日本信号（6741） – [Delayed]NIPPON SIGNAL GROUP Three-years Medium-term Management Plan Next Stage 24

NIPPON SIGNAL GROUPThree-years Medium-term Management PlanNext Stage 24May 20, 2022Copyright © NIPPON SIGNAL CO.,LTD. All Rights Reserved.Long-term VisionBasic Policy and Key Strategies of Next Stage 24Table of contentsTargets of Next Stage 24Goal of Next Stage 24１ Vision-2028 EVOLUTION 100２Basic Policy and Key Strategies of Next Stage 24３ Targets of Next Stage 241Long-term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 241-1. Vision-2028 EVOLUTION 100100 years since the foundationSupporting the evolution of infrastructure safely and comfortablyOur WillBecome a respected corporate group as an infrastructure provider in the Digital eraPrevious PlanNext Stage 24Next PlanVision-2028 EVOLUTION 100Targets of Next Stage 24RobotMedical CareSuper Smart SocietySmartO&MSmartMobilityMaaSSmart Citylow-carbon societyAuthenticationSensingSecurityPaymentServiceCBMSelf-drivingExpanding business fields into the life fieldSafety Security Comfort Reliability2Long-term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 241-2. Value Chain StagesWe aim to transform business through digitalization, high added value, and one-stop operationDigitalTransformation■ High added value■ Acceleratingglobal expansionOne-stop operation from upper system to maintenanceSensingAnalysisAbroad DomesticService MaintenanceAddedVaue lTechnology accumulationHigh robustnessTerminaldeviceField equipmentValue Chain付加価値低下AssemblyStrengths that NSkeep infrastructure “fields“3Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-1．Assumptions for planningChanges in the business environmentThe start of a revolutionary period of digital disruption※➣Shift to a business model utilizing digital technology➣Lower barriers to entry into markets from different industriesShakeout of industries adhering to traditional business modelsNeed for a new growth model for sustainable growthNew medium-term management plan『Next Stage 24』※Disruptive innovation where existing industries are replaced by new digital businesses4Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-2. Assumptions for planning（Changed environmental factors）（Unchanged Values）Changes in business environmentOur ValuesDecrease in people traveling and meeting due to COVID 19Restructuring of our CustomersTransition/diversification of work/lifestylesRapid development of digitalizationPopulation decrease andaging population in JapanPopulation growth and urbanization abroad1. Emphasize “safety and Philosophyreliability” above all.Mono-zukuri (manufacturing)2. Strive to improve customer value by taking the customer’s perspective.Koto-zukuri (business)3. Take on challenges for our own growth.Hito-zukuri (education)4. Preserve the environment and contribute to the development of local communities.Machi-zukuri (CSR)5. Have dreams and share them.Michi-zukuri (creation of the Our MissionOurVisionOurValuesCode of ConductShift to a decarbonized society at the global levelfuture)5Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-3. Review of previous Management PlanThe plan was not achieved due to reduced customers’ investment and difficulty in procuring semiconductors and other parts. We accelerate structural reforms such as the social implementation of products that respond to changing environments.■Development of new products－CBTC：Introduction of 3 operators－CBM：Introduction of 21 lines－MVNO：Contract with 8 prefectures－Self-driving：Participation in 28 demonstration experiments－Robotics：Expanded lineups of cleaning robots Joint development※ of multi-functional railway heavy machine.※West Japan Railway Company、Man-Machine Synergy Effectors, Inc.■Winning top share in the PSD marketpotentialStrengthengrowth SaeslFY2019FY2020FY2021(billion yen)1129385Target1206Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-4. Basic Policy and Key Strategies of Next Stage 24Basic PolicySustain ‘Next Stage’ of InfrastructureSocial implementation of transportation innovation through digitaltechnology and acceleration of overseas localizationFinancialTargets（FY2024）Sales 130 billion yenROE 10%EnvironmentalTargetsReducing greenhouse gas emissions by 50% (2030)Zero Carbon (2050)KeyStrategySustainable Value CreationValue Co-creation with Customers (Social Implementation of Strategic Products)Expansion of overseas business and improvement of profitabilityStrengthening design and manufacturing capabilitiesPromotion of ESG management and enhancing corporate valueReorganization of group company functions, human resource development, and introduction of the next core system7Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-5. Segment TargetsWe aim to increase sales by accelerating the social implementation of strategic products and expanding overseas businessTotal¥85 bnFY2021Overseas¥7.6 bnSmart City¥74 bnSmart City¥15 bnFY2024Total¥130 bnOverseas¥20 bnRailway Signals¥47 bnAFC¥27.6 bnAFC¥38 bnSmart Mobility¥10 bnRailway Signals¥35.9 bnSmart Mobility¥6.2 bn8O&MDisaster prevention/mitigationAutomateddrivingCBTCMedicalCareLong-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-6. Business development of Next stage 24Next-Generation Social/Life Infrastructure NIPPON SIGNAL GROUP aimsIT ParkingStationPlatform SafetyRobotsEco & PowerSolutionsBRTSecurityANSHIN CenterTraffic Signal NetworkingSelf-drivingMaintenance (Overseas) Payment ServiceCollaboration and integration of business and group companiesSafer and more comfortableSupport the movement in totalSupporting the Transformation of Public Transportation into MaaS9Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-7. Market Trends (Keywords)Before the pandemicWith/After COVID 19UrbanAreaLocalAreaImproving safety and convenienceInbound, High-density mass transportChanging lifestyleIT and Cloud computingSlim facilities and lower costsMaintenance of safe/stable transportation and convenienceSelf-drivingRenewal of aging facilities and reduction of operating costsMarket expansionCareful selection of establishment and concentration in urban areasIT and NetworkingSecuring labor forceContactless and maintenance of life infrastructureAutomation and advancing functionalityRailwayMarketRoadTrafficMarketParkingMarketRobotMarketAll MarketsDecarbonization10Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-8. Railway Signals businessVision/TargetProviding solutions to support customers’ restructuringMain StrategiesStrategic products■Existing market strategyAI maintenance CBTCSlim facilities such as CBTC and LRTAdvancing functions and disaster planning (Switches and crossing gates)LRTGoal¥35.9 bn¥47 bnFY2021FY2024■Platform strategyExpansion of AI maintenance and CBMSocial implementation of autonomous driving■Developing the Eco & Power Solution MarketDeveloping new technologies/fields, such as efficient solutions in the electrical stations and vibration power generation11Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-9. Smart Mobility businessStrategic products■Establishing business-model in the self-driving Self-drivingMVNOSelf-driving and high added valueVision/TargetMain StrategiesmarketStandardization of cooperative self-driving systems and business developmentSocial implementation of first/last one-mile services■Existing market strategyConversion of local railway lines to Bus Rapid TransitProduct improvement for energy savingCrossroadsNetworking■Platform StrategyCreating added value through MVNO(Networking for traffic control) and pedestrian supports12BRTGoal¥6.2 bn¥10 bnFY2021FY2024Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-10. AFC businessStrategic products■AFCPlatformmonitoringPaymentServiceVision/TargetSolving customer management issues and realizing MaaSMain StrategiesSocial implementation of flexible fare determinationProviding various payment methods and MaaS(Transportation support, reservation, payment services, etc.)■Station SafetyDevelopment of lightweight platform doors and platform monitoring devicesImproved serviceability with CBMParking■Smart ParkingGoal¥27.6 bn¥38 bnFY2021FY2024Development of new fields through management support to operators and gateless/flapless systemsPromotion of low carbon emissions, such as development of products for EV vehicles13Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-11. Smart City businessVision/TargetCreation of new growth pillarsMain Strategies■Robotics Development and social implementation of multi-factional railway heavy machines and cleaning robotsDeveloping the service robot markets such as security/inspection robots■Sensing■SecurityEntry into the construction machine market and development of omnidirectional sensorsDevelopment of new gates and high-security marketStrategic productsCleaningRobots3D sensorBaggage inspection¥15 bn¥7.4 bnGoalFY2021FY202414Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-12. Smart City business (Body scanner)Increased incidents targeting unspecified persons and terrorist threats➢Strengthening security at facilities where many people gather and Backgroundtransportation facilitiesFeaturesHigh throughputSmall-footprintMultiple types of detection performance(Metal/Explosive)Detection ResultBaggage inspectionRailwaysAirportsEducational institutionsArenasAmusement parksEvent facilitiesPersonal items inspectionUsage scenes15Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-13. Overseas businessStrategic products■Sales/Products strategySouth AsiaASEAN、TaiwanVision/TargetBusiness development rooted in Asian megacitiesMain StrategiesCommercialization of SPACRS seriesDevelopment of traffic signal systems for overseas marketsExpansion of maintenance business■Localized strategyPromoting localization through establishing Nippon Signal BangladeshMain TargetsMarket sizeNew lines/extension projects in cities that NS operates¥35 bn¥40 bnStable revenue acquisition based on past abounding performanceSouth AsiaASEANTaiwan16¥20 bn¥7.6 bnGoalFY2021FY2024Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-14. Implementation Projects and Future Plans in Asian MegacitiesNumber of Stations (Distance)Implementation Projects/New LinesExtension PlansFuture PlansDelhi Metro Line 8Ahmadabad MetroChennai MetroDhaka Line 6＋Line 1&5Bangkok Red LineJakarta MetroYangon Loop Line, Yangon-Mandalay LineHo Chi Minh Metro Line 1Manila SubwayCairo Metro Line 4Beijing Metro Line 15Taiwan22 (29km)22 (27km)9 (9km)49 (68km)11 (29km)10 (12km)Line 10Line 29 (26km)－－－－51 (118km)Yangon-Mandalay Line Phase 2－－Line 3&4Line 4 Phase2Increased number of trainsSouth Link Line electrification project19 (120km)Operating Control Center Renewal, Tao-yuan area underground installation, Hua-doing Line double track project : 18(120km)25 (37km)33 (39km)32 (45km)16 (20km)13 (41km)14 (16km)14 (19km)17 (32km)16 (19km)21 (38km)17Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-15. ESG Efforts to decarbonize and reduce environmental impactParticipating in TCFD and aiming to reduce greenhouse gas emissions by 50% until 2030 (compared to FY2013) and achieve net 0 emissions by 2050Nippon Signal Group’s Decarbonization Initiatives①Reducing Emissions from Products1. Reduced power consumption2. Improved serviceability3. Provision of energy-saving solutionsEEfficiencySlim facilitiesCBMSelf-drivingEnergy savingNew fields such as vibration power generationGreenhouse gas reduction targets■Scope1,2 ■Scope325%202450%203018②Clean power procurement, Introduction of photovoltaic power generation③Reduction of emissions in business activitiesFactoryOfficeDecarbonization100%2050Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 242-16. ESG Promoting Diversity and SustainabilityPromoting diversity as a driving force for value creationKPIFY2024DiversityRatio of female managersNumber of female employees in technical positions1.4 times1.2 times(compared to April 2022)SHealth managementExcellent Health and Productivity Management Organization Acquiring certificationStrengthen education of DX human resources and promote diverse work styles【Contributing to Sustainability through all corporate activities】Continuing/strengthening community-based activities such as railway festivalsSolving social issues and promoting sustainability through business➢Continuous enhancement of corporate governance and compliance, Gincluding appropriate responses to legal system revisions➢Strengthening Group Risk Management and Restructuring of BCP19Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 243-1. Management targetsAiming to maximize corporate value by creating growth opportunities and establishing a growth foundation with ROE as an important indicatorNIPPON SIGNAL GROUP MANAGEMENT TARGETSOperating IncomeRatioSalesROEFY2021¥85 bn6.3%5.3%20FY2024¥130 bn11%10%Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 243-2. Cash AllocationAiming to invest a total of 50 billion yen to create valueFY2021～FY2024Cash Generation¥30 bn+FinancingR&D¥14 bnFocusing on CBM, Self-driving, Payment service, RobotsCapital¥26 bnInvestment in new business development and design/ manufacturing reform + large-scale investment (core system renewal)M&A¥10 bnPromotion of M&A to create new businesses and in-house productionDividendStable dividend with a payout ratio of around 30%21Long-Term VisionBasic Policy and Key Strategies of Next Stage 24Targets of Next Stage 243-3. Payout ratioAiming a stable dividend payout ratio of 30%22NotesBusiness forecasts are established based on the informationavailable to us at the current point of time and certainpreconditions that are decided to be rational. However, theactual business results may differ significantly from theforecasts due to various factors.23