AICHI (6345) FY2026 Q3 Earnings Report

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Executive Summary

Although earnings declined in line with the decrease in revenue, the decline in net income was relatively contained due to gains on the sale of investment securities. Revenue was ¥381.5B (-7.8% YoY), Operating Income was ¥38.6B (-9.5%), Ordinary Income was ¥44.4B (-9.3%), and Net Income was ¥35.2B (attributable to owners of the parent, -6.6%). The decline in Operating Income exceeding the rate of revenue decline indicates negative operating leverage, as the reduction in SG&A expenses (-3.7%) was insufficient to absorb the decrease in revenue (-7.8%). The narrower decline in net income resulted from extraordinary income of ¥7.1B (gain on sale of investment securities) and does not represent an improvement in recurring earnings power.

Factors Affecting Performance

【Revenue】Revenue was ¥381.5B, a decrease of -7.8% YoY. By segment, SpeciallyEquippedVehicle generated ¥292.3B (76.6% of total) and PartsAndRepair generated ¥98.3B (25.8%), with the slowdown in demand for the core SpeciallyEquippedVehicle business weighing on overall results.

【Profit and Loss】The gross margin improved to 20.9% from 20.6% in the same period last year, but the SG&A ratio increased to 10.8%, causing the Operating Income margin to decline to 10.1% from 10.3% in the same period last year. Non-operating income and expenses resulted in a surplus of ¥5.8B, comprising dividend income of ¥1.6B, interest income of ¥1.0B, and other items, contributing to Ordinary Income of ¥44.4B. Extraordinary income of ¥7.1B (gain on sale of investment securities) supported net income. Overall, the results are characterized by lower revenue and lower earnings.

Segment Analysis

PartsAndRepair is a highly profitable segment, with Revenue of ¥98.3B, Operating Income of ¥34.5B, and a margin of 35.1%. SpeciallyEquippedVehicle accounts for just under 80% of total revenue, with Revenue of ¥292.3B, but its margin remains at 14.9%. Compared with the overall margin of 10.1%, the margin of SpeciallyEquippedVehicle is less than half that of PartsAndRepair, indicating a structure in which the larger business has relatively lower profitability.

Key Financial Indicators

【Profitability】The Operating Income margin of 10.1% declined by approximately 19bp YoY, while the Net Income margin of 9.2% increased by approximately 12bp. However, the improvement in the Net Income margin was attributable to extraordinary income.【Cash Flow Quality】Operating Cash Flow (OCF) was -¥52.2B, substantially below Net Income of ¥35.2B. The main factors were an increase in inventories (-¥30.1B), a decrease in accounts payable (-¥31.0B), and corporate income tax payments (-¥24.7B).【Investment Efficiency】While annualized ROE was 6.5% and the Equity Ratio was 83.1%, indicating a high level of financial safety, the low asset turnover ratio is constraining capital efficiency.【Financial Soundness】Liquidity is robust, with current assets of ¥497.1B against current liabilities of ¥120.2B, while cash and deposits stood at ¥216.8B. Total assets declined to ¥862.9B from ¥1003.6B in the prior year, and net assets also contracted to ¥717.1B from ¥840.2B due to the implementation of share repurchases.

Cash Flow Analysis

Operating Cash Flow was -¥52.2B, representing a substantial gap relative to Net Income of ¥35.2B. An increase in inventories (-¥30.1B), a decrease in accounts payable (-¥31.0B), and corporate income tax payments (-¥24.7B) resulted in cash outflows. Investing Cash Flow was -¥26.6B, with capital expenditures on property, plant and equipment and other assets exceeding depreciation and amortization expense of ¥9.2B, indicating that capital investment is in an expansion phase above replacement levels. Financing Cash Flow was a substantial outflow of -¥174.2B, including share repurchases of ¥128.3B and dividend payments. Free Cash Flow (Operating Cash Flow + Investing Cash Flow) was negative at -¥78.8B, indicating a decline in the ability to fund the period’s capital investment and shareholder returns through internal cash flow. Cash and deposits declined to ¥216.8B but remained above current liabilities of ¥120.2B, limiting the direct impact on short-term liquidity.

Quality of Earnings

Net Income of ¥35.2B for the current period includes extraordinary income of ¥7.1B (gain on sale of investment securities), representing approximately 20% of net income. Excluding this extraordinary income, recurring earnings power was limited to Ordinary Income of ¥44.4B (-9.3% YoY). The smaller decline in Net Income (-6.6%) than in Ordinary Income and Operating Income (-9.3% and -9.5%, respectively) indicates reliance on non-recurring items. Non-operating income was ¥6.0B, comprising dividend income of ¥1.6B, other non-operating income of ¥0.4B, and other items, and was small relative to revenue. The situation in which Operating Cash Flow falls substantially below Net Income (Operating Cash Flow of -¥52.2B versus Net Income of ¥35.2B) indicates weak conversion of current-period earnings into cash, primarily due to changes in working capital, namely the increase in inventories and decrease in accounts payable. Comprehensive income was ¥50.6B, exceeding Net Income of ¥35.2B, due to additional valuation gains on other securities, including ¥11.8B in valuation differences on securities.

Earnings Forecast and Guidance

The full-year earnings forecast is Revenue of ¥610.0B (+2.9% YoY), Operating Income of ¥76.0B (+2.1%), and Ordinary Income of ¥83.0B (+0.9%). Cumulative progress rates are 62.5% for Revenue, 50.8% for Operating Income, and 53.4% for Ordinary Income, all below the standard three-quarter progress rate of 75%. To achieve the full-year plan, Revenue of ¥228.5B and Operating Income of ¥36.4B are required in Q4, requiring a standalone Q4 Operating Income margin of 15.9%, above the cumulative margin of 10.1%. The dividend forecast is ¥60.00 per share and the EPS forecast is ¥98.34, making the extent to which earnings improve toward the fiscal year-end a key focus going forward.

Shareholder Returns

The Q2 dividend was ¥30.00 per share, while the full-year dividend forecast is ¥60.00 per share, representing an increase from the previous fiscal year’s actual level on an annualized basis. Based on the full-year forecast EPS of ¥98.34 and dividend of ¥60.00, the Payout Ratio against cumulative Net Income of ¥35.2B is approximately 61.0%. In addition, the Company conducted share repurchases of ¥128.3B, resulting in a high Total Return Ratio relative to cumulative Net Income when dividends and share repurchases are combined. Although cumulative Operating Cash Flow was -¥52.2B and Free Cash Flow was -¥78.8B, the returns were supported by a financial base comprising cash and deposits of ¥216.8B and an Equity Ratio of 83.1%. The recovery of Operating Cash Flow will be a monitoring item in assessing the sustainability of shareholder returns going forward.

Risk Factors

1. Delay in progress toward the full-year plan: The Operating Income progress rate of 50.8% is below the standard progress rate of 75%, requiring Revenue of ¥228.5B and an Operating Income margin of 15.9% in Q4. The concentration of performance toward the fiscal year-end increases execution risk in achieving the plan.

2. Cash flow quality: Operating Cash Flow of -¥52.2B was substantially below Net Income of ¥35.2B, primarily due to the increase in inventories (-¥30.1B) and decrease in accounts payable (-¥31.0B). Cash conversion of earnings is weak, requiring close monitoring of improvements in working capital management.

3. Reliance on extraordinary income: Approximately 20% of Net Income of ¥35.2B was attributable to the gain on sale of investment securities of ¥7.1B. This must be evaluated separately from recurring earnings power, as represented by Ordinary Income (-9.3% YoY).

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceed the industry median, placing the Company in a favorable position within the industry in terms of profitability.

Growth and Capital Efficiency

The Revenue growth rate is substantially below the industry median, indicating that the Company lags its industry peers in terms of growth.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Although the Operating Income margin of 10.1% and Net Income margin of 9.2% exceed the industry median, the downward trend in margins YoY accompanying the decline in revenue is a structural point requiring attention.

2. The smaller decline in Net Income than in Ordinary Income and Operating Income was attributable to the temporary contribution of extraordinary income (gain on sale of investment securities of ¥7.1B), which must be considered separately from recurring earnings power.

3. Although the Company conducted substantial share repurchases of ¥128.3B, Operating Cash Flow was -¥52.2B and Free Cash Flow was -¥78.8B, both negative, indicating that the period’s shareholder returns and investments were not funded by internal cash flow. Financial soundness, reflected in the Equity Ratio of 83.1%, provides the foundation supporting the execution of these returns.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,073–¥1,133 at ±1% for the cost of equity, and ¥1,102–¥1,102 at ±0.1 for ω.

Notes:

• As 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).
• As 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 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 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. 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 a professional as necessary.

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