Quick View
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥17057.7B | ¥13977.7B | +22.0% |
| Operating Income | ¥1580.1B | ¥1421.4B | +11.2% |
| Profit Before Tax | ¥2832.0B | ¥1757.3B | +61.2% |
| Net Income | ¥2028.8B | ¥1294.2B | +56.8% |
| ROE | 4.7% | 3.1% | - |
Executive Summary
This earnings period was characterized by higher revenue centered on the Automotive Business, in addition to a substantial increase in finance income that boosted net income. Revenue was ¥17,057.7B (+22.0% YoY), operating income was ¥1,580.1B (+11.2%), profit before tax, equivalent to ordinary income, was ¥2,832.0B (+61.2%), and net income attributable to owners of the parent was ¥1,836.1B (+80.0%). The primary driver of higher revenue was the expansion of Automotive Business sales, while the substantial increase in net income was largely attributable to finance income expanding to approximately 3.5 times the level of the same period of the previous year.
Factors Affecting Results
【Revenue】Revenue was ¥17,057.7B, up +22.0% YoY. By segment, the Automotive Business, which accounts for 90.4% of consolidated revenue, led revenue growth with an increase of +22.6%. The Motorcycle Business (+18.7%) and Marine Business (+15.6%) also contributed to higher revenue, while the Other Businesses declined by -14.2%.
【Profit and Loss】Operating income was ¥1,580.1B (+11.2% YoY). The gross profit margin declined to 23.5% from 25.9% in the same period of the previous year, while the SG&A ratio improved to 15.3%; however, this was insufficient to offset the decline in the gross profit margin, resulting in an operating margin of 9.3%, down 0.9pt YoY. Profit before tax reached ¥2,832.0B (+61.2%) as finance income expanded sharply from ¥130.7B to ¥1,306.6B, while net income attributable to owners of the parent reached ¥1,836.1B (+80.0%). Net income growth substantially exceeded operating income growth. Although the company achieved higher revenue and profits, it should be noted that the primary driver of profit growth was not improved profitability in the core business but the sharp increase in finance income.
Segment Analysis
The Automotive Business recorded revenue of ¥15,416.9B (+22.6%), operating income of ¥1,343.2B (+12.5%), and a profit margin of 8.7% (down 0.8pt from 9.5% in the previous year). The Motorcycle Business recorded revenue of ¥1,244.3B (+18.7%), operating income of ¥144.4B (+13.1%), and a profit margin of 11.6% (down 0.6pt YoY). The Marine Business posted higher revenue of ¥368.5B (+15.6%), but operating income declined to ¥85.4B (-6.8%), with its profit margin falling 5.6pt YoY to 23.2%, resulting in higher revenue but lower profit. The Other Businesses recorded revenue of ¥28.0B (-14.2%) and operating income of ¥7.1B (-7.3%). Profit margins declined across all segments despite higher revenue, indicating that increases in costs and other factors are broadly pressuring profitability.
Key Financial Indicators
【Profitability】The operating margin was 9.3%, down 0.9pt from 10.2% in the same period of the previous year, while the gross profit margin also declined to 23.5% from 25.9%. The SG&A ratio improved by 0.9pt to 15.3% from 16.2% in the same period of the previous year, but this was insufficient to absorb higher costs.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥864.3B, representing only approximately 0.47 times net income attributable to owners of the parent of ¥1,836.1B. This was attributable to a ¥375.5B decrease in operating liabilities and an ¥886.3B outflow from other working capital.【Investment Efficiency】ROE was 4.7% (quarterly actual), and the annualized level may fluctuate depending on the sustainability of finance income, which drove the sharp increase in profit before tax. Total assets were ¥67,983.5B, and net assets were ¥43,371.1B.【Financial Soundness】The equity ratio improved to 52.1% from 51.0% in the same period of the previous year, while cash and cash equivalents reached ¥10,066.4B.
Cash Flow Analysis
Operating Cash Flow (OCF) was ¥864.3B, up +35.1% YoY, but remained modest relative to net income attributable to owners of the parent of ¥1,836.1B, indicating weaker cash-generation capacity. The factors were a ¥375.5B decrease in operating liabilities and other liabilities and an ¥886.3B cash outflow from other working capital, while inventories generated a cash inflow of ¥204.6B and trade receivables generated a cash inflow of ¥30.9B. Investing Cash Flow was limited to negative ¥43.6B, as expenditures of ¥1,423.8B for capital expenditures were offset by proceeds from the sale and collection of other financial assets totaling ¥556.4B, among other items. Financing Cash Flow was negative ¥548.5B and included dividend payments of ¥463.2B and a net increase in long-term borrowings of ¥102.9B. After deducting capital expenditures and dividends from OCF, cash flow was negative, indicating that the company’s ample cash and cash equivalents of ¥10,066.4B and the liquidation of financial assets are serving as sources of funding for investment and shareholder returns.
Earnings Quality
Of profit before tax of ¥2,832.0B for the current period, operating income was limited to ¥1,580.1B, while finance income of ¥1,306.6B made a substantial contribution to boosting profit. Finance income surged approximately 10 times from ¥130.7B in the same period of the previous year, equivalent to 7.7% of revenue and 82.7% of operating income. It should therefore be evaluated separately as an item with a different nature from recurring business income. Total comprehensive income was ¥2,392.1B, including ¥2,101.4B attributable to owners of the parent. The difference from net income of ¥1,836.1B was primarily attributable to foreign currency translation adjustments of ¥311.9B related to foreign operations, and therefore includes foreign exchange fluctuations, a non-recurring factor. The fact that OCF remained below half of net income attributable to owners of the parent also indicates that cash support was weak relative to accounting profit. In terms of earnings quality, the results show a higher degree of dependence on finance income and foreign exchange factors than on growth in the core business.
Earnings Forecasts and Guidance
The full-year earnings forecast is revenue of ¥69,000B, operating income of ¥5,400B (-13.3% YoY), forecast EPS of ¥217.69, and forecast dividends of ¥51.00. The earnings forecast was revised during the current quarter. As of Q1, progress toward the full-year forecast was 24.7% for revenue and 29.3% for operating income, with operating income progress exceeding the standard 25%. However, the full-year forecast incorporates a year-on-year decline in operating income, which differs in direction from the growth trend in Q1. Progress toward full-year net income attributable to owners of the parent was high at 43.7% as of Q1, but this includes the temporary factor of a sharp increase in finance income and therefore needs to be considered separately from any potential upside in full-year core business earnings power.
Shareholder Returns
Dividend payments to the parent company’s shareholders in Q1 were ¥463.2B, resulting in a payout ratio of 25.2% against net income attributable to owners of the parent of ¥1,836.1B. No share repurchases were conducted; this ratio is a dividend payout ratio based solely on dividends and is not a Total Return Ratio. Based on the full-year forecast, the forecast payout ratio calculated from dividends per share of ¥51.00 and forecast EPS of ¥217.69 is 23.4%, which is close to the actual level for the current period. There was no revision to the dividend forecast, and the substantial cash position of ¥10,066.4B in cash and cash equivalents supports dividend stability.
Risk Factors
-
Business Concentration Risk: The Automotive Business accounts for 90.4% of revenue and approximately 85% of segment operating income, creating a structure that is highly exposed to demand trends in major markets and sales competition.
-
Cash Flow Quality Risk: OCF was limited to ¥864.3B, representing approximately 0.47 times net income attributable to owners of the parent of ¥1,836.1B. The factors were an ¥886.3B outflow from other working capital and a ¥375.5B decrease in operating liabilities, indicating a delay in converting earnings into cash.
-
Earnings Composition Risk: Finance income accounted for ¥1,306.6B of profit before tax of ¥2,832.0B, equivalent to 82.7% of operating income. The +80.0% increase in net income attributable to owners of the parent reflects a high degree of dependence on fluctuations in non-core profit and loss, and the reproducibility of this income requires ongoing monitoring.
Industry Benchmark (Reference; Company Analysis)
Industry Benchmark (manufacturing)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.3% | 8.7% (4.2%–14.3%) | +0.6pt |
| Net Profit Margin | 11.9% | 7.1% (3.2%–10.6%) | +4.8pt |
Both the operating margin and net profit margin exceed the industry median, indicating relatively strong profitability.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 22.0% | 6.2% (-1.1%–14.6%) | +15.8pt |
Revenue growth significantly exceeds the industry median, demonstrating a high growth rate within the industry.
※Source: Company compilation
Key Takeaways from the Earnings
-
Revenue increased +22.0%, led primarily by the Automotive Business, but the operating margin declined 0.9pt YoY to 9.3%, indicating that profitability deteriorated somewhat across all segments.
-
The +80.0% increase in net income attributable to owners of the parent was largely driven by finance income surging approximately 10 times YoY, diverging from the +11.2% growth in core operating income.
-
OCF was ¥864.3B, only approximately 0.47 times net income attributable to owners of the parent, due to an outflow from other working capital. The full-year forecast anticipates a decline in operating income, and the difference between the strong Q1 profit progress and the direction of the full-year plan will be a key focus going forward.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥2,005 |
| base | ¥2,090 |
| bull | ¥2,141 |
| Calculation Assumption | Value |
|---|---|
| Book Value per Share (BPS) | ¥1,835 |
| Adjusted Forecast EPS | ¥245.0 |
| Cost of Equity r | 8.77% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 0.00%) |
| Residual Income Persistence Factor ω / Explicit Forecast | 0.62 / 5 years |
| Assumed Payout Ratio | 23.4% |
| Forecast EPS Confidence Adjustment | ×1.125 (based on the Company’s historical guidance achievement rate) |
| Implied PBR / PER | 1.14x / 8.5x |
Sensitivity: ¥2,029–¥2,153 at ±1% cost of equity, and ¥2,083–¥2,100 at ω±0.1.
Notes:
- Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)
This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary 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, and you should consult a professional as necessary.
---End of Report---
AI Financial Analysis
Executive Summary
Suzuki delivered a strong FY2027 Q1 result, with sales growth and a material uplift in parent-attributable earnings, although the earnings mix became substantially more dependent on finance income. Revenue rose 22.0% YoY to ¥1,705.8bn. Operating income increased 11.2% to ¥158.0bn. Parent-attributable net income rose 80.0% to ¥183.6bn, while consolidated quarterly profit increased 56.8% to ¥202.9bn. Basic EPS advanced to ¥95.17 from ¥52.88. The operating margin declined 91bp YoY to 9.3%, despite remaining within the good 8-15% profitability range. Gross margin contracted 246bp to 23.5%, indicating that cost of sales increased faster than revenue. SG&A fell by 94bp as a percentage of sales to 15.3%, partially offsetting gross-margin pressure and evidencing some operating leverage. Finance income surged to ¥130.7bn from ¥37.3bn and represented 82.7% of operating income, lifting profit before tax by 61.2% to ¥283.2bn. Consequently, the parent-attributable net margin expanded by 346bp to 10.8%, but this improvement was driven principally below the operating line rather than by core margin expansion. Annualized ROE was 16.9%, above the 15% excellent benchmark, supported by a 10.8% net margin, 1.004x annualized asset turnover, and 1.57x financial leverage. Operating cash flow rose to ¥86.4bn but equaled only 0.47x parent-attributable net income, a material earnings-quality concern. Cash generation was held back by ¥37.6bn of payables outflow and ¥88.6bn of other working-capital outflows, notwithstanding inventory and receivables releases. Management's full-year forecast implies Q1 progress of 24.7% in revenue, 29.3% in operating income, and 43.7% in parent-attributable profit; operating profit is ahead of the 25% seasonal reference point, while net profit is especially front-loaded because of finance income. The FY2027 forecast calls for operating income to decline 13.3% YoY and parent-attributable income to decline 4.4% YoY, reinforcing that the Q1 non-operating uplift should not be extrapolated mechanically. The central issue for subsequent quarters is whether automotive volume growth can restore gross and segment operating margins while cash conversion catches up with reported profit.
Profitability Analysis
The annualized DuPont ROE of 16.9% decomposes into a 10.8% net profit margin, 1.004x annualized asset turnover, and 1.57x financial leverage. The largest earnings change came from the net margin: parent-attributable net income rose 80.0%, substantially faster than revenue growth of 22.0%. This was not principally a core operating improvement, as operating income rose only 11.2% and the operating margin fell to 9.3% from 10.2%. Instead, finance income increased by ¥93.3bn YoY to ¥130.7bn, driving the interest burden metric to 1.792x; this metric is above 1.0 because financial income materially exceeded finance costs, rather than because of a conventional low-interest-cost relationship. Gross profit rose 10.5% to ¥400.7bn, below revenue growth, producing a 246bp gross-margin contraction to 23.5%. SG&A grew 15.8%, below revenue growth, and the SG&A ratio improved to 15.3% from 16.2%; this mitigated, but did not offset, the gross-margin decline. The effective tax rate increased to 28.4% from 26.4%, reducing the tax burden to 0.648 from approximately 0.737. Four-wheel vehicles remain the core business, contributing ¥1,541.7bn of revenue, or 90.4% of group sales, and ¥134.3bn of operating income, or 85.0% of group operating profit. Four-wheel revenue grew 22.6%, but its operating margin compressed 79bp to 8.7%. Motorcycles grew revenue 18.7% to ¥124.4bn and operating profit 13.1% to ¥14.4bn, with margin down 58bp to 11.6%. Marine revenue rose 15.6% to ¥36.8bn, but operating income fell 6.8% to ¥8.5bn and margin declined sharply by 557bp to 23.2%. Other operations recorded revenue of ¥2.8bn and operating income of ¥0.7bn. Core profitability therefore remains solid, but the durability of Q1's headline profit growth depends on stabilizing vehicle and marine margins rather than on recurring finance-income gains.
Growth Assessment
Revenue growth was broad across the principal manufacturing operations, led by the ¥283.9bn increase in four-wheel revenue. Motorcycles and marine also expanded sales, supporting the group's 22.0% top-line increase. However, operating-income growth lagged sales growth by 10.8 percentage points, showing that incremental revenue was earned at a lower margin. The four-wheel segment's margin compression is particularly important because of its 90.4% revenue weight and 85.0% operating-profit contribution. The marine segment's decline in operating profit despite double-digit revenue growth also indicates unfavorable mix, costs, or pricing within a high-margin business. Management forecasts FY2027 revenue of ¥6,900.0bn, making Q1 progress broadly in line with the 25% seasonal benchmark at 24.7%. Q1 operating-income progress is 29.3% versus the full-year ¥540.0bn forecast, 4.3 percentage points ahead of the standard Q1 pace. Parent-attributable profit progress is 43.7% versus the ¥420.0bn forecast, 18.7 percentage points ahead of the standard pace. The divergence between operating and net-profit progress indicates that finance income, rather than operating momentum alone, is accelerating reported earnings. The announced forecast revision should therefore be assessed through the evolution of finance income, foreign-exchange-sensitive financial assets, and core vehicle margins in later quarters. The three-period margin trend is characterized as stable, but the 2/10 consistency score suggests that historical growth outcomes have been uneven. Revenue sustainability is supported by broad segment sales growth, while profit sustainability requires better conversion of that growth into gross profit and cash flow.
Financial Health
Liquidity is sound. Current assets of ¥2,783.6bn exceed current liabilities of ¥1,541.4bn, yielding a current ratio of 1.81x, comfortably above both 1.0x and the 1.5x healthy benchmark. Cash and cash equivalents increased ¥33.4bn during Q1 to ¥1,006.6bn. Cash alone covers 65.3% of current liabilities, and accounts receivable plus cash exceed current liabilities. Total bonds and borrowings were ¥752.4bn, comprising ¥186.0bn current and ¥566.4bn non-current; current borrowings are covered by cash and are modest relative to current assets. The reported debt-to-equity ratio of 0.57x is conservative and well below the 2.0x aggressive-financing warning threshold. The equity ratio improved to 52.1% from 51.0% at FY2026 year-end. Total equity increased ¥184.0bn during Q1 to ¥4,337.1bn, supported by ¥239.2bn of comprehensive income, partly offset by ¥55.2bn of owner transactions. Retained earnings rose ¥136.1bn to ¥3,122.8bn, strengthening internally generated capital. Total liabilities decreased ¥22.5bn to ¥2,461.2bn despite a ¥81.2bn increase in non-current borrowings, as current borrowings and trade payables declined. Other financial assets totaled ¥1,861.4bn across current and non-current classifications, a substantial component of the balance-sheet structure and a likely contributor to financial-income sensitivity. Intangible assets represent only 2.7% of total assets, indicating limited balance-sheet concentration in acquired or capitalized intangibles. No current-ratio or leverage warning is triggered, and the maturity profile does not indicate a material short-term refinancing mismatch.
Notable B/S Changes
Other financial assets, non-current: +¥207.5bn (+14.6%) to ¥1,630.9bn - increased financial-asset exposure supports liquidity but heightens sensitivity of earnings and comprehensive income to market and currency movements. Other financial assets, current: -¥183.8bn (-44.4%) to ¥230.5bn - a material reallocation or reduction in short-term financial assets occurred alongside the increase in non-current financial assets. Right-of-use assets: +¥68.2bn (+118.3%) to ¥125.9bn - lease-related asset expansion should be monitored alongside lease liabilities and operating flexibility. Non-current bonds and borrowings: +¥81.2bn (+16.7%) to ¥566.4bn - longer-term funding increased, supporting financing flexibility but raising future financing-cost exposure. Current bonds and borrowings: -¥77.4bn (-29.4%) to ¥186.0bn - short-term refinancing exposure declined materially. Retained earnings: +¥136.1bn (+4.6%) to ¥3,122.8bn - Q1 earnings materially strengthened internally generated capital after dividends. Equity attributable to owners: +¥157.2bn (+4.6%) to ¥3,539.3bn - higher retained earnings and positive other comprehensive income improved the parent capital base.
Cash Flow Quality
The earnings-quality alert is material: operating cash flow of ¥86.4bn covered only 0.47x of parent-attributable net income of ¥183.6bn, well below the 0.8x concern threshold. The root cause is that Q1 earnings included a very large ¥130.7bn of finance income, while operating cash flow reflected only ¥130.7bn at the pre-financing-income operating-cash-flow subtotal level before interest, dividends, and tax payments. Cash conversion was also weakened by a ¥37.6bn decrease in payables and ¥88.6bn of other working-capital outflows. These cash outflows were partly offset by a ¥20.5bn inventory release and a ¥3.1bn receivables release, which are favorable for near-term liquidity but do not fully bridge the profit-to-cash gap. The accruals ratio of 1.4% is low and does not independently indicate elevated accrual risk; the principal quality issue is the limited cash realization of unusually strong financial income. Operating cash flow did improve from ¥64.0bn in the prior-year quarter to ¥86.4bn. The reported free cash flow was ¥820.7bn, reflecting the small net investing cash outflow of ¥43.6bn. However, gross capital expenditures were ¥142.4bn, exceeding operating cash flow by ¥56.0bn; on an operating-cash-flow-less-capex basis, cash generation was negative ¥56.0bn. Proceeds from sales or recoveries of other financial assets of ¥556.4bn largely offset ¥453.8bn of purchases, making net investing cash flow appear substantially stronger than the underlying fixed-asset investment burden. Dividends paid of ¥46.3bn were covered 1.87x by operating cash flow, but were not covered after gross capital expenditures. This profile is manageable given the ¥1,006.6bn cash balance and conservative leverage, but sustainable free cash generation requires stronger operating cash conversion or a lower capex burden.
Dividend Sustainability
The FY2027 dividend forecast is ¥51.00 per share. Against forecast EPS of ¥217.69, the implied dividend-only payout ratio is 23.4%, well below the 60% sustainability benchmark. No share buybacks were recorded in Q1, so total return ratio is equivalent to the dividend payout ratio for the period. Q1 cash dividends paid totaled ¥46.3bn, equivalent to 25.2% of parent-attributable quarterly profit. Operating cash flow covered cash dividends by 1.87x. The balance sheet provides substantial additional support, with ¥1,006.6bn of cash and a 0.57x debt-to-equity ratio. The constraint is not the stated payout ratio but the fact that gross capital expenditures of ¥142.4bn exceeded Q1 operating cash flow. Given low forecast payout and strong liquidity, the current dividend framework appears financially sustainable, while the trajectory of operating cash flow relative to investment spending remains the principal monitoring item.
Risk Assessment
Business risks include High impact / high likelihood: Four-wheel operations account for 90.4% of revenue and 85.0% of operating income; the segment's 79bp margin decline to 8.7% means further automotive pricing, mix, input-cost, or competitive pressure would have an outsized group effect., High impact / medium likelihood: The marine segment's operating margin fell 557bp to 23.2% while revenue increased 15.6%, creating downside risk to a historically high-margin contributor if cost or product-mix pressure persists., High impact / medium likelihood: Automotive manufacturing is exposed to raw-material, component, energy, logistics, quality/recall, regulatory, and model-cycle risks, any of which could further pressure the 23.5% gross margin., Medium impact / medium likelihood: Management identifies geopolitical developments, demand conditions in major markets, and exchange-rate movements as factors that can materially affect actual performance..
Financial risks include High impact / medium likelihood: Finance income of ¥130.7bn was 82.7% of operating income and drove much of the 80.0% increase in parent-attributable profit; volatility in financial-market valuations, interest income, or currencies could reverse this support., Medium impact / medium likelihood: Operating cash flow covered only 0.47x of parent-attributable net income, indicating that headline earnings were not fully translated into operating cash during Q1., Medium impact / medium likelihood: Gross capex of ¥142.4bn exceeded operating cash flow by ¥56.0bn, increasing reliance on cash reserves and financial-asset monetization for investment funding if the pattern persists., Low impact / low likelihood: Total borrowings of ¥752.4bn are manageable relative to equity and cash, but the ¥81.2bn rise in non-current borrowings should be monitored alongside future investment needs..
Key concerns include Core operating-margin compression: group operating margin fell 91bp to 9.3%, while gross margin fell 246bp to 23.5%., Earnings composition: net-profit outperformance was driven by finance income rather than commensurate operating-income growth., Cash conversion: payables and other working-capital outflows limited operating cash flow despite inventory and receivables releases., Forecast phasing: Q1 parent-attributable income already represents 43.7% of the full-year forecast, versus 29.3% for operating income, making later-quarter comparability and earnings normalization important..
Investment Implications
Key takeaways include Q1 revenue growth was robust at 22.0%, led by the core four-wheel business., Operating profitability remains good at a 9.3% margin, but it weakened YoY as gross-margin pressure exceeded SG&A leverage., Annualized ROE of 16.9% is strong, but its Q1 uplift reflects exceptionally high finance income and should be interpreted alongside the lower operating margin., Capital structure and liquidity are resilient, with a 1.81x current ratio, 52.1% equity ratio, 0.57x debt-to-equity ratio, and ¥1,006.6bn of cash., The ¥51.00 FY dividend forecast implies a conservative 23.4% dividend payout ratio based on forecast EPS., Operating cash conversion and capex funding are the principal financial-quality issues rather than solvency..
Metrics to watch include Four-wheel operating margin and group gross margin, Finance income relative to revenue and operating income, Operating cash flow to parent-attributable net income ratio, Other working-capital movements and trade-payables trend, Gross capex relative to operating cash flow, Progress versus FY2027 operating-income forecast, Borrowings and other financial-assets mix.
Regarding relative positioning, Suzuki combines above-benchmark annualized ROE and a conservative balance sheet with a currently good, but declining, operating margin. Relative operating quality is stronger than the headline cash-conversion profile: the company is financially resilient, while the durability of its earnings depends on recovering core automotive and marine margins and reducing reliance on below-the-line financial income.