AICHI CORPORATION FY2026 FY Earnings Report

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Executive Summary

Although revenue was essentially flat, the Company secured an increase in operating income; however, operating cash flow weakened substantially. Revenue was ¥596.1B (+0.5% YoY), operating income was ¥75.1B (+1.0%), ordinary income was ¥81.7B (-0.6%), and net income was ¥66.6B (+5.1%). The increase in net income was supported by a gain on the sale of investment securities of ¥12.5B, which should be distinguished from growth in recurring earnings power. Meanwhile, operating CF was only ¥8.0B, a significant decline from ¥80.3B in the previous year, making this the most important point to monitor in terms of earnings quality.

Factors Affecting Performance

【Revenue】Revenue came in essentially flat at ¥596.1B, up +0.5% YoY. The core Special-Purpose Vehicles segment, which accounted for 74.9% of total revenue, declined 3.0% YoY to ¥446.5B, restraining overall growth. In contrast, the Parts and Repairs segment increased revenue by double digits, rising 10.8% YoY to ¥140.6B, with after-sales service revenue supporting company-wide growth. Other businesses, including used vehicle sales and educational services, grew substantially by 52.3% YoY to ¥9.0B; however, their contribution to the Company as a whole was limited, with a revenue mix of 1.5%.

【Profitability】Operating income was ¥75.1B, up +1.0% YoY, and the operating margin improved slightly to 12.6% from 12.5% in the previous year. The gross margin also improved by approximately 10bp to 22.1%, indicating that the profitability of the core business was broadly maintained. However, profit on a gross-profit basis in the Special-Purpose Vehicles segment declined 11.8% YoY to ¥76.1B, while profit in the Parts and Repairs segment increased 18.0% YoY to ¥51.9B, with a profit margin of 37.0%, thereby offsetting the decline. Ordinary income decreased slightly by 0.6% YoY to ¥81.7B, affected by a decline in equity-method investment income from ¥4.7B to ¥3.6B. Net income increased 5.1% YoY to ¥66.6B, but this was supported by extraordinary income of ¥12.5B, including a ¥12.5B gain on the sale of investment securities; excluding this gain, profit growth appears limited. Overall, while the Company achieved revenue and profit growth, the revenue increase was minimal and the core business experienced declines in both revenue and profit. The results can therefore be characterized as being supported by the Parts and Repairs business and temporary extraordinary income.

Segment Analysis

The Special-Purpose Vehicles segment, representing 74.9% of total revenue, posted revenue of ¥446.5B, down 3.0% YoY, and profit on a gross-profit basis of ¥76.1B, down 11.8% YoY, resulting in declines in both revenue and profit. The Parts and Repairs segment, representing 23.6% of total revenue, achieved substantial growth in both revenue and profit, with revenue of ¥140.6B, up 10.8% YoY, and profit of ¥51.9B, up 18.0% YoY, representing a profit margin of 37.0%. This is a highly profitable business, exceeding the Special-Purpose Vehicles segment by 20.0pt. Other businesses, including used vehicle sales and educational services, recorded revenue of ¥9.0B, up 52.3% YoY, and profit of ¥3.4B, up 227.9% YoY; however, their revenue mix remained limited at 1.5%. It should be noted that segment profit is calculated on a gross-profit basis and therefore differs in its basis of calculation from consolidated operating income, which includes ¥56.7B in company-wide expenses. The structure in which the highly profitable Parts and Repairs business offsets weakness in the core Special-Purpose Vehicles business has become clear.

Key Financial Indicators

【Profitability】The operating margin improved slightly to 12.6% from 12.5% in the previous year, while the net profit margin also improved to 11.2% from 10.7%. However, the improvement in the net profit margin was supported by the ¥12.5B gain on the sale of investment securities, and the improvement in recurring earnings power was limited to the improvement in the operating margin (+approximately 0.1pt). 【Cash Quality】Operating CF was only ¥8.0B, and its ratio to net income of ¥66.6B was 0.12x, a significant decline from the previous year, when operating CF was ¥80.3B and the ratio was 1.27x. The primary factors pressuring working capital were a ¥37.9B increase in accounts receivable and a ¥21.0B decrease in accounts payable. 【Investment Efficiency】ROE was 8.8%, decomposed into a net profit margin of 11.2%, total asset turnover of 0.64x, and financial leverage of 1.23x. The low total asset turnover is a factor constraining return on equity. 【Financial Soundness】The equity ratio of 81.2%, current ratio of 359.9%, and D/E ratio of 0.23x all indicate substantial financial capacity. Cash and deposits amounted to ¥267.1B, a ¥201.6B decrease YoY, as share buybacks of ¥128.3B, dividend payments of ¥45.5B, and investment activity expenditures of ¥36.8B exceeded operating CF.

Cash Flow Analysis

Operating CF declined substantially to ¥8.0B from ¥80.3B in the previous year, and the weak conversion of net income of ¥66.6B into cash was the defining feature of the current period. The primary factors were a ¥37.9B increase in accounts receivable and a ¥21.0B decrease in accounts payable, with deterioration in working capital absorbing operating cash. Investing CF represented an outflow of ¥36.8B. Acquisitions of property, plant and equipment and intangible assets amounted to ¥49.2B, 3.6 times depreciation and amortization expense of ¥13.7B, indicating that expansionary capital investment continues. As a result, free cash flow, comprising operating CF and investing CF, was negative ¥28.7B. Financing CF represented an outflow of ¥174.4B, primarily due to share buybacks of ¥128.3B and dividend payments of ¥45.5B. Operating CF was insufficient to fund investment and shareholder returns, and cash and deposits decreased ¥201.6B YoY to ¥267.1B. The recovery of operating CF through normalization of working capital will therefore be a key focus going forward.

Earnings Quality

The increase in net income of ¥66.6B was supported by extraordinary income of ¥12.5B, including a ¥12.5B gain on the sale of investment securities. After deducting extraordinary losses of ¥1.1B, net extraordinary income was ¥11.4B, representing approximately 17% of net income. Accordingly, caution is required when interpreting net income growth of +5.1% as an improvement in recurring earnings power. Ordinary income declined slightly by 0.6% YoY to ¥81.7B, affected by a decrease in equity-method investment income from ¥4.7B to ¥3.6B. Non-operating income was ¥7.0B, or 1.2% of revenue, and was relatively small, consisting primarily of dividends received of ¥1.7B and interest received of ¥1.2B. The Company’s dependence on non-operating gains and losses itself is therefore not high. On the other hand, operating CF was substantially below net income, indicating that the expansion of accruals, centered on the increase in accounts receivable, resulted in weaker cash support for accounting earnings. Overall, the profitability of the core business on an operating-income basis remained solid, but the increase in net income was affected by temporary factors and accruals, requiring a cautious qualitative assessment.

Earnings Forecast and Guidance

Progress against the full-year forecast was 94.6% for revenue, 95.1% for operating income, 96.1% for ordinary income, and 99.4% for net income, with all metrics approaching the plan at high levels. The full-year forecast calls for revenue of ¥630.0B (+5.7% YoY), operating income of ¥79.0B (+5.2%), and ordinary income of ¥85.0B (+4.0%). Compared with the current-period growth rates of revenue (+0.5%), operating income (+1.0%), and ordinary income (-0.6%), achieving the full-year plan presupposes an acceleration in growth during the remaining period. Forecast EPS was ¥103.78, compared with actual EPS of ¥100.73, while forecast dividends were ¥65, compared with actual dividends of ¥60.

Shareholder Returns

The annual dividend was ¥60 per share, and the payout ratio, based on net income of ¥66.6B, was 59.6%, approximately in line with the generally considered sustainability benchmark of 60%. In addition, the Company conducted share buybacks of ¥128.3B. Combined with total dividends of approximately ¥38.7B, total shareholder returns amounted to approximately ¥167.0B, resulting in a total return ratio of approximately 251% of net income. While the total return ratio substantially exceeded net income, free cash flow was negative ¥28.7B for the current period, indicating that shareholder returns were funded not by excess cash generated by the business but by existing cash balances. Although the Company has substantial financial capacity, with an equity ratio of 81.2% and a D/E ratio of 0.23x, if returns at this level continue, the decline in cash balances may persist unless accompanied by a recovery in operating CF.

Risk Factors

1. Declines in revenue and profit in the core business: The Special-Purpose Vehicles segment, which accounts for 74.9% of total revenue, recorded a 3.0% YoY decline in revenue and an 11.8% YoY decline in profit on a gross-profit basis. Its impact on consolidated performance is substantial, making demand trends a key focus going forward.

2. Decline in cash conversion efficiency: Operating CF was only 0.12x net income, a substantial decrease from 1.27x in the previous year. The primary factor was the ¥37.9B increase in accounts receivable, making it necessary to monitor collection trends.

3. Capital allocation and changes in cash balances: Share buybacks of ¥128.3B, dividend payments of ¥45.5B, and capital investment expenditures of ¥49.2B occurred concurrently, while cash and deposits decreased ¥201.6B YoY. If operating CF does not improve, continuing returns and investment at these levels could lead to a further decline in cash balances.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s operating margin and net profit margin are both substantially above the industry median.

Growth and Capital Efficiency

The revenue growth rate was below the industry median, indicating that the Company’s growth pace is relatively moderate compared with its profitability.

※Source: Compiled by the Company

Key Takeaways from the Results

1. The Parts and Repairs segment achieved high profitability, with revenue up 10.8% YoY and a profit margin of 37.0%, indicating a structural expansion in after-sales service revenue. It is playing a role in offsetting the decline in revenue from the core Special-Purpose Vehicles business.

2. The increase in net income (+5.1%) was supported by the ¥12.5B gain on the sale of investment securities. Caution is therefore required in extrapolating current-period net income of ¥66.6B as the future level of recurring earnings.

3. Operating CF of ¥8.0B and negative free cash flow of ¥28.7B indicate a divergence between accounting earnings and cash-generation capacity. Trends in working capital, particularly accounts receivable, will be an important monitoring item going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,129–¥1,192 at ±1% for the cost of equity, and ¥1,160–¥1,160 at ±0.1 for ω.

Note:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.

(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 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, after consulting professionals as necessary.

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