IKUYO (7273) FY2026 Q3 Earnings Report

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Executive Summary

Although revenue increased substantially due to contributions from two newly consolidated companies, improvement in the profitability of the core business remains a work in progress, and it should be noted that the significant increase in net income was primarily driven by extraordinary items. Revenue was ¥22.31B (+74.9% YoY), Operating Income was ¥0.49B (turning positive from a ¥0.07B loss in the same period of the previous year), Ordinary Income was ¥0.33B (+589.6% YoY), and Net Income was ¥3.39B (a sharp increase from nearly zero in the same period of the previous year). While expanded consolidation of the core Automotive Parts Business drove higher revenue and a return to operating profitability, extraordinary gains and losses—including a ¥7.02B gain on the sale of fixed assets and a ¥2.58B impairment loss—substantially boosted net income.

Factors Driving Performance Changes

【Revenue】Revenue was ¥22.31B, up +74.9% YoY. The Automotive Parts segment accounted for ¥22.18B (+74.5% YoY), constituting nearly all consolidated revenue. The primary drivers of the increase were the new consolidation of Kunshan Veritas Automotive Systems Co., Ltd. and Tamadai Co., Ltd., with expansion on a scale exceeding the autonomous growth of existing businesses contributing to the increase.

【Profit and Loss】Gross profit was ¥3.31B, and the gross margin improved to 14.9% from approximately 10.3% in the same period of the previous year. Although SG&A expenses increased to ¥2.83B (SG&A ratio of 12.7%), the improvement in gross profit exceeded the increase, resulting in Operating Income of ¥0.49B and a return to profitability from a ¥0.07B loss in the same period of the previous year. Ordinary Income remained at ¥0.33B because non-operating expenses (¥0.10B in interest expenses and ¥0.12B in foreign exchange losses) exceeded non-operating income of ¥0.09B. Pre-tax income of ¥5.72B and Net Income of ¥3.39B resulted from the net impact of extraordinary income of ¥8.02B, primarily comprising a ¥7.02B gain on the sale of fixed assets, and extraordinary losses of ¥2.63B, including a ¥2.58B impairment loss related to the Atsugi Plant; these figures do not directly reflect the profitability of the core business. In summary, the Company achieved higher revenue and profit, but profit margins at the operating and ordinary income levels remain low.

Segment Analysis

The Automotive Parts segment led consolidated performance, with revenue of ¥22.18B (+74.5% YoY), segment profit of ¥0.79B (turning positive from a ¥0.07B loss in the same period of the previous year), and a profit margin of 3.5%. In addition to the integration effects of the two newly consolidated companies, improvements in the profitability of existing businesses can also be observed. Meanwhile, Other Businesses (including EV heavy machinery, leasing, and digital asset mining) recorded a segment loss of ¥0.297B on revenue of ¥0.13B, expanding from a ¥0.02B loss in the same period of the previous year. The structure in which losses from non-core businesses weigh on consolidated Operating Income remains in place.

Key Financial Indicators

【Profitability】The Operating Income margin of 2.2% and gross margin of 14.9% both improved from the same period of the previous year, but their absolute levels remain low. The Net Income margin of 13.3% and annualized ROE of 30.4% were materially affected by extraordinary income, primarily the gain on the sale of fixed assets. Accordingly, the Operating Income margin should be prioritized as an indicator of recurring earnings power.【Cash Flow Quality】Net extraordinary gains and losses contributed ¥5.39B, compared with ¥2.96B in profit attributable to owners of the parent; from an accrual perspective as well, earnings quality is overstated relative to the underlying strength of the core business.【Investment Efficiency】ROIC is estimated at approximately 3.1%. Returns on capital relative to total assets of ¥32.53B, which expanded through acquisitions, remain low, making realization of integration benefits a key future issue.【Financial Soundness】The Equity Ratio was 45.7%, the current ratio was 134.7%, interest-bearing debt was ¥3.25B, and the Debt/Capital ratio was 17.9%. Leverage is not excessive, although the current ratio is somewhat below the generally sound level of 150%.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is unavailable, cash trends can be assessed from movements in the balance sheet. Cash and deposits increased by +¥4.02B YoY to ¥5.52B, indicating high cash coverage relative to short-term borrowings of ¥1.18B. Meanwhile, accounts receivable increased to ¥6.04B (+¥2.96B YoY), and inventories increased to ¥0.54B (+¥0.37B YoY), reflecting the accumulation of working capital associated with higher revenue and the expansion of the consolidation scope. Accounts payable also increased to ¥4.44B (+¥2.12B YoY), absorbing part of the funding needs arising from the expansion of procurement and production scale. The increase in intangible fixed assets and goodwill reflects investment activity related to acquisitions, while interest-bearing debt remains limited to ¥3.25B; consequently, the Company is not excessively dependent on debt financing.

Earnings Quality

The composition of earnings for the current period includes a substantial mixture of recurring earnings power and one-time factors. Operating Income of ¥0.49B and Ordinary Income of ¥0.33B indicate the profitability of the core business, whereas pre-tax income of ¥5.72B and Net Income of ¥3.39B were strongly affected by the net impact of extraordinary income of ¥8.02B, primarily comprising a ¥7.02B gain on the sale of fixed assets, and extraordinary losses of ¥2.63B, including a ¥2.58B impairment loss related to the Atsugi Plant. Non-operating income of ¥0.09B, consisting primarily of ¥0.01B in dividend income and other items, was small, while non-operating expenses of ¥0.25B included ¥0.10B in interest expenses and ¥0.12B in foreign exchange losses. The foreign exchange loss was equivalent to 25.5% of Operating Income. Comprehensive income of ¥3.44B was close to Net Income of ¥3.39B; however, attributable to owners of the parent was ¥2.89B, and the allocation difference with ¥0.55B attributable to non-controlling interests should also be taken into account. Accordingly, current-period Net Income was significantly affected by extraordinary gains and losses, and Operating Income and Ordinary Income should be used to evaluate recurring profitability.

Earnings Forecast and Guidance

The full-year Company plan calls for revenue of ¥30.20B, Operating Income of ¥0.96B, Ordinary Income of ¥0.79B, and EPS of ¥148.38. The Q3 cumulative progress rate was approximately standard at 73.9% for revenue; however, the progress rates for Operating Income of 51.1% and Ordinary Income of 41.4% were substantially below the standard 75%. In Q4, approximately ¥0.47B in Operating Income and ¥0.47B in Ordinary Income must be added, making improvement in the profitability of the core business the key to achieving the plan. The progress rate for profit attributable to owners of the parent was high at 90.9% due to the impact of extraordinary gains and losses, but it is not appropriate to use this figure to judge the progress of the core-business plan. No revisions were made to the earnings forecast or dividend forecast during the current quarter.

Shareholder Returns

The Q2 dividend was ¥30.00 per share, and the full-year dividend forecast is ¥33.00 per share (forecast figures reflecting the impact of the stock split; on a pre-split basis, this is equivalent to ¥330.00). The forecast Payout Ratio based on forecast full-year EPS of ¥148.38 is approximately 22.2%, below the general sustainability benchmark of 60%. However, the ¥2.96B in cumulative Q3 profit attributable to owners of the parent includes significant extraordinary gains and losses. Accordingly, the dividend-paying capacity should be assessed based on recurring earnings generation after excluding extraordinary gains and losses. Cash and deposits of ¥5.52B exceed interest-bearing debt of ¥3.25B, ensuring sufficient liquidity to support dividend payments. No revision was made to the dividend forecast during the current quarter.

Risk Factors

1. Lengthening collection period: DSO (days sales outstanding) is approximately 74 days, exceeding the general cautionary level of 60 days. The increases in accounts receivable to ¥6.04B and electronically recorded monetary claims to ¥2.02B are partly attributable to higher revenue, but their impact on capital efficiency must be monitored continuously.

2. Expansion of losses in non-core businesses: Other Businesses (including EV heavy machinery, leasing, and digital asset mining) recorded a segment loss of ¥0.297B on revenue of ¥0.13B, expanding from a ¥0.02B loss in the same period of the previous year. Delays in recovering investments may weigh on consolidated profitability.

3. Expansion of goodwill and intangible assets associated with acquisitions: Following the consolidation of two new companies, goodwill increased to ¥2.42B (16.2% of net assets), and intangible fixed assets increased to ¥2.86B. If integration benefits or the earnings plans of the acquired companies fall short, this could lead to impairment risk.

Industry Benchmarks (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Operating Income margin is below the industry median, while the Net Income margin is substantially above the industry median due to the impact of extraordinary gains and losses.

Growth and Capital Efficiency

The revenue growth rate is substantially above the industry median, with M&A-driven scale expansion serving as a high-growth factor within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Automotive Parts segment achieved higher revenue and a return to profitability due to contributions from the two newly consolidated companies. However, the consolidated Operating Income margin remained at 2.2%, below the industry median, and the structure in which the ¥0.297B loss from Other Businesses weighs on consolidated profitability was confirmed.

2. Profit attributable to owners of the parent of ¥2.96B and annualized ROE of 30.4% were strongly affected by extraordinary gains and losses, primarily the ¥7.02B gain on the sale of fixed assets. The progress rates for the full-year plan—51.1% for Operating Income and 41.4% for Ordinary Income—were also low compared with the revenue progress rate of 73.9%. The accumulation of profit from the core business will be a key point for monitoring going forward.

3. The increase in goodwill to ¥2.42B and intangible fixed assets to ¥2.86B associated with the acquisitions remains below the cautionary level at present; however, realization of integration benefits is a prerequisite for maintaining asset value.

Theoretical Share Price (Reference Value)

Sensitivity: ¥413–¥437 at ±1% for the cost of equity, and ¥422–¥427 at ±0.1 for ω.

Notes:

• Normalized EPS calculated from Ordinary Income and other figures is used to exclude the impact of one-time gains and losses (Company forecast EPS is ¥148.4).
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because 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 mechanical calculation 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.)

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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, after consulting professionals as necessary.

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