YASUNAGA (7271) FY2026 Q3 Earnings Report

Quick View

Executive Summary

The Company reported higher revenue and earnings, with profit growth significantly outpacing revenue growth, primarily due to improved profitability in its core engine-parts business. Revenue was ¥25.04B (¥22.37B in the same period last year, YoY +11.9%), Operating Income was ¥1.40B (¥0.26B, YoY +434.0%), Ordinary Income was ¥1.38B (¥0.35B, YoY +292.7%), and Net Income was ¥0.83B (¥0.40B, YoY +108.7%). In addition to the improvement in gross margin resulting from the slower growth of cost of sales than revenue, the slower growth of SG&A expenses than revenue generated operating leverage and led to a significant increase in earnings. Meanwhile, extraordinary losses of ¥0.33B, including an impairment loss of ¥0.31B, weighed on Net Income.

Factors Affecting Results

【Revenue】Revenue was ¥25.04B, up +11.9% year on year. Core engine parts generated ¥19.03B (up +14.5%), driving the majority of the Company-wide revenue increase, while environmental equipment also grew to ¥3.85B (up +8.5%). Machinery and equipment, on the other hand, declined slightly to ¥3.20B (down -1.2%).

【Profit and Loss】The gross margin improved to 17.9%, up 3.7pt from 14.2% in the same period last year. As the SG&A ratio was also contained at 12.3%, the Operating Income margin expanded by 4.4pt to 5.6% (1.2% in the same period last year). Ordinary Income was ¥1.38B, as a foreign exchange gain of ¥0.10B recorded in non-operating income was offset by ¥0.16B in interest expenses. Net Income was ¥0.83B; however, extraordinary losses of ¥0.33B, including an impairment loss of ¥0.31B, limited the conversion of profit before tax into Net Income. Higher revenue and higher earnings.

Segment Analysis

Engine parts generated Revenue of ¥19.03B (up +14.5%) and Operating Income of ¥1.23B (¥0.20B in the same period last year), resulting in a significant improvement in the profit margin to 6.5% and becoming the central driver of the Company-wide earnings recovery. Environmental equipment generated Revenue of ¥3.85B (up +8.5%) and Operating Income of ¥0.41B, maintaining the highest profitability among the three segments at a 10.7% margin. Machinery and equipment was nearly flat, with Revenue of ¥3.20B (down -1.2%), but returned to profitability, with Operating Income improving from a loss of ¥0.16B in the same period last year to a profit of ¥0.02B. Adjustments, including the elimination of intersegment transactions, changed from +¥0.02B in the same period last year to -¥0.29B, which warrants attention due to its impact on consolidated earnings.

Key Financial Indicators

【Profitability】The Operating Income margin improved by 4.4pt to 5.6% from 1.2% in the same period last year, while the gross margin also improved by 3.7pt to 17.9%. The Net Income margin also improved to 3.3% from 1.8% in the same period last year, but the magnitude of the improvement was smaller than at the operating level due to the impact of extraordinary losses. 【Cash Quality】Of the ¥0.33B in extraordinary losses, impairment losses accounted for ¥0.31B. The proportion of temporary factors relative to Net Income was substantial at approximately 39.8%, and the improvement in Operating Income was not fully reflected in Net Income. 【Investment Efficiency】Annualized ROE was 9.3%, reflecting a structure in which high financial leverage (total assets / net assets) offsets the low Net Income margin. 【Financial Soundness】The Equity Ratio was 30.6%, virtually unchanged from 30.7% in the same period last year. Interest-bearing debt totaled ¥15.96B, comprising ¥8.30B in short-term debt and ¥7.66B in long-term debt. As this exceeded net assets of ¥11.99B, leverage remained relatively high.

Cash Flow Analysis

Although a standalone cash flow statement was not disclosed, an analysis of funding trends based on changes in the balance sheet shows that cash and deposits were ¥8.16B, an increase of ¥1.09B from ¥7.07B in the same period last year. Meanwhile, short-term borrowings increased from ¥6.90B to ¥8.30B, and long-term borrowings increased from ¥7.37B to ¥7.66B, indicating that the Company accumulated cash on hand while increasing its reliance on interest-bearing debt. Construction in progress increased from ¥2.04B to ¥3.28B, suggesting that investment in property, plant and equipment is under way. Although Operating Income improved significantly, the increase was accompanied by higher borrowings on the financing side, making the balance between investing activities and financing activities a key focus going forward.

Quality of Earnings

The increase in operating-level earnings was attributable to higher revenue and the effect of controlling SG&A expenses, and is considered to reflect an improvement in recurring earnings power. However, Net Income was limited to ¥0.83B compared with Ordinary Income of ¥1.38B, with the main cause of this discrepancy being extraordinary losses of ¥0.33B, including an impairment loss of ¥0.31B. As extraordinary gains were negligible (¥0.00B), Net Income was significantly affected by temporary asset valuation factors. Comprehensive Income was ¥0.76B, slightly below Net Income of ¥0.83B, mainly due to a negative foreign currency translation adjustment of ¥0.23B. Non-operating income included a foreign exchange gain of ¥0.10B. As this represents incidental income associated with business activities, it is preferable to exclude it when assessing recurring earnings power.

Earnings Forecasts and Guidance

The cumulative Q3 progress rates against the full-year Company forecasts (Revenue of ¥33.30B, Operating Income of ¥1.80B, and Ordinary Income of ¥1.70B) were 75.2% for Revenue, 77.7% for Operating Income, 81.2% for Ordinary Income, and 83.5% for Net Income. Compared with the standard Q3 progress rate of 75%, all earnings-related indicators exceeded the benchmark, indicating that the pace of profitability improvement is outpacing revenue growth. Neither the earnings forecasts nor the dividend forecasts have been revised.

Shareholder Returns

The Q2 dividend was ¥7.00 per share, while the full-year Company forecast calls for an annual dividend of ¥14.00. Based on forecast EPS of ¥97.06, the forecast Payout Ratio is approximately 14.4%, indicating that dividends remain conservative relative to earnings growth. Retained earnings were ¥6.89B, up 11.0% year on year, suggesting a policy that prioritizes the accumulation of retained earnings.

Risk Factors

1. Concentration in core engine parts: This business generated Revenue of ¥19.03B, accounting for 76.0% of total Company revenue. As a result, the Company’s performance is significantly affected by trends in finished-vehicle production, demand for internal-combustion engines, and the progress of EV adoption.

2. Financial leverage and reliance on short-term funding: Net assets were ¥11.99B against interest-bearing debt of ¥15.96B, resulting in a D/E ratio of approximately 1.33x. Short-term borrowings of ¥8.30B accounted for 47.5% of current liabilities, and changes in refinancing conditions could affect cash management.

3. Impairment losses and investment monetization: While the Company recorded an impairment loss of ¥0.31B during the period, construction in progress was ¥3.28B, equivalent to 20.6% of property, plant and equipment. The operating status and monetization progress of investment projects will affect asset efficiency going forward.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin were below the industry median, indicating that profitability was relatively low within the industry.

Growth and Capital Efficiency

The Revenue growth rate was significantly above the industry median, indicating that the pace of revenue growth ranked highly within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Revenue increased 11.9%, while Operating Income increased 434.0%, with improvements of 3.7pt in gross margin and 4.4pt in Operating Income margin. Earnings growth exceeding the increase in revenue was attributable to SG&A expense controls and improved profitability in the core business.

2. The progress rates for earnings against the full-year forecasts (77.7% for Operating Income and 83.5% for Net Income) exceeded the standard progress rate of 75%, indicating that profitability improvement is progressing at a pace above plan.

3. The impairment loss of ¥0.31B and construction in progress of ¥3.28B are items of interest in evaluating the profitability of existing assets and confirming the timing of operations commencement for ongoing investments.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,080–¥1,144 at ±1% for the cost of equity, and ¥1,110–¥1,113 at ±0.1 for 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 are used (there is a timing gap relative to the full-year forecast).
• As 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 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee the future share price.)

---

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 responsibility, after consulting a professional as necessary.

---End of Report---