MANDARAKE INC. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥15.18B
• Operating Income: ¥1.79B
• Net Income: ¥1.12B
• EPS: ¥34.36

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

FY2025 Q4 (full-year) results show resilient top-line growth but weaker profitability and cash generation; overall, a mixed quarter with solid ROE but soft earnings quality. Revenue rose 5.0% YoY to 151.83, supported by steady demand in core collectibles/second-hand categories. Gross profit was 79.19 with a high gross margin of 52.2%, consistent with Mandarake’s specialized product mix. Operating income declined 13.7% to 17.92, pulling the operating margin down to 11.8%. Ordinary income fell 14.8% to 17.50 as non-operating items were small (non-op income 0.14; non-op expenses 0.37), indicating operating softness as the primary driver. Net income decreased 18.5% to 11.21, translating to a net margin of 7.4%. On a margin basis, operating margin compressed by roughly 256 bps YoY (from ~14.4% to 11.8%), while net margin contracted by about 213 bps (from ~9.5% to 7.4%). SG&A was 58.41; rent expense rose to 5.90, and directors’ compensation was 1.74, with several SG&A sub-items unreported, limiting deeper cost attribution. Cash flow quality weakened: operating cash flow was only 2.15 versus net income of 11.21, an OCF/NI ratio of 0.19x, indicating heavy working capital drag, most likely inventory build. Free cash flow was negative at -1.74 despite modest capex (-0.90), as OCF underperformed. Balance sheet liquidity appears ample by current ratio (261%), but quick ratio is low (38%) due to a large inventory position (100.86), highlighting reliance on inventory monetization. Leverage is moderate (D/E 0.61x; loans totaling 41.26), with strong interest coverage (51x) and ROE a healthy 9.5% via net margin 7.4%, asset turnover 0.803, and financial leverage 1.60x. ROIC of 8.2% is around the sector’s attractive threshold, suggesting decent underlying returns on capital despite cyclical earnings pressure. Dividend data are largely unreported; the calculated payout ratio is low at 3.2%, but negative FCF implies limited cash headroom if dividends or buybacks were to rise. Forward-looking, the key is normalizing inventory and restoring operating margin; if working capital releases, cash conversion should improve and support capital allocation flexibility. In the near term, risks include demand variability, inventory aging/markdown risk, and cost inflation (rent and labor) pressuring margins.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 7.4% × 0.803 × 1.60 ≈ 9.5%. The largest YoY change appears in net profit margin, which fell about 213 bps (from ~9.5% to 7.4%), versus relatively stable asset turnover and modest leverage. The margin compression likely stems from operating deleverage: SG&A growth outpacing gross profit growth and higher occupancy-related costs (rent 5.90) amid only +5% revenue growth. Non-operating impacts were minor (net -0.23), so the decline is fundamentally operating in nature. Sustainability: the margin pressure looks cyclical and partly self-inflicted via inventory build and cost base rigidity; with better inventory productivity and cost control, some recovery is plausible, but a full reversion depends on demand and mix. Concerning trends include SG&A growing faster than operating income and evidence of negative operating leverage (OI -13.7% vs revenue +5.0%).

Growth Assessment

Revenue grew 5.0% YoY to 151.83, indicating steady demand in the specialty resale/collectibles niche. However, profit growth lagged materially: operating income -13.7%, ordinary income -14.8%, net income -18.5%, highlighting margin and cost pressure. Given gross margin remains high at 52.2%, the deterioration seems concentrated in SG&A intensity and possibly store/network-related costs. Profit quality weakened as OCF (2.15) lagged NI (11.21), implying growth is not yet translating into cash due to working capital consumption (notably inventory). Outlook hinges on inventory normalization, same-store sales, and mix; if management slows inventory accumulation and tightens expenses, modest margin recovery is plausible. Absent these, revenue growth alone may not restore prior margin levels.

Financial Health

Liquidity is ample by current ratio (261.4%) but weak by quick ratio (38.4%), reflecting heavy inventory reliance. Short-term loans are 24.00 against cash and receivables totaling ~15.21, introducing some maturity-mismatch risk if inventory monetization slows. Total liabilities are 72.28 vs equity 118.22 (D/E 0.61x), a conservative capital structure without signs of over-leverage; no explicit warning thresholds breached (Current Ratio >> 1.0; D/E < 2.0). Interest coverage is very strong at 51.43x, indicating low near-term refinancing stress. Long-term loans are 17.26, providing some tenor balance, but the low payables (0.20) suggests limited supplier financing, increasing reliance on bank lines. No off-balance sheet commitments are disclosed in the provided data.

Cash Flow Quality

Earnings quality is weak this period with OCF/NI at 0.19x (<0.8 threshold), signaling that reported earnings did not convert to cash. Free cash flow was -1.74 after capex of 0.90; combined with share repurchases of 1.21 and financing outflows (-3.11), cash burn likely occurred. The primary driver appears to be working capital drag, notably inventory expansion (inventories 100.86) and very low payables (0.20), rather than deterioration in gross profitability. While some inventory build can be strategic in collectibles, sustained OCF shortfalls elevate risk if demand slows or discounting rises. No overt signs of aggressive working capital pull-forward (e.g., receivables factoring) are evident; instead, the risk is capital tied in stock.

Dividend Sustainability

Most dividend fields are unreported; the calculated payout ratio is a low 3.2%, implying a conservative policy. However, FCF coverage is -4.81x this year, indicating dividends (if paid) were not covered by free cash flow and would rely on cash reserves or financing. Given modest leverage and strong interest coverage, near-term payment capacity exists, but sustainability requires OCF normalization. With negative FCF and inventory-heavy working capital, upward revisions to shareholder returns (dividend/buybacks) appear constrained until cash conversion improves.

Risk Assessment

Business Risks:

• Demand volatility in collectibles/second-hand markets impacting sales and pricing.
• Inventory obsolescence and markdown risk given large inventory balance (100.86).
• Cost inflation in rent and labor pressuring SG&A and operating leverage.
• Execution risk in inventory procurement and turnover management.

Financial Risks:

• Low quick ratio (38.4%) and reliance on inventory to meet short-term obligations.
• Short-term loans (24.00) exceeding quick assets, creating maturity-mismatch risk.
• Negative FCF and weak OCF/NI (0.19x) increasing dependency on financing or asset monetization.
• Interest rate sensitivity on floating-rate debt (if applicable) despite high coverage.

Key Concerns:

• Operating margin compression (-256 bps YoY) and net margin compression (-213 bps YoY).
• Working capital build driving cash conversion weakness.
• Limited supplier credit (payables 0.20) increasing balance sheet intensity.
• Data gaps (SG&A breakdown, dividend details) limit granular diagnostics.

Investment Implications

Key Takeaways:

• Top-line +5% with high gross margin, but operating deleverage produced double-digit profit declines.
• ROE is solid at 9.5% and ROIC ~8.2%, yet cash conversion is currently poor.
• Balance sheet is conservatively levered; liquidity depends on inventory turnover, not cash/receivables.
• Capital returns likely constrained near term until OCF improves and inventories normalize.

Metrics to Watch:

• Inventory turnover days and stock aging/markdown rates.
• OCF/Net Income and Free Cash Flow trajectory.
• Operating margin and SG&A-to-sales ratio (rent and labor components).
• Same-store sales growth and mix (high-margin categories).
• Short-term vs long-term debt mix and interest rate exposure.
• Share repurchase pace vs cash generation.

Relative Positioning: Versus specialty retailers, Mandarake maintains superior gross margins due to unique merchandise and curation but exhibits greater working capital intensity and cash flow volatility; leverage is conservative and ROE is mid-to-high single digits, leaving execution on inventory productivity and cost discipline as the key differentiators.

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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