TOYODA GOSEI (7282) FY2027 Q1 Earnings Report

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Executive Summary

For Q1 of the fiscal year ending March 2027, both operating income and net income increased by double digits, driven by higher revenue, an improved gross margin, and an improvement in net financial income. Revenue was ¥303.90B (+16.7% YoY), operating income was ¥23.22B (+26.4%), profit before tax was ¥25.77B (+41.3%), and net income attributable to owners of the parent was ¥18.08B (+34.2%). The primary driver of revenue growth was expanding demand in key regions, including Japan, the Americas, and Asia, while the main drivers of profit growth were the improved gross margin and the shift to positive net financial income.

Factors Affecting Performance

【Revenue】Revenue was ¥303.90B, representing a 16.7% YoY increase. By region, the Americas was the largest, at ¥121.08B (39.8% of total, YoY +17.5%), followed by Japan at ¥116.56B (38.3%, +19.8%). Asia (+24.2%) and India (+23.7%) also recorded high growth, while China was the only region to report a decline, with revenue of ¥17.49B (-11.6%).

【Profit and Loss】Operating income was ¥23.22B (YoY +26.4%), and the operating margin improved to 7.6%, approximately 58bp higher than 7.1% in the same period of the previous year. The gross margin rose to 16.4%, approximately 60bp higher YoY, confirming improvements in cost management. Meanwhile, SG&A expenses increased 20.4% to ¥27.75B, outpacing revenue growth, and the SG&A ratio rose approximately 28bp to 9.1%, partially offsetting the benefits of higher operating income. Financial income of ¥2.61B and financial expenses of ¥0.68B caused net financial income to shift from an excess of expenses in the same period of the previous year to an excess of income of ¥1.93B, resulting in profit before tax growth (+41.3%) exceeding operating income growth. The Company delivered higher revenue and higher profits.

Segment Analysis

Segment profitability varied significantly by region. Japan recorded substantial profit growth, with revenue up 19.8% and operating income up 143.1%; its operating margin improved approximately 270bp to 5.3%, making it a key driver of consolidated profit growth. China achieved a significant improvement in profitability despite an 11.6% revenue decline, with operating income up 135.0% and an operating margin of 8.6% (+approximately 536bp), making it a segment with lower revenue but higher profit. In contrast, the Americas reported operating income down 2.9% despite revenue growth of 17.5% (operating margin 8.6%, -approximately 180bp); Europe and Africa reported operating income down 19.2% against revenue growth of 8.3% (operating margin 5.5%, -approximately 185bp); and India’s operating income increased only 4.3% despite revenue growth of 23.7%, with its operating margin declining approximately 136bp. The fact that revenue growth has not necessarily translated into profit growth in certain regions indicates regional differences in the ability to pass through costs.

Key Financial Metrics

【Profitability】The operating margin improved to 7.6% from 7.1% in the same period of the previous year, while the net profit margin attributable to owners of the parent improved to 6.0% from 5.2%. The gross margin rose approximately 60bp YoY to 16.4%; however, because cost of sales accounts for 83.6% of revenue, sensitivity to fluctuations in raw material, labor, and logistics costs remains relatively high.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥51.23B, reaching 2.83 times net income attributable to owners of the parent of ¥18.08B, indicating strong cash generation supporting earnings.【Investment Efficiency】Annualized ROE was 12.6% and the equity ratio was 57.0%, supported by a combination of asset turnover and conservative leverage.【Financial Soundness】Current assets of ¥509.37B exceeded current liabilities of ¥285.91B, resulting in a current ratio of approximately 178%. Cash and cash equivalents of ¥165.33B exceeded total bonds and borrowings of ¥135.90B, indicating a net cash position. However, current borrowings increased ¥36.22B from the end of the previous fiscal year, while non-current borrowings declined ¥23.66B, indicating a shortening of the funding maturity profile and requiring monitoring.

Cash Flow Analysis

Operating Cash Flow was ¥51.23B (+22.7% YoY). A ¥13.73B decrease in trade receivables and a ¥9.58B increase in trade payables contributed to cash inflows, while inventories increased ¥2.86B, indicating inventory accumulation associated with higher revenue. Investing Cash Flow was -¥18.14B, including capital expenditures of ¥17.06B and ¥8.44B of expenditure related to the acquisition of Ashimori Industry as a wholly owned subsidiary. Financing Cash Flow was -¥1.00B, mainly comprising a ¥9.09B increase in short-term borrowings, repayment of long-term borrowings of ¥21.58B, and dividend payments of ¥10.29B. Free Cash Flow (OCF + Investing Cash Flow) remained positive at ¥33.10B, demonstrating the Company’s ability to generate internal funds while proceeding with capacity investments and subsidiary acquisitions. Cash and cash equivalents increased to ¥165.33B, expanding the liquidity buffer.

Earnings Quality

The current period’s profit growth reflects both improved operating profitability and an improvement in financial income and expenses. Profit before tax growth of +41.3% significantly exceeded operating income growth of +26.4%, owing to the shift in net financial income from an excess of expenses in the same period of the previous year to an excess of income, resulting from financial income of ¥2.61B and financial expenses of ¥0.68B. This may include temporary factors. Operating Cash Flow reached 2.83 times net income attributable to owners of the parent, indicating strong earnings-to-cash conversion; however, part of this was attributable to working capital factors, namely a decrease in trade receivables and an increase in trade payables, and the same level of cash inflow may not recur in the future. Comprehensive income was ¥24.69B, including ¥22.58B attributable to owners of the parent. The difference from net income of ¥18.08B was primarily due to a ¥5.18B increase in the foreign currency translation adjustment for foreign operations. The divergence between net income and comprehensive income reflects foreign exchange factors and does not materially impair the underlying profitability of the business.

Earnings Forecast and Guidance

The full-year forecast remains unchanged at revenue of ¥1,200.00B, operating income of ¥80.00B (YoY +0.6%), and EPS of ¥97.30. Q1 progress was 25.3% for revenue and 29.0% for operating income, both exceeding the standard progress rate of 25%. To achieve the full-year operating income forecast, ¥56.78B will be required over the remaining three quarters, implying a required operating margin for the remainder of the year below the 7.6% recorded in Q1. This suggests that management assumes a decline in profitability toward the second half of the fiscal year. There were no revisions to either the earnings forecast or the dividend forecast.

Shareholder Returns

Dividend payments during the quarter were ¥10.29B, resulting in a cash payout ratio of 56.9% relative to net income attributable to owners of the parent of ¥18.08B. As no share repurchases were conducted, the Total Return Ratio was at the same level as the payout ratio. Dividend payments increased 47.5% from ¥6.98B in the same period of the previous year, and dividend coverage by Free Cash Flow of ¥33.10B was 3.22 times, indicating ample financial capacity. In addition, pursuant to a resolution of the Board of Directors dated April 28, 2026, a 1-for-5 stock split is scheduled with September 30, 2026 as the record date. Before taking the stock split into account, the forecast year-end dividend for the fiscal year ending March 2027 is ¥90.00 per share, with an annual dividend of ¥175.00.

Risk Factors

1. Cost pass-through risk: Although the gross margin improved approximately 60bp YoY to 16.4%, the structure in which cost of sales accounts for 83.6% of revenue means that delays in passing through increases in raw material, energy, logistics, and labor costs could cause significant earnings volatility.

2. Regional variation in profitability: The Americas (operating margin 8.6%, -approximately 180bp), Europe and Africa (5.5%, -approximately 185bp), and India (7.3%, -approximately 136bp) all experienced declining operating margins despite revenue growth, indicating that higher revenue has not necessarily translated into higher profits.

3. Shortening of the funding maturity profile: Current borrowings increased ¥36.22B (+77.4%) from the end of the previous fiscal year, while non-current borrowings declined ¥23.66B. With a current ratio of approximately 178% and net cash of ¥29.43B, there is limited concern regarding short-term payment capacity; however, refinancing terms require ongoing monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability metrics are slightly below the industry median but remain within the IQR.

Growth and Capital Efficiency

The revenue growth rate significantly exceeds the industry median and represents high growth above the upper bound of the IQR.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Company delivered higher revenue and higher profits, with revenue up +16.7%, operating income up +26.4%, and net income up +34.2%; the gross margin also improved approximately 60bp. However, the full-year operating income forecast remains unchanged, and the progress profile assumes a decline in profitability in the second half, which warrants attention.

2. Japan and China recorded substantial profit growth and steadily improving operating margins, whereas the Americas, Europe and Africa, and India experienced declining operating margins despite revenue growth, indicating widening differences in regional earnings structures.

3. Operating Cash Flow reached 2.83 times net income, and financial soundness remains high, with net cash of ¥29.43B and an equity ratio of 57.0%. However, the shortening of the funding maturity profile resulting from increased current borrowings represents a structural change requiring ongoing monitoring.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,892–¥4,119 at cost of equity ±1%; ¥3,972–¥4,024 at ω±0.1.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used, resulting in a timing difference from the full-year forecast.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action and does not 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 a professional where necessary.

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