YKT CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥8.32B
• Operating Income: ¥-276M
• Net Income: ¥29M
• EPS: ¥1.84

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

YKT Co., Ltd. (2693) reported FY2025 Q3 consolidated results under JGAAP with revenue of ¥8,322 million, down 0.5% YoY, indicating broadly flat topline amid a soft demand environment. Gross profit was ¥1,539 million, implying a gross margin of 18.5%, consistent with a low-margin trading/industrial equipment profile. Operating income was a loss of ¥276 million (operating margin of -3.3%), essentially flat YoY per disclosure, suggesting cost rigidity and limited pricing power despite near-stable sales. Ordinary income improved versus operating loss to -¥194 million, implying net non-operating gains offsetting some operating weakness; interest expense was modest at ¥18 million. Net income nevertheless turned positive at ¥21 million (EPS ¥1.84), implying material below-ordinary gains (e.g., extraordinary income) or other non-recurring positive items under JGAAP. The DuPont decomposition yields a net margin of 0.25%, asset turnover of 0.607x, and financial leverage of 1.74x, producing a calculated ROE of 0.27% in line with the reported metric. On the balance sheet, total assets were ¥13,720 million and total equity ¥7,889 million; this implies an equity ratio around 57.5% despite the reported equity ratio field showing 0.0% (which appears unreported). Total liabilities were ¥3,595 million, resulting in a moderate debt-to-equity ratio of 0.46x. Liquidity appears ample with current assets of ¥7,594 million and current liabilities of ¥1,773 million, yielding a headline current ratio of 428% and working capital of ¥5,821 million; however, inventory and cash balances were not disclosed in XBRL, so the true quick ratio and liquidity quality cannot be confirmed. Cash flow statements were not disclosed (all zeros indicate unreported), preventing assessment of operating cash flow conversion and free cash flow. Dividend per share was reported as ¥0 with a payout ratio of 0%, suggesting a conservative stance while profitability and cash visibility remain constrained. Interest coverage based on EBIT is negative (approximately -15x), highlighting ongoing operating pressure even if financial leverage is moderate. The combination of flat sales, negative operating margin, and positive net income signals reliance on non-operating or extraordinary items to remain profitable, which may not be sustainable. Near-term outlook hinges on demand recovery in key equipment segments, order intake/backlog trends, and the company’s ability to lift gross margins and control SG&A. Overall, the balance sheet looks resilient, but earnings quality is mixed and cash flow visibility is limited due to disclosure gaps. All assessments reflect available non-zero data; items shown as zero should be treated as unreported rather than true zeros.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 0.25% × Asset turnover 0.607 × Financial leverage 1.74 = ROE 0.27%. The low ROE is mainly constrained by a very thin net margin, while leverage is modest and asset turnover is reasonable for a trading-oriented model. Gross margin is 18.5% (¥1,539m/¥8,322m), indicating limited pricing power; operating margin is -3.3% (¥-276m/¥8,322m), pointing to SG&A cost burden and negative operating leverage. Ordinary income (-¥194m) vs operating income (-¥276m) suggests positive non-operating contributions (e.g., FX gains, dividends, or other income) partially offsetting the core loss; interest expense is relatively small at ¥18m. Net income turned to a small profit of ¥21m, likely supported by extraordinary gains under JGAAP; this raises questions on the repeatability of bottom-line profitability. Operating leverage appears unfavorable: a marginal 0.5% revenue decline coincides with a sustained operating loss, implying fixed cost intensity and a high breakeven sales level. Margin quality is mixed: gross profit covers a portion of fixed costs but not enough to produce operating profits this period. Interest coverage on an EBIT basis is negative (-15x), underscoring earnings fragility despite modest financial leverage.

Growth Assessment

Revenue declined slightly by 0.5% YoY to ¥8,322m, indicating stable but not expanding demand in core segments. The lack of operating profit despite relatively flat sales suggests that revenue quality and pricing power are insufficient to offset fixed costs. Profit growth quality is weak: positive net income appears driven by non-operating/extraordinary effects rather than core operations. With gross margin at 18.5% and operating margin at -3.3%, incremental revenue would need to be accompanied by cost discipline and/or improved mix to restore operating profitability. Sustainability of growth will depend on order backlog recovery, normalization in industrial and electronics equipment demand, and the ability to pass through costs. Outlook near term is cautious given ongoing operating loss; however, the balance sheet can support operations while margins are repaired. Absent disclosure of quarterly cash flows and order metrics, visibility on near-term acceleration is limited.

Financial Health

Total assets are ¥13,720m and total equity is ¥7,889m, implying an equity ratio of roughly 57.5% (reported 0.0% is unreported), indicating a solid capital base. Total liabilities are ¥3,595m, yielding a debt-to-equity ratio of 0.46x, consistent with moderate leverage. Current assets are ¥7,594m versus current liabilities of ¥1,773m, producing a headline current ratio of 428% and working capital of ¥5,821m; however, inventory and cash balances were not disclosed, so true liquidity quality cannot be verified. The quick ratio shown equals the current ratio due to unreported inventories; this likely overstates immediate liquidity. Interest expense is ¥18m, and with operating losses, EBIT-based interest coverage is negative; nonetheless, the low absolute interest burden and strong equity base mitigate solvency risk in the near term. Overall, solvency is comfortable; liquidity appears ample on paper but requires confirmation once cash and inventory are disclosed.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed (zeros reflect unreported data), so OCF/NI and free cash flow cannot be evaluated. Reported OCF/NI ratio of 0.00 and FCF of 0 should be disregarded for analytical conclusions. Earnings quality is therefore uncertain: net profit appears supported by non-operating/extraordinary items, while core operations are loss-making. Working capital dynamics cannot be assessed because inventories and cash were unreported and receivable/payable details were not provided. Given the operating loss, high-quality cash conversion would require strong collections and inventory discipline; visibility is limited pending full cash flow disclosure.

Dividend Sustainability

Annual DPS is ¥0 with a reported payout ratio of 0%. Given a small net profit (¥21m) driven by non-operating/extraordinary factors and an operating loss, the decision to keep DPS at zero aligns with cash preservation. FCF coverage is unassessable due to unreported cash flows; the displayed 0.00x should not be interpreted as actual coverage. Balance sheet strength (implied equity ratio ~57.5%) provides flexibility, but sustainable dividends would require restoring positive and recurring operating cash flow and improving operating margin. Policy outlook likely remains conservative until core profitability and cash generation normalize.

Risk Assessment

Business Risks:

• Cyclical demand in industrial/SMT/equipment end-markets, exposing revenue to macro slowdowns
• Low gross margins (~18.5%) limiting pricing power and buffer against cost inflation
• Negative operating margin and high breakeven sales level, indicating adverse operating leverage
• Potential reliance on non-operating/extraordinary gains to achieve net profitability
• Supply chain and lead-time volatility affecting order timing and revenue recognition
• Foreign exchange fluctuations impacting import/export transactions and gross margin
• Customer concentration risk typical in equipment/trading businesses (not disclosed but common)
• Geographic exposure risks (e.g., China/Asia demand) if relevant to sales mix (not disclosed)

Financial Risks:

• Negative EBIT leading to weak interest coverage (~-15x) despite modest leverage
• Unreported cash and inventories obscuring true liquidity position and working capital needs
• Potential inventory and receivables risk if demand weakens, though inventory data is unreported
• Earnings volatility tied to non-operating and extraordinary items under JGAAP

Key Concerns:

• Sustained operating losses despite nearly flat revenue
• Thin net margin (0.25%) and low ROE (0.27%)
• Lack of cash flow disclosure preventing assessment of cash generation and FCF
• Apparent dependence on below-ordinary items to reach positive net income

Investment Implications

Key Takeaways:

• Topline stable (-0.5% YoY), but core operations remain loss-making (operating margin -3.3%)
• Net profit of ¥21m likely driven by non-operating/extraordinary items rather than operating recovery
• Balance sheet appears solid with implied equity ratio ~57.5% and D/E 0.46x
• Liquidity looks strong on headline ratios, but cash/inventory disclosure gaps limit validation
• ROE is low at 0.27%, constrained by a very thin net margin
• Interest burden is small (¥18m), but negative EBIT results in weak coverage

Metrics to Watch:

• Order intake and backlog/book-to-bill trends
• Gross margin and SG&A-to-sales ratio progression
• Operating income margin and breakeven sales level
• Operating cash flow and free cash flow once disclosed
• Working capital turns: receivable days, payable days, and inventory days (when reported)
• Composition of non-operating and extraordinary items and their recurrence
• FX impact on gross margin and ordinary income

Relative Positioning: Within Japan-listed industrial equipment trading peers, YKT currently exhibits weaker operating profitability and ROE, albeit with a comparatively solid equity base and moderate leverage; recovery depends on improving margin mix and regaining positive operating leverage.

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