AIRMAN CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

In Q1, profit expanded at a pace exceeding revenue growth, resulting in higher revenue and profit accompanied by improved profitability. Revenue was ¥137.4B (+3.7% YoY), Operating Income was ¥24.4B (+50.9%), Ordinary Income was ¥25.9B (+67.9%), and Net Income attributable to owners of the parent was ¥17.8B (+62.9%), with profit growth substantially exceeding revenue growth in each case. The primary driver of profit growth was the increase in gross margin, centered on the Construction Machinery Business (27.4%→33.3%); the recognition of foreign exchange gains in non-operating income also contributed to the increase in Ordinary Income.

Factors Affecting Results

【Revenue】Revenue was ¥137.4B, representing a 3.7% YoY increase. By segment, the Construction Machinery Business was the primary contributor at ¥112.0B (81.5% of revenue, YoY +4.4%), while the Industrial Machinery Business remained at ¥25.4B (18.5% composition ratio, YoY +0.9%). Growth in the Construction Machinery Business drove overall company revenue growth.

【Profit and Loss】Operating Income was ¥24.4B (YoY +50.9%), and the Operating Income margin improved to 17.7% from 12.2% in the previous year, an improvement of +5.5pt. The primary factor was the increase in gross margin (27.4%→33.3%); the SG&A ratio was 15.5%, nearly unchanged from 15.3% in the previous year, indicating that cost improvements translated directly into higher profit. Segment profit was ¥26.4B for Construction Machinery (YoY +55.4%, profit margin 23.6%, +7.8pt from 15.8% in the previous year) and ¥4.9B for Industrial Machinery (YoY +8.8%, profit margin 19.3%, +1.4pt from 17.9% in the previous year). The larger margin improvement in Construction Machinery was the primary factor lifting the overall profit margin. Ordinary Income was ¥25.9B (YoY +67.9%); foreign exchange gains of ¥1.4B in non-operating income reversed the foreign exchange losses recorded in the previous year, increasing Ordinary Income by more than the growth in Operating Income. Extraordinary gains and losses had virtually no impact (extraordinary loss of ¥0.0B), and temporary factors were limited. Net Income attributable to owners of the parent was ¥17.8B (YoY +62.9%); although the effective tax rate rose slightly to 31.1% from 28.7% in the previous year, the profit growth trend was maintained. This was a results profile characterized by higher revenue and profit, with profit growth substantially exceeding revenue growth.

Segment Analysis

The Construction Machinery Business generated revenue of ¥112.0B (YoY +4.4%) and segment profit of ¥26.4B (YoY +55.4%), with a profit margin of 23.6% (15.8% in the previous year). It is the core business, accounting for 81.5% of total company revenue and 84.3% of total segment profit of ¥31.3B. The Industrial Machinery Business generated revenue of ¥25.4B (YoY +0.9%) and segment profit of ¥4.9B (YoY +8.8%), with a profit margin of 19.3% (17.9% in the previous year), securing higher profit despite modest revenue growth. Both businesses improved their profit margins from the previous year; however, the larger improvement in Construction Machinery contributed to lifting consolidated Operating Income to ¥24.4B after deducting company-wide expenses of ¥6.9B from total segment profit.

Key Financial Indicators

【Profitability】The Operating Income margin and Net Income margin both improved significantly, to 17.7% (12.2% in the previous year) and 13.0% (8.2% in the previous year), respectively, while gross margin also increased to 33.3% (27.4% in the previous year). 【Cash Quality】Cash and deposits were ¥114.3B, down from ¥121.2B in the previous year, while inventories increased to ¥137.3B (¥108.2B in the previous year, +26.9%). Working capital accumulation has therefore preceded profit growth, creating a structure in which cash generation is likely to lag behind profit recognition. 【Investment Efficiency】ROE was 3.9%, EPS was ¥66.11 (¥39.67 in the previous year, +66.6%), and BPS was ¥1,704.59 (¥1,670.64 in the previous year). Against total assets of ¥677.8B, Net Income attributable to owners of the parent was ¥17.8B, and the substantial equity base (Equity Ratio of 68.0%) is one factor suppressing capital efficiency. 【Financial Soundness】The Equity Ratio remained high at 68.0% (68.5% in the previous year), and the liability structure was conservative, centered on long-term borrowings of ¥70.9B.

Cash Flow Analysis

Cash and deposits were ¥114.3B, a decrease of ¥6.9B from ¥121.2B in the previous year, indicating a modest contraction in cash on hand despite the earnings expansion. The primary factor was a ¥29.2B increase in inventories (¥108.2B→¥137.3B), reflecting increased funds tied up in working capital, mainly product inventories. Meanwhile, accounts payable were ¥55.6B, up ¥6.9B from ¥48.6B in the previous year, and the increase in trade payables partially offset the working capital burden. Investment securities were ¥62.8B, up ¥5.8B from ¥57.1B in the previous year, indicating that part of the funds was allocated to securities investments. Long-term borrowings were ¥70.9B, slightly down from ¥72.1B in the previous year, reflecting a conservative financial stance. Overall, inventory accumulation has delayed the timing of cash generation relative to profit growth.

Quality of Earnings

Most profit was derived from improved operating profitability, and the impact of temporary factors was limited. Extraordinary losses were minimal at ¥0.0B, and the difference between Ordinary Income and Net Income attributable to owners of the parent was primarily attributable to the effective tax rate of 31.1% (28.7% in the previous year). Foreign exchange gains accounted for ¥1.4B of non-operating income of ¥1.8B and reversed the foreign exchange loss of ¥1.3B in the previous year, contributing to the increase in Ordinary Income. This foreign exchange impact could reverse depending on market conditions and therefore warrants attention. Comprehensive income was ¥23.4B, ¥5.6B higher than Net Income attributable to owners of the parent of ¥17.8B. The difference was primarily due to an increase of +¥4.0B in valuation difference on securities and an increase of +¥1.2B in foreign currency translation adjustments, indicating that valuation gains unrelated to the earning power of the core business lifted comprehensive income. Inventory and trade receivables have increased from the previous year, and the lag between accrual-based profit recognition and cash conversion is also an observation point when assessing earnings quality.

Earnings Forecasts and Guidance

Q1 progress against the full-year plan was 22.8% for Revenue (versus the ¥602.0B plan), 29.4% for Operating Income (versus the ¥83.0B plan), 29.8% for Ordinary Income (versus the ¥87.0B plan), and 29.7% for Net Income attributable to owners of the parent (versus the ¥60.0B plan). Profit-related indicators exceeded the simple progress benchmark of 25%. The company revised its earnings forecasts during the quarter, while leaving its dividend forecast (¥20.00) unchanged. Although revenue progress was slightly below the standard benchmark, profit progress was ahead, supported by the improvement in gross margin and margin expansion in the Construction Machinery Business.

Shareholder Returns

The annual dividend forecast remains unchanged at ¥20.00, the same level as the previous fiscal year, and no revision to the dividend forecast was made during the quarter. Based on the full-year EPS forecast of ¥222.73, the Payout Ratio is approximately 9.0% (¥20.00÷¥222.73), representing a low return level relative to earnings. Based on the weighted-average number of shares during the period of approximately 26.94M shares, excluding treasury shares, the total annual dividend is estimated to be in the ¥5B range, which is within a reasonable level relative to cash and deposits of ¥114.3B and the earnings level. No share repurchases have been confirmed.

Risk Factors

1. Business concentration risk: The Construction Machinery Business accounts for 81.5% of Revenue (¥112.0B/¥137.4B) and 84.3% of segment profit, creating a structure in which demand fluctuations in this business have a significant impact on overall performance.

2. Working capital retention risk: Inventories were ¥137.3B, an increase of +26.9% from the previous year, accumulating at a pace substantially exceeding revenue growth of +3.7%. The relative risk of inventory valuation losses and discounting measures during periods of demand fluctuation has increased.

3. Foreign exchange risk: Foreign exchange gains of ¥1.4B in non-operating income reversed the foreign exchange losses recorded in the previous year and lifted Ordinary Income. However, this effect could reverse due to fluctuations in foreign exchange rates and therefore requires monitoring as a factor affecting Ordinary Income.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin substantially exceeded the industry median, placing profitability at a high level within the industry.

Growth and Capital Efficiency

The revenue growth rate was below the industry median, positioning the company’s revenue growth pace as somewhat modest within the industry.

※Source: Company compilation

Key Points from the Financial Results

1. Gross margin improved by +5.9pt to 33.3% (27.4% in the previous year), while the Operating Income margin improved by +5.5pt to 17.7% (12.2% in the previous year). Profit growth of +50.9%, substantially exceeding revenue growth of +3.7%, indicates a change in the margin structure driven by improved pricing and product mix.

2. While inventories increased by +26.9%, cash and deposits declined, creating a divergence between earnings growth and the timing of cash generation. The future trend in inventory levels will be an observation point for assessing working capital efficiency.

3. Full-year progress rates for profit-related indicators were in the 29% range, exceeding the planned simple progress benchmark of 25%. The company revised its earnings forecasts during the quarter, and the relationship between progress and the revisions will be a point to confirm in future results.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,876–¥1,991 at ±1% for the cost of equity, and ¥1,927–¥1,941 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).

(Calculation model: Residual income model / Interest rate reference month: 2026-06 / This figure does not predict or guarantee the future share price)

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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 available earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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