MASARU CORPORATION FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥10.65B
• Operating Income: ¥638M
• Net Income: ¥379M
• EPS: ¥455.94

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

FY2025 Q4 was a clearbeat quarter for Masaru, with strong top-line growth translating into outsized operating profit expansion and robust cash generation. Revenue rose 19.0% YoY to 106.47, while operating income jumped 56.6% YoY to 6.38, evidencing improved operating leverage and/or better project margins. Ordinary income increased 56.4% to 6.58, and net income rose 46.1% to 4.05, despite a relatively elevated effective tax rate of 34.5%. Calculated operating margin improved to about 6.0% (6.38/106.47), up from roughly 4.6% a year ago, implying approximately 144 bps of expansion. Net margin improved to 3.8% from roughly 3.1% last year, a gain of about 70 bps. SG&A was 15.92 (about 14.9% of revenue), supporting the view that cost discipline and scale benefits contributed to margin gains. ROE printed at 7.7%, underpinned by a 3.8% net margin, 1.209x asset turnover, and modest financial leverage of 1.67x. ROIC was reported at 20.5%, well above a typical 7–8% target threshold and indicative of strong capital efficiency. Cash flow quality was excellent: operating cash flow was 12.38, 3.06x net income, and free cash flow was 12.47, more than covering dividend needs. The balance sheet is conservative with total assets of 88.06, cash and deposits of 33.65, and total liabilities of 35.29; current ratio stands at 231%, and D/E (using total liabilities/equity) is 0.67x. Interest coverage is very strong at about 57x, reflecting minimal financial risk. Investing CF was slightly positive (0.09) with modest capex (0.22), suggesting limited capital intensity and good FCF conversion. Non-operating items were small (income 0.32; expenses 0.12), and interest expense was only 0.11, keeping financial drag minimal. Earnings quality is reinforced by OCF outpacing NI, likely due to favorable working capital dynamics (e.g., collections/advance billings), though detailed AR/AP movements are not disclosed. Forward-looking, improved margins, ample liquidity, and strong FCF provide flexibility for stable dividends and potential incremental shareholder returns, subject to order intake visibility and cost environment. Key watch items include order backlog quality, materials/labor cost trends, and any shifts in project mix that could impact gross margins.

Profitability Analysis

ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 3.8% × 1.209 × 1.67 ≈ 7.7%. The largest YoY driver is the margin component: operating income grew 56.6% vs revenue +19.0%, implying meaningful margin expansion. Using growth rates to infer prior-year metrics, operating margin improved from ~4.56% (4.08/89.46) to ~5.99% (6.38/106.47), a ~144 bps uplift; net margin rose from ~3.10% to 3.80%, ~70 bps higher. Asset turnover at 1.209x is healthy and likely up modestly with higher revenue on a comparatively stable asset base (total assets 88.06). Financial leverage is modest at 1.67x (assets/equity), little changed in essence given conservative funding. Business reasons for the margin expansion likely include better pricing/mix in construction projects, scale benefits on SG&A, and stable non-operating results (non-operating income only 0.32). With capex light and cost controls evident (SG&A ~14.9% of sales), some portion of the margin improvement appears sustainable, contingent on order quality and input cost stability. Flags: we cannot compare SG&A growth vs revenue growth due to lack of YoY SG&A disclosure; nonetheless, operating profit outpaced sales, indicating positive operating leverage in the period.

Growth Assessment

Revenue grew 19.0% YoY to 106.47, implying prior-year sales of ~89.46. Operating income rose 56.6% to 6.38 (prior ~4.08), and net income increased 46.1% to 4.05 (prior ~2.77). Growth quality appears solid given limited reliance on non-operating items (non-operating income 0.32 vs operating income 6.38) and strong OCF. The EBITDA margin is 6.3% (EBITDA 6.68), consistent with an improving profitability profile. Sustainability hinges on order intake/backlog, execution discipline, and cost pass-through for materials and labor. Near-term outlook is supported by a healthy balance sheet and cash position, allowing continued investment in execution capacity and stable shareholder returns. Monitor whether the margin gains persist as mix normalizes and if the elevated tax rate remains a drag on net growth.

Financial Health

Liquidity is strong: current ratio 231.3% and quick ratio 231.3% (cash 33.65; current assets 65.55 vs current liabilities 28.33). No warning thresholds breached (no Current Ratio < 1.0). Solvency is conservative with total liabilities/equity at 0.67x; long-term loans are minimal at 1.28. Interest coverage is ~56.9x, indicating very low refinancing risk. Maturity profile risk appears low given sizable cash and current assets well in excess of current liabilities; short-term loan data is unreported, but cash provides ample cushion. No off-balance sheet obligations are disclosed in the provided data. Equity stands at 52.77, with retained earnings of 31.12 supporting future resilience.

Cash Flow Quality

OCF was 12.38 versus net income of 4.05, yielding an OCF/NI ratio of 3.06x, which signals high earnings quality. Free cash flow was reported at 12.47, comfortably covering capex (0.22) and leaving significant headroom for dividends and potential bolt-on investments. Investing CF was slightly positive (0.09), suggesting asset disposals or returns on investments; capex remains modest, indicating low capital intensity. The strong OCF suggests favorable working capital movements (e.g., receivables collection or advance payments), but detailed AR/AP/inventory data are not disclosed. No signs of working capital manipulation are evident from the high OCF/NI ratio, but continued monitoring of OCF conversion as growth continues is prudent.

Dividend Sustainability

The calculated payout ratio is 27.8%, comfortably below the 60% benchmark for sustainability, though the reported payout ratio in XBRL (0.4%) appears inconsistent with calculated figures and may reflect a different basis. FCF coverage of dividends is very strong at 11.07x, indicating ample capacity to maintain or potentially increase distributions. With cash and deposits at 33.65 and minimal debt, dividend safety is high under current conditions. Policy outlook: While DPS is unreported, the company has room to sustain dividends alongside growth investments, subject to maintaining order flow and margins.

Risk Assessment

Business Risks:

• Project execution risk and fixed-price contract exposure affecting gross margins
• Materials and labor cost inflation potentially compressing margins
• Order intake/backlog visibility risk impacting revenue continuity
• Customer concentration risk (not disclosed but common in construction-related businesses)
• Goodwill of 3.28 and intangible assets of 3.39 introduce impairment risk if performance falters

Financial Risks:

• Tax rate at 34.5% is a drag on net profitability
• Potential working capital volatility inherent in project-based cash flows
• Limited disclosure on short-term borrowings could mask intra-year funding needs, despite strong cash

Key Concerns:

• Sustainability of margin gains as mix normalizes and competition reacts
• Dependence on the construction cycle and public/private capex budgets
• Sensitivity to economic slowdown, which could delay projects and collections

Investment Implications

Key Takeaways:

• Beat-like quarter: revenue +19% with operating income +56.6% and net income +46.1%
• Operating margin expanded ~144 bps YoY to ~6.0%; net margin up ~70 bps to 3.8%
• High-quality earnings with OCF/NI at 3.06x and FCF of 12.47
• Balance sheet conservative: current ratio 231%, liabilities/equity 0.67x, interest coverage ~57x
• ROE 7.7% and ROIC 20.5% indicate efficient capital deployment
• Dividend appears well covered with a ~28% payout and 11x FCF coverage

Metrics to Watch:

• Order intake and backlog (quantity and margin quality)
• Gross margin trajectory (cost pass-through on materials/labor)
• SG&A ratio versus revenue growth for continued operating leverage
• Working capital turns and OCF conversion relative to net income
• Tax rate normalization and its impact on net margins

Relative Positioning: Within Japan’s small/mid-cap construction and specialized contracting peers, Masaru currently exhibits above-average cash generation, solid margin momentum, and conservative leverage, positioning it favorably on quality and balance sheet strength while execution and order visibility remain the primary swing factors.

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