GNI Group Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥19.36B
• Operating Income: ¥-497M
• Net Income: ¥-2.08B
• EPS: ¥-9.65

Income Statement

Balance Sheet

Cash Flow Statement

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

GNI Group (2160) reported FY2025 Q3 consolidated results under IFRS with revenue of 193.57 (100M JPY), up 12.6% YoY, demonstrating solid top-line growth despite ongoing losses. Gross profit was 136.76, implying a very high gross margin of 70.7%, consistent with a specialty pharma/biotech profile with high-margin products or licensing revenue. However, profitability deteriorated at the operating level: operating income was -4.97, down 65.6% YoY, indicating cost growth and/or other operating charges offsetting the revenue gains. SG&A was 108.72, and the bridge from gross profit to operating loss implies additional operating items (e.g., R&D expensed, impairment, or other operating expenses) beyond SG&A of roughly 33.0. Profit before tax was -10.84, and reported net income was -4.95, while a large tax line of 11.99 yields a highly unusual effective tax rate of -110.6%, suggesting recognition of tax credits/benefits, regional mix effects, or discrete items; the reconciliation to net income appears inconsistent with the simple PBT – tax arithmetic, indicating unreported below-the-line items or classification effects. Total comprehensive income was -39.78, much larger in magnitude than net loss, pointing to sizable OCI losses (likely FX translation or FV changes), which is relevant given the group’s overseas exposure. The DuPont-calculated ROE is -0.9%, driven by a small negative net margin (-2.6%), low asset turnover (0.234), and moderate leverage (1.57x). Cash flow quality is weak this quarter: operating cash flow was -20.57 and investing cash flow -64.36, producing free cash flow of -84.93; this implies ongoing cash burn despite a reported cash and equivalents balance of 101.15 at period-end. The balance sheet shows total assets of 825.97 and equity of 525.31 (equity ratio 60.6%), providing a capital buffer; liabilities are 322.29 with interest-bearing loans of at least 57.75 (short-term 45.75, long-term 12.00). Liquidity ratios are not calculable due to unreported current liabilities, but working capital equals current assets (292.22), highlighting data gaps. Accounts receivable of 62.36 and inventories of 25.29 appear manageable relative to revenue, though collection dynamics and inventory turns are not directly inferable. No dividends are reported, typical for growth-oriented biopharma prioritizing R&D and pipeline investments; DPS and payout ratios are N/A. Book value per share is reported at 900.26 JPY (XBRL), with a calculated value of 944.88 JPY, suggesting differences in share count basis or equity components. Overall, the quarter shows healthy revenue momentum and structurally high gross margin but continued operating losses, negative free cash flow, and sizable OCI volatility. The capital structure remains conservative, but the company is reliant on cash reserves and access to financing as it invests for growth. Data limitations (notably missing current liabilities, depreciation, R&D, and interest expense) constrain precision of ratio analysis and earnings quality assessment. We focus on the path to operating breakeven, cash burn trajectory, and the drivers behind OCI losses as key to the outlook.

Profitability Analysis

ROE_decomposition: DuPont metrics: net profit margin -2.6%, asset turnover 0.234x, financial leverage 1.57x, yielding a calculated ROE of -0.9% (matches reported). The weak ROE stems primarily from a slim negative net margin, compounded by low asset turnover typical of R&D-intensive models; leverage contributes modestly but does not offset losses. margin_quality: Gross margin is 70.7% (136.76/193.57), indicating strong pricing/mix and/or licensing revenue contribution. Note: reported cost of sales (35.15) is not arithmetically consistent with the stated gross profit (193.57 - 35.15 = 158.42 > 136.76), implying differences in cost classification under IFRS (e.g., inclusion of some production-related expenses within gross profit line) or data extraction variances. Operating margin is negative (operating loss -4.97), with SG&A of 108.72 and implied other operating expenses of ~33.0 pushing results below breakeven. operating_leverage: Revenue grew 12.6% YoY, but operating income declined to -4.97, indicating negative operating leverage this period, likely due to step-up in SG&A/R&D and other operating charges outpacing gross profit growth. As fixed cost absorption improves, incremental margins could expand, but current evidence shows cost intensity offsetting revenue gains.

Growth Assessment

revenue_sustainability: Top-line growth of +12.6% YoY to 193.57 suggests sustained demand or expanded indications/geographies. Receivables at 62.36 (about 32% of quarterly revenue run-rate annualized assumptions vary) appear reasonable, but without DSO we cannot fully validate revenue quality. profit_quality: Despite high gross margin, profit quality is pressured by elevated operating costs and other charges. The large negative comprehensive income (-39.78) vs net income (-4.95) indicates material OCI volatility, which can obscure underlying earnings trends. outlook: Path to profitability hinges on cost discipline (SG&A/R&D efficiency), scaling revenue, and minimizing one-off operating items. Monitoring mix (product vs licensing), regional profitability, and currency effects will be crucial. Without disclosed R&D and D&A, assessing operating leverage and normalized margins remains constrained.

Financial Health

liquidity: Current assets are 292.22; current liabilities are unreported, preventing current/quick ratio calculation. Cash and equivalents are 101.15, providing a liquidity cushion, but operating and investing cash outflows totaled 84.93 this period (FCF), implying limited runway if trends persist. solvency: Equity is 525.31 with an equity ratio of 60.6%, indicating a solid capital base. Total liabilities are 322.29, and the debt-to-equity ratio (total liabilities/equity) is 0.61x. Interest-bearing loans are at least 57.75 (short 45.75, long 12.00), suggesting moderate leverage. capital_structure: Leverage is moderate with financial leverage (assets/equity) of 1.57x. Balance sheet flexibility exists, but continued cash burn may necessitate additional financing or cost rationalization to sustain investments.

Cash Flow Quality

earnings_quality: OCF of -20.57 vs net income of -4.95 yields an OCF/NI ratio of 4.16x (both negative), implying cash outflow exceeding the accounting loss—indicative of working capital build and/or non-cash gains not offsetting cash needs. Lack of D&A disclosure limits EBITDA cross-checks. FCF_analysis: Free cash flow was -84.93 (OCF -20.57 + investing -64.36). Capex of -4.65 is modest; the majority of investing outflow likely reflects strategic investments, licenses, or financial assets. Persistent negative FCF is a key watchpoint. working_capital: Accounts receivable are 62.36 and inventories 25.29; without current liabilities and detailed WC components, we cannot compute DSO/DIO/DPO. The negative OCF suggests working capital absorption or timing effects.

Dividend Sustainability

payout_ratio_assessment: Dividends are unreported; payout ratio is not calculable. Given negative net income and negative free cash flow, distributable capacity appears limited under a conservative policy framework. FCF_coverage: Not calculable due to no reported dividends; FCF is negative, implying any hypothetical dividend would not be covered by internally generated cash. policy_outlook: For an R&D-oriented, growth-focused profile with ongoing losses and cash burn, a retained-earnings policy is more consistent. Confirmation would require management guidance.

Risk Assessment

Business Risks:

• R&D execution risk and clinical/regulatory outcomes (implied for biopharma business model).
• Revenue concentration risk by product or geography (not disclosed but common sector risk).
• Pricing and reimbursement pressures affecting high gross margins.
• Supply chain and manufacturing scalability for commercialization.
• Currency translation volatility impacting OCI and reported equity.

Financial Risks:

• Negative free cash flow (-84.93) and negative OCF (-20.57) raising financing needs if sustained.
• Moderate leverage with at least 57.75 of interest-bearing debt and potential refinancing risk.
• Large OCI losses (-39.78 comprehensive income) affecting equity and capital flexibility.
• Limited transparency on current liabilities, interest expense, and D&A impairs ratio monitoring.

Key Concerns:

• Path to operating breakeven remains uncertain given negative operating leverage in the quarter.
• Discrepancies among cost of sales and gross profit figures complicate margin analysis.
• Tax line behavior (effective tax rate -110.6%) and reconciliation to net income indicate complex below-the-line items.
• Sustained cash burn could pressure liquidity within several quarters absent improvement or financing.

Investment Implications

Key Takeaways:

• Revenue grew 12.6% YoY to 193.57 with a strong gross margin of 70.7%.
• Operating income deteriorated to -4.97 due to elevated SG&A and other operating costs (~33.0 implied).
• Net loss was -4.95, while total comprehensive loss was -39.78, highlighting OCI headwinds.
• Free cash flow was -84.93, driven by negative OCF and substantial investing outflows.
• Balance sheet remains equity-heavy (equity ratio 60.6%) with moderate leverage (D/E 0.61x).

Metrics to Watch:

• Operating income bridge (gross profit, SG&A, R&D, other operating items) and progress to breakeven.
• OCF and FCF trends; cash runway vs cash and equivalents (101.15).
• Receivables and inventories turns; DSO/DIO once disclosures allow.
• Composition of investing cash flows (capex vs strategic investments).
• OCI components (FX translation, FV through OCI) driving comprehensive income volatility.
• Effective tax reconciliation and any discrete tax items.

Relative Positioning: Versus TSE-listed biotech/specialty pharma peers, GNI shows competitive gross margins and revenue growth but lags on operating profitability and cash flow self-sufficiency; capital structure is comparatively conservative, but higher OCI volatility and limited disclosure on key cost drivers constrain visibility.

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