APPLE INTERNATIONAL CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥29.53B
• Operating Income: ¥526M
• Net Income: ¥1.08B
• EPS: ¥26.56

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

Verdict: FY2025 Q3 was a weak quarter operationally with sharp profit compression, cushioned somewhat by non-operating/extraordinary gains. Revenue declined 11.9% YoY to 295.27, while operating income fell 57.1% YoY to 5.26, and net income dropped 66.5% YoY to 3.41. Gross profit was 29.50, implying a gross margin of 10.0% on the provided data. Operating margin declined to roughly 1.78% this quarter, and net margin was 1.16%, both materially below the prior year. Using the disclosed YoY rates, we estimate operating margin compressed by about 188 bps YoY (from roughly 3.66% to 1.78%). Net margin likely compressed by a similar ~188 bps YoY (from ~3.04% to 1.16%). Ordinary income declined 61.5% YoY to 5.16, but profit before tax was 13.44, indicating significant extraordinary gains lifted PBT above ordinary income. Despite that boost, bottom-line was only 3.41, pointing to additional below-the-line impacts and taxes (effective tax rate ~19.3% on the period’s PBT measure). Leverage is moderate (D/E 0.97x), and interest coverage remains strong at 10.86x, so solvency is not the immediate issue—profitability is. Liquidity is solid with a current ratio of 231.7% and cash of 52.54 against short-term loans of 41.10. ROE is low at 3.3% per DuPont (margin 1.1%, asset turnover 1.452, leverage 1.97x), underscoring weak earnings power. ROIC at 3.8% is below the 5% warning threshold, suggesting capital efficiency challenges and limited value creation versus typical cost of capital. Non-operating income is meaningful (1.81), and the non-operating income ratio is flagged at 53.1%, highlighting reliance on items outside core operations in this quarter’s result. Cash flow metrics are unreported; thus, earnings quality cannot be validated via OCF conversion. Dividend signals are mixed: a calculated payout ratio of 61% is near/above the comfort range given depressed profits and low ROIC. Forward-looking, the key is restoring operating margin and improving asset turnover (inventory and receivables discipline) to lift ROE/ROIC, while reducing dependence on non-operating/extraordinary items.

Profitability Analysis

ROE decomposition: ROE ≈ Net Profit Margin (1.1%) × Asset Turnover (1.452) × Financial Leverage (1.97x) = ~3.3%. The largest driver of the weak ROE is the slim net profit margin (1.1%); asset turnover is reasonable for a trading-heavy, auto-related business at 1.45x, and leverage is under 2x. The biggest change YoY is margin compression: operating income fell 57.1% on an 11.9% revenue decline, indicating significantly lower operating margin. Business reasons likely include weaker gross spreads on used vehicles/auto-related trading, inventory markdowns or mix pressure, and higher fixed cost absorption amid lower volumes; non-operating effects helped PBT but not core profitability. Sustainability: margin pressure is partially cyclical (pricing, FX, demand), but unless gross margin and SG&A efficiency improve, ROE will remain subdued; extraordinary gains are by nature non-recurring. Watch for SG&A discipline—although SG&A level (17.22) is below gross profit, the decline in operating income suggests operating deleverage; if SG&A growth outpaces revenue in subsequent quarters, that would be a red flag. Overall, the path to better ROE is primarily through margin restoration; leverage is already moderate and asset turnover improvement hinges on working capital turns.

Growth Assessment

Top-line contracted 11.9% YoY to 295.27, signaling softer demand or pricing in core businesses. Operating income decreased 57.1% YoY to 5.26, pointing to negative operating leverage and/or weaker unit economics. Net income declined 66.5% to 3.41 despite PBT uplift from extraordinary items, suggesting limited quality of the bottom line. Estimated operating margin compression of ~188 bps YoY confirms deterioration in core profitability. Non-operating income (1.81) and extraordinary items contributed materially to PBT (PBT 13.44 vs ordinary 5.16), which is not a dependable driver of long-term growth. With ROIC at 3.8% (<5% warning), current growth does not appear value-accretive. Near-term outlook hinges on normalizing gross spreads, effective pricing, and inventory turnover improvements; FX conditions and export demand (if applicable to the business mix) will also be key. Without OCF data, we cannot confirm whether growth is supported by cash generation, which tempers confidence in the earnings run-rate.

Financial Health

Liquidity is strong: current ratio 231.7% and quick ratio 150.1% exceed benchmarks. There is no warning on current ratio (<1.0) or D/E (>2.0); D/E is 0.97x, within a conservative-to-moderate range. Maturity profile: short-term loans of 41.10 are well covered by cash (52.54) and current assets (178.89), limiting near-term refinancing risk; accounts payable (7.57) is modest relative to receivables (61.11) and inventories (63.02), indicating working capital is tied up mostly in AR and inventory. Long-term loans are 19.68; overall interest-bearing debt is manageable given coverage at 10.86x. No off-balance sheet obligations are reported in the provided data. Equity is 103.47 versus total assets 203.38, supporting a stable capital base. Conclusion: balance sheet resilience is adequate, with no immediate liquidity or solvency red flags.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be assessed and earnings quality cannot be validated against cash generation. Free cash flow is unreported; thus, the sustainability of funding dividends and capex from internal cash is unknown. Working capital appears sizable (AR 61.11, inventories 63.02); absent OCF data, we cannot determine if inventory buildups or receivable elongation are depressing cash. Given margin compression and reliance on non-operating/extraordinary items for PBT, we would treat earnings quality as uncertain until OCF data is available. No explicit signs of working capital manipulation can be inferred from the disclosed snapshot alone.

Dividend Sustainability

The calculated payout ratio is 61.0%, slightly above the <60% comfort benchmark, and high relative to current low ROE (3.3%) and sub-5% ROIC (3.8%). FCF coverage is unreported, preventing verification that dividends are funded by operating inflows after capex. With profitability under pressure and non-operating items supporting PBT, a payout at ~60% may be at risk if earnings do not recover or if working capital absorbs cash. Policy outlook: without explicit guidance, we assume a cautious stance is warranted; improved OCF conversion and margin recovery would be needed to sustain or grow dividends sustainably.

Risk Assessment

Business Risks:

• Profitability compression: operating margin down an estimated ~188 bps YoY on an 11.9% revenue decline
• Dependence on non-operating/extraordinary gains to lift PBT (PBT 13.44 vs ordinary income 5.16)
• Inventory and receivable intensity (inventories 63.02, AR 61.11) could pressure cash if turns slow
• Low capital efficiency (ROIC 3.8%) risks value dilution if not improved

Financial Risks:

• Exposure to short-term funding cycles (short-term loans 41.10), albeit currently covered by cash
• Earnings sensitivity to interest rates despite strong coverage (10.86x) if profits weaken further
• Potential dividend strain with payout ~61% amid low ROE/ROIC and unreported FCF

Key Concerns:

• Earnings quality uncertainty due to unreported OCF and FCF
• Sustained margin pressure may limit internal capital generation for growth and dividends
• High reliance on working capital may amplify cyclicality

Investment Implications

Key Takeaways:

• Core profitability weakened materially; operating margin estimated ~1.78% vs ~3.66% a year ago
• Net margin compressed to 1.16%; ROE at 3.3% and ROIC at 3.8% indicate weak capital efficiency
• Non-operating and extraordinary items inflated PBT relative to ordinary income, lowering earnings quality
• Balance sheet liquidity is solid (current ratio 232%, cash 52.54 > short-term loans 41.10) and leverage is moderate (D/E 0.97x)
• Cash flow disclosure is insufficient to validate earnings conversion and dividend coverage

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (target >1.0)
• Gross margin and unit spreads; operating margin trajectory (seek stabilization/recovery)
• Inventory turnover days and receivables days
• Composition of non-operating and extraordinary items
• ROIC progression toward >5% first, then toward 7–8% target range
• Net debt movement and interest coverage under lower EBIT scenarios

Relative Positioning: Versus small-cap auto/used-car trading peers, liquidity and interest coverage are decent, but profitability and capital efficiency are weaker given sub-2% operating margin and sub-5% ROIC. Reliance on non-operating/extraordinary items to support PBT places the company below peers with steadier operating earnings and stronger cash conversion.

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