MABUCHI MOTOR CO.,LTD. FY2026 Q1 Earnings Report

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Executive Summary

Despite higher revenue, core earnings profitability weakened, while the substantial increases in ordinary income and net income were primarily attributable to a non-recurring boost from foreign exchange gains. Revenue was ¥503.7B (+7.3% YoY), while operating income was ¥54.0B (-15.4% YoY). Meanwhile, ordinary income was ¥79.2B (+66.8% YoY), and net income was ¥58.0B (+74.5% YoY). The decline in operating income was mainly due to an approximately 80bp decrease in gross profit margin and a 20.3% increase in SG&A expenses, which exceeded revenue growth by 13pt. The increases in ordinary income and net income resulted from the shift from a foreign exchange loss of ¥28.4B in the same period of the previous year to a foreign exchange gain of ¥10.7B in the current period, representing an improvement of ¥39.0B.

Factors Affecting Earnings

【Revenue】Revenue increased to ¥503.7B (+7.3% YoY). By market, the automotive electrical equipment market was ¥391.5B (+6.7% YoY), while the life and industrial equipment market was ¥112.2B (+9.2% YoY), with the latter recording relatively stronger growth. By region, Europe was ¥127.4B (+14.0% YoY), Japan was ¥304.0B (+1.2% YoY), Asia was ¥452.3B (+4.5% YoY), and the Americas were ¥95.3B (-2.7% YoY). Growth in Asia, the largest market, was limited.

【Profit and Loss】Operating income declined to ¥54.0B (-15.4% YoY). As the gross profit margin declined to 29.5% from 30.3% in the previous year, SG&A expenses increased 20.3% to ¥94.5B, substantially outpacing revenue growth, causing the operating margin to contract by approximately 290bp to 10.7% from 13.6% in the previous year. Meanwhile, ordinary income increased substantially to ¥79.2B (+66.8% YoY), and net income rose to ¥58.0B (+74.5% YoY). However, this was primarily due to the recognition of a ¥10.7B foreign exchange gain within non-operating income of ¥27.4B, compared with a foreign exchange loss of ¥28.4B in the previous year, rather than an increase in earnings from the core business. Extraordinary items consisted solely of an extraordinary loss of ¥0.6B, with a limited impact on net income. In conclusion, the quarter was characterized by higher revenue but lower operating income, while ordinary income and net income increased substantially due to non-operating foreign exchange factors.

Segment Analysis

Of the total segment profit of ¥55.5B for the reported segments, Asia was the largest earnings contributor at ¥37.2B, accounting for 67.1% of the total, and its profit margin improved to 8.2% from 7.8% in the previous year. In Japan, segment profit declined substantially to ¥15.8B (-43.1% YoY) against revenue of ¥304.0B (+1.2% YoY), with the profit margin falling to 5.2% from 9.2% in the previous year. The Americas recorded revenue of ¥95.3B (-2.7% YoY) and profit of ¥0.1B (-94.1% YoY), representing an almost complete loss of profitability. Europe recorded increased profit against revenue of ¥127.4B (+14.0% YoY), with profit of ¥2.3B and an improved profit margin of 1.8%, although profitability remained low. Deteriorating profitability in Japan and the Americas was the primary factor depressing the company-wide operating margin, and the profitability gap between regions is widening.

Key Financial Indicators

【Profitability】The operating margin declined by approximately 290bp to 10.7% from 13.6% in the same period of the previous year, while the net profit margin increased by approximately 440bp to 11.5% from approximately 7.1% in the same period of the previous year. This divergence resulted from foreign exchange gains offsetting the deterioration in core business profitability; caution is therefore warranted before viewing the current period’s high net profit margin as a sustainable level of earnings power. 【Cash Flow Quality】Cash and deposits were substantial at ¥1,352.2B, while accounts receivable were ¥393.1B and inventories were ¥380.0B. Receivables turnover and inventory turnover are relatively long, indicating room to improve the speed of working capital conversion into cash. 【Investment Efficiency】Annualized ROE remained at 6.9%. Despite the high net profit margin of 11.5%, both total asset turnover of 0.533x and financial leverage of 1.12x were relatively restrained, limiting efficiency from both asset utilization and leverage perspectives. 【Financial Soundness】The equity ratio was extremely high at 89.5%, and current assets of ¥2,480.0B substantially exceeded current liabilities of ¥267.9B. Although long-term borrowings increased to ¥44.5B, their ratios to total assets and net assets remained small, and the net cash position was maintained.

Cash Flow Analysis

As detailed cash flow statements are not included in this disclosure, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥1,352.2B, down from ¥1,434.1B in the same period of the previous year, but remained at more than five times current liabilities of ¥267.9B. Inventories increased to ¥380.0B from ¥356.8B in the previous year, with work in process in particular rising to ¥22.2B (+42.4% YoY), indicating increased funds tied up in the production process. Short-term borrowings increased to ¥5.5B, while long-term borrowings increased to ¥44.5B. Although the growth rates from the same period of the previous year were substantial, borrowings represented only 1.3% of total assets, limiting their impact on the funding structure. Overall, the buildup of inventories and increase in borrowings indicate an investment of funds in working capital, while cash levels remain substantial and financial liquidity concerns are limited.

Earnings Quality

The increase in net income in the current period warrants caution regarding earnings quality, as it depended heavily on improved non-operating income and expenses rather than an improvement in the core business’s earnings power. Foreign exchange gains of ¥10.7B accounted for a major portion of non-operating income of ¥27.4B, boosting ordinary income and net income through the shift from a foreign exchange loss of ¥28.4B in the same period of the previous year. Interest income declined to ¥5.8B from ¥6.8B in the same period of the previous year, indicating a reduced contribution from interest income. Extraordinary income was ¥0.03B and extraordinary loss was ¥0.6B, resulting in a slight net negative impact and a limited effect on net income. Meanwhile, comprehensive income was ¥120.6B, exceeding net income of ¥58.0B by ¥62.6B, primarily due to foreign currency translation adjustments of ¥52.8B. The increase in the valuation of overseas assets raises the yen-denominated valuation of overseas subsidiaries and differs in nature from realized earnings.

Earnings Forecasts and Guidance

Q1 progress against the full-year earnings forecasts was 23.6% for revenue, against a forecast of ¥2,130.0B; 20.8% for operating income, against a forecast of ¥260.0B; and 27.1% for ordinary income, against a forecast of ¥292.0B. Operating income progress was below the standard 25%. The company’s full-year plan assumes an operating margin of 12.2%, requiring improvement from the Q1 result of 10.7%. Meanwhile, the company forecasts a 16.8% YoY decline in full-year ordinary income, indicating that the boost from foreign exchange gains seen in Q1 is expected to diminish over the full year. There were no revisions to the earnings or dividend forecasts during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥56.00, and the full-year EPS forecast is ¥89.56, implying a forecast payout ratio of approximately 62.5%. This figure is a payout ratio based solely on dividends and is not a Total Return Ratio including share buybacks. The company has a strong financial base, with cash and deposits of ¥1,352.2B and an equity ratio of 89.5%, providing room to support the sustainability of payments even with a relatively high payout ratio. It should also be noted that the company implemented a 2-for-1 stock split effective January 1, 2026, and the dividend amount for the fiscal year ended December 2025 is stated at the actual amount before the split.

Risk Factors

1. Foreign Exchange Risk: The company recorded a foreign exchange gain of ¥10.7B in the current quarter, an improvement of ¥39.0B from the foreign exchange loss of ¥28.4B in the same period of the previous year. This demonstrates a structure in which ordinary income and net income are significantly affected by this non-operating factor.

2. Regional Profitability Gap Risk: Japan’s segment profit margin declined to 5.2% from 9.2% in the previous year, while the Americas remained at a low profitability level of 0.1%. Asia, meanwhile, is the core region, accounting for 67.1% of segment profit, but its revenue growth was limited to +4.5%.

3. Risk of Declining Core Profit Margins Due to Rising SG&A Expenses: SG&A expenses increased 20.3% YoY, substantially exceeding revenue growth of +7.3%, and the operating margin declined by approximately 290bp to 10.7%. As foreign exchange gains diminish, deterioration in core business profitability is likely to become more apparent.

Industry Benchmark (For Reference; Company Analysis)

Key Takeaways from the Earnings Results

1. Although the company achieved higher revenue, operating income declined 15.4% YoY. The earnings data indicate that the substantial increases in ordinary income and net income were primarily due to the recognition of foreign exchange gains and were not accompanied by an improvement in core business profitability.

2. By region, Asia is the core operating region, accounting for 67.1% of segment profit. Meanwhile, Japan’s profit declined 43.1% despite revenue growth, and the Americas were also at a level close to a complete loss of profitability, indicating a widening profitability gap between regions.

3. While the company has a strong financial base, with an equity ratio of 89.5% and cash and deposits of ¥1,352.2B, annualized ROE remained at 6.9%, confirming a structure in which low asset turnover constrains capital efficiency.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,258–¥1,329 at ±1% for the cost of equity, and ¥1,290–¥1,294 at ±0.1 for ω.

Notes:

• Since forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets at the end of the quarter are used; there is a timing difference from 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 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it 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. Industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

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