TOYODA GOSEI (7282) FY2026 Q3 Earnings Report

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Executive Summary

In addition to higher revenue, improved profitability and increased financial income contributed to growth in Operating Income and Net Income that exceeded the rate of revenue growth. Revenue was ¥8306.2B (+5.5% YoY), Operating Income was ¥525.2B (+11.5%), Profit Before Tax, corresponding to the Ordinary Income stage, was ¥604.4B (+22.6%), and Net Income attributable to owners of the parent was ¥438.9B (+36.0%). The gross profit margin improved to 15.2% from 14.5% in the same period of the previous year, and this improvement in profitability was the primary factor behind earnings growth, absorbing the increase in the SG&A ratio.

Factors Affecting Performance

【Revenue】Revenue increased 5.5% YoY to ¥8306.2B. By region, India grew +20.0%, Asia +8.4%, Japan +7.8%, and the Americas +5.2%, while China declined -10.1% and Europe and Africa remained low-growth markets at +2.9%. Japan and the Americas accounted for the majority of revenue by scale (approximately 76% combined), with solid demand driving overall revenue growth.

【Profit and Loss】Operating Income was ¥525.2B (+11.5%), with the benefit of the gross profit margin improving from 14.5% to 15.2% exceeding the increase in the SG&A ratio (8.5%→8.8%). Profit Before Tax was ¥604.4B (+22.6%), boosted by net financial income of ¥61.9B, as financial income of ¥82.2B exceeded financial expenses of ¥20.3B. Net Income attributable to owners of the parent was ¥438.9B (+36.0%), representing earnings growth substantially above the increase in Operating Income. The Company recorded both revenue and profit growth, with improved profitability and increased financial income particularly accelerating earnings growth.

Segment Analysis

The Americas was the largest contributor to Operating Income at ¥224.4B (+8.3%), with a profit margin of 7.2%. Japan generated Revenue of ¥3209.1B (+7.8%) and Operating Income of ¥113.1B (+17.7%), resulting in a profit margin of only 3.5%; the asymmetry between scale and profitability therefore continues. Asia (profit margin: 14.0%) and India (profit margin: 11.5%) achieved relatively high profitability as well as high growth rates. Although China’s Revenue declined -10.1%, Operating Income rose +107.9% to ¥21.3B, indicating significant improvement in profitability. Europe and Africa recorded Revenue growth of +2.9%, while Operating Income declined -8.2%, continuing the pattern of higher revenue but lower profit.

Key Financial Metrics

【Profitability】The Operating Income margin was 6.3%, improving from 6.0% in the same period of the previous year, while the Net Income margin rose to 5.3% from 4.1%. The gross profit margin improved to 15.2% from 14.5% in the same period of the previous year, but remained below 20%; the impact of rising raw material and labor costs and the effectiveness of price pass-through on profit margins therefore remains significant.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1015.6B, approximately 2.3 times Net Income attributable to owners of the parent, indicating cash generation exceeding accounting profit.【Investment Efficiency】ROE (annualized) was 10.1%, while the Equity Ratio was 58.4%, slightly down from 59.4% in the same period of the previous year but maintaining a sound level.【Financial Soundness】Current assets of ¥5023.8B compared with current liabilities of ¥2340.6B indicate good liquidity. Cash and cash equivalents of ¥1783.2B substantially exceeded short-term interest-bearing debt of ¥475.0B, placing the Company effectively in a net cash position.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥1015.6B, a substantial increase of +51.0% YoY. In addition to a composition consisting of Profit Before Tax of ¥604.4B plus depreciation and amortization of ¥394.5B, a ¥207.6B cash inflow from the decrease in trade receivables contributed to the increase. Investing Cash Flow was -¥219.0B, including capital expenditures of ¥387.3B, equivalent to approximately 4.7% of Revenue, indicating a balanced approach between investment recovery and expansion. As a result, Free Cash Flow was ¥796.7B, more than sufficient to absorb Financing Cash Flow of -¥216.8B, including dividend payments of ¥133.5B. Cash and cash equivalents accumulated to ¥1783.2B, an increase of +¥595.5B from the beginning of the period. Since the contribution from working capital, namely the decrease in trade receivables, includes temporary factors, the sustainability of OCF from the next period onward requires monitoring of trends in trade receivables and trade payables.

Earnings Quality

Other income of ¥27.7B and other expenses of ¥34.1B were broadly balanced against Operating Income of ¥525.2B, indicating that Operating Income does not depend on non-recurring income. The primary factors adding to Profit Before Tax were financial income of ¥82.2B (net ¥61.9B after deducting financial expenses of ¥20.3B) and share of profit of investments accounted for using the equity method of ¥17.2B. Both have a certain degree of recurrence, but the increase in Profit Before Tax (+22.6%), exceeding the Operating Income growth rate (+11.5%), was largely attributable to financial factors. OCF reached approximately 2.3 times Net Income attributable to owners of the parent, indicating a small accrual, or difference between accounting profit and cash, and good quality of earnings cash conversion. An impairment loss recognized in the same period of the previous year did not occur in the current period, and no significant one-time losses were identified.

Earnings Forecast and Guidance

The Full-Year forecast is Revenue of ¥1兆1400B, Operating Income of ¥700.0B (+17.0% YoY), EPS of ¥422.51, and a dividend of ¥110.00. The Q3 cumulative progress rates were 72.9% for Revenue, 75.0% for Operating Income, and 82.8% for Net Income (based on projected Net Income attributable to owners of the parent of ¥530B relative to the Company forecast). Operating Income was almost in line with the standard 75% progress level. Although Revenue progress was slightly below the standard level, profit progress was strong; taking into account that the earnings forecast was revised during the current quarter, progress toward the Full-Year plan is generally steady.

Shareholder Returns

A dividend of ¥50.00 per share was paid in Q2, and the Full-Year forecast dividend is ¥110.00 per share. There was no revision to the dividend forecast, and total dividend payments for the current period were ¥133.5B. Using the Company forecast of ¥530B in Net Income attributable to owners of the parent as the denominator, the Payout Ratio is approximately 26%, a conservative level below 60%. No share repurchases were conducted, and shareholder returns consisted solely of dividends; therefore, discussion of the Total Return Ratio is not applicable. Free Cash Flow of ¥796.7B substantially exceeded dividend payments, and the current dividend funding is sufficiently supported by Operating Cash Flow.

Risk Factors

1. Raw Material and Labor Costs and Gross Profit Margin Structure: Although the gross profit margin improved to 15.2% from the same period of the previous year, it remains below 20%. If rising costs cannot be absorbed through price pass-through or productivity improvements, the impact on the Operating Income margin, currently 6.3%, could be significant.

2. Regional Differences in Profitability: In China, Revenue declined -10.1% while Operating Income increased +107.9%, indicating improved profitability; however, the sustainability of demand trends remains uncertain. In Europe and Africa, Revenue increased +2.9% while Operating Income declined -8.2%, and the pattern of higher revenue but lower profit continues.

3. Reversal Risk from Working Capital Changes and Foreign Exchange Impact: The increase in OCF included a ¥207.6B cash inflow from the decrease in trade receivables, and OCF growth could slow if trade receivables begin to increase going forward. In addition, translation adjustments for foreign operations of ¥191.6B were a major factor in other comprehensive income. Given the high proportion of overseas Revenue, foreign exchange fluctuations could affect both equity and earnings.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Return

Compared with the industry median, both the Operating Income margin and Net Income margin are below the median in terms of profitability.

Growth and Capital Efficiency

The Revenue growth rate exceeded the industry median, indicating a relative advantage in top-line growth.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Against Revenue growth of 5.5%, Operating Income increased +11.5% and Net Income increased +36.0%, confirming earnings growth exceeding revenue growth. Improvement in the gross profit margin (14.5%→15.2%) was the primary factor behind the improvement in profitability, and its sustainability will be a key focus going forward.

2. OCF reached ¥1015.6B, approximately 2.3 times Net Income attributable to owners of the parent, while Free Cash Flow was also strong at ¥796.7B, confirming cash generation exceeding accounting profit. Financial soundness remains high, with an Equity Ratio of 58.4% and cash and cash equivalents of ¥1783.2B.

3. By region, contrasting trends were observed: improved profitability in China despite lower Revenue, and higher Revenue but lower profit in Europe and Africa. The impact of changes in the regional portfolio structure on consolidated profitability will remain an area to monitor in future earnings results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,617–¥4,892 at Cost of Equity ±1%, and ¥4,749–¥4,755 at ω±0.1.

Notes:

• Net assets as of the quarter-end 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 market share prices or recommendations of specific investment actions, nor do they predict or guarantee future share prices.)

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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 professionals as necessary.

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