NISSAN MOTOR (7201) FY2027 Q1 Earnings Report

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Executive Summary

The main focus is the turnaround from a substantial operating loss in the previous-year period to operating profitability; however, Net Income remained modest due to financial expenses and a high tax burden. Revenue was ¥29642.0B (+9.5% YoY), Operating Income was ¥778.9B (an improvement from the previous year's ¥791.2B loss), Ordinary Income was ¥490.9B (an improvement from the previous year's ¥1092.3B loss), and Net Income was ¥82.9B (an improvement from the previous year's ¥1140.1B loss). Gross profit expansion driven by higher revenue and an improved cost ratio was the primary factor behind the return to operating profitability, while interest expense and the high effective tax rate weighed on Net Income.

Factors Affecting Performance

【Revenue】Revenue increased 9.5% YoY to ¥29642.0B. By segment, the Automotive Business generated ¥26622.9B (+8.8%), while the Automotive Financing Business generated ¥3626.5B (+14.8%), with both segments recording higher revenue. By region, North American sales grew substantially by +24.4% and drove the overall increase, while Japan, Asia, and other regions recorded declines; growth was concentrated in North America.

【Profit and Loss】Operating Income was ¥778.9B, representing a turnaround from the previous year's ¥791.2B loss to profitability. The gross margin was 15.8% (an improvement from an estimated 8.7% in the previous year), supported by the fact that the increase in cost of sales (+1.0%) was below revenue growth. However, SG&A expenses increased 24.1% YoY, outpacing revenue growth and absorbing part of the gross profit improvement. Ordinary Income decreased by ¥287.9B from Operating Income to ¥490.9B, as interest expense of ¥320.0B exceeded interest income of ¥120.7B and foreign exchange gains of ¥142.6B. Income taxes of ¥324.9B were recognized against Profit Before Tax of ¥407.8B, resulting in a high effective tax rate of approximately 79.7%; consequently, Net Income remained at ¥82.9B. Although revenue and profit increased at the operating and ordinary income levels, the heavy tax burden and financial expenses were prominent at the net income level.

Segment Analysis

Of consolidated Operating Income of ¥778.9B, the Automotive Financing Business contributed ¥861.8B (profit margin of 23.8%), while the Automotive Business recorded an operating loss of ¥178.0B (profit margin of -0.7%). Although the Automotive Business improved from a loss in the previous year, it remained in the red, and consolidated operating profitability effectively depends on the high profitability of the Automotive Financing Business. By location, North America was the largest profit-contributing region, generating Operating Income of ¥959.8B and turning around from a loss in the previous year. Meanwhile, Europe continued to record an operating loss of ¥261.1B, indicating substantial profitability disparities among regions.

Key Financial Indicators

【Profitability】The Operating Income margin was 2.6%, a substantial improvement from negative 2.9% in the previous year, although it remains low in absolute terms. The Net Income margin remained at 0.3%, reflecting significant compression by downstream expenses from the 15.8% gross margin, including SG&A expenses, financial expenses, and taxes.【Cash Flow Quality】Operating Cash Flow (OCF) was an inflow of ¥371.6B, improving from an outflow of ¥84.2B in the previous year and indicating cash generation substantially exceeding Net Income of ¥82.9B. However, investing cash flow was an outflow of ¥2151.5B, resulting in negative free cash flow of ¥1779.9B.【Investment Efficiency】ROE (Annualized) was 0.6%, and the Equity Ratio was 26.5%, indicating a low level of capital profitability.【Financial Soundness】Total assets were ¥209259.0B, while Net Assets were ¥53286.5B. The Equity Ratio of 26.5% was broadly unchanged from the previous year. The high level of interest-bearing debt is contributing to the financial expense burden through high financial leverage.

Cash Flow Analysis

Operating Cash Flow (OCF) was an inflow of ¥371.6B, a significant improvement from the outflow of ¥84.2B in the previous-year period. A decrease in trade receivables of ¥1267.5B contributed to cash inflows, while a decrease in trade payables of ¥1711.8B and an increase in inventories of ¥766.5B acted as offsetting factors; changes in working capital therefore worked to reduce OCF. Investing cash flow was an outflow of ¥2151.5B, reflecting ongoing investment expenditures, including acquisitions of property, plant and equipment. As a result, free cash flow (OCF + investing cash flow) was negative ¥1779.9B. Financing cash flow was an inflow of ¥1104.9B, indicating that the shortfall in free cash flow was covered by external financing. Cash and cash equivalents decreased by ¥435.6B during the period, with an ending balance of ¥22212.4B.

Earnings Quality

OCF substantially exceeded Net Income, indicating a favorable aspect in terms of cash generation relative to reported earnings for the period. However, the gap between Ordinary Income of ¥490.9B and Net Income of ¥82.9B reflects the significant impact of extraordinary items and the tax burden. Extraordinary income of ¥103.7B, including a gain on the sale of fixed assets of ¥67.0B, was offset by extraordinary losses of ¥186.8B, including a loss on the disposal and sale of fixed assets of ¥9.2B, resulting in a net negative impact of ¥83.2B. In addition, income taxes of ¥324.9B were high relative to Profit Before Tax of ¥407.8B, resulting in an effective tax rate of approximately 80%. Foreign exchange gains of ¥142.6B were recorded in non-operating income; as this represents more than 18% of Operating Income of ¥778.9B, it is important to note that the quality of Ordinary Income is highly sensitive to foreign exchange factors.

Earnings Forecast and Guidance

The full-year company forecast is Revenue of ¥13T (+8.3% YoY) and Operating Income of ¥2000B (+244.8%). Q1 progress rates were 22.8% for Revenue and 38.9% for Operating Income, with progress in Operating Income substantially exceeding the simple one-quarter benchmark of 25%. This reflects the rebound from the substantial loss in the previous-year period, improved North American profitability, and a higher gross margin. Meanwhile, progress toward the full-year forecast of ¥200B in Net Income attributable to owners of the parent was 18.8%, below the standard pace, as high financial expenses and the tax burden restrained progress at the net income level.

Shareholder Returns

The full-year dividend forecast is ¥0 per share, resulting in a current Payout Ratio of 0%. No share repurchases have been identified in the data for the current period. Although OCF has turned positive, free cash flow remains negative at ¥1779.9B; recovery of cash-generating capacity sufficient to exceed investment expenditures will be a prerequisite for the resumption of shareholder returns in the future.

Risk Factors

1. Profitability Structure of the Automotive Business: The Automotive Business recorded an operating loss of ¥178.0B (profit margin of -0.7%), while consolidated Operating Income of ¥778.9B depends on ¥861.8B from the Automotive Financing Business. Achieving sustained profitability in the core automotive business remains a challenge.

2. High Leverage and Interest Burden: Interest-bearing debt remains high, and Ordinary Income declined by ¥287.9B from Operating Income. Interest expense of ¥320.0B exceeded the combined total of interest income and foreign exchange gains, with the financial expense burden compressing Net Income.

3. High Effective Tax Rate: Income taxes of ¥324.9B were recorded against Profit Before Tax of ¥407.8B, resulting in an effective tax rate of approximately 79.7%. Fluctuations in the tax burden are a factor reducing the predictability of Net Income.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin are below the industry median, placing profitability at a low level within the industry.

Growth and Capital Efficiency

The Revenue growth rate exceeds the industry median, indicating a relatively high pace of revenue growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Operating Income margin improved substantially YoY and turned positive, but the Automotive Business alone remains loss-making at the operating level, and consolidated earnings continue to depend heavily on the Automotive Financing Business.

2. OCF turned positive and exceeded Net Income, but substantial investing cash outflows resulted in negative free cash flow, and the company continues to depend on financing cash flows for funding.

3. Progress toward the full-year forecast is ahead of the standard pace at the Operating Income level, but below the standard pace at the Net Income level, as the burden of financial expenses and taxes constrains the conversion of operating improvements into Net Income.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,128–¥1,195 at ±1% for the cost of equity, and ¥1,149–¥1,169 at ±0.1 for ω.

Notes:

• Net Income is substantially compressed relative to Operating Income due to the tax burden, acquisition-related expenses, and non-controlling interests (Net Income ÷ Operating Income 10%). This value reflects that compression at face value; if these factors are temporary, intrinsic earning power may be higher.
• 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 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 above its appropriate level.

(Model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest Rate Reference Month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it 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 responsibility, after consulting a professional as necessary.

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