| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3039.3B | ¥3095.6B | -1.8% |
| Operating Income / Operating Profit | ¥222.3B | ¥218.4B | +1.8% |
| Pre-tax Income | ¥236.5B | ¥204.1B | +15.9% |
| Net Income | ¥156.3B | ¥140.1B | +11.6% |
| ROE | 7.5% | 7.2% | - |
The fiscal year ended March 2026 recorded Revenue of ¥3,039.3B (YoY -¥56.3B, -1.8%) with a slight decline, while Operating Income was ¥222.3B (YoY +¥3.9B, +1.8%), Ordinary Income (Pre-tax Income) was ¥236.5B (YoY +¥32.4B, +15.9%), and Net Income attributable to owners of the parent was ¥136.8B (YoY +¥9.4B, +7.3%), securing year-on-year profit growth. Despite lower sales, gross margin improved to 20.6% (from 19.2%, +1.4pt) and operating margin improved to 7.3% (from 7.1%, +0.2pt), enabling operating-level profit growth. An increase in financial income (¥25.97B, prior year ¥5.79B) and a reduction in financial expenses (¥9.75B, prior year ¥14.32B) drove double-digit pre-tax profit growth. Comprehensive income was ¥247.1B (from ¥141.7B, +74.4%), with expansion of foreign operations’ translation differences of ¥90.95B boosting equity.
[Revenue] Revenue of ¥3,039.3B was a modest decline of -1.8% YoY. By segment, the core AT (Automatic Transmission-related business) recorded ¥1,883.2B (-5.7%), MT (Manual Transmission-related business) ¥754.6B (+2.3%), TS (Industrial Machinery Drive & Transmission business) ¥127.8B (-7.9%). Other segments (two-wheeler clutches, transportation, etc.) grew substantially to ¥273.6B (+23.4%). Company-wide revenue mix: AT 62%, MT 25%, TS 4%, Other 9%. AT’s revenue decline was affected by adjustments in vehicle production and changes in customer demand mix, but profitability improved due to gross margin improvement.
[Profit & Loss] Cost of sales decreased to ¥2,411.7B (prior year ¥2,501.4B, -3.6%), a larger decline than revenue, resulting in a gross margin of 20.6% (prior 19.2%, +1.4pt). SG&A was ¥388.5B (prior ¥365.1B, +6.4%) and increased despite lower sales, but the gross margin gain more than offset this, yielding Operating Income of ¥222.3B (+1.8%). Operating margin was 7.3% (prior 7.1%, +0.2pt). Financial income was ¥25.97B (prior ¥5.79B, +¥20.18B); financial expenses were ¥9.75B (prior ¥14.32B, -¥4.57B), improving net financial income by +¥24.75B. Equity-method losses were -¥2.03B (prior -¥5.88B), narrowing losses, leading to Pre-tax Income of ¥236.5B (+15.9%). After corporate taxes of ¥80.2B (effective tax rate 33.9%), Net Income was ¥156.3B (+11.6%). Net income attributable to owners of the parent was ¥136.8B (+7.3%), and non-controlling interests attributable portion was ¥19.5B (prior ¥12.6B, +54.0%). In summary, despite lower sales, improvements in gross margin and financial results produced profit growth even in a revenue-decline environment.
MT (Manual Transmission-related business) reported Revenue ¥754.6B (+2.3%), Operating Income ¥115.2B (+7.0%), and maintained a high Operating Margin of 15.3%. AT (Automatic Transmission-related business) saw Revenue ¥1,883.2B (-5.7%) but Operating Income rose significantly to ¥156.8B (+26.1%), with a margin of 8.3% (prior 6.2%, +2.1pt). AT, accounting for approximately 71% of company operating profit, is the core segment and its profitability improvement drove group-level profit growth despite revenue decline. TS (Industrial Machinery Drive & Transmission business) had Revenue ¥127.8B (-7.9%), Operating Income ¥15.3B (-8.7%), and a margin of 11.9%, showing resilience but with both sales and profits down. Other segments grew Revenue to ¥273.6B (+23.4%) but recorded an operating loss of -¥28.4B (turned from operating profit ¥0.03B prior), likely due to corporate-level costs and adjustment burdens.
[Profitability] Operating margin 7.3% (prior 7.1%, +0.2pt) and Net margin 4.5% (prior 4.1%, +0.4pt) indicate improving profitability. ROE 7.3% improved from 6.4% ( +0.9pt), exceeding the company’s historical level. Gross margin 20.6% (prior 19.2%, +1.4pt) reflects product mix, cost optimization, and price pass-through.
[Cash Quality] Operating Cash Flow (OCF) ¥405.7B is approximately 2.97x Net Income attributable to owners of the parent ¥136.8B, indicating excellent conversion of earnings to cash. Days Sales Outstanding (DSO) is 63 days (Accounts receivable ¥527.8B ÷ Revenue ¥3,039.3B × 365 days). Days Inventory Outstanding (DIO) is 62 days (Inventory ¥409.8B ÷ Cost of sales ¥2,411.7B × 365 days), somewhat heavy, but working capital improved YoY (Inventory decreased ¥40.3B, Accounts receivable decreased ¥30.5B).
[Investment Efficiency] Total asset turnover 0.95x (Revenue ¥3,039.3B ÷ Total assets ¥3,201.0B) maintained prior-year level. ROIC-equivalent (Operating Income ÷ (Interest-bearing debt + Equity)) is approximately 7.7%, exceeding the cost of capital.
[Financial Soundness] Equity ratio 60.2% (prior 59.4%, +0.8pt) remains strong. Interest-bearing debt (bonds and borrowings) totaled ¥545.6B (current ¥231.0B, non-current ¥314.6B), down ¥17.3B from prior ¥562.9B. Interest coverage is approximately 33x (Operating Income ¥222.3B ÷ Interest paid ¥6.8B), indicating a very high capacity to service interest.
Operating Cash Flow was ¥405.7B (prior ¥314.9B, +28.8%), a substantial increase. Pre-tax Income ¥236.5B plus Depreciation & Amortization of ¥134.7B and other add-backs produced a subtotal of ¥450.9B (prior ¥380.3B, +18.6%). Improvements in working capital (Inventory decreased ¥40.3B, Accounts receivable decreased ¥30.5B, Accounts payable decreased ¥16.6B) contributed. Corporate tax payments were ¥44.4B (prior ¥64.4B, -¥20.0B, -31.1%), also contributing to higher OCF. Investing Cash Flow was -¥200.9B (prior -¥87.2B, -130.4%), reflecting increased outflows: net time deposit outflow -¥34.8B (deposits ¥-83.7B, withdrawals +¥48.9B), capital expenditures -¥71.6B (prior -¥75.6B), cash outflow for business combinations -¥54.1B, equity-method investment acquisitions -¥15.4B, etc. Proceeds from sale of tangible fixed assets were ¥1.11B, significantly down from prior ¥34.96B. Free Cash Flow was ¥204.7B (OCF ¥405.7B - Investing CF ¥200.9B), which comfortably covered dividends paid ¥109.9B and share repurchases ¥9.3B (total ¥119.2B). Financing Cash Flow was -¥169.6B (prior -¥287.2B), with reduced outflows. Principal repayments of long-term borrowings were -¥22.3B, net increase in short-term borrowings -¥2.1B (proceeds ¥49.1B - repayments ¥51.2B), dividends paid -¥109.9B (including dividends to non-controlling interests -¥21.7B), and treasury stock acquisitions -¥9.3B. Cash and cash equivalents rose by ¥63.1B from beginning balance ¥681.6B to ending balance ¥744.7B; foreign exchange translation effects contributed +¥28.0B.
Operating Income ¥222.3B adjusted by Financial Income ¥25.97B (time deposit interest, dividends, etc.), Financial Expenses -¥9.75B (interest paid, etc.), and Equity-method loss -¥2.03B yields Pre-tax Income ¥236.5B. The increase in Financial Income reflects one-off benefits from higher deposit balances and rising interest rates; the net improvement in non-operating items (+¥24.75B) supported double-digit pre-tax profit growth. The operating-level profit improvement is driven by recurring factors from gross margin improvement. No extraordinary gains or losses were recorded; the majority of Net Income ¥156.3B is based on recurring earnings power. OCF of ¥405.7B is about 2.97x Net Income attributable to owners of the parent ¥136.8B, a high level. Accrual items largely contributed positively through working capital improvements (reductions in inventory and receivables), and non-cash expenses such as Depreciation & Amortization ¥134.7B and impairment losses ¥14.6B boosted OCF. Comprehensive income ¥247.1B results from Net Income ¥156.3B plus OCI of approximately +¥90.8B, mainly foreign currency translation differences +¥90.95B, demonstrating a material book equity boost from FX movements. Overall, the quality of earnings is high, with one-off items largely confined to OCI such as translation differences.
The company’s FY2027 plan targets Revenue ¥3,050.0B (vs. this period +0.4%), Operating Income ¥245.0B (+10.2%), Net Income attributable to owners of the parent ¥140.0B (+2.3%), and EPS ¥391.72 (from ¥374.31, +4.6%). Progress to date: Revenue this period ¥3,039.3B ÷ full-year target ¥3,050.0B = 99.6%, Operating Income ¥222.3B ÷ target ¥245.0B = 90.7%, already at high achievement rates. While the company forecasts Pre-tax Income to rise +10.2%, the post-tax Net Income growth forecast is only +2.3%, implying possible increases in tax burden or rising NCI ratio being factored in. Dividend guidance is DPS ¥175 (this period actual ¥300, -¥125 large cut), with payout ratio on forecast EPS ¥391.72 at approximately 44.7%, sharply down from 82.2% prior. This indicates a conservative shift prioritizing retained earnings and financial flexibility.
This period’s dividend comprised an interim dividend ¥150 and a year-end dividend ¥150, totaling DPS ¥300 (prior DPS ¥100, +¥200). Against Net Income attributable to owners of the parent ¥136.8B, total dividends were ¥109.9B (payout ratio 80.3%), and together with treasury stock repurchases ¥9.3B, total shareholder returns were ¥119.2B, implying a Total Return Ratio of 87.1%, a high level. Versus Free Cash Flow ¥204.7B, total returns ¥119.2B left surplus cash of ¥85.5B, indicating ample cushion. For FY2027 the company plans DPS ¥175, a cut of -¥125 from this period’s ¥300. Versus forecast EPS ¥391.72, the payout ratio is about 44.7%, a substantial reduction that prioritizes internal reserves. Treasury purchases during this period amounted to ¥9.3B (limited impact on outstanding free float), and continuation in subsequent periods is undecided. The change in dividend policy reflects prioritization of growth investment and financial soundness; while short-term shareholder returns decline, long-term sustainability is expected to improve.
Dependence on AT business and demand volatility risk: The AT business accounts for 62% of revenue and about 71% of operating profit. Fluctuations in vehicle production volumes, medium-to-long-term structural changes in AT demand due to EV/electrification shifts, and customer concentration among major OEMs are volatility drivers for earnings. Although AT achieved profit growth this period despite revenue decline through margin improvement, future demand slowdowns or share shifts could materially affect consolidated performance.
Working capital efficiency deterioration risk: With DSO 63 days and DIO 62 days, inventory and receivables remain elevated. Looser credit terms for overseas distributors/OEMs and inventory build to cope with demand variability are likely contributors. If inventory and receivables collection delays progress, OCF generation and interest burden could deteriorate. While working capital improved this period (Inventory down ¥40.3B, Receivables down ¥30.5B), sustainability requires monitoring.
Shortening of interest-bearing debt maturities and interest rate risk: Current portion of bonds and borrowings increased to ¥231.0B (prior ¥47.5B, +383.4%), while non-current portion decreased to ¥314.6B (prior ¥515.4B, -39.0%), indicating shorter maturity profile. Risks of higher refinancing costs upon rollover/re-pricing of short-term borrowings are present. Ending cash ¥744.7B and strong OCF are mitigating factors, but in a rising-rate environment net financial results could worsen and pressure pre-tax income. Interest coverage of approximately 33x provides buffer, but lengthening borrowings and hedging strategy remain important.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 7.3% | 6.3% (3.2%–9.9%) | +1.0pt |
| Operating Margin | 7.3% | 7.8% (4.6%–12.3%) | -0.4pt |
| Net Margin | 5.1% | 5.2% (2.3%–8.2%) | -0.0pt |
ROE 7.3% is +1.0pt above the industry median 6.3%, placing the company slightly higher in capital efficiency within the sector. Operating margin 7.3% and Net margin 5.1% are close to medians, indicating profitability near industry average.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -1.8% | 3.7% (-0.4%–9.3%) | -5.5pt |
Revenue growth -1.8% lags the industry median +3.7% by -5.5pt, placing the company in the lower growth cohort. While the industry generally exhibits revenue growth, the company’s decline may be a temporary adjustment period; returning to industry-level growth will be key.
※ Source: Company aggregation
Notable resilience in the revenue-decline phase: gross margin improvement +1.4pt and substantial financial income improvement secured profit growth. AT posted Revenue -5.7% but Operating Income +26.1% and margin 8.3% (prior 6.2%, +2.1pt), demonstrating product mix correction, cost optimization, and price pass-through driving margin expansion. MT maintained high profitability with Operating Margin 15.3%, supporting stable earnings. OCF / Net Income attributable to owners of the parent ≈ 3.0x demonstrates excellent cash conversion, aided by working capital improvements (reductions in inventory and receivables). Going forward, sustaining AT profitability improvements and reversing losses in Other segments (operating loss -¥28.4B) are focal points for further performance gains.
Financial soundness ranks highly within the industry: Equity ratio 60.2%, Interest coverage ≈33x, Free Cash Flow ¥204.7B indicate ample investment capacity. The FY2027 dividend forecast DPS ¥175 (from ¥300, -¥125) signals a conservative pivot prioritizing retained earnings and growth investment. Payout ratio on forecast basis ≈44.7% (down from 80.3%) but appears more sustainable when compared to Free Cash Flow. The shift of borrowings toward short-term (current +¥183.5B, non-current -¥200.9B) poses re-pricing risk, but strong cash ¥744.7B and robust OCF mitigate this. DSO 63 days and DIO 62 days exceed best-practice benchmarks (<45 days, <60 days), indicating room to generate additional cash through improved turnover as a near-term catalyst.
This report is an AI-generated earnings analysis based on XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are company-compiled reference information based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.