EPCO Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.74B
• Operating Income: ¥294M
• Net Income: ¥84M
• EPS: ¥33.04

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

Earnings for FY2025 Q3 show solid top-line expansion and improving profitability for 株式会社エプコ (23110), with revenue of ¥4,744 million, up 13.2% YoY. Operating income rose 10.3% YoY to ¥294 million, indicating positive but slightly tempered operating leverage relative to sales growth. Net income surged to ¥295 million (+250.5% YoY), implying substantial non-operating/extraordinary contributions or a favorable tax/base effect versus the prior year. Net profit margin stands at 6.22%, ordinary margin at roughly 6.9% (¥328 million on revenue), and operating margin at about 6.2%, reflecting stable operational execution. Gross profit is reported at ¥1,310.7 million, equating to a 27.6% gross margin, which appears internally consistent with the provided gross margin metric. However, reported cost of sales of ¥2,879.9 million does not reconcile with revenue and gross profit (which would imply cost of sales of ~¥3,433 million); this suggests classification differences or partial disclosure in the cost line. The DuPont breakdown yields ROE of 6.56%, driven by a 6.22% net margin, 0.844x asset turnover, and modest financial leverage of 1.25x. The balance sheet is conservative: total assets are ¥5,623 million, equity is ¥4,496 million, and total liabilities are ¥1,177 million, implying an equity ratio around 79.9% by calculation (versus the disclosed 0.0%, which appears to be an unreported placeholder). Liquidity is strong with a current ratio of 296.2% and working capital of ¥2,057 million, though the absence of inventory and cash disclosures (reported as zero/unreported) limits deeper assessment of liquid asset composition. Interest expense is minimal at ¥1.51 million, and interest coverage is a very comfortable 194.7x, underscoring low financial risk. Ordinary income exceeded operating income by ¥34 million, pointing to net non-operating gains. The net income relative to ordinary income and the reported tax figure imply possible extraordinary items or tax effects; the effective tax rate metric is shown as 0.0% but is clearly not reflective of the disclosed tax amount. Cash flow statements are unreported (zeros), so operating cash flow and free cash flow quality cannot be verified for this period. Dividend information shows DPS of ¥0 and a payout ratio of 0%, suggesting either retention for growth/strengthening or timing/policy factors; without cash flow data, sustainability analysis is constrained. Overall, the company demonstrates steady core profitability, strong liquidity and solvency, and moderate ROE, with data limitations around cost classification and cash flows requiring caution.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 6.22% (¥295m / ¥4,744m)
• asset_turnover: 0.844x (¥4,744m / ¥5,623m)
• financial_leverage: 1.25x (¥5,623m / ¥4,496m)
• calculated_ROE: 6.56% (matches reported 6.56%) margin_quality: Gross margin is 27.6% (¥1,310.7m/¥4,744m), operating margin ~6.2% (¥294m/¥4,744m), and net margin 6.22%. The spread between gross and operating margin (21.4ppt) indicates material SG&A/overheads (¥1,016.7m). Ordinary income exceeds operating income by ~¥34m, reflecting positive non-operating items offsetting ¥1.51m interest expense. Note: cost of sales reported (¥2,879.9m) does not reconcile with revenue and gross profit, suggesting classification differences; gross margin itself aligns with the reported 27.6%. operating_leverage: Revenue grew 13.2% YoY while operating income grew 10.3% YoY, implying modest negative operating leverage in the quarter due to SG&A growth roughly in line with or slightly above gross profit growth. The high interest coverage (194.7x) indicates leverage does not amplify earnings materially; operating leverage is the primary driver of bottom-line sensitivity.

Growth Assessment

revenue_sustainability: Double-digit revenue growth (+13.2% YoY) suggests healthy demand and/or execution on existing backlog. Sustainability will depend on order intake, utilization, and client activity; visibility is limited without segment/backlog disclosures. profit_quality: Operating income growth (+10.3% YoY) trails revenue, indicating some cost pressure or investment in SG&A. Net income growth (+250.5% YoY) is likely influenced by non-operating/extraordinary or base effects rather than purely recurring operations; ordinary income (¥328m) above operating income supports this. outlook: With ROE at 6.56% and robust liquidity, the company appears positioned to support ongoing operations and selective investment. Key to sustaining growth will be maintaining gross margin near 27–28% and controlling SG&A. Data gaps (cash flows, detailed cost breakdown) limit visibility on durability of recent net profit expansion.

Financial Health

liquidity: Current assets ¥3,105.5m vs current liabilities ¥1,048.5m yields a current ratio of 296.2% and working capital of ¥2,057.0m, indicating strong short-term coverage. Quick ratio is reported equal to current ratio due to unreported inventories; actual quick liquidity cannot be confirmed due to missing cash details. solvency: Total liabilities ¥1,177.0m vs equity ¥4,496.0m results in a low debt-to-equity of 0.26x. Interest expense is minimal (¥1.51m) and coverage is 194.7x, underscoring low financial risk. Calculated equity ratio is approximately 79.9% (¥4,496m/¥5,623m), despite the reported 0.0% which appears to be a placeholder. capital_structure: Leverage is modest with assets/equity at 1.25x. Balance sheet flexibility is high, providing capacity for investment or shareholder returns subject to cash generation.

Cash Flow Quality

earnings_quality: OCF and FCF are unreported (shown as zero placeholders). As such, we cannot corroborate earnings with cash conversion for the period. The OCF/Net Income ratio shown as 0.00 should not be interpreted as actual zero but as missing data. FCF_analysis: Free cash flow is unreported; no assessment of capex intensity or FCF coverage is possible from the provided data. working_capital: Working capital is strong at ¥2,057.0m. Without cash flow statements, changes in receivables/payables and their impact on cash conversion cycles cannot be evaluated.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is reported as ¥0 with a payout ratio of 0.0%. Given net income of ¥295m and moderate ROE (6.56%), capacity for dividends exists in principle, but policy or timing likely explains the zero payout. FCF_coverage: FCF is unreported; thus, coverage of any prospective dividends by free cash flow cannot be assessed. policy_outlook: With a strong balance sheet and low leverage, the company has flexibility; decisions will hinge on reinvestment needs and cash generation visibility. Absent cash flow disclosure, we assume a conservative stance on payout sustainability assessment.

Risk Assessment

Business Risks:

• Revenue dependency on project volumes and client activity; variability can affect utilization and margins.
• Cost inflation (labor/subcontracting) potentially pressuring gross margin if not offset by pricing.
• Customer concentration risk typical in BPO/engineering services, which can drive earnings volatility.
• Execution risk on large projects impacting delivery schedules and revenue recognition.
• Regulatory/market changes in end-markets that influence client spending cycles.

Financial Risks:

• Data limitations around cash flows impede assessment of cash conversion and liquidity buffers.
• Potential working capital swings inherent in project/service businesses.
• Exposure to extraordinary items or non-operating gains that may not recur, affecting net income visibility.

Key Concerns:

• Inconsistency between reported cost of sales and gross profit suggests classification/disclosure gaps.
• Unreported cash flow statements, cash balance, and share data limit valuation and payout analysis.
• Net income surge appears partly non-operational; sustainability into subsequent periods is uncertain without detail.

Investment Implications

Key Takeaways:

• Top-line growth of +13.2% YoY with operating income up +10.3% indicates steady core expansion.
• ROE at 6.56% reflects moderate profitability with low leverage (assets/equity 1.25x).
• Strong liquidity (current ratio 296.2%) and low debt (D/E 0.26x) underpin financial resilience.
• Interest burden is negligible (¥1.51m) with coverage of 194.7x.
• Net income growth (+250.5% YoY) likely benefits from non-operating or extraordinary factors.
• Cash flow and cash balance are unreported; earnings-to-cash conversion remains unverified.
• Gross margin reported at 27.6%; preserving this level is key to sustaining operating margins near 6%.

Metrics to Watch:

• Order intake/backlog and utilization rates to gauge revenue visibility.
• Gross margin and SG&A ratio progression to assess operating leverage.
• Operating cash flow, free cash flow, and working capital days (DSO/DPO) once disclosed.
• Non-operating income/extraordinary items and effective tax rate normalization.
• Client concentration metrics and churn to evaluate revenue durability.

Relative Positioning: The company exhibits a conservative balance sheet and moderate ROE relative to typical Japan small/mid-cap service peers, with lower financial risk but incomplete cash flow disclosure constraining assessment of earnings quality.

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