WILL,Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥10.15B
• Operating Income: ¥923M
• Net Income: ¥376M
• EPS: ¥48.80

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: A solid FY2025 Q3 with strong profit growth and clear margin expansion, underpinned by disciplined costs and manageable leverage, albeit with cash-flow opacity due to unreported CF data. Revenue rose 18.5% YoY to 101.49, while operating income climbed 45.6% YoY to 9.23, driving operating leverage. Net income increased 49.6% YoY to 5.63, and EPS (basic) was 48.80 JPY. Operating margin printed at approximately 9.1%, with ordinary margin at 8.2% and net margin at 5.5%. Based on disclosed growth rates, operating margin expanded by about 169 bps YoY (from ~7.4% to ~9.1%), signaling improved efficiency and/or mix. Net margin likely expanded by roughly 116 bps YoY (from ~4.4% to ~5.5%), reflecting strong cost control and benign non-operating drag. Gross margin stands at 13.0%, showing that most of the profit delta came from SG&A discipline and operating scale rather than gross spread. Financial structure is stable: current ratio is 167% and interest coverage is a robust 20.5x, despite a moderately high D/E of 1.86x. Equity increased to 53.08 (assets 151.99), implying an equity ratio of roughly 34.9%, which is reasonable for the sector. ROE is 10.6%, supported more by leverage (2.86x) and improved margin than by asset turnover (0.668x). Earnings quality cannot be validated as operating cash flow was not disclosed; OCF/NI is not calculable, which tempers confidence in the strength of the earnings beat. ROIC is 6.0%, below the 7–8% typical target range, suggesting room to improve capital efficiency. Short-term borrowings are sizable at 34.75, but current assets of 96.18 provide an adequate buffer; refinancing risk appears limited near term. The calculated payout ratio of 39% looks conservative, yet dividend sustainability cannot be confirmed without FCF figures. Looking ahead, sustaining the widened operating margin and elevating ROIC above 7% are the key levers for value creation, while monitoring funding costs and cash conversion is essential.

Profitability Analysis

ROE decomposition (DuPont): ROE 10.6% = Net Profit Margin 5.5% × Asset Turnover 0.668 × Financial Leverage 2.86x. The most impactful component in the period's improvement appears to be margin expansion, inferred from operating income growth (+45.6% YoY) outpacing revenue growth (+18.5% YoY). Business drivers likely include SG&A discipline and operating scale benefits, given operating margin rose from ~7.4% to ~9.1% (approx. +169 bps). Asset turnover at 0.668 is moderate, indicating revenue generation per asset is steady rather than accelerating; leverage at 2.86x materially supports ROE. Sustainability: margin gains stemming from cost control and scale can persist if mix and volume remain favorable; however, if one-off factors (e.g., lower promotional spend or timing of project deliveries) contributed, the uplift may normalize. Watch for any period-ahead SG&A growth exceeding revenue growth; with SG&A at 6.83 and revenue at 101.49, the ratio is contained, but a re-acceleration in costs would pressure margins. Net margin improved to ~5.5% despite net non-operating expenses (0.86 vs. non-op income 0.11), which speaks to core operating strength. Overall, ROE quality is decent but still reliant on leverage; improving ROIC (currently 6.0%) and asset turns would make ROE more resilient.

Growth Assessment

Top-line growth of 18.5% YoY (to 101.49) was healthy and translated into stronger operating profit growth (+45.6% YoY to 9.23), evidencing positive operating leverage. Ordinary income rose 49.1% YoY to 8.33 despite net non-operating expense headwinds, reaffirming core P/L momentum. Net income increased 49.6% YoY to 5.63, lifting net margin to 5.5%. Operating margin expansion (+169 bps YoY) indicates better efficiency and/or mix; however, the lack of segment detail and gross margin history limits attribution. Revenue sustainability hinges on maintaining demand in core businesses; absent order/backlog disclosures, we assume volume/mix tailwinds but cannot confirm visibility. Non-operating line remains a small drag (interest expense 0.45), which is manageable given strong coverage. With ROIC at 6.0%, incremental growth should focus on higher-return projects to close the gap to the 7–8% benchmark. Near-term outlook is constructive if cost discipline persists, but sensitivity to funding costs and potential macro slowdown should be monitored.

Financial Health

Liquidity is healthy: current ratio 167.3% and quick ratio 167.1% both exceed benchmarks. Solvency is acceptable but leveraged: D/E is 1.86x (above a conservative 1.5x threshold but below the 2.0x warning), and interest coverage is strong at 20.51x. Equity ratio is approximately 34.9% (53.08/151.99), indicating a balanced capital structure for a debt-using model. Short-term loans of 34.75 are well-covered by current assets of 96.18 (cash 12.83 and receivables 8.86), suggesting limited maturity mismatch; nonetheless, reliance on short-term debt warrants ongoing refinancing vigilance. Long-term loans stand at 28.25, spreading out obligations. No off-balance sheet obligations were disclosed in the data provided. There are no explicit warning triggers (Current Ratio well above 1.0; D/E below 2.0).

Cash Flow Quality

Earnings quality cannot be validated due to unreported operating cash flow; OCF/Net Income is not calculable. Free cash flow is also unreported, preventing assessment of the sustainability of dividends and growth capex. Working capital composition appears conservative with modest inventories (0.13) and manageable receivables (8.86); however, without period-to-period WC deltas, we cannot check for working capital-driven earnings support or potential timing benefits. Interest coverage of 20.5x suggests that the earnings base comfortably services interest, but cash-based confirmation is needed. No clear signs of working capital manipulation can be inferred from the limited data.

Dividend Sustainability

The calculated payout ratio is 39.0%, which is comfortably below the 60% benchmark and appears sustainable on an earnings basis. DPS and total dividends paid were not disclosed, so cash distributions cannot be reconciled to cash flows. Without OCF and capex data, FCF coverage of dividends cannot be assessed. Given strong interest coverage and improving profitability, the payout looks prudent; however, confirmation requires visibility on cash conversion and investment needs. Policy outlook remains unclear due to lack of explicit guidance or historical DPS trajectory in the provided data.

Risk Assessment

Business Risks:

• Margin normalization risk after a period of strong operating leverage (operating income +45.6% vs revenue +18.5%).
• Demand sensitivity in core markets; revenue visibility not disclosed (no backlog/order book provided).
• Execution risk in cost control; SG&A discipline may be harder to sustain as growth resumes.
• ROIC at 6.0% below target range, implying risk of value dilution if growth requires heavy investment.

Financial Risks:

• Moderate-to-high leverage (D/E 1.86x) increases sensitivity to credit conditions.
• Short-term borrowing reliance (34.75) introduces refinancing risk if markets tighten, despite healthy current assets.
• Interest rate risk: higher rates could erode coverage and net margin (interest expense 0.45).
• Cash flow opacity: unreported OCF/FCF limits validation of earnings quality and dividend cover.

Key Concerns:

• Insufficient cash flow disclosure prevents assessment of OCF/NI and FCF coverage.
• Non-operating expense overhang versus modest non-operating income keeps ordinary margin below operating margin.
• ROIC below 7% suggests capital efficiency improvement is required to sustain ROE without higher leverage.

Investment Implications

Key Takeaways:

• Strong profit momentum with clear operating and net margin expansion (~+169 bps and ~+116 bps YoY, respectively).
• ROE at 10.6% is solid, supported by leverage (2.86x) and improved margins; asset turnover remains moderate (0.668).
• Balance sheet is liquid (current ratio 167%) with robust interest coverage (20.5x), though leverage is not low (D/E 1.86x).
• ROIC at 6.0% indicates room to enhance capital efficiency and mix.
• Dividend payout appears conservative at 39%, but cash-based sustainability is unverified.

Metrics to Watch:

• Operating cash flow and OCF/Net Income ratio (>1.0 preferred).
• Free cash flow after capex to assess dividend capacity and deleveraging potential.
• Debt maturity profile and interest rate exposure (proportion of floating vs fixed).
• SG&A trajectory relative to revenue growth to gauge durability of margin expansion.
• ROIC progress toward >7–8% through mix and asset efficiency improvements.

Relative Positioning: Relative to domestic small/mid-cap peers in asset-light real estate/services adjacent models, the company exhibits above-peer margin momentum and strong coverage ratios, offset by moderate-to-high leverage and sub-target ROIC; near-term performance appears favorable, but medium-term value creation hinges on improving cash conversion and capital efficiency.

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