Hitachi, a sprawling conglomerate of 900 group firms, has been trying to narrow its focus to give it a better chance of competing globally with more profitable rivals such as Germany's Siemens and General Electric Co .
Over the next three years Hitachi will allocate about 70 percent of its 1.4 trillion yen ($15.4 billion) budget for capital spending and strategic investments to its social innovation segment, it said.
This includes a group of businesses such as power plants, smart grids, cloud computing, batteries and railway systems.
Hitachi will look to mergers and acquisitions to bolster these operations, President Hiroaki Nakanishi said, in a sign the company is becoming more aggressive toward expansion after years of cost-cutting.
We are clearly stating that we will be changing to offence from defense, Nakanishi told a news conference. Sales growth is not everything, but profit growth won't come without an increase in sales.
Hitachi said it would aim for an operating profit margin of more than 5 percent in the financial year to March 2013 on sales of 10.5 trillion yen. That would produce a profit of at least 525 billion yen, up from 202 billion yen in the year just ended.
The profit target seems conservative, said Yukihiko Shimada, a senior analyst at Mitsubishi UFJ Morgan Stanley Securities. Unless something really goes wrong, this profit figure is reachable.
Average predictions from six analysts see Hitachi achieving an operating profit of 469 billion yen for the year to March 2013.
Hitachi aims to boost the ratio of sales generated in overseas markets to more than half the total, up from 41 percent in the year ended in March 2010, as it makes a push into emerging markets.
Nakanishi attributed Hitachi's lower profitability than global rivals to its reliance on its domestic business and past quality problems.
Hitachi also aims to lower its debt-to-equity ratio to 0.8 times or below, from 1.04 times at the end of last financial year.
Hitachi shares were up 0.5 percent in late Monday trade in a steady broader market <.N225>.
($1=91.05 Yen) (Reporting by Sachi Izumi; Editing by Michael Watson)