HATCH WORK CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.02B
• Operating Income: ¥223M
• Net Income: ¥155M
• EPS: ¥81.34

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

Hatch-Work (148A0) reported solid FY2025 Q3 results with clear operating leverage: revenue rose 15.4% YoY to ¥2,023 million while operating income grew 69.1% to ¥223 million, expanding the operating margin to roughly 11.0%. Net income increased 110.9% to ¥155 million, lifting the net margin to 7.66% and pushing reported/derived ROE to 16.63%. Gross profit of ¥1,012 million implies a 50.0% gross margin, indicating a relatively high value-add model consistent with an asset-light service or software-like business. Ordinary income exceeded operating income (¥237 million vs. ¥223 million), helped by limited financial costs (interest expense ¥3.6 million) and likely small non-operating gains. Liquidity appears sound with a current ratio of 148% and working capital of ¥682 million. Leverage is moderate: total liabilities/ equity is 1.77x, and an analytically derived equity ratio is approximately 33.7% (equity ¥932 million / total assets ¥2,764 million), despite the reported equity ratio field showing 0.0% (unreported). Interest coverage is strong at 62.8x, reflecting healthy operating earnings relative to low interest costs. Asset turnover of 0.732 suggests efficient utilization of the asset base for a company at this scale. The DuPont bridge (7.66% margin × 0.732 turnover × 2.97 leverage) reconciles well to the 16.63% ROE, underscoring quality of earnings at this stage. YoY margin expansion is notable: using the growth rates implies last year’s operating margin around 7.5%, improving by roughly 350 bps to ~11.0% this year. Effective tax rate appears closer to ~20% (¥39 million tax / ~¥194 million pre-tax) rather than the displayed 0.0%, which is an unreported artifact. Cash flow statement line items are unreported (shown as zero), limiting direct assessment of operating cash flow conversion and free cash flow. No dividend was paid (DPS ¥0), consistent with a reinvestment stance during growth and margin scaling. Overall, the company exhibits improving profitability, disciplined cost control, and manageable leverage, with data limitations mainly in cash flow disclosures and certain per-share metrics (shares outstanding unreported). Approximate share count inferred from EPS and net income is about 1.9 million shares, supporting EPS of ¥81.34. Key watchpoints include sustaining double-digit top-line growth, maintaining gross margin around 50%, converting earnings to cash, and preserving balance sheet flexibility.

Profitability Analysis

ROE_decomposition: ROE 16.63% = Net margin 7.66% × Asset turnover 0.732 × Financial leverage 2.97. This indicates balanced contributions from margin expansion and modest leverage, with efficiency (turnover) appropriate for an asset-light model. margin_quality: Gross margin of 50.0% suggests meaningful pricing power/value-add. Operating margin of ~11.0% (¥223m/¥2,023m) represents a significant YoY uplift (~350 bps, inferred). Ordinary margin is ~11.7%, modestly above operating margin, indicating small positive non-operating effects and low interest burden. operating_leverage: Revenue +15.4% vs. operating income +69.1% implies strong operating leverage from scaling effects and cost discipline. Last-year implied operating income ~¥132m on ~¥1,753m revenue (margin ~7.5%), improving to ~11.0% this year as fixed costs are absorbed over a larger revenue base.

Growth Assessment

revenue_sustainability: Top-line growth of +15.4% is healthy; sustainability will depend on customer retention, new bookings, and pricing. The 50% gross margin supports a service/software-like model with potential for continued scaling. profit_quality: Net income +110.9% outpaced revenue growth due to operating leverage, not financial engineering (interest expense is only ¥3.6m, and ordinary income tracks operating trends). Effective tax appears ~20%, consistent with normalized profitability. outlook: If mid-teens revenue growth continues and operating margin holds around low double digits, earnings growth can remain above revenue growth. Key drivers will be maintaining gross margin near 50%, controlling SG&A growth below revenue growth, and protecting unit economics.

Financial Health

liquidity: Current assets ¥2,103m vs. current liabilities ¥1,420m yields a current ratio of 148% and quick ratio of 148% (inventories unreported). Working capital is ¥682m, supporting near-term obligations. solvency: Total liabilities ¥1,653m vs. equity ¥932m implies debt-to-equity of 1.77x, a moderate leverage profile. Interest coverage is strong at 62.8x, indicating ample buffer against rate or earnings volatility. capital_structure: Analytically derived equity ratio is ~33.7% (¥932m/¥2,764m), indicating a balanced mix of liabilities and equity; reported equity ratio of 0.0% is unreported and not reflective of actual capitalization.

Cash Flow Quality

earnings_quality: With OCF unreported, direct OCF/NI analysis is not possible. Nonetheless, high interest coverage and expanding margins suggest earnings are operationally driven rather than reliant on non-recurring items. FCF_analysis: Free cash flow is unreported. Assuming an asset-light model (no inventories disclosed, D&A unreported), capital intensity may be moderate; confirm capex and working capital trends when cash flow data becomes available. working_capital: Positive working capital of ¥682m provides flexibility. Monitor receivables days and deferred revenue/billings (if applicable) to assess cash conversion and seasonality.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio 0%, consistent with reinvestment during a margin expansion phase. EPS is ¥81.34, implying capacity to initiate dividends later if cash generation is robust. FCF_coverage: FCF coverage is unreported due to lack of OCF/Capex data. Dividend capacity should be evaluated after confirming recurring OCF and capex needs. policy_outlook: Given growth and operating leverage, retaining earnings to fund expansion appears rational. A future shift to shareholder returns would hinge on sustained profitability, stable growth, and visible FCF.

Risk Assessment

Business Risks:

• Growth deceleration risk if customer acquisition or retention slows
• Pricing pressure impacting 50% gross margin
• Execution risk in scaling SG&A efficiently to sustain double-digit operating margins
• Product/technology obsolescence or heightened competition (if software/service model)
• Concentration risk if revenue is reliant on a limited set of customers or channels

Financial Risks:

• Cash flow conversion risk due to unreported OCF and capex
• Refinancing or covenant risk if leverage rises, despite current strong interest coverage
• Working capital swings affecting liquidity (receivables, advance billings timing)
• Tax rate normalization variability (effective rate estimated ~20%)

Key Concerns:

• Lack of disclosed cash flow statement items this period limits FCF visibility
• Reported equity ratio and EBITDA fields are unreported, requiring careful recalculation
• Sustaining margin gains as growth moderates may be challenging

Investment Implications

Key Takeaways:

• Demonstrated operating leverage: revenue +15.4% with operating income +69.1%
• Healthy profitability profile: 50% gross margin and ~11% operating margin
• ROE at 16.63% supported by reasonable leverage (2.97x assets/equity) and 0.732x asset turnover
• Solid liquidity with ¥682m working capital and 148% current ratio
• Cash flow data absent; FCF and OCF conversion need verification before assessing capital return capacity

Metrics to Watch:

• Revenue growth trajectory and bookings/pipeline visibility
• Gross margin stability around 50%
• Operating margin progression and SG&A efficiency
• Operating cash flow, free cash flow, and capex once disclosed
• Receivable days, deferred revenue/billings, and churn/retention (if SaaS-like)
• Leverage (liabilities/equity) and interest coverage
• Effective tax rate normalization

Relative Positioning: Within Japan small/mid-cap growth and software/service peers, Hatch-Work shows competitive gross margins and above-average ROE with improving operating margins; balance sheet leverage is moderate and liquidity adequate, but relative FCF visibility is lower due to unreported cash flow data.

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
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