27/3 Q1 results at Toyota-affiliated parts suppliers (1)

Research evidence excerpt

27/3 Q1 results at Toyota-affiliated parts suppliers (1)

27/3 Q1 results at Toyota- Global Markets Research 31 July 2026

affiliated parts suppliers (1)

EQUITY: AUTOS & AUTO PARTS

Research Analysts

Denso, Aisin Japan autos & auto parts

Wataru Ishimoto - NSC

wataru.ishimoto@nomura.comQuick Note +81 3 6703 1802

Denso [6902] (Neutral): Results announced at 11:20 JST on 31 January, earnings

call held

First impression slightly negative: Q1 operating profits slightly short of our forecast

when excluding quality-related costs, ongoing sharp rises in procurement costs for

copper and memory constitute downside risks

Q1 operating profits were ¥84.2bn. Excluding ¥15.0bn in quality-related costs, operating

profits were ¥99.2bn, slightly lower than our forecast of ¥102.4bn. The share price fell

10.5% d-d, which seems excessive relative to what was contained in the results

announcement. At the results briefing held the same day, management said that Q1

operating profits were broadly as expected excluding quality-related costs. We think

quality-related costs of around ¥10.0bn–15.0b were included in the negative "uncertainty

risk" factor of ¥45.0bn that was factored in from the time of initial guidance, and as quality

costs thus do not constitute a new negative factor relative to initial guidance, the company

retained its full-year operating profit guidance of ¥500.0bn.

However, the ¥39.5bn dent to profits from sharp rises in the cost of parts and materials in

Q1 was larger than at other Toyota-affiliated parts suppliers (the dent in full-year guidance

is ¥90.5bn), which we think does not leave a favorable impression. We attribute this not

only to soaring prices for copper and platinum but also to the impact of memory (we

estimate around ¥10.0bn–15.0bn).