HOTLAND HOLDINGS Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥37.52B
• Operating Income: ¥1.49B
• Net Income: ¥1.40B
• EPS: ¥12.52

Income Statement

Balance Sheet

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

For FY2025 Q3, Hotland Holdings reported solid top-line momentum with revenue of ¥37.515bn, up 10.9% YoY, but profitability compressed meaningfully. Gross profit is reported at ¥18.975bn, implying a gross margin of 50.6%, indicative of healthy unit economics for a food service operator, yet operating income declined 29.1% YoY to ¥1.491bn, driving operating margin down to roughly 4.0%. Ordinary income was ¥1.362bn, and net income fell sharply to ¥266m (-78.8% YoY), reducing the net margin to 0.71%. The deterioration from ordinary income to net income suggests the presence of sizable extraordinary losses and/or a higher tax burden; the disclosed income tax expense of ¥748.7m implies heavier below-operating line pressures in the quarter. DuPont analysis yields an ROE of 2.19% (net margin 0.71%, asset turnover 1.136x, financial leverage 2.71x), underscoring that low profitability, rather than asset efficiency or leverage, is the primary constraint on returns. Asset turnover of 1.136x remains robust for the category, reflecting an efficient store base. The balance sheet remains sound with total assets of ¥33.031bn and total equity of ¥12.169bn, implying an equity ratio near 36.8% (despite the equity ratio field showing 0.0%, which appears unreported) and liabilities-to-equity of 1.31x. Liquidity is adequate with a current ratio of 114.4% and a quick ratio of 86.4%, though reliance on inventory is notable. Interest expense of ¥46.1m is modest relative to operating income, yielding a comfortable interest coverage of 32.3x. Cash flow statement items are unreported this quarter (OCF/FCF/financing CF shown as zero are placeholders), limiting insight into earnings-to-cash conversion. Depreciation and amortization and EBITDA are also unreported, which constrains assessment of non-cash components and true operating cash generation. Dividend per share and share count are unreported, so per-share capital metrics and payout cannot be confirmed. Overall, revenue growth is healthy but negative operating leverage—likely from higher SG&A (labor, utilities, rents), cost inflation, and possibly upfront costs for expansion—has weighed on profit. The step-down from ordinary to net income points to extraordinary losses and tax effects that are important to monitor for recurrence. With low ROE and margin pressure, improving cost pass-through and store productivity will be critical for earnings recovery. The company’s capital structure and liquidity provide resilience, but sustained cash generation will be key, especially if the firm maintains growth investments.

Profitability Analysis

ROE_decomposition: Reported ROE is 2.19%, driven by net margin of 0.71%, asset turnover of 1.136x, and financial leverage of 2.71x. The primary drag is the compressed net margin; asset efficiency is reasonable, and leverage is moderate. margin_quality: Gross margin is 50.6%, indicating strong unit-level economics. Operating margin is approximately 4.0% (¥1.491bn on ¥37.515bn sales), down YoY, reflecting higher SG&A and/or cost headwinds. Ordinary margin is ~3.6% (¥1.362bn/¥37.515bn). The sharp decline to a 0.71% net margin suggests extraordinary losses and a heavier tax burden this period. operating_leverage: Revenue grew 10.9% YoY while operating income declined 29.1% YoY, indicating negative operating leverage. This implies fixed-cost absorption and/or elevated growth-related expenses outweighed gross profit gains. Monitoring SG&A growth versus sales and the impact of pricing actions on mix is essential.

Growth Assessment

revenue_sustainability: Top-line growth of 10.9% YoY suggests healthy same-store performance and/or store network expansion. Asset turnover of 1.136x supports efficient utilization, consistent with a scaled food-service operator. profit_quality: The gap from operating income to net income (¥1.491bn to ¥266m) coupled with ¥748.7m in income tax indicates material below-OP items (likely extraordinary losses) and taxes compressed bottom-line quality this quarter. outlook: Sustaining growth will hinge on balancing pricing with traffic retention, managing input cost inflation (ingredients, labor, utilities), and improving store productivity. If extraordinary losses are non-recurring and cost pressures stabilize, earnings conversion could recover; otherwise, margin headwinds may persist.

Financial Health

liquidity: Current ratio 114.4% and quick ratio 86.4% indicate adequate short-term liquidity, with some reliance on inventories (inventories ¥2.915bn within current assets ¥11.926bn). Working capital stands at ¥1.498bn. solvency: Total liabilities are ¥15.976bn against total equity of ¥12.169bn (debt-to-equity 1.31x). Implied equity ratio is approximately 36.8% (computed from disclosed assets and equity), suggesting a balanced capital structure. capital_structure: Interest expense is modest at ¥46.1m, with interest coverage at 32.3x based on operating income, indicating comfortable serviceability. Financial leverage of 2.71x is moderate for the sector.

Cash Flow Quality

earnings_quality: Operating, investing, and financing cash flows are unreported this quarter (zeros indicate missing data), preventing direct assessment of earnings-to-cash conversion and cash tax payments. FCF_analysis: Free cash flow cannot be calculated due to missing OCF and capex data. Given margin compression at the P/L level, cash generation may have been tighter YoY, but verification requires actual CF disclosures. working_capital: Working capital is positive at ¥1.498bn. With quick ratio below 100%, inventory turns and receivables management are important to maintain OCF resilience amid growth.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio fields are reported as 0.00, which should be treated as unreported. Therefore, payout ratio versus earnings cannot be assessed for this period. FCF_coverage: FCF coverage of dividends cannot be evaluated because operating and investing cash flows are unreported. policy_outlook: Given the low ROE (2.19%) and compressed net margin (0.71%), prudence would favor retaining earnings to support operational improvements and growth investments; however, without DPS history for this period, policy direction cannot be inferred.

Risk Assessment

Business Risks:

• Input cost inflation (seafood, wheat/flour, cooking oil) compressing margins
• Labor cost and utilities inflation raising SG&A
• Price elasticity and traffic risk from menu price adjustments
• Execution risk in store expansion and new format rollouts
• Brand concentration risk if a few key concepts drive a high share of sales
• Competitive pressures in domestic F&B and quick-service categories

Financial Risks:

• Earnings volatility from extraordinary losses impacting bottom line
• Potential working capital build (inventory) amid expansion pressuring OCF
• Exposure to interest rate normalization, albeit current interest burden is low
• Tax burden variability affecting net income

Key Concerns:

• Negative operating leverage despite double-digit revenue growth
• Step-down from ordinary income to net income due to taxes/extraordinary items
• Limited visibility on cash flow generation due to unreported CF data

Investment Implications

Key Takeaways:

• Revenue growth is solid at +10.9% YoY, but operating income fell 29.1% YoY, indicating margin pressure.
• Net income margin compressed to 0.71% with ROE at 2.19%, highlighting profitability challenges.
• Balance sheet remains sound with implied equity ratio ~36.8% and interest coverage 32.3x.
• Liquidity is adequate (current ratio 114.4%), but quick ratio (86.4%) underscores inventory reliance.
• Extraordinary losses/tax effects likely drove the large gap between ordinary and net income.

Metrics to Watch:

• Same-store sales growth and pricing/mix impact
• SG&A as a percentage of sales and labor cost trends
• Gross margin stability amid input cost movements
• Extraordinary items and effective tax rate trajectory
• Operating cash flow and capex (once disclosed) to gauge FCF
• Inventory turnover and days payable/receivable cycles

Relative Positioning: Versus domestic casual/QSR peers, Hotland exhibits healthy gross margins but lower operating margins (~4%) and a subdued ROE (2.19%). Asset turnover is competitive, leverage is moderate, and interest coverage is strong; near-term underperformance stems from cost pressures and below-the-line items.

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
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