NEC Networks & System Integration (1973) IR day presentation summary

Progress of business plan and financial performance

• Profit growth has resumed, though targets are delayed by a year due to telecom capex controls and wage hikes, with digital transformation services (DXS) showing the strongest results among business areas.

• Net sales and operating income are on an upward trend, with FY25/3 forecasts showing continued growth.

Capital efficiency and market evaluation

• Return on equity (ROE) and price-to-book ratio (PBR) have improved significantly, with ROE rising from 8.7% to 10.4% and PBR doubling from 1x to 2x.

• Market evaluation as a systems integrator has improved, with price-to-earnings ratio (PER) increasing to 20.2x.

• Further improvements in capital efficiency and market evaluation are targeted, aiming to exceed industry averages.

Strategic initiatives for value enhancement

• Focus on improving financial value (ROE) and non-financial value (human capital), aiming for a virtuous cycle of corporate and shareholder value enhancement.

• Asset efficiency is being improved through better management of receivables and inventories, despite challenges from large-scale projects and component shortages.

• Portfolio optimization is ongoing, screening businesses based on ROIC and growth potential.

• Cash allocation prioritizes shareholder returns and proactive growth investments, including M&A and investments in DX, local 5G, and carbon neutrality.