Nippon Aqua Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥24.29B
• Operating Income: ¥1.74B
• Net Income: ¥1.19B
• EPS: ¥37.19

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Nihon Aqua (14290) reported robust FY2025 Q3 standalone results under JGAAP, with revenue of ¥24.288bn (+16.7% YoY) and operating income of ¥1.74bn (+14.4% YoY), indicating healthy topline momentum albeit slightly softer operating leverage than revenue growth. Gross profit was ¥4.672bn, implying a gross margin of 19.2%, which appears to be the primary driver of profitability given limited non-operating contributions. Operating margin stood at 7.2% and ordinary margin at 7.2%, with ordinary income (¥1.753bn) slightly above operating income due to small net non-operating gains roughly offsetting interest expense. Net income reached ¥1.186bn (+13.7% YoY), corresponding to a net margin of 4.88% and EPS of ¥37.19. DuPont analysis points to an ROE of 11.14%, decomposed into a net margin of 4.88%, asset turnover of 1.053x, and financial leverage of 2.17x, suggesting balanced contributions from profitability and asset efficiency with moderate leverage. Liquidity appears sound with a current ratio of 140% and quick ratio of 124%, supported by ¥18.82bn in current assets versus ¥13.42bn in current liabilities and working capital of ¥5.40bn. Solvency is comfortable: total liabilities of ¥13.53bn against equity of ¥10.65bn (liabilities/equity 1.27x) and very strong interest coverage of ~129x, reflecting modest interest expense (¥13.49m). The effective tax rate inferred from disclosed numbers is ~28.8% (¥504m tax on ¥1.753bn ordinary income), despite a 0.0% metric shown in the summary, which appears to be a template artifact. There is an internal inconsistency between disclosed cost of sales (¥16.15bn) and gross profit (¥4.67bn); the margin and gross profit figures are internally consistent and imply cost of sales of ~¥19.62bn, so analysis relies on the gross profit figure. Cash flow data (OCF/FCF) and depreciation/EBITDA are not disclosed in the XBRL, limiting cash conversion and capex intensity assessment; zeros should be interpreted as undisclosed, not actual zeros. Dividend figures are also undisclosed; payout ratio and FCF coverage shown as 0.0%/0.00x should be treated as not available. Using net income and EPS implies roughly 31.9 million shares outstanding (indicative), which would place estimated BVPS near the mid-¥300s based on reported equity, subject to rounding and standalone scope. Overall, the company shows good growth, stable margins, prudent balance sheet, and strong interest coverage, but the lack of cash flow disclosure and standalone scope warrant caution. External demand drivers tied to construction/housing activity and raw material cost trends remain key to the outlook. Given the insulation-focused business model, gross margin sensitivity to input prices and project mix will remain central to earnings quality. Data limitations (cash flow, depreciation, dividends, shares) constrain deeper analysis, but available non-zero data support a view of resilient operations and adequate financial strength through Q3.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 4.88%
• asset_turnover: 1.053x
• financial_leverage: 2.17x
• calculated_ROE: 11.14%
• interpretation: ROE is driven by moderate margins, solid asset turnover, and moderate leverage; ROA (margin × turnover) is ~5.1%. margin_quality:
• revenue: 24288000000
• gross_profit: 4672278000
• gross_margin: 19.2%
• operating_income: 1740000000
• operating_margin: 7.2%
• ordinary_income: 1753000000
• ordinary_margin: 7.2%
• net_income: 1186000000
• net_margin: 4.88%
• notes: Gross profit and margin are internally consistent; disclosed cost of sales (¥16.15bn) conflicts with gross profit and revenue. Analysis relies on the gross profit figure and margins, which align with operating income. operating_leverage:
• yoy_revenue_growth: 16.7%
• yoy_operating_income_growth: 14.4%
• assessment: Operating income grew slightly slower than revenue, indicating modest negative operating leverage in Q3 year-to-date, likely due to higher SG&A or cost pressures.
• sg_and_a_estimate: {'sg_and_a': 2932278000, 'sg_and_a_to_sales': '12.1%', 'method': 'SG&A approximated as gross profit minus operating income.'}

Growth Assessment

revenue_sustainability: Topline growth of 16.7% YoY suggests strong demand, likely supported by construction activity and insulation adoption. Sustainability depends on housing starts, renovation demand, and competitive pricing. profit_quality: Margins are stable in the mid-to-high single-digit operating range; ordinary profit closely tracks operating profit, implying limited reliance on non-operating gains. Effective tax rate is ~28.8%, consistent with statutory levels. outlook: Assuming stable housing demand and manageable input costs, earnings can remain resilient. Watch for raw material price volatility (isocyanates, blowing agents), labor availability, and seasonal/weather effects, which can influence quarterly mix and execution.

Financial Health

liquidity:

• current_assets: 18819894000
• current_liabilities: 13415988000
• current_ratio: 140.3%
• quick_ratio: 123.7%
• working_capital: 5403906000
• assessment: Comfortable liquidity headroom with ample current and quick assets relative to short-term obligations. solvency:
• total_assets: 23060000000
• total_liabilities: 13525927000
• total_equity: 10647000000
• equity_ratio_inferred: 46.2%
• debt_to_equity: 1.27x (total liabilities/equity)
• interest_coverage: ≈129x (operating income / interest expense)
• assessment: Moderate leverage with strong coverage; low interest burden (¥13.49m) indicates limited interest-bearing debt exposure. capital_structure: Balance sheet is equity-rich (equity/asset ~46%) with liabilities dominated by non-interest-bearing items likely linked to operations. Funding capacity appears adequate for working capital needs.

Cash Flow Quality

earnings_quality: With cash flow statements undisclosed, earnings-to-cash conversion cannot be verified. However, the small interest expense and stable margins suggest limited reliance on financing for earnings. free_cash_flow_analysis: FCF not disclosed; capex and depreciation are undisclosed, preventing assessment of maintenance vs. growth capex needs. working_capital: Inventory of ¥2.22bn within current assets indicates a working-capital-intensive model; monitoring receivables, payables, and inventory turns is important for cash conversion timing. limitations: OCF, investing CF, financing CF, and D&A are not disclosed in XBRL (zeros shown), so quantitative cash flow ratios (OCF/NI, FCF margin) cannot be computed.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed; the 0.0% values should be treated as unavailable. On earnings capacity alone (¥1.186bn net income), there appears to be headroom for distributions, but policy is unknown. fcf_coverage: Not assessable due to undisclosed OCF/FCF. policy_outlook: Absent disclosure on dividend policy, assume a pragmatic stance aligned with earnings stability, balance sheet health, and investment needs; confirmation requires management guidance.

Risk Assessment

Business Risks:

• Exposure to Japanese housing starts and renovation cycles affecting insulation demand
• Raw material price volatility (isocyanates/MDI, polyols, blowing agents) impacting gross margins
• Competitive pricing pressure in insulation and construction services
• Execution and labor availability constraints, including subcontractor capacity
• Weather and seasonality affecting on-site installation volumes and productivity
• Regulatory changes related to building energy efficiency and chemical safety (ESG/regulatory compliance)
• Supplier concentration risk for key chemical inputs

Financial Risks:

• Working capital intensity leading to cash flow timing risk
• Potential increases in interest rates or credit spreads (though current interest burden is low)
• Customer credit risk in the construction value chain
• Standalone (non-consolidated) reporting limits visibility on group cash and obligations

Key Concerns:

• Inconsistency between disclosed cost of sales and gross profit; reliance on gross profit/margin figures for analysis
• Lack of cash flow disclosure, limiting assessment of cash conversion and FCF
• Undisclosed depreciation and capex levels, obscuring capital intensity and maintenance needs
• Dividend information and share count not disclosed in the dataset, constraining per-share and payout analysis

Investment Implications

Key Takeaways:

• Strong topline growth (+16.7% YoY) with operating profit up 14.4% indicates resilient demand
• Margins stable: GP margin 19.2%, OP margin ~7.2%, net margin 4.9%
• ROE of 11.1% supported by balanced asset efficiency and moderate leverage
• Liquidity and solvency are solid with current ratio 1.40x and interest coverage ~129x
• Cash flow, depreciation, and dividend data not disclosed; conclusions on cash conversion and payouts remain provisional

Metrics to Watch:

• Gross margin trajectory versus raw material cost trends
• SG&A ratio and operating leverage as revenue scales
• Order backlog / housing starts as demand indicators
• OCF/Net income and FCF once disclosed
• Inventory and receivable turns (working capital efficiency)
• Capex and depreciation once disclosed (capital intensity and replacement needs)
• Effective tax rate normalization

Relative Positioning: Within Japan’s building materials/insulation space, the company exhibits above-trend revenue growth and sound balance sheet metrics, with profitability consistent with installation/service-heavy models; sustained performance will hinge on input cost management and steady construction demand.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis