Aichi Tokei Denki Co.,Ltd. FY2027 Q1 Earnings Report

Quick View

Executive Summary

Despite a +10.1% year-on-year increase in revenue, the combination of a decline in gross margin and a sharp increase in SG&A expenses caused the Company’s operating result to shift from a profit to a loss. Revenue was ¥13.78B (¥12.52B in the previous year, YoY +10.1%), operating income was ¥-0.74B (¥0.84B in the previous year, YoY -187.8%), ordinary income was ¥-0.58B (¥1.07B in the previous year, YoY -154.4%), and net income was ¥-0.40B (¥0.77B in the previous year, YoY -152.2%). The benefit of higher revenue was offset by deterioration in the gross margin due to an increase in the cost ratio (23.5% in the previous year → 20.8%) and a sharp rise in the SG&A ratio (16.8% in the previous year → 26.1%), ultimately resulting in a net loss. This is the key feature of the current earnings results.

Factors Behind Changes in Business Performance

【Revenue】Revenue was ¥13.78B, representing a year-on-year increase of +10.1%. As the Company has a high weighting toward measurement-equipment-related operations and a strong degree of concentration in a single business, disclosure of segment information has been omitted. No disclosure data is available regarding the regional composition of revenue.

【Profit and Loss】Gross profit was ¥2.86B, with a gross margin of 20.8%, down approximately 2.7pt from 23.5% in the previous year, confirming an increase in the cost ratio. SG&A expenses increased 71.3% to ¥3.60B from ¥2.10B in the previous year, while the SG&A ratio rose approximately 9.3pt to 26.1% from 16.8%. Consequently, the operating result shifted from the previous year’s operating profit of ¥0.84B to an operating loss of ¥0.74B. Even after factoring in non-operating income of ¥0.16B (including dividend income of ¥0.12B), ordinary income remained at ¥-0.58B, while the net loss narrowed to ¥-0.40B due to the recognition of deferred tax benefits. Although revenue increased, deterioration in the cost structure led to lower profit and ultimately a shift into the red; the results can therefore be characterized as higher revenue but lower profit (shift into the red).

Segment Analysis

The Group has a high weighting toward measurement-equipment-related operations and has omitted disclosure of segment-level revenue and profit/loss information because the materiality of such disclosure is limited.

Key Financial Indicators

【Profitability】The operating margin was -5.3%, deteriorating by approximately 12.0pt from +6.7% in the previous year, while the net profit margin also declined to -2.9% from +6.2% in the previous year. ROE was -0.8%, mainly due to the shift of net income into the red. 【Cash Quality】Cash and deposits were ¥9.05B, broadly flat compared with ¥9.17B in the previous year, while accounts receivable decreased 25.6% to ¥9.23B from ¥12.41B in the previous year. In contrast, work in process increased 4.4% to ¥12.62B from ¥12.08B in the previous year, accounting for 81.4% of total inventories (¥15.50B). 【Investment Efficiency】Total asset turnover relative to revenue remained moderate, while total assets contracted to ¥66.53B from ¥70.28B in the previous year. 【Financial Soundness】The equity ratio rose to 76.6% from 74.8% in the previous year. Interest-bearing debt was limited at ¥0.70B, and the Company was effectively in a net cash position relative to cash and deposits of ¥9.05B.

Cash Flow Analysis

As no numerical data from the statement of cash flows has been disclosed, funding trends are analyzed based on changes in the balance sheet. While cash and deposits remained broadly flat at ¥9.05B compared with ¥9.17B in the previous year, the recognition of an operating loss and increases in inventories of work in process (¥12.62B, up +4.4% year on year) and finished goods (¥2.54B, up +8.0% year on year) may have tied up funds in working capital. Accounts receivable decreased 25.6% to ¥9.23B from ¥12.41B in the previous year, indicating an improvement in cash collection; however, accounts payable also decreased 19.6% to ¥3.72B from ¥4.63B in the previous year, indicating that cash outflows on the payment side also progressed. The provision for product warranties increased substantially to ¥2.42B from ¥1.13B in the previous year, warranting attention as a potential future cash outflow burden. Interest-bearing debt was limited at ¥0.70B, indicating a low degree of reliance on external financing.

Quality of Earnings

The Company’s recurring earnings are predominantly derived from operating profit/loss based on product sales. Non-operating income was limited to ¥0.16B (including dividend income of ¥0.12B), while non-operating expenses were ¥0.01B, resulting in limited distortion of earnings from non-operating items. Against an ordinary loss of ¥0.58B, the net loss was limited to ¥0.40B. This divergence was primarily attributable to a reduction in the tax burden from deferred taxes (-¥0.206B), with a temporary tax effect compressing the final net loss. Comprehensive income was ¥-0.56B, below net income of ¥-0.40B. Unrealized valuation differences on securities of ¥-0.19B and adjustments related to retirement benefits of ¥-0.06B made negative contributions, while foreign currency translation adjustments were a positive factor of ¥0.09B. The sharp increase in the provision for product warranties (¥1.13B in the previous year → ¥2.42B) represents the advance recognition of future expenses, while also indicating an increase in quality-related costs. This point warrants attention when assessing the quality of operating earnings.

Earnings Forecast and Guidance

The full-year Company forecast calls for revenue of ¥60.48B (YoY +2.3%), operating income of ¥3.73B (YoY -20.8%), and ordinary income of ¥4.07B (YoY -21.9%). Against these forecasts, Q1 revenue progress was 22.8%, slightly below the evenly distributed progress benchmark of 25%, while operating income and ordinary income were both negative, resulting in negative progress rates and a substantial shortfall. The earnings forecast was revised during the current quarter, reflecting a review of the assumptions underlying the full-year plan. There was no revision to the dividend forecast, which remains at ¥120 per year. Revenue progress assumes achievement of a plan weighted toward the second half, while recovery in profitability will require normalization of inventory and quality-related costs.

Shareholder Returns

The full-year dividend forecast is ¥120, representing a planned increase from the previous year’s actual dividend of ¥45. There was no revision to the dividend forecast during the current quarter. The payout ratio based on the Company’s forecast EPS of ¥232.7 is 51.6% (¥120 ÷ ¥232.7). Although the Company recorded a net loss in Q1, interest-bearing debt was limited at ¥0.70B against cash and deposits of ¥9.05B, preserving the resilience of its financial base to sustain dividend payments. However, progress against the full-year earnings plan is substantially below target at this point, and the payout ratio will require monitoring depending on the extent of the earnings recovery in the second half.

Risk Factors

1. Upside risk in quality assurance costs: The provision for product warranties increased +114.2% to ¥2.42B from ¥1.13B in the previous year, reaching 17.5% of revenue. This could become a continuing source of pressure on future cash outflows and earnings.

2. Accumulation of inventory and work in process: Work in process was ¥12.62B, accounting for 81.4% of total inventories of ¥15.50B, and increased +4.4% year on year. Delays in production processes or the postponement of acceptance timing may be intensifying the amount of funds tied up in working capital.

3. Deterioration in profitability and cost structure: The SG&A ratio surged to 26.1% from 16.8% in the previous year, with expenses expanding at a pace exceeding the revenue growth rate of +10.1%. As a result, the operating margin deteriorated by approximately 12.0pt to -5.3% from +6.7% in the previous year, making optimization of the cost structure a key challenge.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company is substantially below the industry median on both profitability and return metrics, and its shift into the red ranks in the lower tier of the industry.

Growth and Capital Efficiency

The revenue growth rate exceeds the industry median, indicating that top-line growth is relatively strong within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. While revenue increased (+10.1%), the gross margin deteriorated from 23.5% in the previous year to 20.8%, and the SG&A ratio deteriorated from 16.8% in the previous year to 26.1%. As these developments occurred concurrently, the operating result shifted from the previous year’s operating profit of ¥0.84B to an operating loss of ¥0.74B.

2. The provision for product warranties surged +114.2% year on year to ¥2.42B, while work in process remained at ¥12.62B, accounting for more than 80% of inventories. The normalization of quality-related costs and inventory is therefore a structural issue that will determine future earnings recovery.

3. Although Q1 revenue progress against the full-year plan was 22.8%, progress in operating income and ordinary income was negative, representing a substantial shortfall. The earnings forecast was revised during the current quarter. Achievement of the plan is predicated on a recovery in profitability during the second half.

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 5-year fade period). It is not a forecast of the market price or a recommendation of any specific investment action.

Sensitivity: ¥3,047–¥3,221 at ±1% for the cost of equity, and ¥3,126–¥3,136 at ±0.1 for ω.

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 (there is a timing difference relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

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

---

This report is an earnings analysis document automatically generated by AI based on XBRL earnings report 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, with consultation with a professional as necessary.

---End of Report---