Mirairo Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥832M
• Operating Income: ¥142M
• Net Income: ¥81M
• Earnings per Unit (EPU): ¥9.15

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: Solid top-line and operating performance with strong cash generation, but headline net profit fell sharply due to non-operating/one-off factors, compressing bottom-line margins. Revenue rose 17.3% YoY to 8.32, outpacing the prior year’s run-rate and demonstrating healthy demand. Gross profit was 4.60, implying a robust 55.3% gross margin, and operating income increased 21.6% YoY to 1.42 as operating leverage worked modestly in the quarter. Ordinary income edged up only 1.4% YoY to 1.23, indicating deterioration below the operating line despite positive non-operating net income of 0.04. Net income declined 54.4% YoY to 0.81 despite a negative effective tax rate of -47.4%, suggesting the prior-year bottom line likely benefited from sizable one-offs or tax effects not repeated this period. Operating margin, on a calculated basis, expanded to about 17.1% from roughly 16.5% a year ago (approximately +60 bps). Ordinary income margin compressed to 14.8% from about 17.1% (-230 bps), and net margin fell to 9.7% from about 25.0% (-1,530 bps), highlighting the normalization of non-operating/tax items. Cash generation was strong: operating cash flow of 1.79 was 2.21x net income, and free cash flow was a healthy 1.38 after minimal capex of 0.02. The balance sheet is liquid with cash of 4.22, current assets of 5.39, and current liabilities of 2.33, yielding a current ratio of 231.7%. Leverage remains conservative at 0.41x D/E and interest coverage is very strong at 45x, mitigating refinancing risk. ROE calculated at 9.2% is decent given modest leverage (1.33x) and an asset turnover of 0.711, with ROIC reported at a high 20.7%. Financing cash inflow of 3.44 suggests reliance on new capital (equity and/or debt) during the period, consistent with the increase in shares versus the average share count. Earnings quality appears high given OCF outpacing net income and limited working-capital strain. Forward-looking, sustaining mid-teens operating margins while normalizing tax and non-operating items should stabilize net margins closer to operating performance. Key watchpoints are the durability of revenue growth, control of SG&A relative to sales, and any return to normalized tax rates which could temper reported net profit.

Profitability Analysis

ROE decomposition (DuPont): ROE 9.2% = Net Profit Margin 9.7% × Asset Turnover 0.711 × Financial Leverage 1.33x. The component that appears to have changed the most YoY is the Net Profit Margin, which fell sharply (net income -54.4% vs revenue +17.3%), while leverage is modest and asset turnover is steady for a cash-rich balance sheet. The business reason is a normalization of below-the-line items (ordinary income grew only +1.4% despite +21.6% operating income; effective tax rate was unusually negative), implying last year’s net was boosted by one-offs or very favorable tax effects. Operating margin modestly expanded (~+60 bps) as revenue growth outpaced SG&A escalation implied by higher operating profit. The margin compression at the bottom line is likely non-recurring if driven by last year’s one-offs; however, a reversion to a normal positive tax rate would also pressure future net margins relative to operating margins. No explicit SG&A breakdown was disclosed, but given operating income growth (+21.6%) exceeded revenue growth (+17.3%), SG&A growth was likely contained below sales growth, a favorable operating leverage sign.

Growth Assessment

Revenue growth of 17.3% YoY indicates solid demand momentum and/or improved pricing/mix. Operating income growth of 21.6% YoY points to incremental operating leverage and cost control. Ordinary income lagged (+1.4% YoY), signaling deterioration in non-operating contributions versus last year. Net income fell 54.4% YoY, implying last year benefited from one-offs/tax items; current period shows a more normalized earnings base. Gross margin at 55.3% and EBITDA margin at 20.4% are healthy for the business model, supporting medium-term profitability if sustained. Sustainability hinges on maintaining sales growth while preventing SG&A from re-inflating. With minimal capex (0.02) and strong cash generation, growth investments can be funded internally. Outlook: expect net margins to track closer to operating/ordinary levels once tax normalizes; top-line trajectory and cost discipline remain the main drivers.

Financial Health

Liquidity is strong: current ratio 231.7% and quick ratio 231.7%, with cash 4.22 covering all short-term loans of 0.95 comfortably. No warning on liquidity (Current Ratio well above 1.0). Solvency is conservative with D/E at 0.41x and interest coverage at 44.97x, far above risk thresholds; no D/E>2.0 concern. Maturity mismatch risk appears low: cash and receivables (5.09 combined) exceed current liabilities (2.33), and short-term debt is readily covered by cash. Total liabilities are 3.64 against equity of 8.81, indicating ample buffer. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 2.21x, signaling high-quality earnings with cash conversion exceeding accounting profit. Free cash flow is positive at 1.38 after minimal capex of 0.02, leaving room for balance sheet strengthening or shareholder returns. Working capital behavior appears benign; the strong OCF relative to NI suggests limited revenue accrual risk and potential favorable collections or advances. Financing CF of 3.44 implies incremental external funding (equity and/or debt), but given the strong liquidity and low leverage this does not raise immediate concerns. No signs of aggressive working capital manipulation are evident from available figures.

Dividend Sustainability

Dividend data are unreported, so payout ratio and FCF coverage cannot be calculated. From a capacity perspective, current FCF of 1.38 exceeds net income of 0.81, indicating headroom for a dividend if policy permits. Balance sheet strength (cash 4.22; low D/E 0.41x) further supports potential distributions. However, absent explicit policy and historical DPS, we cannot assess policy stability or targets. If a dividend is initiated or continued, sustainability would likely be supported by positive FCF and low capex needs, contingent on maintaining current operating margins and revenue.

Risk Assessment

Business Risks:

• Revenue scale is small (8.32), making results sensitive to customer concentration and project timing.
• Potential normalization of tax rate from a negative effective rate could reduce future net profit.
• Dependence on maintaining high gross margin (55.3%); pricing pressure could compress profitability.
• Limited disclosure on SG&A composition reduces visibility into cost drivers.

Financial Risks:

• Financing inflow reliance (3.44) suggests periodic capital raises or borrowing; dilution or interest costs could rise if market conditions tighten.
• Short-term loans of 0.95 introduce some rollover risk, though mitigated by cash 4.22.
• Potential volatility in ordinary income if non-operating items swing.

Key Concerns:

• Large YoY decline in net income (-54.4%) despite strong operating growth indicates non-recurring effects in the base period; visibility on normalized net profitability is limited.
• Ordinary income margin compression (~-230 bps YoY) may reflect lower non-operating contributions.
• Data gaps (no extraordinary items disclosure, limited SG&A breakdown, no dividend data) constrain full assessment.

Investment Implications

Key Takeaways:

• Core operations improved with operating income +21.6% YoY and modest operating margin expansion (~+60 bps).
• Bottom-line weakness (-54.4% NI YoY) appears driven by non-operating/tax normalization rather than core deterioration.
• Cash generation is strong (OCF/NI 2.21x; FCF 1.38) and balance sheet is liquid (current ratio 232%).
• Leverage is conservative (D/E 0.41x) with very strong interest coverage (~45x).
• ROE at 9.2% and ROIC at 20.7% indicate efficient capital use on a modestly levered base.

Metrics to Watch:

• Revenue growth run-rate and order pipeline/conversion.
• Operating margin and SG&A as a percentage of sales for signs of sustained operating leverage.
• Ordinary income vs operating income gap to gauge stability of non-operating items.
• Effective tax rate normalization trajectory and its impact on net margin.
• Working capital turns (AR and payables days) given the small scale.

Relative Positioning: Versus small-cap peers, the company shows stronger liquidity, conservative leverage, and high cash conversion; however, earnings visibility at the bottom line is clouded by non-operating/tax swings and limited disclosure granularity.

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