JINUSHI Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥43.43B
• Operating Income: ¥4.29B
• Net Income: ¥4.86B
• EPS: ¥134.03

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 weaker quarter with profit compression and elevated reliance on one-off gains amid solid short-term liquidity but structurally high leverage. Revenue declined 9.3% YoY to 434.3, while operating income fell 40.5% YoY to 42.9, indicating negative operating leverage. The operating margin is 9.9% (42.93/434.28), down roughly 520 bps from an estimated ~15.1% a year ago, underscoring margin pressure. Gross profit was reported at 106.8 with a gross margin of 24.6%, but the accompanying cost-of-sales figure does not arithmetically reconcile, suggesting classification differences; we rely on the reported gross margin. Ordinary income shrank 53.0% YoY to 31.2 due to higher non-operating expenses (7.1) exceeding non-operating income (1.4), notably interest expense of 4.65. Profit before tax of 66.1 exceeds ordinary income, implying sizable extraordinary gains (~34.8) that lifted pre-tax profit this quarter. Net income was 27.6 (-43.1% YoY), translating to a net margin of 6.4% and EPS of 134.03 JPY. Interest coverage remains adequate at 9.23x despite margin compression, aided by still-decent operating income. Capital structure is aggressive: D/E at 2.27x and LTV at 58.5% point to high leverage consistent with a real-estate–like funding model. Liquidity is strong in the near term with a current ratio of 1,606% and cash/deposits of 245.1 against current liabilities of 71.5. ROE is 5.8% via DuPont (6.4% margin × 0.281x turnover × 3.27x leverage), and ROIC at 2.8% is well below the 7–8% target range, indicating capital efficiency concerns. Earnings quality cannot be validated this quarter as operating cash flow (OCF) was not disclosed; thus, potential divergence between OCF and net income is unknown. The calculated payout ratio is 66.3%, modestly above a typical 60% sustainability threshold, but FCF coverage cannot be assessed without cash flow data. Forward-looking, the combination of margin compression, low ROIC, and high leverage increases sensitivity to interest rate and refinancing conditions. Execution on asset recycling, fee-based income, and stabilizing operating margins will be critical to improve ROE/ROIC without adding leverage.

Profitability Analysis

ROE decomposition: 5.8% ROE = 6.4% Net Profit Margin × 0.281x Asset Turnover × 3.27x Financial Leverage. The largest delta vs prior year is the margin component, evidenced by operating income down 40.5% on a 9.3% revenue decline and an estimated operating margin contraction of ~520 bps. Business drivers include lower transaction/revenue volume and a heavier non-operating expense burden (interest costs), while ordinary income was also weighed down by net non-operating losses; extraordinary gains lifted PBT but are non-recurring. Asset turnover remains structurally low (0.281x), typical for asset-heavy real estate models; no sign of improvement this quarter. Leverage (3.27x in DuPont terms, D/E 2.27x) is high and supports ROE but raises risk; this component appears stable rather than expanding. Sustainability: margin headwinds appear partly cyclical (deal timing, pricing) and partly structural (interest cost drag); extraordinary gains that boosted PBT are one-time. Watch for concerning trends: revenue contraction (-9.3%) alongside steeper operating profit decline (-40.5%) indicates negative operating leverage; SG&A detail is unreported, but total SG&A of 34.7 versus lower revenue suggests fixed-cost pressure.

Growth Assessment

Top line decreased 9.3% YoY to 434.3, reflecting softer deal activity and/or slower asset turnover. Operating profit fell 40.5% to 42.9, indicating margin compression and negative operating leverage. Ordinary income declined 53.0% to 31.2, as non-operating expenses (notably interest) more than offset small non-operating income. Net income of 27.6 (-43.1% YoY) implies weaker core profitability absent extraordinary gains. Profit before tax at 66.1 indicates meaningful one-off gains this quarter; growth in PBT is not comparable to ordinary earnings. Revenue sustainability hinges on pipeline execution and market conditions for land/asset recycling; current asset turnover at 0.281x signals slower churn. Outlook: stabilization requires recovering gross/operating margins through pricing discipline, fee income, and cost control, alongside mitigating interest expense via refinancing or hedging. Near-term growth is likely dependent on deal timing and asset sale gains, which can be lumpy.

Financial Health

Liquidity: very strong in the short term with a current ratio of 1606% (current assets 1,148.96 vs current liabilities 71.54) and cash of 245.1 exceeding short-term loans of 12.8. Solvency: leverage is high with D/E at 2.27x (warning) and LTV at 58.5% (above conservative thresholds), consistent with a real estate financing model. Interest coverage at 9.23x is sound but could compress if operating income weakens or interest rates rise. Maturity profile: noncurrent liabilities are large (1,002.56) vs current liabilities (71.54), implying limited near-term pressure but elevated medium-term refinancing risk; current assets exceed noncurrent liabilities, but liquidity of non-cash current assets is unknown. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF, investing CF, and FCF were not disclosed; thus, OCF/Net Income and FCF coverage cannot be assessed. Given reliance on extraordinary gains to lift PBT this quarter, cash conversion may be volatile depending on the timing of asset sales and settlements. Without working capital detail (AR, inventories), potential working capital swings cannot be evaluated. Dividend and capex coverage from FCF cannot be determined; caution warranted until OCF trends are available.

Dividend Sustainability

Calculated payout ratio is 66.3%, slightly above a typical 60% comfort level. DPS and total dividends were not disclosed, and FCF coverage is unknown due to missing cash flow data. With ROIC at 2.8% and ROE at 5.8% amidst high leverage, maintaining or increasing dividends may depend on continued asset recycling gains and stable OCF. Policy outlook: prioritize balance sheet resilience (refinancing/hedging) and ROIC improvement; dividend growth visibility is limited until core profitability and cash generation firm up.

Risk Assessment

Business Risks:

• Revenue timing and lumpiness tied to asset recycling and deal closings
• Margin compression from pricing pressure and negative operating leverage
• Dependence on extraordinary gains to support PBT in a weak operating quarter
• Low ROIC (2.8%) signaling subpar capital efficiency

Financial Risks:

• High leverage (D/E 2.27x, LTV 58.5%) increases sensitivity to valuation and rate shocks
• Interest rate risk elevating interest expense and lowering coverage
• Refinancing risk given large noncurrent debt balances and potential spread widening
• Cash flow visibility risk due to unreported OCF/FCF

Key Concerns:

• Operating margin contraction of ~520 bps YoY
• Ordinary income down 53% YoY despite PBT boosted by one-offs
• Asset turnover at 0.281x constrains earnings scalability
• Data inconsistencies between reported gross profit and cost of sales; reliance on reported margin figures

Investment Implications

Key Takeaways:

• Core profitability weakened: revenue -9.3% YoY, operating income -40.5% YoY
• Operating margin compressed to ~9.9%, with ordinary income down 53% YoY
• PBT supported by sizable extraordinary gains; not indicative of recurring earnings power
• Leverage is high (D/E 2.27x; LTV 58.5%) but short-term liquidity is ample (current ratio 1606%)
• ROE 5.8% and ROIC 2.8% underscore capital efficiency headwinds
• Interest coverage remains acceptable at 9.23x but is vulnerable to rate and earnings pressure

Metrics to Watch:

• Operating margin trajectory and SG&A efficiency once details are disclosed
• OCF/Net income and FCF once reported (target >1.0 OCF/NI)
• Refinancing schedule, average debt cost, and hedging ratio
• Extraordinary gains vs recurring profit mix (ordinary income recovery)
• ROIC improvement toward >5% first, then 7–8% target
• LTV/D/E trends and asset recycling pace

Relative Positioning: Versus domestic real estate operators/asset recyclers, the company exhibits stronger near-term liquidity but higher leverage, lower ROIC, and greater earnings volatility due to reliance on transaction gains, leaving it more sensitive to rate cycles and deal timing until recurring margins stabilize.

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
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