Hakuten Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥14.95B
• Operating Income: ¥1.57B
• Net Income: ¥575M
• EPS: ¥68.20

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

Verdict: Strong quarter with broad-based margin expansion and sharply higher profitability, supported by disciplined SG&A and healthy balance sheet liquidity. Revenue rose 16.4% YoY to 149.5, with operating income up 81.4% to 15.72, indicating significant operating leverage. Gross profit reached 38.70, implying a gross margin of 25.9%. Operating margin improved to 10.5% from an estimated ~6.8% a year ago, a c. +375–380 bps expansion. Net income increased 84.7% YoY to 10.63, lifting net margin to 7.1% from an estimated ~4.5% last year, a c. +260–265 bps expansion. Ordinary income rose 82.2% YoY to 15.65, with minimal non-operating impact (non-operating income 0.05; expenses 0.13). SG&A was 30.04 against gross profit of 38.70, indicating improved operating efficiency despite revenue growth. Interest expense remains de minimis at 0.10, with interest coverage a robust 151.5x, underscoring low financial risk from debt service. Liquidity is strong (current ratio 218%), and cash and deposits of 29.87 provide ample flexibility. ROE is a high 25.6% (NPM 7.1% × ATO 1.774 × leverage 2.03x), reflecting an asset-light, efficiently run model. Dividend affordability appears comfortable with a calculated payout ratio of 29%, though actual cash flow disclosure is limited. Cash flow quality cannot be assessed due to unreported OCF/FCF; this is the key data gap. There is an inconsistency between profit before tax (8.59) and reported net income (10.63) versus tax (2.84), suggesting unreported extraordinary items or presentation differences; conclusions rely primarily on revenue, gross profit, and operating income where disclosure is clearer. Forward-looking, improved margins and strong balance sheet support continued earnings resilience, but results likely remain sensitive to project timing, client marketing budgets, and macro conditions in the events/marketing domain.

Profitability Analysis

ROE decomposition (DuPont): ROE 25.6% = Net Profit Margin 7.1% × Asset Turnover 1.774 × Financial Leverage 2.03x. The largest driver of improvement appears to be margin expansion: operating income grew +81.4% vs revenue +16.4%, implying significant operating margin uplift (to ~10.5% from ~6.8% YoY). Gross margin printed at 25.9%, and SG&A growth was contained relative to gross profit, improving operating leverage. Asset turnover at 1.774 is high for a project-based, asset-light model, but YoY movement cannot be precisely measured due to lack of prior asset averages; nonetheless, the earnings delta is dominated by the margin component. Financial leverage (Liabilities/Equity ~1.03x; equity multiplier 2.03x) is moderate and stable, not the primary source of ROE change. Business reason: richer project mix, scale benefits, and SG&A discipline boosted operating leverage; low interest burden further supported bottom-line conversion. Sustainability: part of the margin gain appears structural (mix/scale, cost discipline), but some may be timing-related given project-based revenue recognition and Q4 seasonality typical in marketing/events. Watch for SG&A growth re-accelerating faster than revenue; for now, SG&A was kept in check relative to top-line, a positive trend.

Growth Assessment

Revenue growth of +16.4% YoY to 149.5 indicates robust demand recovery and/or strong execution in experiential marketing/exhibitions. Operating income rose +81.4% YoY to 15.72, evidencing strong operating leverage from mix and cost control. Net income advanced +84.7% to 10.63, with net margin reaching 7.1%. Non-operating items were small (net -0.08), suggesting growth was predominantly operational. The improvement in operating margin to ~10.5% from ~6.8% YoY underscores better project profitability and scale efficiencies. Growth quality: high, as it is driven by core operations rather than financial gains; however, lack of OCF/FCF data limits validation of cash conversion. Outlook: If client activity and event calendars remain healthy into Q4, margins can remain elevated; however, project timing and macro-sensitive marketing budgets could introduce volatility. Near-term growth should continue to track pipeline conversion and utilization, with tougher comps in coming quarters given the strong margin base.

Financial Health

Liquidity is strong: current assets 72.45 vs current liabilities 33.22 (current ratio 218.1%, quick ratio 218.1% as inventories are unreported). Cash and deposits of 29.87 and accounts receivable of 30.30 comfortably cover short-term obligations; no warning on current ratio (<1.0) applies. Solvency: total liabilities 42.81 vs equity 41.45 yields D/E of 1.03x, within conservative territory and below the 2.0x warning threshold. Interest-bearing debt is modest (ST loans 0.20; LT loans 9.22), and interest coverage is very strong at 151.5x, indicating low debt service risk. Maturity mismatch risk appears low: current assets (72.45) materially exceed current liabilities (33.22), and short-term borrowings are minimal. No off-balance sheet obligations were disclosed; absence of disclosure limits our ability to assess lease and guarantee exposures.

Cash Flow Quality

Operating cash flow, free cash flow, and capex were not disclosed; OCF/Net Income and FCF coverage ratios are therefore not calculable. This is the primary constraint on assessing earnings quality. Working capital indicators from the balance sheet (AR 30.30 against 9-month revenue 149.5) look reasonable for a project-based business, but without OCF we cannot confirm cash conversion. No signs of aggressive non-operating profit reliance (non-operating income ratio ~0.5%), and interest expense is low, supporting clean earnings from operations. Dividend and capex sustainability from internal cash generation cannot be confirmed in the absence of OCF/FCF data.

Dividend Sustainability

The calculated payout ratio is 29.0%, implying a conservative stance relative to profitability. With cash and deposits of 29.87, balance-sheet liquidity appears ample to support ordinary dividends. Assuming DPS approximates a ~29% payout on EPS of 68.2 JPY, indicative annual cash dividends would be manageable relative to cash on hand and low debt service needs. However, FCF coverage cannot be assessed due to missing OCF and capex data. Policy outlook: given elevated ROE (25.6%) and manageable leverage, the company has room to maintain or modestly increase shareholder returns, contingent on sustaining current margin levels and cash generation. Absent explicit guidance, we treat the current payout level as sustainable but data-limited.

Risk Assessment

Business Risks:

• Project timing and seasonality risk in event/experiential marketing may cause quarterly volatility.
• Client budget sensitivity to macroeconomic conditions can impact order intake and pricing.
• Execution risk on large projects affecting margins and working capital swings.
• Competition in marketing services/event production pressuring pricing and utilization.

Financial Risks:

• Cash flow visibility is limited due to unreported OCF/FCF, obscuring earnings-to-cash conversion.
• Accounts receivable concentration risk typical of project-based businesses (counterparty risk, collection timing).
• Moderate overall leverage (D/E 1.03x) though interest burden is low; refinancing risk is limited but not zero.

Key Concerns:

• Data inconsistency between profit before tax (8.59), income tax (2.84), and net income (10.63) suggests potential extraordinary factors or presentation differences.
• Dependence on continued strength in events/marketing demand to sustain expanded margins.
• Potential cost inflation (labor, venue, materials) that could compress gross margins if not passed through.

Investment Implications

Key Takeaways:

• Margin-led earnings beat profile: operating income +81% on sales +16% implies strong operating leverage.
• ROE of 25.6% underpinned by higher net margin (7.1%) and high asset turnover (1.77x).
• Liquidity robust (current ratio 218%, cash 29.87) with minimal interest burden (coverage 151x).
• Payout ratio at 29% appears conservative; capacity for ongoing shareholder returns subject to cash flow.
• Primary analytical gap is lack of OCF/FCF disclosure; monitor cash conversion closely.

Metrics to Watch:

• Order backlog and project pipeline conversion for Q4 seasonality.
• Operating margin trajectory and SG&A growth vs revenue.
• Cash flow from operations and working capital movements (AR days, advance receipts).
• Client concentration and repeat business rates.
• Any extraordinary gains/losses clarifying PBT vs NI discrepancy.

Relative Positioning: Within Japan’s marketing/events peers, the company exhibits above-average operating margin momentum and ROE, supported by an asset-light balance sheet and strong liquidity; key differentiator is the current scale-driven operating leverage, while the main relative drawback is limited cash flow disclosure.

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