NISSAN TOKYO SALES HOLDINGS (8291) FY2026 Q3 Earnings Report

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Executive Summary

The cumulative results for 2026 FY Q3 were challenging, with Operating Income declining 49.2% YoY due to the combined impact of lower revenue and reduced fixed-cost absorption. Revenue was ¥951.8B (¥1064.7B in the same period of the previous year, YoY -10.6%), Operating Income was ¥30.2B (¥59.5B, YoY -49.2%), Ordinary Income was ¥31.2B (¥59.5B, YoY -47.6%), and Net Income was ¥23.2B (¥38.7B, YoY -40.1%). The primary cause of the decline in profit was the increase in the SG&A ratio and the unfavorable impact of operating leverage, as SG&A expenses declined only 0.8% despite the decrease in revenue.

Factors Driving Performance Changes

【Revenue】Revenue was ¥951.8B, down 10.6% YoY. The Company operates as a single segment comprising the automotive-related business, with limited diversification across businesses. Progress against the full-year Company forecast of ¥1,320B was 72.1%, below the standard 75%, indicating that a recovery in revenue during Q4 is necessary.

【Profit and Loss】Gross profit was ¥233.4B (gross margin: 24.5%), representing only a slight decline from 24.8% in the same period of the previous year. Meanwhile, SG&A expenses were ¥203.2B, down only 0.8% YoY and failing to keep pace with the 10.6% decline in revenue. As a result, the SG&A ratio increased by approximately 2.1pt from 19.2% to 21.3%. The Operating Income margin contracted by approximately 2.4pt from 5.6% to 3.2%, significantly exceeding the decline in the gross margin. Ordinary Income exceeded Operating Income by ¥0.9B; however, dividend income of ¥2.1B accounted for 36% of non-operating income of ¥5.8B. Extraordinary income of ¥4.8B and extraordinary losses of ¥0.6B provided a net temporary boost of ¥4.2B to pretax profit. Accordingly, the high progress of Net Income of ¥23.2B (85.9% of the full-year forecast) should be evaluated separately from the recovery of the core business. In conclusion, the Company recorded lower revenue and lower profit.

Key Financial Indicators

【Profitability】The Operating Income margin of 3.2% contracted from 5.6% in the same period of the previous year, while the Net Income margin also declined from 3.6% to 2.4%. ROE (annualized) was 5.4%, and the Equity Ratio of 60.8% (58.3% in the same period of the previous year) indicates capital stability.【Cash Flow Quality】Of Net Income of ¥23.2B, ¥4.2B represented a temporary boost from extraordinary gains and losses, placing recurring earnings power below this level. Dividend income of ¥2.1B accounted for 36% of non-operating income, indicating a certain degree of reliance on investment income.【Investment Efficiency】Property, plant and equipment of ¥520.6B, including land of ¥299.1B, accounted for 54.8% of total assets, while the earnings contribution of the core business relative to this asset base was limited.【Financial Soundness】Current assets were ¥323.2B versus current liabilities of ¥197.2B, providing ¥125.97B of working capital surplus. Long-term borrowings increased 39.8% YoY to ¥110.8B; however, earnings remained more than sufficient relative to interest expense of ¥1.4B, and financial constraints are not currently limiting performance.

Cash Flow Analysis

As individual data from the statement of cash flows have not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥142.7B, down ¥24.7B from ¥167.4B in the same period of the previous year, while long-term borrowings increased ¥31.5B to ¥110.8B, suggesting that the Company is allocating funds to investment and operations while pursuing financing. Accounts receivable declined ¥11.2B to ¥25.6B, while accounts payable also decreased ¥17.7B to ¥89.9B, indicating a reduction in working capital in line with the contraction in sales. Treasury stock decreased ¥29.8B to ¥0.3B, suggesting a significant change in the capital structure, such as the cancellation or disposal of shares. Overall, the Company is simultaneously reducing working capital in response to the contraction in business scale and securing funds through increased borrowings.

Earnings Quality

Net Income of ¥23.2B includes extraordinary income of ¥4.8B (including gains on sales of investment securities of ¥0.4B and gains on sales of fixed assets of ¥0.9B, among others) and extraordinary losses of ¥0.6B, resulting in a temporary net boost of ¥4.2B. Excluding these extraordinary gains and losses, the earnings power of the core business is represented by the Operating Income margin of 3.2%. Dividend income of ¥2.1B accounted for 36% of non-operating income of ¥5.8B, indicating a certain degree of reliance on non-operating investment income. Comprehensive income was ¥25.7B, slightly exceeding Net Income of ¥23.2B, with the positive ¥4.5B valuation difference on securities largely offset by the negative ¥2.0B adjustment related to retirement benefits. The Net Income progress rate of 85.9% against the full-year forecast is elevated because it includes extraordinary gains and losses. Attention should therefore be paid to the difference from the Operating Income progress rate of 65.7%, which better indicates the pace of recovery in the core business.

Earnings Forecast and Guidance

The full-year Company forecasts are Revenue of ¥1,320B (前年比 -6.8%), Operating Income of ¥46.0B (同 -37.9%), and Ordinary Income of ¥46.0B (同 -37.6%). Cumulative Q3 progress rates were 72.1% for Revenue, 65.7% for Operating Income, and 67.7% for Ordinary Income, all below the standard 75% progress level. Operating Income was particularly 9.3pt below the standard, requiring standalone Operating Income of ¥15.8B in Q4 to achieve the full-year forecast. This represents approximately 52% of cumulative Operating Income of ¥30.2B, meaning that improvement in the gross profit mix and control of the SG&A ratio will be necessary. The Company revised its earnings forecast during the quarter, and the current level appears to reflect a downward revision from the initial plan.

Shareholder Returns

The Q2 dividend was ¥12.00 per share, and the full-year dividend forecast was revised upward to ¥27.00. Based on the full-year Net Income forecast of ¥27.0B and the mid-period average number of shares outstanding of 59,455,295 shares, the forecast Payout Ratio is approximately 59.5%, calculated using dividends alone as the numerator. The Company announced the introduction of DOE (dividend on equity), advancing a shift toward a return policy that considers equity in addition to fluctuations in annual profit. Net assets were ¥577.9B, an increase of ¥11.4B YoY, indicating that equity serving as the source of increased dividends is accumulating. However, as Net Income for the current period includes a ¥4.2B boost from extraordinary gains and losses, dividend sustainability must be evaluated in light of the future recovery trend in Operating Income.

Risk Factors

1. Risk from the single-segment structure: The Company operates as a single segment comprising the automotive-related business, making it difficult to diversify fluctuations in unit sales, vehicle prices, and demand for maintenance services across businesses. Revenue declined 10.6% YoY, directly reflecting the structural vulnerability of the business model in performance.

2. Reduced fixed-cost absorption: The Operating Income margin was 3.2%, contracting by approximately 2.4pt from the same period of the previous year. As revenue declined 10.6% while SG&A expenses decreased only 0.8%, the Company’s structure is susceptible to amplified fixed-cost burdens during periods of declining demand.

3. Increased borrowings and asset profitability: Long-term borrowings were ¥110.8B, up 39.8% YoY. Property, plant and equipment of ¥520.6B, including land of ¥299.1B, accounted for 54.8% of total assets, while the core business’s earnings power relative to this asset base (Operating Income margin of 3.2%) was relatively low. Although interest coverage remains high, continued declines in profitability could raise concerns regarding an increased leverage burden.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (retail)

Profitability and Returns

The Operating Income margin was in line with the industry median, while the Net Income margin exceeded the median partly due to the contribution from extraordinary gains and losses.

Growth and Capital Efficiency

The Revenue growth rate was significantly below the industry median, highlighting the Company’s marked growth deceleration within the industry.

※Source: Company analysis

Key Points from the Financial Results

1. The primary source of earnings deterioration was not the decline in the gross margin (approximately 0.3pt YoY), but the rigidity of SG&A expenses relative to the decline in revenue. The SG&A ratio increased by approximately 2.1pt from 19.2% to 21.3%, making the deterioration in operating leverage the primary cause of the decline in profit.

2. The progress rate against the full-year Operating Income forecast was 65.7%, below the standard level, requiring the Company to secure Operating Income in Q4 equivalent to approximately 52% of the cumulative amount. The cumulative Net Income progress rate of 85.9% includes extraordinary gains and losses of ¥4.2B, so the Operating Income progress rate should be emphasized as the indicator of the pace of recovery in the core business.

3. Following the introduction of DOE, the full-year dividend forecast was revised upward to ¥27.00, resulting in a forecast Payout Ratio of approximately 59.5%. The financial foundation, including an Equity Ratio of 60.8% and net assets of ¥577.9B, supports enhanced shareholder returns; however, the sustainability of profit recovery and the ability to maintain enhanced returns will be key areas of focus.

Theoretical Share Price (Reference Value)

Sensitivity: ¥807–¥851 at Cost of Equity ±1%, and ¥824–¥831 at ω ±0.1.

Notes:

• As the progress of Net Income against the full-year forecast (86%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a range of +10% at the upper limit (because companies with progress ahead of forecast tend to exceed their forecasts. The adjustment may be excessive for businesses with strong seasonality).
• 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 from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(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 summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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