In quarterly earnings reports (Q1-Q3), certain items such as cash flow statements and segment information are optional disclosures under regulations. "Not disclosed" entries in this article reflect regulatory requirements, not company omissions. Additionally, data extraction from XBRL is not yet complete. We are continuously working to improve data accuracy.
This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.
AI Financial Analysis
Executive Summary
Verdict: A modest top-line increase but margin compression led to a double‑digit decline in operating profit, with cash generation remaining solid. Revenue rose 1.4% YoY to 187.5, while operating income declined 12.2% YoY to 9.18 and net income fell 9.4% YoY to 6.29. Gross profit reached 34.05, implying a gross margin of 18.2%, consistent with a volume-led, lower-margin mix typical of auto retail/distribution. Operating margin slipped to 4.9% (9.18/187.5), down from an estimated ~5.7% a year ago, indicating cost pressure or adverse mix. Ordinary income was 9.50, aided slightly by 0.49 in non-operating income, while non-operating expenses were contained at 0.17. Net profit margin stood at 3.4%, down from an estimated ~3.8% a year ago, reflecting weaker operating leverage and a normalized effective tax rate of 32.4%. Despite softer earnings, operating cash flow was strong at 13.41, more than 2x net income (OCF/NI 2.13x), signaling healthy earnings quality. EBITDA was 13.75 with an EBITDA margin of 7.3%, and interest coverage remained very strong at 65.8x, underscoring conservative financial risk. The balance sheet shows total assets of 204.62 and equity of 113.09, with a D/E of 0.81x and current ratio of 1.18x; liquidity is adequate but reliant on inventories (65.54) in line with the business model. Quick ratio of 0.28 highlights sensitivity to inventory turns and payables management. ROE was 5.6% via DuPont (NPM 3.4% × asset turnover 0.916 × leverage 1.81x), below typical cost of equity benchmarks and pressured by margin compression. ROIC of 5.4% trails a 7–8% target range, suggesting limited value creation absent improvement in margins or capital efficiency. Capex was 10.91; using a proxy FCF (OCF − capex), FCF approximates 2.50, implying capacity to fund a low payout. The calculated payout ratio is 23.4%, which appears serviceable under current cash flow, though dividends are unreported in XBRL. Forward-looking, margin recovery depends on mix, pricing discipline, and inventory normalization, while strong cash generation provides a buffer. Overall, performance is resilient in cash terms but requires margin rehabilitation to lift ROE/ROIC toward target levels.
Profitability Analysis
ROE decomposition: ROE 5.6% = Net Profit Margin 3.4% × Asset Turnover 0.916 × Financial Leverage 1.81x. The largest change vs. last year appears to be margin compression: operating income fell 12.2% on a 1.4% revenue rise, implying an operating margin drop from ~5.7% to 4.9% (≈ −76 bps). Net margin also compressed from ~3.75% to 3.35% (≈ −40 bps), while asset turnover (0.916) and leverage (1.81x) likely moved modestly. Business drivers likely include cost inflation (personnel, logistics), mix shifts (used vs. new vehicles, aftersales), and potentially tighter gross spreads amid competitive pricing. These pressures are partly cyclical/mix‑related and could normalize if supply chains and vehicle pricing stabilize, but immediate, structural relief is uncertain. SG&A intensity is 13.3% of sales; absent segment detail, we cannot confirm whether SG&A growth outpaced revenue, but deleverage is evident in the OPM decline. Given the reliance on inventory turns, small volume/mix shifts can drive disproportionate margin movement—suggesting some recovery potential but also ongoing sensitivity. Bottom line: margin is the key swing factor for ROE; without margin repair, ROE will remain mid‑single digits.
Growth Assessment
Revenue growth was modest at +1.4% YoY to 187.5, indicating stable demand but limited pricing/volume expansion. Operating profit declined 12.2% to 9.18, signaling negative operating leverage. Ordinary profit fell 10.5% to 9.50, with a minor cushion from non-operating income (0.49). Net income decreased 9.4% to 6.29, pressured by weaker operating margin and a 32.4% effective tax rate. Gross margin at 18.2% suggests a volume-driven model with limited pricing power; mix shifts likely weighed on OPM. EBITDA margin was 7.3%, consistent with a low‑teens gross spread business. Profit quality is supported by OCF/NI of 2.13x. Outlook: revenue should track industry volumes and inventory availability, while profit recovery will hinge on inventory normalization, used-car pricing stability, and cost discipline. Near-term, mix/pricing volatility remains the principal risk to margin expansion. Medium-term initiatives should focus on improving inventory turns and aftersales mix to lift ROIC toward 7–8%.
Financial Health
Liquidity: Current ratio 1.18x (adequate; no warning as it is >1.0), but below the 1.5x healthy benchmark; quick ratio 0.28x reflects inventory-heavy working capital. Solvency: D/E 0.81x is conservative; interest coverage 65.8x is very strong. Balance sheet: Current liabilities 72.94 vs. current assets 86.07; cash + AR total 17.21, indicating reliance on converting 65.54 of inventories and rolling 37.05 of payables—typical for the sector but exposes the firm to inventory turn risk. Debt structure: Short-term loans 5.43 and long-term loans 7.14 suggest manageable refinancing risk; no explicit maturity cliffs disclosed. No off-balance sheet obligations are reported in the provided data. No warnings triggered for Current Ratio < 1.0 or D/E > 2.0.
Cash Flow Quality
OCF/Net Income is 2.13x, indicating high earnings quality and positive working capital dynamics. Operating CF was 13.41 versus NI of 6.29, supported by non-cash charges (D&A 4.57) and likely working capital inflows (component details unreported). Capex was 10.91; a proxy FCF (OCF − capex) is approximately 2.50, but full investing CF is unreported, so true FCF may differ. Financing CF was −3.26, implying net debt reduction or dividends/shareholder returns, though dividends are unreported. No clear signs of working capital manipulation can be inferred from the limited data; inventory remains high, consistent with the model. Given robust OCF and modest leverage, cash flow quality appears solid.
Dividend Sustainability
The calculated payout ratio is 23.4% (based on reported earnings), indicating a conservative policy. While total dividends paid are unreported, a payout at ~23% of NI (≈1.47) appears covered by proxy FCF of ~2.50 (OCF 13.41 minus capex 10.91). With strong interest coverage and moderate leverage, dividend capacity looks sustainable under current conditions. However, sustainability remains sensitive to margin recovery and inventory turns given the quick ratio of 0.28x. Policy outlook likely stays conservative until ROIC rises toward 7–8% and operating margin stabilizes.
Risk Assessment
Business Risks:
Margin compression from pricing pressure and adverse sales mix (used vs. new vehicles, aftersales share)
Inventory turn risk given high inventories (65.54) relative to cash and receivables
Volatility in used-car residual values impacting gross spreads
Supply chain normalization risk affecting vehicle availability and discounting
Tax rate variability (effective tax 32.4%) impacting net margin
Financial Risks:
Liquidity reliance on inventory liquidation and payables rollover (quick ratio 0.28x)
Potential working capital swings that could dilute OCF in weaker quarters
Exposure to interest rate changes on short-term financing (short-term loans 5.43), albeit currently small
ROIC at 5.4% below target, risking underperformance vs. cost of capital if margins do not improve
Key Concerns:
Operating margin declined to 4.9% with ~76 bps compression YoY
Net margin compressed to 3.4% despite revenue growth
ROE at 5.6% and ROIC at 5.4% indicate limited value creation vs. typical benchmarks
Low quick ratio underscores sensitivity to demand and inventory cycles
Investment Implications
Key Takeaways:
Stable revenue but weaker margins drove double-digit declines in operating and net income
Earnings quality is solid with OCF/NI at 2.13x and strong interest coverage
Balance sheet conservative (D/E 0.81x), but liquidity leans on inventory turns
ROE 5.6% and ROIC 5.4% need margin and capital efficiency improvements to close the gap to targets
Proxy FCF (~2.50) appears to cover a low payout (~23%), supporting dividend resilience
Metrics to Watch:
Operating margin trajectory and SG&A intensity
Inventory levels and turnover (vs. payables)
OCF sustainability and working capital movements
ROIC progression toward 7–8%
Used-car pricing and new-car supply normalization
Relative Positioning:
Within auto retail/distribution peers, the company shows stronger-than-average cash conversion and conservative leverage, but profitability metrics (OPM, ROE, ROIC) are mid-pack to below-target, leaving upside contingent on margin repair and improved capital turns.
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
