GS Yuasa (6674) FY2027 Q1 Earnings Report

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Executive Summary

The Company posted higher revenue and earnings, accompanied by improved profit margins, indicating an improvement in the quality of earnings from the previous year. Revenue was ¥1417.3B (+7.5% YoY), Operating Income was ¥115.8B (+39.3%), Ordinary Income was ¥121.0B (+42.8%), and Net Income attributable to owners of the parent was ¥75.6B (+15.7%). The primary drivers of earnings growth were improved profitability in overseas lead-acid batteries and lithium-ion batteries, with the gross margin rising by approximately 190bp from the previous year to 25.6%. Meanwhile, the relatively modest growth in Net Income attributable to owners of the parent compared with Operating Income was due to the reversal of a temporary factor: a ¥15.6B gain on the sale of fixed assets recorded in the same period of the previous year.

Factors Affecting Performance

【Revenue】Revenue was ¥1417.3B, representing a +7.5% YoY increase. Mobility is the core business, accounting for 73.2% of total Company revenue. Overseas Lead-Acid Batteries increased to ¥583.8B (+11.7% YoY), Domestic Lead-Acid Batteries to ¥249.4B (+9.4%), and Lithium-Ion Batteries to ¥236.8B (+9.8%). In contrast, Industrial Battery Power Supplies in the Social Infrastructure business declined to ¥332.8B (-2.7% YoY), resulting in divergent performance across businesses.

【Profit and Loss】Operating Income was ¥115.8B, representing a +39.3% YoY increase. Segment profit from Overseas Lead-Acid Batteries was ¥72.3B (+88.7% YoY; profit margin of 12.4%), driving the expansion in Company-wide earnings. Lithium-Ion Batteries also turned profitable, improving from a loss of ¥0.3B to a profit of ¥8.0B. Conversely, Industrial Battery Power Supplies recorded profit of ¥9.8B (-61.5% YoY), while Aerospace, Space and Defense posted profit of ¥6.2B (-17.6%), indicating substantial variation among businesses despite overall earnings growth. Special gains and losses amounted to a net loss of ¥0.6B in the current period, reflecting the reversal of the ¥15.6B gain on the sale of fixed assets recorded in the previous year. Consequently, growth in Ordinary Income translated almost directly into Net Income. Overall, the Company is in a phase of higher revenue and earnings, with earnings growth outpacing revenue growth as profit margins improve.

Segment Analysis

Segment classification was changed to six segments beginning in Q1, with Aerospace, Space and Defense established as an independent segment. Total Operating Income from Mobility was ¥104.5B (+91.0% YoY), comprising the core of Company-wide earnings, driven by the 12.4% profit margin of Overseas Lead-Acid Batteries. Social Infrastructure recorded revenue of ¥382.4B (-2.1% YoY) and profit of ¥16.0B (-51.4%), reflecting a significant deterioration in profitability, with Industrial Battery Power Supplies, whose profit margin was 2.9%, weighing on the overall segment. Aerospace, Space and Defense remained solid, with revenue of ¥49.7B (+2.1% YoY), although its profit margin declined from the previous year to 12.5%. A notable feature is the contrasting progress of improvements in Overseas Lead-Acid Batteries and Lithium-Ion Batteries versus deterioration in Social Infrastructure within the business portfolio.

Key Financial Indicators

【Profitability】The Operating Margin improved by approximately 190bp to 8.2% from 6.3% in the same period of the previous year, while the gross margin also improved by a similar amount to 25.6%. The Net Profit Margin rose to 5.3% from 4.9% in the previous year, reflecting growth in Ordinary Income, while the impact of special gains and losses was limited.【Cash Flow Quality】Inventories increased by +11.9% YoY to ¥826.5B, with increases in finished products, raw materials, and work in process, indicating that inventory growth exceeded the pace of revenue growth.【Investment Efficiency】Annualized ROE was 8.9%, reflecting the increase in Net Income, although the total asset turnover ratio was not at a level that would substantially improve capital efficiency. Construction in progress was ¥904.4B, accounting for 33.7% of property, plant and equipment and increasing substantially from the previous year, indicating that the Company remains in the midst of growth investments.【Financial Soundness】The Equity Ratio was 58.6%. Current assets of ¥3083.0B versus current liabilities of ¥2024.3B resulted in a current ratio of approximately 152%, indicating sound short-term payment capacity. Short-term borrowings declined by -34.0% YoY, reducing the degree of short-term dependence in the funding structure.

Cash Flow Analysis

Although disclosure of individual items in the statement of cash flows is limited, changes in the balance sheet indicate that cash and deposits were ¥378.8B, remaining almost flat from ¥367.5B in the same period of the previous year. Inventories increased by +11.9% YoY to ¥826.5B, with finished products, raw materials, and work in process all increasing, suggesting that the amount of funds tied up in working capital has expanded. Meanwhile, construction in progress increased substantially from the previous year to ¥904.4B, indicating continued investment in capital expenditures. Short-term borrowings decreased by -34.0% YoY, suggesting a move to reduce dependence on short-term funding. Net assets were ¥4394.9B, slightly lower than in the previous year, affected by changes in other comprehensive income, including negative foreign currency translation adjustments.

Quality of Earnings

The earnings increase in the current period was attributable to substantive improvement in profitability at the Operating Income and Ordinary Income levels, with only a limited contribution from temporary factors. A temporary special gain of ¥15.6B from the sale of fixed assets was recorded in the same period of the previous year, whereas special gains in the current period were limited to ¥0.5B, resulting in a net loss of ¥0.6B in special gains and losses. Accordingly, the +42.8% growth rate in Ordinary Income was reflected almost directly as high-quality earnings growth. Comprehensive income was ¥73.1B, including ¥51.9B attributable to owners of the parent, and diverged from Net Income of ¥75.6B primarily due to a ¥-33.9B foreign currency translation adjustment, indicating that the yen-based valuation of overseas businesses depressed comprehensive income. The increase in inventories is a point of caution from an accrual perspective, and the extent to which earnings growth translates into cash generation will require monitoring.

Earnings Forecast and Guidance

The full-year forecast is revenue of ¥6800.0B (+11.7% YoY), Operating Income of ¥630.0B (+4.7%), and Ordinary Income of ¥610.0B (+4.8%). Q1 progress rates were 20.8% for revenue, 18.4% for Operating Income, and 19.8% for Ordinary Income, all below the simple 25% benchmark. In particular, the Q1 Operating Margin of 8.2% was below the 9.3% margin assumed in the full-year plan, making improvement in profitability during the second half of the fiscal year critical to achieving the plan. Although the earnings forecast was revised during the quarter, there was no revision to the dividend forecast.

Shareholder Returns

The full-year dividend forecast remains unchanged at ¥98.00 per share, with no revision to the dividend forecast during the quarter. Based on the full-year EPS forecast of ¥393.74, the Payout Ratio is approximately 24.9%, while the total dividend amount of approximately ¥98.3B relative to the full-year Net Income forecast of ¥395.0B is conservative. Compared with the previous year’s dividend results, including an interim dividend of ¥30, the Company appears to be on a dividend growth trend. However, balancing dividends against funding requirements for investments, symbolized by construction in progress of ¥904.4B, will be an important consideration in evaluating future dividend policy.

Risk Factors

1. Widening disparities in profitability by business: Revenue from Industrial Battery Power Supplies declined by -2.7% YoY, while segment profit fell sharply by -61.5%, with deteriorating profitability in the Social Infrastructure field weighing on the Company-wide profit margin.

2. Inventory growth and working capital constraints: Inventories increased to ¥826.5B (+11.9% YoY), with finished products, raw materials, and work in process all increasing. Inventory growth exceeding the revenue growth rate of +7.5% requires monitoring from a funding-efficiency perspective.

3. Execution risk related to large-scale investments: Construction in progress was ¥904.4B, accounting for 33.7% of property, plant and equipment and increasing substantially from the previous year. The start-up timing of the investment pipeline centered on Overseas Lead-Acid Batteries and progress in recovering investments will affect future asset efficiency.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Margin and Net Profit Margin are slightly below the industry median.

Growth and Capital Efficiency

The Revenue Growth Rate exceeds the industry median, indicating a relatively strong position in terms of growth.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Margin improved by approximately 1.9pt YoY to 8.2%, driven by improved profitability in Overseas Lead-Acid Batteries and Lithium-Ion Batteries. Meanwhile, the substantial decline in profit from Industrial Battery Power Supplies demonstrates the asymmetry in the earnings structure across businesses.

2. The Q1 progress rate against the full-year plan was 18.4% for Operating Income, representing a weaker-than-standard start. The pace of margin recovery in the second half of the fiscal year will be a key factor to monitor in assessing achievement of the full-year plan.

3. The substantial increase in construction in progress indicates progress in growth investments. Combined with the buildup in inventories, the efficiency of working capital and invested capital will be important areas of focus in future financial analysis.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,310–¥4,567 at ±1% for the Cost of Equity, and ¥4,434–¥4,438 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 five-year fade) / Interest Rate Reference Month: 2026-07 / This is a mechanically calculated value based solely on publicly available data and is not a forecast of the market price, a recommendation of any specific investment action, or a prediction or guarantee of 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. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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