Quick View
| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥294.3B | ¥282.4B | +4.2% |
| Operating Income | ¥11.7B | ¥14.4B | −19.1% |
| Ordinary Income | ¥15.9B | ¥18.1B | −11.9% |
| Net Income | ¥13.2B | ¥10.7B | +23.7% |
| ROE | 1.6% | 1.3% | - |
Executive Summary
The quarter was characterized by an increase in revenue but a decline in earnings due to deteriorating profitability in the core business, while non-operating income offset this decline and resulted in higher net income. Revenue expanded to ¥294.3B (+4.2% YoY), but operating income declined by double digits to ¥11.7B (-19.1% YoY). Although ordinary income remained at ¥15.9B (-11.9% YoY), net income increased to ¥13.2B (+23.7% YoY), primarily due to the return to profitability in non-operating income and expenses, including ¥4.8B in equity-method investment gains, as well as a lower effective tax rate. Both the gross margin of 17.5% and operating margin of 4.0% declined from the previous year, indicating room for improvement in the earnings structure of the core business.
Factors Affecting Results
【Revenue】Revenue increased 4.2% YoY to ¥294.3B. The Company operates as a single segment, the Automotive Parts Business, and does not disclose a breakdown by business composition; however, progress against the full-year plan of ¥1,180.0B was 24.9%, which is a standard level.
【Profit and Loss】Cost of sales remained high at ¥242.8B, representing a cost ratio of 82.5%, resulting in a gross margin of 17.5% and gross profit of only ¥51.5B. SG&A expenses increased from the previous year to ¥39.9B, or 13.5% of revenue. Consequently, operating income declined 19.1% YoY to ¥11.7B, and the operating margin fell to 4.0%. Meanwhile, ordinary income reached ¥15.9B, supported by ¥5.9B in non-operating income, including ¥4.8B in equity-method investment gains and ¥1.0B in interest income. Extraordinary gains and losses were immaterial, at gains of ¥0.0B and losses of ¥0.0B, and had virtually no impact on net income. Net income increased 23.7% YoY to ¥13.2B; however, this was driven less by improvement in the core business than by non-operating income and lower tax expense, and should be viewed as a revenue-growth/earnings-decline structure.
Segment Analysis
The Company operates as a single segment, the Automotive Parts Business, and does not disclose segment-level revenue or profit and loss.
Key Financial Indicators
【Profitability】The 4.0% operating margin declined from approximately 5.1% in the same period of the previous year, while the 17.5% gross margin also deteriorated from the previous year. In contrast, the net profit margin improved from the previous year to approximately 4.2%, indicating that the improvement in profitability depends on non-operating factors.【Cash Quality】Non-operating income accounted for 2.0% of revenue, but was equivalent to 50.5% of operating income, a substantial level; therefore, the quality of ordinary income is highly sensitive to earnings from investees.【Investment Efficiency】ROE remained low at 1.6%, and total asset turnover was also low. Improving asset efficiency, centered on ¥368.4B in property, plant and equipment, is a key issue.【Financial Soundness】The equity ratio was 64.9%, while the current ratio was calculated at approximately 194.7% based on current assets of ¥643.4B divided by current liabilities of ¥330.4B, indicating a conservative and stable financial foundation.
Cash Flow Analysis
Although the Company does not disclose a statement of cash flows, funding trends can be assessed from changes in the balance sheet. Cash and deposits decreased to ¥114.6B from ¥124.3B in the previous year, while total assets contracted to ¥1,245.0B from ¥1,296.4B. Current assets decreased to ¥643.4B from ¥693.9B in the previous year, while net assets increased to ¥808.2B. Retained earnings continued to accumulate, reaching ¥603.3B from ¥597.6B in the previous year. Accounts receivable increased to ¥147.9B from ¥125.9B in the previous year, and the increase in working capital appears to have been one factor behind the decline in cash and deposits.
Quality of Earnings
Both ordinary income and net income strongly reflect the boost from non-operating income and expenses, warranting caution regarding earnings quality. Non-operating income of ¥5.9B, including ¥4.8B in equity-method investment gains and ¥1.0B in interest income, was added to operating income of ¥11.7B, resulting in ordinary income of ¥15.9B. A substantial portion of the increase in ordinary income was therefore attributable to factors outside the core business. Extraordinary gains and losses were very small, at gains of ¥0.0B and losses of ¥0.0B, limiting the impact of temporary factors. Income taxes and other taxes were ¥2.7B, resulting in a low effective tax rate of approximately 17%, which also contributed to the increase in net income. Accordingly, it should be noted that the increase in net income for the period was supported not by an improvement in operating activities, but by equity-method investment gains and lower tax expense—factors that are either less recurring or outside the core business.
Earnings Forecasts and Guidance
Progress against the full-year plan was 24.9% for revenue, 19.7% for operating income, 24.2% for ordinary income, and 24.9% for net income. While progress in revenue and net income was in line with the standard 25% level, operating income progress was 5.3pt below that level. Improvement in profitability from Q2 onward will therefore be necessary to achieve the full-year operating income plan of ¥59.0B (+1.4% YoY). The full-year ordinary income plan is ¥66.0B (-12.8% YoY), indicating that the initial plan itself already incorporates a decline in earnings. As of the current quarter, there have been no revisions to the earnings forecast or dividend forecast.
Shareholder Returns
The full-year dividend forecast is ¥18.00 per share, and the annual dividend total calculated using the period-average number of shares outstanding of 96,249 thousand shares is approximately ¥1.3B. Dividing this by the full-year net income forecast of ¥50.0B gives an estimated payout ratio of approximately 34.6%, remaining below 60%. There has been no disclosure regarding share repurchases, and no assessment is made of the Total Return Ratio. Compared with the previous year’s annual dividend results—the previous-year dividend of ¥7, comprising the interim and year-end dividends, is assumed to represent the interim portion—the Company is moving toward a dividend increase. Although detailed OCF disclosure is unavailable, there are no significant concerns regarding dividend sustainability given the financial foundation reflected in the 64.9% equity ratio.
Risk Factors
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Concentration risk in the Automotive Parts Business: As the Company operates as a single segment, fluctuations in automakers’ production volumes and model changes directly affect revenue and capacity utilization. The business structure does not benefit from diversification.
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Risk of declining profitability: Both the gross margin of 17.5% and operating margin of 4.0% declined from the previous year. If the pass-through of increases in raw material, logistics, and labor costs is delayed, the impact on operating income is likely to be significant.
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Risk of dependence of ordinary income on non-operating income: Profitable non-operating income and expenses, including ¥4.8B in equity-method investment gains, offset the decline in operating income. Fluctuations in the performance of investees could affect ordinary income and net income.
Industry Benchmark (For Reference; Compiled by the Company)
Industry Benchmark (manufacturing)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.0% | 7.2% (3.2%–12.5%) | −3.2pt |
| Net Profit Margin | 4.5% | 5.9% (2.9%–12.5%) | −1.4pt |
Profitability is below the industry median, placing the Company in the lower-tier group.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 4.2% | 5.6% (1.1%–13.9%) | −1.4pt |
Revenue growth is also slightly below the industry median, placing the Company in an average to somewhat weaker position within the industry.
※Source: Compiled by the Company
Key Takeaways from the Financial Results
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Revenue increased 4.2% YoY and is progressing in line with the full-year plan, while operating income declined 19.1% YoY, resulting in an adverse operating leverage effect characterized by revenue growth and earnings decline. Both the gross margin and operating margin are below the industry median, making the recovery of core business profitability a key focus going forward.
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The increase in net income (+23.7%) was attributable to non-operating income and expenses, including ¥4.8B in equity-method investment gains, and the low effective tax rate, without an accompanying improvement in operating income. From an earnings-quality perspective, caution is warranted because earnings are supported by factors with limited recurrence.
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Financial soundness is strong, with an equity ratio of 64.9% and a current ratio of approximately 194.7%, providing substantial financial capacity to address profitability challenges. Full-year operating income progress of 19.7% is below the standard 25% level, and attention will focus on the extent to which the planned improvement in profitability in the second half can be achieved.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥757 |
| base | ¥768 |
| bull | ¥782 |
| Calculation Assumption | Value |
|---|---|
| Book Value per Share (BPS) | ¥840 |
| Adjusted Forecast EPS | ¥56.1 |
| Cost of Equity r | 9.77% (10-year Japanese government bond 2.77% + equity risk premium 6.00% + size premium 1.00%) |
| Persistence Coefficient of Residual Income ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 34.6% |
| Forecast EPS Confidence Adjustment | ×1.080 (based on the peer industry’s historical guidance achievement rate) |
| implied PBR / PER | 0.91x / 13.7x |
Sensitivity: ¥747–¥790 at a ±1% change in the cost of equity, and ¥766–¥770 at a ±0.1 change in ω.
Notes:
- Since 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, resulting in a timing gap relative to 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 solely from publicly disclosed data; this does not constitute a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)
This report is an automatically generated earnings analysis document produced by AI based on XBRL earnings report 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 adviser as necessary.
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AI Financial Analysis
Executive Summary
Ichikoh Industries delivered a mixed FY2026 Q1 result: sales growth remained positive, but core operating profitability weakened materially. Revenue rose 4.2% year on year to ¥29.43bn. Gross profit increased 3.1% to ¥5.15bn, broadly tracking revenue but growing more slowly. Gross margin declined 19bp year on year to 17.5%, which is below the 20% efficiency benchmark and indicates limited manufacturing cost absorption. SG&A expenses rose 12.1% to ¥3.99bn, substantially faster than revenue growth. As a result, the SG&A-to-sales ratio increased by 94bp to 13.5%. Operating income fell 19.1% to ¥1.17bn. The operating margin compressed by 114bp to 4.0%, below the 5% threshold identified in the quality alerts. Ordinary income nevertheless declined by a smaller 11.9% to ¥1.59bn, supported by ¥0.48bn of equity-method earnings and ¥0.59bn of non-operating income. Profit attributable to owners rose 21.2% to ¥1.25bn, lifting net margin by 59bp to 4.2%. The divergence between weaker operating income and higher net income primarily reflects the absence of the prior-year restructuring-related extraordinary loss rather than an improvement in core earnings power. Current-period extraordinary gains and losses were immaterial, at ¥0.02bn and ¥0.03bn respectively. Financial liquidity is strong, with a current ratio of 194.7%, a quick ratio of 189.5%, and working capital of ¥31.30bn. Leverage is moderate, with debt-to-equity of 0.54x and interest coverage of 30.66x. Full-year guidance was maintained, and Q1 sales and profit progress are broadly consistent with the annual plan, although operating-income progress is modestly behind the seasonal reference level. The central forward issue is whether sales growth can be converted into renewed gross-margin expansion and tighter SG&A control, as these are necessary to achieve the guided 5.0% full-year operating margin.
Profitability Analysis
The reported annualized DuPont ROE is 6.2%, comprising a 4.2% net profit margin, 0.945x asset turnover, and 1.54x financial leverage. This ROE is below the 8% benchmark for a satisfactory return profile, with the principal constraint being modest margin rather than excessive leverage. The 4.2% net margin improved from approximately 3.6% in the prior-year quarter, but this improvement was not mirrored in operating performance. Operating margin declined to 4.0% from 5.1%, while gross margin declined to 17.5% from 17.7%. The largest negative operating driver was SG&A growth of 12.1%, compared with revenue growth of 4.2%, producing unfavorable operating leverage. Cost of sales increased 4.5%, slightly exceeding sales growth, indicating that production and procurement costs also did not provide margin support. The low gross-margin quality alert is relevant because a 17.5% gross margin leaves limited room to absorb sales, administrative, development, and customer-service costs in an automotive-parts manufacturing business. The low operating-efficiency alert is also material: a 4.0% EBIT margin means relatively small movements in pricing, input costs, utilization, or labor costs can have a significant effect on earnings. Ordinary income benefited from ¥0.48bn of equity-method earnings, equal to 41.5% of operating income, making affiliate earnings an important contributor to pre-tax profitability. Non-operating income of ¥0.59bn represented 50.5% of operating income, while the ¥0.11bn foreign-exchange loss offset 9.2% of operating income. The tax burden of 0.782 and effective tax rate of 17.0% were favorable and supported conversion of pre-tax profit into attributable earnings. The interest burden of 1.367x reflects net non-operating income exceeding finance costs, while interest expense of only ¥0.04bn is readily covered by operating income. The current improvement in net profit therefore appears less sustainable than an operating-margin-led recovery. Restoring profitability will require improved gross-profit conversion and SG&A discipline rather than reliance on non-operating and equity-method contributions.
Growth Assessment
Q1 revenue growth of 4.2% demonstrates continued sales expansion in the single automotive-parts business. However, operating income declined 19.1%, showing that the incremental revenue generated negative operating leverage. Gross profit grew only 3.1%, below the sales growth rate, while SG&A grew 12.1%; this combination reduced operating profit despite higher revenue. Full-year guidance calls for revenue of ¥118.00bn, up 0.8% year on year, operating income of ¥5.90bn, up 1.4%, ordinary income of ¥6.60bn, down 12.8%, and attributable profit of ¥5.00bn. Q1 progress against guidance was 24.9% for sales, 19.7% for operating income, 24.2% for ordinary income, and 24.9% for attributable profit. Sales, ordinary-income, and attributable-profit progress are close to the standard 25% Q1 reference point. Operating-income progress is 5.3 percentage points below the 25% reference, but does not exceed the 10 percentage point deviation threshold. The full-year plan implies an operating margin of 5.0%, compared with the Q1 margin of 4.0%, requiring a 1.0 percentage point improvement over the remaining quarters. The implied full-year net margin is 4.2%, broadly in line with Q1, suggesting management expects continued non-operating and/or tax support alongside an operating recovery. The maintained forecast indicates that management has not revised its assumptions despite the first-quarter operating-profit shortfall. Manufacturing growth quality should be assessed through the pace of gross-margin recovery, the relationship between SG&A and sales growth, and the stability of equity-method earnings. Automotive-parts demand remains exposed to OEM production schedules, model cycles, customer pricing pressure, raw-material costs, semiconductor and component availability, and foreign-exchange movements. The ¥1.07bn Q1 foreign-exchange loss shows that currency movements can be meaningful relative to the company’s narrow operating-profit base.
Financial Health
The balance sheet is financially sound, with total equity of ¥80.82bn funding 64.9% of total assets. Total liabilities were ¥43.68bn, equivalent to 35.1% of total assets. The current ratio of 194.7% and quick ratio of 189.5% indicate substantial coverage of short-term obligations by liquid current assets. Working capital was ¥31.30bn, providing a sizeable liquidity cushion against current liabilities of ¥33.04bn. Cash and deposits were ¥11.46bn, while trade receivables were ¥14.79bn and electronically recorded monetary claims were ¥1.24bn. Short-term loans receivable totaled ¥27.32bn and represented a substantial component of current assets, making collection and counterparty quality important to liquidity analysis. Current liabilities included ¥14.02bn of trade payables and ¥7.51bn of electronically recorded obligations. The company does not exhibit a maturity mismatch on the reported balance-sheet structure because current assets substantially exceed current liabilities. Debt-to-equity of 0.54x is conservative relative to the 1.0x benchmark and well below the 2.0x warning threshold. Interest coverage of 30.66x indicates strong capacity to service reported interest expense. Lease obligations totaled ¥5.49bn, comprising ¥0.74bn current and ¥4.75bn non-current, and should be considered alongside conventional financing obligations. The net defined-benefit liability was ¥5.75bn, equal to 7.1% of total equity, representing a long-term obligation that merits monitoring. Deferred tax assets totaled ¥3.37bn, or 4.2% of total equity. Asset-retirement obligations were limited at ¥0.26bn, equal to approximately 0.1% of total liabilities.
Notable B/S Changes
Short-term loans receivable: -¥58.35bn year on year to ¥27.32bn - a major reduction in a significant current-asset component, affecting liquidity composition and counterparty exposure. Electronically recorded obligations: -¥56.34bn year on year to ¥7.51bn (-44.2%) - a substantial reduction in electronically settled supplier obligations and a key driver of lower current liabilities. Trade receivables: +¥2.20bn year on year to ¥14.79bn (+17.5%) - receivables increased faster than revenue, requiring monitoring of collection efficiency and customer credit exposure. Investment securities: +¥0.28bn year on year to ¥4.64bn (+6.3%) - the portfolio remains modest at 3.7% of total assets but adds exposure to market-value and investee-performance movements.
Cash Flow Quality
Current-period earnings quality is supported by immaterial extraordinary items: the company recorded only ¥0.02bn of extraordinary income and ¥0.03bn of extraordinary loss. However, the year-on-year increase in attributable profit should not be interpreted solely as a recurring earnings improvement because the prior-year quarter included ¥0.37bn of restructuring costs within extraordinary losses. Q1 ordinary income of ¥1.59bn exceeded operating income of ¥1.17bn by ¥0.43bn, reflecting the importance of non-operating income and equity-method earnings. Equity-method earnings of ¥0.48bn were a significant contributor, equivalent to 30.3% of ordinary income. Interest income of ¥0.10bn exceeded interest expense of ¥0.04bn, providing a modest positive financial contribution. Foreign-exchange losses of ¥0.11bn partially offset this support and remain material given their scale relative to operating income. Trade receivables increased to ¥14.79bn from ¥12.59bn year on year, broadly exceeding the 4.2% revenue increase and warranting attention to customer collection trends. Finished goods increased to ¥1.74bn from ¥1.59bn, while raw materials and work in process declined to ¥3.70bn and ¥2.76bn respectively. Product-warranty provisions were ¥0.40bn, approximately 1.4% of quarterly revenue, within the normal 1-2% manufacturing benchmark. Operating cash-flow conversion, free-cash-flow generation, and cash coverage of capital expenditures are not assessed here.
Dividend Sustainability
The full-year dividend forecast is ¥18.00 per share, with no revision disclosed. Based on forecast EPS of ¥52.01, the implied dividend payout ratio is 34.6%. This is below the 60% sustainability benchmark and leaves a meaningful portion of expected profit available for reinvestment, balance-sheet resilience, and other capital-allocation uses. The forecast dividend is covered by the full-year attributable-profit forecast of ¥5.00bn on an earnings basis. The company’s strong liquidity, moderate debt-to-equity ratio of 0.54x, and high interest coverage support dividend capacity from a balance-sheet perspective. Dividend durability nevertheless depends on management achieving the full-year operating-profit plan, as Q1 operating income was only 19.7% of the annual target. The proposed distribution profile appears conservative relative to forecast earnings, but the sustainability of cash funding should be judged alongside future operating cash generation and capital-investment requirements.
Risk Assessment
Business risks include Margin and pricing risk: Q1 gross margin declined to 17.5% and operating margin to 4.0%, leaving earnings sensitive to OEM pricing, product mix, labor, energy, and material-cost movements., Automotive production-cycle risk: as a single-segment automotive-parts manufacturer, revenue is exposed to OEM production volumes, vehicle-model cycles, customer concentration, supply-chain disruption, and the pace of electrification-related technology change., Foreign-exchange risk: Q1 foreign-exchange losses of ¥1.07bn were equivalent to 9.2% of operating income, demonstrating that currency movements can materially influence profitability., Affiliate earnings risk: equity-method earnings of ¥0.48bn accounted for 30.3% of ordinary income, creating exposure to the performance and valuation of investee businesses., Quality and warranty risk: product-warranty provisions of ¥0.40bn require continued monitoring because recalls, field failures, or customer claims could pressure margins..
Financial risks include Earnings-conversion risk: attributable profit increased despite a 19.1% decline in operating income, reflecting support from non-operating items and the absence of prior restructuring costs., Receivable concentration risk: trade receivables were ¥14.79bn and short-term loans receivable were ¥27.32bn, making collection performance and counterparty credit quality important., Lease and retirement-obligation risk: lease obligations totaled ¥5.49bn and the net defined-benefit liability was ¥5.75bn, although liquidity and leverage metrics remain sound., Operational-plan risk: Q1 operating-income progress of 19.7% trails the 25% seasonal reference needed to achieve the full-year ¥5.90bn target..
Key concerns include Highest priority: recovery of operating margin from 4.0% toward the 5.0% level implied by full-year guidance., High priority: containment of SG&A growth, which was 12.1% year on year versus 4.2% sales growth., High priority: maintenance of gross margin above the Q1 17.5% level amid automotive supply-chain and input-cost volatility., Medium priority: sustainability of non-operating and equity-method contributions supporting ordinary and net income., Medium priority: monitoring trade receivables and the large short-term loans receivable balance..
Investment Implications
Key takeaways include Revenue growth was positive at 4.2%, but Q1 core earnings weakened, with operating income down 19.1% and operating margin down 114bp to 4.0%., Net income growth of 21.2% overstates the improvement in recurring operating performance because the prior-year period contained restructuring-related extraordinary costs., The balance sheet provides resilience, supported by a 194.7% current ratio, 0.54x debt-to-equity, and 30.66x interest coverage., The maintained full-year plan requires a meaningful operating-margin recovery during the remaining quarters., The ¥18.00 forecast DPS implies a conservative 34.6% payout ratio based on forecast EPS..
Metrics to watch include Quarterly gross margin and operating margin relative to the Q1 levels of 17.5% and 4.0%., SG&A growth relative to revenue growth., Operating-income progress relative to the ¥5.90bn full-year forecast., Equity-method earnings and foreign-exchange gains or losses relative to operating income., Trade receivables, short-term loans receivable, warranty provisions, and lease obligations., Dividend coverage relative to forecast earnings and future cash generation..
Regarding relative positioning, Ichikoh enters the year with stronger liquidity and more conservative leverage than would be implied by a financially stressed automotive supplier, but its profitability profile is comparatively modest: the 4.0% operating margin and 6.2% annualized ROE are below the stated operating-efficiency and return benchmarks. The company’s near-term relative position will depend less on balance-sheet repair and more on its ability to convert sales growth into gross-profit expansion and sustainable operating leverage.