JTEKT (6473) FY2027 Q1 Earnings Report

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Executive Summary

In Q1, both operating income and net income increased substantially alongside higher revenue, with profitability improving from the same period of the previous year, primarily due to improved earnings in the Automotive segment. Revenue was ¥4919.7B (¥4547.9B in the same period of the previous year, +8.2%), operating income was ¥228.1B (¥135.3B, +68.6%), profit before tax was ¥215.6B (¥103.2B, +108.8%), and profit attributable to owners of the parent was ¥138.3B (¥65.1B, +112.5%). The increase in profit significantly exceeding revenue growth was driven by an improved gross margin and lower finance costs.

Factors Affecting Performance

【Revenue】Revenue was ¥4919.7B, representing an 8.2% YoY increase. By segment, Mobilities (Automotive) generated ¥3552.9B (72.2% of total revenue, YoY +9.7%), Bearing (Industrial Machinery and Bearings) generated ¥881.7B (17.9%, +2.4%), and MachineTools generated ¥485.2B (9.9%, +8.3%), with all three segments reporting higher revenue.

【Profit and Loss】Operating income was ¥228.1B (YoY +68.6%), and the operating margin improved by approximately 167bp, from 3.0% to 4.6%. The gross margin improved to 16.8% (15.2% in the previous year), while the SG&A ratio was broadly flat at 12.2% (12.1% in the previous year), indicating that the primary drivers of profit growth were improvements in the cost structure and product mix. By segment, Mobilities’ profit increased substantially to ¥157.6B (YoY +158.1%, profit margin 4.4%), driving company-wide profit growth, while Bearing (¥36.8B, -11.2%) and MachineTools (¥33.0B, -15.0%) reported lower profits. The halving of finance costs from ¥73.1B to ¥34.1B also contributed to the increase in profit before tax. In conclusion, the company achieved higher revenue and profit, with the breadth of profit growth concentrated in the Automotive segment.

Segment Analysis

Mobilities (Automotive) was the core contributor to company-wide profit growth, with revenue of ¥3552.9B (YoY +9.7%), business profit of ¥157.6B (YoY +158.1%), and a profit margin of 4.4% (an improvement of approximately 256bp from 1.9% in the previous year). Bearing (Industrial Machinery and Bearings) reported revenue of ¥881.7B (+2.4%), but business profit declined to ¥36.8B (-11.2%), with the profit margin deteriorating to 4.2% (down approximately 64bp from 4.8% in the previous year). MachineTools (Machine Tools) reported revenue of ¥485.2B (+8.3%), business profit of ¥33.0B (-15.0%), and a profit margin of 6.8% (down approximately 56bp from 7.4% in the previous year). Although all three segments achieved higher revenue, profit improvement was concentrated in Automotive, while the other two segments may have been affected by price competition and demand fluctuations.

Key Financial Metrics

【Profitability】The operating margin improved to 4.6% (3.0% in the same period of the previous year), the gross margin improved to 16.8% (15.2% in the previous year), and the net margin, based on profit attributable to owners of the parent, improved to 2.8% (1.4% in the previous year). 【Cash Flow Quality】Operating CF of ¥433.2B was approximately 3.1 times profit attributable to owners of the parent of ¥138.3B. A ¥204.8B decrease in trade receivables contributed to cash inflows, while inventories increased by ¥61.6B. 【Investment Efficiency】Annualized ROE was 6.8%, an improvement from the same period of the previous year, although the absolute level leaves room for further improvement in capital efficiency. 【Financial Soundness】The equity ratio remained stable at 50.5% (50.1% in the previous year). Current assets of ¥8220.8B versus current liabilities of ¥5074.3B resulted in a current ratio of approximately 162%, a healthy level.

Cash Flow Analysis

Operating CF was ¥433.2B, up 20.3% YoY. In addition to profit before tax of ¥215.6B and depreciation and amortization of ¥176.4B, a ¥204.8B decrease in trade receivables contributed to cash inflows. Meanwhile, inventories increased by ¥61.6B, representing a use of funds in working capital. Investing CF was -¥69.7B, with capital expenditures of ¥153.8B partially offset by ¥79.98B of proceeds from the sale of investment securities and other investing activities. Financing CF was -¥68.4B, with dividends paid by the parent company of ¥95.5B representing the primary cash outflow. Free cash flow was ¥363.4B, while operating-basis FCF after capital expenditures was ¥279.4B; both were sufficient to cover dividend payments. Cash and cash equivalents increased by ¥309.2B from the beginning of the period to ¥1684.7B, expanding financial flexibility.

Earnings Quality

The increase in profit during the current period was primarily attributable to improved profitability in the Automotive segment, with limited contribution from one-off factors such as extraordinary gains and losses. Net finance income was -¥12.0B, comprising finance income of ¥22.1B and finance costs of ¥34.1B, an improvement from -¥31.5B in the same period of the previous year that supported growth in profit before tax. Operating CF of ¥433.2B substantially exceeded profit attributable to owners of the parent of ¥138.3B, indicating strong cash backing for earnings. However, comprehensive income of ¥293.7B significantly exceeded net income of ¥144.1B, primarily due to foreign currency translation differences of ¥77.6B related to foreign operations and FVTOCI valuation gains of ¥64.3B. These items should be evaluated separately from operating profit and loss for the current period.

Earnings Forecasts and Guidance

Against the full-year earnings forecasts of revenue of ¥18800.0B, operating income of ¥750.0B, and EPS of ¥157.07, Q1 progress rates were 26.2% for revenue and 30.4% for operating income, both tracking ahead of the simple 25% progress rate. The faster-than-expected progress in operating income reflects improved profitability in the Automotive segment and lower finance costs. No revisions were made to the earnings or dividend forecasts during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥70.00, and the forecast payout ratio based on the full-year EPS forecast of ¥157.07 is 44.6%. Dividends paid by the parent company during Q1 were ¥95.5B, representing a coverage ratio of approximately 2.9 times against operating-basis FCF after capital expenditures of ¥279.4B, and were more than adequately funded by internally generated cash. Share repurchases were ¥0.0B and immaterial, making dividends the primary form of shareholder returns during the period.

Risk Factors

1. Profit dependence on the Automotive segment: Mobilities’ business profit of ¥157.6B accounts for approximately 69.3% of total segment profit of ¥227.4B, creating a structure in which changes in the segment’s ability to pass through prices and production trends have a significant impact on company-wide profit.

2. Low-margin structure: The operating margin of 4.6% and gross margin of 16.8% are below the industry median operating margin of 8.7%, leaving limited room to absorb fluctuations in raw material, energy, and logistics costs.

3. Deteriorating profitability in Industrial Machinery, Bearings, and Machine Tools: Although both segments achieved higher revenue, business profit declined by -11.2% and -15.0%, respectively, indicating that the breadth of profit improvement remains limited to the Automotive segment.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the operating margin and net margin are below the industry median, placing the company in the low-margin group within the industry.

Growth and Capital Efficiency

Revenue growth exceeded the industry median, placing the company’s revenue growth pace relatively high within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Profit growth during the current period was concentrated in improved profitability in the Automotive segment (profit margin from 1.9%→4.4%). Industrial Machinery, Bearings, and Machine Tools all reported higher revenue but lower profit, indicating that the breadth of profit improvement remains limited.

2. Operating CF was approximately 3.1 times profit attributable to owners of the parent, indicating strong cash backing for earnings during the period of profit growth. Although the decrease in trade receivables contributed positively, inventories increased, making working capital trends an area to monitor going forward.

3. Q1 progress against the full-year forecast was 30.4% for operating income and 26.2% for revenue, with profit progress ahead of revenue progress. Whether this trend continues throughout the full year will be a key factor in assessing future performance.

Theoretical Share Price (Reference Value)

Sensitivity: 2,291円〜2,423円 at ±1% for the cost of equity, and 2,349円〜2,360円 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 are used (there is a timing difference relative to the full-year forecast).

（Calculation model: Residual Income Model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-07 / These are mechanically calculated values based solely on publicly disclosed data and do not constitute forecasts of the market share price or recommendations for any specific investment action, nor do they predict or guarantee future share prices）

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This report is an automatically generated earnings analysis document created 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 with professionals as necessary.

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