RS Technologies Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥58.58B
• Operating Income: ¥11.06B
• Net Income: ¥8.42B
• EPS: ¥252.22

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

RS Technologies (34450) reported strong top-line expansion in FY2025 Q3 with revenue of ¥58.6bn, up 31.5% YoY, translating into operating income of ¥11.1bn (+14.4% YoY) and net income of ¥6.67bn (+19.2% YoY). The revenue growth outpaced operating profit growth, implying some operating margin compression versus the prior year, though the current operating margin remains solid at roughly 18.9%. Net profit margin stands at 11.38%, supported by very low interest expense (¥56mn) and positive non-operating balance (ordinary income exceeds operating income). DuPont decomposition yields ROE of 4.76%, driven by an 11.38% net margin, asset turnover of 0.320x, and modest financial leverage of 1.31x. The company’s asset intensity and conservative leverage cap ROE despite healthy margins. Liquidity is very strong: current assets of ¥124.9bn against current liabilities of ¥34.8bn produce a current ratio of 3.59x and quick ratio of 3.40x, with working capital of ¥90.1bn. The balance sheet appears conservative with total liabilities of ¥46.6bn versus equity of ¥140.0bn (liabilities-to-equity of 0.33x), implying an equity ratio near the mid-70% range by calculation, despite the disclosed equity ratio field showing 0% (noted as unreported). Interest coverage is exceptionally high at about 197.5x, indicating ample buffer against financial costs. Inventory is modest at ¥6.68bn relative to current assets, suggesting a cash- and receivables-heavy profile, though composition details are not disclosed. Cash flow statement items are unreported this quarter, limiting the assessment of earnings-to-cash conversion and free cash flow. Dividend figures are also unreported (DPS and payout showing as zero), so payout policy for the period cannot be inferred from the dataset. EPS is ¥252.22, but outstanding shares and book value per share are unreported, constraining per-share balance sheet analysis. Overall, fundamentals point to a profitable, liquid, and lowly leveraged company benefiting from strong revenue growth, but with ROE held back by low leverage and modest asset turnover. Near-term monitoring should focus on whether margins stabilize and whether strong earnings translate into operating cash flow once cash flow data become available.

Profitability Analysis

ROE is 4.76% via DuPont: Net margin 11.38% × asset turnover 0.320 × financial leverage 1.31. Operating margin is approximately 18.9% (¥11.06bn/¥58.58bn), and ordinary income margin is about 20.5%, reflecting positive non-operating contributions. The net margin of 11.38% is robust for a manufacturing/processing business and is supported by very low interest costs (¥56mn), yielding interest coverage of about 197.5x. Gross margin is 24.4% (¥14.28bn/¥58.58bn), implying an SG&A ratio around 5.5% (gross profit less operating profit as a percent of sales), which suggests good cost discipline. YoY, revenue growth (+31.5%) exceeds operating profit growth (+14.4%), indicating some margin pressure versus last year despite solid absolute margins. With depreciation not disclosed, EBITDA and operating leverage diagnostics are limited; however, the widening gap between revenue growth and operating income growth hints at either cost inflation, mix shifts, or incremental fixed costs limiting operating leverage in the quarter. Asset turnover of 0.320x is modest, constraining ROE; it may reflect a sizable cash/current asset base or capital-intensive assets. Financial leverage is conservative at ~1.31x assets-to-equity, so ROE uplift from leverage is limited. The implied effective tax rate, using ordinary income as a proxy for pre-tax income, is roughly 22% (¥2.656bn/¥12.018bn), even though the reported effective tax rate field shows 0% due to non-disclosure conventions.

Growth Assessment

Top-line growth of 31.5% YoY to ¥58.6bn is strong, suggesting favorable demand conditions and/or increased capacity utilization. Operating income growth of 14.4% YoY trails sales growth, pointing to some margin compression or higher operating expenses; net income growth of 19.2% YoY sits in between, helped by low financing costs and non-operating income. The net margin of 11.38% remains healthy, indicating that profit quality is not solely dependent on non-operating items. Sustainability hinges on whether the cost structure can scale efficiently; the current SG&A intensity appears low, but further gains may require operating leverage that was not evident this quarter. Without cash flow data, it is unclear whether growth is cash-generative or supported by working capital expansion; current assets are high relative to liabilities, which could either reflect strong liquidity or growing receivables. Outlook-wise, maintaining near-19% operating margins alongside double-digit revenue growth would be a favorable combination; given the gap between sales and OP growth, stabilizing gross margin and controlling fixed costs will be key. Monitoring order trends, capacity utilization, and product mix will be important to assess the durability of the growth trajectory.

Financial Health

Total assets are ¥183.2bn funded by ¥46.6bn of liabilities and ¥140.0bn of equity, implying low leverage (liabilities-to-equity ~0.33x) and a calculated equity ratio in the ~76% range. Liquidity is strong: current ratio 3.59x and quick ratio 3.40x, with working capital of ¥90.1bn. Interest expense is minimal at ¥56mn, and interest coverage is about 197.5x, indicating negligible near-term refinancing risk. Current liabilities of ¥34.8bn are well covered by current assets of ¥124.9bn, suggesting ample buffer for operations and growth investments. Inventories stand at ¥6.68bn (modest versus current assets), indicating limited inventory risk on the balance sheet as disclosed. The conservative capital structure lowers financial risk but also dampens ROE. Overall solvency and liquidity metrics are very strong.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported for the period, so direct assessment of earnings-to-cash conversion is not possible. Consequently, the OCF/NI and FCF metrics shown as zero should be treated as placeholders rather than actual values. Given net income of ¥6.67bn and significant working capital headroom, the company likely has the capacity to convert earnings to cash, but verification awaits disclosed cash flow statements. Working capital appears ample with current assets of ¥124.9bn versus current liabilities of ¥34.8bn; inventories are only ¥6.68bn, suggesting that working capital is likely concentrated in cash and receivables, though exact composition is not provided. Without depreciation data, we cannot adjust earnings for non-cash charges or estimate maintenance capex needs. Key watchpoints are: future disclosure of OCF, changes in receivables and payables, capex intensity, and any buildup of inventory relative to sales.

Dividend Sustainability

Dividend-related fields (DPS, payout, and FCF coverage) are unreported for the quarter and appear as zeros by convention. With EPS at ¥252.22 and a strong balance sheet (low leverage, high liquidity), the capacity to sustain or grow dividends would typically depend on cash generation and capital allocation priorities, neither of which can be confirmed without cash flow and capex data. Payout ratio cannot be meaningfully assessed from the provided dataset. If the company follows a stable or progressive dividend policy, coverage would need to be evaluated against normalized OCF and maintenance capex once disclosed. Until then, dividend sustainability assessment remains data-limited.

Risk Assessment

Business Risks:

• Operating margin compression risk as revenue growth outpaces operating profit growth
• Potential cost inflation or adverse product mix affecting gross margin
• Dependence on non-operating income to bridge from operating to ordinary profit
• Execution risk in scaling operations while preserving cost discipline
• Demand cyclicality risk inherent to capital-intensive manufacturing/value-add processing

Financial Risks:

• ROE constrained by low asset turnover and conservative leverage
• Working capital concentration in receivables/cash (exact mix unknown) could mask slower collections
• Limited visibility on cash generation due to unreported cash flow statements
• Potential capex requirements not captured without investing cash flow disclosure

Key Concerns:

• Lack of cash flow disclosure prevents validation of earnings quality and FCF
• Signs of margin pressure despite strong sales growth
• Asset turnover of 0.320x limits overall capital efficiency and ROE

Investment Implications

Key Takeaways:

• Strong top-line growth (+31.5% YoY) with solid operating margin (~18.9%) and net margin (11.38%)
• ROE at 4.76% is restrained by low leverage (1.31x) and modest asset turnover (0.320x)
• Very strong liquidity (current ratio 3.59x; quick ratio 3.40x) and low liabilities-to-equity (~0.33x)
• Interest coverage is extremely high (~197.5x), indicating minimal financing stress
• Cash flow and dividend details are unreported this quarter, limiting payout and FCF analysis

Metrics to Watch:

• Operating margin trajectory versus gross margin to gauge cost pressure
• Ordinary income composition (recurring vs. non-recurring non-operating items)
• Working capital turns (DSO, DIO, DPO) once disclosed
• OCF and capex to assess FCF conversion and cash returns capacity
• Asset turnover trend as capacity and sales scale

Relative Positioning: Within TSE-listed industrial/processing peers, the company exhibits above-average margins and exceptionally strong liquidity with conservative leverage, but lags on capital efficiency (asset turnover) and consequently on ROE, pending confirmation of cash flow 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