ALPHA (3434) FY2026 Q3 Earnings Report

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Executive Summary

Although cumulative Q3 results were characterized by declining revenue and earnings, the key point was that net income was boosted by foreign exchange gains and extraordinary income. Revenue was ¥523.8B (¥549.0B in the previous year, YoY -4.6%), while operating income was ¥2.9B (¥4.3B in the previous year, YoY -32.6%), indicating deterioration in core operating profitability. Meanwhile, ordinary income improved substantially to ¥8.6B (YoY +138.5%), and net income attributable to owners of the parent improved significantly to ¥9.2B (¥0.3B in the previous year). However, this improvement was largely attributable to foreign exchange gains of ¥6.3B and extraordinary income of ¥4.0B, which should be evaluated separately from the weakness in operating income.

Factors Driving Earnings Fluctuations

【Revenue】Revenue was ¥523.8B, down 4.6% year on year. In the Automotive Parts Business, revenue declined across most major locations, with North America down 13.8%, Asia down 6.7%, and Japan down 3.5%, while Europe increased 7.0%. In the Security Equipment Business, domestic revenue declined 8.6%, whereas overseas revenue increased 11.6%, resulting in mixed performance. Growth in Europe and overseas security operations was insufficient to offset the company-wide revenue decline.

【Profit and Loss】The gross profit margin improved to 14.0% from 13.2% in the previous year; however, SG&A expenses increased 3.3% (¥70.6B), leaving the SG&A ratio elevated at 13.5%. Consequently, operating income declined to ¥2.9B (operating margin: 0.6%). In non-operating items, the non-operating balance was a surplus of ¥5.7B, primarily due to foreign exchange gains of ¥6.3B, resulting in ordinary income recovering to ¥8.6B. In addition, extraordinary income of ¥4.0B was recorded, contributing to pretax income of ¥11.9B, and net income reached ¥9.2B. Since the sources of earnings differ at the operating income, ordinary income, and net income levels, the overall structure can be described as “declining revenue and earnings (core operations) but higher earnings (overall).” Overall, results should be assessed as declining revenue and earnings.

Segment Analysis

Total segment profit was ¥10.4B, down 15.5% from ¥12.3B in the previous year. The Automotive Parts Business recorded losses of ¥3.98B in North America and ¥9.42B in Asia, with losses widening and highlighting challenges related to capacity utilization and price pass-through. Japan generated profit of ¥4.4B, while Europe secured profit of ¥3.9B. The Security Equipment Business in Japan was the largest source of profit at ¥9.97B, although profit declined year on year, while overseas operations remained solid at ¥5.5B. Adjustments for company-wide expenses and other items improved to △¥7.45B from △¥7.95B in the previous year, but this was insufficient to offset the decline in consolidated operating income.

Key Financial Indicators

【Profitability】The operating margin remained low at 0.6% (0.8% in the previous year), as the increase in SG&A expenses absorbed the improvement in the gross profit margin to 14.0% (13.2% in the previous year). The ordinary income margin rose to 1.6%, but dependence on foreign exchange gains was high.【Cash Flow Quality】Of net income attributable to owners of the parent of ¥9.2B, non-operating and extraordinary gains and losses made a significant contribution. The notable gap from operating income of ¥2.9B indicates that earnings quality was influenced by temporary factors.【Investment Efficiency】Annualized ROE was 3.0% and ROIC was 0.6%, both low levels, making the securing of earning power above the cost of capital a key challenge. EPS was ¥96.03 (¥3.26 in the previous year), and BPS was ¥3,801.35.【Financial Soundness】The equity ratio remained high at 51.0% (52.3% in the previous year); however, short-term borrowings increased by ¥24.8B year on year to ¥143.6B, indicating greater dependence on short-term liabilities.

Cash Flow Analysis

As detailed data from the cash flow statement was unavailable, funding trends are analyzed based on changes in the balance sheet. Cash and deposits increased to ¥112.3B from ¥107.9B in the previous year (Note: previous-year cash was ¥102.5B), indicating that liquidity was maintained. Meanwhile, short-term borrowings increased by ¥24.8B (+20.8%) year on year to ¥143.6B, resulting in a funding structure for interest-bearing liabilities that was weighted toward short-term financing. Accounts receivable increased by ¥9.5B (+6.9%) year on year to ¥147.9B, suggesting that a lengthening collection period may be tying up working capital. Investment securities increased by ¥19.3B (+48.3%) year on year to ¥59.2B, suggesting that cash outflows from investing activities occurred. Overall, the company appears to be increasing its assets and investments while offsetting weak operating income through short-term borrowings.

Earnings Quality

Ordinary income of ¥8.6B substantially exceeded operating income of ¥2.9B, with the difference primarily attributable to foreign exchange gains of ¥6.3B; this should be distinguished from recurring business earning power. In addition, pretax income of ¥11.9B included extraordinary income of ¥4.0B (including gains on the sale of fixed assets of ¥0.2B, among other items), which boosted net income attributable to owners of the parent to ¥9.2B. Foreign exchange gains accounted for approximately 70% of total non-operating income of ¥9.1B, while recurring income such as dividend income of ¥1.0B was limited. Comprehensive income was ¥13.0B, exceeding net income of ¥8.3B, due to an increase of ¥12.6B in valuation differences on securities, while foreign currency translation adjustments were negative ¥7.8B. Accordingly, current-period earnings depended more heavily on foreign exchange factors, extraordinary items, and valuation gains than on operating factors, making it difficult to conclude that earnings quality reflected an improvement in core operations.

Earnings Forecast and Guidance

Progress toward the full-year revenue forecast of ¥700.0B was 74.8%, almost in line with the standard progress rate of 75%. By contrast, progress toward the full-year operating income forecast of ¥15.0B was only 19.3%, implying that operating income of ¥12.1B must be generated in Q4 alone. Progress toward the full-year ordinary income forecast of ¥14.0B was 61.6%, below the standard progress rate, although not to the same extent as operating income. Progress toward the forecast net income attributable to owners of the parent of ¥9.0B was already 102.4%. However, because foreign exchange gains and extraordinary income made significant contributions, this should be viewed separately from the risk of missing the operating income plan.

Shareholder Returns

The Q2 dividend was ¥20.00 per share, and the company’s full-year forecast is an annual dividend of ¥50.00. Based on the average number of shares outstanding during the period of 960.4 million shares, total annual dividends are estimated at approximately ¥4.8B, resulting in an estimated payout ratio of approximately 53% against the full-year forecast net income attributable to owners of the parent of ¥9.0B. This level remains below the generally accepted guideline of 60%; however, given the low full-year operating income progress rate of 19.3%, the stability of dividend resources will depend on the extent of the recovery in core operating profit going forward. Although cumulative Q3 net income attributable to owners of the parent has already exceeded the full-year forecast, caution is warranted before interpreting this progress alone as indicating increased capacity for dividend growth, since it includes foreign exchange gains and extraordinary income.

Risk Factors

1. Deterioration in regional profitability: In the Automotive Parts Business, North America recorded revenue of ¥114.97B (down 13.8% year on year) and a segment loss of ¥3.98B, while Asia recorded revenue of ¥101.61B (down 6.7%) and a loss of ¥9.42B. Capacity utilization, price pass-through, and customer production trends are weighing on consolidated profitability.

2. Dependence on foreign exchange gains: Foreign exchange gains of ¥6.29B were equivalent to 216.9% of operating income of ¥2.90B, with foreign exchange factors supporting a substantial portion of ordinary income. If foreign exchange rates reverse, ordinary income and net income could fluctuate significantly.

3. Dependence on short-term financing: Short-term borrowings increased by ¥24.76B year on year to ¥143.62B, and the short-term liabilities ratio reached 83.4%. Operating income of ¥2.90B only slightly exceeded interest expenses of ¥2.77B, meaning that changes in financing conditions amid rising interest rates or declining operating earnings could affect the financial burden.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The company’s profitability is significantly below the industry median, with both its operating margin and net profit margin at low levels within the industry.

Growth and Capital Efficiency

While many companies in the industry are generating revenue growth, the company recorded a revenue decline and ranks toward the lower end in terms of growth.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Although the gross profit margin improved by approximately 0.8pt year on year, the increase in SG&A expenses (+3.3%) exceeded this improvement, causing the operating margin to decline from 0.8% to 0.6%. A decline in fixed-cost absorption capacity during a period of falling revenue is evident.

2. The substantial improvement in ordinary income and net income was largely attributable to foreign exchange gains of ¥6.29B and extraordinary income of ¥4.03B, creating a significant gap from the operating income progress rate of 19.3% against the full-year forecast. The level and quality of earnings must be evaluated separately.

3. The increase in short-term borrowings (+¥24.8B) and low interest coverage have increased sensitivity to funding costs and changes in refinancing conditions amid low profitability.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,921–¥3,083 at ±1% for the cost of equity, and ¥2,977–¥3,016 at ±0.1 for ω.

Notes:

• Since forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).

(Valuation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest Rate Reference Month: 2026-08 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, with consultation with a professional as necessary.

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