TEIN (7217) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, revenue increased but operating income declined, making the deterioration in profitability the primary focus. Revenue increased to ¥3.997B (+2.0% YoY), while Operating Income declined to ¥0.130B (-45.4%), Ordinary Income to ¥0.209B (-30.8%), and Net Income attributable to owners of the parent to ¥0.153B (-16.7%). The primary factor was a decline in the gross margin, as the rate of increase in the cost of sales exceeded revenue growth. Non-operating income, including foreign exchange gains and equity-method investment income, mitigated the decline in Ordinary Income to a certain extent.

Factors Affecting Performance

【Revenue】Revenue increased to ¥3.997B, representing a 2.0% increase YoY. Although the Company operates as a single business engaged in the manufacture and sale of automotive suspensions and does not disclose segment information, consolidated revenue maintained solid growth.

【Profit and Loss】Cost of sales increased to ¥2.488B, up 6.1% YoY, exceeding revenue growth. As a result, Gross Profit declined to ¥1.509B (-4.2%), and the gross margin fell to 37.8% from 40.2% in the same period of the previous year, a decline of approximately 2.4pt. SG&A expenses also increased to ¥1.378B (+3.1%), raising the SG&A ratio to 34.5%. Consequently, Operating Income declined to ¥0.130B (-45.4%), and the operating margin narrowed to 3.3%. Ordinary Income was ¥0.209B (-30.8%), with non-operating income of ¥0.089B, including a foreign exchange gain of ¥0.023B and equity-method investment income of ¥0.037B, partially offsetting the decline in Operating Income. Extraordinary gains and losses were both immaterial, and the impact of temporary factors was limited. Net Income of ¥0.153B (-16.7%) declined at a slower rate than Ordinary Income, while the tax burden ratio remained within a normal range. In summary, the results reflected higher revenue but lower earnings.

Segment Analysis

The Group operates as a single segment engaged in the manufacture and sale of automotive suspensions, and does not disclose segment-level revenue or profit and loss information.

Key Financial Indicators

【Profitability】The operating margin of 3.3% and net margin of 3.8% both declined from 6.1% and 4.7%, respectively, in the same period of the previous year. The gross margin also deteriorated to 37.8% from 40.2%. Annualized ROE remained at 3.2%, indicating that low profitability is weighing on capital efficiency.【Cash Flow Quality】Finished goods inventory of ¥1.73B accounted for 19.7% of total assets, suggesting that inventory reduction has not kept pace with revenue growth.【Investment Efficiency】ROIC remained at approximately the low 2% range, indicating limited earnings generation capacity relative to assets held. Basic EPS declined to ¥15.48 from ¥18.35 in the same period of the previous year, a decrease of -15.6%, while BPS increased to ¥655.38 from ¥620.94, indicating an accumulation of net assets.【Financial Soundness】The Equity Ratio remained high at 73.5%, while cash and deposits increased to ¥1.60B. Long-term borrowings declined to ¥0.20B, whereas current liabilities increased, requiring attention to the composition of short-term funding.

Cash Flow Analysis

As the cash flow statement is not disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits increased by +¥0.33B, from ¥1.27B in the same period of the previous year to ¥1.60B, strengthening short-term payment capacity. Meanwhile, long-term borrowings declined from ¥0.29B to ¥0.20B, indicating progress in reducing interest-bearing debt. Current liabilities increased significantly YoY, and increases in accounts payable and accrued expenses may have affected cash management. Finished goods inventory remained high at ¥1.73B, with funds tied up in inventory constituting a factor pressuring working capital. Overall, the Company achieved both an increase in cash and deposits and a reduction in borrowings, securing financial funding capacity.

Earnings Quality

The current period’s earnings show a degree of dependence on factors outside the core business. Against Ordinary Income of ¥0.209B, non-operating income was ¥0.089B, equivalent to approximately 68% of Operating Income of ¥0.130B; the primary components were a foreign exchange gain of ¥0.023B and equity-method investment income of ¥0.037B. Extraordinary gains and losses were both immaterial, and the impact of temporary factors on Net Income was limited. Comprehensive Income was ¥0.483B, substantially exceeding Net Income of ¥0.153B, primarily due to foreign currency translation adjustments of ¥0.310B. This divergence mainly resulted from the translation of overseas assets into yen and differs in nature from operating cash generation. Accordingly, trends in Operating Income and Ordinary Income should be emphasized when assessing core earnings power.

Earnings Forecast and Guidance

The full-year Company forecasts are Revenue of ¥5.549B (+3.8% YoY), Operating Income of ¥0.168B (-51.3%), Ordinary Income of ¥0.277B (-29.2%), and Net Income attributable to owners of the parent of ¥0.200B. Cumulative Q3 progress was 72.0% for Revenue, 77.4% for Operating Income, 75.5% for Ordinary Income, and 76.5% for Net Income, with the profit indicators slightly exceeding the standard 75% progress level. However, the full-year Operating Income forecast itself incorporates a substantial decline from the previous year, and the plan assumes the establishment of a low-margin level rather than a recovery in profitability. Attention should be paid to the trends in revenue and costs in Q4 against the revised plan, as the earnings forecast was revised during the current quarter.

Shareholder Returns

The full-year dividend forecast is ¥16 per share after reflecting the impact of the 2-for-1 stock split effective October 1, 2025 (¥32 for both the year-end and annual dividends before reflecting the split). The Q2 dividend was ¥0, suggesting a policy of paying a single year-end dividend. Based on the average number of shares outstanding during the period, the estimated annual total dividend is approximately ¥0.159B, resulting in a Payout Ratio of approximately 79.5% against the full-year Net Income forecast of ¥0.200B. This is a Payout Ratio based solely on dividends and is not a Total Return Ratio including share repurchases. Since the Payout Ratio exceeds the general guideline of 60%, failure to achieve the earnings plan could reduce dividend-paying capacity. Nevertheless, the financial foundation of cash and deposits of ¥1.60B and an Equity Ratio of 73.5% supports the short-term funding of dividend payments.

Risk Factors

1. Profitability deterioration: The operating margin declined to 3.3% from 6.1% in the same period of the previous year, a decrease of approximately 2.8pt, as gross margin deterioration and increased SG&A expenses progressed simultaneously. Costs were not absorbed even during a period of revenue growth, making the effectiveness of price pass-through and cost control key areas of focus going forward.

2. Inventory and working capital accumulation: Finished goods inventory of ¥1.73B accounted for 19.7% of total assets and remained high relative to Revenue of ¥3.997B. Prolonged inventory retention could increase the risk of inventory write-downs and discount sales, potentially pressuring funding efficiency.

3. Short-term liability composition and dependence on a single business: Current liabilities increased significantly from the same period of the previous year and include short-term borrowings and long-term borrowings due within one year. In addition, because the Company operates as a single segment focused on automotive suspensions, it has a structure in which it is difficult to diversify demand fluctuation risk arising from trends in automobile production. However, cash and deposits of ¥1.60B and an Equity Ratio of 73.5% provide a buffer.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s Operating Margin and Net Margin are both below the industry median, placing it in the lower tier of the industry.

Growth and Capital Efficiency

The Revenue Growth Rate was also slightly below the industry median, and growth remained below the average level.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Despite higher revenue, Operating Income declined 45.4%, with gross margin deterioration and increased SG&A expenses pressuring the profit margin. The effectiveness of cost control and price pass-through will be key to restoring profitability.

2. Finished goods inventory remained at a level equivalent to approximately 20% of total assets, making improvements in inventory efficiency an important point for review from both working capital and capital efficiency perspectives.

3. The solid financial foundation, comprising an Equity Ratio of 73.5% and cash and deposits of ¥1.60B, functions as a funding safety net during a period of declining profitability. However, the Payout Ratio is high at approximately 79.5%, making achievement of the full-year plan a prerequisite for dividend sustainability.

Theoretical Share Price (Reference Value)

Sensitivity: ¥518–¥546 for a ±1% change in the Cost of Equity, and ¥528–¥534 for a ±0.1 change in ω.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the quarter-end were used (there is a timing difference relative to the full-year forecast).

(Valuation 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; 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 discretion and responsibility, in consultation with a professional as necessary.

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