COSMO BIO COMPANY,LIMITED FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥7.88B
• Operating Income: ¥275M
• Net Income: ¥301M
• EPS: ¥47.96

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

FY2025 Q3 (cumulative) shows a mixed quarter: solid top-line growth but notable margin compression, resulting in lower operating and bottom-line profitability year over year. Revenue rose 6.4% YoY to 78.85, supported by steady demand, while operating income fell 25.4% to 2.75, indicating cost pressure and weaker operating leverage. Gross profit was 24.71 with a gross margin of 31.3%, but SG&A of 21.02 (26.7% of sales) constrained operating profit. Operating margin declined to 3.49% (vs. an estimated 4.98% a year ago), a compression of roughly 149 bps. Ordinary income came in at 3.69 (-3.9% YoY), implying support from non-operating items beyond the partial breakdown disclosed, and profit before tax of 4.38 suggests additional below-ordinary gains contributed. Net income was 2.72 (-6.3% YoY), with net margin at 3.45% vs. an estimated 3.91% last year (about 46 bps compression). The effective tax rate was 31.1%, in a normal range. Total comprehensive income of 7.23 surpassed net income, likely reflecting valuation gains (e.g., on investment securities). Liquidity is very strong with a current ratio of 646.5% and cash and deposits of 29.93; leverage remains conservative with D/E at 0.24x. ROE is a modest 2.8% (DuPont: NPM 3.5% × AT 0.643 × FL 1.24x), and ROIC at 2.7% is below the 5% warning threshold, signaling subdued capital efficiency. Cash flow statements were not disclosed, limiting assessment of earnings quality and FCF coverage. Dividend details were not disclosed, but a calculated payout ratio of 111.2% implies potential pressure if sustained without stronger cash generation. Forward-looking, management likely needs to prioritize margin recovery (pricing, mix, procurement) and capital efficiency improvement while maintaining disciplined SG&A. Monitoring non-operating income reliance, FX effects on imported reagents, and inventory discipline will be key to stabilizing profitability into FY-end.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.8% = Net Profit Margin 3.5% × Asset Turnover 0.643 × Financial Leverage 1.24x. The largest adverse change appears in margin, as operating income fell 25.4% despite 6.4% revenue growth, compressing operating margin by ~149 bps YoY (to 3.49% from ~4.98%). Business drivers include higher SG&A intensity (SG&A ratio 26.7%) and likely gross margin pressure in a mixed demand and FX environment for imported reagents, with only partial offset from non-operating gains (dividends 0.39, interest 0.07, and other unreported items). Net margin also compressed by ~46 bps YoY to 3.45%, reflecting weaker operating profitability despite ordinary and below-ordinary support. Asset turnover at 0.643 is modest and reflects a balance sheet with sizable cash (29.93) and investment securities (38.45) relative to sales. Financial leverage is low at 1.24x, limiting ROE amplification; this is conservative but keeps returns subdued when margins are thin. The margin pressure seems cyclical/operational rather than one-time; it may stem from cost inflation, FX pass-through timing, and expense growth. Non-operating supports appear partly one-off or market-driven (e.g., investment-related), and not a reliable substitute for structural margin improvement. Concerning trend: operating profit down while revenue up implies cost growth outpacing revenue; SG&A appears to have grown faster than sales or savings failed to materialize, weighing on operating leverage.

Growth Assessment

Top-line growth of 6.4% YoY to 78.85 indicates resilient demand across the portfolio. However, profit growth is not keeping pace: operating income -25.4% and net income -6.3% show negative operating leverage. Current gross margin of 31.3% and SG&A ratio of 26.7% produced a thin operating margin of 3.49%, making earnings sensitive to small cost changes. Ordinary income decline (-3.9% YoY) was much milder than operating income, indicating heightened reliance on non-operating items to stabilize profits. With ROIC at 2.7%, incremental growth must be higher-margin or more capital-light to create value. Near-term outlook hinges on: pricing power to offset FX/import cost pressures, product mix shift toward higher-margin proprietary or exclusive lines, and tighter SG&A controls. If cost normalization or price/mix improvements occur in Q4, margins could rebound; otherwise, earnings risk persists despite stable revenue. Given comprehensive income significantly exceeded net income, market-driven valuation gains may not recur, so underlying operating recovery is central to sustaining growth quality.

Financial Health

Liquidity is robust: current assets 71.57 vs current liabilities 11.07 yields a current ratio of 646.5% and a quick ratio of 560.6%, well above benchmarks. Working capital stands at 60.50, providing ample cushion. Cash and deposits of 29.93 and investment securities of 38.45 underpin a strong liquidity profile. Solvency is conservative with total liabilities of 23.97 and total equity of 98.69 (D/E 0.24x). Short-term loans are minimal at 0.20, and noncurrent liabilities of 12.90 appear manageable relative to liquid assets. There is no warning on current ratio (<1.0) or D/E (>2.0). Maturity mismatch risk is low given significant liquid assets versus short-term obligations. Off-balance sheet obligations were not disclosed in the provided data, so no assessment can be made on leases/guarantees.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow were not disclosed, preventing direct assessment of cash conversion or FCF. Consequently, OCF/Net Income and FCF coverage metrics are not calculable. Given net income of 2.72 and the lack of OCF data, earnings quality cannot be validated; we cannot confirm whether working capital consumed or released cash. The sizable cash and securities position provides a buffer, but sustainability of dividends and capex cannot be judged without OCF/FCF visibility. No clear signs of working capital manipulation can be inferred due to absent period-over-period inventory/receivables turnover data; however, receivables (26.75) and inventories (9.51) look proportionate to the revenue scale.

Dividend Sustainability

Dividend amounts were not disclosed; however, a calculated payout ratio of 111.2% indicates potential pressure if based on current earnings. Without OCF/FCF and DPS details, we cannot verify cash coverage. The strong net cash/liquid asset position could support dividends in the short term, but with ROIC at 2.7% and compressed margins, sustained payout above earnings would be a risk if operating cash flows are not robust. Policy outlook is uncertain from the data; if the company targets stable or progressive dividends, near-term maintenance may rely on balance sheet strength unless profitability improves.

Risk Assessment

Business Risks:

• Margin compression from cost inflation and FX on imported reagents reducing gross margins
• SG&A growth outpacing revenue, weakening operating leverage
• Reliance on non-operating gains (dividends/valuation-related) to support ordinary income
• Product mix and vendor dependency risk in niche life-science reagents
• Demand cyclicality tied to research funding and biotech/pharma capex cycles

Financial Risks:

• Low ROIC (2.7%) below typical cost of capital, implying value-creation risk
• Potential dividend strain if payout remains effectively >100% without strong OCF
• Market value fluctuations of investment securities affecting comprehensive income and equity
• FX volatility (likely USD/JPY) impacting procurement costs and pricing

Key Concerns:

• Operating margin down ~149 bps YoY despite 6.4% revenue growth
• Net margin down ~46 bps YoY; earnings increasingly supported by non-operating items
• Limited visibility due to unreported cash flow statements and capex
• Capital efficiency warning (ROIC 2.7%)

Investment Implications

Key Takeaways:

• Revenue growth solid at +6.4% YoY, but operating profit -25.4% highlights cost pressure
• Operating margin compressed to 3.49%; SG&A ratio elevated at 26.7%
• Ordinary income resilience relies on non-operating contributions beyond partial disclosure
• Net margin 3.45% and ROE 2.8% reflect subdued return profile; ROIC 2.7% is a red flag
• Balance sheet strength (current ratio 6.5x, D/E 0.24x, cash/securities ~68.4) mitigates near-term risk
• Dividend sustainability uncertain with implied payout >100% absent OCF support

Metrics to Watch:

• Operating margin and SG&A ratio trajectory into Q4
• Gross margin trends and FX pass-through effectiveness
• OCF, FCF, and working capital turns (DSO, DIO) when disclosed
• ROIC progression versus 5% and 7–8% benchmarks
• Composition of non-operating/extraordinary gains and comprehensive income
• Inventory levels vs. sales to detect overstocking
• Dividend policy disclosure and cash coverage

Relative Positioning: Within Japanese life-science reagent distributors, the company exhibits strong liquidity and low leverage but weaker capital efficiency and margin resilience this quarter. Near-term performance appears more sensitive to cost/FX dynamics and reliant on non-operating supports versus peers with higher structural gross margins or proprietary product exposure.

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