VT HOLDINGS CO.,LTD. FY2026 FY Earnings Report

Financial Highlights

• Net Sales: ¥388.73B
• Operating Income: ¥11.00B
• Net Income: ¥5.95B
• EPS: ¥41.50

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

FY2026 results were mixed: strong top-line growth but margin compression in the core Car business kept operating profit nearly flat and net profit declined. Revenue rose 10.6% YoY to 3,887.3, driven by broad-based increases across new cars (+6.8% YoY), used cars (+15.3%), service (+14.0%), rental (+10.8%), and housing (+14.1%). Gross profit expanded 12.4% to 599.9, but operating income inched up only 1.3% to 110.0 as SG&A grew 15.2% to 487.1. Operating margin compressed by 25 bps to 2.8% (from 3.1%), while gross margin improved 23 bps to 15.4% on mix and volume. Segment-wise, Car operating income fell 8.3% to 80.1 with margin down to 2.2%, offset partly by Housing operating income up 25.4% to 20.6 with a 6.5% margin. Finance costs increased to 20.7 amid higher borrowings, keeping interest burden contained but edging down coverage. Net income declined 2.8% to 59.5, and profit attributable to owners fell 7.6% to 48.98 as a higher effective tax rate and larger non-controlling interests weighed. Cash generation remained solid: operating CF of 187.9 (OCF/NI 3.84x) and FCF of 79.8 covered dividends 2.8x and total shareholder returns 1.6x. Working capital intensity rose, with inventories up to 876.4 and DIO flagged at 97 days, pressuring cash conversion (OCF/EBITDA 0.68x). Leverage is high (D/E 2.89x) and the equity ratio stands at 23.3%, though interest coverage of ~5.3x is acceptable. Goodwill is modest at 13.5 (4.5% of assets; 17.3% of equity) and M&A activity was minimal. Guidance calibration is challenging: versus management’s targets, the company reached ~97% of revenue, ~81% of operating income, and ~70% of profit to owners, undershooting profit goals due to margin pressure and tax. Dividend per share totaled ¥24 (c. 60% payout to owners), appearing sustainable on FCF, but the total return ratio exceeded 100% of owners’ earnings due to buybacks. Near-term focus is on normalizing Car margins, accelerating inventory turns, and moderating leverage to support the FY target recovery trajectory.

Profitability Analysis

ROE decomposition (3-factor): Net margin 1.3% × Asset turnover 1.283 × Financial leverage 3.89x = ~6.3% ROE. The largest change YoY was margin: operating margin compressed to 2.8% while revenue expanded, with SG&A growth (+15.2%) outpacing gross profit growth (+12.4%). Business drivers: Car segment margin fell to 2.2% as pricing/mix and cost inflation diluted profitability; Housing benefited from scale and mix, lifting its margin to 6.5%. Sustainability: Car margin softness may persist near term given inventory carry costs and promotional intensity; Housing strength is more sustainable given order backlog conversion and controlled SG&A. Extended DuPont (5-factor): Tax burden 0.484 (effective tax rate high), interest burden 0.921, and EBIT margin 2.8%. Interest burden is stable, but the elevated tax burden and low EBIT margin are the primary ROE headwinds. Operating efficiency concerns: SG&A grew faster than revenue (+15.2% vs +10.6%), indicating operating leverage turned adverse in the Car segment.

Growth Assessment

Top-line growth was broad-based across all major categories and regions, particularly Europe and Japan. Volume and service growth underpinned gross profit, while operating profit lagged on higher SG&A and cost inflation. Housing delivered double-digit revenue and a 25%+ jump in operating profit, demonstrating robust demand and execution. Equity-method income increased to 2.20, contributing marginally to PBT. Finance income rose alongside higher cash yields, partially offsetting increased interest expense. Despite revenue momentum, net profit declined on higher taxes and larger profit attribution to non-controlling interests. Near-term growth sustainability hinges on improved inventory turnover and Car margin normalization; macro demand in autos appears steady, but pricing discipline and cost pass-through will be key. The company’s diversified aftermarket/service and rental streams support recurring gross profit. Given minimal M&A activity, growth is primarily organic with operating improvements as the main lever.

Financial Health

Leverage is elevated: D/E is 2.89x and the equity ratio is 23.3%. Interest coverage remains acceptable at ~5.3x (EBIT 110.0 / finance costs 20.7). Debt/EBITDA is ~3.1x, above investment-grade comfort (<2.5x) but below high-yield (>4x). Liquidity pressure is visible: current assets 147,541 vs current liabilities 158,049 imply a current ratio of ~0.93 (<1.0 warning). Maturity profile shows significant short-term borrowings (58,134) versus large inventories (87,643); maturity mismatch risk is manageable if inventory turns improve, but refinancing and working capital reliance are notable. Contract liabilities of 13,521 provide some revenue visibility in Housing and services. Goodwill (13,522) is moderate at 17.3% of equity, limiting impairment risk under current trends. Treasury stock increased (share repurchases of 23.02) while total equity declined to 77,941, incrementally tightening capital buffers.

Notable B/S Changes

Treasury stock: -23.0bn change (from -6.67 to -29.70, -345%) - Reflects stepped-up buybacks, reducing equity and modestly increasing leverage. Intangible assets: -3.85bn (-28.2%) - Likely amortization/disposals; reduces non-cash asset base and lowers future amortization burden.

Cash Flow Quality

OCF of 187.9 vs net income of 59.5 yields OCF/NI of 3.84x, indicating high earnings quality. FCF was 79.8, supported by disciplined capex (CapEx/Depreciation ~0.82x). Working capital consumed cash: inventories increased by 8,956 and receivables were broadly flat; payables increased 2,557, partially offsetting. Cash conversion (OCF/EBITDA) at 0.68x is weak, driven mainly by inventory build and higher lease payments (14.96). No signs of aggressive working capital manipulation; changes align with sales growth and inventory accumulation dynamics in autos. FCF covered dividends 2.71x and total shareholder returns (dividends + buybacks) ~1.55x, leaving some balance sheet flexibility despite higher leverage.

Dividend Sustainability

DPS totaled ¥24 (interim ¥12, year-end ¥12). Payout ratio is ~60% against profit attributable to owners (EPS ¥41.5), within a sustainable range. FCF coverage of dividends is strong at 2.71x. Including buybacks (23.02), the total return ratio is ~105% of profit attributable to owners (dividends 28.47 + buybacks 23.02 vs NI owners 48.98), indicating shareholder returns exceeded owners’ earnings; this is covered by FCF this year (~1.55x coverage) but less resilient if cash conversion weakens. Given leverage and a <1.0 current ratio, maintaining DPS appears feasible, but additional buybacks should be balanced against inventory and debt normalization priorities.

Risk Assessment

Business risks include Concentration in Car segment (91.8% of revenue) exposes earnings to auto demand cycles and competitive pricing, Margin pressure in Car (2.2% margin) from cost inflation, promotions, and mix drag, High inventory days (97) heighten obsolescence and markdown risks in used cars and imported models, Elevated effective tax rate reduces net profitability leverage from volume growth, Regional exposure to Europe and Japan concentrates macro/FX sensitivity.

Financial risks include High leverage (D/E 2.89x) with sizable short-term borrowings (58,134) increases refinancing risk, Current ratio ~0.93 signals tight liquidity; reliance on working capital lines, Debt/EBITDA ~3.1x sits above investment-grade thresholds; a downturn could compress interest coverage, Low cash conversion (OCF/EBITDA 0.68x) tied to inventory build may persist if turns do not improve.

Key concerns include Operating margin below 3% and SG&A growth outpacing revenue constrain profit scalability, Total shareholder return >100% of owners’ earnings not structurally sustainable if FCF moderates, Housing growth offsetting Car weakness may not fully compensate if auto margins stay depressed.

Investment Implications

Key takeaways include Top-line strength (+10.6%) did not translate to bottom-line growth; Car margin compression is the swing factor, OCF robust vs earnings (3.84x), but low cash conversion reflects inventory intensity, Leverage high (D/E 2.89x) yet interest coverage acceptable (~5.3x); balance sheet improvement requires inventory normalization, Housing delivered strong margin (6.5%) and profit growth, partially buffering core weakness, Shareholder returns generous (DPS ¥24; buybacks), but total return exceeded owners’ earnings.

Metrics to watch include Car segment operating margin and SG&A trajectory, Inventory days and inventory turnover, Debt/EBITDA and interest coverage, Effective tax rate and tax burden, OCF/EBITDA cash conversion, Progress vs next-year profit guidance, particularly operating income.

Regarding relative positioning, Within domestic auto retail peers, VT demonstrates solid scale and diversified revenue streams (service, rental, housing) but operates with lower operating margins and higher leverage; execution on inventory turns and Car margin repair is required to close the profitability gap.