PRESS KOGYO CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Driven by both the Automotive and Construction Machinery businesses, the Company posted higher revenue and earnings, with operating leverage contributing to profit growth. Revenue was ¥516.2B (+13.0% YoY), Operating Income was ¥38.2B (+40.6%), and Ordinary Income was ¥39.0B (+41.8%), with growth in each case significantly exceeding the rate of revenue growth. Consolidated Net Income was ¥29.2B (+49.1%), of which Net Income Attributable to Owners of the Parent was ¥24.0B (+76.2%). The main drivers of earnings growth were higher revenue and improved profitability in the automotive-related business, as well as a recovery in the profit margin of the construction machinery-related business. Improvements in both the gross margin and the SG&A ratio lifted the Operating Income margin to 7.4%.

Factors Affecting Earnings

【Revenue】Revenue of ¥516.2B (+13.0% YoY) reflected double-digit revenue growth in both the core automotive-related business, at ¥417.6B (+12.0%, 80.9% of revenue), and the construction machinery-related business, at ¥100.2B (+18.1%, 19.4%). The Other Businesses also posted modest revenue growth to ¥7.0B (+10.4%). Both reported segments expanded, indicating that the revenue increase was not attributable to a one-time factor in a specific business.

【Profit and Loss】The gross margin was 15.5%, improving by approximately 108bp from 14.5% in the prior-year period, while the SG&A ratio was 8.1%, down approximately 38bp from 8.5%. As a result, the Operating Income margin improved by approximately 145bp to 7.4%, compared with 5.96% in the prior-year period. Non-operating income of ¥1.8B, primarily consisting of ¥1.2B in dividend income, was almost offset by non-operating expenses of ¥1.1B, including ¥0.6B in interest expense and ¥0.3B in foreign exchange losses. Accordingly, Ordinary Income was ¥39.0B, broadly in line with Operating Income. Extraordinary gains and losses were modest, comprising a gain of ¥0.1B and a loss of ¥0.2B, and had a limited impact on Net Income. By segment, Operating Income in the automotive-related business was ¥43.6B (+28.2%, 10.4% margin), while that in the construction machinery-related business was ¥4.1B (+105.5%, 4.1% margin). Both segments achieved earnings growth exceeding their respective revenue growth rates. The Company achieved higher revenue and earnings, confirming improved profitability through price pass-through and fixed-cost absorption.

Segment Analysis

The automotive-related business recorded revenue of ¥417.6B (+12.0% YoY) and segment profit of ¥43.6B (+28.2%), with its profit margin improving to 10.4% from 9.2% in the prior-year period, an improvement of approximately 1.3pt. As the core business accounting for 80.9% of Company-wide revenue, it is showing progress not only in revenue growth but also in profitability improvement. The construction machinery-related business posted revenue of ¥100.2B (+18.1%) and segment profit of ¥4.1B (+105.5%), representing substantial earnings growth. Its profit margin improved to 4.1% from 2.6%, an improvement of approximately 1.6pt, making its recovery trend increasingly clear. The Other Businesses recorded revenue of ¥7.0B (+10.4%), profit of ¥0.3B (+30.4%), and a 4.3% profit margin. The profit margins of the automotive-related and construction machinery-related businesses still differ by approximately 6.3pt, and the business mix continues to determine the level of the Company-wide profit margin.

Key Financial Metrics

【Profitability】The Operating Income margin was 7.4% (5.96% in the prior-year period), while the Net Income margin was 5.7% (Net Income of ¥29.2B ÷ Revenue of ¥516.2B; 4.3% in the prior-year period), with both metrics improving year over year. Simultaneous improvement in the gross margin and reduction in the SG&A ratio were the backdrop to the higher profit margins.【Cash Flow Quality】Non-operating income was 0.4% of revenue, while the impact of extraordinary gains and losses on Net Income was also small. The difference between Ordinary Income and Net Income was limited, indicating that most earnings were generated by the core business.【Investment Efficiency】ROE (Consolidated Net Income ÷ Consolidated Net Assets) was 2.2%. On a quarterly standalone basis, Net Income remains relatively small compared with the scale of total assets. Against total assets of ¥2060.8B, revenue was ¥516.2B, indicating that improvement in asset efficiency remains gradual.【Financial Soundness】The Equity Ratio (Equity ÷ Total Assets) was 58.4%, broadly flat from 58.0% in the prior-year period, while the current ratio was a sound 157.7% (current assets of ¥881.1B ÷ current liabilities of ¥558.7B). Interest-bearing debt is weighted toward short-term borrowings, with short-term borrowings of ¥53.8B compared with long-term borrowings of ¥8.7B. However, cash and deposits of ¥238.7B exceed these amounts, limiting liquidity-related financial pressure.

Cash Flow Analysis

Although the Company has not disclosed a cash flow statement, changes in the balance sheet indicate a trend toward accumulating funds. Cash and deposits increased by ¥16.6B to ¥238.7B from ¥222.1B in the prior-year period, while accounts receivable and notes receivable decreased by ¥39.4B to ¥411.1B from ¥450.5B. Progress in collecting receivables appears to have contributed to the increase in cash. Inventories, comprising finished goods, raw materials, and work in process, totaled ¥152.8B and were broadly flat year over year. Work in process amounted to ¥105.3B, accounting for approximately 69% of total inventories. The combined balance of accounts payable and electronically recorded obligations was ¥327.0B, down ¥5.4B from ¥332.3B in the prior-year period, indicating that settlement of trade payables preceded collections. Property, plant and equipment increased by ¥12.4B year over year to ¥996.9B, suggesting that capital investment has continued. Overall, cash balances accumulated during a period of higher revenue and earnings, with no signs of liquidity strain.

Quality of Earnings

Earnings are primarily generated by recurring business activities, indicating good earnings quality. Non-operating income of ¥1.8B was primarily composed of dividend income of ¥1.2B and remained limited to 0.4% of revenue. Non-operating expenses of ¥1.1B were also modest, comprising ¥0.6B in interest expense and ¥0.3B in foreign exchange losses. Extraordinary gains and losses consisted of a gain of ¥0.1B from the sale of fixed assets and a loss of ¥0.2B from the disposal of fixed assets, with a limited impact on Net Income. The close levels of Operating Income, Ordinary Income, and Income Before Taxes also indicate that distortion from one-time factors was limited. Comprehensive Income was ¥25.0B, of which ¥21.9B was attributable to owners of the parent, approximately ¥2.1B below Net Income Attributable to Owners of the Parent of ¥24.0B for the same period. This difference resulted from negative other comprehensive income items, including foreign currency translation adjustments of -¥2.1B, valuation differences on available-for-sale securities of -¥1.5B, and adjustments related to retirement benefits of -¥0.7B. In other words, fluctuations in foreign exchange rates during the period and changes in the market value of securities held partially offset the realized earnings performance reflected in Net Income.

Earnings Forecasts and Guidance

The full-year plan calls for revenue of ¥1,970.0B (-2.6% YoY), Operating Income of ¥130.0B (-3.8%), and Ordinary Income of ¥132.0B (-5.9%), representing lower revenue and earnings compared with the previous fiscal year’s results. Against this plan, Q1 progress rates were 26.2% for revenue, 29.4% for Operating Income, 29.5% for Ordinary Income, and 30.0% for Net Income Attributable to Owners of the Parent, based on the full-year forecast of ¥80.0B. All exceeded the 25% benchmark for simple quarterly linear progress. The extent of the outperformance was particularly significant on the profit side, supported by the Q1 earnings structure, including gross margin improvement, a lower SG&A ratio, and the limited impact of extraordinary gains and losses. The full-year dividend forecast is ¥50.00, and the EPS forecast is ¥81.97. During the quarter, both the earnings forecast and the dividend forecast were revised.

Shareholder Returns

The full-year dividend forecast is ¥50.00 per share, implying a Payout Ratio of approximately 61.0% based on the full-year EPS forecast of ¥81.97. Compared with the dividend of ¥16 in the same period of the prior year, the Company is on track for a dividend increase. In addition to earnings growth supporting dividend funding, the financial foundation of cash and deposits of ¥238.7B and an Equity Ratio of 58.4% provides support for the dividend. Treasury shares totaled 514 thousand shares, or approximately 0.5% of issued shares, and no large-scale share repurchase activity has been identified.

Risk Factors

1. Business Concentration Risk: The automotive-related business accounts for 80.9% of revenue, creating a structure in which changes in demand trends and transaction terms in this business could have a significant impact on overall performance. Although the construction machinery-related business is recovering, it accounts for only 19.4% of revenue.

2. Inventory Composition Risk: Work in process accounts for ¥105.3B, or approximately 69%, of total inventories of ¥152.8B. Any stagnation within the production process or delays in production progress could affect the timing of cash conversion.

3. Interest-Bearing Debt Maturity Structure Risk: The debt structure is weighted toward short-term borrowings, with short-term borrowings of ¥53.8B compared with long-term borrowings of ¥8.7B. Cash and deposits of ¥238.7B exceed short-term borrowings, limiting the near-term impact on liquidity. However, changes in refinancing terms warrant monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Takeaways from the Results

1. The Operating Income margin improved by approximately 145bp year over year to 7.4%, supported by both gross margin improvement (+108bp) and a lower SG&A ratio (-38bp). Earnings growth of +40.6%, exceeding revenue growth of +13.0%, indicates progress in improving the efficiency of the cost structure.

2. While the full-year plan calls for lower revenue and earnings year over year, Q1 progress rates were 26.2% for revenue and 29–30% for profit-related indicators, exceeding the benchmark for linear quarterly progress. Depending on the business environment from the second half onward, the widening gap between the full-year plan and actual results will warrant observation.

3. The profit margin of the construction machinery-related business improved by approximately 1.6pt year over year to 4.1%, making its recovery trend increasingly clear. However, the Company remains highly dependent on the automotive-related business, which accounts for 80.9% of revenue, and the structure in which the business portfolio determines overall profitability continues.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥1,121–¥1,184 at ±1% for the cost of equity, and ¥1,149–¥1,154 at ±0.1 for ω.

Notes:

• 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.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value is not intended to forecast 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 discretion and responsibility, after consulting a professional adviser as necessary.

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