EXEDY Corporation FY2027 Q1 Earnings Report

Quick View

Executive Summary

In Q1 of FY2027, revenue increased while Operating Income remained almost flat, whereas quarterly Net Income attributable to owners of the parent increased significantly due to an improvement in net financial income. Revenue was ¥751.4B (+4.5% YoY), Operating Income was ¥49.5B (+0.8%), and quarterly Net Income attributable to owners of the parent was ¥33.95B (+24.8%). The main drivers of the revenue increase were growth in the Other Business category (+28.2%) and MT (manual transmission-related business excluding automatic transmission systems, +9.7%). The slowdown in Operating Income growth was attributable to the rise in the SG&A ratio (14.6%, +1.8pt), which offset the improvement in the gross profit margin (20.6%, +1.1pt). Meanwhile, financial income surged to ¥12.2B (¥1.4B in the previous year), while financial expenses declined to ¥3.3B, resulting in Profit Before Tax of ¥55.4B (+33.3%) and contributing to the increase in Net Income. Consolidated quarterly profit, including non-controlling interests, was ¥38.0B (+22.4%).

Factors Affecting Performance

【Revenue】Revenue increased 4.5% YoY to ¥751.4B. By segment, the core AT business (related to automatic transmission systems), which accounted for 59.4% of the total, was almost flat at -0.4%. MT (related to manual transmission systems), accounting for 25.7%, grew 9.7%, while TS, accounting for 4.2%, declined 2.5%. The Other Business category, accounting for 10.7%, grew substantially by 28.2% and was a key contributor to the company-wide revenue increase.

【Profit and Loss】Operating Income was ¥49.5B, up only 0.8% YoY. Although the gross profit margin improved 1.1pt YoY to 20.6%, this was offset by a 1.8pt increase in the SG&A ratio to 14.6%; consequently, the Operating Income margin declined to 6.6% from 6.8% in the previous year. In non-operating items, financial income surged to ¥12.2B (¥1.4B in the previous year), while financial expenses declined to ¥3.3B (¥9.6B in the previous year), resulting in Profit Before Tax of ¥55.4B (+33.3%). Meanwhile, equity-method investment gain (loss) turned to -¥3.1B from +¥0.6B in the previous year, and the effective tax rate increased to 31.3% from 25.3%. As a result, quarterly Net Income attributable to owners of the parent was ¥33.95B (+24.8%). Overall, this was a revenue and profit increase in which Net Income grew substantially on the back of non-operating factors, despite only modest growth in Operating Income.

Segment Analysis

By segment, the core AT business, accounting for 59.4% of the total, reported revenue of ¥446.6B (-0.4%) but Operating Income of ¥36.6B (+34.2%), representing a significant improvement in profitability. Its margin rose to 8.2% from 6.1% in the previous year. MT, accounting for 25.7%, saw revenue increase 9.7% to ¥192.8B, but Operating Income declined slightly by 2.0% to ¥26.9B, suggesting mix and cost impacts on profitability despite higher revenue. Nevertheless, its margin remained at 14.0%, the highest level among the three segments. TS, accounting for 4.2%, reported lower revenue of ¥31.3B (-2.5%), but Operating Income increased substantially by 52.4% to ¥4.8B, resulting in a margin of 15.3%. The Other Business category not included in the reportable segments, including motorcycle clutches and transportation services, among others, generated revenue of ¥80.7B (+28.2%), but its Operating Income (loss) turned to a deficit of -¥15.55B from +¥0.41B in the previous year, becoming a factor weighing on company-wide profit.

Key Financial Indicators

【Profitability】The Operating Income margin declined 0.2pt to 6.6% from 6.8% in the previous year, as the 1.1pt improvement in the gross profit margin to 20.6% was more than offset by the 1.8pt increase in the SG&A ratio to 14.6%. The Net Income margin based on quarterly Net Income attributable to owners of the parent improved 0.7pt to 4.5% from 3.8%, with the improvement in net financial income supporting profitability.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥107.6B, approximately 3.2 times quarterly Net Income attributable to owners of the parent of ¥33.95B, indicating sound cash-generation capacity underpinning earnings.【Investment Efficiency】ROE was 1.9% (quarterly result, before annualization), while total assets were ¥3168.1B, almost unchanged at -1.0% from the end of the previous fiscal year.【Financial Soundness】The Equity Ratio was 60.2%, maintained at the same level as at the end of the previous fiscal year. Cash and cash equivalents of ¥688.4B exceeded total interest-bearing debt of ¥542.1B, resulting in a net cash position of approximately ¥146.2B and a stable financial base.

Cash Flow Analysis

Cash flow from operating activities was ¥107.6B, up 2.6% YoY. This resulted from deducting income taxes paid of ¥28.9B, which increased from ¥13.0B in the previous year, among other items, from ¥137.0B at the subtotal stage. In terms of working capital, a decrease in accounts receivable contributed +¥32.5B to OCF, while an increase in inventories contributed -¥6.2B and acted as an offsetting factor. Cash flow from investing activities was -¥37.1B, of which capital expenditures accounted for -¥18.0B. Cash flow from financing activities was -¥120.1B, with cash outflows including dividend payments of ¥53.9B, share repurchases of ¥30.0B, and dividend payments to non-controlling interests of ¥31.8B. Free cash flow (OCF + investing CF) was ¥70.5B, sufficient to cover dividend payments; however, total cash outflows including share repurchases amounted to ¥83.9B, exceeding free cash flow. Cash and cash equivalents decreased by -¥56.4B from ¥744.7B at the beginning of the period to ¥688.4B, although excluding foreign currency translation differences of -¥6.8B, the underlying decline was limited.

Earnings Quality

The increase in Profit Before Tax to ¥55.4B (+33.3%) depended heavily not only on the modest 0.8% increase in Operating Income, but also on non-operating factors, namely the surge in financial income to ¥12.2B from ¥1.4B in the previous year and the decline in financial expenses to ¥3.3B from ¥9.6B. These items are affected by market interest rates and foreign exchange levels. Meanwhile, equity-method investment gain (loss) turned to -¥3.1B from +¥0.6B in the previous year, reflecting the impact of performance fluctuations at non-consolidated affiliates. OCF being approximately 3.2 times quarterly Net Income attributable to owners of the parent suggests high-quality earnings with limited accruals. Comprehensive income was ¥54.9B, including ¥49.4B attributable to owners of the parent. The difference from quarterly profit of ¥38.0B, including ¥33.95B attributable to owners of the parent, was primarily due to foreign currency translation differences of +¥16.9B related to foreign operations, compared with -¥11.9B in the previous year. This indicates that foreign exchange movements influence the divergence between comprehensive income and Net Income.

Earnings Forecast and Guidance

Progress against the full-year company forecast was 24.6% for Revenue (¥751.4B against a forecast of ¥3050.0B), broadly in line with plan. Progress for Operating Income was 20.2% (¥49.5B against a forecast of ¥245.0B), slightly behind the simple quarterly allocation benchmark of 25%, apparently reflecting the rise in the SG&A ratio and the widening deficit in the Other Business category. Quarterly Net Income attributable to owners of the parent reached 24.3% of the forecast (¥33.95B against ¥140.0B), broadly in line with plan, supported by improvement in non-operating items. Progress against the EPS forecast of ¥391.72 was 23.8%, at an actual ¥93.27. As of the current quarter, no revisions have been made to the earnings or dividend forecasts.

Shareholder Returns

Dividend payments during the period were ¥53.9B, almost unchanged from ¥53.9B in the same period of the previous year. Based on the full-year company forecast of a dividend of ¥175.00 per share and forecast EPS of ¥391.72, the Payout Ratio is approximately 44.7%. Share repurchases amounted to ¥30.0B, a substantial increase from ¥9.3B in the same period of the previous year. Total shareholder returns, comprising dividends and share repurchases, amounted to ¥83.9B, exceeding free cash flow of ¥70.5B for the period and indicating an enhanced shareholder return policy utilizing cash on hand of ¥688.4B.

Risk Factors

1. Segment concentration risk: The core AT business accounts for 59.4% of revenue and is the main driver of Operating Income. Trends in demand and changes in profitability in this business could therefore have a significant impact on company-wide performance.

2. Deterioration in the profitability of the Other Business category: Despite revenue growth of +28.2%, the Other Business category not included in the reportable segments, including motorcycle clutches and transportation services, among others, turned to an Operating Income deficit of -¥15.55B from +¥0.41B in the previous year, becoming a factor compressing profitability, including through the allocation of company-wide expenses.

3. Working capital fluctuations: Inventories increased 2.7% to ¥421.0B from ¥409.8B at the end of the previous fiscal year, while accounts receivable decreased 5.2% to ¥500.5B from ¥527.8B. The continuation of inventory accumulation could affect cash-generation capacity.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

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

Growth and Capital Efficiency

The Revenue growth rate also falls slightly below the industry median, placing the company’s revenue growth in the mid-to-lower range within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. While Operating Income growth was limited to +0.8%, quarterly Net Income attributable to owners of the parent increased significantly by +24.8%. The fact that the main driver of profit growth was the improvement in net financial income rather than the core business is therefore worth noting when assessing the composition of earnings.

2. While the margin of the core AT business improved to 8.2% from 6.1% in the previous year, the Other Business category turned to a deficit of -¥15.55B, highlighting divergent profitability trends among the segments.

3. Share repurchases increased substantially YoY, and total shareholder returns including dividends exceeded free cash flow, confirming a shareholder return policy that utilizes cash on hand.

Theoretical Stock Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market price or a recommendation of any specific investment action.

Sensitivity: ¥4,919–¥5,202 at ±1% for the cost of equity, and ¥5,050–¥5,062 at ±0.1 for ω.

Notes:

• 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, resulting in a timing gap versus the full-year forecast.

(Calculation model: Residual income model / Interest rate reference month: 2026-06 / This value does not forecast or guarantee future stock prices)

---

This report is an earnings analysis document automatically generated by AI based on 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 with professionals as necessary.

---End of Report---