, 1/9 ≈ 11%).
Specific Initiatives to Sustain ROE
Under our 4th Mid-Term Business Plan, we will prioritize growth investments to drive earnings growth, while gradually increasing our dividend payout ratio toward our target of 40% (compared with 36.2% for the fiscal year ended February 2025).
Additionally, to manage working capital and prevent an excessive rise in the equity ratio, we will consider flexible share buybacks to serve as a cash flow adjustment mechanism.
| Fiscal Year-End (February 2025) | Fiscal Year-End (February 2026) | Fiscal Year-End (February 2028) | Long-Term Targets | ||
|---|---|---|---|---|---|
- Net Income ÷ Net Assets - Net assets are calculated as the average of the beginning and end-of-period balances. | 16.6％ 261億円/1,573億円 | 16.0％ 282億円/1,769億円 | 17% or more | 15～18％ | Maintain an ROE that consistently exceeds the cost of equity |
A. Net income - Net Income ÷ Sales | 12.2％ 261億円/2,132億円 | 12.5％ 282億円/2,252億円 | 12.3％ 370億円/3,000億円 | 10～12％ | Reference: Net profit margin for the fiscal year ending February 2028 based on the following exchange rates. USD 130 yen, GBP 164 yen, EUR 141 yen → 10.6% USD 140 yen, GBP 177 yen, EUR 147 yen → 12.3% |
B. Net Asset Turnover Ratio - Sales / Total assets - Total assets are calculated as the average of the beginning and end-of-period balances. | 1.03x 2,132億円/2,079億円 | 1.02x 2,252億円/2,214億円 | 1.10x | 1.10x or higher | Cash and deposits: Approximately 2.0 to 2.5 months of sales Inventory turnover period: Approximately 5 months |
C. Financial Leverage - Total assets ÷ Net assets - All are calculated as the average of the beginning and end-of-period balances. | 1.32x 2,079億円/1,573億円 | 1.25x 2,214億円/1,769億円 | 1.30x Equivalent to an equity ratio of 77% | 1.30x or higher | The equity ratio will remain at the same level Flexible share buybacks Flexible use of borrowings |
Cash Allocation
In addition to operating cash flow and cash on hand, we will utilize borrowings as needed to secure working capital equivalent to approximately 2 ~ 2.5 months of monthly sales, and then allocate funds to growth investments and shareholder returns.