NIHONWASOU HOLDINGS,INC. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥3.27B
• Operating Income: ¥194M
• Net Income: ¥160M
• EPS: ¥11.09

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

日本和装ホールディングス (24990) FY2025 Q3 shows a modest top-line contraction with disproportionate profit pressure, highlighting elevated operating leverage and cost absorption challenges. Revenue declined 4.5% YoY to ¥3,274m, while operating income fell 34.1% YoY to ¥194m, compressing the operating margin to roughly 5.9%. Net income decreased 37.1% YoY to ¥100m, implying a net margin of 3.05% and EPS of ¥11.09. Gross profit of ¥3,135m implies an unusually high gross margin of 95.7%, consistent with an asset-light, intermediation/service-centric model (low cost of goods sold and high SG&A). DuPont deconstruction yields ROE of 2.76% driven by a 3.05% net margin, 0.375x asset turnover, and 2.41x financial leverage—solid balance sheet leverage but subpar profitability and efficiency. Ordinary income of ¥157m and interest expense of ¥25m translate to interest coverage of about 7.7x, adequate but vulnerable if earnings soften further. On the balance sheet, total liabilities of ¥5,709m and equity of ¥3,619m indicate a debt-to-equity ratio of 1.58x (moderate leverage). Liquidity appears strong with current assets of ¥9,041m and current liabilities of ¥3,733m, yielding a current ratio of 242% and working capital of ¥5,309m. Inventories are small at ¥121m, reinforcing the light-inventory nature of the business. Reported equity ratio is shown as 0.0% but is clearly non-representative; based on provided totals, equity-to-assets is approximately 41.5% (¥3,619m/¥8,726m). Cash flow statements are unreported (all zeros), preventing assessment of operating cash generation, capex, or free cash flow—this is a key analytical limitation. The tax line (¥104m) suggests an elevated effective tax relative to pretax income, while the calculated metric table displays 0.0%, reinforcing that some derived metrics may be placeholders. Dividend data show no dividends (DPS ¥0, payout 0%), consistent with conserving cash amid declining earnings. Asset turnover (0.375x) indicates slow capital turns relative to many service peers, weighing on ROE. Overall, fundamentals point to a business with high gross margin but heavy fixed/semifixed SG&A, resulting in high operating leverage; the decline in revenue disproportionately impacted profits. Data gaps (notably cash flows and certain line items) constrain confidence in cash conversion and dividend capacity assessments; nonetheless, liquidity and solvency appear adequate, while near-term earnings resilience is the swing factor.

Profitability Analysis

ROE_decomposition: ROE 2.76% = Net margin 3.05% × Asset turnover 0.375 × Financial leverage 2.41. Profitability (margin) and efficiency (turnover) are the primary drags; leverage contributes but is not excessive. margin_quality: - Gross margin: 95.7% (very high, consistent with fee/intermediation model; low COGS, high SG&A). - Operating margin: ~5.9% (¥194m/¥3,274m), down materially YoY, indicating SG&A absorption issues. - Net margin: 3.05%, pressured by interest and taxes. The gap between gross and operating margin underscores heavy overhead intensity. operating_leverage: Revenue down 4.5% YoY versus operating income down 34.1% YoY implies high operating leverage. Small changes in sales can significantly swing profits, a risk if volumes soften or marketing intensity rises.

Growth Assessment

revenue_sustainability: Top-line declined to ¥3,274m (-4.5% YoY). With minimal inventories and a services-like model, growth likely depends on seminar attendance, conversion rates, and event activity rather than stock availability. Sustaining revenue will require stable demand for kimono-related services and successful customer acquisition. profit_quality: Net income ¥100m (margin 3.05%) reflects compression from fixed/semifixed SG&A. Interest expense (¥25m) and apparent tax burden further dilute profitability. Absence of D&A (unreported) limits visibility on non-cash mix; operating income appears a reasonable proxy for EBITDA here but true EBITDA is unknown. outlook: Given elevated operating leverage, near-term profit trajectory hinges on stabilizing revenues and controlling SG&A. If sales normalize or cost discipline improves, margins could rebound; conversely, further revenue softness would disproportionately impact earnings.

Financial Health

liquidity: Current assets ¥9,041m vs. current liabilities ¥3,733m yields a current ratio of 242% and quick ratio of 239%, indicating ample short-term liquidity. Working capital stands at ¥5,309m. solvency: Total liabilities ¥5,709m, equity ¥3,619m (D/E 1.58x). Implied equity ratio ~41.5% despite a reported 0.0% placeholder. Interest coverage ~7.7x suggests manageable debt service at current earnings levels. capital_structure: Moderate leverage with adequate coverage. The business model appears asset-light (low inventories), with capital needs likely concentrated in marketing and operations rather than heavy capex.

Cash Flow Quality

earnings_quality: Cash flow statements are unreported (OCF/NI shown as 0.00 due to missing data), preventing validation of accruals or cash conversion. The high gross margin and SG&A-intensive model often produce volatile OCF around event timing and receivables/payables swings. FCF_analysis: Free cash flow cannot be computed without OCF and capex data. No assessment of maintenance versus growth spending is possible from provided figures. working_capital: Working capital is sizeable (¥5,309m). Inventories are small (¥121m), implying working capital is primarily receivables, deposits, and cash/short-term investments. Without CF data, turnover and collection risk cannot be validated.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio 0%. With EPS ¥11.09, the company retained earnings in the period. FCF_coverage: Unassessable due to unreported OCF/FCF. Earnings alone would cover a modest dividend, but sustainability depends on actual cash generation and capital needs. policy_outlook: Given earnings contraction and elevated operating leverage, a conservative stance on dividends appears consistent with preserving liquidity. Any future resumption would likely track stabilization in margins and demonstrable OCF.

Risk Assessment

Business Risks:

• Demand volatility for kimono-related classes/events and discretionary spending sensitivity
• High operating leverage from SG&A, causing outsized profit swings on small revenue changes
• Customer acquisition and conversion rate dependence tied to seminar marketing efficacy
• Event execution risks (cancellations, attendance variability, seasonality)
• Brand/reputational risks in a niche retail-intermediation market
• Demographic shifts and changing consumer tastes affecting kimono demand

Financial Risks:

• Profit sensitivity to sales declines given fixed cost base
• Interest burden (¥25m) could pressure coverage if earnings weaken further
• Working capital concentration in receivables/deposits (implied), creating cash collection risk
• Limited visibility on cash flows due to unreported CF statements
• Potential tax burden variability (tax expense ¥104m relative to pretax income)

Key Concerns:

• Sharp YoY decline in operating and net income despite modest revenue drop
• Inability to validate cash generation and FCF due to unreported cash flow data
• Data anomalies (e.g., current assets exceeding total assets, reported equity ratio 0.0%) necessitate caution in ratio interpretation

Investment Implications

Key Takeaways:

• Revenue decline of 4.5% YoY translated into a 34.1% YoY drop in operating income, evidencing high operating leverage
• ROE of 2.76% is constrained by low asset turnover (0.375x) and compressed net margins (3.05%)
• Liquidity appears ample (current ratio 242%) and leverage moderate (D/E 1.58x), with interest coverage ~7.7x
• Gross margin is structurally high (95.7%), but SG&A intensity drives margin volatility
• Cash flow unreported, limiting assessment of earnings quality, FCF, and dividend capacity

Metrics to Watch:

• SG&A-to-sales ratio and operating margin trajectory
• Seminar/event volumes, conversion rates, and booking pipeline
• Operating cash flow, capex, and free cash flow once disclosed
• Receivables days, advances/deferred revenue, and cash balance movements
• Interest coverage and debt levels
• Asset turnover and inventory turns (even if small)

Relative Positioning: Compared with Japanese small-cap service/intermediation peers, the company exhibits structurally higher gross margins but lower ROE due to weak asset turnover and pressured net margins; balance sheet leverage is moderate and liquidity strong, but earnings volatility and limited cash flow disclosure weigh on quality perceptions.

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
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