DAIKI ALUMINIUM INDUSTRY CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

This earnings result confirmed higher revenue and profits, accompanied by multilayered improvements in profit margins, against a backdrop of volume recovery and improved spreads. Revenue was ¥976.1B (¥747.3B in the same period of the previous year, +30.6%), Operating Income was ¥37.4B (+146.1%), Ordinary Income was ¥33.7B (+229.5%), and Net Income was ¥23.8B (+278.8%). Profit growth exceeding revenue growth indicates that improvements in raw material spreads and volume recovery in the core Secondary Aluminum Alloy Business progressed at a pace exceeding the increase in SG&A expenses.

Factors Affecting Financial Performance

【Revenue】Revenue of ¥976.1B increased +30.6% year on year. By segment, Secondary Aluminum Alloys led the overall result with revenue of ¥968.4B (composition ratio 99.2%, +31.6%), while Other Businesses declined to ¥12.5B (1.3%, -18.9%). The Company’s concentration on its core business has increased further.

【Profit and Loss】Operating Income was ¥37.4B (+146.1%), and the Operating Margin improved to 3.8% from 2.0% in the previous year, an improvement of approximately +180bp. The gross margin also increased to 6.1% from 4.8% in the previous year, apparently reflecting improved raw material spreads. Ordinary Income was ¥33.7B (+229.5%). Although interest expense of ¥5.3B was a burden, a reduction in foreign exchange losses compared with the previous year provided support. Extraordinary gains and losses were minor, comprising a gain of ¥0.1B and a loss of ¥0.2B, limiting the impact of temporary factors. Net Income was ¥23.8B (+278.8%); even after reflecting income taxes and other taxes of ¥9.8B (effective tax rate of approximately 29%), the profit growth rate exceeded that of Operating Income. Revenue and profit both increased.

Segment Analysis

The reported segments comprise Secondary Aluminum Alloys and Other Businesses, including the Die-Cast Products Business. Secondary Aluminum Alloys generated revenue of ¥968.4B (+31.6% year on year), Operating Income of ¥36.6B (+167.5%), and an Operating Margin of 3.8% (approximately +1.9pt year on year), demonstrating a clear improvement in profitability. Its contribution accounts for virtually all consolidated Operating Income. The Other Business segment contracted, with revenue of ¥12.5B (-18.9%) and Operating Income of ¥0.8B (-43.3%), although its profit margin was higher than that of the core business at 6.8%. Its impact on consolidated performance in absolute terms is limited, and consolidated performance is effectively dependent on spread and volume trends in the core business.

Key Financial Indicators

【Profitability】The Operating Margin improved to 3.8% from 2.0% in the previous year, the Net Income Margin improved to 2.4% from 0.9%, and ROE was 3.0%. Although all indicators improved year on year, their absolute levels remain low. 【Cash Flow Quality】Accounts receivable of ¥820.0B (41.2% of total assets) and inventories of ¥328.1B (16.5%) indicate a high level of working capital, while improvement in asset efficiency has lagged behind revenue growth. 【Investment Efficiency】The total asset turnover ratio was approximately 0.49x, suggesting that earnings growth has not kept pace with the expansion of the asset base. 【Financial Soundness】The Equity Ratio declined somewhat to 39.7% from 42.9% in the previous year, and dependence on interest-bearing debt is high, primarily due to short-term borrowings of ¥805.4B. Current assets of ¥1610.4B and current liabilities of ¥1078.6B imply a current ratio of approximately 149%, indicating that liquidity is secured on the surface.

Cash Flow Analysis

Although the Company has not disclosed a cash flow statement, funding trends can be assessed from changes in the balance sheet. Cash and deposits declined to ¥69.2B from ¥90.8B in the previous year, while accounts receivable increased to ¥820.0B (¥744.2B in the previous year, +10.2%) and inventories increased substantially to ¥328.1B (¥226.8B in the previous year, +44.6%). This buildup of working capital was financed through an increase in short-term borrowings to ¥805.4B (¥679.7B in the previous year, +18.6%), creating a structure in which funding needs associated with revenue growth are absorbed through short-term borrowings. Accounts payable also increased to ¥204.3B (¥162.2B in the previous year, +25.9%), supporting the expansion of procurement. However, the rate of increase on the asset side exceeded this, and, together with the decline in cash on hand, this suggests pressure on funding efficiency.

Earnings Quality

Extraordinary gains and losses were minor, comprising a gain of ¥0.1B and a loss of ¥0.2B, indicating that the increase in profit for the current period was attributable to an improvement in recurring earnings power from the core business. Interest expense accounted for ¥5.3B of the ¥6.5B in non-operating expenses, and although costs arising from the liability structure placed some pressure on Ordinary Income, non-operating income of ¥2.8B was primarily composed of items such as dividends received of ¥0.8B, with no notable one-time income. Net Income of ¥23.8B compared with Ordinary Income of ¥33.7B reflects income taxes and other taxes of ¥9.8B (effective tax rate of approximately 29%); the gap between Ordinary Income and Net Income is therefore largely explainable by the tax burden. From an accrual perspective, however, accounts receivable and inventories increased at a faster pace than revenue, indicating that cash conversion has lagged earnings growth reported on the income statement. This is an important point to consider when assessing earnings quality.

Earnings Forecast and Guidance

Progress against the full-year plan was 22.0% for revenue, calculated as ¥976.1B/¥4428.0B; 21.3% for Operating Income, calculated as ¥37.4B/¥175.5B; and 19.6% for Net Income, calculated as ¥23.8B/¥121.5B. Progress at each level was below the standard quarterly benchmark of 25%, suggesting that the plan was designed on the assumption of continued demand recovery and maintained spreads in the second half of the fiscal year. Neither the earnings forecast nor the dividend forecast was revised in this quarter, and management has maintained its current plan.

Shareholder Returns

The full-year dividend forecast is ¥90.00 per share, implying a Payout Ratio of approximately 29.3% based on full-year forecast EPS of ¥307.03. Compared with the previous year’s actual dividend of ¥25 per share, the plan represents a dividend increase, indicating an expansion of shareholder returns in line with the profit growth phase. No disclosure regarding share repurchases has been made at this time, and dividends remain the primary means of shareholder returns. Given the financial structure’s high dependence on short-term borrowings, the Payout Ratio itself is moderate, but its consistency with cash on hand requires monitoring.

Risk Factors

1. Segment concentration risk: Secondary Aluminum Alloys account for 99.2% of revenue and virtually all Operating Income, creating a structure in which consolidated performance is highly dependent on spread and volume trends in a single business.

2. Working capital and collection risk: Accounts receivable increased to ¥820.0B (+10.2% year on year) and inventories to ¥328.1B (+44.6% year on year), while cash and deposits declined to ¥69.2B. If inventory turnover deteriorates or collection delays occur, an impact on cash generation capacity can be expected.

3. Funding structure risk: Short-term borrowings of ¥805.4B account for approximately 40% of total assets, with the majority of interest-bearing debt concentrated in short-term obligations. Interest expense was ¥5.3B, increasing from the previous year, and the impact of changes in the interest-rate environment on earnings needs to be monitored.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Operating Margin and Net Income Margin are below the industry median, indicating that profitability is low relative to the manufacturing industry average.

Growth and Capital Efficiency

The revenue growth rate is substantially above the industry median, indicating that the pace of revenue growth is high within the industry.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. The Operating Margin improved +1.8pt year on year and the Net Income Margin improved +1.5pt due to volume recovery and improved spreads. Given the high concentration in the core Secondary Aluminum Alloys Business (revenue composition ratio of 99.2%), these improvements must be viewed in light of the business’s high sensitivity to market and spread trends.

2. Accounts receivable and inventories increased at a faster pace than revenue, while cash and deposits declined from the previous year. Despite higher revenue and profits, the impact of working capital expansion on cash generation capacity is a key point in the earnings data.

3. Full-year progress was 22.0% for revenue, 21.3% for Operating Income, and 19.6% for Net Income, all below the quarterly benchmark of 25%. The extent to which earnings can be accumulated in the second half of the fiscal year will be a key point to confirm in future earnings results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,408–¥2,552 at Cost of Equity ±1%; ¥2,467–¥2,497 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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 responsibility, after consulting a professional as necessary.

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