AUTOBACS SEVEN (9832) FY2026 Q3 Earnings Report

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Executive Summary

This was a revenue and profit growth result in which profitability improved as Operating Income grew faster than Revenue. Revenue was ¥211.96B (+12.6% YoY), Operating Income was ¥12.45B (+25.2%), Ordinary Income was ¥13.42B (+24.6%), and Net Income attributable to owners of the parent was ¥8.72B (+14.1%). The gross profit margin improved by approximately 0.7pt to 35.7%, and gross profit growth exceeding the SG&A expense growth rate (+13.0%) drove Operating Income higher. The main reasons Net Income growth fell below Operating Income growth were the increase in the effective tax rate and the reversal of extraordinary gains recorded in the same period of the previous year.

Factors Affecting Performance

【Revenue】Revenue was ¥211.96B (+12.6% YoY). By segment, the AUTOBACS Business was ¥157.79B, accounting for 74.5% of the total and representing the core business, followed by the Consumer Business at ¥38.54B, the Wholesaling Business at ¥25.87B, and the Expansion Business at ¥7.99B. The core AUTOBACS Business generated Operating Income of ¥17.79B and a profit margin of 11.3%, demonstrating high profitability and driving overall profit.

【Profit and Loss】Operating Income was ¥12.45B (+25.2%), and the Operating Income margin improved to 5.9% from 5.3% in the same period of the previous year. Improvements in the gross profit margin and control of SG&A expenses were the two supporting factors. Ordinary Income was ¥13.42B (+24.6%). Net Income was limited to ¥8.72B (+14.1%), mainly due to the increase in the effective tax rate to approximately 35.0% and the reversal of extraordinary gains recorded in the same period of the previous year, including a ¥1.03B gain on the bargain purchase arising from negative goodwill. Revenue and profit both increased.

Segment Analysis

The AUTOBACS Business generated Revenue of ¥157.79B and Operating Income of ¥17.79B, with a profit margin of 11.3%, demonstrating profitability substantially exceeding that of the other segments and serving as the primary source of consolidated Operating Income. The Consumer Business has a significant scale, with Revenue of ¥38.54B, but its Operating Income was ¥0.57B and its profit margin was 1.5%, indicating low profitability and limited contribution to earnings. The Wholesaling Business generated Revenue of ¥25.87B and Operating Income of ¥0.88B, with a profit margin of 3.4%, while the Expansion Business generated Revenue of ¥7.99B but achieved relatively high efficiency, with Operating Income of ¥0.70B and a profit margin of 8.7%. Overall, the business portfolio appears to have a high degree of earnings dependence on the AUTOBACS Business.

Key Financial Metrics

【Profitability】The Operating Income margin was 5.9%, improving from 5.3% in the same period of the previous year, while the Net Income margin was 4.1%, remaining broadly flat year on year. Annualized ROE was 8.5%, reflecting the combination of the Net Income margin, total asset turnover, and financial leverage, with the improvement in the Operating Income margin being the primary factor.【Cash Flow Quality】Non-operating income was ¥2.02B, equivalent to 1.0% of Revenue, while interest and dividend income totaled only ¥0.19B, indicating a low degree of dependence on non-operating income. Comprehensive Income was ¥9.97B, exceeding Net Income of ¥8.73B, reflecting positive contributions of ¥0.62B from valuation differences on securities and ¥0.38B from foreign currency translation adjustments.【Investment Efficiency】The Equity Ratio was 51.0%, and BPS increased to ¥1,745.36 from ¥1,679.29 in the previous year. Goodwill was ¥8.39B, representing only 6.1% of net assets, indicating limited dependence on M&A-related assets.【Financial Soundness】Cash and deposits were ¥30.73B, while long-term borrowings increased to ¥33.07B (+25.9% YoY). At the same time, interest expenses were only ¥0.29B, indicating a light burden, and the Equity Ratio of 51.0% demonstrates a strong financial foundation.

Cash Flow Analysis

Although direct data from the cash flow statement is unavailable, trends in funding can be assessed based on changes in the balance sheet. Cash and deposits were ¥30.73B, remaining broadly flat from ¥31.29B in the same period of the previous year. Meanwhile, accounts receivable increased to ¥43.18B (+45.9% YoY), and inventories increased to ¥31.08B (+12.4% YoY), resulting in greater working capital requirements. In contrast, accounts payable increased substantially to ¥37.56B (+132.5% YoY), suggesting that changes in purchasing and settlement terms offset the funding needs associated with increases in accounts receivable and inventories. Long-term borrowings increased to ¥33.07B (+25.9% YoY), indicating that part of the investment funding required for business expansion was obtained through borrowings. The expansion of both assets and liabilities while maintaining the cash balance indicates the status of working capital management during a growth phase. If sales growth slows going forward, normalization of accounts payable could affect cash management and should be monitored.

Earnings Quality

Profit growth during the current period was supported by improved profitability in the core business and was primarily driven by recurring factors. Of non-operating income of ¥2.02B, dividend income was ¥0.12B and other non-operating income was ¥1.14B, with no apparent dependence on specific non-recurring items. While the same period of the previous year included extraordinary income of ¥1.03B, including a gain on the bargain purchase arising from negative goodwill, and extraordinary losses of ¥0.21B, Profit Before Tax and Ordinary Income were equal in the current period, indicating that earnings quality has become more normalized than in the previous year, without an uplift from extraordinary gains or losses. The reason Net Income growth (+14.1%) fell below Operating Income growth (+25.2%) was the increase in the effective tax rate from approximately 33.9% to approximately 35.0%, in addition to the reversal of the previous year’s extraordinary income; this does not indicate deterioration in the core business. Comprehensive Income of ¥9.97B exceeded Net Income of ¥8.73B, with positive contributions from valuation differences on securities and foreign currency translation adjustments. These items, however, arose from the valuation of other securities and assets at overseas locations and should be distinguished from recurring business earnings.

Earnings Forecast and Guidance

The full-year company forecasts are Revenue of ¥276.00B (YoY+10.6%), Operating Income of ¥13.50B (+11.3%), Ordinary Income of ¥13.50B (+7.9%), forecast EPS of ¥104.42, and forecast dividends of ¥60.00. The Q3 cumulative progress rates, calculated by dividing actual results by the full-year forecasts, were 76.8% for Revenue, 92.2% for Operating Income, and 99.4% for Ordinary Income. Operating Income and Ordinary Income were therefore progressing substantially ahead of the 75% level that is generally expected after three quarters. In particular, Net Income attributable to owners of the parent was ¥8.72B on a Q3 cumulative basis, already exceeding the full-year Net Income forecast of ¥8.20B, indicating that profitability through Q3 has exceeded the company’s plan. Nevertheless, the Revenue progress rate remains broadly at a standard level, and Q4 sales trends, inventory clearance, promotional expenses, and tax burden will determine the full-year outcome.

Shareholder Returns

The Q2 dividend was ¥30.00 per share, and the full-year dividend forecast is ¥60.00. The forecast Payout Ratio based on forecast full-year EPS of ¥104.42 is approximately 57.5%, below the 60% level generally regarded as an indication of sustainability. Q3 cumulative Net Income attributable to owners of the parent of ¥8.72B exceeded the full-year Net Income forecast of ¥8.20B. In light of accumulated retained earnings of ¥70.24B and equity of ¥137.06B, the company has a reasonable capacity to fund dividend payments. No data on share repurchases has been provided; accordingly, this assessment is based on the Payout Ratio, and no assessment has been made based on the Total Return Ratio.

Risk Factors

1. Demand volatility risk: The automotive aftermarket business is affected by vehicle inspection and maintenance demand, seasonal factors, and consumers’ discretionary spending. Although the full-year progress rate for Operating Income is high at 92.2%, the Revenue progress rate is only 76.8%, making Q4 sales trends a key determinant of full-year achievement.

2. Inventory and competition risk: Inventories increased to ¥31.08B (+12.4% YoY), implying that inventory days exceed the 60-day level. Intensifying competition from e-commerce and specialty retailers could increase discounting and promotional activity, potentially pressuring the sustainability of the improved gross profit margin (35.7%).

3. Working capital risk: Accounts payable increased to ¥37.56B (+132.5% YoY), substantially exceeding the growth rates of accounts receivable (+45.9%) and inventories (+12.4%). If this reflects a temporary cash benefit from changes in purchasing and settlement terms, cash outflows may increase when payments are made in the future.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the company’s Operating Income margin and Net Income margin exceed the industry median, indicating that profitability is relatively high within the industry.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median, indicating a high growth pace within the industry.

※Source: Compiled by the company

Key Points from the Earnings Results

1. Operating Income increased 25.2% against Revenue growth of 12.6%, confirming operating leverage accompanied by an improved gross profit margin (+approximately 0.7pt) and control of SG&A expenses. The full-year progress rates for Operating Income and Ordinary Income were high at 92.2% and 99.4%, respectively.

2. Inventories increased 12.4% YoY, while accounts payable increased 132.5%, resulting in a significant change in working capital. This may reflect a cash benefit arising from changes in purchasing and settlement terms, and working capital trends during any slowdown in sales growth are a key area of focus.

3. The forecast full-year Payout Ratio is approximately 57.5%. Since Q3 cumulative Net Income exceeds the full-year Net Income forecast, the dividend burden is not excessive based on the current earnings level.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,552–¥1,640 at ±1% for the cost of equity, and ¥1,590–¥1,598 at ±0.1 for ω.

Notes:

• Since Net Income progress against the full-year forecast is 106%, exceeding the standard level of 75%, forecast EPS has been adjusted upward within a maximum range of +10% (because companies progressing ahead of plan tend to outperform forecasts. For businesses with strong seasonality, the adjustment may be excessive).
• Since forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end have been used, resulting in a timing difference relative to the full-year forecast.

(Calculation model: Residual Income Model (Ohlson-type, with an explicit five-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 forecast or guarantee the future share price.)

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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 discretion and responsibility, after consulting with a professional as necessary.

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