Under the Medium-Term Management Plan 2026, we have set consolidated operating profit and return on equity (ROE) as KPI (key performance indicators) and are working to increase corporate value.
The Board of Directors regularly examines the cost of equity and WACC (weighted average cost of capital), stock price and PBR (price book-value ratio), and analyzes the gap between the company's own assessment and that of securities analysts and institutional investors, as well as actual market assessments, and examines measures to eliminate this gap. At the same time, the Board of Directors implements management that is conscious of the cost of capital and stock price by improving medium-to long-term capital efficiency through earnings growth and appropriate shareholder returns. Recently, we have estimated our cost of equity, which is the rate of return expected by investors, to be in the range of 6.0-6.5%. From FY2021 to FY2023, ROE was significantly higher than the cost of equity due to the extremely high level of earnings resulting from increased sales of new Coronavirus testing-related reagents in the Coronavirus crisis. In FY2024, however, the level of earnings declined due to the downturn in the life sciences market that resulted from the reaction to the Coronavirus crisis and the impact of economic conditions. As a result, ROE was 1.3%. ROE estimated from the forecast for FY2025 is expected to be 3.0%, a slight increase from the previous fiscal year.
We also recognize that our share price and PBR have declined due to a fall in the level of earnings as a result of the repercussion of the Coronavirus crisis.
We have positioned the CDMO business (development and manufacturing services for biologics) including regenerative medicine as future growth businesses. This business requires upfront investment on facilities and human resources. Going forward, as CDMO business expands, consolidated operating profit and ROE will improve, and by implementing appropriate capitalization policies, we will strive to improve stock prices, PBR, and corporate value.
PBR, PER is calculated based on the average stock price during the fiscal year. FY2025 (forecast) is estimated based on the average stock price for the first half of the fiscal year.
