MITSUBISHI MOTORS CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

While this quarter recorded significant increases in Operating Income and Ordinary Income, the growth in Net Income was relatively subdued due to higher tax expenses and extraordinary losses. Revenue was ¥619.86B (+1.8% YoY), Operating Income was ¥10.08B (+78.8%), and Ordinary Income was ¥9.74B (+101.3%). Consolidated Net Income was ¥3.50B (+3.7%), of which Net Income attributable to owners of the parent was ¥1.41B (¥0.74B in the previous year, +91.2% YoY); the decline in Net Income attributable to non-controlling interests (¥2.64B→¥2.09B) was one factor behind this divergence. Profitability at the operating level improved due to an improved gross profit margin and restrained SG&A expenses, but the increase in the effective tax rate to 61.0% (50.2% in the previous year) compressed Net Income growth.

Factors Affecting Performance

【Revenue】Revenue was ¥619.86B, an increase of +1.8% YoY. The Automobiles segment, which accounted for 97.6% of the revenue mix, increased by +1.5%, while Financial Services posted a relatively high increase of +15.4%. By region, North America expanded to ¥179.67B (+21.0%) and Japan to ¥157.56B (+9.2%), while Asia declined to ¥108.66B (-14.9%), Europe to ¥25.50B (-17.3%), and other regions to ¥79.83B (-12.8%), indicating a shift in the regional mix toward North America and Japan.

【Profit and Loss】Operating Income was ¥10.08B (+78.8%). The gross profit margin improved to 16.2% from 15.5% in the previous year, a +0.7pt improvement, supported by cost management and improvements in pricing and product mix. SG&A expenses were ¥90.37B (14.6% of revenue), managed at approximately the same level as the previous year, allowing operating leverage to take effect and improving the Operating Income margin to 1.6% from 0.9% in the previous year. Ordinary Income was ¥9.74B (+101.3%), boosted by foreign exchange gains of ¥1.18B and interest income of ¥1.99B. Extraordinary losses of ¥0.99B, mainly due to ¥0.60B in losses on disposal of fixed assets, exceeded extraordinary gains of ¥0.24B, leaving Profit Before Tax at ¥8.98B. The effective tax rate increased to 61.0% from 50.2% in the previous year, resulting in Net Income attributable to owners of the parent of ¥1.41B (+91.2%) and total consolidated Net Income of ¥3.50B (+3.7%). In conclusion, the company achieved both revenue and profit growth.

Segment Analysis

Automobiles generated revenue of ¥60.98B (97.6% of the total, +1.5% YoY) and Operating Income of ¥9.58B (+93.3% YoY, 1.57% margin), driving the majority of company-wide Operating Income. Financial Services generated revenue of ¥1.51B (2.4% of the total, +15.4% YoY) and Operating Income of ¥0.62B (-16.0% YoY, 4.09% margin). Although its margin was high, its small scale resulted in a decline in profit from the previous year.

By regional Revenue (for external customers, based on revenue arising from contracts with customers), North America grew to ¥17.97B (¥14.85B in the previous year, +21.0%, 29.3% of the total), and Japan to ¥15.76B (¥14.43B in the previous year, +9.2%, 25.7% of the total). Meanwhile, Asia declined to ¥10.87B (¥12.77B in the previous year, -14.9%, 17.7% of the total), Europe to ¥2.55B (¥3.08B in the previous year, -17.3%, 4.2% of the total), and other regions to ¥7.98B (¥9.16B in the previous year, -12.8%), indicating an overall shift toward greater revenue concentration in North America and Japan.

Key Financial Metrics

【Profitability】The Operating Income margin improved to 1.6% from 0.9% in the previous year, while the gross profit margin also improved to 16.2% from 15.5%, reflecting the effects of cost management and SG&A control.【Cash Quality】The effective tax rate increased to 61.0% from 50.2% in the previous year, and together with extraordinary losses of ¥0.99B, restrained the growth of Net Income attributable to owners of the parent. Comprehensive Income was ¥4.97B, exceeding consolidated Net Income of ¥3.50B, with a foreign currency translation adjustment of +¥2.49B as the main positive factor.【Investment Efficiency】ROE was 0.4%, and R&D expenses were ¥15.44B, equivalent to 2.5% of revenue.【Financial Soundness】The Equity Ratio was 41.6% (equivalent to 39.8% in the previous year), indicating an improving trend. The current ratio was 139.9%, and the quick ratio (based on current assets less inventories) was 109.4%, indicating that short-term payment capacity was secured, although short-term borrowings increased by +66.4% YoY.

Cash Flow Analysis

Cash and deposits were ¥307.03B, down ¥131.86B (-30.0%) from ¥438.89B in the previous year, while short-term borrowings increased by ¥46.39B (+66.4%) to ¥116.29B from ¥69.90B in the previous year. This indicates a shift toward short-term funding, while long-term borrowings declined from the previous year to ¥121.73B. Working capital (accounts receivable of ¥211.45B + inventories of ¥329.34B - accounts payable of ¥368.56B) was ¥172.24B, expanding from ¥86.71B in the previous year. The primary factors were an increase in inventories (+15.5%) and a decrease in accounts payable (-17.6%). This expansion in working capital is considered to be behind the decline in cash and increase in short-term borrowings and should be monitored as a development in the company’s funding position.

Quality of Earnings

The core source of recurring earnings was Operating Income of ¥10.08B, supported by improvements in the gross profit margin and SG&A ratio. In non-operating items, foreign exchange gains of ¥1.18B and interest income of ¥1.99B made positive contributions, while interest expenses of ¥1.71B and other items offset these gains, leaving the non-operating balance approximately neutral. Extraordinary gains of ¥0.24B were exceeded by extraordinary losses of ¥0.99B, mainly due to ¥0.60B in losses on disposal of fixed assets, resulting in a temporary net negative factor of -¥0.76B. The effective tax rate rose significantly to 61.0% from 50.2% in the previous year, and the increase in the tax burden factor was the primary reason for restraining the growth of Net Income attributable to owners of the parent. While Net Income attributable to owners of the parent increased substantially to ¥1.41B (+91.2%), total consolidated Net Income was limited to ¥3.50B (+3.7%). This divergence resulted from the decline in Net Income attributable to non-controlling interests from ¥2.64B to ¥2.09B. To assess earnings quality, both consolidated and parent-attributable results should therefore be considered together.

Earnings Forecast and Guidance

Progress against the full-year plan was 19.0% for Revenue (619.9/3,260B), 11.2% for Operating Income (100.8/900B), 12.2% for Ordinary Income (97.4/800B), and 5.6% for Net Income attributable to owners of the parent (14.1/250B). All metrics were below the 25% benchmark for even quarterly progress, with Net Income showing particularly low progress. As of the current quarter, there were no revisions to the earnings forecast or dividend forecast, suggesting that the plan assumes a back-loaded second half.

Shareholder Returns

The company’s annual dividend plan is ¥10 per share, with no revision to the dividend forecast as of the current quarter. The Payout Ratio against forecast EPS of ¥18.68 is approximately 53.5%. The unchanged dividend forecast is based on a plan assuming forecast full-year Net Income of ¥25.0B.

Risk Factors

1. Earnings quality and tax burden: The effective tax rate increased to 61.0% from 50.2% in the previous year, and together with extraordinary losses of ¥0.99B, restrained the growth of Net Income attributable to owners of the parent. If the tax burden does not normalize, full-year Net Income progress (5.6%) could fall further behind.

2. Changes in the funding structure: Short-term borrowings increased by +66.4% YoY (¥69.90B→¥116.29B), while cash and deposits decreased by -30.0% (¥438.89B→¥307.03B), indicating an increasing reliance on short-term funding.

3. Level of quality assurance costs: The provision for product warranties was ¥65.16B, a high 10.5% of Revenue. Quality-related costs are therefore an item whose continuing impact on profit margins should be monitored.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The company’s profitability is substantially below the industry median.

Growth and Capital Efficiency

The Revenue growth rate is also below the industry median, placing the company’s revenue growth pace among the more moderate levels within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Income margin improved to 1.6% from 0.9% in the previous year, and the gross profit margin improved to 16.2% from 15.5%, indicating progress in strengthening profitability through cost and expense management.

2. Full-year progress was 19.0% for Revenue, 11.2% for Operating Income, and 5.6% for Net Income attributable to owners of the parent, all below the standard quarterly progress benchmark of 25%. The degree to which the back-loaded plan is achieved will be a key point for future monitoring.

3. There was a significant difference between the growth rates of consolidated Net Income (+3.7%) and Net Income attributable to owners of the parent (+91.2%), against a backdrop of declining Net Income attributable to non-controlling interests. Together with the higher effective tax rate, changes in the composition of earnings are a key feature of the current period.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type, explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥580–¥614 at ±1% for the cost of equity, and ¥593–¥599 at ±0.1 for ω.

Notes:

• Net Income has been substantially compressed relative to Operating Income due to the tax burden, acquisition-related expenses, and non-controlling interests (Net Income ÷ Operating Income 28%). This value reflects that compression at face value; if these factors are temporary, normalized earnings 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 end of the quarter are used (there is a timing difference from 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: 2026-06 / This value does not predict 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 professionals as necessary.

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