Rigaku Holdings Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥59.50B
• Operating Income: ¥6.56B
• Net Income: ¥4.27B
• EPS: ¥18.81

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

Rigaku Holdings (268A0) reported FY2025 Q3 (IFRS, consolidated) results showing top-line softness and pronounced operating deleverage, but with resilient cash generation. Revenue was 594.96 (100M JPY), down 4.9% YoY, while operating income fell 44.6% to 65.62, indicating significant margin compression. Net income declined 52.5% to 42.73, translating to a net margin of 7.2% and a calculated ROE of 5.2% using the provided DuPont metrics. Gross margin remained high at 64.3%, signaling strong value-add and pricing power in core businesses, though SG&A intensity rose to 44.3% of sales, pressuring operating leverage. EBITDA was 102.00 with a margin of 17.1%, versus an implied operating margin of about 11.0%, suggesting D&A is not the primary driver of the profit drop; rather, it is lower volume and higher opex. The effective tax rate was elevated at 41.9%, weighing on net profitability and ROE. On the balance sheet, total assets were 1,739.25 and equity 815.81, yielding financial leverage of 2.13x and a debt-to-equity ratio of 1.17x. Interest-bearing debt by components totals at least 553.88 (short-term 40.00 and long-term 513.88), indicating moderate leverage for a capital-intensive instrumentation manufacturer. Liquidity ratios cannot be precisely assessed due to unreported current liabilities; however, cash and equivalents stood at 279.92 and operating cash flow was a healthy 82.13. Cash flow quality was strong with OCF/Net Income at 1.92x and positive free cash flow of 48.72, despite the earnings decline. Financing cash outflows of -34.85 reflect dividend payments (-28.14) and modest share repurchases (-0.04), consistent with a disciplined capital return stance. Total comprehensive income of 29.92 was below net income, implying negative OCI that partially offsets retained earnings growth. Book value per share is calculated at 357.97 JPY, while basic EPS is 18.81 JPY on 227.16 million average shares. While reported and calculated margins are robust for an equipment/analytics business, the YoY profit contraction highlights cyclical end-market headwinds and a cost base that did not flex down commensurately with sales. Data limitations (non-disclosure of several line items) constrain granularity, but the available metrics point to solid balance sheet capacity and good cash conversion through the cycle.

Profitability Analysis

ROE of 5.2% decomposes into a 7.2% net margin, 0.342x asset turnover, and 2.13x leverage. The largest negative delta YoY appears to be at the operating level: operating income fell 44.6% on a 4.9% revenue decline, evidencing significant operating deleverage. Gross margin is high at 64.3%, indicating strong product mix and pricing; the squeeze is primarily in SG&A, which is 263.29 (44.3% of sales). Operating margin is approximately 11.0% (65.62/594.96), down sharply YoY (exact prior-year margin not provided), and below the 17.1% EBITDA margin, showing that D&A is not the main pressure point. The effective tax rate of 41.9% further compresses net margin and ROE, potentially due to geographic profit mix or discrete items. Asset turnover at 0.342x is modest, consistent with the capital intensity and project-driven nature of analytical/inspection equipment. Financial leverage at 2.13x supports ROE but is not excessive. Overall margin quality at the gross level remains strong, but opex discipline and volume recovery are needed to restore operating and net margins.

Growth Assessment

Revenue declined 4.9% YoY to 594.96, suggesting softer demand in core end-markets, likely including semiconductor, electronics inspection, and industrial R&D customers. Profit contraction was outsized versus sales due to operating deleverage, with operating income down 44.6% and net income down 52.5%. The gross margin of 64.3% indicates that pricing/mix has held up; the revenue decline appears demand-driven rather than pricing-led. EBITDA of 102.00 points to an intact earnings capacity once volumes normalize, but short-term growth will depend on order intake recovery. The high effective tax rate amplified the net profit decline, implying potential for some rebound in net income if the tax mix normalizes. Outlook-wise, a stabilization in capex cycles for semiconductors, materials science, and industrial inspection would be supportive; conversely, prolonged macro softness would keep growth muted. With strong OCF and positive FCF, Rigaku can maintain R&D and capex to support medium-term product-cycle growth despite near-term headwinds. Specific guidance is not provided here; thus, growth sustainability hinges on backlog conversion and regional demand trends, which are not disclosed in the provided data.

Financial Health

Total assets are 1,739.25 and equity is 815.81, yielding an equity ratio of 46.9% and leverage (assets/equity) of 2.13x. Total liabilities are 957.77, and the debt-to-equity ratio is 1.17x. Reported debt components include short-term loans of 40.00 and long-term loans of 513.88, implying at least 553.88 of interest-bearing debt; total interest-bearing debt is unreported. Liquidity assessment is constrained because current liabilities are unreported; consequently, current and quick ratios are not calculable. Current assets are 712.28, including accounts receivable of 202.80 and inventories of 211.19, indicating meaningful working capital tied in receivables and stock. Cash and equivalents are 279.92, providing a liquidity buffer. Total comprehensive income of 29.92, below net income, points to OCI headwinds that modestly temper equity growth. Overall solvency is sound with nearly half the balance sheet funded by equity; leverage is moderate and appears manageable given positive OCF.

Cash Flow Quality

Operating cash flow was 82.13 versus net income of 42.73, for an OCF/NI ratio of 1.92x, indicating solid earnings quality and strong cash conversion. Free cash flow is reported at 48.72, positive after investing outflows including capex of 31.78. The gap between OCF and FCF reflects ongoing investment but within internally funded capacity. Working capital remained a significant use of capital structurally (receivables 202.80, inventories 211.19), but the positive OCF suggests either stable working capital or some release; detailed working capital movements by component are not disclosed. Financing cash flow of -34.85 includes dividends paid of -28.14 and small buybacks, consistent with returning cash while preserving balance sheet strength. Interest expense is unreported, so interest coverage cannot be calculated; however, cash generation appears adequate to service debt. Overall, cash flow quality is robust relative to depressed earnings, providing flexibility for investment and shareholder returns.

Dividend Sustainability

The calculated payout ratio is 16.1%, implying a conservative distribution against net income. Free cash flow coverage of dividends is reported at 7.07x; using the disclosed cash flow statement dividends paid of 28.14 and FCF of 48.72 would imply approximately 1.7x coverage, suggesting methodology/timing differences between calculated payout and cash basis figures. Regardless, both indicators point to dividends being covered by earnings and cash flow in the period. With OCF at 82.13 and modest capex (31.78), the company retains capacity to fund dividends internally even amid profit volatility. Absent explicit DPS guidance and with DPS items unreported, we infer the policy is to maintain a sustainable base dividend with potential variability subject to earnings normalization. The high effective tax rate and cyclical end-market exposure are watch points for future dividend headroom, but current-period coverage appears adequate.

Risk Assessment

Business Risks:

• Cyclical demand in semiconductor, electronics inspection, and industrial R&D end-markets
• Order timing volatility and project execution risk impacting quarterly revenue
• Foreign exchange exposure affecting reported sales and margins (not disclosed here)
• Competitive pricing pressure in analytical/inspection equipment
• Product mix shifts that could dilute gross margin despite current strength
• Supply chain and component availability risks impacting lead times and costs

Financial Risks:

• Elevated effective tax rate (41.9%) suppressing net income and ROE
• Moderate leverage (D/E 1.17x) with at least 553.88 of loans outstanding
• Working capital intensity (AR 202.80, inventory 211.19) tying up cash in downturns
• Interest expense and coverage unreported, limiting assessment of debt service cushion
• OCI volatility reducing comprehensive income and equity accretion

Key Concerns:

• Sharp operating income contraction (-44.6% YoY) on modest revenue decline (-4.9%)
• SG&A intensity at 44.3% of sales, indicating limited cost flexibility near term
• Limited visibility due to several unreported items (e.g., interest, current liabilities, DPS)

Investment Implications

Key Takeaways:

• Revenue down 4.9% YoY to 594.96 with significant operating deleverage; operating income down 44.6%
• Gross margin remains strong at 64.3%, but SG&A pressure compresses operating margin to ~11.0%
• ROE at 5.2% reflects low asset turnover (0.342x) and high tax rate headwinds
• Cash generation robust: OCF 82.13, FCF 48.72, OCF/NI 1.92x
• Balance sheet solid with equity ratio 46.9% and moderate leverage (D/E 1.17x)
• Dividend appears sustainable at a 16.1% payout ratio with positive FCF coverage

Metrics to Watch:

• Order intake/backlog and book-to-bill to gauge demand recovery
• SG&A trajectory and cost actions to restore operating leverage
• Effective tax rate normalization and drivers
• Working capital turns (DSO, inventory days) and cash conversion
• Debt profile and interest expense/coverage once disclosed
• Gross margin stability amid mix and pricing dynamics

Relative Positioning: Within precision analytical and inspection equipment peers, Rigaku exhibits above-average gross margins and solid cash conversion but currently below-peer profitability at the operating and net levels due to deleverage; balance sheet strength provides resilience pending volume recovery.

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