SUZUKI CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥9.18B
• Operating Income: ¥1.32B
• Net Income: ¥910M
• EPS: ¥60.41

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: A solid top-line and ordinary income beat with resilient core profitability, but capital efficiency (ROIC 4.5%) and lack of cash flow disclosure temper the quality of the print. Revenue rose 14.6% YoY to 91.75, indicating strong demand or better pricing. Operating income increased 10.5% YoY to 13.22, implying operating leverage was positive but less than revenue growth. Ordinary income grew faster at 25.3% YoY to 13.77, helped by items below operating line and/or mix, though the disclosed non-operating breakdown suggests additional unreported components. Net income rose 11.5% YoY to 8.67, with an effective tax rate of 19.7%. Gross margin printed at 19.8%, and operating margin approximates 14.4%, while net margin stands at 9.4%. Directionally, operating profit growth lagging revenue suggests mild operating margin compression YoY, while ordinary income growth outpaced revenue implying expansion at the ordinary margin level; exact basis point changes cannot be calculated given missing prior-period margin data. Interest coverage is exceptionally strong at 128.5x, reflecting low financial risk and modest interest burden (interest expense 0.10). Liquidity is robust with a current ratio of 190.7% and quick ratio of 186.8%, and working capital of 96.67, indicating low near-term refinancing risk. Balance sheet leverage remains conservative (D/E 0.45x; assets/equity 1.45x), with short-term loans (13.60) comfortably covered by cash (69.80) and receivables (73.08). Total comprehensive income of 18.48 materially exceeded net income, highlighting positive OCI movements (likely valuation gains on investment securities of 39.11). Earnings quality cannot be confirmed as operating cash flow and capex were not disclosed this quarter. Capital efficiency is a watch-point: ROIC of 4.5% is below the 5% warning threshold despite healthy margins, implying low asset turnover (0.219) is a drag. DuPont shows ROE at 3.0%, driven more by margins than leverage, underscoring a need to lift asset productivity. Forward-looking, the combination of strong demand and ample liquidity supports continued execution, but sustaining earnings growth will likely require improved asset turns/ROIC and clearer cash generation to underpin the reported high payout ratio (141.2%).

Profitability Analysis

ROE decomposition (DuPont): ROE 3.0% = Net Profit Margin (9.4%) × Asset Turnover (0.219) × Financial Leverage (1.45x). The low asset turnover is the primary drag on ROE; financial leverage is modest and margins are comparatively healthier. Among components, the largest structural headwind is asset turnover (0.219), suggesting capital intensity or slow asset cycling is limiting equity returns. Business explanation: the company maintains substantial current assets (203.26) relative to quarterly sales, and investment securities (39.11) may be dilutive to operating asset productivity, suppressing turns. Operating profit grew +10.5% vs revenue +14.6%, indicating slight adverse operating mix or higher COGS/SG&A intensity, while ordinary income outpaced on non-operating contributions; this mix likely aided ROE via the margin component but not via asset turnover. Sustainability: margin levels appear supported by strong interest coverage and tax rate normalization; however, any ordinary-income lift from non-operating items is less repeatable than core operating margin. Concerning trend flags: revenue growth outpacing operating income growth hints at mild operating margin pressure; lack of SG&A detail prevents confirmation, but vigilance is warranted if SG&A growth continues to outstrip sales. Note: reported ordinary income (13.77) is higher than the arithmetic sum of operating income plus disclosed non-operating net (-0.96), implying additional unreported items in non-operating income; this limits precision in assessing recurring vs one-time contributions.

Growth Assessment

Top-line growth of +14.6% YoY indicates solid demand and/or pricing. Operating income growth of +10.5% lagged revenue, suggesting slight operating deleverage or unfavorable mix. Ordinary income growth of +25.3% outpaced both, pointing to supportive below-OP items, but the limited breakdown restricts visibility on recurrence. Net income growth of +11.5% was healthy with an effective tax rate of 19.7%. With asset turnover at 0.219 and ROIC at 4.5%, capital intensity remains a constraint on scalable growth in returns. Total comprehensive income (18.48) substantially exceeding net income (8.67) adds balance sheet value via OCI, but this is market-dependent and non-cash. Outlook: continuation of double-digit revenue growth is plausible given Q1 momentum, but improving operating leverage and asset productivity will be key to translating growth into higher ROE/ROIC. Watch for pricing durability, cost pass-through, and inventory/receivables discipline to lift turns. Absence of OCF/capex data is a near-term limitation on assessing sustainability of growth investments.

Financial Health

Liquidity is strong: current ratio 190.7% and quick ratio 186.8% comfortably exceed benchmarks. No warning on current ratio (<1.0) or D/E (>2.0); D/E is 0.45x (conservative). Maturity mismatch risk appears low: current assets (203.26) exceed current liabilities (106.60) by 96.67; cash (69.80) and receivables (73.08) together cover short-term loans (13.60) multiple times. Long-term loans are modest at 4.28, and interest coverage is robust at 128.5x. Equity is solid at 288.44 with retained earnings of 210.28, supporting resilience. Off-balance sheet obligations are not disclosed; no information on guarantees/leases beyond standard accounts, so hidden leverage cannot be ruled out.

Cash Flow Quality

OCF is unreported, so OCF/Net Income cannot be evaluated; earnings quality assessment is constrained. Free cash flow and capex are unreported, preventing analysis of FCF coverage for dividends and growth investments. Working capital composition (high receivables 73.08 vs low inventories 4.14 and sizeable payables 62.19) suggests a low-inventory model; however, without period-to-period movements, we cannot detect timing-driven cash boosts or working capital optimization. No clear signs of manipulation can be assessed in the absence of cash flow and WC delta data. Conclusion: cash conversion remains a key unknown; future disclosure of OCF and capex is essential.

Dividend Sustainability

The calculated payout ratio is 141.2%, which is well above the <60% benchmark and would be unsustainable if representative of recurring policy. However, DPS and total dividends are unreported, and OCF/FCF are unavailable; thus, the payout ratio source likely reflects a company forecast or legacy policy metric rather than confirmed Q1 cash distributions. With ROIC at 4.5% and unknown FCF, sustained high payouts could crowd out investment needed to improve asset turns and returns. Until OCF/FCF is disclosed, assess dividend safety as uncertain; coverage by recurring FCF cannot be verified.

Risk Assessment

Business Risks:

• Operating margin sensitivity if cost inflation or mix pressures persist (operating profit growth < revenue growth).
• Low asset turnover (0.219) constraining ROIC (4.5%), risking value dilution if growth requires additional capital.
• Dependence on non-operating items to lift ordinary income this quarter; recurrence uncertain.
• FX exposure risk (imported components/materials) potentially affecting gross margin and earnings volatility.
• Supply chain/timing risk embedded in receivables and payables cycles.

Financial Risks:

• Dividend sustainability risk given calculated payout ratio of 141.2% without FCF disclosure.
• Cash flow visibility risk: OCF, capex, and financing CF are unreported; earnings-to-cash conversion unverified.
• Market valuation exposure through investment securities (39.11), as evidenced by large OCI swing (TCI 18.48).
• Potential undisclosed off-balance sheet commitments (leases/guarantees) not visible in current data.

Key Concerns:

• ROIC below 5% warning threshold indicates capital efficiency challenge.
• Margin trajectory ambiguity due to lack of SG&A breakdown and prior-period margin comps.
• Arithmetic gap between reported ordinary income and disclosed non-operating detail suggests unreported components affecting quality assessment.

Investment Implications

Key Takeaways:

• Strong start to FY2026 with revenue +14.6% and ordinary income +25.3% YoY.
• Operating leverage positive but modest; operating income +10.5% trails sales growth.
• Balance sheet strength: current ratio ~191%, D/E 0.45x, interest coverage ~128x.
• Net margin 9.4% supports ROE 3.0%, but low asset turnover (0.219) caps returns.
• ROIC at 4.5% is below target range; improving asset productivity is the key lever.
• Total comprehensive income far above net income signals OCI gains tied to securities.
• Dividend sustainability unclear: calculated payout 141.2% with no FCF disclosure.

Metrics to Watch:

• Operating cash flow and free cash flow (cash conversion vs net income).
• Asset turnover and working capital days (DSO, DPO, inventory turns).
• Operating margin trend and SG&A intensity once disclosed.
• ROIC trajectory relative to 7–8% benchmark.
• Exposure and sensitivity of OCI to investment securities valuation.
• Dividend guidance vs FCF coverage.

Relative Positioning: Financially conservative with strong liquidity and low interest burden, but trails best-in-class peers on capital efficiency (ROIC) and transparency on cash generation.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis