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

Cosmo Bio Co., Ltd. (3386) reported FY2025 Q3 consolidated results under JGAAP with revenue of ¥7,885 million, up 6.4% year on year, indicating continued topline growth despite a tougher profit environment. Gross profit was ¥2,471 million, translating to a gross margin of 31.3%, which appears broadly healthy for a distribution-centric life science tools business. Operating income declined 25.4% YoY to ¥275 million, compressing the operating margin to 3.5% and signaling negative operating leverage driven by higher SG&A and/or gross margin pressure. Ordinary income of ¥369 million exceeded operating income by ¥94 million, suggesting supportive non-operating gains (e.g., FX or financial income), which cushioned the drop in operating profit. Net income was ¥272 million, down 6.3% YoY, with a net margin of 3.45%, implying that non-operating gains and a normalized tax rate helped stabilize bottom-line performance relative to operating profit. DuPont analysis indicates a calculated ROE of 2.76% (net margin 3.45% × asset turnover 0.643 × financial leverage 1.24), reflecting modest profitability on a sizable equity base. Balance sheet strength is notable: total assets were ¥12,266 million and total equity ¥9,869 million, implying an equity ratio of approximately 80.4% despite the reported equity ratio field being unreported. Liquidity appears ample with a current ratio of 620% and quick ratio of 535.2%, supported by working capital of ¥6,063 million and inventories of ¥989 million. Leverage is low, with total liabilities of ¥2,167 million and a debt-to-equity ratio of 0.22x, which reduces financial risk but dampens ROE. The effective tax rate is not reported in the summary, but based on income taxes of ¥136 million and net income of ¥272 million, a simple approximation suggests a pre-tax income of roughly ¥408 million and an effective tax rate around 33.3%. Cash flow statement items are unreported in the provided data (zeros denote non-disclosure), limiting assessment of operating cash conversion and free cash flow. Similarly, depreciation and amortization and interest expense are unreported, so EBITDA and interest coverage cannot be reliably assessed from this snapshot. Dividend information is not disclosed (DPS and payout ratio fields show zero by system convention), hence dividend capacity must be inferred from earnings stability and balance sheet strength rather than explicit policy. Overall, the company exhibits resilient revenue growth and a very solid financial position, but faces margin compression at the operating level and a greater reliance on non-operating gains to support earnings in the period. Key monitoring areas include gross margin trajectory, SG&A discipline, and cash conversion given rising working capital needs typical in distribution. Data limitations constrain some conclusions, so the analysis focuses on available non-zero disclosures and ratio computations derived from the balance sheet and income statement.

Profitability Analysis

ROE is 2.76%, decomposed as net profit margin 3.45% × asset turnover 0.643 × financial leverage 1.24. Operating margin sits at 3.5% (¥275m / ¥7,885m), down YoY given the 25.4% decline in operating income versus 6.4% revenue growth, indicating negative operating leverage and/or increased SG&A intensity. Gross margin is 31.3% (¥2,471m / ¥7,885m), implying that most of the margin compression occurred below gross profit, likely from SG&A escalation. Ordinary margin is 4.68% (¥369m / ¥7,885m), showing non-operating gains of about ¥94m that buffered profitability. Net margin is 3.45%, consistent with reported DuPont. With D&A unreported, EBITDA and EBITDA margin cannot be assessed; actual underlying operating cash earnings could be higher than operating income if D&A exists. The effective tax rate calculated from available figures is approximately 33.3%, indicating a normal tax burden. Overall profitability is modest with thin operating margins and ROE dampened by a strong equity base; improving expense efficiency and operating leverage will be critical for margin recovery.

Growth Assessment

Revenue grew 6.4% YoY to ¥7,885m, indicating steady demand in the life science tools/reagents distribution market. However, operating income declined 25.4% YoY to ¥275m, signaling cost pressure and/or unfavorable mix; growth was not accretive to operating profit in this period. Ordinary income rose above operating income due to ¥94m in net non-operating gains, suggesting external factors (e.g., FX) partially offset operating weakness; this support may be volatile. Net income decreased 6.3% YoY to ¥272m, a smaller decline than operating profit due to non-operating items and normalized taxation. The sustainability of revenue growth appears reasonable given the diversified research market exposure, but profit quality needs improvement through margin management and SG&A control. Without cash flow disclosure, it is unclear whether growth is supported by healthy cash generation; working capital intensity could be rising as inventories totaled ¥989m. Outlook hinges on stabilizing gross margin, enhancing pricing and mix, and converting sales growth into operating profit while reducing reliance on non-operating gains.

Financial Health

Total assets are ¥12,266m and total equity ¥9,869m, implying an equity ratio of approximately 80.4% (despite the reported field being unreported). Total liabilities are ¥2,167m, resulting in a debt-to-equity ratio of 0.22x, indicating conservative leverage. Liquidity is strong with current assets of ¥7,229m versus current liabilities of ¥1,166m, yielding a current ratio of 620% and working capital of ¥6,063m; the quick ratio is 535.2%, supported by low inventory relative to current assets (inventories ¥989m). Such a balance sheet profile provides ample buffer against short-term volatility and supports operational flexibility. Interest expense is unreported, but low leverage suggests minimal interest burden. Overall solvency and liquidity are robust, though high equity capitalization suppresses ROE.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported in the provided data; the OCF/Net Income ratio shown as 0.00 is not meaningful. As a result, earnings quality cannot be validated via cash conversion in this snapshot. Free cash flow cannot be calculated without OCF and capex; D&A is also unreported, limiting assessment of non-cash earnings components. Working capital appears ample (¥6,063m), with inventories at ¥989m; however, without period-over-period cash flow details, it is unclear whether inventory and receivables absorbed cash during growth. Given ordinary income exceeded operating income, non-operating gains supported earnings, which may not translate to cash in the same way as operating profit. Future disclosures should focus on OCF relative to net income, changes in inventories and receivables, and capex to assess sustainable FCF.

Dividend Sustainability

Dividend data (DPS, payout ratio, and FCF coverage) are unreported in this snapshot; EPS is ¥47.96 but there is no disclosed DPS. With net income of ¥272m and a strong equity base (equity ratio ~80%), capacity for dividends exists from a balance sheet perspective, but payout sustainability depends on operating cash generation, which is not disclosed here. The decline in operating income and reliance on non-operating gains argue for a prudent payout until operating margins recover and cash conversion is confirmed. Policy outlook cannot be inferred without management guidance or historical payout data.

Risk Assessment

Business Risks:

• Operating margin pressure from rising SG&A and distribution costs (negative operating leverage in the period).
• Potential gross margin compression due to pricing, mix, or supplier terms in a competitive reagent/tools market.
• Inventory obsolescence risk given product breadth and life cycles (inventories ¥989m).
• Demand cyclicality tied to research budgets, biotech funding, and academic/government procurement timing.
• FX exposure impacting imported product costs and non-operating gains volatility.

Financial Risks:

• Earnings reliance on non-operating gains (ordinary income > operating income by ¥94m).
• Limited ROE (2.76%) due to a large equity base; risk of capital inefficiency if margins do not improve.
• Uncertain cash conversion with cash flow statements unreported, obscuring FCF visibility.
• Potential working capital consumption during growth phases if inventories and receivables expand.

Key Concerns:

• Sustained negative operating leverage despite revenue growth (-25.4% YoY operating income vs +6.4% revenue).
• Lack of disclosed cash flow data prevents assessment of earnings quality and dividend coverage.
• Ordinary income dependence suggests profits may be sensitive to FX and other non-operating items.

Investment Implications

Key Takeaways:

• Topline grew 6.4% YoY to ¥7,885m, but operating income fell 25.4% to ¥275m, compressing OPM to 3.5%.
• Gross margin at 31.3% is reasonable, but SG&A intensity likely rose, driving negative operating leverage.
• Ordinary income (¥369m) exceeded operating income by ¥94m, indicating reliance on non-operating gains.
• Balance sheet is very strong: equity ratio ~80.4%, current ratio 620%, debt-to-equity 0.22x.
• ROE is modest at 2.76%, constrained by thin margins and a large equity base.
• Cash flow and dividend metrics are undisclosed, limiting visibility on FCF and payout capacity.

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio trajectory.
• Gross margin stability and pricing/mix effects.
• Ordinary income composition (FX, investment income) and volatility.
• Inventory levels and turnover; working capital changes and OCF vs. net income.
• ROE and asset turnover improvements without compromising balance sheet prudence.

Relative Positioning: Within Japanese life science reagent/tools distributors, Cosmo Bio shows strong balance sheet resilience and liquidity but lower operating margin resilience this quarter, with a greater contribution from non-operating items to earnings and modest ROE relative to peers with higher operating leverage and better cash conversion.

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