GS Yuasa Corporation FY2027 Q1 Earnings Report

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Executive Summary

Driven by improved profitability in the Mobility Business (lead-acid batteries and lithium-ion batteries), the Company reported higher revenue and substantial growth in operating and ordinary income. Revenue was ¥1,417.3B (+7.5% YoY), operating income was ¥115.8B (+39.3%), and ordinary income was ¥121.0B (+42.8%). Net income attributable to owners of the parent was ¥75.6B (+15.7%), while consolidated net income, including the portion attributable to non-controlling interests, was ¥98.0B (+28.3%). The reason that the growth rate of profit exceeded the growth in net income attributable to owners of the parent was the increase in profit attributable to non-controlling interests to ¥22.4B (¥11.1B in the previous year). This was attributable to increased profit contributions from overseas subsidiaries, including overseas lead-acid battery operations, which increased the allocation to non-controlling interests.

Factors Affecting Results

【Revenue】Revenue was ¥1,417.3B (+7.5% YoY), with the Mobility Business, comprising the total of domestic and overseas lead-acid batteries and lithium-ion batteries and accounting for 75.5% of the overall composition, leading growth at ¥1,070.0B (+10.8%). In particular, overseas lead-acid batteries grew significantly to ¥583.8B (+11.7%), while lithium-ion batteries reached ¥236.8B (+9.8%). In contrast, Social Infrastructure, comprising the total of industrial battery power supplies and aerospace, space, and defense, declined to ¥382.4B (-2.1%), with industrial battery power supplies remaining weak at ¥332.8B (-2.7%). The primary drivers of revenue growth were increased demand and improved profitability in the Mobility Business, while slower progress on Social Infrastructure projects acted as an offsetting factor.

【Profit and Loss】Operating income was ¥115.8B (+39.3% YoY), and the operating margin improved to 8.2% from 6.3% in the previous year. Mobility led performance, with operating income of ¥104.5B (+91.0%). Overseas lead-acid batteries were particularly profitable, generating operating income of ¥72.3B (+88.7%; margin of 12.4%). Lithium-ion batteries expanded sharply to operating income of ¥8.0B (¥0.3B in the previous year), with progress toward profitability. Meanwhile, Social Infrastructure posted a substantial decline in operating income to ¥16.0B (-51.4%), and industrial battery power supplies deteriorated to ¥9.8B (-61.5%; margin of 2.9%), putting downward pressure on the Company-wide margin. Ordinary income increased to ¥121.0B (+42.8%), supported in part by interest and dividend income and equity-method gains and losses of ¥4.6B. Although the previous year included extraordinary income of ¥17.7B, including gains on the sale of fixed assets, extraordinary income in the current period was limited to ¥0.5B, reducing the benefit from temporary factors. Following the increase in profit attributable to non-controlling interests to ¥22.4B (¥11.1B in the previous year), net income attributable to owners of the parent was ¥75.6B (+15.7%). In conclusion, the Company reported higher revenue and higher profits.

Segment Analysis

Beginning in Q1, the Company changed its segment classification from five segments to six segments (domestic and overseas lead-acid batteries, lithium-ion batteries, industrial battery power supplies, aerospace, space, and defense, and other). Aerospace, space, and defense, which had previously been included in “Other,” is now presented separately, while overseas industrial operations were reclassified into industrial battery power supplies. Prior-year figures have been reclassified on the basis of the new structure.

Mobility, in aggregate, generated revenue of ¥1,070.0B (75.5% composition; +10.8%) and operating income of ¥104.5B (90.3% composition; +91.0%), making it the earnings pillar. Overseas lead-acid batteries were the largest contributor to profit, with revenue of ¥583.8B and profit of ¥72.3B (margin of 12.4%). Lithium-ion batteries generated revenue of ¥236.8B (+9.8%) and operating income of ¥8.0B (¥0.3B in the previous year), with profitability expanding, although the margin of 3.4% remains low. Social Infrastructure, in aggregate, generated revenue of ¥382.4B (-2.1%) and operating income of ¥16.0B (-51.4%; margin of 4.2%). The decline in the margin of industrial battery power supplies to 2.9% was a factor worsening the overall business mix. Aerospace, space, and defense maintained a relatively high margin, generating revenue of ¥49.7B (+2.1%) and operating income of ¥6.2B (-17.6%; margin of 12.5%), although profit declined.

Key Financial Indicators

【Profitability】The operating margin was 8.2% (6.3% in the previous year), while the ordinary income margin was 8.5% (6.4% in the previous year), with both improving. The gross margin was 25.6%, and the SG&A ratio was 17.5% (17.4% in the previous year), remaining broadly flat. Gross profit growth absorbed the increase in SG&A expenses, leading to an improvement in the operating margin. The net margin attributable to owners of the parent was 5.3% (5.0% in the previous year). 【Cash Quality】Extraordinary items were limited, with extraordinary income of ¥0.5B and extraordinary losses of ¥1.1B, meaning that most profit was generated from recurring operating results. Accounts receivable were ¥905.8B, equivalent to 63.9% of quarterly revenue, while inventories of ¥826.5B were equivalent to 78.4% of cost of sales for the same period. Working capital levels therefore remain an area requiring monitoring. 【Investment Efficiency】ROE was 2.2%, and the asset turnover ratio, calculated as quarterly revenue divided by total assets, was 0.189x. 【Financial Soundness】The equity ratio, based on equity attributable to owners of the parent, was 52.5%, slightly down from 53.3% in the previous year. Current assets of ¥3,083.0B versus current liabilities of ¥2,024.3B resulted in a current ratio of 152.3%, indicating that liquidity was secured. Among interest-bearing debt, long-term borrowings of ¥290.5B and bonds of ¥200.0B formed the core of non-current liabilities, while short-term borrowings were ¥252.4B, down 34.0% from ¥382.3B in the previous year.

Cash Flow Analysis

Although the Company does not disclose a statement of cash flows, trends in funding can be inferred from changes in the balance sheet. Cash and deposits were ¥378.8B, remaining broadly flat at +3.1% from ¥367.5B in the previous year. Accounts receivable and notes receivable were ¥905.8B, down 18.8% from ¥1,115.6B in the previous year, indicating an improvement in cash collection compared with the previous year. Meanwhile, inventories increased to ¥826.5B, up 11.9% from ¥738.8B in the previous year, and inventory trends remain an area to monitor in terms of working capital management. Short-term borrowings declined to ¥252.4B, down 34.0% from ¥382.3B in the previous year, reducing reliance on short-term funding. Construction in progress increased substantially to ¥904.4B, up 54.3% from ¥586.1B in the previous year, indicating that investment in property, plant, and equipment is progressing ahead of operations. While capital investments remain under construction, depreciation expense may precede the associated revenue contribution, and the degree to which such investments contribute to revenue and profit after commencing operations will determine future cash-generation capacity.

Earnings Quality

Current-period profit was of relatively high quality because it was largely generated from recurring operating results, with limited impact from extraordinary items. Extraordinary income was ¥0.5B and extraordinary losses were ¥1.1B, both minor, and the current period had almost none of the temporary uplift from extraordinary income of ¥17.7B recorded in the same period of the previous year, primarily from gains on the sale of fixed assets. Non-operating income and expenses included interest and dividend income and equity-method gains and losses of ¥4.6B, which supported ordinary income and can be viewed as recurring income associated with business activities. Meanwhile, comprehensive income was ¥73.1B, of which the portion attributable to owners of the parent was limited to ¥51.9B, ¥23.7B below net income attributable to owners of the parent of ¥75.6B. This divergence was primarily attributable to foreign currency translation adjustments of -¥33.9B. Although valuation differences on available-for-sale securities of +¥29.1B partially offset the impact, valuation fluctuations arising from the translation of overseas subsidiaries into yen were a source of volatility in comprehensive income.

Earnings Forecast and Guidance

Progress toward the full-year Company forecasts (revenue of ¥6,800.0B, operating income of ¥630.0B, ordinary income of ¥610.0B, and net income of ¥395.0B) was 20.8% for revenue, 18.4% for operating income, 19.8% for ordinary income, and 19.1% for net income attributable to owners of the parent. These figures were below simple one-quarter progress of 25%, with operating income progress particularly low. This suggests that deteriorating profitability in the Social Infrastructure Business and the start-up burden for lithium-ion batteries are assumptions underlying earnings improvement toward the second half of the fiscal year. Although the earnings forecast was revised during the quarter, the dividend forecast was not revised.

Shareholder Returns

The full-year dividend forecast is ¥98.00 per share, and the dividend forecast was not revised during the quarter. Based on the Company’s forecast EPS of ¥393.74, the Payout Ratio is approximately 24.9%, a conservative level that preserves a relatively large portion of earnings as retained earnings. Although a simple comparison with the dividend paid in the same period of the previous year (¥30, equivalent to an interim dividend) is not possible, on a full-year basis, the Company appears to have relatively substantial room to secure funds for dividends against the backdrop of earnings growth.

Risk Factors

1. Deterioration in Social Infrastructure profitability: Operating income from industrial battery power supplies declined substantially to ¥9.8B (-61.5% YoY; margin of 2.9%), while Social Infrastructure was ¥16.0B (-51.4%; margin of 4.2%). As dependence on Mobility within Company-wide operating income increases, the recovery of Social Infrastructure profitability will be an important variable for the overall operating margin.

2. Elevated working capital levels: Inventories continued to increase, reaching ¥826.5B, up 11.9% YoY and equivalent to 78.4% of cost of sales. Construction in progress also increased to ¥904.4B (+54.3%), and the pace at which inventory and equipment under construction become operational could affect capital efficiency.

3. Increase in profit attributable to non-controlling interests and foreign exchange impact: Net income attributable to non-controlling interests doubled to ¥22.4B (¥11.1B in the previous year), causing growth in net income attributable to owners of the parent (+15.7%) to lag growth in consolidated net income (+28.3%). In addition, foreign currency translation adjustments of -¥33.9B reduced comprehensive income, and the Company’s business mix, which has a high proportion of overseas subsidiaries, is susceptible to foreign exchange fluctuations.

Industry Benchmark (Reference; Compiled by the Company)

Both the operating margin and net margin were slightly below the industry median, placing profitability approximately at the industry midpoint.

The revenue growth rate exceeded the industry median, placing the Company relatively high within the industry in terms of growth.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The core of earnings improvement was the Mobility Business, particularly overseas lead-acid batteries (margin of 12.4%) and progress toward profitability in lithium-ion batteries. The operating margin improved by 186bp from 6.3% in the previous year to 8.2%. Whether this improvement represents a structural change across the Company or a temporary development will need to be assessed in conjunction with the recovery in Social Infrastructure profitability in subsequent quarters.

2. Declining profitability in the Social Infrastructure Business (industrial battery power supplies and public infrastructure) is weighing on the overall business mix and is one reason why full-year operating income progress of 18.4% remains below simple progress of 25%.

3. Construction in progress increased 54.3% YoY, making the timing of the commencement of operations for capital investments a structural point of observation that will determine the pace of absorption of future depreciation expenses and the contribution to earnings.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly available data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥4,310–¥4,567 at cost of equity ±1%, and ¥4,434–¥4,438 at ω±0.1.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value 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 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 professionals as necessary.

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