Unicharm Selected for the Nikkei Moat Stock Index Recognizing Its Strong Competitive Edge

Unicharm's Recognition in the Nikkei Moat Stock Index

Unicharm Corporation, led by President and CEO Hiroshi Takahara, has proudly announced its selection for the Nikkei Moat Stock Index, a new benchmark established by the Nikkei Inc. The inclusion reflects the company's sustained efforts in product innovation and solid brand presence on a global scale.

What is the Nikkei Moat Stock Index?

The term "moat," which essentially means a defensive barrier akin to a castle's moat, is a concept that renowned investor Warren Buffett emphasizes. Companies that possess strong technological capabilities, brand recognition, and cost competitiveness are deemed to have a moat, allowing for a sustainable competitive advantage and the potential for high mid-to-long-term returns.

The Nikkei Moat Stock Index exclusively selects approximately 30 stocks from leading companies listed on the Tokyo Stock Exchange Prime Market, excluding financial sectors, based on stringent criteria. This index showcases companies that are capable of standing out in their respective industries.

Selection Criteria

To qualify for inclusion in the Nikkei Moat Stock Index, companies must meet the following requirements:
1. A market capitalization exceeding 100 billion yen
2. Revenues that rank within the top 20% of their industry
3. A PEG ratio (Price to Earnings Growth ratio) of less than 2 yet greater than zero (considered only for initial listing)

The PEG ratio is calculated by dividing the projected Price Earnings Ratio by the growth rate of Earnings per Share (EPS). If a company's PEG ratio exceeds 2, it is typically considered overvalued, while the requirement of less than 2 and greater than zero indicates a potentially undervalued position relative to its earnings growth.

Methodology for Stock Inclusion

From the set of qualifying companies, those exceeding the average operating cash flow margin for their industry and demonstrating exceptional profitability are selected for the index. The operating cash flow margin, which is calculated by dividing operating cash flow by total revenues, signifies a company's ability to generate cash from its core business operations.

Significance of This Selection

Unicharm's inclusion in the Nikkei Moat Stock Index comes as the company prepares to celebrate its 65th anniversary on February 10, 2026. This milestone not only marks a significant period of growth for Unicharm but also acknowledges its commitment to innovation and sustainable practices that have led to the fortification of its competitive advantage, as evidenced by objective financial data.

The company considers this recognition as a validation of its ongoing efforts to create value through innovative solutions and sustainable business activities. Unicharm's core brand essence, summed up in the phrase "Love Your Possibilities," will continue to guide its strategy in enhancing corporate value and addressing societal challenges.