GS Yuasa (6674) FY2026 Q3 Earnings Report

Quick View

Executive Summary

The Company recorded higher revenue and earnings for the current period, with earnings growth driven primarily by improved profit margins. Revenue was 4,329.8B yen (+1.4% year on year), Operating Income was 379.7B yen (+19.5%), Ordinary Income was 367.8B yen (+28.1%), and consolidated Net Income was 258.3B yen (209.3B yen in the same period of the previous year). While revenue growth remained modest, the Operating Income margin improved to 8.8% (approximately 7.4% in the previous year), with the improvement in the cost ratio being the primary driver of earnings growth. The reason Ordinary Income growth exceeded Operating Income growth was the shift from a foreign exchange loss in the previous year to a foreign exchange gain in the current period.

Factors Affecting Earnings

【Revenue】Revenue was 4,329.8B yen, representing only a slight 1.4% increase year on year. Although the breakdown of volume and price factors is limited based on the disclosed data, the growth rate was moderate, and earnings growth in the current period was more dependent on profitability improvement than on revenue expansion.

【Profit and Loss】The gross profit margin improved from the previous year to 25.0% due to the decline in the cost of sales ratio. SG&A expenses were 700.7B yen, up +4.2% year on year, exceeding revenue growth (+1.4%) and partially offsetting the improvement in gross profit. Nevertheless, Operating Income increased to 379.7B yen (+19.5%), and the Operating Income margin rose to 8.8%. In non-operating income and expenses, the foreign exchange loss recorded in the previous year turned into a foreign exchange gain in the current period, resulting in Ordinary Income of 367.8B yen (+28.1%), a growth rate exceeding that of Operating Income. The 23.7B yen in extraordinary income includes a 15.7B yen gain on the sale of non-current assets, which should be distinguished as a temporary factor. In conclusion, the current period was characterized by higher revenue and earnings, with earnings growth led by cost improvements.

Key Financial Indicators

【Profitability】The 8.8% Operating Income margin improved from the previous year, primarily due to the increase in the 25.0% gross profit margin, while the SG&A ratio rose slightly to 16.2%, making indirect cost management a focus going forward.【Cash Flow Quality】Cash and deposits were 328.8B yen, representing a significant year-on-year decline, while increases in inventories (finished products 820.4B yen, work in progress 283.6B yen, and raw materials 369.4B yen) are placing pressure on working capital.【Investment Efficiency】ROE (annualized) was 8.3%, remaining at a mid-level based on both net profit margin and asset turnover. EPS increased to 220.03 yen (183.39 yen in the previous year, +20.0%), reflecting higher earnings.【Financial Soundness】The Equity Ratio was 58.0% (also shown as 51.5% in a reference indicator), indicating a stable capital base. Interest-bearing debt, combining current and non-current debt, was limited, and the Company is considered to have sufficient earnings capacity to absorb interest costs.

Cash Flow Analysis

As detailed data from the statement of cash flows has not been disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits declined significantly to 328.8B yen from 607.9B yen in the previous year, against a backdrop of expanded working capital and investment expenditures, including increases in inventories (finished products +21.2% year on year, work in progress +14.3%, and raw materials +14.8%) and construction in progress (602.0B yen, +21.6% year on year). While Accounts Payable declined year on year to 468.1B yen, electronically recorded obligations increased, and changes in the composition of payment methods also affected cash management. Overall, improvement in cash generation has lagged earnings growth, and reducing inventories and accounts receivable will be key to improving capital efficiency going forward.

Quality of Earnings

The reason Ordinary Income growth (+28.1%) exceeded Operating Income growth (+19.5%) was the improvement in non-operating income and expenses, including the shift from a foreign exchange loss of approximately 2.3B yen in the previous year to a foreign exchange gain of 1.8B yen in the current period. The 23.7B yen in extraordinary income includes a 15.7B yen gain on the sale of non-current assets, which should be distinguished as a non-recurring factor. Extraordinary losses were small at 11.6B yen and primarily consisted of losses on the disposal of non-current assets and similar items. Consolidated Net Income was 258.3B yen, compared with Net Income attributable to owners of the parent of 220.7B yen, reflecting the deduction of 37.5B yen in profit attributable to non-controlling interests. Comprehensive income was 374.9B yen, exceeding Net Income, primarily due to an increase of 108.5B yen in foreign currency translation adjustments; therefore, the level of comprehensive income is strongly affected by foreign exchange movements.

Earnings Forecasts and Guidance

The full-year Company forecasts are revenue of 6,000.0B yen (+3.4% year on year), Operating Income of 535.0B yen (+6.9%), and Ordinary Income of 515.0B yen (+11.1%). Cumulative progress rates were 72.2% for revenue, 71.0% for Operating Income, and 71.4% for Ordinary Income, all slightly below the standard 75% progress level. The full-year forecast for Net Income attributable to owners of the parent is 360.0B yen, with a cumulative progress rate of 61.3%, lower than the other indicators and 13.7 percentage points below the standard level. The required earnings level in Q4 is more than 155B yen in Operating Income and more than 139B yen in Net Income. Maintaining profit margins and trends in the tax burden and profit attributable to non-controlling interests will be key to achieving the full-year targets.

Shareholder Returns

The interim dividend was 30.00 yen per share, and the full-year forecast dividend is 90.00 yen. Using the full-year forecast Net Income of 360.0B yen and the forecast dividend, the Payout Ratio is estimated at approximately 25.1%, a conservative level. Given the high Equity Ratio and the Company’s capacity to absorb interest costs, it appears to have sufficient financial capacity to support dividend payments. However, the significant decline in cash and deposits and the expansion of working capital require monitoring from the perspective of cash coverage of dividends.

Risk Factors

1. Inventory and working capital accumulation: Finished product inventories increased to 820.4B yen (+21.2% year on year), work in progress to 283.6B yen (+14.3%), and raw materials to 369.4B yen (+14.8%). Demand fluctuations could result in valuation losses or inventory adjustments.

2. Sustainability of margin improvement: With revenue growth limited to +1.4%, the increase in Operating Income was primarily attributable to improvement in the cost ratio. This improvement could reverse due to fluctuations in raw material prices and product mix.

3. Changes in funding liquidity: Cash and deposits declined significantly year on year, and the ratio of cash to short-term borrowings of 378.7B yen is below 1x. If working capital expansion and investment expenditures continue, the decline in available funding capacity will need to be monitored.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company is generally at the same level as the industry median; its Operating Income margin is slightly higher, while its Net Income margin is slightly lower.

Growth and Capital Efficiency

The Company’s revenue growth rate is below the industry median, placing it in a relatively moderate position in terms of growth.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Income margin improved to 8.8%, primarily due to the increase in the gross profit margin. However, SG&A expense growth exceeded revenue growth, making trends in indirect cost management a factor that will influence the margin trend.

2. Finished product inventories, work in progress, and raw materials all increased by double digits. The speed at which inventories are converted into demand will be a key point of focus in the future monetization of earnings.

3. The full-year progress rate for Net Income attributable to owners of the parent was 61.3%, lower than the other earnings indicators. Trends in the tax burden, profit attributable to non-controlling interests, and non-recurring income and expenses in Q4 will be the focus for the full-year outcome.

Theoretical Share Price (Reference Value)

Sensitivity: 4,036 yen–4,276 yen at ±1% for the cost of equity, and 4,153 yen–4,153 yen 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).
• Because 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 value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

---

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

---End of Report---