ALPS ALPINE (6770) FY2026 Q3 Earnings Report

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Executive Summary

This earnings period saw profit expand at a rate exceeding revenue growth, indicating progress in profitability improvement. Revenue was ¥761.19B (+2.8% YoY), Operating Income was ¥33.26B (+31.5%), Ordinary Income was ¥40.25B (+64.6%), and Net Income (net income attributable to owners of the parent) was ¥23.96B (versus ¥10.23B in the previous year; +141.7% YoY based on consolidated net income). The primary drivers of profit growth were operating leverage resulting from restrained growth in SG&A expenses, a ¥7.21B boost from equity-method investment income, and the reversal of extraordinary losses and impairment losses recorded in the same period of the previous year.

Factors Driving Earnings Changes

【Revenue】Revenue increased 2.8% YoY to ¥761.19B. The gross profit margin remained at 18.0%, indicating a business structure in which component prices, product mix, and progress in passing through price increases have a significant impact on profit.

【Profit and Loss】Operating Income was ¥33.26B (+31.5% YoY), with an operating margin of 4.4% (an improvement of approximately 95bp from approximately 3.4% in the previous year). SG&A expenses were ¥103.78B (SG&A ratio: 13.6%), and profit growth exceeding the revenue growth rate indicates the effect of operating leverage from cost control. Ordinary Income was ¥40.25B (+64.6% YoY), with equity-method investment income of ¥7.21B accounting for 17.9% of Ordinary Income and contributing to improved non-operating income and expenses. Meanwhile, a foreign exchange loss of ¥2.19B was recorded as a non-operating expense. Extraordinary items included an extraordinary gain on the sale of fixed assets of ¥0.17B and extraordinary losses of ¥1.25B, including an impairment loss of ¥0.65B, resulting in a net ¥1.08B factor reducing Net Income. The effective tax rate was relatively high at 38.1%. Overall, the company reported higher revenue and higher profit.

Key Financial Metrics

【Profitability】The operating margin was 4.4%, the net profit margin was 3.1%, and ROE was 5.5%. All improved from the same period of the previous year, although their absolute levels remain low. Under the DuPont decomposition, ROE of 5.5% consists of a net profit margin of 3.1% × total asset turnover of 0.98x × financial leverage of 1.77x, indicating greater room for improvement in the profit margin than through leverage. 【Cash Quality】Cash and deposits were ¥121.33B, while working capital was substantial, including accounts receivable of ¥175.55B and inventories of ¥82.98B. Management of the accounts receivable collection cycle will be a key focus going forward. 【Investment Efficiency】Annualized ROA was approximately 4.1% on an estimated basis. Together with total asset turnover of 0.98x, this indicates room for improvement in asset efficiency. Equity-method investment income of ¥7.21B demonstrates earnings contributions from investee companies, while also representing a factor that may cause earnings volatility. 【Financial Soundness】The Equity Ratio was 56.6%, the current ratio was 211.3%, the Debt/Capital ratio was 17.0%, and interest coverage was approximately 49.6x, indicating a sound financial foundation.

Cash Flow Analysis

Because individual line-item data from the statement of cash flows is not included in the disclosed information, funding trends are reviewed based on changes in the balance sheet. Cash and deposits were ¥121.33B, down from ¥147.94B in the same period of the previous year. Accounts receivable increased to ¥175.55B from ¥166.84B in the previous year, while inventories also increased to ¥82.98B from ¥69.33B. This suggests that the build-up of working capital progressed in parallel with the decline in cash levels, indicating that increases in accounts receivable and inventories associated with revenue growth may have been uses of funds. Interest-bearing liabilities consisted of short-term borrowings of ¥35.26B and long-term borrowings of ¥54.72B, and their scale relative to total assets was limited.

Quality of Earnings

Equity-method investment income of ¥7.21B made a significant contribution to the increase in Ordinary Income. This is a recurring but volatile source of income linked to the performance of investee companies rather than to operating activities themselves. Non-operating income included interest income of ¥1.34B and dividend income of ¥1.46B, providing stable income from financial assets; meanwhile, a foreign exchange loss of ¥2.19B was recorded as a non-operating expense and reduced profit. Extraordinary losses of ¥1.25B, including an impairment loss of ¥0.65B, were recorded as an extraordinary item and reduced Net Income as a temporary factor. Comprehensive income was ¥55.59B, substantially exceeding Net Income of ¥23.96B, primarily due to foreign currency translation adjustments of ¥26.26B. This divergence reflects valuation differences arising from the translation of overseas assets and liabilities into yen rather than the underlying earning power of the core business. Care should therefore be taken not to confuse fluctuations in comprehensive income with underlying earnings power.

Earnings Forecasts and Guidance

Progress against the full-year company forecasts was 75.4% for Revenue, 89.9% for Operating Income, 95.8% for Ordinary Income, and 114.1% for Net Income. Compared with the standard Q3 progress rate of 75%, Operating Income and Ordinary Income were significantly ahead, while Net Income had already exceeded the full-year forecast of ¥21.0B, reaching ¥23.96B. Accordingly, the implied Operating Income margin for Q4 based on the company’s plan is approximately 1.5%, assuming a substantial decline from the cumulative margin of 4.4%. This divergence may reflect conservative forecast assumptions, seasonality, or anticipated costs and foreign exchange impacts, and the actual earnings trend through fiscal year-end will be a key area of focus.

Shareholder Returns

The Q2 dividend was ¥30.00 per share, and the payout ratio based solely on this dividend was 26.1%. The forecast payout ratio calculated from the full-year company forecast of annual dividends of ¥62.00 and forecast EPS of ¥104.53 is approximately 59.3%. Cumulative basic EPS of ¥119.27 has already exceeded the full-year forecast EPS. If earnings continue to outperform, the effective payout ratio will trend below the forecast level. The financial foundation, including an Equity Ratio of 56.6% and a current ratio of 211.3%, provides support for continued dividend payments.

Risk Factors

1. Profitability Structure Risk: A gross profit margin of 18.0% and an operating margin of 4.4% are below the industry median, creating a structure in which component prices and delays in passing through price increases can have a significant impact on profit margins.

2. Accounts Receivable Collection Risk: Accounts receivable of ¥175.55B account for 35.3% of current assets, and annualized days sales outstanding are approximately 63 days, exceeding 60 days. A deterioration in collection terms could place pressure on working capital.

3. Investee Company and Foreign Exchange Risk: Equity-method investment income of ¥7.21B, accounting for 17.9% of Ordinary Income, is linked to the performance of investee companies. In addition, a foreign exchange loss of ¥2.19B was recorded, meaning that currency fluctuations associated with overseas operations may affect Ordinary Income.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Return

Both the operating margin and net profit margin are below the industry median, indicating that profitability is relatively low within the industry.

Growth and Capital Efficiency

The revenue growth rate is slightly below the industry median but remains within the IQR.

※Source: Compiled by the Company

Key Earnings Highlights

1. The fact that Operating Income increased +31.5% against revenue growth of +2.8%, with operating leverage emerging through SG&A expense control, is noteworthy as evidence of progress in improving the cost structure.

2. Part of the increase in Ordinary Income depended on equity-method investment income of ¥7.21B. This source should be distinguished from the standalone improvement in Operating Income (4.4%, +95bp YoY) when assessing the composition of earnings sources.

3. Although Net Income has already exceeded the full-year forecast, reaching 114.1% progress, the Q4 plan assumes a substantial decline in the operating margin. Consistency with this company forecast will be a key point to verify in future earnings results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,938–¥2,048 at ±1% for the cost of equity, and ¥1,983–¥1,997 at ±0.1 for ω.

Notes:

• Because Net Income progress against the full-year forecast (114%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of schedule tend to exceed forecasts; adjustments may be excessive for businesses with strong seasonality).
• 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 have been used (there is a timing difference from the full-year forecast).

(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, nor does it predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 with professionals as necessary.

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