KIDS STAR Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥885M
• Operating Income: ¥221M
• Net Income: ¥142M
• EPS: ¥55.47

Income Statement

Balance Sheet

Profitability Ratios

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

Kids Star Co., Ltd. (248A0) reported FY2025 Q3 consolidated results under JGAAP with stable topline and earnings versus the prior year. Revenue was ¥885.0 million, essentially flat YoY (+0.0%), indicating steady demand but limited expansion during the period. Gross profit was ¥550.7 million, translating to a robust gross margin of 62.2%, which underscores a high value-add business model and disciplined cost of sales management. Operating income reached ¥221.0 million (also +0.0% YoY), yielding an operating margin of approximately 25.0%, suggesting solid operating efficiency despite muted growth. Ordinary income was ¥222.0 million, only slightly above operating income, implying minimal non-operating items and/or interest effects in the quarter. Net income was ¥141.0 million (+0.0% YoY), equating to a net margin of 15.93% and reflecting a relatively normal tax burden. Based on reported income tax of ¥79.3 million, the implied effective tax rate is approximately 36%, consistent with a standard domestic tax load. Asset turnover stands at 0.313x (Revenue ¥885.0 million / Total assets ¥2.826 billion), indicating modest capital efficiency. With financial leverage of 1.22x (Assets/Equity), the DuPont-calculated ROE is 6.06%, which is in line with the reported figure and suggests that returns are margin-led rather than leverage-driven. The balance sheet appears conservative: equity of ¥2.325 billion against total assets of ¥2.826 billion implies an equity ratio of roughly 82.3%, even though the disclosed equity ratio field shows 0.0% (likely undisclosed). Liquidity looks strong with current assets of ¥2.449 billion versus current liabilities of ¥498.8 million, yielding a current ratio of about 4.9x and working capital of ¥1.95 billion. Cash flow statements were not disclosed in this dataset (zeros indicate unreported), limiting our ability to assess cash conversion and free cash flow. Dividend data shows DPS at 0 and payout ratio at 0% (likely undisclosed rather than actual), so dividend policy remains unclear from this release. EPS was ¥55.47; using net income, this implies an average share count around 2.54 million, but shares outstanding were not disclosed. Overall, profitability is healthy with strong margins, capital structure is conservative, and liquidity is ample; however, growth was flat and cash flow disclosure is missing, which constrains assessment of earnings quality and dividend capacity.

Profitability Analysis

ROE_decomposition: ROE 6.06% = Net margin 15.93% × Asset turnover 0.313 × Financial leverage 1.22. Returns are predominantly margin-driven with modest asset efficiency and low leverage. margin_quality: Gross margin 62.2% and operating margin ~25.0% indicate strong pricing and cost control. Ordinary income closely tracks operating income (¥222m vs ¥221m), implying limited non-operating distortions. The implied effective tax rate is ~36% (¥79.3m tax on ~¥220m pre-tax), consistent with normalized taxation. operating_leverage: With flat revenue and flat operating income, operating leverage impact appears neutral this period. The high gross margin suggests room for operating leverage when growth resumes, but current data do not evidence margin expansion.

Growth Assessment

revenue_sustainability: Revenue held at ¥885.0m (+0.0% YoY), indicating stability but no visible expansion. Sustainability appears reasonable given persistent gross margin strength, but end-market momentum is unclear from the provided data. profit_quality: Operating income (¥221.0m) and ordinary income (¥222.0m) stability imply recurring earnings without reliance on non-operating gains. Net margin at 15.93% is solid; tax rate ~36% suggests no unusual tax benefits. outlook: Near-term outlook is steady but growth catalysts are not evident in the disclosed figures. If the company can leverage its high gross margin through scale, operating income could expand; however, absent demand indicators or pipeline detail, we assume a neutral trajectory.

Financial Health

liquidity: Current assets ¥2,449.3m vs current liabilities ¥498.8m → current ratio ~4.9x; quick ratio effectively the same given no inventories reported (likely undisclosed). Working capital stands at ¥1,950.4m, indicating ample short-term coverage. solvency: Total liabilities ¥500.9m vs equity ¥2,325.0m → liabilities-to-equity ~0.22x. Calculated equity ratio is ~82.3% (¥2.325b/¥2.826b), despite the disclosed 0.0% (undisclosed). Leverage is low, supporting solvency. capital_structure: Financial leverage at 1.22x is modest. Ordinary income approximating operating income implies minimal interest burden; however, interest expense was not disclosed, so precise coverage cannot be calculated.

Cash Flow Quality

earnings_quality: With ordinary income nearly equal to operating income and a standard tax rate, earnings quality appears solid. However, absent operating cash flow disclosure, we cannot validate cash conversion. FCF_analysis: Operating and investing cash flows were not reported. Free cash flow therefore cannot be assessed. Balance sheet liquidity provides a buffer, but sustainability of cash generation remains to be confirmed. working_capital: Large positive working capital (¥1,950.4m) supports operations. Without cash flow details, the direction of receivables/payables is unknown; nevertheless, the current asset base suggests sufficient liquidity for operating needs.

Dividend Sustainability

payout_ratio_assessment: EPS is ¥55.47; DPS is shown as ¥0.00 (likely undisclosed). Hence, payout ratio cannot be reliably determined from this dataset. FCF_coverage: Free cash flow was not disclosed, so coverage of any dividend is indeterminable. policy_outlook: Given a strong equity base and stable profitability, the company could theoretically sustain distributions; however, absence of DPS and cash flow data precludes assessment of policy direction or capacity.

Risk Assessment

Business Risks:

• Flat revenue growth (+0.0% YoY) suggests potential demand softness or competitive intensity.
• Concentration risk if revenue relies on a limited set of products/customers (not disclosed).
• Execution risk in scaling operations to leverage high gross margins.

Financial Risks:

• Limited disclosure of cash flows restricts visibility into cash conversion and liquidity dynamics.
• Potential working capital swings not observable without OCF detail.
• Tax rate variability around the ~36% effective rate could impact net margins.

Key Concerns:

• Lack of cash flow data (OCF/FCF) impedes earnings quality verification.
• Equity ratio reported as 0.0% in the dataset, though calculated ~82%, highlights disclosure/labeling gaps.
• No disclosed dividend information to gauge capital allocation priorities.

Investment Implications

Key Takeaways:

• Strong margin profile: gross margin 62.2%, operating margin ~25.0%, net margin 15.93%.
• ROE 6.06% is margin-led with modest asset turnover (0.313x) and low leverage (1.22x).
• Conservative balance sheet: calculated equity ratio ~82% and liabilities-to-equity ~0.22x.
• Liquidity is ample with ~¥1.95b of working capital and a ~4.9x current ratio.
• Growth paused: revenue and operating income flat YoY, suggesting neutral demand conditions.
• Cash flow and dividend data not disclosed, constraining assessment of cash conversion and shareholder returns.

Metrics to Watch:

• Revenue growth trajectory and order/pipeline indicators.
• Operating income margin sustainability and SG&A efficiency.
• Operating cash flow and free cash flow once disclosed.
• Asset turnover improvements (currently 0.313x).
• Effective tax rate stability around ~36%.
• Any updates on dividend policy or capital return plans.

Relative Positioning: Within a small-cap, margin-focused peer set, the company appears financially conservative with above-average margins but below-average capital efficiency and muted near-term growth; disclosure on cash flows and capital allocation will be key to narrowing the information gap.

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