Bridge Report:（6914）OPTEX GROUP The second quarter of the fiscal year ending December 2024

Tatsuya Nakajima  President/CEO	OPTEX GROUP CO., LTD. (6914)

Company Information 

Stock Information 

*The share price is the closing price on August 15. DPS and EPS are from the financial results for the second quarter of FY 12/24. ROE and BPS are actual results for the previous term.

Earnings Trend 

Net profit is net profit attributed to parent shareholders. The same applies hereafter. 

This Bridge Report presents OPTEX GROUP’s earnings results for the second quarter of the fiscal year ending December 2024 and so on. 

Table of Contents 

Key Points
1. Company Overview
2. 2Q of Fiscal Year Ending December 2024 Earnings Results
3. Fiscal Year Ending December 2024 Earnings Forecasts
4. Conclusion
<Reference 1. Three-year (2024-2026) Management Plan>
<Reference 2: Regarding Corporate Governance>

Key Points

• In the second quarter of the fiscal year ending December 2024, sales and profit increased by double digits, with sales reaching a record high on a half-yearly basis. Sales increased 12.2% year on year to 30.5 billion yen. The SS business was steady for major customers in Japan, while overseas sales were also stable, despite the impact of inflation. The IA business was sluggish, with FA segment sales affected by inventory adjustments in Europe and weak demand for capital investment in China. MVL segment sales were affected, as semiconductor and electronic component sales in Japan were sluggish, while EV-related products performed well. MECT segment sales were stable, with deliveries of secondary battery manufacturing equipment. The foreign exchange made a positive contribution of 2.1 billion yen, mainly in the SS business.

   

• Operating profit increased 18.1% year on year to 3.1 billion yen. Gross profit margin decreased 1.5 points due to an increase in the percentage of MECT segment sales of IA business, which have a relatively low gross profit margin, and a decrease in the percentage of MVL segment sales, which have a high gross profit margin. Gross profit increased only 8.8% year on year, but SG&A expenses augmented 6.7% year on year, resulting in a double-digit increase in profit. Foreign exchange rates made a positive contribution of 0.8 billion yen on a net basis. Both sales and profit were mostly in line with forecasts.

   

• There is no change in the earnings forecast. Sales are expected to be 61 billion yen, up 8.2% year on year, and operating profit is forecast to be 6.6 billion yen, up 11.9% year on year. Sales are expected to increase in all segments and businesses, and growth strategies for both the SS and IA businesses will be steadily implemented in preparation for a full-fledged market recovery phase. The company plans to pay a dividend of 40.00 yen/share, unchanged from the previous fiscal year. Payout ratio is expected to be 28.4%.

   

• The progress rate of the results in the first half toward the full-year forecast is 50.0% for sales and 47.6% for operating profit. Sales were large compared to those in the past few years. Operating profit was relatively steady. Although the FA segment sales of the IA business recorded a year-on-year decrease for seven consecutive quarters, sales increased in the second quarter (April to June) for the first time in eight quarters due to the contributions from Asia and Europe. Inventory adjustments are also progressing, with a focus on whether the recovery trend will continue in the third quarter and beyond.

   

• In addition, the medium-term management plan calls for an operating profit margin of 11% in 2024 and 12% in 2025, but the operating profit margin in the first half of this year is 10.3%, falling below the plan, even when the contribution of foreign exchange rates is included. Along with further improving profitability in highly profitable areas such as FA and MVL segment in the SS and IA businesses, the company believes that improving profitability in the MECT segment of IA businesses, which have continued to expand, but have low profit margins, is a challenge and we will closely monitor their progress.

   

1. Company Overview

OPTEX GROUP Co., Ltd. is a holding company centered around OPTEX Co., Ltd. that manufactures and sells outdoor sensors (top share of 40% in the global market), automatic door sensors (30% share of the global market and 50% share of the domestic market) and environment-related products. OPTEX GROUP holds subsidiaries including OPTEX FA CO., LTD., which deals with FA related sensing business; CCS Inc., which holds the global top share in the LED lighting business for image processing; Sanritz Automation Co., Ltd., which has a wealth of results in the development, manufacturing and sales of industrial computers, MITSUTEC CO., LTD., which plans, develops, manufactures, and sells image processing, inspection, and measuring equipment and automated machinery and equipment, contributing to the improvement in quality of manufacturing with its advanced technologies (included in the scope of consolidation from the fiscal year ended December 2022), Three Ace Co., Ltd., which specializes in the development of various systems, applications, and digital content; OPTEX MFG Co., Ltd., which is responsible for manufacturing Group products, RAYTEC LIMITED (UK), which has attained the largest global share (about 50 %) for supplemental lights for CCTV; and FIBER SENSYS INC. (US), which deals with optical fiber intrusion detection systems. As of December 31, 2023, the company operates in 95 locations worldwide, including 28 overseas companies. 

1-1 Corporate History 

In May 1979, Mr. Toru Kobayashi (former director and advisor), who was developing security sensors in a manufacturer of anti-crime devices in Kyoto, established OPTEX Co., Ltd. with the spirit of the endeavor to “make their products recognized in the world as much as possible.” 
In November 1979, the company developed “the world’s first far-infrared sensor for automatic doors.” Around that time, pressure-sensitive rubber mats were used for automatic doors, and an automatic door sensor that utilizes far-infrared light was epoch-making. OPTEX was unrivaled in maintenance and installation services and seized the largest share in the market of automatic door sensors in the third year after inauguration (currently occupying about 50% of the Japanese market). 
Since then, the company has developed a wide array of products for security, automatic doors, and industrial equipment with its unique ideas and technologies that embodies them. 

In the 1980s, the company entered overseas markets. While it had been considered impossible to set a far-infrared sensor outdoors because external factors, such as light, would cause errors, the company developed the outdoor far-infrared sensor “VX-40” with its original technology, and that sensor was highly evaluated mainly in the European market, and occupied the largest share in the global market of outdoor intrusion detection sensors. 
Through business expansion, the company became an over-the-counter company (equivalent to being listed in the JASDAQ market) in 1991. Then, it was listed in the second section of Tokyo Stock Exchange (TSE) in 2001, and in the first section of TSE in 2003. In April 2022, the company was listed on the Prime Market following the restructuring of the Tokyo Stock Exchange. 
 
Recently, the company has been strengthening solutions based on image processing technologies and high-end security systems. In 2008, it reorganized ZENIC INC., which undertakes the development of ICs and LSI for image processing, etc., into a subsidiary. In 2010, it acquired FIBER SENSYS INC. (US), which has plenty of experience handling high-end security systems (optical fiber intrusion detection systems) for important facilities in Europe and the U.S., as a subsidiary. In 2012, it acquired RAYTEC LIMITED (UK), which handles supplemental lighting for cameras of high-end security systems for important large-scale facilities, as a subsidiary.  
In May 2016, it acquired CCS Inc., which has the world’s largest share in the market of LED lighting for image processing, as a subsidiary, and transformed it into a 100% subsidiary in July 2018. 
With the aim of adopting next-generation business administration and pursuing group synergy, it shifted to the holding company system on January 1, 2017.  
 
In December 2020, the company acquired Sanritz Automation Co., Ltd., which has an abundance of experience in developing, manufacturing, and selling industrial computer systems, as a subsidiary. Furthermore, the company made MITSUTEC CO., LTD. into a subsidiary in November 2021. MITSUTEC CO., LTD. is a company that plans, develops, manufactures, and sells image processing inspection / measuring equipment and automated machinery and equipment. The company is promoting a three-year medium-term management plan (2024-26), and part of the measures to achieve this plan is business model transformation and strengthening its ability to propose solutions to achieve further growth as a leading company in the global niche market. 

1-2 Business Description 

The Company’s business is composed of its main SS business (security sensor segment and automatic door sensor segment), sensors for industrial machinery, LED lighting device and system for image processing, the “IA Business” which works towards the automation, labor saving, and optimization of the production line using industrial computers, “EMS business,” which was included in the SS business up until the previous term and provides contract manufacturing services for electronic equipment in China, and “Other business”, which operates programs for outdoor activities and experiencing and learning of the environment and develops apps and digital content.
In the SS business, “Social & Environment,” which was previously included in “Security” and “Other,” has become quantitatively more important, and is therefore listed as “Social & Environment” from the first quarter of the fiscal year ending December 2024.

＊SS：Sensing Solution、IA：Industrial Automation、FA：Factory Automation、MVL：Machine Vision Lighting、IPC：Industrial PC 、MECT：Mechatronics、EMS：Electronics Manufacturing Service。

1-3 Advantages: Diversified Technologies/Expertise on Sensing and Unique Sensing Algorithm 

To produce stable and reliable sensors, it is essential to build on a number of elemental technologies and expertise, as well as “algorithms” to control physical changes. The company takes advantage of its technologies/expertise suitable for intended applications and its unique sensing algorithm to secure the largest share in the global market. 

1-4 ROE analysis 

The ROE for the fiscal year ended December 2023 was 11.1%, indicating that the company recorded a double-digit ROE for the third consecutive year. It is aiming for an operating profit margin of 15% or more in its Mid-term and Long-term Management Plan. Under this aim, it will promote cost efficiencies and a transformation from selling products to selling solutions with the aim of reliably improving its ROE and maintaining it to at least 10%. 

1-5 Efforts on Sustainability

The company believes that building a relationship of trust with a wide range of stakeholders is essential for improving corporate value and has posted “sustainability information”（https://www.optexgroup.co.jp/esg/）on its website to further enhance sustainability information disclosure. In addition, Published the ESG Bridge Report through Investment Bridge Inc. 
The company identify the materiality for sustainable growth for the first time and mention the challenges and initiatives for the future in the report. 
Posted on June 6, 2023. 
https://www.bridge-salon.jp/report_bridge/archives/eng/6914/20230620.html

2. 2Q of Fiscal Year Ending December 2024 Earnings Results

2-1 Business Results 

　*Unit: million yen. The net profit is the profit attributable to owners of the parent company. The same shall apply hereinafter.

Sales and profit increased by double digits, with sales reaching a record high on a half-yearly basis.
Sales increased 12.2% year on year to 30.5 billion yen, with sales reaching a record high on a half-yearly basis. The SS business was steady for major customers in Japan, while overseas sales were also stable, despite the impact of inflation. The IA business was sluggish, with FA segment sales affected by inventory adjustments in Europe and weak demand for capital investment in China. MVL segment sales were affected, as semiconductor and electronic component sales in Japan were sluggish, while EV-related products performed well. MECT segment sales were stable, with deliveries of secondary battery manufacturing equipment. The foreign exchange made a positive contribution of 2.1 billion yen, mainly in the SS business.
Operating profit increased 18.1% year on year to 3.1 billion yen. Gross profit margin decreased 1.5 points due to an increase in the percentage of MECT segment sales of IA business, which have a relatively low gross profit margin, and a decrease in the percentage of MVL segment sales, which have a high gross profit margin. Gross profit increased only 8.8% year on year, but SG&A expenses augmented 6.7% year on year, resulting in a double-digit increase in profit. Foreign exchange rates made a positive contribution of 0.8 billion yen on a net basis.
Ordinary profit increased 23.5% year on year, mainly due to an increase of 0.3 billion yen year on year in foreign exchange gain.
Both sales and profit were mostly in line with forecasts.

◎Trends in each quarter 

On a quarterly basis, sales and profit increased year on year, but decreased quarter on quarter (from the first quarter of the fiscal year ending December 2024).

2-2 Regional trends 

*Unit: million yen.

Domestically, the SS business is performing well. Overseas, sales increased in the Americas and Europe, but decreased in Asia due to sluggish capital investment in China.

◎Average exchange rate 

2-3 Earnings by Segment 

①Trends in each segment 

*Unit: million yen. Composition ratio of operating profit refers to sales profit margin.

②Trends in each segment and region 

*Unit: million yen. In the SS business, “Social & Environment,” which was previously included in “Security” and “Other,” has become quantitatively more important and is therefore listed as “Social & Environment " from the first quarter of the fiscal year ending December 2024. In addition, due to the reclassification of the Customer Counting System segment of the SS Business (formerly part of "Others") into the SS Business (Automatic Door Related), the actual figures in the fiscal year 2023 were revised.

◎SS Business 
(Security sensor segment)
<Highlights of performance in 2Q of FY 12/24>

(From the company release)

(Automatic door sensor segment)
<Highlights of performance in 2Q of FY 12/24>

(From the company release)

(Social & Environment)
<Highlights of performance in 2Q of FY 12/24>

(From the company release)

◎IA Business 
(FA segment)
<Highlights of performance in 2Q of FY 12/24>

(From the company release)

(MVL segment)
<Highlights of performance in 2Q of FY 12/24>

(From the company release)

(IPC segment)
<Highlights of performance in 2Q of FY 12/24>

(From the company release)

(MECT segment)
<Highlights of performance in 2Q of FY 12/24>

(From the company release)

2-4 Financial Conditions and Cash Flow

◎Main BS

*Unit: million yen

Total assets increased 3.7 billion yen from the end of the previous fiscal year to 70.8 billion yen due to an increase in cash and other factors. Total liabilities stood at 22.8 billion yen, at the same level as the end of the previous fiscal year. Net assets increased 3.7 billion yen from the end of the previous fiscal year to 48 billion yen due to an increase in retained earnings and foreign currency translation adjustment.
Equity ratio increased 2.0 points from the end of the previous term to 67.3%.

◎Cash Flow

*Unit: million yen

The surpluses of operating CF and free CF increased due to an increase in interim net income before taxes and other adjustments. The cash position has increased.

3. Fiscal Year Ending December 2024 Earnings Forecasts

3-1 Earnings forecast

*Unit: million yen

There is no change in the earnings forecast with increased sales and profit. The company aims to achieve record-high sales and
operating profit.
There is no change in the earnings forecast. Sales are expected to be 61 billion yen, up 8.2% year on year, and operating profit is forecast to be 6.6 billion yen, up 11.9% year on year.
Sales are expected to increase in all segments and businesses, and growth strategies for both the SS and IA businesses will be steadily implemented in preparation for a full-fledged market recovery phase.
To improve profitability, the company will work to improve the gross profit margin in the IA business (IPC segment, MECT segment) in addition to further improving profitability in the SS business and the IA business (FA segment, MVL segment).
The company plans to pay a dividend of 40.00 yen/share, unchanged from the previous fiscal year. Payout ratio is expected to be 28.4%.

◎Regional trends

*Unit: million yen. Colored boxes for company-wide revenue growth rate of +8.2% or more.

3-2 Trends in each segment

①Sales of each segment

*Unit: million yen. Colored boxes for company-wide revenue growth rate of +8.2% or more.

The recognized environment surrounding each business is as follows:
◎ SS Business
* Security sensor segment
High inflation and interest rates will continue to cause uncertainty in the European and U.S. markets, which are major markets for the company. Inventory is steadily decreasing. The company aims to increase solution sales by implementing a direct marketing strategy.

* Automatic door sensor segment
Due to the impact of inflation and high interest rates, some new projects are being postponed both in Japan and overseas. The company will meet the solid demand for upgrade in Japan and promote new products in North America.

◎ IA Business
* FA segment
In Japan, food and semiconductor-related demand is expected to remain firm. In Europe and China, the curtailment of capital investment and inventory adjustment will continue. The company will focus on finding potential demand for automation and labor saving.
Regarding the IO link, which realizes IoT in factories, the number of sensors used is steadily increasing, and profitability is good.

* MVL segment
Solid demand for capital investment in the EV-related industries will continue. Solution sales are expected to expand in Japan and overseas through the increase of proposals by actively holding private exhibitions and so on.

* IPC segment
The market for semiconductor production equipment is expected to recover from its decline, and industrial PC sales are expected to remain strong.

* MECT segment
Demand for secondary battery manufacturing equipment will increase against the backdrop of the accelerating spread of EVs, and sales will remain firm. In the second half of the fiscal year, the company has received orders and are preparing for production and delivery on time.

②Trends in each segment and region

*Unit: million yen. Colored boxes for company-wide revenue growth rate of +8.2% or more.

4. Conclusion

The progress rate toward the full-year forecast is 50.0% for sales and 47.6% for operating profit. Sales were large compared to those in the past few years. Operating profit was relatively steady. Although the FA segment sales of the IA business recorded a year-on-year decrease for seven consecutive quarters, sales increased in the second quarter (April to June) for the first time in eight quarters due to the contributions from Asia and Europe. Inventory adjustments are also progressing, with a focus on whether the recovery trend will continue in the third quarter and beyond.
In addition, the medium-term management plan calls for an operating profit margin of 11% in 2024 and 12% in 2025, but the operating profit margin in the first half of this year is 10.3%, falling below the plan, even when the contribution of foreign exchange rates is included. Along with further improving profitability in highly profitable areas such as FA and MVL segment in the SS and IA businesses, the company believes that improving profitability in the MECT segment of IA businesses, which have continued to expand, but have low profit margins, is a challenge and we will closely monitor their progress.

<Reference 1. Three-year (2024-2026) Management Plan>

1 Overview and Targets

In the fiscal year ended December 2023, both sales and operating profit fell below the revised forecasts due to a temporary slowdown in the IA business caused by the sluggish Chinese economy.
In the fiscal year ending December 2024, the company aims to increase operating profit by re-strengthening sales of highly profitable products.
The company has set management targets of sales growth of 10%, an operating profit margin of 15% or higher, and an ROE of 10% or higher, and in the fiscal year ending December 2026, it aims to achieve sales of 75 billion yen, an operating profit of 10 billion yen, and an operating profit margin of 13.3%, accelerating its shift to a solution proposal business.

(From the company release)

2 Main Business Initiatives

(1) SS business
①Security sensor segment
The company will further enhance image verification solutions, an area of its forte, and aggressively invest in business offices and facilities.
It will also continue to focus on direct marketing to cultivate existing markets and develop new markets.

②Automatic door sensor segment
The company will expand its market share in Europe and the U.S. by developing new products and aggressive investment.
Additionally, it will develop the market further through remote monitoring services and “OMNICITY,” a service that creates new customer experiences through the effective use of automatic entrance doors.

（2）IA Business
①FA segmentLike the SS business, the company will expand the number of customers by developing direct consulting and marketing activities to meet on-site needs and reflect them in product planning.
Moreover, as a strategy for shifting from single-product sales to solution sales, the company is focusing on providing solutions centered on the "IO-Link master, " which is a communication technology that enables the two-way exchange of various data between sensors and higher-level control systems.

②MVL segment
In addition to MV lighting, the company has procured power supplies, cameras, lenses, etc., from cooperating manufacturers and provides them as a system that is developed in the testing rooms to meticulously meet customer needs. In recent years, it has expanded its field to include AI and robots and has set up an AI lab and a robotics room in collaboration with external manufacturers and vendors with the aim of "evolving into a total solution vendor in the inspection process."
The company provides solutions that “make the invisible visible and the impossible possible.”

③IPC segment
The company will establish a stable supply system for industrial PCs for semiconductor manufacturing equipment, which are selling steadily.
It aims to develop new businesses such as monitoring systems and wireless visualization systems.

④MECT segment
The company will establish a stable supply system for secondary battery manufacturing equipment, which is selling steadily.
It will also develop new businesses, such as visual inspection solutions.

3 Growth Vision

Under the group's corporate philosophy of “We aim to become a corporate group full of Venture Spirit,” the company has positioned “business model transformation” as the core of its growth strategy and is shifting from conventional individual product sales to comprehensive solution sales in all of its businesses.

(From the company release)

<Reference2: Regarding Corporate Governance>

◎Organization type, and the composition of directors and auditors

◎Corporate Governance Report
The latest revision date: August 9, 2024

<Fundamental concept>
As the Group, we recognize that it is our greatest mission to continuously improve corporate value while earning the trust of our shareholders, investors, customers, and society. To practice it, we consider enhancement of the corporate governance as one of important management tasks and aim to improve the transparency of management, maintain management systems accompanying fair and prompt decision making and strengthen management monitoring function.

<Reasons for Non-compliance with the Principles of the Corporate Governance Code>
The company implements all of the principles of the Corporate Governance Code.

<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>
[Principle 1-4. Cross-shareholdings]
The Company acquires and possesses cross-shareholdings upon deliberations and a resolution by the Board of Directors only when it is determined that it will contribute to strengthening business relationships and increasing corporate value in the Group’s business strategy. In addition, the Board of Directors verifies the significance of the shares we held every year. If it determines that the reasonable value sought is poor, we will strive to sell and reduce that holding in consideration of market trends and other factors.

Cross-shareholdings held by the Company at present: 55 million yen in one company (Amount on the balance sheet for December 31, 2023)

The Company makes a comprehensive judgement to determine the advisability of exercising the voting rights for the shares we hold. We individually examine this based on whether doing so will contribute to the sustainable growth and improvement of mid- to long-term corporate value improvement of that company and whether doing so will significantly harm shareholder value.

[Supplementary Principle 2-4-1. Ensuring Diversity in the Promotion of Core Personnel]
The concept of our corporate group since the business start-up has been "a desire to be a company in which self-actualization is possible for employees with the company serving as the stage for that." Under this desire, we have focused on creating an environment so that employees themselves can make the stages of their lives full of changes and inspiration without discriminating between men and women, nationalities, and between new employees fresh out of college and mid-career hires.
The status of employees of our domestic group companies (12 companies including our company) is as follows.

- Male / female rati Male: Female = 77%: 23%
- Ratio of mid-career hires: 60%
- Ratio of foreign employees: 1%
- Male-female ratio of managers: Male: Female = 96%: 4%
- Ratio of mid-career hires among managers: 71%

As mentioned above, due to the characteristics of the Group's business areas and business content, there are potentially few female and foreign employees, and their percentage among managers is not high at present.
On the other hand, more than 70% of mid-career hires have been promoted to managerial positions showing that we recognize that diverse human resources with various experiences and skills shall occupy the core of management.
In addition, our corporate group has consolidated subsidiaries worldwide. Thus, we believe that we have sufficiently ensured the diversity of our corporate group as a whole, including these subsidiaries.
We will consider the features of each operating company in each business area and continue to actively promote and review the environment to fully demonstrate the capabilities of each employee to secure more diversity of employees.

[Supplementary Principle 3-1-3. Sustainability Initiatives]
・To strengthen relationships with all stakeholders and contribute to the sustainable growth of society.
・To aim to achieve recycling-oriented business management through the supply of environmentally friendly products.
・To aim for sustainable growth and development of group companies through improved employee engagement.
These are the basic policies for sustainability. Since its founding, the OPTEX GROUP has developed its business, intending to contribute to “a safe, worry-free and convenient” society and industry by making full use of its expertise in sensing technology, aiming to become the “No. 1 Global Niche” sensor manufacturer under the key concept of engaging in the task of eliminating the “un” from unease, the “in” from inconvenient, and the “dis” from dissatisfying that exist in the world (the Futoru (eliminating negatives) Business).
The company will continue to promote this “FUTORU business” to contribute to solving environmental and social problems, and at the same time, is confident that it will lead to the expansion of each of its businesses and increase its corporate value. The company aims to contribute to the sustainable development of society and increase its corporate value.
The Group's initiatives are posted on the company's website at the following addresses.
・Sustainability →　https://www.optexgroup.co.jp/esg/
The website shown above provides information about our governance and our initiatives regarding relationships with society. The following websites provide more detailed information on our environmental and human resource initiatives.
・Basic Sustainability Policy　→　https://www.optexgroup.co.jp/esg/policy.html
・Reduction of Environmental Impacts →　https://www.optexgroup.co.jp/esg/environment-impact.html
・Initiatives for TCFD recommendations　→　https://www.optexgroup.co.jp/esg/tcfd.html
* In January 2023, the Group announced its support for the TCFD and set the Group's CO2 reduction target as “30% reduction by 2030 (compared to 2019: Scopes 1 and 2)".
We will keep focusing on the improvement of the quality and quantity of information disclosure concerning our corporate group’s initiatives for sustainability.
・ESG Report →　https://www.optexgroup.co.jp/shareholder/library/index.html#esgreport
・Strategies, indicators, and targets related to human resources →　https://www.optexgroup.co.jp/esg/human-resources.html

[Principle 5-1. Policy on Constructive Dialogue with Shareholders]
The Company has established an public relations・IR Department. The IR Department strives to provide easy-to-understand explanations about our management policies and business conditions to engage in positive and constructive dialogue with our shareholders. In addition, the President, the responsible officer, and IR personnel give briefings for institutional investors and briefings for private investors on a planned basis. We respond to requests for meetings with institutional investors as the occasion calls.
We establish a venue to allow the attendance of diverse shareholders at our ordinary general meeting of shareholders. We then hold a shareholder briefing to obtain understanding for our future policies after the end of that meeting.

[Action to Implement Management that is Conscious of Cost of Capital and Share Price (under review)]
The company recognizes that improving the cost of capital and capital profitability based on the balance sheet, as well as sales and profits on the income statement, is one of the important management issues for sustainable growth. We have set a “return on equity (ROE) of 10% or higher” as a target management indicator. Currently, we estimate our cost of equity to be around 7% (6-8%). We recognize that we have achieved a return on capital that exceeds the expected return demanded by shareholders and investors. However, we believe that we need to further improve profitability in the future.
Regarding the “Action to Implement Management that is Conscious of Cost of Capital and Share Price” promoted by the Tokyo Stock Exchange, the Board of Directors will fully examine specific initiatives, etc., and disclose the details around February 2025 in line with the formulation of the three-year management plan in the beginning of 2025.

The back number of Bridge Reports (OPTEX GROUP CO., LTD.: 6914) and contents of Bridge Salon (IR seminars) can be seen at www.bridge-salon.jp/