| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥1712.8B | ¥1540.7B | +11.2% |
| Operating Income | ¥150.9B | ¥154.5B | -2.4% |
| Equity-Method Investment Income | ¥0.7B | ¥0.8B | -11.0% |
| Ordinary Income | ¥165.8B | ¥168.4B | -1.5% |
| Net Income | ¥93.7B | ¥95.9B | -2.3% |
| ROE | 7.6% | 8.0% | - |
For the fiscal year ended March 2026, Revenue was ¥1,712.8B (YoY +¥172.1B +11.2%), Operating Income was ¥150.9B (YoY -¥3.6B -2.4%), Ordinary Income was ¥165.8B (YoY -¥2.6B -1.5%), and Net Income was ¥93.7B (YoY -¥2.2B -2.3%). The company posted revenue growth but profit decline. Revenue continued double-digit growth for the third consecutive year, while at the operating level SG&A ratio expanded from 34.7% to 34.7% and gross margin slightly fell to 43.5% from 43.7%, resulting in an operating margin of 8.8%, down 1.2pt from 10.0% a year ago. The core Automotive Products & Motorcycle Products Sales business drove performance with Revenue of ¥1,654.9B (+11.6%), but operating income for that segment was limited to ¥136.8B (-2.7%). At the bottom-line, special gains of ¥13.6B, including gains on sales of investment securities of ¥11.7B, provided support and contained the decline in net income.
[Revenue] Revenue of ¥1,712.8B (+11.2%) was mainly driven by the Automotive Products & Motorcycle Products Sales business, which accounted for ¥1,654.9B (+11.6%) or 96.6% of total revenue. Solid demand for tires and maintenance-related products and operation of both store network and e-commerce channels contributed. Rental real estate business was ¥57.9B (+0.2%), remaining flat and representing a limited 3.4% share. Cost of sales was ¥968.0B, 56.5% of revenue, yielding a gross margin of 43.5%, down 0.2pt from 43.7% a year ago. Rising procurement costs and changes in product mix pressured the gross margin.
[Profitability] Against gross profit of ¥744.8B, SG&A was ¥593.9B (34.7% of revenue, YoY +¥41.9B +7.6%), resulting in Operating Income of ¥150.9B (-2.4%). SG&A ratio rose 1.0pt from 33.7% a year ago, with increases in personnel expenses, logistics costs, and promotion expenses offsetting operating leverage. Non-operating income was ¥18.1B (including dividend income ¥4.0B) and non-operating expenses were ¥3.2B (including interest expense ¥2.0B), yielding Ordinary Income of ¥165.8B (-1.5%). Special gains totaled ¥13.6B (mainly gain on sales of investment securities ¥11.7B) and special losses totaled ¥8.7B (including impairment losses ¥4.0B and loss on disposal of fixed assets ¥2.0B), producing profit before income taxes of ¥170.7B. After income taxes of ¥51.0B (effective tax rate 29.9%), Net Income was ¥93.7B (-2.3%). The difference between Ordinary Income and Net Income reflects a net special items contribution of +¥4.9B; non-operating income and special gains mitigated the decline in profits. In summary, the company achieved revenue growth but experienced profit compression due to rising costs.
The Automotive Products & Motorcycle Products Sales segment reported Revenue ¥1,654.9B (+11.6%), Operating Income ¥136.8B (-2.7%), and margin 8.3%. As the core segment accounting for 90.7% of consolidated operating income, revenue increased but SG&A growth led to profit decline. The Rental Real Estate segment recorded Revenue ¥57.9B (+0.2%), Operating Income ¥14.1B (+0.9%), and margin 24.3%. While maintaining high margins, the segment’s scale is limited and contribution to consolidated operating income was only 9.3%. The decline in profitability of the automotive products sales segment was the main driver of the 1.2pt contraction in consolidated operating margin, highlighting the need to control SG&A ratio.
[Profitability] Operating margin 8.8% (down 1.2pt from 10.0% prior year), Net margin 5.5% (down 0.7pt from 6.2%). ROE 7.6% decreased from 9.5% a year earlier, primarily due to contraction in net margin. The spread between gross margin 43.5% and SG&A ratio 34.7% is 8.8%, down from 9.3% prior year.
[Cash Quality] Operating Cash Flow (OCF) was ¥104.7B, 1.12x of Net Income ¥93.7B, broadly healthy. OCF/EBITDA (EBITDA = Operating Income ¥150.9B + Depreciation ¥36.6B = ¥187.5B) was 0.56x, with inventory increase -¥46.4B and accounts receivable increase -¥9.6B pressuring working capital. Inventory turnover days were about 129 days (Inventory ¥341.4B ÷ Revenue ¥1,712.8B × 365 days), at a high level. Accrual ratio ((Net Income ¥93.7B - OCF ¥104.7B) ÷ Total Assets ¥2,068.2B) = -0.5%, indicating good cash backing, though inventory build-up may constrain future cash conversion.
[Investment Efficiency] ROIC (Operating Income ¥150.9B × (1-0.299) ÷ (Equity ¥1,239.0B + Interest-bearing Debt ¥530B)) is 6.0%. Total asset turnover was 0.83x (Revenue ¥1,712.8B ÷ Total Assets ¥2,068.2B), down from prior year due to inventory increases.
[Financial Soundness] Equity Ratio 59.9% (down 4.9pt from 64.8% prior year), D/E ratio 0.43x (Interest-bearing Debt ¥530B ÷ Equity ¥1,239.0B). Current ratio 157.7%, Quick ratio 98.9%, indicating generally adequate short-term liquidity. Debt/EBITDA 2.83x slightly exceeds the investment-grade benchmark of 2.5x, but interest coverage is 75x (EBITDA ¥187.5B ÷ Interest Expense ¥2.0B), indicating very strong ability to service interest. New long-term borrowings of ¥180.0B were recorded to lengthen part of the maturity profile, but short-term borrowings remain ¥350.0B and short-term debt ratio is high at 60.3% (Short-term borrowings ¥350.0B ÷ Interest-bearing Debt ¥530B), so refinance risk warrants attention.
Operating Cash Flow was ¥104.7B (YoY -35.7%). From pretax profit ¥170.7B plus depreciation ¥36.6B totaling ¥207.3B, working capital changes of -¥50.0B (inventory increase -¥46.4B, accounts receivable increase -¥9.6B, accounts payable increase +¥13.2B) and corporate tax payments -¥52.4B were deducted. Subtotal OCF before working capital changes was ¥154.7B, 1.65x of Net Income ¥93.7B and favorable, but large inventory increase resulted in final OCF being only 1.12x of Net Income. Investing Cash Flow was -¥89.8B, mainly due to capital expenditures -¥96.4B (2.6x depreciation). M&A-related outflow -¥47.1B (acquisition of subsidiary shares -¥47.1B) also occurred, indicating continued growth investment. Free Cash Flow was limited at ¥14.9B (OCF ¥104.7B + Investing CF -¥89.8B), well below dividend payments of ¥54.0B (FCF coverage 0.28x). Financing Cash Flow showed an inflow of ¥69.9B, reflecting long-term borrowings ¥180.0B and net items including short-term borrowings repayment -¥0.2B, share buybacks -¥50.2B, and dividend payments -¥53.98B. Interest-bearing debt rose to ¥530B (from ¥350B prior year, +¥180B), and issuance of ¥180.0B of long-term borrowings improved the maturity profile. Cash and deposits increased to ¥397.3B (from ¥312.5B prior year, +¥84.8B), and cash/short-term borrowings ratio is 1.14x, providing minimum liquidity.
The decline in operating-stage margins is notable. Operating Income ¥150.9B was supported by non-operating income ¥18.1B (1.1% of revenue) and special gains ¥13.6B (mainly gain on sales of investment securities ¥11.7B). Non-operating income at 1.1% of revenue does not indicate excessive reliance (>5%), so structural distortion is limited. Most special gains were one-time gains on investment securities, but net special items of +¥4.9B boosted pretax profit; recurring earning power was affected by operating-level cost increases. Comprehensive income was ¥137.1B, ¥43.4B above Net Income ¥93.7B, mainly due to valuation differences on other securities +¥16.5B. Accrual ratio -0.5% is healthy; OCF exceeded Net Income and accounting profit–cash divergence is small. However, large inventory increase -¥46.4B is pressuring working capital, OCF/EBITDA 0.56x is low, and there is room to improve future cash conversion. The gap between Ordinary Income ¥165.8B and Net Income ¥93.7B is explained by tax expense ¥51.0B and non-controlling interests ¥0B; no abnormal divergence is observed.
Company guidance forecasts Revenue ¥1,760.0B (+2.8%), Operating Income ¥160.0B (+6.0%), Ordinary Income ¥174.0B (+4.9%), and EPS ¥142.61. The company expects to shift from the current period’s revenue-up/profit-down to slight revenue and profit growth. Operating margin is expected at 9.1% (current period 8.8% +0.3pt), assuming control of SG&A growth and maintenance of gross margin. The progress rate to date (Operating Income ¥150.9B ÷ Full Year forecast ¥160.0B) is 94.3%, leaving limited upside for the full year. Improving inventory turnover, refining pricing strategy, and clearing seasonal products will be key in H2. Dividend forecast is ¥34 per share annually (post-stock-split adjusted from current period ¥62), implying a payout ratio of about 40.5%, within a sustainable range.
Annual dividend was ¥62 (interim ¥29, year-end ¥33), with payout ratio 44.6% (Total dividends ¥54.0B ÷ Net Income ¥93.7B × 100). Payout rose 4.1pt from 40.5% prior year but remains within a sustainable range below 60%. Share buybacks of ¥50.2B were executed, and combined with dividends ¥54.0B total shareholder returns were ¥104.2B, giving a Total Return Ratio of 111.2% (Total return ¥104.2B ÷ Net Income ¥93.7B × 100), indicating an aggressive stance exceeding Net Income. However, Free Cash Flow was ¥14.9B versus total return ¥104.2B, resulting in an FCF coverage of 0.14x and showing dependence on OCF and external financing (long-term borrowings ¥180B). Next period dividend forecast is ¥34 (post-stock-split adjusted), and sustainability will depend on improved OCF through inventory turnover and optimizing capex allocation. Cash and deposits ¥397.3B sufficiently support dividend payments, but sustainability of total returns requires improvement in operating cash and FCF.
Inventory stagnation / overstock risk: Inventory ¥341.4B (YoY +¥48.3B +16.5%) and inventory turnover days approximately 129 days. Inventory growth exceeding revenue growth rate (+11.2%) raises the risk of impairment, valuation losses, and markdowns in case of demand shifts, and increases storage and obsolescence costs. Inventory reduction is the shortest path to improving OCF and ROIC; improving ordering accuracy and revising product mix are urgent.
Refinancing risk: Short-term borrowings ¥350.0B and short-term debt ratio 60.3% concentrate maturities in the short term. Cash ¥397.3B covers short-term borrowings by 1.14x, but the company is sensitive to higher refinancing costs when interest rates or credit spreads widen. New long-term borrowings ¥180.0B lengthened part of the maturity profile, but further lengthening and optimization of borrowing composition are key to improving financial stability.
Cost inflation and pressure on operating leverage: SG&A ratio rose to 34.7% (from 33.7% prior year +1.0pt), with personnel and logistics cost increases diluting operating leverage. The contraction in operating margin (-1.2pt) despite revenue growth +11.2% suggests delayed price pass-through and weak cost control. Wage increases and higher logistics costs are structural; absorption through price adjustments and operational efficiency improvements is necessary.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.8% | 3.4% (1.4%–5.0%) | +5.5pt |
| Net Margin | 5.5% | 2.3% (1.0%–4.6%) | +3.2pt |
Both operating margin and net margin significantly exceed industry medians, placing profitability in the upper tier within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 11.2% | 5.9% (0.4%–10.7%) | +5.3pt |
Revenue growth outperforms the industry median by 5.3pt, indicating relatively strong top-line expansion.
※Source: Company compilation
Structural shift to revenue-up/profit-down is the focus: Despite robust Revenue +11.2%, SG&A ratio +1.0pt and gross margin -0.2pt reduced operating margin to 8.8% (-1.2pt). The next fiscal year plans for revenue and profit growth but only a modest operating margin recovery to 9.1% (+0.3pt); realizing inventory compression and SG&A control will be critical. Structural improvement in margins requires price revisions and fundamental cost-structure reforms.
Room to improve cash conversion: OCF/EBITDA 0.56x and inventory turnover days 129 indicate working capital efficiency issues. Free Cash Flow ¥14.9B is far below dividends ¥54.0B (FCF coverage 0.28x), and total returns ¥104.2B were financed by external funds. Inventory optimization is the fastest route to expanding OCF; progress in ordering accuracy and product mix improvement next fiscal year will determine dividend/return sustainability.
Correcting the maturity profile and strengthening financial resilience: Short-term borrowings ¥350B and short-term debt ratio 60.3% leave refinancing risk, but new long-term borrowings ¥180B partially lengthened maturities. Interest coverage 75x indicates very strong interest servicing capacity and Debt/EBITDA 2.83x is acceptable. Further lengthening of short-term debt and optimizing borrowing composition are keys to improving interest-rate shock resilience and financial stability.
This report is an earnings analysis automatically generated by AI after analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public earnings data. Investment decisions are your own responsibility; please consult a professional advisor as necessary.