■ Long-term Growth Strategy

Hagiwara Electric Holdings <7467> has been executing the medium-term management plan 'Make New Value 2023 (MNV2023)' targeting the period from March 2022 to March 2024, but the final year's management target was achieved one year ahead of schedule. The company has announced a new medium-term management plan 'Make New Value 2026 (MNV2026)' with the final year targeting March 2027. The following is an overview.

1. Positioning of the new medium-term management plan 'MNV2026'

The company positions 'MNV2026' as a plan to aim for a management style that emphasizes corporate value enhancement, as well as to prepare for the evolution to the next growth stage by connecting people, society, and technology in advanced electronics as an engineering solution partner. Specifically, it aims to establish a structural reform and business foundation for the growth stage considering the external environment change, but from another perspective, it can also be said to be a foundation building for the 'next growth stage=MNV Next' that comes after the end of 'MNV2026'.

2. Basic outline of 'MNV2026'

The company has set 'Enhancement of corporate value-Improvement of earnings power-' as a key policy of 'MNV2026'. To achieve this, it plans to promote three structural reforms and six key strategies as follows.

(1) Three structural reforms

Business structure: Improvement of value proposition through business model reform

Capital productivity: Management reform conscious of capital productivity

Human capital: Maximizing employee power through human capital utilization

(2) Six key strategies: Growth through reform, execution capability, and efficiency

Device business strategy

Solution business strategy

Business innovation strategy

Management enhancement strategy

Human resources strategy

ESG promotion

3. Three structural reforms

(1) Improvement of value proposition through business model reform

a) Value proposition: Expansion of value-added and service businesses based on the concept of solution-oriented approach to the existing business.

Expanding the value-added and service businesses such as related development and service businesses that contribute to the solution-oriented approach in the existing business.

b) Profit awareness: building business models aimed at profitability.

Promote the creation of new business models, such as data platform-type businesses. In addition, make use of knowledge within the group such as device application technology and IoT construction technology.

c) Promotion of co-creation: activation of business innovation.

Promote value-added innovation (creation) through collaboration with synergies within the group and collaboration with other companies' businesses. Activate the use of co-creation innovation activity bases (open in December 2023).

By implementing such measures, the plan is to increase the profit composition of solution-type business※ by 10% in the fiscal year ending March 2027.

※A value obtained by combining the profits of solution-type businesses in the device business with those in the conventional segments (based on gross sales profit).

(2) Management reform focusing on capital productivity.

a) Capital cost: awareness and implementation of capital cost.

Establish an in-house management system that focuses on profits for invested capital based on shareholder capital costs of 7-8%.

b) Portfolio: appropriate business portfolio management.

Monitor the earning power of major business areas focused on business models and begin building and operating systems that enable a strategic approach to business portfolios.

c) Environment construction: acceleration of environment construction for advanced management.

Realize management that is conscious of timely capital productivity through the gradual renewal of IT systems.

(3) Maximizing Employee Power through the Utilization of Human Capital.

Accelerate the development of 'creative and challenging human resources' responsible for promoting business model transformation towards solutions-oriented business, and strengthen the foundation of human resource development.

Specifically, maximize employee performance and synchronize employee activities with management goals and achievements. Also, each person sets goal management that is linked to company goals and scalable. By implementing these, aim for corporate management that cultivates management participation among all employees towards the next stage of growth and improves corporate value together with all employees.

(Written by FISCO guest analyst Noboru Terashima)