Capital Policy
Based on the following considerations, our company recognizes the cost of equity as 10%, and we aim to maintain an ROE that exceeds the cost of equity.
Specifically, while our ROE performance for the fiscal year ending February 2025 was 16.6%, we are aiming for an ROE of 17% or higher in the fiscal year ending February 2028, the final year of our fourth medium-term management plan. Furthermore, in the long term, we envision maintaining an ROE level of 15% to 18%, which is consistently and stably above the cost of equity.
Concepts regarding the cost of equity
- Questionnaire method
- Based on interviews with institutional investors, many estimate the figure at around 10%.
- CAPM method
- Risk-free rate (2.0%) + Beta value (1.5) × Market risk premium (6%) ≈ 11%
- Earnings yield method (reciprocal of PER)
- Our company's P/E ratio has fluctuated between 9 and 11 times → Therefore, 1/9 = 11%, 1/11 = 9%
Specific initiatives to maintain ROE
During the period of the 4th Medium-Term Management Plan, we will prioritize investment in growth and aim for profit growth, while gradually increasing the dividend payout ratio to 40% (actual result for the fiscal year ending February 2025: 36.2%).
Furthermore, in order to prevent an increase in working capital and equity ratios, we will consider the flexible implementation of treasury stock as a mechanism to adjust cash flow.
| 2025 End of February | 2026 End of February | 2028 End of February | Long-term image | ||
|---|---|---|---|---|---|
- Net Income ÷ Net Assets - Net assets are the average of the beginning and ending of the period. | 16.6％ 261億円/1,573億円 | 16.0％ 282億円/1,769億円 | 17% or more | 15～18％ | Maintain a stable and consistent ROE that 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 at the following 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 - Sales revenue / Total assets - Total assets are the average of the beginning and end of the period. | 1.03 times 2,132億円/2,079億円 | 1.02 times 2,252億円/2,214億円 | 1.10 times | 1.10 times more | Cash and cash equivalents level: Approximately 2 to 2.5 months of monthly sales. Inventory turnover period: Approximately 5 months |
C. Financial leverage - Total assets ÷ Net assets - All are average values at the beginning and end of the period. | 1.32 times 2,079億円/1,573億円 | 1.25 times 2,214億円/1,769億円 | 1.30 times Equity ratio equivalent to 77% | 1.30 times or more | The equity ratio will remain at the same level. Flexible implementation of share buybacks Use of borrowed funds as needed |
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.