Musashi Seimitsu Industry is an auto parts manufacturer with a product lineup focused primarily on automotive gears. The company recorded FY03/21 revenue of JPY204.7bn, about 51% of which was from the Honda Motor group (hereinafter Honda). The company also supplies gear products to domestic automakers such as Toyota and Suzuki and overseas automakers such as Ford and GM in the US, BYD in China, and Daimler in Germany. It also supplies parts to transmission manufacturers such as the Aisin group. In addition, Musashi Seimitsu produces gear products for motorcycles, with sales to Honda as well as to Kawasaki Heavy Industries, Hero, and TVS in India.
In FY03/21, the PT Business, which focuses mainly on powertrain gears, accounted for 69.3% of revenue, with the L&S Business, which centers on suspension products, accounting for 8.5%, and the Motorcycle Business, which focuses mainly on non-automotive gear products, accounting for 22.2%.
For transmission systems, the company makes differential assemblies that balance engine power to the left/right of the vehicle during operation, and speed reduction mechanisms also referred to as a Reducer Unit). These include planetary assemblies that lower output rotational speed in order to increase torque. Other mainstay products include components such as camshafts that regulate an engine’s intake and exhaust valves.
Using the technological and developmental abilities gained and fostered since its founding in 1938, the company has created a globally integrated production system for its mainstay gear products that includes not only their design and development, but also everything from steel forging to assembly operations. While a system built on the division of labor, i.e., having other companies manage heat treatment and other chemical process operations, is generally considered the norm in the precision machining components industry, the company’s integrated production system covering everything from forging to assembly allows it to achieve not only shorter delivery times, but lower costs on the back of reduced transportation expenses and enhanced productivity.
With the integrated production system contributing to lower costs and shorter delivery times, Honda makes use of the company’s differential assemblies in 100% of its vehicles, making these precision mechanical parts indispensable to the automaker. According to management, the company also has the largest global market share in motorcycle transmission gears.
While Europe’s weighting in the auto parts sector as a whole tends to be rather small, the company’s breakdown for revenue by region in FY03/21 was notably well balanced, with Japan accounting for 15.9% of total revenue, the Americas (North America and South America) accounting for 22.1%, Asia (including China) accounting for 36.2%, and Europe accounting for 25.7%. With performance in Europe struggling on the back of weak sales, the company set its sights on forming new business relationships with European automakers and in June 2016 acquired German firm Hay Holding GmbH, the largest forging and machining manufacturer in the region. Despite expectations that this would enhance the company’s presence in Europe, earnings deteriorated on a sharp increase in interest-bearing debt due to the large-scale M&A costing about JPY28.1bn and the European auto market subsequently falling into a slump. However, there are now signs that the company’s efforts to improve profitability in the region are beginning to show.
Honda, the company’s largest customer, is also its largest shareholder. Musashi Seimitsu Industry is an equity-method affiliate of Honda, with a 25.1% stake in FY03/21. While the company could be considered one of the “Honda affiliated” component manufacturers, its fourth president, Hiroshi Otsuka (grandson to the company’s founder and first president and son of the second president) has consistently run the company’s business. Under his leadership, the company has continued to chart a course independent from Honda, and in FY03/18 there were no members of the board of directors hailing from Honda, which stands in contrast to there being a majority of directors (nine at the time) from Honda on board in 2006 when Mr. Otsuka became the company’s president. Since taking office in May 2006. Mr. Otsuka has been simultaneously promoting the diversification and globalization of human resources and actively appointing women and non-Japanese nationals as executives. The ten-member board at present includes three women and two foreign nationals.
The global auto industry is going through a period of profound change that the chairperson of the Japan Automobile Manufacturers Association (JAMA) calls a once-in-a-century transformation. The massive growth in electric vehicles such as EVs, e-HEVs, HEVs, and FCVs has led to reduced demand for transmissions, and the company believes that camshaft sales are likely to soon be a thing of the past. That said, management notes that the total amount of sales expected to disappear would be equal to only about 7% of total revenue in FY03/21. On the other hand, the company expects demand for speed reduction mechanisms used in EVs to expand as the trend toward electrification progresses. In fact, deliveries of EV speed reduction mechanisms, which were almost non-existent in 2015, grew to about 900,000 units in 2020. Of course, while concerns over the commodification of EVs, i.e., an ongoing decline in EV market prices, are unlikely to be completely eliminated, upside factors for the company include the need for improved strength and precision in gears in line with the increased prevalence of EVs. The company believes that as the shift to electric vehicles progresses, enhanced gear volume and improved added value in EV products will contribute to enhanced revenue and an improved product mix, which will in turn will result in higher profits.
The company was founded in 1938 as a manufacturer of aircraft components. It later became a manufacturer of sewing machine parts, and is today a manufacturer of automotive parts. In anticipation of major changes in the future (the “new normal” era), the company is working to not only strengthen its existing businesses, but also to create new businesses that can become future earnings pillars. The company has four areas of focus: the e-mobile Unit business, the energy solutions business, the AI solutions business, and the plant bioscience business. In March 2021, Toyota Motor at its main plant installed an AI-based visual inspection machine developed by the company for use during the inspection process in production line. The machine uses an in-house developed AI to detect scratches and other visual defects in finished products (something that even today is largely done by humans). The company forecasts FY03/23 revenue in its AI solutions business of at least JPY1.0bn, up from about JPY100mn in FY03/21.
The company is currently focusing on creating new businesses based on its basic philosophy of achieving through innovation. As part of the process of creating new businesses, management established “Musashi Innovation Lab CLUE”, which has already produced results through the spinning-off of companies from internal startup efforts. While working to strengthen its auto parts business, where trends moving forward are increasingly difficult to predict, the company is focused on creating new businesses and fostering their growth so as to ensure an improved potential for growth moving forward.
Earnings trends
For FY03/22, the company reported revenue of JPY241.9bn (+18.2% YoY), operating profit of JPY8.4bn (+12.1% YoY), recurring profit of JPY9.4bn (+14.0% YoY), and net income attributable to owners of the parent of JPY5.4bn (-26.4% YoY). OPM narrowed 0.2pp YoY, despite increased revenue and profit on the back of higher sales in all regions, as a result of fluctuating production due to the semiconductor shortage, as well as higher logistics costs. As previously forecast, the company expects the annual DPS to be JPY45.0, with the payout ratio at 54.1%.
For FY03/23, the company forecasts revenue of JPY275.0bn (+13.7% YoY), operating profit of JPY10.0bn (+18.9% YoY), recurring profit of JPY9.5bn (+0.7% YoY), net income attributable to owners of the parent of JPY6.5bn (+19.7% YoY), and EPS of JPY99.6. These forecasts assume exchange rates of JPY120/USD and JPY135/EUR. The company plans to record record-high sales for the first time in four years, but expects OPM to surpass that of FY03/22 by only 0.1pp. The annual DPS is also expected to remain level YoY, at JPY45.0, with the payout ratio at 45.2%.
In April 2021, the company formulated and announced “Musashi 100th Year Vision” as its new long-term vision leading up to the centennial of its founding in 2038. Although the company did not announce a medium-term business plan with specific numerical targets, a revenue target of JPY300.0bn was set for FY03/24, the financial year three years after the announcement of the long-term vision (the FY03/22 full-year plan was for revenue of JPY230.0bn, and the company's historical record for revenue was JPY255.9bn in FY03/19). Although a profit target has not been provided, applying the company's current profit margin of 7% yields operating profit of JPY21.0bn, which would also be a record high (at present the record high is JPY16.5bn, achieved in FY03/08).
Strengths and weaknesses
Strengths
The company’s integrated production system enables lower costs and shorter delivery times, allowing it to differentiate itself and offer new value propositions to its customers.
The company’s effective use of its existing equipment and facilities allows it to readily respond to the demands brought on by the electrification of automobiles.
A long-serving president has put in place a solidly consistent long-term management vision. Accordingly, the company has laid the groundwork to simultaneously strengthen its core businesses and create new businesses.
Weaknesses
A real recovery in the European business has yet to manifest, and it appears it will be some time until that business will make a significant contribution to earnings.
The substantial amount of capital expenditures needed to create an integrated production system suppresses earnings at the company for longer than at other auto parts manufacturers.
A lag exists between rises in steel and other raw material costs and their reflection in selling prices. Accordingly, the adverse impact on near-term earnings can be severe.
Key financial data
Income statement
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21
FY03/22
FY03/23
(JPYmn)
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Est.
Revenue
148,820
158,209
164,397
180,522
237,910
255,934
236,355
204,714
241,896
275,000
YoY
18.1%
6.3%
3.9%
9.8%
31.8%
7.6%
-7.7%
-13.4%
18.2%
13.7%
Gross profit
21,859
23,868
27,796
28,607
37,776
39,694
32,690
29,679
32,034
-
YoY
78.8%
9.2%
16.5%
2.9%
32.1%
5.1%
-17.6%
-9.2%
7.9%
-
Gross profit margin
14.7%
15.1%
16.9%
15.8%
15.9%
15.5%
13.8%
14.5%
13.2%
-
SG&A expenses
13,292
12,279
14,397
17,440
22,008
25,586
25,405
22,171
23,621
-
YoY
17.7%
-7.6%
17.2%
21.1%
26.2%
16.3%
-0.7%
-12.7%
6.5%
-
SG&A ratio
8.9%
7.8%
8.8%
9.7%
9.3%
10.0%
10.7%
10.8%
9.8%
-
Operating profit
8,567
11,588
13,398
11,166
15,767
14,107
7,285
7,507
8,413
10,000
YoY
813.3%
35.3%
15.6%
-16.7%
41.2%
-10.5%
-48.4%
3.0%
12.1%
18.9%
Operating profit margin
5.8%
7.3%
8.1%
6.2%
6.6%
5.5%
3.1%
3.7%
3.5%
3.6%
Recurring profit
9,623
11,875
11,449
10,323
15,929
14,791
7,113
8,277
9,435
9,500
YoY
270.5%
23.4%
-3.6%
-9.8%
54.3%
-7.1%
-51.9%
16.4%
14.0%
0.7%
Recurring profit margin
6.5%
7.5%
7.0%
5.7%
6.7%
5.8%
3.0%
4.0%
3.9%
3.5%
Net income
6,827
6,379
6,809
6,315
10,351
9,885
-6,902
7,378
5,429
6,500
YoY
169.9%
-6.6%
6.7%
-7.3%
63.9%
-4.5%
-
-
-26.4%
19.7%
Net margin
4.6%
4.0%
4.1%
3.5%
4.4%
3.9%
-
3.6%
2.2%
2.4%
Per-share data (split-adjusted; JPY)
Shares issued (year-end; '000)
62,400
62,400
62,400
62,400
62,442
65,135
65,184
65,258
65,288
-
EPS (JPY)
109.4
102.8
109.1
50.6
165.9
155.6
-106.0
113.1
83.2
99.6
EPS (fully diluted; JPY)
106.3
93.4
99.7
46.3
151.6
-
-
-
-
-
Dividend per share (JPY)
22.0
24.0
25.0
26.0
66.0
42.0
31.5
35.0
45.0
45.0
Book value per share (JPY)
983.0
1,154.5
1,071.1
1,147.4
1,330.4
1,405.3
1,096.2
1,305.0
1,541.3
-
Balance sheet (JPYmn)
Cash and cash equivalents
10,586
9,538
13,059
30,607
26,106
27,152
20,665
24,143
27,554
Total current assets
55,246
59,093
58,800
100,664
103,678
104,555
89,075
102,053
122,180
Tangible fixed assets
82,911
94,199
81,565
108,116
103,716
102,506
98,219
102,249
111,699
Intangible assets
1,003
1,322
1,780
28,017
28,005
25,602
7,423
6,416
5,525
Investments and other assets
16,001
14,924
13,006
11,683
12,378
11,786
12,614
15,348
20,556
Total assets
155,162
169,539
155,152
248,482
247,778
244,450
207,333
226,066
259,960
Short-term debt
21,446
30,569
20,556
37,979
23,423
39,655
51,148
50,342
54,667
Total current liabilities
51,378
55,392
44,029
71,985
71,484
74,755
87,800
89,862
92,827
Long-term debt
28,653
24,855
28,498
74,679
63,362
49,173
27,958
27,151
41,914
Total fixed liabilities
32,777
30,176
33,175
88,184
75,944
61,361
37,021
40,289
54,863
Total liabilities
84,155
85,569
77,204
160,169
147,428
136,116
124,821
130,152
147,690
Shareholders' equity
61,329
72,029
66,822
71,582
83,056
91,510
71,435
85,141
100,588
Total net assets
71,006
83,969
77,947
88,312
100,350
108,333
82,511
95,914
112,269
Total interest-bearing debt
50,099
55,424
49,054
112,658
86,785
88,828
79,106
77,493
96,581
Cash flow statement(JPYmn)
Cash flows from operating activities
18,965
17,570
22,968
19,445
26,813
26,714
26,359
18,259
5,805
Cash flows from investing activities
-26,288
-20,295
-10,211
-41,236
-14,336
-19,847
-18,673
-12,198
-20,131
Cash flows from financing activities
7,655
337
-7,585
40,892
-20,534
-6,616
-10,878
-6,886
14,758
Financial ratios
ROA (RP-based)
6.7%
7.3%
7.1%
5.1%
6.4%
6.0%
3.1%
3.8%
3.9%
ROE
12.0%
9.6%
9.8%
9.1%
13.4%
11.3%
-8.5%
9.4%
5.8%
Equity ratio
39.5%
42.5%
43.1%
28.8%
33.5%
37.4%
34.5%
37.7%
38.7%
Source: Shared Research based on company materials Notes: Figures may differ from company materials due to differences in rounding methods.
Earnings
Quarterly earnings
Cumulative
FY03/21
FY03/22
FY03/22
(JPYmn)
Q1
Q1–Q2
Q1–Q3
Q1–Q4
Q1
Q1–Q2
Q1–Q3
Q1–Q4
% of Est.
FY Est.
Revenue
27,803
82,328
142,740
204,714
58,186
113,545
172,392
241,896
105.2%
230,000
YoY
-55.5%
-33.5%
-21.5%
-13.4%
109.3%
37.9%
20.8%
18.2%
12.4%
Gross profit
-1,023
7,386
18,088
29,679
7,854
14,142
20,328
32,034
YoY
-
-55.2%
-27.3%
-9.2%
-
91.5%
12.4%
7.9%
Gross profit margin
-3.7%
9.0%
12.7%
14.5%
13.5%
12.5%
11.8%
13.2%
SG&A expenses
4,772
10,304
15,779
22,171
6,178
11,808
17,181
23,621
YoY
-24.2%
-17.3%
-14.2%
-12.7%
29.5%
14.6%
8.9%
6.5%
SG&A ratio
17.2%
12.5%
11.1%
10.8%
10.6%
10.4%
10.0%
9.8%
Operating profit
-5,796
-2,918
2,308
7,507
1,676
2,333
3,147
8,413
93.5%
9,000
YoY
-
-
-64.5%
3.0%
-
-
36.4%
12.1%
19.9%
Operating profit margin
-20.8%
-3.5%
1.6%
3.7%
2.9%
2.1%
1.8%
3.5%
3.9%
Recurring profit
-5,637
-3,126
2,469
8,277
1,629
1,936
3,285
9,435
119.4%
7,900
YoY
-
-
-62.8%
16.4%
-
-
33.0%
14.0%
-4.6%
Recurring profit margin
-20.3%
-3.8%
1.7%
4.0%
2.8%
1.7%
1.9%
3.9%
3.4%
Net income
-3,135
-1,484
2,544
7,378
1,562
1,248
1,706
5,429
96.9%
5,600
YoY
-
-
-41.6%
-
-
-
-32.9%
-26.4%
-24.1%
Net margin
-11.3%
-1.8%
1.8%
3.6%
2.7%
1.1%
1.0%
2.2%
2.4%
Quarterly
FY03/21
FY03/22
(JPYmn)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Revenue
27,803
54,525
60,412
61,974
58,186
55,359
58,847
69,504
YoY
-55.5%
-11.3%
4.2%
13.7%
109.3%
1.5%
-2.6%
12.2%
Gross profit
-1,023
8,409
10,702
11,591
7,854
6,288
6,186
11,706
YoY
-
7.2%
27.7%
48.5%
-
-25.2%
-42.2%
1.0%
Gross profit margin
-3.7%
15.4%
17.7%
18.7%
13.5%
11.4%
10.5%
16.8%
SG&A expenses
4,772
5,532
5,475
6,392
6,178
5,630
5,373
6,440
YoY
-24.2%
-10.4%
-7.5%
-8.9%
29.5%
1.8%
-1.9%
0.8%
SG&A ratio
17.2%
10.1%
9.1%
10.3%
10.6%
10.2%
9.1%
9.3%
Operating profit
-5,796
2,878
5,226
5,199
1,676
657
814
5,266
YoY
-
71.9%
112.1%
564.0%
-
-77.2%
-84.4%
1.3%
Operating profit margin
-20.8%
5.3%
8.7%
8.4%
2.9%
1.2%
1.4%
7.6%
Recurring profit
-5,637
2,511
5,595
5,808
1,629
307
1,349
6,150
YoY
-
57.7%
109.4%
1,105.0%
-
-87.8%
-75.9%
5.9%
Recurring profit margin
-20.3%
4.6%
9.3%
9.4%
2.8%
0.6%
2.3%
8.8%
Net income
-3,135
1,651
4,028
4,834
1,562
-314
458
3,723
YoY
-
117.2%
143.2%
-
-
-
-88.6%
-23.0%
Net margin
-11.3%
3.0%
6.7%
7.8%
2.7%
-0.6%
0.8%
5.4%
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
By segment
FY03/21
FY03/22
FY03/22
Cumulative(JPYmn)
Q1
Q1–Q2
Q1–Q3
Q1–Q4
Q1
Q1–Q2
Q1–Q3
Q1–Q4
% of Est.
FY Est.
Revenue
27,803
82,328
142,740
204,714
58,186
113,545
172,392
241,896
105.2%
230,000
YoY
-55.5%
-33.5%
-21.5%
-13.4%
109.3%
37.9%
20.8%
18.2%
12.4%
Japan
5,297
12,366
22,327
32,543
8,374
16,233
25,114
34,277
90.9%
37,700
YoY
-39.7%
-32.8%
-16.3%
-7.9%
58.1%
31.3%
12.5%
5.3%
15.8%
% of total
19.1%
15.0%
15.6%
15.9%
14.4%
14.3%
14.6%
14.2%
16.4%
Americas
4,674
19,113
32,953
45,296
12,568
24,718
36,609
51,352
106.8%
48,100
YoY
-67.9%
-33.4%
-21.8%
-19.0%
168.9%
29.3%
11.1%
13.4%
6.2%
% of total
16.8%
23.2%
23.1%
22.1%
21.6%
21.8%
21.2%
21.2%
20.9%
Asia
4,681
16,115
28,693
44,262
12,225
25,564
39,570
56,322
112.9%
49,900
YoY
-69.9%
-49.1%
-38.6%
-28.2%
161.2%
58.6%
37.9%
27.2%
12.7%
% of total
16.8%
19.6%
20.1%
21.6%
21.0%
22.5%
23.0%
23.3%
21.7%
China
6,458
14,317
23,130
29,987
7,145
14,279
23,836
33,160
106.6%
31,100
YoY
9.3%
18.9%
19.6%
36.3%
10.6%
-0.3%
3.1%
10.6%
3.7%
% of total
23.2%
17.4%
16.2%
14.6%
12.3%
12.6%
13.8%
13.7%
13.5%
Europe
6,690
20,415
35,634
52,624
17,872
32,749
47,260
66,783
105.7%
63,200
YoY
-62.1%
-38.3%
-24.2%
-14.3%
167.1%
60.4%
32.6%
26.9%
20.1%
% of total
24.1%
24.8%
25.0%
25.7%
30.7%
28.8%
27.4%
27.6%
27.5%
Operating profit
-5,796
-2,918
2,308
7,507
1,676
2,333
3,147
8,413
93.5%
9,000
YoY
-
-
-64.5%
3.0%
-
-
36.4%
12.1%
19.9%
Operating profit margin
-20.8%
-3.5%
1.6%
3.7%
2.9%
2.1%
1.8%
3.5%
3.9%
Japan
-1,982
-1,980
-493
1,600
614
757
1,128
2,716
82.3%
3,300
YoY
-
-
-
-42.7%
-
-
-
69.8%
106.3%
Operating profit margin
-37.4%
-16.0%
-2.2%
4.9%
7.3%
4.7%
4.5%
7.9%
8.8%
% of total
32.9%
63.6%
-23.8%
21.7%
38.2%
32.5%
35.5%
32.2%
36.7%
Americas
-1,110
140
967
1,215
28
-47
-194
444
49.3%
900
YoY
-
-80.3%
-15.8%
-31.0%
-
-
-
-63.5%
-25.9%
Operating profit margin
-23.7%
0.7%
2.9%
2.7%
0.2%
-0.2%
-0.5%
0.9%
1.9%
% of total
18.4%
-4.5%
46.6%
16.5%
1.7%
-2.0%
-6.1%
5.3%
10.0%
Asia
-1,750
-1,334
49
2,556
460
1,781
2,778
4,726
107.4%
4,400
YoY
-
-
-98.7%
-40.7%
-
-
5,569.4%
84.9%
72.1%
Operating profit margin
-37.4%
-8.3%
0.2%
5.8%
3.8%
7.0%
7.0%
8.4%
8.8%
% of total
29.0%
42.9%
2.4%
34.7%
28.6%
76.4%
87.3%
56.0%
48.9%
China
724
1,938
3,616
4,321
610
1,109
2,307
3,323
107.2%
3,100
YoY
59.8%
74.1%
64.3%
149.5%
-15.7%
-42.8%
-36.2%
-23.1%
-28.3%
Operating profit margin
11.2%
13.5%
15.6%
14.4%
8.5%
7.8%
9.7%
10.0%
10.0%
% of total
-12.0%
-62.3%
174.3%
58.7%
38.0%
47.6%
72.5%
39.3%
34.4%
Europe
-1,908
-1,875
-2,065
-2,326
-107
-1,269
-2,837
-2,764
-
-2,700
YoY
-
-
-
-
-
-
-
-
-
Operating profit margin
-28.5%
-9.2%
-5.8%
-4.4%
-0.6%
-3.9%
-6.0%
-4.1%
-4.3%
% of total
31.7%
60.3%
-99.5%
-31.6%
-6.7%
-54.4%
-89.2%
-32.7%
-30.0%
Adjustment
231
193
233
140
70
1
-34
-32
-
By segment
FY03/21
FY03/22
Quarterly (JPYmn)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Revenue
27,803
54,525
60,412
61,974
58,186
55,359
58,847
69,504
YoY
-55.5%
-11.3%
4.2%
13.7%
109.3%
1.5%
-2.6%
12.2%
Japan
5,297
7,069
9,961
10,216
8,374
7,859
8,881
9,163
YoY
-39.7%
-26.5%
20.5%
18.1%
58.1%
11.2%
-10.8%
-10.3%
% of total
19.1%
13.0%
16.5%
16.5%
14.4%
14.2%
15.1%
13.2%
Americas
4,674
14,439
13,840
12,343
12,568
12,150
11,891
14,743
YoY
-67.9%
2.0%
3.0%
-10.5%
168.9%
-15.9%
-14.1%
19.4%
% of total
16.8%
26.5%
22.9%
19.9%
21.6%
21.9%
20.2%
21.2%
Asia
4,681
11,434
12,578
15,569
12,225
13,339
14,006
16,752
YoY
-69.9%
-29.0%
-16.4%
4.1%
161.2%
16.7%
11.4%
7.6%
% of total
16.8%
21.0%
20.8%
25.1%
21.0%
24.1%
23.8%
24.1%
China
6,458
7,859
8,813
6,857
7,145
7,134
9,557
9,324
YoY
9.3%
28.0%
20.8%
157.4%
10.6%
-9.2%
8.4%
36.0%
% of total
23.2%
14.4%
14.6%
11.1%
12.3%
12.9%
16.2%
13.4%
Europe
6,690
13,725
15,219
16,990
17,872
14,877
14,511
19,523
YoY
-62.1%
-11.1%
9.2%
17.7%
167.1%
8.4%
-4.7%
14.9%
% of total
24.1%
25.2%
25.2%
27.4%
30.7%
26.9%
24.7%
28.1%
Operating profit
-5,796
2,878
5,226
5,199
1,676
657
814
5,266
YoY
-
71.9%
112.1%
564.0%
-
-77.2%
-84.4%
1.3%
Operating profit margin
-20.8%
5.3%
8.7%
8.4%
2.9%
1.2%
1.4%
7.6%
Japan
-1,982
2
1,487
2,093
614
143
371
1,588
YoY
-
-99.7%
74.5%
172.5%
-
7,050.0%
-75.1%
-24.1%
Operating profit margin
-37.4%
0.0%
14.9%
20.5%
7.3%
1.8%
4.2%
17.3%
% of total
32.9%
0.1%
28.7%
39.6%
38.2%
19.7%
43.7%
30.2%
Americas
-1,110
1,250
827
248
28
-75
-147
638
YoY
-
343.3%
89.2%
-59.5%
-
-
-
157.3%
Operating profit margin
-23.7%
8.7%
6.0%
2.0%
0.2%
-0.6%
-1.2%
4.3%
% of total
18.4%
42.9%
15.9%
4.7%
1.7%
-10.3%
-17.3%
12.1%
Asia
-1,750
416
1,383
2,507
460
1,321
997
1,948
YoY
-
-67.3%
14.9%
298.6%
-
217.5%
-27.9%
-22.3%
Operating profit margin
-37.4%
3.6%
11.0%
16.1%
3.8%
9.9%
7.1%
11.6%
% of total
29.0%
14.3%
26.7%
47.4%
28.6%
182.0%
117.4%
37.0%
China
724
1,214
1,678
705
610
499
1,198
1,016
YoY
59.8%
83.9%
54.2%
-
-15.7%
-58.9%
-28.6%
44.1%
Operating profit margin
11.2%
15.4%
19.0%
10.3%
8.5%
7.0%
12.5%
10.9%
% of total
-12.0%
41.6%
32.4%
13.3%
38.0%
68.7%
141.1%
19.3%
Europe
-1,908
33
-190
-261
-107
-1,162
-1,568
73
YoY
-
-
-
-
-
-
-
-
Operating profit margin
-28.5%
0.2%
-1.2%
-1.5%
-0.6%
-7.8%
-10.8%
0.4%
% of total
31.7%
1.1%
-3.7%
-4.9%
-6.7%
-160.1%
-184.7%
1.4%
Adjustment
231
-38
40
-93
70
-69
-35
2
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Exchange rate
FY03/20
FY03/21
FY03/22
Q1
Q1–Q2
Q1–Q3
Q1–Q4
Q1
Q1–Q2
Q1–Q3
Q1–Q4
Q1
Q1–Q2
Q1–Q3
USD
109.67
108.67
108.89
108.95
107.38
106.32
105.54
105.94
109.76
110.10
111.45
YoY
0.1%
-1.8%
-2.2%
-1.9%
-2.1%
-2.2%
-3.1%
-2.8%
2.2%
3.6%
5.6%
BRL
28.00
27.36
27.11
26.17
19.82
19.63
19.49
19.44
21.15
21.04
20.80
YoY
-5.5%
-5.7%
-6.9%
-10.3%
-29.2%
-28.3%
-28.1%
-25.7%
6.7%
7.2%
6.7%
EUR
122.87
120.91
121.12
120.85
118.74
121.66
122.61
124.07
132.44
131.16
130.96
YoY
-7.1%
-7.5%
-7.3%
-7.0%
-3.4%
0.6%
1.2%
2.7%
11.5%
7.8%
6.8%
IDR
0.0077
0.0077
0.0077
0.0077
0.0073
0.0073
0.0073
0.0074
0.0077
0.0077
0.0078
YoY
-1.3%
0.0%
0.0%
0.0%
-5.2%
-5.2%
-5.2%
-3.9%
5.5%
5.5%
6.8%
INR
1.59
1.57
1.56
1.55
1.43
1.44
1.43
1.44
1.50
1.50
1.51
YoY
-2.5%
-2.5%
-3.1%
-3.1%
-10.1%
-8.3%
-8.3%
-7.1%
4.9%
4.2%
5.6%
CNY
16.01
15.64
15.62
15.59
15.11
15.20
15.39
15.65
17.06
17.07
17.35
YoY
-19.9%
-6.0%
-5.4%
-5.5%
-5.6%
-2.8%
-1.5%
0.4%
12.9%
12.3%
12.7%
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Full-year FY03/22 results (out May 10, 2022)
Full-year FY03/22 results summary
Full-year FY03/22 results were as follows
Revenue: JPY241.9bn (+18.2% YoY, versus previous company forecast of JPY230.0bn)
Operating profit: JPY8.4bn (+12.1% YoY, forecast of JPY9.0bn)
OPM: 3.5% (-0.2pp YoY, forecast of 3.9%)
Recurring profit: JPY9.4bn (+14.0% YoY, forecast of JPY7.9bn)
Net income attributable to owners of the parent: JPY5.4bn (-26.4% YoY, forecast of JPY5.6bn)
The company recorded EPS of JPY83.2 and plans to pay out a year-end dividend of JPY30.0 per share, expecting an annual DPS of JPY45.0 (versus DPS of JPY35.0 in FY03/21). Based on the company forecast, the payout ratio is expected to be 54.1% (30.9% in FY03/21).
Backed by gains in all regional segments, revenue grew by 18.2% YoY and exceeded the company forecast (which called for revenue of JPY230.0bn). Operating profit rose by 12.1% YoY as a result of this increased revenue, and the lowering of costs by measures such as productivity improvements.
Meanwhile, operating profit fell below the company forecast, due principally to fluctuating production as a result of the semiconductor shortage, higher logistics costs caused by insufficient supply of shipping containers, and inflation pushing up various costs. OPM also narrowed by 0.2pp YoY to 3.5%. Recurring profit finished above forecast, however, on the back of improved non-operating income (compared against the company forecast). The significant drop to net income attributable to the parent was the result of deterioration to extraordinary gains and losses because of the absence of extraordinary gains recorded in FY03/21, as well as posting a loss on the valuation of investment securities in FY03/22.
Q4 FY03/22 (January–March) results summary
Q4 FY03/22 (January–March 2022) results were as follows
Revenue: JPY69.5bn (+12.2% YoY)
Operating profit: JPY5.3bn (+1.3% YoY)
Recurring profit: JPY6.2bn (+5.9% YoY)
Net income attributable to owners of the parent: JPY3.7bn (-23.0% YoY)
On a quarterly (three month) basis, revenue increased YoY for the first time since Q2 FY03/22, and operating profit increased YoY for the first time since Q1 FY03/22.
Shared Research will update details following the results briefing and interviews with the company.
FY03/23 company forecasts
FY03/21
FY03/22
FY03/23
(JPYmn)
1H
2H
FY
1H
2H
FY
1H Est.
2H Est.
FY Est.
Revenue
82,328
122,386
204,714
113,545
128,351
241,896
275,000
YoY
-33.5%
8.8%
-13.4%
37.9%
4.9%
18.2%
13.7%
Gross profit
7,386
22,293
29,679
14,142
17,892
32,034
-
YoY
-55.2%
37.7%
-9.2%
91.5%
-19.7%
7.9%
-
Gross profit margin
9.0%
18.2%
14.5%
12.5%
13.9%
13.2%
-
SG&A expenses
10,304
11,867
22,171
11,808
11,813
23,621
-
YoY
-17.3%
-8.3%
-12.7%
14.6%
-0.5%
6.5%
-
SG&A ratio
12.5%
9.7%
10.8%
10.4%
9.2%
9.8%
-
Operating profit
-2,918
10,425
7,507
2,333
6,080
8,413
10,000
YoY
-
221.1%
3.0%
-
-41.7%
12.1%
18.9%
Operating profit margin
-3.5%
8.5%
3.7%
2.1%
4.7%
3.5%
3.6%
Recurring profit
-3,126
11,403
8,277
1,936
7,499
9,435
9,500
YoY
-
261.5%
16.4%
-
-34.2%
14.0%
0.7%
Recurring profit margin
-3.8%
9.3%
4.0%
1.7%
5.8%
3.9%
3.5%
Net income
-1,484
8,862
7,378
1,248
4,181
5,429
6,500
YoY
-
-
-
-
-52.8%
-26.4%
19.7%
Net margin
-1.8%
7.2%
3.6%
1.1%
3.3%
2.2%
2.4%
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Forecast summary
The company announced a new forecast for FY03/23, outlined below.
Revenue: JPY275.0bn (+13.7% YoY)
Operating profit: JPY10.0bn (+18.9% YoY)
OPM: 3.6% (+0.1pp YoY)
Recurring profit: JPY9.5bn (+0.7% YoY)
Net income attributable to owners of the parent: JPY6.5bn (+19.7% YoY)
The company expects EPS of JPY99.6, and plans for an annual DPS of JPY45.0 (DPS of JPY45.0 was also forecast for FY03/22). Based on the company forecast, the payout ratio would amount to 45.2% (54.1% was forecast for FY03/22).
These forecasts are based on assumed exchange rates of JPY120/USD and JPY135/EUR. The expected revenue of JPY275.0bn (+13.7% YoY) would mean achieving a record high for the first time in four years, surpassing the FY03/19 result of JPY255.9bn. On the other hand, the company forecasts that OPM will only widen by 0.1pp YoY, despite the anticipated 18.9% YoY boost to operating profit.
Shared Research will update details following the results briefing and interviews with the company.
Implementing organizational changes (announced February 14, 2022)
As part of its “Go Far Beyond” Musashi 100th Year Vision, the company implemented the following organizational changes with the aim of responding to changes in the environment and accelerating the transformation of its people, structure, and business.
With the goal of maximizing and better coordinating the company’s three strengths (selling ability, creating ability, and manufacturing capabilities) in order to realize its electrification strategy, the company created the Chief Core Business Officer (CBO) position, under which the sales and purchasing functions of the PT Business, L&S Business, and Motorcycle Business will be unified.
In order to facility faster management decision-making in the mainstay business, the company divided the PT Division into the PT-Diff Division and the PT-GB Division.
Establish a new Chief Monozukuri Officer (CMO) position to help strengthen the company’s manufacturing capabilities and its ability to adapt to change. The company aims to strengthen its earnings structure and build a business more resilient to change by promoting the standardization of systems and the advancement of DX in manufacturing operations around the world.
The company aims to clarify the separation of its manufacturing base and its business base while further distinguishing areas in which it will promote integration and areas in which it will promote specialization. On a wider scope, management intends to bolster the company’s operating structure by strengthening its organizational capacity to respond to the electrification of automobiles.
Capital expenditures
Capital expenditures
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21
FY03/22
(JPYmn)
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Est.
Capital expenditures
22,907
24,314
16,324
9,295
13,303
12,792
16,276
17,368
12,469
20,000
YoY
-
6.1%
-32.9%
-43.1%
43.1%
-3.8%
27.2%
6.7%
-28.2%
60.4%
Japan
2,757
3,816
1,951
1,953
2,149
3,950
2,968
2,170
1,915
-
YoY
-
38.4%
-48.9%
0.1%
10.0%
83.8%
-24.9%
-26.9%
-11.8%
-
% of total
12.0%
15.7%
12.0%
21.0%
16.2%
30.9%
18.2%
12.5%
15.4%
-
Americas
4,082
7,147
2,607
3,275
4,696
2,437
2,829
4,566
4,783
-
YoY
-
75.1%
-63.5%
25.6%
43.4%
-48.1%
16.1%
61.4%
4.8%
-
% of total
17.8%
29.4%
16.0%
35.2%
35.3%
19.1%
17.4%
26.3%
38.4%
-
Asia
15,917
13,031
11,233
3,811
3,869
2,679
4,031
4,633
1,843
-
YoY
-
-18.1%
-13.8%
-66.1%
1.5%
-30.8%
50.5%
14.9%
-60.2%
-
% of total
69.5%
53.6%
68.8%
41.0%
29.1%
20.9%
24.8%
26.7%
14.8%
-
China
-
-
-
-
-
-
3,990
2,265
593
-
YoY
-
-
-
-
-
-
-
-43.2%
-73.8%
-
% of total
-
-
-
-
-
-
24.5%
13.0%
4.8%
-
Europe
151
320
533
256
2,589
3,726
2,458
3,734
3,335
-
YoY
-
111.9%
66.6%
-52.0%
911.3%
43.9%
-34.0%
51.9%
-10.7%
-
% of total
0.7%
1.3%
3.3%
2.8%
19.5%
29.1%
15.1%
21.5%
26.7%
-
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
By segment
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21
FY03/22
(JPYmn)
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Est.
Revenue
125,993
148,820
158,209
164,397
180,522
237,910
255,934
236,355
204,714
230,000
YoY
0.6%
18.1%
6.3%
3.9%
9.8%
31.8%
7.6%
-7.7%
-13.4%
12.4%
Japan
35,353
35,421
31,156
27,717
27,221
28,778
33,699
35,316
32,543
37,700
YoY
-0.3%
0.2%
-12.0%
-11.0%
-1.8%
5.7%
17.1%
4.8%
-7.9%
15.8%
% of total
28.1%
23.8%
19.7%
16.9%
15.1%
12.1%
13.2%
14.9%
15.9%
16.4%
Americas
26,310
30,567
36,619
46,925
42,274
52,111
55,922
55,924
45,296
48,100
YoY
29.6%
16.2%
19.8%
28.1%
-9.9%
23.3%
7.3%
0.0%
-19.0%
6.2%
% of total
20.9%
20.5%
23.1%
28.5%
23.4%
21.9%
21.9%
23.7%
22.1%
20.9%
Asia
45,016
62,771
71,333
73,772
69,779
63,703
64,955
61,678
44,262
49,900
YoY
6.8%
39.4%
13.6%
3.4%
-5.4%
-8.7%
2.0%
-5.0%
-28.2%
12.7%
% of total
35.7%
42.2%
45.1%
44.9%
38.7%
26.8%
25.4%
26.1%
21.6%
21.7%
China
-
-
-
-
-
20,652
23,597
22,003
29,987
31,100
YoY
-
-
-
-
-
-
14.3%
-6.8%
36.3%
3.7%
% of total
-
-
-
-
-
8.7%
9.2%
9.3%
14.6%
13.5%
Europe
5,150
5,305
6,055
6,645
34,269
72,665
77,759
61,433
52,624
63,200
YoY
-23.0%
3.0%
14.1%
9.7%
415.7%
112.0%
7.0%
-21.0%
-14.3%
20.1%
% of total
4.1%
3.6%
3.8%
4.0%
19.0%
30.5%
30.4%
26.0%
25.7%
27.5%
South America
14,162
14,755
13,043
9,336
6,977
-
-
-
-
-
YoY
-31.2%
4.2%
-11.6%
-28.4%
-25.3%
-
-
-
-
-
% of total
11.2%
9.9%
8.2%
5.7%
3.9%
-
-
-
-
-
Operating profit
938
8,567
11,588
13,398
11,166
15,767
14,107
7,285
7,507
9,000
YoY
-91.0%
813.3%
35.3%
15.6%
-16.7%
41.2%
-10.5%
-48.4%
3.0%
19.9%
Operating profit margin
0.7%
5.8%
7.3%
8.1%
6.2%
6.6%
5.5%
3.1%
3.7%
3.9%
Japan
3,586
2,760
927
2,517
2,138
2,164
2,733
2,793
1,600
3,300
YoY
26.0%
-23.0%
-66.4%
171.5%
-15.1%
1.2%
26.3%
2.2%
-42.7%
106.3%
Operating profit margin
10.1%
7.8%
3.0%
9.1%
7.9%
7.5%
8.1%
7.9%
4.9%
8.8%
% of total
320.8%
34.9%
8.3%
19.4%
19.7%
14.2%
19.9%
39.9%
21.7%
36.7%
Americas
439
1,104
2,341
2,944
2,371
2,073
2,017
1,761
1,215
900
YoY
-
151.5%
112.0%
25.8%
-19.5%
-12.6%
-2.7%
-12.7%
-31.0%
-25.9%
Operating profit margin
1.7%
3.6%
6.4%
6.3%
5.6%
4.0%
3.6%
3.1%
2.7%
1.9%
% of total
39.3%
14.0%
20.9%
22.7%
21.8%
13.6%
14.7%
25.2%
16.5%
10.0%
Asia
-3,835
3,229
7,048
7,725
7,427
6,296
5,600
4,309
2,556
4,400
YoY
-
-
118.3%
9.6%
-3.9%
-15.2%
-11.1%
-23.1%
-40.7%
72.1%
Operating profit margin
-8.5%
5.1%
9.9%
10.5%
10.6%
9.9%
8.6%
7.0%
5.8%
8.8%
% of total
-343.0%
40.8%
62.9%
59.4%
68.3%
41.4%
40.7%
61.6%
34.7%
48.9%
China
-
-
-
-
-
3,210
3,091
1,732
4,321
3,100
YoY
-
-
-
-
-
-
-3.7%
-44.0%
149.5%
-28.3%
Operating profit margin
-
-
-
-
-
15.5%
13.1%
7.9%
14.4%
10.0%
% of total
-
-
-
-
-
21.1%
22.5%
24.8%
58.7%
34.4%
Europe
421
485
887
942
-333
1,461
315
-3,603
-2,326
-2,700
YoY
-56.3%
15.2%
82.9%
6.2%
-
-
-78.4%
-
-
-
Operating profit margin
8.2%
9.1%
14.6%
14.2%
-1.0%
2.0%
0.4%
-5.9%
-4.4%
-4.3%
% of total
37.7%
6.1%
7.9%
7.2%
-3.1%
9.6%
2.3%
-51.5%
-31.6%
-30.0%
South America
507
327
9
-1,132
-725
-
-
-
-
-
YoY
-79.4%
-35.5%
-97.2%
-
-
-
-
-
-
-
Operating profit margin
3.6%
2.2%
0.1%
-12.1%
-10.4%
-
-
-
-
-
% of total
45.3%
4.1%
0.1%
-8.7%
-6.7%
-
-
-
-
-
Adjustment
-180
659
375
401
287
560
348
291
140
-
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Exchange rate
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21
FY03/22
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Est.
USD
-
-
-
121.25
108.72
110.70
111.07
108.95
105.94
103.00
YoY
-
-
-
-
-10.3%
1.8%
0.3%
-1.9%
-2.8%
-2.8%
BRL
-
-
-
36.25
31.70
35.00
29.17
26.17
19.44
20.00
YoY
-
-
-
-
-12.6%
10.4%
-16.7%
-10.3%
-25.7%
2.9%
EUR
-
-
-
133.69
120.63
127.22
130.01
120.85
124.07
125.00
YoY
-
-
-
-
-9.8%
5.5%
2.2%
-7.0%
2.7%
0.7%
IDR
-
-
-
0.0091
0.0082
0.0083
0.0077
0.0077
0.0074
0.0070
YoY
-
-
-
-
-9.9%
1.2%
-7.2%
-
-3.9%
-5.4%
INR
-
-
-
1.84
1.63
1.73
1.60
1.55
1.44
1.40
YoY
-
-
-
-
-11.4%
6.1%
-7.5%
-3.1%
-7.1%
-2.8%
CNY
-
-
-
19.19
16.41
16.63
16.50
15.59
15.65
16.00
YoY
-
-
-
-
-14.5%
1.3%
-0.8%
-5.5%
0.4%
2.2%
Source: Shared Research based on company data
Comparison of past initial forecasts and actual results
Results vs. Initial Est.
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21
FY03/22
(JPYmn)
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Revenue
Initial Est.
142,000
160,000
160,000
146,000
213,000
249,000
251,000
-
230,000
Act.
148,820
158,209
164,397
180,522
237,910
255,934
236,355
204,714
241,896
Difference
4.8%
-1.1%
2.7%
23.6%
11.7%
2.8%
-5.8%
-
5.2%
Operating profit
Initial Est.
8,000
12,000
11,700
10,500
13,000
17,000
14,500
-
16,000
Act.
8,567
11,588
13,398
11,166
15,767
14,107
7,285
7,507
8,413
Difference
7.1%
-3.4%
14.5%
6.3%
21.3%
-17.0%
-49.8%
-
-47.4%
Recurring profit
Initial Est.
8,000
11,500
10,500
10,000
12,500
16,200
14,300
-
15,100
Act.
9,623
11,875
11,449
10,323
15,929
14,791
7,113
8,277
9,435
Difference
20.3%
3.3%
9.0%
3.2%
27.4%
-8.7%
-50.3%
-
-37.5%
Net income
Initial Est.
5,000
7,000
6,800
7,000
7,800
10,400
9,100
-
10,200
Act.
6,827
6,379
6,809
6,315
10,351
9,885
-6,902
7,378
5,429
Difference
36.5%
-8.9%
0.1%
-9.8%
32.7%
-5.0%
-
-
-46.8%
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Medium-term business plan
Musashi Seimitsu Industry does not at present have a medium-term business plan. The company in the past would formulate three-year medium-term targets and once that term was ended, create new three-year targets. The company does not establish a rolling 12-month forecast . During the period covered by the “Musashi Global Vision 2020” long-term vision launched in 2007, the company announced and implemented the three following three-year medium-term plans.
10th medium-term plan (FY03/09–FY03/11)
11th medium-term plan (FY03/12–FY03/14)
12th medium-term plan (FY03/15–FY03/17)
In its 13th medium-term plan (FY03/18–FY03/20), the company did not supply numerical targets for external consumption, offering only earnings forecasts for each subsequent year. Shared Research believes this was due to the presence of factors that would be difficult to incorporate into a three-year plan, including the sharp increase in new component orders as the electrification of automobiles accelerated and the mounting effects stemming from the acquisition and subsequent conversion to a subsidiary of Hay Holding GmbH (now Musashi Europe GmbH) in 2016.
As such, the Musashi Global Vision 2020 came to a close in the midst of the COVID-19 pandemic without the company having a three-year plan in place. On the other hand, the scale of the company expanded in the following ways during the 13 years in which management pursued the goals within its long-term vision.
Revenue increased from JPY161.3bn to JPY236.4bn
The number of company locations increased from 21 in 10 countries to 35 in 14 countries
The number of employees increased from 9,000 to 16,000
These figures, taken from the company website, reflect changes over the 12-term period from FY03/08 to FY03/20.
Musashi 100th Year Vision
Backed by this expansion, the company in April 2021 (when there was still no clear picture as to when the COVID-19 pandemic would be brought to heel) announced “Musashi 100th Year Vision” as its new long-term vision. The vision focuses on promoting a shared set of values in the years running up to 2038 based on the “Go Far Beyond! Break barriers and go on adventures!” slogan. The new vision also reiterates the Musashi Philosophy reaffirmed in the previous long-term vision under the “Our Origin,” “Our Purpose,” and “Our Way” themes, while at the same time expressing the company’s aim to “break the barriers of limitations and common thought and create new values that are not an extension of the present ones.”
The three key themes in the Musashi Philosophy are outlined below. The company believes that by adhering to these themes, it will be able to become an “essential company” capable of contributing to the resolution of social issues by 2038, the 100th anniversary of its founding.
“Our Origin”
Company founder Yoshiharu Otsuka (the grandfather of the company’s fourth and current president Hiroshi Otsuka) has seen the rise and fall of many companies, but noted that “there are very few groups that are united by the spirit of Simplicity, Sturdiness, and Consistent Sincerity that no longer exist. We should never forget this fact.” This reflects the founding concept of the company and the corporate spirit that has been passed down from generation to generation.
“Our Purpose”
The company’s mission is to
contribute to “enriched Harmony between our lives and Earth, using our Passion for technology
and Wisdom for innovation.” Here, “passion” refers to the company’s aim to continually evolve by
using its enthusiasm for “Monozukuri” and technological capabilities to take on new challenges, while “wisdom” refers to its
ability to use knowledge passed down and continually improved to create
innovations. Finally, the company aims to contribute to a sustainable and
prosperous world in which people live in “harmony” with the
environment.
“Our Way”
The “Our Way” theme centers
on “the values each of us hold in our hearts” and “moving into
the future with exploration and exploitation of knowledge” concepts. As specific
goals within the theme, the company focuses on the ideas of “Customer first,” “Integrity,” “Be unique, be
creative,” “Try first, learn fast (challenge yourself),” “One Musashi
(working together),” “Leadership and ownership (understanding your rights and obligations),” and “Smile and
thanks” (remember to smile and be grateful).
At the FY03/21 results briefing held in
May 2021, the company announced a FY03/24 revenue target of JPY300.0bn. This
target not only exceeds the past revenue high for the company, but represents management’s aim to
increase revenue by JPY70.0bn in just two years (the company’s revenue forecast
for FY03/22 is JPY230.0bn).
The company has provided no breakdown by
region or business in its FY03/24 JPY300.0bn revenue target. However, Shared
Research believes that it is relatively easy to forecast revenue over the next
two to three years in the auto parts sector based on new orders received from the
automakers and transmission manufacturers. With this in mind, we believe the outlook
fairly certain, although we note that there remain some hard-to-predict
variables, including sales volume for new and existing auto sales at Honda.
While the company may not be disclosing a breakdown for expected revenue,
largely due to the sensitive nature of product launch plans at Honda and other
automakers to which it supplies components, Shared Research believes the
company’s FY03/24 revenue target of JPY300.0bn to be quite achievable.
While providing a revenue target of
JPY300.0bn, the company has not disclosed profit targets. That said, management
at the results briefing indicated that the company had sufficient capacity to
achieve OPM in FY03/22 of 7%. Applying a profit margin of 7% to the company’s JPY300.0bn revenue
forecast would yield operating profit of JPY21.0bn, which well exceeds the past
high of JPY16.5bn in FY03/08. Should OPM continue to improve and recover to 8%,
where it stood in FY03/16, operating profit would reach JPY24.0bn. Finally, if
OPM recovers to the double-digit level for the first time since FY03/11,
operating profit based on this OPM could exceed JPY30.0bn.
Management cited three factors
contributing to the enhanced likelihood of profits expanding over the medium
term. First, cost reductions and improvements pursued to date have contributed
to an enhanced cost structure at the company. Second, earnings are improving in
previously unprofitable regions such as Europe. Third, the company’s product mix
is improving on an increase in orders for electric vehicle components. The
company expects these factors to continue to have an effect in FY03/22. Based
on current conditions, Shared Research believes greater clarity in regard to FY03/24
performance will gradually be achieved as the company provides quarterly
updates.
Business
Business overview
Corporate and business summary
Musashi Seimitsu Industry is an auto parts manufacturer with a product lineup focused primarily on automotive gears. The company recorded FY03/21 revenue of JPY204.7bn which according to Shared Research’s calculation ranks 21st among the 59 major auto parts manufacturers. About 51% of the company’s revenue was to the Honda Motor group (hereinafter Honda). The company also conducts business with almost all the global automakers, including domestic automakers such as Toyota and Suzuki, overseas automakers such as Ford and GM in the US, BYD in China, and Daimler in Germany. The company supplies gear products to transmission manufacturers, including the Aisin group. In addition, the company produces gear products for motorcycles, with sales to Honda as well as to Kawasaki Heavy Industries, Suzuki, BMW, Triumph, Harley Davidson, Hero, and TVS.
Honda, which accounts for more than half the company’s revenue, is also its largest shareholder. Musashi Seimitsu Industry is a Honda equity-method affiliate, with the latter maintaining a 25.1% stake in the company as of the end of March 2021.
In FY03/21, the PT Business, which focuses mainly on powertrain gears and camshafts that regulate an engine’s intake and exhaust valves, accounted for 69.3% of revenue, with the L&S Business, which includes suspension products used to ensure that unevenness in the road is not transferred to the vehicle’s body, and ball joints, which link the tires to the suspension and are considered important for safety, accounting for 8.5%. The Motorcycle Business, which focusses mainly on motorcycle gear products and general-purpose engine components, accounted for 22.2% of revenue. The PT Business, accounting for roughly 70% of total revenue, is clearly the company’s mainstay business.
“Powertrain” is a general term for the power transmission system, which consists mainly of the engine, transmission, and clutch. The powertrain is generally considered the heart of the vehicle and can be one of the differentiating factors in terms of an automobile’s driving performance, fuel efficiency, environmental performance (including in terms of exhaust), and interior comfort. Aiming to improve the competitiveness of their vehicles, automakers have continued to focus on advancing their research and development of powertrains. As such, most of the powertrain and peripheral components are manufactured by the automakers themselves or by auto parts suppliers, including consolidated subsidiaries, with which they have already established strong and close relationships.
Musashi Seimitsu Industry manufactures and sells transmission-system differential mechanisms, including differential gears and differential assemblies that stabilize engine power to the left/right of the vehicle during operation, and speed reduction mechanisms, including planetary assemblies that lower output rotational speed in order to increase torque and match the speed of the vehicle to the speed of the engine or motor. Other mainstay products include components such as camshafts that regulate an engine’s intake and exhaust valves. With the integrated production system contributing to lighter and smaller products, lower costs, and shorter deliver times, the company’s differential assemblies (including gears) are installed in all Honda vehicles, making these precision mechanical parts indispensable to the automaker’s vehicles. According to management, the company also has the largest global market share in motorcycle transmission gears.
A breakdown of FY03/21 revenue of JPY204.7bn by region shows revenue to external customer reaching about JPY32.5bn in Japan (15.9% of total revenue), JPY45.3bn in the Americas, comprising North America and South America (22.1%), JPY44.3bn in Asia (21.6%), JPY30.0bn in China (14.6%), and JPY52.6bn in Europe (25.7%). While Asia including China accounted for the largest share (36.2%) of revenue, the breakdown for revenue by region at the company was notably well balanced.
Europe’s share of total revenue stood at roughly 4% through 2015, but improved following the company’s 2016 acquisition of Hay Holding GmbH (now Musashi Europe GmbH), Germany’s largest forging and machining manufacturer. The acquisition price for Hay Holding was substantial, at about JPY28.1bn, though it did improve the company’s presence in Europe. However, profitability in the European business continued to suffer after the acquisition, recording in FY03/20 operating losses of JPY3.6bn and impairment losses of roughly JPY13.5bn.
Special characteristics of the company’s business model
The product flow for the company’s automotive components starts with orders, then moves to the design and development stage, followed by prototype testing and then mass production. Sales are booked when the products are shipped. Basically, the first orders come with each new vehicle model. The company then engages in the design and development of the requested components in cooperation with either the automaker or the transmission manufacturer. As the relevant model enters mass production, so too do the company’s products, resulting in an increase in deliveries and sales. It generally takes two to three years from the start of development until mass production, though it can take an additional few years if the powertrain is being overhauled, depending on the model.
The powertrain consists of the transmission, which can include the company’s differential assembly products, and the engine, upon which the company’s camshafts may be mounted. Given the importance of the powertrain as the heart of the vehicle, the decisions regarding the use of the company’s products are made during the design and development stage. Once a vehicle is launched, no changes are made to the powertrain, including the transmission. As such, once the company’s gears and other products are adopted, they will continue to be used throughout the model cycle (usually five to six years). At the same time, it is important to note that components are not introduced at any time within the model cycle.
While an automobile’s model cycle is usually five to six years, the model cycle for the powertrain, including the installed transmission is generally 10–12 years. Accordingly, an upgraded powertrain can be used in two generations of a particular auto model, with the same being said for derivatives of that model.
One example of this would be the powertrain used in Honda’s Civic and derivative SUV and wagon models. This powertrain will be used again, albeit with minor spec changes and upgrades, when the Civic and its derivatives undergo full model changes (generally after five to six years). However, with the passing of another five to six years and another round of full model changes, the powertrain used may also be significantly upgraded, or in fact entirely new. This new powertrain like its predecessor, will likely be used through two Civic and derivative model cycles (10–12 years). The repetition of this cycle has become standard in the industry, largely as the development of powertrains requires a substantial level of capital expenditures and R&D spending on the part of the automakers, with the recovery period for this investment usually taking 10–12 years, or two auto model cycles. However, Shared Research believes that as electrification in the industry accelerates, there may be cases in which powertrains are only used for one model cycle (five to six years).
Accordingly, the initial order can be a critical time for the company. It is at this point that the company aggressively promotes the strengths of its products, including their low cost, lightweight nature, quality, and quick delivery times. Once the order is confirmed and design and development commence, cancelation of the order is no longer on the table.
Delivery prices are determined when the order is received or during the initial design and development stages. However, once mass production begins, price reviews are conducted each year, with the negotiations being conducted by the auto parts manufacture and the automaker mainly the purchasing department. At that time, the automaker may ask for a reduction in prices in the form of a request for cooperation in lowering costs. While the negotiations are often settled based on economic conditions at the time, including in regard to exchange rates, steel and other raw material prices, and the state of new car sales, delivery prices are generally reduced by 1%–3% annually. Delivery price is almost never lifted, though this can happen as a result of major specification changes (this is extremely rare) or as the result of a natural disaster. As an example of the latter, prices were lifted during the tumultuous period just after the Great East Japan Earthquake in 2011.
Of course, delivery prices can be quite different based on the product. Product prices can also differ based how they are delivered. As an example, differential gear prices are higher when they are delivered as part of an assembly than when they are delivered as a simple component, largely as the former involves an increased number of processes. This makes it extremely difficult for an outside observer to get a clear picture of delivery prices for each product. In addition, while the impact on earnings may be rather small for the company, there is also a price difference depending on whether a component is used in a new auto or used as a replacement part.
Profitability analysis
Auto parts manufacturers generally have very different profit margins for different products. Generally speaking, the profit margin for electronic and electrical components, as well as for small parts that benefit from mass production, such as springs and fasteners, averaged around 11% for the five years between FY03/16 and FY03/21. On the other hand, the profit margin on the same basis for pressed parts and interior materials produced in-house was about 3%. That being said, profit margins can also vary substantially among auto part companies that offer the same kinds of products. In addition, it should be remembered that some auto part companies have highly profitable divisions operating in non-automotive fields, including the construction machinery and electric appliances sectors. As such, Shared Research believes it important to maintain a certain sense of caution when comparing the profit margins of different auto parts manufacturers.
Keeping these peculiarities of the sector in mind, Musashi Seimitsu Industry’s OPM in FY03/21 reached 3.7%, exceeding the sector average of 2.3%. However, the company’s FY03/20 OPM was 3.1%, which was short of the 3.5% sector average. At the very least, it can be said that for these two years, profitability at the company was not particularly strong. Please note that the auto part sector average figures used here reflect the simple average of OPM at the 59 listed companies as calculated by Shared Research, and are not based on combined revenue and operating profit at those companies.
On the other hand, it should be noted that the last two fiscal years have been highly unusual in that performance was impacted by a variety of factors stemming from the pandemic, including the suspension of operations in Japan and overseas. Shared Research believes that the impact from these factors varied significantly from company to company.
The deterioration in earnings in FY03/13 served to depress the company’s 10-year OPM average. In FY03/13, the company’s business in Asia fell into the red, dropping from operating profit of JPY4.5bn in FY03/12 to an operating loss of JPY3.8bn, largely due to the lingering impact from flooding in Thailand two years previously and production difficulties during the subsequent recovery production period. However, Shared Research views this downturn as a one-off event, noting that no other Honda affiliate had a similar experience and that the company made a rapid recovery the following year. Correcting for this year results in the company’s ten-year average OPM rising to 6.1%, exceeding the sector average on the same basis of 5.1%.
Even when factoring in the transitory deterioration in earnings in FY03/13, the company’s OPM has been following a downward course (see Figure XX). Shared Research views the downtrend as particularly clear when compared to the OPM averages for the Honda affiliate auto parts manufacturers and the auto parts sector as a whole, which have remained at about 5%, except during the pandemic and just after the global financial crisis. While the company’s OPM sometimes topped the 10% level prior to FY03/11, it has struggled to best the 7% level in recent years.
Shared Research believes the general downtrend in profitability can be attributed to higher costs as the company expanded its global business, deteriorating profitability in the European business, and declining profitability in the Motorcycle Business. Please see the Overseas Development section of this report for more information regarding the first two of these factors. As for the third factor, the deteriorating profit margin in the Motorcycle Business appears largely the result of price competition from emergent local competitors in the compact (100cc–110cc displacement) vehicle market in Asia. We note that the company does not disclose profit margins by business segment.
Amid the ongoing deterioration in profitability, the company announced that it expected a recovery in OPM in FY03/22. More specifically, management targets OPM for the year of 7.0%. With its sector peers also targeting profit margin recoveries, the company is not alone in this respect, though Figure XX shows that it expects the recovery to be rather substantial. On the other hand, Honda does not expect a recovery in its profit margin, and in fact expects OPM to dip from 5.0% in FY03/21 to 4.3% in FY03/22. Shared Research is unsure at this point if Honda is being conservative or if the auto parts manufacturers are just putting forth bullish targets. That said, given current conditions, we expect attention moving forward to be on whether or not Musashi Seimitsu Industry’s targeted recovery in profitability proves sustainable.
Long-term trends in operating profit and OPM
FY03/01
FY03/02
FY03/03
FY03/04
FY03/05
FY03/06
FY03/07
FY03/08
FY03/09
FY03/10
(JPYmn)
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Revenue
64,535
72,160
88,248
92,259
107,246
125,512
144,329
161,302
145,499
107,816
Operating profit
6,040
6,477
9,901
9,090
12,387
9,577
11,695
16,482
8,589
5,616
YoY
-
7.2%
52.9%
-8.2%
36.3%
-22.7%
22.1%
40.9%
-47.9%
-34.6%
Operating profit margin
9.4%
9.0%
11.2%
9.9%
11.6%
7.6%
8.1%
10.2%
5.9%
5.2%
FY03/11
FY03/12
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
(JPYmn)
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Revenue
127,026
125,205
125,993
148,820
158,209
164,397
180,522
237,910
255,934
236,355
Operating profit
12,767
10,377
938
8,567
11,588
13,398
11,166
15,767
14,107
7,285
YoY
127.3%
-18.7%
-91.0%
813.3%
35.3%
15.6%
-16.7%
41.2%
-10.5%
-48.4%
Operating profit margin
10.1%
8.3%
0.7%
5.8%
7.3%
8.1%
6.2%
6.6%
5.5%
3.1%
FY03/21
FY03/22
(JPYmn)
Act.
Est.
Revenue
204,714
230,000
Operating profit
7,507
16,000
YoY
3.0%
113.1%
Operating profit margin
3.7%
7.0%
Source: Shared Research based on company materials
Musashi Seimitsu Industry’s profit margin compared to the auto parts sector average and the Honda affiliated auto parts manufacturer average
Source: Shared Research, based on company data
OPM at Musashi Seimitsu Industry and Honda
Source: Shared Research, based on company data.
Profit analysis by business segment
Segment earnings
By segment
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21
(JPYmn)
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Revenue
125,993
148,820
158,209
164,397
180,522
237,910
255,934
236,355
204,714
YoY
0.6%
18.1%
6.3%
3.9%
9.8%
31.8%
7.6%
-7.7%
-13.4%
Japan
35,353
35,421
31,156
27,717
27,221
28,778
33,699
35,316
32,543
YoY
-0.3%
0.2%
-12.0%
-11.0%
-1.8%
5.7%
17.1%
4.8%
-7.9%
% of total
28.1%
23.8%
19.7%
16.9%
15.1%
12.1%
13.2%
14.9%
15.9%
Americas
26,310
30,567
36,619
46,925
42,274
52,111
55,922
55,924
45,296
YoY
29.6%
16.2%
19.8%
28.1%
-9.9%
23.3%
7.3%
0.0%
-19.0%
% of total
20.9%
20.5%
23.1%
28.5%
23.4%
21.9%
21.9%
23.7%
22.1%
Asia
45,016
62,771
71,333
73,772
69,779
63,703
64,955
61,678
44,262
YoY
6.8%
39.4%
13.6%
3.4%
-5.4%
-8.7%
2.0%
-5.0%
-28.2%
% of total
35.7%
42.2%
45.1%
44.9%
38.7%
26.8%
25.4%
26.1%
21.6%
China
-
-
-
-
-
20,652
23,597
22,003
29,987
YoY
-
-
-
-
-
-
14.3%
-6.8%
36.3%
% of total
-
-
-
-
-
8.7%
9.2%
9.3%
14.6%
Europe
5,150
5,305
6,055
6,645
34,269
72,665
77,759
61,433
52,624
YoY
-23.0%
3.0%
14.1%
9.7%
415.7%
112.0%
7.0%
-21.0%
-14.3%
% of total
4.1%
3.6%
3.8%
4.0%
19.0%
30.5%
30.4%
26.0%
25.7%
South America
14,162
14,755
13,043
9,336
6,977
-
-
-
-
YoY
-31.2%
4.2%
-11.6%
-28.4%
-25.3%
-
-
-
-
% of total
11.2%
9.9%
8.2%
5.7%
3.9%
-
-
-
-
Operating profit
938
8,567
11,588
13,398
11,166
15,767
14,107
7,285
7,507
YoY
-91.0%
813.3%
35.3%
15.6%
-16.7%
41.2%
-10.5%
-48.4%
3.0%
Operating profit margin
0.7%
5.8%
7.3%
8.1%
6.2%
6.6%
5.5%
3.1%
3.7%
Japan
3,586
2,760
927
2,517
2,138
2,164
2,733
2,793
1,600
YoY
26.0%
-23.0%
-66.4%
171.5%
-15.1%
1.2%
26.3%
2.2%
-42.7%
Operating profit margin
10.1%
7.8%
3.0%
9.1%
7.9%
7.5%
8.1%
7.9%
4.9%
% of total
320.8%
34.9%
8.3%
19.4%
19.7%
14.2%
19.9%
39.9%
21.7%
Americas
439
1,104
2,341
2,944
2,371
2,073
2,017
1,761
1,215
YoY
-
151.5%
112.0%
25.8%
-19.5%
-12.6%
-2.7%
-12.7%
-31.0%
Operating profit margin
1.7%
3.6%
6.4%
6.3%
5.6%
4.0%
3.6%
3.1%
2.7%
% of total
39.3%
14.0%
20.9%
22.7%
21.8%
13.6%
14.7%
25.2%
16.5%
Asia
-3,835
3,229
7,048
7,725
7,427
6,296
5,600
4,309
2,556
YoY
-
-
118.3%
9.6%
-3.9%
-15.2%
-11.1%
-23.1%
-40.7%
Operating profit margin
-8.5%
5.1%
9.9%
10.5%
10.6%
9.9%
8.6%
7.0%
5.8%
% of total
-343.0%
40.8%
62.9%
59.4%
68.3%
41.4%
40.7%
61.6%
34.7%
China
-
-
-
-
-
3,210
3,091
1,732
4,321
YoY
-
-
-
-
-
-
-3.7%
-44.0%
149.5%
Operating profit margin
-
-
-
-
-
15.5%
13.1%
7.9%
14.4%
% of total
-
-
-
-
-
21.1%
22.5%
24.8%
58.7%
Europe
421
485
887
942
-333
1,461
315
-3,603
-2,326
YoY
-56.3%
15.2%
82.9%
6.2%
-
-
-78.4%
-
-
Operating profit margin
8.2%
9.1%
14.6%
14.2%
-1.0%
2.0%
0.4%
-5.9%
-4.4%
% of total
37.7%
6.1%
7.9%
7.2%
-3.1%
9.6%
2.3%
-51.5%
-31.6%
South America
507
327
9
-1,132
-725
-
-
-
-
YoY
-79.4%
-35.5%
-97.2%
-
-
-
-
-
-
Operating profit margin
3.6%
2.2%
0.1%
-12.1%
-10.4%
-
-
-
-
% of total
45.3%
4.1%
0.1%
-8.7%
-6.7%
-
-
-
-
Adjustment
-180
659
375
401
287
560
348
291
140
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Foreign exchange trends
Exchange rate
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
USD
-
-
-
121.25
108.72
110.70
111.07
108.95
105.94
YoY
-
-
-
-
-10.3%
1.8%
0.3%
-1.9%
-2.8%
BRL
-
-
-
36.25
31.70
35.00
29.17
26.17
19.44
YoY
-
-
-
-
-12.6%
10.4%
-16.7%
-10.3%
-25.7%
EUR
-
-
-
133.69
120.63
127.22
130.01
120.85
124.07
YoY
-
-
-
-
-9.8%
5.5%
2.2%
-7.0%
2.7%
IDR
-
-
-
0.0091
0.0082
0.0083
0.0077
0.0077
0.0074
YoY
-
-
-
-
-9.9%
1.2%
-7.2%
-
-3.9%
INR
-
-
-
1.84
1.63
1.73
1.60
1.55
1.44
YoY
-
-
-
-
-11.4%
6.1%
-7.5%
-3.1%
-7.1%
CNY
-
-
-
19.19
16.41
16.63
16.50
15.59
15.65
YoY
-
-
-
-
-14.5%
1.3%
-0.8%
-5.5%
0.4%
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Executive summary
Business overview
Musashi Seimitsu Industry is an auto parts manufacturer with a product lineup focused primarily on automotive gears. The company recorded FY03/21 revenue of JPY204.7bn, about 51% of which was from the Honda Motor group (hereinafter Honda). The company also supplies gear products to domestic automakers such as Toyota and Suzuki and overseas automakers such as Ford and GM in the US, BYD in China, and Daimler in Germany. It also supplies parts to transmission manufacturers such as the Aisin group. In addition, Musashi Seimitsu produces gear products for motorcycles, with sales to Honda as well as to Kawasaki Heavy Industries, Hero, and TVS in India.
In FY03/21, the PT Business, which focuses mainly on powertrain gears, accounted for 69.3% of revenue, with the L&S Business, which centers on suspension products, accounting for 8.5%, and the Motorcycle Business, which focuses mainly on non-automotive gear products, accounting for 22.2%.
For transmission systems, the company makes differential assemblies that balance engine power to the left/right of the vehicle during operation, and speed reduction mechanisms also referred to as a Reducer Unit). These include planetary assemblies that lower output rotational speed in order to increase torque. Other mainstay products include components such as camshafts that regulate an engine’s intake and exhaust valves.
Using the technological and developmental abilities gained and fostered since its founding in 1938, the company has created a globally integrated production system for its mainstay gear products that includes not only their design and development, but also everything from steel forging to assembly operations. While a system built on the division of labor, i.e., having other companies manage heat treatment and other chemical process operations, is generally considered the norm in the precision machining components industry, the company’s integrated production system covering everything from forging to assembly allows it to achieve not only shorter delivery times, but lower costs on the back of reduced transportation expenses and enhanced productivity.
With the integrated production system contributing to lower costs and shorter delivery times, Honda makes use of the company’s differential assemblies in 100% of its vehicles, making these precision mechanical parts indispensable to the automaker. According to management, the company also has the largest global market share in motorcycle transmission gears.
While Europe’s weighting in the auto parts sector as a whole tends to be rather small, the company’s breakdown for revenue by region in FY03/21 was notably well balanced, with Japan accounting for 15.9% of total revenue, the Americas (North America and South America) accounting for 22.1%, Asia (including China) accounting for 36.2%, and Europe accounting for 25.7%. With performance in Europe struggling on the back of weak sales, the company set its sights on forming new business relationships with European automakers and in June 2016 acquired German firm Hay Holding GmbH, the largest forging and machining manufacturer in the region. Despite expectations that this would enhance the company’s presence in Europe, earnings deteriorated on a sharp increase in interest-bearing debt due to the large-scale M&A costing about JPY28.1bn and the European auto market subsequently falling into a slump. However, there are now signs that the company’s efforts to improve profitability in the region are beginning to show.
Honda, the company’s largest customer, is also its largest shareholder. Musashi Seimitsu Industry is an equity-method affiliate of Honda, with a 25.1% stake in FY03/21. While the company could be considered one of the “Honda affiliated” component manufacturers, its fourth president, Hiroshi Otsuka (grandson to the company’s founder and first president and son of the second president) has consistently run the company’s business. Under his leadership, the company has continued to chart a course independent from Honda, and in FY03/18 there were no members of the board of directors hailing from Honda, which stands in contrast to there being a majority of directors (nine at the time) from Honda on board in 2006 when Mr. Otsuka became the company’s president. Since taking office in May 2006. Mr. Otsuka has been simultaneously promoting the diversification and globalization of human resources and actively appointing women and non-Japanese nationals as executives. The ten-member board at present includes three women and two foreign nationals.
The global auto industry is going through a period of profound change that the chairperson of the Japan Automobile Manufacturers Association (JAMA) calls a once-in-a-century transformation. The massive growth in electric vehicles such as EVs, e-HEVs, HEVs, and FCVs has led to reduced demand for transmissions, and the company believes that camshaft sales are likely to soon be a thing of the past. That said, management notes that the total amount of sales expected to disappear would be equal to only about 7% of total revenue in FY03/21. On the other hand, the company expects demand for speed reduction mechanisms used in EVs to expand as the trend toward electrification progresses. In fact, deliveries of EV speed reduction mechanisms, which were almost non-existent in 2015, grew to about 900,000 units in 2020. Of course, while concerns over the commodification of EVs, i.e., an ongoing decline in EV market prices, are unlikely to be completely eliminated, upside factors for the company include the need for improved strength and precision in gears in line with the increased prevalence of EVs. The company believes that as the shift to electric vehicles progresses, enhanced gear volume and improved added value in EV products will contribute to enhanced revenue and an improved product mix, which will in turn will result in higher profits.
The company was founded in 1938 as a manufacturer of aircraft components. It later became a manufacturer of sewing machine parts, and is today a manufacturer of automotive parts. In anticipation of major changes in the future (the “new normal” era), the company is working to not only strengthen its existing businesses, but also to create new businesses that can become future earnings pillars. The company has four areas of focus: the e-mobile Unit business, the energy solutions business, the AI solutions business, and the plant bioscience business. In March 2021, Toyota Motor at its main plant installed an AI-based visual inspection machine developed by the company for use during the inspection process in production line. The machine uses an in-house developed AI to detect scratches and other visual defects in finished products (something that even today is largely done by humans). The company forecasts FY03/23 revenue in its AI solutions business of at least JPY1.0bn, up from about JPY100mn in FY03/21.
The company is currently focusing on creating new businesses based on its basic philosophy of achieving through innovation. As part of the process of creating new businesses, management established “Musashi Innovation Lab CLUE”, which has already produced results through the spinning-off of companies from internal startup efforts. While working to strengthen its auto parts business, where trends moving forward are increasingly difficult to predict, the company is focused on creating new businesses and fostering their growth so as to ensure an improved potential for growth moving forward.
Earnings trends
For FY03/22, the company reported revenue of JPY241.9bn (+18.2% YoY), operating profit of JPY8.4bn (+12.1% YoY), recurring profit of JPY9.4bn (+14.0% YoY), and net income attributable to owners of the parent of JPY5.4bn (-26.4% YoY). OPM narrowed 0.2pp YoY, despite increased revenue and profit on the back of higher sales in all regions, as a result of fluctuating production due to the semiconductor shortage, as well as higher logistics costs. As previously forecast, the company expects the annual DPS to be JPY45.0, with the payout ratio at 54.1%.
For FY03/23, the company forecasts revenue of JPY275.0bn (+13.7% YoY), operating profit of JPY10.0bn (+18.9% YoY), recurring profit of JPY9.5bn (+0.7% YoY), net income attributable to owners of the parent of JPY6.5bn (+19.7% YoY), and EPS of JPY99.6. These forecasts assume exchange rates of JPY120/USD and JPY135/EUR. The company plans to record record-high sales for the first time in four years, but expects OPM to surpass that of FY03/22 by only 0.1pp. The annual DPS is also expected to remain level YoY, at JPY45.0, with the payout ratio at 45.2%.
In April 2021, the company formulated and announced “Musashi 100th Year Vision” as its new long-term vision leading up to the centennial of its founding in 2038. Although the company did not announce a medium-term business plan with specific numerical targets, a revenue target of JPY300.0bn was set for FY03/24, the financial year three years after the announcement of the long-term vision (the FY03/22 full-year plan was for revenue of JPY230.0bn, and the company's historical record for revenue was JPY255.9bn in FY03/19). Although a profit target has not been provided, applying the company's current profit margin of 7% yields operating profit of JPY21.0bn, which would also be a record high (at present the record high is JPY16.5bn, achieved in FY03/08).
Strengths and weaknesses
Strengths
The company’s integrated production system enables lower costs and shorter delivery times, allowing it to differentiate itself and offer new value propositions to its customers.
The company’s effective use of its existing equipment and facilities allows it to readily respond to the demands brought on by the electrification of automobiles.
A long-serving president has put in place a solidly consistent long-term management vision. Accordingly, the company has laid the groundwork to simultaneously strengthen its core businesses and create new businesses.
Weaknesses
A real recovery in the European business has yet to manifest, and it appears it will be some time until that business will make a significant contribution to earnings.
The substantial amount of capital expenditures needed to create an integrated production system suppresses earnings at the company for longer than at other auto parts manufacturers.
A lag exists between rises in steel and other raw material costs and their reflection in selling prices. Accordingly, the adverse impact on near-term earnings can be severe.
Key financial data
Notes: Figures may differ from company materials due to differences in rounding methods.
Earnings
Quarterly earnings
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Full-year FY03/22 results (out May 10, 2022)
Full-year FY03/22 results summary
Full-year FY03/22 results were as follows
The company recorded EPS of JPY83.2 and plans to pay out a year-end dividend of JPY30.0 per share, expecting an annual DPS of JPY45.0 (versus DPS of JPY35.0 in FY03/21). Based on the company forecast, the payout ratio is expected to be 54.1% (30.9% in FY03/21).
Backed by gains in all regional segments, revenue grew by 18.2% YoY and exceeded the company forecast (which called for revenue of JPY230.0bn). Operating profit rose by 12.1% YoY as a result of this increased revenue, and the lowering of costs by measures such as productivity improvements.
Meanwhile, operating profit fell below the company forecast, due principally to fluctuating production as a result of the semiconductor shortage, higher logistics costs caused by insufficient supply of shipping containers, and inflation pushing up various costs. OPM also narrowed by 0.2pp YoY to 3.5%. Recurring profit finished above forecast, however, on the back of improved non-operating income (compared against the company forecast). The significant drop to net income attributable to the parent was the result of deterioration to extraordinary gains and losses because of the absence of extraordinary gains recorded in FY03/21, as well as posting a loss on the valuation of investment securities in FY03/22.
Q4 FY03/22 (January–March) results summary
Q4 FY03/22 (January–March 2022) results were as follows
On a quarterly (three month) basis, revenue increased YoY for the first time since Q2 FY03/22, and operating profit increased YoY for the first time since Q1 FY03/22.
Shared Research will update details following the results briefing and interviews with the company.
FY03/23 company forecasts
Note: Figures may differ from company materials due to differences in rounding methods.
Forecast summary
The company announced a new forecast for FY03/23, outlined below.
The company expects EPS of JPY99.6, and plans for an annual DPS of JPY45.0 (DPS of JPY45.0 was also forecast for FY03/22). Based on the company forecast, the payout ratio would amount to 45.2% (54.1% was forecast for FY03/22).
These forecasts are based on assumed exchange rates of JPY120/USD and JPY135/EUR. The expected revenue of JPY275.0bn (+13.7% YoY) would mean achieving a record high for the first time in four years, surpassing the FY03/19 result of JPY255.9bn. On the other hand, the company forecasts that OPM will only widen by 0.1pp YoY, despite the anticipated 18.9% YoY boost to operating profit.
Shared Research will update details following the results briefing and interviews with the company.
Implementing organizational changes (announced February 14, 2022)
As part of its “Go Far Beyond” Musashi 100th Year Vision, the company implemented the following organizational changes with the aim of responding to changes in the environment and accelerating the transformation of its people, structure, and business.
With the goal of maximizing and better coordinating the company’s three strengths (selling ability, creating ability, and manufacturing capabilities) in order to realize its electrification strategy, the company created the Chief Core Business Officer (CBO) position, under which the sales and purchasing functions of the PT Business, L&S Business, and Motorcycle Business will be unified.
In order to facility faster management decision-making in the mainstay business, the company divided the PT Division into the PT-Diff Division and the PT-GB Division.
Establish a new Chief Monozukuri Officer (CMO) position to help strengthen the company’s manufacturing capabilities and its ability to adapt to change. The company aims to strengthen its earnings structure and build a business more resilient to change by promoting the standardization of systems and the advancement of DX in manufacturing operations around the world.
The company aims to clarify the separation of its manufacturing base and its business base while further distinguishing areas in which it will promote integration and areas in which it will promote specialization. On a wider scope, management intends to bolster the company’s operating structure by strengthening its organizational capacity to respond to the electrification of automobiles.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Comparison of past initial forecasts and actual results
Note: Figures may differ from company materials due to differences in rounding methods.
Medium-term business plan
Musashi Seimitsu Industry does not at present have a medium-term business plan. The company in the past would formulate three-year medium-term targets and once that term was ended, create new three-year targets. The company does not establish a rolling 12-month forecast . During the period covered by the “Musashi Global Vision 2020” long-term vision launched in 2007, the company announced and implemented the three following three-year medium-term plans.
In its 13th medium-term plan (FY03/18–FY03/20), the company did not supply numerical targets for external consumption, offering only earnings forecasts for each subsequent year. Shared Research believes this was due to the presence of factors that would be difficult to incorporate into a three-year plan, including the sharp increase in new component orders as the electrification of automobiles accelerated and the mounting effects stemming from the acquisition and subsequent conversion to a subsidiary of Hay Holding GmbH (now Musashi Europe GmbH) in 2016.
As such, the Musashi Global Vision 2020 came to a close in the midst of the COVID-19 pandemic without the company having a three-year plan in place. On the other hand, the scale of the company expanded in the following ways during the 13 years in which management pursued the goals within its long-term vision.
These figures, taken from the company website, reflect changes over the 12-term period from FY03/08 to FY03/20.
Musashi 100th Year Vision
Backed by this expansion, the company in April 2021 (when there was still no clear picture as to when the COVID-19 pandemic would be brought to heel) announced “Musashi 100th Year Vision” as its new long-term vision. The vision focuses on promoting a shared set of values in the years running up to 2038 based on the “Go Far Beyond! Break barriers and go on adventures!” slogan. The new vision also reiterates the Musashi Philosophy reaffirmed in the previous long-term vision under the “Our Origin,” “Our Purpose,” and “Our Way” themes, while at the same time expressing the company’s aim to “break the barriers of limitations and common thought and create new values that are not an extension of the present ones.”
The three key themes in the Musashi Philosophy are outlined below. The company believes that by adhering to these themes, it will be able to become an “essential company” capable of contributing to the resolution of social issues by 2038, the 100th anniversary of its founding.
“Our Origin”
Company founder Yoshiharu Otsuka (the grandfather of the company’s fourth and current president Hiroshi Otsuka) has seen the rise and fall of many companies, but noted that “there are very few groups that are united by the spirit of Simplicity, Sturdiness, and Consistent Sincerity that no longer exist. We should never forget this fact.” This reflects the founding concept of the company and the corporate spirit that has been passed down from generation to generation.
“Our Purpose”
The company’s mission is to contribute to “enriched Harmony between our lives and Earth, using our Passion for technology and Wisdom for innovation.” Here, “passion” refers to the company’s aim to continually evolve by using its enthusiasm for “Monozukuri” and technological capabilities to take on new challenges, while “wisdom” refers to its ability to use knowledge passed down and continually improved to create innovations. Finally, the company aims to contribute to a sustainable and prosperous world in which people live in “harmony” with the environment.
“Our Way”
The “Our Way” theme centers on “the values each of us hold in our hearts” and “moving into the future with exploration and exploitation of knowledge” concepts. As specific goals within the theme, the company focuses on the ideas of “Customer first,” “Integrity,” “Be unique, be creative,” “Try first, learn fast (challenge yourself),” “One Musashi (working together),” “Leadership and ownership (understanding your rights and obligations),” and “Smile and thanks” (remember to smile and be grateful).
At the FY03/21 results briefing held in May 2021, the company announced a FY03/24 revenue target of JPY300.0bn. This target not only exceeds the past revenue high for the company, but represents management’s aim to increase revenue by JPY70.0bn in just two years (the company’s revenue forecast for FY03/22 is JPY230.0bn).
The company has provided no breakdown by region or business in its FY03/24 JPY300.0bn revenue target. However, Shared Research believes that it is relatively easy to forecast revenue over the next two to three years in the auto parts sector based on new orders received from the automakers and transmission manufacturers. With this in mind, we believe the outlook fairly certain, although we note that there remain some hard-to-predict variables, including sales volume for new and existing auto sales at Honda. While the company may not be disclosing a breakdown for expected revenue, largely due to the sensitive nature of product launch plans at Honda and other automakers to which it supplies components, Shared Research believes the company’s FY03/24 revenue target of JPY300.0bn to be quite achievable.
While providing a revenue target of JPY300.0bn, the company has not disclosed profit targets. That said, management at the results briefing indicated that the company had sufficient capacity to achieve OPM in FY03/22 of 7%. Applying a profit margin of 7% to the company’s JPY300.0bn revenue forecast would yield operating profit of JPY21.0bn, which well exceeds the past high of JPY16.5bn in FY03/08. Should OPM continue to improve and recover to 8%, where it stood in FY03/16, operating profit would reach JPY24.0bn. Finally, if OPM recovers to the double-digit level for the first time since FY03/11, operating profit based on this OPM could exceed JPY30.0bn.
Management cited three factors contributing to the enhanced likelihood of profits expanding over the medium term. First, cost reductions and improvements pursued to date have contributed to an enhanced cost structure at the company. Second, earnings are improving in previously unprofitable regions such as Europe. Third, the company’s product mix is improving on an increase in orders for electric vehicle components. The company expects these factors to continue to have an effect in FY03/22. Based on current conditions, Shared Research believes greater clarity in regard to FY03/24 performance will gradually be achieved as the company provides quarterly updates.
Business
Business overview
Corporate and business summary
Musashi Seimitsu Industry is an auto parts manufacturer with a product lineup focused primarily on automotive gears. The company recorded FY03/21 revenue of JPY204.7bn which according to Shared Research’s calculation ranks 21st among the 59 major auto parts manufacturers. About 51% of the company’s revenue was to the Honda Motor group (hereinafter Honda). The company also conducts business with almost all the global automakers, including domestic automakers such as Toyota and Suzuki, overseas automakers such as Ford and GM in the US, BYD in China, and Daimler in Germany. The company supplies gear products to transmission manufacturers, including the Aisin group. In addition, the company produces gear products for motorcycles, with sales to Honda as well as to Kawasaki Heavy Industries, Suzuki, BMW, Triumph, Harley Davidson, Hero, and TVS.
Honda, which accounts for more than half the company’s revenue, is also its largest shareholder. Musashi Seimitsu Industry is a Honda equity-method affiliate, with the latter maintaining a 25.1% stake in the company as of the end of March 2021.
In FY03/21, the PT Business, which focuses mainly on powertrain gears and camshafts that regulate an engine’s intake and exhaust valves, accounted for 69.3% of revenue, with the L&S Business, which includes suspension products used to ensure that unevenness in the road is not transferred to the vehicle’s body, and ball joints, which link the tires to the suspension and are considered important for safety, accounting for 8.5%. The Motorcycle Business, which focusses mainly on motorcycle gear products and general-purpose engine components, accounted for 22.2% of revenue. The PT Business, accounting for roughly 70% of total revenue, is clearly the company’s mainstay business.
“Powertrain” is a general term for the power transmission system, which consists mainly of the engine, transmission, and clutch. The powertrain is generally considered the heart of the vehicle and can be one of the differentiating factors in terms of an automobile’s driving performance, fuel efficiency, environmental performance (including in terms of exhaust), and interior comfort. Aiming to improve the competitiveness of their vehicles, automakers have continued to focus on advancing their research and development of powertrains. As such, most of the powertrain and peripheral components are manufactured by the automakers themselves or by auto parts suppliers, including consolidated subsidiaries, with which they have already established strong and close relationships.
Musashi Seimitsu Industry manufactures and sells transmission-system differential mechanisms, including differential gears and differential assemblies that stabilize engine power to the left/right of the vehicle during operation, and speed reduction mechanisms, including planetary assemblies that lower output rotational speed in order to increase torque and match the speed of the vehicle to the speed of the engine or motor. Other mainstay products include components such as camshafts that regulate an engine’s intake and exhaust valves. With the integrated production system contributing to lighter and smaller products, lower costs, and shorter deliver times, the company’s differential assemblies (including gears) are installed in all Honda vehicles, making these precision mechanical parts indispensable to the automaker’s vehicles. According to management, the company also has the largest global market share in motorcycle transmission gears.
A breakdown of FY03/21 revenue of JPY204.7bn by region shows revenue to external customer reaching about JPY32.5bn in Japan (15.9% of total revenue), JPY45.3bn in the Americas, comprising North America and South America (22.1%), JPY44.3bn in Asia (21.6%), JPY30.0bn in China (14.6%), and JPY52.6bn in Europe (25.7%). While Asia including China accounted for the largest share (36.2%) of revenue, the breakdown for revenue by region at the company was notably well balanced.
Europe’s share of total revenue stood at roughly 4% through 2015, but improved following the company’s 2016 acquisition of Hay Holding GmbH (now Musashi Europe GmbH), Germany’s largest forging and machining manufacturer. The acquisition price for Hay Holding was substantial, at about JPY28.1bn, though it did improve the company’s presence in Europe. However, profitability in the European business continued to suffer after the acquisition, recording in FY03/20 operating losses of JPY3.6bn and impairment losses of roughly JPY13.5bn.
Special characteristics of the company’s business model
The product flow for the company’s automotive components starts with orders, then moves to the design and development stage, followed by prototype testing and then mass production. Sales are booked when the products are shipped. Basically, the first orders come with each new vehicle model. The company then engages in the design and development of the requested components in cooperation with either the automaker or the transmission manufacturer. As the relevant model enters mass production, so too do the company’s products, resulting in an increase in deliveries and sales. It generally takes two to three years from the start of development until mass production, though it can take an additional few years if the powertrain is being overhauled, depending on the model.
The powertrain consists of the transmission, which can include the company’s differential assembly products, and the engine, upon which the company’s camshafts may be mounted. Given the importance of the powertrain as the heart of the vehicle, the decisions regarding the use of the company’s products are made during the design and development stage. Once a vehicle is launched, no changes are made to the powertrain, including the transmission. As such, once the company’s gears and other products are adopted, they will continue to be used throughout the model cycle (usually five to six years). At the same time, it is important to note that components are not introduced at any time within the model cycle.
While an automobile’s model cycle is usually five to six years, the model cycle for the powertrain, including the installed transmission is generally 10–12 years. Accordingly, an upgraded powertrain can be used in two generations of a particular auto model, with the same being said for derivatives of that model.
One example of this would be the powertrain used in Honda’s Civic and derivative SUV and wagon models. This powertrain will be used again, albeit with minor spec changes and upgrades, when the Civic and its derivatives undergo full model changes (generally after five to six years). However, with the passing of another five to six years and another round of full model changes, the powertrain used may also be significantly upgraded, or in fact entirely new. This new powertrain like its predecessor, will likely be used through two Civic and derivative model cycles (10–12 years). The repetition of this cycle has become standard in the industry, largely as the development of powertrains requires a substantial level of capital expenditures and R&D spending on the part of the automakers, with the recovery period for this investment usually taking 10–12 years, or two auto model cycles. However, Shared Research believes that as electrification in the industry accelerates, there may be cases in which powertrains are only used for one model cycle (five to six years).
Accordingly, the initial order can be a critical time for the company. It is at this point that the company aggressively promotes the strengths of its products, including their low cost, lightweight nature, quality, and quick delivery times. Once the order is confirmed and design and development commence, cancelation of the order is no longer on the table.
Delivery prices are determined when the order is received or during the initial design and development stages. However, once mass production begins, price reviews are conducted each year, with the negotiations being conducted by the auto parts manufacture and the automaker mainly the purchasing department. At that time, the automaker may ask for a reduction in prices in the form of a request for cooperation in lowering costs. While the negotiations are often settled based on economic conditions at the time, including in regard to exchange rates, steel and other raw material prices, and the state of new car sales, delivery prices are generally reduced by 1%–3% annually. Delivery price is almost never lifted, though this can happen as a result of major specification changes (this is extremely rare) or as the result of a natural disaster. As an example of the latter, prices were lifted during the tumultuous period just after the Great East Japan Earthquake in 2011.
Of course, delivery prices can be quite different based on the product. Product prices can also differ based how they are delivered. As an example, differential gear prices are higher when they are delivered as part of an assembly than when they are delivered as a simple component, largely as the former involves an increased number of processes. This makes it extremely difficult for an outside observer to get a clear picture of delivery prices for each product. In addition, while the impact on earnings may be rather small for the company, there is also a price difference depending on whether a component is used in a new auto or used as a replacement part.
Profitability analysis
Auto parts manufacturers generally have very different profit margins for different products. Generally speaking, the profit margin for electronic and electrical components, as well as for small parts that benefit from mass production, such as springs and fasteners, averaged around 11% for the five years between FY03/16 and FY03/21. On the other hand, the profit margin on the same basis for pressed parts and interior materials produced in-house was about 3%. That being said, profit margins can also vary substantially among auto part companies that offer the same kinds of products. In addition, it should be remembered that some auto part companies have highly profitable divisions operating in non-automotive fields, including the construction machinery and electric appliances sectors. As such, Shared Research believes it important to maintain a certain sense of caution when comparing the profit margins of different auto parts manufacturers.
Keeping these peculiarities of the sector in mind, Musashi Seimitsu Industry’s OPM in FY03/21 reached 3.7%, exceeding the sector average of 2.3%. However, the company’s FY03/20 OPM was 3.1%, which was short of the 3.5% sector average. At the very least, it can be said that for these two years, profitability at the company was not particularly strong. Please note that the auto part sector average figures used here reflect the simple average of OPM at the 59 listed companies as calculated by Shared Research, and are not based on combined revenue and operating profit at those companies.
On the other hand, it should be noted that the last two fiscal years have been highly unusual in that performance was impacted by a variety of factors stemming from the pandemic, including the suspension of operations in Japan and overseas. Shared Research believes that the impact from these factors varied significantly from company to company.
The deterioration in earnings in FY03/13 served to depress the company’s 10-year OPM average. In FY03/13, the company’s business in Asia fell into the red, dropping from operating profit of JPY4.5bn in FY03/12 to an operating loss of JPY3.8bn, largely due to the lingering impact from flooding in Thailand two years previously and production difficulties during the subsequent recovery production period. However, Shared Research views this downturn as a one-off event, noting that no other Honda affiliate had a similar experience and that the company made a rapid recovery the following year. Correcting for this year results in the company’s ten-year average OPM rising to 6.1%, exceeding the sector average on the same basis of 5.1%.
Even when factoring in the transitory deterioration in earnings in FY03/13, the company’s OPM has been following a downward course (see Figure XX). Shared Research views the downtrend as particularly clear when compared to the OPM averages for the Honda affiliate auto parts manufacturers and the auto parts sector as a whole, which have remained at about 5%, except during the pandemic and just after the global financial crisis. While the company’s OPM sometimes topped the 10% level prior to FY03/11, it has struggled to best the 7% level in recent years.
Shared Research believes the general downtrend in profitability can be attributed to higher costs as the company expanded its global business, deteriorating profitability in the European business, and declining profitability in the Motorcycle Business. Please see the Overseas Development section of this report for more information regarding the first two of these factors. As for the third factor, the deteriorating profit margin in the Motorcycle Business appears largely the result of price competition from emergent local competitors in the compact (100cc–110cc displacement) vehicle market in Asia. We note that the company does not disclose profit margins by business segment.
Amid the ongoing deterioration in profitability, the company announced that it expected a recovery in OPM in FY03/22. More specifically, management targets OPM for the year of 7.0%. With its sector peers also targeting profit margin recoveries, the company is not alone in this respect, though Figure XX shows that it expects the recovery to be rather substantial. On the other hand, Honda does not expect a recovery in its profit margin, and in fact expects OPM to dip from 5.0% in FY03/21 to 4.3% in FY03/22. Shared Research is unsure at this point if Honda is being conservative or if the auto parts manufacturers are just putting forth bullish targets. That said, given current conditions, we expect attention moving forward to be on whether or not Musashi Seimitsu Industry’s targeted recovery in profitability proves sustainable.
Profit analysis by business segment
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.