SUZUKI (6785) FY2026 Q3 Earnings Report

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Executive Summary

In addition to revenue growth centered on the Parts Business, progress in fixed-cost absorption resulted in higher revenue and income, with both operating income and ordinary income posting growth in the high double digits. Revenue was ¥29.62B (+20.7% year on year), operating income was ¥4.44B (+39.2%), ordinary income was ¥4.66B (+48.1%), and net income attributable to owners of the parent was ¥2.99B (+46.0%). The operating margin improved to 15.0%, from 13.0% in the same period of the previous year, an improvement of approximately 2.0pt, confirming that income growth outpaced revenue growth.

Factors Affecting Business Performance

【Revenue】Revenue increased 20.7% year on year to ¥29.62B. The Parts Segment, which accounts for 78.7% of external revenue, led company-wide growth with revenue of ¥23.29B (+23.5%). Machinery and Equipment (¥5.49B, +9.7%) and Dies (¥1.70B, +6.8%) also contributed to revenue growth. By region, sales to China grew substantially to ¥6.41B, an increase of approximately 45.7% year on year, while sales to Thailand declined approximately 10.1% to ¥2.94B, indicating uneven overseas demand across regions.

【Profit and Loss】Operating income increased 39.2% year on year to ¥4.44B, while ordinary income increased 48.1% to ¥4.66B, with both exceeding the growth rate of revenue. The gross margin was 22.1% and the SG&A expense ratio was 7.1%; the primary driver of the improvement in the operating margin (approximately +2.0pt year on year) was the containment of fixed-cost growth relative to the expansion in revenue. Ordinary income growth exceeded operating income growth because foreign exchange gains of ¥0.12B included in non-operating income contributed to results; accordingly, the improvement at the ordinary income level includes a partially temporary foreign exchange factor. Extraordinary income of ¥0.02B (gain on sale of investment securities and gain on sale of fixed assets) and extraordinary loss of ¥0.02B (loss on disposal of fixed assets) were nearly offset, resulting in a negligible net impact. In conclusion, the quarter delivered higher revenue and income, with improved profitability in the core businesses supporting company-wide earnings growth.

Segment Analysis

By segment, the Parts Business was the largest and most profitable business, with revenue of ¥22.65B (+23.5%), segment income of ¥4.62B (+27.1%), and a margin of 20.4%. The Dies Business posted revenue of ¥1.70B (+6.8%), while segment income rose 45.1% to ¥0.25B, representing a strong margin of 14.8%. The Machinery and Equipment Business recorded revenue of ¥5.49B (+9.7%), income of ¥0.66B (+20.1%), and a margin of 12.0%, with income growth exceeding revenue growth. The Leasing Business was small, with revenue of ¥0.28B, but had the highest margin company-wide at 25.9%. By regional revenue, Japan was the largest market at ¥19.32B (+20.8%), while China at ¥6.41B (+45.7%) drove growth. In contrast, Thailand declined to ¥2.94B (−10.1%), confirming regional disparities in the overseas business.

Key Financial Metrics

【Profitability】The operating margin improved to 15.0% (13.0% in the same period of the previous year), while the gross margin was 22.1% and the ordinary income margin improved to 15.7% (12.8%). Fixed-cost absorption and growth in the highly profitable Parts Business are supporting the ROE level. ROE was 10.4%, indicating that strong profitability is supporting capital efficiency. 【Cash Flow Quality】Accounts receivable were ¥8.15B, accounting for 17.3% of total assets, and the DSO-equivalent period was approximately 75 days, indicating a somewhat lengthy collection period and an expansion in working capital during the revenue-growth phase. 【Investment Efficiency】Total assets increased to ¥47.14B (¥39.77B in the previous year). From an asset-efficiency perspective, work in process inventory amounted to ¥2.72B, accounting for approximately 49.5% of inventories, indicating a relatively high level of in-process inventory. 【Financial Soundness】The equity ratio was high at 68.9%. Interest-bearing debt totaled approximately ¥1.09B against cash and deposits of ¥8.14B, indicating a financial foundation close to being debt-free in substance.

Cash Flow Analysis

Although a standalone cash flow statement has not been disclosed, the balance sheet trends indicate an accumulation of funds. Cash and deposits of ¥8.14B substantially exceeded total interest-bearing debt of approximately ¥1.09B, placing the Company in a net cash position. Meanwhile, accounts receivable of ¥8.15B and work in process inventory of ¥2.72B both increased along with revenue, suggesting that working-capital expansion may be restraining cash-generation capacity to some extent relative to earnings growth. Accounts payable also accumulated to ¥7.71B, with the use of trade payables partially offsetting the working-capital burden. Retained earnings increased to ¥22.50B (¥20.81B in the previous year), supporting the high level of financial soundness represented by an equity ratio of 68.9% through the accumulation of internal reserves.

Earnings Quality

The difference between the growth rates of ordinary income and net income attributable to owners of the parent reflects a structure in which foreign exchange gains of ¥0.12B and dividend income of ¥0.03B included in non-operating income lifted ordinary income, while income taxes of ¥1.28B and profit attributable to non-controlling interests of ¥0.39B were deducted. Extraordinary income and extraordinary loss were each approximately ¥0.02B, leaving the net impact nearly neutral; most of net income was therefore derived from recurring earnings generated by operating activities. Comprehensive income was ¥6.10B, substantially exceeding consolidated net income of ¥3.38B, driven primarily by other comprehensive income (OCI), including ¥2.48B in valuation differences on other securities. This divergence resulted from changes in the fair value of investment securities held, which totaled ¥6.16B, and should be assessed separately from the Company’s core earnings power.

Earnings Forecast and Guidance

The full-year company plan calls for revenue of ¥40.10B (+20.3%), operating income of ¥5.67B (+32.1%), and ordinary income of ¥5.88B (+39.8%); no revisions have been made to either the earnings forecast or the dividend forecast. The progress rates for the nine months ended Q3 were 73.9% for revenue, 78.4% for operating income, and 79.2% for ordinary income, with profit progress slightly exceeding revenue progress. Compared with the standard progress rate of 75%, operating income and ordinary income are ahead of plan, and the hurdles for required revenue and income growth in Q4 are relatively low.

Shareholder Returns

The Q2 dividend was ¥45 per share, and the full-year dividend forecast, including the forecast year-end dividend of ¥60, is ¥105. Given that the annual dividend in the previous year was in the ¥40 range, the Company is on track for a dividend increase. The forecast payout ratio, calculated using the average number of shares outstanding during the period of 14.356 million shares and the full-year company plan for profit attributable to owners of the parent of ¥3.73B, is approximately 40.4%; this is a metric covering dividends only. Given the financial capacity indicated by cash and deposits of ¥8.14B substantially exceeding total interest-bearing debt of approximately ¥1.09B, there is little concern regarding the Company’s dividend payment capacity.

Risk Factors

1. Business concentration risk: The Parts Business accounts for 78.7% of external revenue, creating a structure in which the production plans and demand fluctuations of major customers have a significant impact on consolidated results.

2. Regional variations in demand: Sales to China amounted to ¥6.41B, driving growth with an increase of 45.7% year on year, while sales to Thailand declined 10.1% to ¥2.94B, indicating regional disparities in overseas demand.

3. Increases in working capital and inventory: Accounts receivable amounted to ¥8.15B, while work in process inventory accounted for approximately 49.5% of inventories. A lengthening collection cycle and accumulation of in-process inventory during the revenue-growth phase require monitoring.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

Growth and Capital Efficiency

※Source: Company analysis

Key Points from the Financial Results

1. Operating income increased 39.2% and ordinary income increased 48.1%, exceeding revenue growth of +20.7%, indicating progress in profitability improvements centered on the Parts Business.

2. Progress against the full-year plan was 78.4% for operating income and 79.2% for ordinary income, exceeding the standard 75%, suggesting a cushion toward achieving the earnings plan on the profit side.

3. The trend toward a lengthening DSO due to the increase in accounts receivable and the high proportion of work in process inventory within inventories warrant attention as indicators of working-capital expansion accompanying revenue growth.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,364–¥2,501 at a ±1% change in the cost of equity, and ¥2,427–¥2,437 at a ±0.1 change in ω.

Notes:

• Net assets as of the quarter-end are used (there is a time lag between these figures and 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 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 disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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AI Financial Analysis

Executive Summary

Suzuki delivered a strong FY2026 Q3 cumulative result, with broad-based sales growth translating into materially faster operating and attributable-profit growth. Revenue rose 20.7% YoY to ¥29.62bn. Operating income increased 39.2% to ¥4.44bn. Ordinary income grew 48.1% to ¥4.66bn, outpacing operating income partly because the company recorded a ¥0.12bn foreign-exchange gain versus a foreign-exchange loss in the prior-year period. Profit attributable to owners of parent rose 46.0% to ¥2.99bn, equivalent to EPS of ¥208.01. The operating margin expanded by approximately 200bp YoY to 15.0%, placing profitability at the excellent end of the stated manufacturing benchmark. Gross margin improved by about 100bp to 22.1%, indicating that cost-of-sales growth was contained below revenue growth. The SG&A-to-sales ratio declined by roughly 100bp to 7.1%, demonstrating favorable operating leverage. The Parts segment remained the core business, producing 82.4% of aggregate segment profit and 78.7% of external sales. Sales in China increased 45.7% YoY, making it the most rapidly expanding major geographic market. Japan also posted a solid 20.8% revenue increase, while Thailand revenue declined 10.1%. Net margin reached 10.1%, and the supplied annualized DuPont ROE was 12.3%, a good level although below the 15% excellent threshold. Financial risk is low in absolute debt terms: interest-bearing debt was only ¥1.09bn and debt/capital was 3.2%. Liquidity is robust, with a 195.0% current ratio, ¥8.14bn of cash, and cash equal to 8.99x short-term loans. The principal operational watchpoints are elevated annualized receivable days of 75 and a 49.5% work-in-process share of inventory, which can tie up capital and signal production-cycle pressure. Full-year company guidance appears achievable based on the 73.9% sales and 78.4% operating-profit progress rates through Q3, although the implied Q4 operating margin moderates to approximately 11.7%.

Profitability Analysis

The supplied annualized DuPont ROE of 12.3% decomposes into a 10.1% net profit margin, 0.838x asset turnover, and 1.45x financial leverage. Profitability, rather than leverage, is the central driver of returns: the balance sheet is conservatively financed and financial leverage is moderate. Operating margin rose to 15.0% from approximately 13.0% in the prior-year Q3 cumulative period, a 200bp expansion. Gross margin increased to 22.1% from approximately 21.1%, contributing around half of the operating-margin expansion. SG&A expenses rose only 6.2% YoY to ¥2.11bn, substantially below the 20.7% revenue increase, and the SG&A ratio consequently fell to 7.1% from 8.1%. This cost discipline indicates positive operating leverage rather than margin expansion being solely attributable to non-operating factors. Parts segment profit grew 27.1% to ¥4.62bn and remained the primary earnings engine. Mold segment profit increased 45.1% to ¥0.25bn, while Machinery and Equipment segment profit increased 20.1% to ¥0.66bn. Segment profit margins, calculated against external revenue, were approximately 22.9% for Mold, 19.8% for Parts, and 12.7% for Machinery and Equipment, demonstrating that Parts combines scale with strong segment profitability. Ordinary income growth exceeded operating-income growth because foreign-exchange gains were ¥0.12bn, compared with a foreign-exchange loss in the prior period. The effective tax rate was 27.4%, and the 0.641 tax burden is moderately below the 0.70 reference point but remains consistent with a normal Japanese corporate tax profile. Interest coverage of 206.03x confirms that interest costs of ¥0.22bn are immaterial to earnings capacity. The 1.45x financial leverage factor and 3.2% debt/capital ratio indicate that ROE is being generated from operations and asset utilization rather than aggressive debt financing.

Growth Assessment

Revenue growth was broad-based across the principal operating segments. Parts revenue increased 23.0% YoY to ¥23.29bn, accounting for the majority of consolidated growth. Mold revenue increased 30.0% to ¥1.10bn, supported by higher Japan and Thailand sales. Machinery and Equipment revenue increased 9.8% to ¥5.21bn, representing positive but more moderate growth. Rental revenue rose 5.6% to ¥0.06bn. By customer location, Japan revenue grew 20.8% to ¥19.32bn, China grew 45.7% to ¥6.41bn, and other regions grew 9.2% to ¥0.93bn. Thailand declined 10.1% to ¥2.96bn, partially offsetting the strong expansion elsewhere. China represented 21.6% of external revenue, so the acceleration there is an important earnings contributor but also increases exposure to local demand and customer conditions. The quality of operating growth is favorable because operating income rose 18.5 percentage points faster than revenue. Non-operating income was only 0.8% of revenue, so the earnings profile remains predominantly operating in nature. Extraordinary gains and losses were nearly offsetting, with net extraordinary income of only about ¥0.02bn; attributable earnings therefore were not materially dependent on exceptional items. Q3 cumulative revenue represents 73.9% of the ¥40.10bn full-year forecast, versus the standard 75% seasonal progress rate. Operating income represents 78.4% of the ¥5.67bn forecast and attributable profit represents 80.1% of the ¥3.73bn forecast, modestly ahead of the seasonal benchmark. The implied Q4 forecast requires revenue of ¥10.48bn and operating income of ¥1.23bn. That implied Q4 operating margin is approximately 11.7%, below the Q3 cumulative 15.0% margin, suggesting management has retained a prudent margin assumption for the final quarter.

Financial Health

The balance sheet is strong, with total equity of ¥32.46bn funding 68.9% of total assets and liabilities representing only 31.1% of assets. Current assets of ¥23.19bn exceeded current liabilities of ¥11.89bn by ¥11.30bn, producing working capital of ¥11.30bn. The 195.0% current ratio and 191.1% quick ratio indicate ample liquidity without reliance on inventory liquidation. Cash and deposits were ¥8.14bn, while short-term loans were ¥0.91bn; cash covered short-term loans by 8.99x. Total interest-bearing debt was only ¥1.09bn, comprising ¥0.91bn of short-term loans and ¥0.18bn of long-term loans. Debt/capital of 3.2% is highly conservative, and the reported 0.45x debt-to-equity ratio remains well below the 2.0x warning threshold. Short-term debt represented 83.4% of debt, which creates a refinancing-risk flag in maturity composition, but the absolute amount is small and readily covered by cash and current assets. Long-term loans fell ¥0.40bn, or 68.9% YoY, and short-term loans fell ¥0.37bn, or 28.9%, indicating lower borrowing rather than debt-funded expansion. Accounts payable increased ¥1.90bn, or 32.7%, to ¥7.71bn, broadly supporting the higher business volume and contributing to current-liability growth. Investment securities increased ¥3.59bn, or 139.4%, to ¥6.16bn and accounted for 13.1% of assets. The increase coincided with a ¥2.48bn valuation gain on securities recorded in OCI and a ¥1.13bn rise in deferred tax liabilities, indicating that unrealized market-value appreciation is an important component of the larger investment balance. Accumulated other comprehensive income increased to ¥4.18bn from ¥1.50bn, strengthening reported equity but also increasing sensitivity of book value to securities-market movements. Intangible assets rose ¥0.07bn, or 50.2%, but remain only 0.5% of total assets and do not create material M&A or amortization risk. PPE remained substantial at ¥17.27bn, or 36.6% of total assets, consistent with a manufacturing-oriented asset base.

Notable B/S Changes

Investment securities: +¥3.59bn (+139.4%) to ¥6.16bn - the increase coincided with a ¥2.48bn valuation gain on securities in OCI; reported equity is more exposed to market-value movements in the investment portfolio. Accounts payable: +¥1.90bn (+32.7%) to ¥7.71bn - higher supplier balances supported the increase in operating scale and working capital, but supplier-payment conditions should be monitored. Long-term loans: -¥0.40bn (-68.9%) to ¥0.18bn - deleveraging reduced long-dated borrowing and reinforces the conservative capital structure. Short-term loans: -¥0.37bn (-28.9%) to ¥0.91bn - borrowings declined despite sales growth; cash of ¥8.14bn provides substantial coverage of the remaining short-term debt. Intangible assets: +¥0.07bn (+50.2%) to ¥0.22bn - the percentage increase is notable but the balance remains immaterial at 0.5% of total assets.

Cash Flow Quality

Dividend Sustainability

The company has paid an interim dividend of ¥45 per share and forecasts a ¥60 year-end dividend, for a full-year DPS forecast of ¥105. Based on forecast EPS of ¥259.82, the prospective dividend payout ratio is approximately 40.4%. This is below the 60% sustainability reference point and leaves meaningful retained earnings capacity for working-capital needs, capital investment, and balance-sheet resilience. Retained earnings were ¥22.50bn at Q3, equivalent to a substantial internal capital base. The forecast dividend represents a 31.3% increase from the prior-year ¥80 per share dividend, aligning shareholder distributions with the sharp improvement in earnings. The conservative debt structure and high liquidity provide further support for the stated dividend plan. Dividend sustainability should nevertheless be considered alongside the elevated receivable days and high work-in-process mix, as these items can increase operational funding needs during periods of rapid growth.

Risk Assessment

Business risks include Working-capital execution risk is elevated: annualized receivable days are 75 days, above the 60-day warning threshold. Slower collection can increase funding needs and may expose the company to customer-credit stress if demand conditions weaken., Production-cycle risk is elevated because work in process is ¥2.72bn and represents 49.5% of total manufacturing inventory, above the 40% warning threshold. A high WIP mix may reflect longer manufacturing lead times, bottlenecks, or unfinished production that is more exposed to schedule changes and cost overruns., China revenue increased 45.7% YoY to ¥6.41bn and represented 21.6% of consolidated sales. This supports growth but heightens exposure to Chinese industrial demand, local competition, customer concentration, and geopolitical or trade-policy disruption., Thailand revenue declined 10.1% YoY. Continued weakness in this market could constrain geographic diversification and partly offset growth in Japan and China., As a manufacturer, the company remains exposed to raw-material costs, labor availability, production yields, customer demand cycles, quality issues, and exchange-rate movements. Foreign-exchange gains of ¥0.12bn supported ordinary income in the current period, showing that currency movements can affect reported earnings..

Financial risks include The 83.4% short-term debt ratio triggers the refinancing-risk alert because a high portion of borrowings matures within one year. The practical impact is mitigated by ¥8.14bn of cash, 8.99x cash coverage of short-term debt, and only ¥1.09bn of total interest-bearing debt., Investment securities rose 139.4% YoY to ¥6.16bn, while valuation gains on securities added ¥2.48bn to OCI. Equity and comprehensive income are therefore more sensitive to fluctuations in market prices of strategic or listed shareholdings., Accounts payable rose 32.7% to ¥7.71bn. Supplier financing supports liquidity, but the implied annualized payment cycle is extended relative to typical manufacturing norms and should be monitored for changes in supplier terms or purchasing conditions..

Key concerns include Receivable days of 75 are the highest-priority operating metric to monitor because faster earnings growth has not yet demonstrated equally efficient cash collection., The 49.5% WIP ratio is a material manufacturing-specific warning signal and should be assessed against production capacity, lead times, order visibility, and potential inventory obsolescence., Forecast achievement requires a lower implied Q4 operating margin of approximately 11.7%, versus 15.0% for the Q3 cumulative period; this leaves a cushion versus guidance but indicates anticipated margin normalization., The increase in investment securities and associated unrealized gains boosted comprehensive income to ¥6.10bn, substantially above attributable profit of ¥2.99bn; investors should distinguish operating earnings from market-driven OCI movements..

Investment Implications

Key takeaways include FY2026 Q3 cumulative operating performance was strong, with revenue up 20.7%, operating income up 39.2%, and attributable profit up 46.0% YoY., Operating-margin expansion of approximately 200bp to 15.0% was supported by both gross-margin improvement and SG&A discipline., Parts is the core business, generating ¥23.29bn of revenue and ¥4.62bn of segment profit, or 82.4% of aggregate segment profit., The balance sheet has substantial liquidity and very low absolute leverage, which limits financing stress despite the high short-term share of debt., Annualized receivable days and the WIP inventory mix are the primary indicators that could challenge cash conversion and manufacturing execution if growth slows..

Metrics to watch include Parts segment revenue growth and segment margin, China revenue growth and the recovery trajectory in Thailand, Annualized receivable days, currently 75 days, Work-in-process inventory share, currently 49.5%, Q4 operating margin versus the approximately 11.7% implied by full-year guidance, Investment securities valuation changes and their effect on OCI and equity, Cash relative to short-term loans and the short-term debt ratio.

Regarding relative positioning, Suzuki’s 15.0% operating margin, 10.1% net margin, 12.3% annualized ROE, 195.0% current ratio, and 3.2% debt/capital position it as a highly profitable and conservatively financed manufacturer. Relative to the stated benchmarks, profitability and liquidity are strengths, while receivables collection efficiency and the elevated WIP composition are the principal areas where operational discipline needs to be demonstrated.