Initiatives for shareholder return and corporate value improvement.

1. Initiatives for shareholder return.

Waveblock Holdings (7940) considers maintaining stable dividends that are not influenced by annual performance changes while aiming for a dividend payout ratio of 35% or more as a basic policy for shareholder return initiatives. Depending on the situation, stock splits and shareholder returns, including the acquisition of treasury stocks, will also be considered. Based on this basic policy, the dividend per share for the fiscal year ending March 2024 is 30.0 yen (dividend payout ratio of 55.5%), the same as the previous year, and is planned to be the same at 30.0 yen (same 57.5%) for the fiscal year ending March 2025. In addition, if the performance of the fiscal year 2026 and beyond goes as planned in the new medium-term management plan (net income of 800 million yen for the fiscal year ending March 2026 and 1 billion yen for the fiscal year ending March 2027), it will be necessary to increase dividends as the dividend payout ratio falls below 35% after the fiscal year ending March 2026. If the number of issued shares does not change, the net income per share for the fiscal year ending March 2027 is expected to be 118.5 yen, and the dividend per share will be 41.5 yen if the dividend payout ratio is 35%.

Aim to exceed the cost of capital through strengthening profitability and acquiring growth.

2. Approach to improving corporate value.

The company believes that improving corporate value is one of its important management issues, as its PBR has long been below 1 (BPS was 1,902 yen and PBR was in the 0.3x range at the end of March 2024), and it is important to increase it. The reason why PBR has been below 1x is that the level of ROE was 2.9% in the fiscal year ending March 2024, which is significantly lower than the company's cost of equity (about 6%) and due to the fact that its main Maternal Solution business has low growth and profitability in a mature market, and it is difficult for investors to understand its future growth potential. In order to increase corporate value, the company will pursue three goals: (1) steadily implementing the new medium-term management plan to obtain profitability and growth centered on growth businesses and creating new business expansion routes through M&A, (2) allocating management resources appropriately, using capital cost excess as a criterion for investment judgment, and (3) suppressing capital cost by utilizing low-cost interest-bearing debt; and raise the ROE to 6.3% for the fiscal year ending March 2027 to the same level as the cost of equity, along with revenue expansion. Additionally, the company aims to increase dividends according to its dividend policy and improve its communication with shareholders and investors through dialogue and appropriate information disclosure to enhance their understanding of the company's growth potential, aiming to achieve a PBR of over 1. We expect that our automobile metal decorative films and parts molding products will become a medium-term growth driver for our company's performance if they continue to expand stably, and we are keeping an eye on this trend.

The company will pursue three goals: (1) steadily implementing the new medium-term management plan to obtain profitability and growth centered on growth businesses and creating new business expansion routes through M&A, (2) allocating management resources appropriately, using capital cost excess as a criterion for investment judgment, and (3) suppressing capital cost by utilizing low-cost interest-bearing debt; and aims to increase its revenue and raise the ROE to 6.3% for the fiscal year ending March 2027 to the same level as the cost of equity. Additionally, the company aims to increase dividends according to its dividend policy and improve its communication with shareholders and investors through dialogue and appropriate information disclosure to enhance their understanding of the company's growth potential, aiming to achieve a PBR of over 1. The company believes that our automobile metal decorative films and parts molding products will become a medium-term growth driver for our company's performance if they continue to expand stably, and we are keeping an eye on this trend.

(Written by FISCO guest analyst, Jo Sato)