JTEKT Corporation FY2027 Q1 Earnings Report

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Executive Summary

The quarter ended with higher revenue and higher profit, with the growth in Operating Income and Net Income significantly outpacing revenue growth, resulting in earnings characterized by improved profitability. Revenue was ¥491.97B (+8.2% YoY), Operating Income was ¥22.81B (+68.6%), Profit Before Tax was ¥21.56B (+108.8%), and Net Income attributable to owners of the parent was ¥13.83B (+112.5%). The primary drivers of profit growth were the recovery in profitability of the core Mobilities (Automotive) segment, the operating leverage effect resulting from SG&A expenses growing more slowly than revenue, and lower financial expenses.

Factors Affecting Performance

【Revenue】Revenue was ¥491.97B, representing an 8.2% YoY increase. By segment, Mobilities (Automotive) was the largest growth driver at ¥355.29B (72.2% of total revenue, +9.7% YoY), while Bearing (Industrial Machinery and Bearings) recorded ¥88.17B (+2.4%) and MachineTools recorded ¥48.52B (+8.3%), with all segments securing revenue growth.

【Profit and Loss】Gross profit was ¥82.52B (+19.4%), and the gross margin improved to 16.8% from 15.2% in the previous year, a +1.6pt improvement. SG&A expenses increased to ¥59.78B (+8.5%), with the growth rate below the revenue growth rate. As a result, the SG&A ratio remained broadly flat at 12.2%, while the Operating Income margin improved to 4.6% from 2.97%, a +1.7pt improvement. By segment, Mobilities recovered sharply to ¥15.76B (+158.1%, 4.4% margin), while Bearing declined to ¥3.68B (-11.2%, 4.2% margin) and MachineTools declined to ¥3.30B (-15.0%, 6.8% margin). Profitability improvement therefore remains highly dependent on Mobilities. Financial expenses fell substantially to ¥3.41B from ¥7.31B in the previous year, boosting Profit Before Tax and resulting in Net Income attributable to owners of the parent of ¥13.83B (+112.5%). The key characteristic was that both revenue and profit increased, with the magnitude of profit growth significantly exceeding that of revenue growth.

Segment Analysis

Of the three reportable segments, Mobilities (Automotive) is the largest, accounting for 72.2% of the revenue mix, and drove most of the Company-wide profit increase with Operating Income of ¥15.76B (+158.1%). Its margin improved to 4.4% (equivalent to approximately 1.9% in the previous year), suggesting progress in passing through higher prices and improving profitability. In contrast, Bearing (Industrial Machinery and Bearings) increased revenue (+2.4%) but reported lower profit of ¥3.68B (-11.2%, 4.2% margin), while MachineTools (Machine Tools) also increased revenue (+8.3%) but reported lower profit of ¥3.30B (-15.0%, 6.8% margin). Profitability deteriorated in both non-automotive segments. The Company-wide profit increase is largely attributable to improvement in Mobilities alone, indicating a widening polarization of profitability among segments.

Key Financial Metrics

【Profitability】The Operating Income margin was 4.6%, improving by +1.7pt from 2.97% in the same period of the previous year. The margin for Net Income attributable to owners of the parent was 2.81%, improving by +1.4pt from 1.43% in the previous year. ROE (quarterly, non-annualized) was 1.7%, calculated by dividing Net Income for the quarter attributable to owners of the parent of ¥13.83B by the average equity attributable to owners of the parent at the beginning and end of the period.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥43.32B, reaching 3.0 times consolidated quarterly profit of ¥14.41B, indicating sound cash-generation capacity underpinning earnings.【Investment Efficiency】Capital expenditures were ¥15.38B, down -35.4% from ¥23.79B in the previous year. Capital expenditures were 0.87 times depreciation and amortization of ¥17.64B, representing a restrained level centered on replacement investment. Interest coverage (Operating Income/financial expenses) was 6.7 times, a significant improvement from 1.9 times in the previous year, indicating enhanced resilience to interest burdens.【Financial Soundness】The Equity Ratio was 50.5%, up +0.4pt from 50.1% at the end of the same period of the previous year. The current ratio was approximately 162%, calculated as current assets of ¥822.08B divided by current liabilities of ¥507.43B, representing a sound level. Total interest-bearing debt was ¥221.54B, equivalent to 27.4% of equity attributable to owners of the parent of ¥809.38B. Net interest-bearing debt after deducting cash on hand of ¥168.47B was limited to ¥53.07B.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥43.32B, up +20.3% from ¥36.00B in the same period of the previous year, representing cash generation well above Profit Before Tax of ¥21.56B. In the breakdown, the decrease in trade receivables contributed +¥20.48B, while an increase in inventories of -¥6.16B and a decrease in trade payables of -¥0.63B were negative factors. After deducting income taxes paid of ¥9.07B, OCF reached the reported level. Investing Cash Flow was -¥6.97B. Capital expenditures of ¥15.38B (down -35.4% from ¥23.79B in the previous year) were offset by other income of ¥8.00B, including proceeds from the sale of investment securities, reducing the scale of investment from -¥22.57B in the previous year. Financing Cash Flow was -¥6.84B, primarily due to dividend payments to the parent company’s shareholders of ¥9.55B, turning negative from +¥5.78B in the previous year. Free Cash Flow (OCF + Investing Cash Flow) was ample at ¥36.34B, more than covering dividend payments, and cash and cash equivalents accumulated to ¥168.47B (+¥30.92B from the beginning of the period, +22.5%).

Earnings Quality

OCF reached 3.0 times consolidated quarterly profit of ¥14.41B during the quarter, indicating relatively sound cash flow underpinning earnings. On the income statement, the halving of financial expenses to ¥3.41B from ¥7.31B in the previous year was a factor boosting Profit Before Tax. This reflects structural improvement related to the interest-rate environment and the effects of foreign exchange hedging, while no extraordinary gains or losses were recorded as disclosed temporary items. Comprehensive income was ¥29.37B, substantially exceeding Net Income of ¥14.41B. The primary components of the ¥14.95B difference were other comprehensive income (OCI), including a foreign currency translation gain on foreign operations of ¥7.76B and valuation gains of ¥6.43B on financial assets designated as FVTOCI. Because these items do not pass through the P/L, there is a divergence between realized earnings for the period and comprehensive changes in asset value. Accordingly, when evaluating earnings quality, greater emphasis should be placed on trends in Operating Income and Profit Before Tax at the income-statement level.

Earnings Forecast and Guidance

Progress against the full-year earnings forecast was 26.2% for revenue, calculated as ¥491.97B/¥1,880.0B; 30.4% for Operating Income, calculated as ¥22.81B/¥75.0B; and 27.7% for EPS, calculated as ¥43.45/¥157.07. Operating Income progress exceeded the 25% benchmark for an even quarterly allocation and was relatively front-loaded, even after considering the seasonality weighted toward the first half. Neither the earnings forecast nor the dividend forecast was revised during the quarter. Full-year Operating Income is planned to increase sharply by +201.8% YoY, and the current Q1 result (+68.6% YoY) represents part of the progress toward achieving that target.

Shareholder Returns

The full-year dividend forecast is ¥70 per share, implying a Payout Ratio of approximately 44.6% against assumed EPS of ¥157.07. Dividend payments during the quarter totaled ¥9.55B to shareholders of the parent, with coverage of approximately 3.8 times against Free Cash Flow of ¥36.34B, representing ample capacity relative to the source of funds for payment. Share repurchases were ¥0.00B and therefore negligible, making dividends the core component of the current shareholder-return policy.

Risk Factors

1. Widening segment profitability gap: Bearing (Industrial Machinery and Bearings) reported a profit growth rate of -11.2%, while MachineTools (Machine Tools) reported -15.0%, with profit declines continuing. The Company-wide profit improvement remains dependent on the increase in Mobilities (+158.1%), requiring monitoring.

2. Concentration of business composition: Mobilities accounts for 72.2% of revenue and generates more than half of segment profit. Consequently, fluctuations in supply and demand in the automotive industry have a relatively significant impact on Company-wide performance.

3. Accumulation of working capital: Inventories increased by +¥8.92B (+3.6%) from the end of the previous fiscal year and were a negative factor of -¥6.16B in OCF. If the inventory increase reflects demand requirements, the issue is limited; however, it warrants attention as a risk to capital efficiency and inventory valuation in the event of a reversal in supply and demand.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin are below the industry median, indicating that profitability is less competitive than the manufacturing-industry average.

Growth and Capital Efficiency

The revenue growth rate exceeds the industry median, indicating relatively strong top-line growth.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Operating Income margin improved by +1.7pt YoY (2.97%→4.64%), while Profit Before Tax increased by +108.8% alongside the halving of financial expenses, indicating from the earnings figures that the Company is in a profitability recovery phase. The primary driver of improvement was the sharp recovery in Mobilities segment profit.

2. Operating Income progress against the full-year plan was 30.4%, exceeding the 25% benchmark for an even quarterly allocation. This pace will be closely monitored as an indicator of progress toward achieving the plan in the second half.

3. While Mobilities drove profit growth, Bearing and MachineTools recorded higher revenue but lower profit. The profitability gap among segments is therefore a structural issue affecting the quality of Company-wide earnings.

Theoretical Share Price (For Reference)

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 period). It is not a forecast of the market share price or a recommendation for any specific investment action.

Sensitivity: ¥2,298–¥2,432 at ±1% for the cost of equity, and ¥2,357–¥2,367 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end were used, resulting in a timing difference from the full-year forecast.

(Calculation model: Residual Income Model / Interest rate reference month: 2026-06 / This figure does not forecast 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-summary data. It does not recommend investment in any specific security. 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 professionals as necessary.

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