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

Mandarake (TSE:2652) reported FY2025 Q4 (JGAAP, non-consolidated) results with steady top-line growth but weaker earnings quality and cash conversion. Revenue rose 5.0% YoY to ¥15.183bn, supported by strong gross profitability; gross profit was ¥7.919bn, implying a robust gross margin of 52.2%. Despite the healthy gross margin, operating income fell 13.7% YoY to ¥1.792bn as operating margin compressed to roughly 11.8%, indicating cost pressure or unfavorable mix. Ordinary income was ¥1.75bn and net income was ¥1.121bn, with net margin at 7.38%. DuPont analysis shows ROE at 9.48%, driven by a solid margin profile, moderate asset turnover of 0.803x, and low-to-moderate leverage of 1.60x. Liquidity remains ample on a current basis (current ratio 261%), but quick liquidity is thin (quick ratio 38%), reflecting a highly inventory-heavy current asset structure. Inventories are ¥10.086bn, accounting for about 85% of current assets, highlighting working capital intensity and potential volatility in cash conversion. Operating cash flow was only ¥215m versus net income of ¥1.121bn (OCF/NI 0.19x), suggesting significant working capital absorption, likely from inventory build; free cash flow was negative at ¥-174m. Balance sheet solvency appears sound with an estimated equity ratio near 62.5% (derived from equity of ¥11.822bn over assets of ¥18.907bn) and a debt-to-equity ratio of 0.61x, while interest coverage is strong at 51x. Reported effective tax rate appears as 0.0% in the metrics table, but using disclosed figures implies a tax rate around 39% (¥678m tax on roughly ¥1.75bn pre-tax), so taxation remains a material expense. Dividend was reported as ¥0.00 per share with a payout ratio of 0%, aligning with a period of negative free cash flow and a focus on internal funding. Earnings quality is mixed: accounting profitability is solid, but cash flow conversion is weak due to working capital needs. Operating leverage turned negative this year—costs grew faster than sales—pressuring operating profit despite higher revenue. The capital structure is conservative and provides resilience, but the business model’s reliance on inventory introduces cash flow risk and potential markdown exposure. Outlook hinges on inventory turnover discipline, SG&A control, and maintaining pricing power in the used/collectibles categories. Data limitations exist (e.g., cash balance, equity ratio, share count not fully disclosed in XBRL), so certain ratios are derived from available figures.

Profitability Analysis

ROE is 9.48%, decomposed as Net Margin 7.38% × Asset Turnover 0.803 × Financial Leverage 1.60. Operating margin is roughly 11.8% (¥1.792bn OI on ¥15.183bn sales), down YoY given operating income fell 13.7% despite a 5.0% revenue increase. Gross margin remains strong at 52.2%, indicating healthy buy-sell spreads and pricing power in core categories. However, SG&A growth outpaced revenue (implied by OI decline), indicating cost inflation (labor, rent, logistics) or higher marketing to drive traffic and online volumes. EBITDA was ¥2.034bn (13.4% margin), providing a buffer above OI given modest depreciation of ¥242m. Interest expense of ¥34.8m is small; interest coverage is 51.4x, so financial costs do not burden profitability. Margin quality is supported by high gross margin but pressured by operating expenses; maintaining OPEX discipline is key. Asset efficiency is moderate (ATO 0.803x), consistent with an inventory-intensive specialty retailer. Overall, profitability is acceptable but trending weaker due to negative operating leverage in the period.

Growth Assessment

Revenue growth of 5.0% YoY to ¥15.183bn appears organic and consistent with stable underlying demand in used/collectibles. Profit growth lagged: operating income declined 13.7% and net income fell 18.5%, pointing to cost pressure and/or unfavorable product mix. The sustainability of revenue growth will depend on inventory availability, sourcing quality, and maintaining sell-through without discounting. Profit quality is mixed: high gross margin suggests defensible niche positioning, but OPEX intensity diluted incremental margins. With ordinary income at ¥1.75bn and a normalized tax burden near ~39%, bottom-line growth will require either operating improvement or renewed same-store sales momentum. Negative free cash flow indicates investment and working capital absorption; near-term growth should be balanced against cash conversion discipline. Outlook: modest sales growth is plausible, but restoring operating leverage via SG&A control and improved inventory turnover will be critical to stabilize earnings.

Financial Health

Total assets are ¥18.907bn and equity is ¥11.822bn, implying an estimated equity ratio of about 62.5% (derived). Total liabilities are ¥7.228bn, with a debt-to-equity ratio of 0.61x, indicating moderate leverage. Liquidity is strong on a current basis: current assets ¥11.821bn vs current liabilities ¥4.522bn (current ratio 261%). However, quick ratio is only 38.4% because inventories are ¥10.086bn (≈85% of current assets), so near-cash liquidity is limited. Working capital is ample at ¥7.299bn, providing an operating cushion but tying up cash. Interest burden is low; interest coverage is 51.4x, and no liquidity stress is evident from interest costs. Equity base is sizable relative to assets, supporting solvency and flexibility. Reported equity ratio in the input appears as 0.0% due to non-disclosure formatting; the derived figure better reflects solvency. Cash and equivalents were not disclosed in the cash flow section (shown as 0), limiting precise net cash/debt analysis.

Cash Flow Quality

Operating cash flow was ¥215m versus net income of ¥1,121m, for an OCF/NI ratio of 0.19x, indicating weak cash realization in the period. The shortfall is likely driven by working capital outflows, particularly inventory build, given the very high inventory balance relative to sales. Free cash flow was negative at ¥-174m (OCF ¥215m minus investing CF ¥389m), implying internal cash generation did not fully fund investments. Depreciation was ¥242m, modest relative to EBITDA, suggesting cash earnings capacity, but conversion to cash was hampered by working capital. Without detailed working capital line items, we infer inventory and perhaps receivables absorption as the key drivers. Financing CF was negative at ¥-311m, likely reflecting debt repayment and/or lease/service of obligations; dividends appear nil. Overall, earnings quality is mixed: accounting profits are solid, but low OCF/NI and negative FCF point to elevated cash conversion risk.

Dividend Sustainability

Annual DPS is reported as ¥0.00 with a payout ratio of 0%, and free cash flow is negative at ¥-174m. Given the negative FCF and inventory-led working capital needs, retention of earnings is consistent with maintaining balance sheet strength. Even though profitability is positive, cash earnings did not translate into distributable cash this period, so coverage of any potential dividend from FCF would be weak. The capital structure is conservative with strong equity, but prudent policy would favor reinvestment and working capital normalization before distributions. Future dividend capacity will depend on restoring OCF/NI toward ≥0.8–1.0x and achieving sustained positive FCF. No explicit dividend policy data were disclosed; current stance appears conservative.

Risk Assessment

Business Risks:

• Inventory obsolescence and markdown risk given large inventory relative to sales
• Demand volatility in discretionary otaku/collectibles categories
• Sourcing constraints for high-quality used goods impacting gross margin
• Competition from online marketplaces and peer specialty retailers
• Store operating cost inflation (rent, labor, utilities) pressuring OPEX
• Execution risk in omni-channel and e-commerce logistics
• Event-driven seasonality and promotional intensity affecting margins

Financial Risks:

• Weak cash conversion (OCF/NI 0.19x) and negative free cash flow
• High reliance on inventory for liquidity (quick ratio 38%)
• Potential working capital swings impacting funding needs
• Tax burden near ~39% reducing net income sensitivity to operating gains
• Exposure to interest rate changes on any floating liabilities, albeit low interest burden

Key Concerns:

• Sustained inventory build could further depress OCF and necessitate external funding
• Operating leverage turned negative; further cost inflation could erode margins
• Maintaining gross margin while accelerating sell-through is critical to avoid discounting

Investment Implications

Key Takeaways:

• Top-line growth of 5% YoY with high gross margin (52.2%) but compressed operating margin (~11.8%)
• ROE of 9.48% driven by solid margins and moderate leverage; asset turnover is 0.803x
• Cash conversion is weak (OCF/NI 0.19x) and FCF negative (¥-174m), likely due to inventory absorption
• Balance sheet is strong with an estimated equity ratio of ~62.5% and D/E of 0.61x
• Liquidity profile is inventory-heavy (quick ratio 38%), increasing cash flow volatility risk

Metrics to Watch:

• Inventory turnover days and year-on-year inventory levels
• OCF/Net income ratio and free cash flow trajectory
• SG&A-to-sales ratio and operating margin progression
• Same-store sales and e-commerce mix/ASP trends
• Tax rate normalization and effective tax rate
• Interest coverage and any changes in total liabilities

Relative Positioning: Within Japanese specialty retail/used collectibles, Mandarake exhibits superior gross margins and a conservative balance sheet but lags on cash conversion due to heavy inventory intensity; restoring inventory turnover is key to closing the gap on free cash flow peers.

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