| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1596.1B | ¥1381.8B | +15.5% |
| Operating Income | ¥43.6B | ¥37.8B | +15.4% |
| Equity-method Investment Income (Loss) | - | - | - |
| Ordinary Income | ¥39.1B | ¥34.6B | +13.0% |
| Net Income | ¥27.6B | ¥23.3B | +18.3% |
| ROE | 3.0% | 2.6% | - |
For the quarter ended March 2027 (Q1), Revenue was ¥1,596.1B (YoY +¥214.3B, +15.5%), Operating Income was ¥43.6B (YoY +¥5.8B, +15.4%), Ordinary Income was ¥39.1B (YoY +¥4.5B, +13.0%), and Quarterly Net Income attributable to owners of the parent was ¥27.6B (YoY +¥4.3B, +18.3%). Growth in both revenue and profit continued, with double-digit top-line expansion and SG&A control driving Operating Income growth of more than 15%. However, interest expense doubled to ¥4.7B (prior ¥2.4B), and non-operating expenses rose to ¥5.0B (prior ¥4.0B), causing Ordinary Income growth to lag Operating Income by 2.4pt and remain at +13.0%. Gross margin was 16.0% and Operating Margin was 2.7%, essentially flat year-on-year, indicating a continued low-margin structure. EPS was ¥26.63 (prior ¥21.83, +22.0%), reflecting solid growth at the net income level after absorbing tax effects and non-controlling interests. Progress against the full-year plan was: Revenue 25.4%, Operating Income 18.2%, Ordinary Income 17.5%, with profit metrics 6–8pt below the standard 25% pace, indicating back-loaded performance for the remainder of the fiscal year.
[Revenue] Revenue of ¥1,596.1B (+15.5%) benefited from expansion in both retail and wholesale vehicle sales, achieving double-digit growth. By segment, Japan recorded ¥1,569.0B (+14.9%) and drove the business, accounting for 98.3% of consolidated sales. By revenue type, vehicle sales (retail) were the largest at ¥955.3B, up ¥44.0B (+4.8%) year-on-year. Vehicle sales (wholesale) increased substantially to ¥508.1B, up ¥154.7B (+43.8%), with wholesale channel expansion the primary contributor to revenue growth. Maintenance revenue was ¥49.8B (+18.2%), commission revenue was ¥44.4B (-1.3%), and other revenue was ¥29.3B (+34.6%), so service and ancillary revenues were generally solid. Other revenue (leasing) doubled to ¥9.3B from ¥4.4B the prior year, contributing via lease business expansion. Overall, capturing domestic used-car market demand and strengthening wholesale resulted in unit-driven volume growth rather than price-led growth.
[Profitability] Gross profit was ¥256.1B (gross margin 16.0%), up ¥34.7B year-on-year, while gross margin remained flat at 16.0%. SG&A was ¥212.6B (SG&A ratio 13.3%), up ¥29.0B year-on-year, with the SG&A ratio unchanged at 13.3%, indicating limited operating leverage. Operating Income was ¥43.6B (Operating Margin 2.7%), rising +15.4% thanks to revenue growth, but margin levels remained low without structural improvement. Non-operating income was limited at ¥0.5B (interest income ¥0.3B, etc.), while non-operating expenses increased ¥1.0B to ¥5.0B year-on-year. The bulk of this was interest expense of ¥4.7B (prior ¥2.4B, +94.6%), reflecting higher interest-bearing debt and rising interest rates. Payment fees were ¥0.0B and foreign exchange losses ¥0.1B, both immaterial. Consequently, Ordinary Income of ¥39.1B (+13.0%) lagged Operating Income growth. Extraordinary items were minor, with special loss ¥0.6B (loss on disposal of fixed assets ¥0.5B). Pre-tax income of ¥38.4B less corporate taxes of ¥10.9B (effective tax rate 28.4%) and non-controlling interests of ¥0.8B resulted in Net Income attributable to owners of the parent of ¥27.6B (+18.3%). In summary, while revenue and profit increased, rising interest burdens constrained margin improvement, producing volume-driven profit growth within a low-margin structure.
Reportable segments are Japan and Other (U.S.). The Japan segment posted Revenue of ¥1,569.0B (+14.9%) and Operating Income of ¥44.0B (+15.1%), with an operating margin of 2.8%. Year-on-year, sales rose ¥203.2B and profit increased ¥5.8B, achieving revenue and profit growth with operating margin unchanged at 2.8%. All categories—vehicle retail, wholesale, and maintenance—saw revenue increases, with wholesale expansion particularly notable. The Other segment (U.S.) recorded Revenue of ¥27.2B (prior ¥16.8B) and is at an early stage with small scale, but operating loss improved to △¥0.3B (prior △¥1.0B), narrowing the deficit by ¥0.7B. Adjusted consolidated Operating Income was ¥43.6B, with Japan effectively generating nearly all consolidated profit and indicating high domestic concentration.
[Profitability] Operating Margin 2.7%, Ordinary Income Margin 2.4%, Net Margin 1.7%—all at low levels. Gross Margin 16.0% was flat year-on-year, reflecting a low-price, high-turnover used-vehicle distribution model. ROE was 3.0% (annualized) and, by DuPont decomposition, is driven by Net Margin 1.7% × Total Asset Turnover 0.59x (annualized) × Financial Leverage 2.97x. The low ROE stems from both low margins and turnover. ROA was 1.0% (annualized). Estimated ROIC (EBIT ÷ (Equity + Interest-bearing Debt)) is approximately 1.9%, below the cost of capital, indicating a need to improve capital efficiency.
[Cash Quality] Days Sales Outstanding (DSO) approximately 91 days, Days Inventory Outstanding (DIO) approximately 292 days, indicating long inventory holding. Days Payable Outstanding (DPO) approximately 27 days, producing a Cash Conversion Cycle (CCC) of about 356 days. Interest coverage (Operating Income ÷ Interest Expense) is 9.3x, indicating capacity to service interest although down from 15.7x the prior year.
[Investment Efficiency] Total assets ¥2,720.9B (YoY +4.3%) versus Revenue ¥1,596.1B gives Total Asset Turnover of 0.59x (annualized). Inventory ¥1,073.1B represents 39.4% of total assets and is the main drag on turnover. Trade receivables ¥399.9B (prior ¥322.5B) increased in line with revenue growth.
[Financial Soundness] Equity Ratio 33.6% (prior 34.6%) indicates moderate capitalization. Total interest-bearing debt ¥881.7B (short-term borrowings ¥25.9B + long-term borrowings ¥790.9B + corporate bonds ¥7.0B + other leases, etc.) rose year-on-year, yet with Net Assets ¥915.5B (prior ¥903.2B) the D/E ratio is 1.97x, within an acceptable range. Current Ratio 255.7% and Quick Ratio ((Current Assets - Inventory) / Current Liabilities) 116.0% indicate ample liquidity. Cash and Deposits were ¥343.1B (prior ¥274.6B), up ¥68.5B, improving available liquidity.
Against Operating Income of ¥43.6B, large working capital stagnation limited cash generation. Inventory ¥1,073.1B and Trade Receivables ¥399.9B totaling ¥1,473.0B account for 75.1% of current assets, and low turnover suppresses cash conversion. With DSO 91 days + DIO 292 days = 383 days less DPO 27 days yields CCC 356 days, effectively locking in roughly one year’s worth of working capital. Contract liabilities ¥321.7B (advances received) act as deferred revenue equivalents and partially support working capital with customer prepayments. Increased interest payments of ¥4.7B consistently drain cash from operating activities, so rising interest burdens squeeze both profit and cash. Cash and deposits rose ¥68.5B to ¥343.1B, likely supported by increased debt funding and some inventory financing, which contributed to cash increases. Improving free cash flow will require accelerating inventory turnover (shortening DIO) and strengthening receivables management (shortening DSO).
Current period profits are primarily from core operations, with Operating Income ¥43.6B at the core. Non-operating income ¥0.5B (interest income, etc.) is minor, while most of non-operating expenses ¥5.0B consisted of interest expense ¥4.7B, which reduced Ordinary Income relative to Operating Income by ¥4.5B. Extraordinary items were limited to special loss ¥0.6B (loss on disposal of fixed assets ¥0.5B), so one-off factors were minimal. Comprehensive Income was ¥32.6B (attributable to owners of the parent ¥31.8B), and the difference of ¥5.0B between Comprehensive Income and Net Income ¥27.6B was mainly due to foreign currency translation adjustments of ¥5.0B. Exchange rate movements affect asset valuations but do not impact recurring profit and loss. Given low gross margin 16.0% and Operating Margin 2.7%, pricing power is weak and margin improvement will be difficult without efficiency gains. Rising interest expense is degrading earnings quality, and interest-rate volatility poses a risk to earnings stability. On accruals, attention is needed on inventory valuation and receivables collectability; DIO of 292 days implies risk of stagnation and obsolescence.
Full-year plan: Revenue ¥6,290.0B (+12.5%), Operating Income ¥240.0B (+21.7%), Ordinary Income ¥224.0B (+23.4%), EPS ¥141.42, Dividend ¥21.06. Q1 progress rates: Revenue 25.4%, Operating Income 18.2% (¥43.6B ÷ ¥240.0B), Ordinary Income 17.5% (¥39.1B ÷ ¥224.0B). Versus the standard 25% pace, Revenue is roughly on track, while Operating Income is 6.8pt and Ordinary Income 7.5pt below, reflecting a back-loaded plan. Downside factors include continued low margins and larger-than-expected increases in interest expense. Conversely, seasonality in used-car demand and further ramp-up of wholesale could contribute in the latter half of the year. Full-year Operating Margin target 3.8% (¥240.0B ÷ ¥6,290.0B) versus Q1 2.7% is 1.1pt lower, so margin improvements in H2 are key to meeting guidance. There were no revisions to earnings or dividend forecasts this quarter; the company maintains the current plan.
No dividend was paid as of Q1-end; dividends are paid at year-end in a lump sum. Full-year dividend forecast is ¥21.06 (prior period ¥15.43, +¥5.63) indicating a dividend increase policy. Dividend payout ratio versus full-year EPS forecast ¥141.42 is 14.9%, low and reflecting a retention-focused stance. Comparing prior DPS ¥15.43 and Q1 EPS ¥26.63 (annualized ¥106.52) implies a quarterly-base payout ratio of roughly 14.5%, consistent with the full-year plan. With Cash and Deposits ¥343.1B and Current Ratio 255.7%, funding for dividends appears adequately secured. Although low operating cash flow generation and rising interest costs pose bottlenecks, Interest Coverage of 9.3x suggests payment capability is maintained and there is limited immediate risk to dividend sustainability. No share buyback activity has been disclosed, making evaluation of Total Return Ratio difficult. Future expansion of dividend capacity depends on profit growth and improvements in inventory efficiency that expand operating cash flow.
Inventory stagnation / slow turnover risk: Inventory ¥1,073.1B (39.4% of total assets) and DIO 292 days indicate prolonged holding. In the event of fluctuations in used-car prices or demand slowdown, inventory valuation losses and discounting pressure could depress gross margins. Although DIO remained flat year-on-year, lack of turnover improvement necessitates ongoing monitoring of inventory risk.
Rising interest burden and higher financing costs: Interest expense doubled to ¥4.7B (prior ¥2.4B, +94.6%). Most interest-bearing debt ¥881.7B consists of long-term borrowings ¥790.9B, so rising interest rates could materially increase interest payments and compress Ordinary Income. Interest Coverage could decline from 9.3x, and without margin improvements financing costs may become a significant drag.
Concentration on domestic demand and economic sensitivity: Japan segment accounts for 98.3% of sales, making performance highly sensitive to domestic used-car market supply-demand fluctuations. Economic downturns or normalization of new-car supply reducing used-car demand could rapidly deteriorate profitability given high inventory and low gross margins. Overseas contributions (e.g., U.S.) are minor and geographic diversification is limited.
Profitability & Returns
| Metric | Our Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.7% | 4.3% (1.7%–6.9%) | -1.5pt |
| Net Margin | 1.7% | 3.8% (1.5%–5.1%) | -2.1pt |
Profitability is below industry median, with both Operating and Net Margins at the lower end. This reflects a low gross margin, high-turnover model and suggests significant scope for margin improvement.
Growth & Capital Efficiency
| Metric | Our Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 15.5% | 3.1% (-0.6%–11.7%) | +12.4pt |
Revenue growth exceeds the industry median by a wide margin, indicating strong top-line expansion. Wholesale expansion and a volume strategy have been effective.
※ Source: Company compilation
Potential to improve low-margin, low-ROE structure: With Operating Margin 2.7% and ROE 3.0% below industry peers, there is scope for improvement via accelerating inventory turnover (shortening DIO) and improving gross profit mix. Given Revenue growth of 15.5%—top-tier in the industry—if efficiency improvements are implemented, rapid improvement in ROE/ROIC is possible.
Interest burden increase and working capital inefficiency as constraints: Interest expense rose +94.6% year-on-year, representing a downside to full-year progress. CCC of 356 days and long working capital tails combine with higher interest costs to hinder cash generation. Execution of inventory optimization and stronger receivables management in H2 is key to achieving full-year guidance and expanding dividend capacity.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings release data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed before making such decisions.