Aisin Seiki posts record operating profit margin in Q4

by SR on May 7, 2012

Record operating margin in Q4 FY3/12, can beat in FY3/13

Aisin Seiki quarterly sales and operating profit

Aisin Seiki operating profit margins by quarter

  • Conclusion: You’ve got to give it to them. I’m not a huge fan of Aisin Seiki, partly because its main profit driver of automatic gearboxes is doomed to obsolescence if electric vehicles ever do take off, partly because they compete with the internal gearbox shops at their customers and partly because their approach to disclosure makes analysing the company more difficult than it need be. Having said all that, just before Golden Week on 27 April the company posted their highest ever quarterly operating profit and their highest ever quarterly operating margin. Note that this is in a world where production volumes at Toyota (which accounts for 64% of Aisin Seiki’s revenue) are still below the peaks of 2007-2008 and with the headwind of a very strong yen. Full marks to Aisin’s management for execution.
  • Guidance for FY3/13 looks conservative, as with Denso. In my note on Denso’s results I argue that management’s guidance is too low given the cost-cutting of the past couple of years. The implied incremental margin for Denso, after adjusting for the expected increase in depreciation, is just 19%. The same figure for Aisin Seiki is 21%, slightly higher but in the same ball park, based on Aisin’s management guidance of OP of Y150bn (+23.1% YoY). Sales guidance is virtually identical for both Aisin (+8.5% YoY) and Denso (+8.4% YoY) and I regard this as a worst-case scenario. So potentially for both Aisin Seiki and Denso we have upside in volumes and upside in the operating leverage that those volumes will generate. (In all fairness to Aisin Seiki I should note that it has generally managed to post slightly higher sales growth than Denso over the past few years, although the price of that sales growth has been lower margins than Denso.) The following charts summarise the main figures.

Aisin Seiki operating profit margins by quarter

Aisin Seiki annual sales and operating profit

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