■Medium-term Management Plan
3. Enhancement of corporate governance
Seiko Giken ＜6834＞ is working to enhance corporate governance in order to strengthen competitiveness and continuously improve corporate value while maintaining sound management. In particular, we recognize that building a system that can autonomously ensure management transparency and respond quickly to changes in the business environment is an important issue. Stock prices have been trending with 2,000 yen in between over the past 4 years, and off-site sales of approximately 400,000 shares were carried out in 2023/6, and turnover increased. Against this background, the idea is to promote responses aimed at realizing management that is conscious of capital costs and stock prices. According to an analysis of current capital costs and capital profitability, PBR has remained at a level of 0.62 times to 0.90 times lower than 1 times in the 5 years from fiscal 2019 to fiscal 2023. PER is 14 to 22 times, which is a level comparable to other companies in the industry. However, the ROE is 2.8% to 4.9%, which is about 8% below the capital cost recognized by the company. Therefore, improving ROE is essential in order to improve PBR.
First, PER improvements can be cited as specific measures aimed at improving corporate value. In order to foster growth expectations in the stock market, we will strengthen IR and corporate public relations, enhance disclosure of non-financial information including sustainability-related information, and promote efforts to maintain and improve shareholder returns. Next, in order to improve ROE, we recognize that it is particularly important to improve total asset turnover among the three factors of net profit on sales, total asset turnover, and financial leverage. The total asset turnover ratio for the last 5 years has been 0.49 to 0.57 revolutions, which indicates that sales are insufficient compared to total assets. Going forward, it is our policy to expand sales by utilizing cash on hand and operating cash flow, actively making growth investments such as capital investments, R&D, M&A, and alliances.
In capital allocation, operating cash flows generated from fiscal 2024 to fiscal 2026 will be actively allocated to growth investments to improve capital efficiency. Specifically, it is planned to use operating cash flow of 7 billion yen to 10 billion yen and cash and deposits of 14 billion yen as capital, and allocate 10 billion yen or more to growth investment, M&A, R&D, and capital investment in the medium term. We will also focus on securing appropriate shareholder returns and working capital.
(Written by FISCO Visiting Analyst Hiroshi Nakayama)