Yamaha Motor (7272) FY2026 Q2 Earnings Report

Quick View

Executive Summary

Profit expanded significantly ahead of revenue growth, resulting in an earnings performance characterized by higher revenue and profit alongside an improved earnings structure. Revenue was ¥14979.9B (+17.2% YoY), Operating Income was ¥1584.8B (+88.6%), Profit Before Tax, corresponding to the ordinary income stage, was ¥1594.9B (+92.5%), and Net Income attributable to owners of the parent was ¥1139.0B (+114.7%). The Operating Income margin improved substantially to 10.6% from approximately 6.6% in the same period of the previous year, with higher revenue and profit in the core Landmobility Business driving overall performance.

Factors Affecting Performance

【Revenue】Revenue was ¥14979.9B, up +17.2% YoY. By segment, Landmobility, accounting for approximately 66% of revenue, led growth with ¥9845.6B (+21.8%), while MarineProducts at ¥3006.7B (+7.4%), FinancialServices at ¥636.4B (+18.1%), and Robotics at ¥601.2B (+24.5%) also recorded higher revenue. OutdoorLandVehicle, on the other hand, remained at ¥802.9B (+3.3%), while its Operating Income remained in the red at -¥119.8B.

【Profit and Loss】Operating Income was ¥1584.8B (+88.6%), representing growth substantially exceeding the revenue growth rate and confirming a structure benefiting from operating leverage. The main driver was Landmobility Operating Income of ¥1127.3B (+89.8%, 11.4% margin), while Robotics (+337.8%) and FinancialServices (+50.6%) also improved their profit margins. With a gross margin of 31.7% and an SG&A expense ratio of 21.8%, gross margin improvement exceeded the increase in SG&A expenses, contributing to bottom-line expansion. Consolidated Net Income was ¥1204.6B (+103.8%), while Net Income attributable to owners of the parent was ¥1139.0B (+114.7%), representing an earnings performance of higher revenue and profit.

Segment Analysis

Landmobility was the largest segment, accounting for approximately 66% of revenue and approximately 71% of Operating Income. It drove overall performance, exceeding the Company-wide results in both revenue and profit growth rates. MarineProducts has high profitability, with a profit margin of 15.3%, and functions as a stable source of earnings. OutdoorLandVehicle continued to post an operating loss despite higher revenue (-¥119.8B, with the loss narrowing from the previous year), leaving challenges in its earnings structure. Robotics is small in scale but expanded profit sharply by +337.8% YoY, with its profit margin reaching 6.1%.

Key Financial Indicators

【Profitability】The Operating Income margin of 10.6% and the Net Income margin, based on income attributable to owners of the parent, of 7.6% both improved substantially from the same period of the previous year. Profit expansion absorbing the increase in SG&A expenses was achieved against a gross margin of 31.7%. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1533.9B, equivalent to 1.35 times Net Income attributable to owners of the parent, indicating sound cash backing for accounting profit. 【Investment Efficiency】ROE of 9.3% improved from the level in the same period of the previous year, but total asset turnover remained at approximately 0.5 times, leaving room for improvement in asset efficiency. 【Financial Soundness】The Equity Ratio was 41.4%, while total bonds and borrowings were approximately ¥1296.7B. Given cash and deposits of ¥4014.6B and the high level of interest coverage based on Operating Income (Operating Income of ¥1584.8B versus financial expenses of ¥65.5B), the financial foundation is stable.

Cash Flow Analysis

Operating Cash Flow was ¥1533.9B, a substantial increase of +318.5% YoY. In addition to the increase in Profit Before Tax, a ¥667.6B decrease in inventories contributed to cash inflows, while an increase in trade receivables was a source of cash outflows. Investing Cash Flow was -¥508.2B, of which capital expenditures accounted for ¥584.4B, equivalent to approximately 3.9% of revenue and a standard level for a manufacturer. Financing Cash Flow was -¥1108.0B, reflecting progress in the net reduction of short-term borrowings and repayment of long-term borrowings, while dividend payments of ¥97.0B were made. Free Cash Flow was ¥1025.7B, covering investments and dividends while securing a surplus. Cash and cash equivalents were ¥4014.6B, with foreign currency translation adjustments of ¥107.8B also increasing the balance.

Earnings Quality

The increase in profit for the current period resulted from gross margin improvement and SG&A expense control at the Operating Income level, with limited reliance on temporary factors from extraordinary gains and losses. Profit Before Tax of ¥1594.9B only slightly exceeded Operating Income of ¥1584.8B. Financial income of ¥75.6B and financial expenses of ¥65.5B largely offset each other, while equity-method investment income of ¥63.2B made only a positive contribution. Accordingly, the quality of earnings is sound, as non-operating items have not materially distorted profit. Operating Cash Flow reached 1.35 times Net Income attributable to owners of the parent, indicating limited accruals, or divergence between accounting profit and cash generation. However, the factors supporting Operating Cash Flow included a decrease in inventories, a working capital movement. Whether this contribution is temporary or the result of continued inventory optimization needs to be assessed based on future trends.

Earnings Forecasts and Guidance

Progress against the Full-Year earnings forecast was 51.7% for revenue, 60.9% for Operating Income, and 67.0% on a Net Income basis (actual results of ¥1139.0B against the forecast of ¥1700B in income attributable to owners of the parent). As of the first half, profit is progressing at a pace exceeding revenue progress. The Company revised its earnings forecast during the current quarter, apparently reflecting the high profitability achieved in the first half. The planned Full-Year Operating Income margin is approximately 9.0%, a more conservative assumption than the first-half actual result of 10.6%, incorporating profit-margin normalization in the second half. The dividend forecast has not been revised and remains unchanged at ¥50.00 per year.

Shareholder Returns

The Q2 dividend was ¥25.00 per share, and the Full-Year forecast dividend is ¥50.00. Based on first-half Net Income attributable to owners of the parent of ¥1139.0B and dividend payments of ¥97.0B, the Payout Ratio is approximately 8.5% on a total dividend amount basis. The forecast Payout Ratio for the annual dividend of ¥50.00 against forecast EPS of ¥175.16 is approximately 28.5%. There were no share repurchases, and shareholder returns for the current period consist solely of dividends. Free Cash Flow of ¥1025.7B substantially exceeded dividend payments, indicating a high level of cash-based dividend sustainability.

Risk Factors

1. Elevated inventory levels: Inventories were ¥5388.2B, accounting for 17.8% of total assets. Although inventories turned toward a decrease in the first half, the absolute level remains high, potentially pressuring the gross margin through valuation losses and increased sales-promotion expenses when demand fluctuates.

2. Divergence between the Full-Year plan and first-half profit margins: The first-half Operating Income margin was 10.6%, compared with approximately 9.0% on a Full-Year plan basis, which assumes profit-margin normalization toward the second half. If this assumption breaks down, the extent of upside to Full-Year progress may narrow.

3. Differences in segment profitability: OutdoorLandVehicle continued to post an operating loss of -¥119.8B despite higher revenue. Although its impact on Company-wide earnings is limited, there is an imbalance in the earnings structure within the business portfolio.

Industry Benchmark (For Reference; Compiled by the Company)

Key Takeaways from the Earnings Results

1. Operating Income growth of +88.6% substantially exceeded revenue growth of +17.2%, confirming an earnings structure benefiting from operating leverage through gross margin improvement and the absorption of SG&A expenses.

2. Operating Cash Flow was ¥1533.9B, equivalent to 1.35 times Net Income attributable to owners of the parent. Cash backing for profit was sound, although the contribution from a working capital movement—namely, a decrease in inventories—requires monitoring in future periods.

3. Progress against the Full-Year plan was 60.9% for Operating Income and 67.0% for income attributable to owners of the parent, progressing at a pace above the standard 50% for the first half. The Company has already revised its earnings forecast.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,468–¥1,556 at ±1% for the cost of equity, and ¥1,506–¥1,520 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing gap 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 values based solely on publicly disclosed data; these are not forecasts of the market share price or recommendations of any specific investment action, and do not forecast or guarantee future share prices.)

---

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. 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 professionals as necessary.

---End of Report---

---

AI Financial Analysis

Executive Summary

Yamaha Motor delivered a strong FY2026 Q2 result, with revenue growth translating into materially faster operating and attributable-profit growth. Revenue rose 17.2% year on year to ¥1,497.99bn. Operating income increased 88.6% to ¥158.48bn, substantially outperforming the top-line expansion. Profit attributable to owners of the parent more than doubled, rising 114.7% to ¥113.90bn. The operating margin expanded to 10.6% from 6.6% in the prior-year period, an improvement of approximately 400bp. Gross margin improved to 31.7% from 31.5%, a more modest improvement of roughly 20bp. This indicates that the principal driver of the operating-margin improvement was SG&A leverage rather than gross-margin expansion alone. SG&A increased only 1.4% year on year to ¥327.24bn, far below the 17.2% increase in revenue. Net profit margin improved to 7.6% from 4.2%, an expansion of approximately 345bp. Finance income of ¥7.56bn exceeded finance costs of ¥6.55bn, limiting the effect of funding costs on pre-tax profit. Other income less other expenses contributed a net ¥4.92bn, supportive but not sufficiently large to be the central explanation for earnings growth. Operating cash flow was ¥153.39bn and exceeded attributable net income by 1.35x, supporting the cash-backed character of reported earnings. Free cash flow was positive at ¥102.57bn after ¥58.44bn of capital expenditure. The company also reduced net financing cash flow by ¥110.80bn, reflecting a balance-sheet-supportive funding profile during a period of higher earnings. The full-year forecast has been revised, and Q2 progress is ahead of conventional seasonal benchmarks in profit terms. Revenue progress against full-year guidance is 51.7%, close to the standard 50% Q2 level, while operating-income progress of 61.0% and attributable-profit progress of 67.0% are each more than 10 percentage points ahead of the standard pace. The key issue for the second half is whether the substantial margin improvement can be retained amid demand, foreign-exchange, and inventory-cycle uncertainty. Inventory efficiency requires particular monitoring despite the inventory balance declining year on year, because annualized inventory days remain elevated at 96 days.

Profitability Analysis

Reported annualized ROE is 17.6%, above the 15% level generally associated with strong profitability. The three-factor DuPont decomposition is net profit margin of 7.6%, annualized asset turnover of 0.992x, and financial leverage of 2.34x. The largest year-on-year change is the margin component: the operating margin rose by about 400bp and the attributable net margin by about 345bp. Revenue growth of ¥219.97bn was accompanied by only a ¥4.55bn increase in SG&A expense, creating substantial operating leverage. Gross profit increased ¥72.40bn to ¥474.48bn, and gross margin improved by around 20bp, showing that cost of sales remained controlled while mix, pricing, or production efficiency may have been supportive. The stronger gross profit and unusually restrained SG&A growth together lifted operating income by ¥74.44bn. The extended DuPont tax burden was 0.714, consistent with an effective tax rate of 24.5% and within a normal range. The interest burden was 1.006, reflecting that finance income slightly exceeded finance costs and that debt servicing did not dilute EBIT. Other income net of other expenses was ¥4.92bn, equivalent to only 3.1% of operating income, so the earnings improvement is predominantly operating rather than dependent on below-the-line items. Equity-method investment income was ¥6.32bn, up from ¥4.47bn, providing a modest supplementary contribution. The current operating margin is in the good benchmark range of 8-15%, but the durability of the sharp SG&A leverage is the central profitability question for the second half.

Growth Assessment

Top-line growth of 17.2% was robust and was converted into 88.6% operating-income growth, demonstrating a highly favorable incremental profit outcome. The gross-margin improvement was modest, while the operating-margin step-up was pronounced, indicating that fixed-cost absorption and SG&A discipline were central to growth quality. At Q2, revenue has reached 51.7% of the ¥2,900.00bn full-year forecast, broadly consistent with a normal first-half run rate. Operating income has already reached 61.0% of the ¥260.00bn full-year target, 11.0 percentage points above the standard 50% Q2 progress rate. Attributable profit has reached 67.0% of the ¥170.00bn full-year target, 17.0 percentage points ahead of the standard pace. This creates a favorable earnings cushion, although it also implies that the current first-half margin is above the margin embedded in the revised full-year plan. The full-year guidance implies second-half revenue of ¥1,402.01bn, operating income of ¥101.52bn, and attributable profit of ¥56.10bn. Implied second-half operating margin is therefore approximately 7.2%, well below the 10.6% achieved in the first half. Management's forecast consequently appears to incorporate either normal seasonality, more conservative demand assumptions, or an expectation of lower second-half profitability. The two-period consistency score of 2/10 indicates that the available earnings-growth history is limited and does not yet establish a stable multi-year growth pattern. Revenue sustainability should be assessed through continued demand conditions, foreign-exchange developments, pricing and mix, and the pace at which inventory converts into customer deliveries.

Financial Health

Liquidity is sound based on current assets of ¥1,747.53bn versus estimated current liabilities of ¥1,027.71bn, producing a current ratio of approximately 1.70x. This is above the 1.5x healthy benchmark and does not indicate a near-term maturity mismatch. Cash and cash equivalents were ¥401.46bn. Current bonds and borrowings were ¥483.25bn, while non-current bonds and borrowings were ¥546.42bn, for total reported bonds and borrowings of ¥1,029.67bn. Current assets exceed current borrowings, although cash alone does not fully cover current bonds and borrowings. The reported debt-to-equity ratio of 1.34x is below the 2.0x aggressive-leverage warning threshold, but it remains above the 1.0x conservative benchmark. Total equity increased ¥94.29bn year on year to ¥1,292.92bn, and the equity ratio improved to 41.4% from 39.0%. The increase in capital strength was supported by earnings and positive other comprehensive income of ¥32.33bn, including ¥27.48bn of foreign-currency translation gains. Bonds and borrowings declined by ¥14.47bn year on year, despite the rise in non-current borrowings, because current borrowings fell materially. Net defined-benefit liabilities of ¥56.00bn and lease payments of ¥7.12bn in operating cash flow are obligations relevant to fixed-commitment assessment. Trade receivables increased ¥61.54bn, or 33.9% year on year, to ¥243.26bn; this requires monitoring because receivable growth exceeded revenue growth. Inventories declined ¥52.55bn year on year to ¥538.82bn, partly offsetting the receivables increase and supporting total working-capital discipline.

Notable B/S Changes

Accounts receivable: +¥61.54bn (+33.9%) to ¥243.26bn - growth materially exceeded the 17.2% revenue increase and corresponded to a ¥57.58bn operating-cash-flow outflow; collection and dealer/customer credit quality warrant monitoring. Inventories: -¥52.55bn (-8.9%) to ¥538.82bn - the decline generated a ¥66.76bn operating-cash-flow benefit, but annualized inventory days remain elevated at 96 days, leaving inventory turnover and demand-normalization risk significant. Bonds and borrowings: -¥14.47bn (-1.4%) to ¥1,029.67bn - current borrowings fell by ¥132.56bn while non-current borrowings increased by ¥117.90bn, indicating a maturity shift toward longer-term funding alongside net debt reduction. Total equity: +¥94.29bn (+7.9%) to ¥1,292.92bn - earnings accumulation and positive foreign-currency translation effects improved the equity ratio to 41.4% from 39.0%.

Cash Flow Quality

Cash conversion was strong in FY2026 Q2. Operating cash flow of ¥153.39bn was 1.35x attributable net income of ¥113.90bn, exceeding the 1.0x high-quality benchmark. Free cash flow was ¥102.57bn after capital expenditure of ¥58.44bn, providing internally generated capacity for dividends, debt reduction, and investment. The accruals ratio was negative 1.3%, which is consistent with favorable cash realization rather than aggressive accrual-led earnings. Working-capital movements were mixed: receivables consumed ¥57.58bn of cash, while inventory released ¥66.76bn and payables generated ¥21.67bn. The receivables cash outflow aligns with the 33.9% year-on-year increase in trade receivables and should be monitored for collection efficiency in the second half. The inventory cash release is favorable for first-half cash flow, but it should not obscure the inventory-quality concern signaled by annualized DIO of 96 days. Both reported HIGH_INVENTORY_DAYS alerts identify the same issue: 96 inventory days exceeds the 90-day severe-warning threshold and the 60-day manufacturing efficiency benchmark. The root cause is that inventory remains high relative to the annualized cost-of-sales run rate, tying up capital and increasing exposure to demand normalization, model-cycle shifts, dealer destocking, and potential markdowns. For a global powersports and mobility manufacturer, some inventory is necessary to maintain product availability across seasonal and geographically dispersed markets, but 96 days is nevertheless elevated. The impact is a higher risk that future operating cash flow could weaken if inventory needs to rebuild or if slower sales require discounting. Investing cash flow was negative ¥50.82bn, predominantly reflecting capital expenditure, and was fully funded by operating cash flow. Financing cash flow was negative ¥110.80bn, driven in part by net short-term borrowing reduction of ¥115.87bn and long-term borrowing repayments of ¥81.35bn, partly offset by new borrowings and bond issuance. Overall, earnings quality is strong, but sustained conversion of receivables and the resolution of elevated inventory days are necessary to preserve that assessment.

Dividend Sustainability

The declared Q2 dividend is ¥25.00 per share, and full-year guidance indicates a ¥50.00 per-share dividend. Based on forecast EPS of ¥175.16, the prospective dividend payout ratio is approximately 28.5%. This is comfortably below the 60% sustainability benchmark. The Q2 dividend payout ratio calculated from the interim dividend and current-period EPS is 22.3%. Free cash flow coverage of the Q2 dividend is 4.03x, indicating substantial cash coverage. Free cash flow of ¥102.57bn also exceeds dividends paid of ¥9.70bn by a wide margin. The positive cash-flow profile and current ratio of approximately 1.70x support the capacity to maintain the indicated dividend. Capital expenditure of ¥58.44bn is also being funded from operating cash flow, so dividend coverage is not currently reliant on incremental borrowing. The principal variables for dividend capacity are the sustainability of first-half margins, inventory normalization, receivable collection, and the planned pace of debt reduction. No dividend revision was announced alongside the forecast revision.

Risk Assessment

Business risks include Inventory risk: annualized DIO of 96 days exceeds both the 90-day severe-warning threshold and the 60-day manufacturing benchmark. Elevated days can precede dealer destocking, discounting, production adjustments, and weaker cash conversion if demand slows., Demand and product-cycle risk: as a global manufacturer of motorcycles, marine products, recreational vehicles, and related mobility products, earnings are exposed to discretionary consumer demand, dealer inventory behavior, model cycles, and regional economic conditions., Foreign-exchange risk: other comprehensive income included ¥27.48bn of translation gains, and management identifies exchange-rate movements as a potential source of deviation from forecasts. Currency changes can affect export competitiveness, translated overseas earnings, and procurement costs., Margin normalization risk: the first-half operating margin of 10.6% is materially above the approximately 7.2% implied by full-year guidance for the second half, making the persistence of SG&A leverage and gross-margin discipline a key operational risk., Supply-chain and input-cost risk: manufacturing profitability remains exposed to raw-material, component, logistics, energy, and tariff movements, which could reverse the modest first-half gross-margin expansion..

Financial risks include Receivables risk: trade receivables rose 33.9% year on year to ¥243.26bn and consumed ¥57.58bn of operating cash flow. A further divergence from revenue growth could pressure cash conversion., Leverage risk: reported debt-to-equity of 1.34x is manageable and below the 2.0x warning threshold, but it is not conservative. Total reported bonds and borrowings remain ¥1,029.67bn., Refinancing and interest-rate risk: ¥483.25bn of bonds and borrowings are current. Current assets provide coverage, but the scale of near-term maturities makes funding-market access and interest-cost discipline relevant., Defined-benefit obligation risk: net defined-benefit liabilities were ¥56.00bn, creating sensitivity to discount rates, asset returns, and actuarial assumptions..

Key concerns include The duplicated inventory-day quality alerts require explicit attention: 96 days is high even though the absolute inventory balance fell year on year. The issue is elevated inventory relative to the annualized sales and cost base, rather than a simple increase in the balance., The first-half earnings beat versus the revised full-year run rate may reflect a favorable period mix or conservatism in guidance; the second-half margin trajectory is therefore more informative than the headline Q2 beat., Cash flow is currently strong, but it benefits from a ¥66.76bn inventory cash release. Sustained free-cash-flow strength requires that receivable growth moderates and inventory days improve without sacrificing sales., Industry-specific exposure to discretionary powersports and marine demand raises sensitivity to consumer confidence, retail financing conditions, and dealer stocking patterns..

Investment Implications

Key takeaways include Revenue increased 17.2%, operating income increased 88.6%, and attributable profit increased 114.7%, demonstrating exceptional first-half profit conversion., Operating margin expanded by approximately 400bp to 10.6%, primarily through SG&A leverage, while gross margin improved by approximately 20bp to 31.7%., Reported annualized ROE of 17.6% is strong, supported by a 7.6% net margin, annualized asset turnover of 0.992x, and 2.34x financial leverage., Operating cash flow of ¥153.39bn and free cash flow of ¥102.57bn support earnings quality and dividend funding., Full-year profit guidance is conservative relative to first-half achievement, with Q2 operating-income and attributable-profit progress at 61.0% and 67.0%, respectively., Elevated annualized inventory days of 96 and rapid receivable growth are the principal balance-sheet and working-capital issues to monitor..

Metrics to watch include Second-half operating margin versus the approximately 7.2% margin implied by the full-year forecast, Annualized inventory days and the pace of inventory conversion, Trade receivables growth and operating-cash-flow impact, Gross margin resilience amid materials, logistics, and foreign-exchange movements, Operating cash flow and free cash flow after working-capital movements, Debt-to-equity ratio, current borrowings, and net debt reduction, Progress against the revised ¥2,900.00bn revenue, ¥260.00bn operating-income, and ¥170.00bn attributable-profit forecasts.

Regarding relative positioning, The company currently exhibits strong profitability for a global manufacturing business, with a 10.6% operating margin, 17.6% reported annualized ROE, and cash conversion above net income. Its balance sheet is adequately liquid and leverage is manageable, but working-capital efficiency is weaker than preferred because annualized inventory days are above manufacturing benchmarks. Relative performance will depend on whether the first-half SG&A leverage and margin strength can be maintained while reducing inventory intensity and containing receivable growth.