AISIN CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

Although Revenue increased, this was a case of higher Revenue but lower profit, with Operating Income and final profit declining due to negative operating leverage, as SG&A expenses grew faster than Revenue, and the European business falling into the red. Revenue was ¥13,156.0B (+7.8% YoY), Operating Income was ¥365.9B (-23.6%), Profit Before Tax was ¥478.5B (-16.5%), and Net Income attributable to owners of the parent was ¥318.8B (-19.4%). The Operating Income margin declined to 2.8% from 3.9% in the previous year, primarily due to the decline in gross margin to 10.0% from 11.0% and a +10.8% increase in SG&A expenses. Although higher financial income and share of profit of investments accounted for using the equity method supported Profit Before Tax, the decline in Net Income attributable to owners of the parent was greater than the decline in Profit Before Tax, partly due to an increase in profit attributable to non-controlling interests.

Factors Affecting Financial Performance

【Revenue】Revenue was ¥13,156.0B (+7.8% YoY). By region, ASEAN and India grew to ¥1,509.0B (+28.9%), while North America increased to ¥3,374.9B (+19.7%), driving overall growth. In contrast, China declined to ¥1,193.9B (-13.4%) and Europe to ¥628.5B (-18.3%), resulting in a polarized regional mix. Japan was ¥6,350.4B (+6.5%) and remained the largest segment, accounting for 48.3% of total Revenue.

【Profit and Loss】Operating Income was ¥365.9B (-23.6% YoY), and the Operating Income margin declined to 2.8% from 3.9% in the previous year, a decrease of 1.1pt. By segment, Japan secured higher profit at ¥80.0B (+30.7%, 1.3% margin), as did ASEAN and India at ¥162.1B (+1.6%, 10.7% margin). In contrast, North America declined to ¥48.0B (-28.8%, 1.4% margin), China declined to ¥51.7B (-48.8%, 4.3% margin), and Europe fell into the red at -¥6.9B, compared with +¥39.1B in the previous year. Profit Before Tax was ¥478.5B (-16.5%), supported by financial income of ¥113.0B and share of profit of investments accounted for using the equity method of ¥43.3B, which more than doubled from ¥18.9B in the previous year. Net Income attributable to owners of the parent was ¥318.8B (-19.4%), a decline greater than that in Profit Before Tax, because profit attributable to non-controlling interests increased to ¥61.7B from ¥51.3B in the previous year (+20.2%), resulting in a change in profit allocation. This was a case of higher Revenue but lower profit, making cost control and improvement of the regional mix key areas of focus going forward.

Segment Analysis

Among the five reportable segments, ASEAN and India maintained the highest profitability, with Revenue of ¥1,509.0B (11.5% composition ratio, +28.9%) and Operating Income of ¥162.1B (10.7% margin), serving as the core contributor to consolidated profit. Japan had the largest Revenue scale at ¥6,350.4B (48.3% composition ratio, +6.5%), but remained a low-margin business, with Operating Income of ¥80.0B and a 1.3% margin. North America recorded significant Revenue growth to ¥3,374.9B (+19.7%), but Operating Income deteriorated to ¥48.0B (-28.8%, 1.4% margin), resulting in higher Revenue but lower profit. China experienced both lower Revenue and lower profit, with Revenue of ¥1,193.9B (-13.4%) and Operating Income of ¥51.7B (-48.8%, 4.3% margin, compared with 7.3% in the previous year), indicating deteriorating profitability. Europe fell into the red, with Revenue of ¥628.5B (-18.3%) and an Operating Loss of -¥6.9B, compared with Operating Income of +¥39.1B in the previous year, becoming a factor depressing the consolidated profit margin.

Key Financial Indicators

【Profitability】The Operating Income margin was 2.8%, down 1.1pt from 3.9% in the previous year, while the gross margin also declined to 10.0% from 11.0%. The Net Income margin based on consolidated quarterly profit was 2.9% (¥380.6B/Revenue), while the margin based on Net Income attributable to owners of the parent was 2.4% (¥318.8B/Revenue).【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1,241.7B, approximately 3.9 times Net Income attributable to owners of the parent of ¥318.8B and approximately 3.3 times consolidated quarterly profit of ¥380.6B, indicating that cash generation relative to profit remains strong.【Investment Efficiency】ROE was 1.6% (quarterly actual, based on Net Income), while the Equity Ratio was 48.5%, broadly flat from 48.8% in the previous year.【Financial Soundness】Cash and cash equivalents were ¥5,878.0B. Total interest-bearing debt (current ¥933.4B + non-current ¥5,380.7B) was ¥6,314.1B, and the financial base remained stable together with an Equity Ratio of 48.5%.

Cash Flow Analysis

Operating Cash Flow was ¥1,241.7B, down 27.6% YoY from ¥1,713.9B in the previous year. The primary factor was a significant increase in income taxes paid to ¥547.0B from ¥173.5B in the previous year, which partially offset the cash generation effects of a decrease in trade receivables (+¥623.0B) and a decrease in inventories (+¥96.1B). Investing Cash Flow was -¥524.2B, of which capital expenditures accounted for ¥510.0B, down 15.7% YoY from ¥605.2B, indicating a somewhat restrained level of investment. Financing Cash Flow was -¥808.9B, with major outflows including share buybacks of ¥461.7B, dividend payments of ¥290.0B, and dividends paid to non-controlling interests of ¥110.6B. Free Cash Flow was ¥717.5B (Operating Cash Flow ¥1,241.7B − Investing Cash Flow ¥524.2B), which comfortably covered dividend payments; however, total shareholder returns of ¥751.7B, including share buybacks, slightly exceeded FCF. Cash and cash equivalents were ¥5,878.0B at period-end, broadly unchanged from ¥5,924.0B at the beginning of the period.

Quality of Earnings

Of Profit Before Tax of ¥478.5B, financial income of ¥113.0B and share of profit of investments accounted for using the equity method of ¥43.3B (YoY +129.6% from ¥18.9B in the previous year) contributed to offset the slowdown in business profit, indicating a somewhat higher reliance on non-operating income. Comprehensive income was limited to ¥86.7B, representing a substantial divergence from quarterly profit of ¥380.6B. Comprehensive income attributable to owners of the parent turned negative at -¥7.2B, compared with +¥191.7B in the previous year. The primary factor was a significant deterioration in the net change of equity financial assets measured at fair value through other comprehensive income, which was -¥466.6B, indicating that market fluctuations in equities and other instruments affected net assets. The OCF subtotal before changes in working capital was ¥1,662.9B, exceeding Profit Before Tax. While non-cash expenses such as depreciation and amortization and reductions in trade receivables and inventories supported cash generation, the decrease in trade payables (-¥219.0B) was a factor weighing on cash generation.

Earnings Forecast and Guidance

The full-year forecast is Revenue of ¥52,500.0B, Operating Income of ¥2,350.0B (+2.7% YoY), Net Income attributable to owners of the parent of ¥1,500.0B, forecast EPS of ¥212.70, and forecast dividends of ¥75.00. There were no revisions to the earnings or dividend forecasts during the quarter. Progress rates were 25.1% for Revenue, 15.6% for Operating Income, and 21.3% for Net Income attributable to owners of the parent, with profit below the quarterly benchmark of 25%. In particular, the delay in progress toward the Operating Income target indicates that the deterioration in the Q1 Operating Income margin to 2.8% is below the level required by the full-year plan, which calls for +2.7% YoY profit growth. Improvement in profitability during the second half of the fiscal year is therefore a prerequisite for achieving the plan.

Shareholder Returns

Cumulative dividend payments for Q1 were ¥290.0B, compared with ¥227.5B in the previous year. The Payout Ratio against Net Income attributable to owners of the parent of ¥318.8B was approximately 91.0%; however, this is a quarterly figure, and it should be noted that its assumptions differ from those underlying the full-year profit and dividend plans. On a full-year basis, the Payout Ratio calculated from forecast dividends of ¥75.00 and forecast EPS of ¥212.70 is approximately 35.3%. The high quarterly Payout Ratio was substantially affected by fluctuations in profit during the period. Share buybacks increased significantly to ¥461.7B from ¥83.2B in the previous year. Total shareholder returns, including dividends, were ¥751.7B, resulting in a Total Return Ratio of approximately 235.8% on a quarterly basis. Total shareholder returns slightly exceeded FCF of ¥717.5B, indicating that part of the returns during the period relied on cash on hand and financing.

Risk Factors

1. Deterioration in European business profitability: Revenue was ¥628.5B (-18.3%), while the region fell into the red with an Operating Loss of -¥6.9B, compared with Operating Income of +¥39.1B in the previous year, depressing the consolidated profit margin.

2. Slowdown in the Chinese business: Revenue was ¥1,193.9B (-13.4%), Operating Income was ¥51.7B (-48.8%), and the profit margin was 4.3%, compared with 7.3% in the previous year, indicating continued declines in both Revenue and profit.

3. Cash flow fluctuations due to working capital and tax payments: Income taxes paid surged to ¥547.0B from ¥173.5B in the previous year, while trade payables declined by ¥219.0B, resulting in a 27.6% YoY decline in Operating Cash Flow.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

Both the Operating Income margin and Net Income margin were significantly below the industry median, placing profitability in the lower tier of the industry.

Growth and Capital Efficiency

The Revenue growth rate was slightly above the industry median, indicating relatively solid top-line growth within the industry.

Source: Company compilation

Key Points from the Earnings Results

1. While Revenue growth exceeded the industry median, the Operating Income margin of 2.8% was significantly below the industry median of 8.8%, indicating a structural profitability issue in which Revenue growth is not translating into profit growth.

2. By region, profitability was widely dispersed, with ASEAN and India at a 10.7% margin, North America and Japan in the 1% range, China at 4.3%, and Europe in the red. The uneven regional mix was the primary cause of variability in consolidated profitability.

3. Total shareholder returns of ¥751.7B, including share buybacks of ¥461.7B, slightly exceeded quarterly FCF of ¥717.5B. The fact that part of the funding for shareholder returns depended on cash on hand is an important point to monitor together with future cash flow trends.

Theoretical Stock Price (For Reference)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson 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: ¥2,856–¥3,023 at ±1% for the cost of equity, and ¥2,935–¥2,940 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: 2026-06 / This value does not predict or guarantee the future stock 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 available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting professionals as necessary.

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