Mullion Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥3.25B
• Operating Income: ¥874M
• Net Income: ¥459M
• EPS: ¥58.63

Income Statement

Balance Sheet

Cash Flow Statement

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

Verdict: Strong quarter with double-digit growth and clear margin expansion, albeit against a highly leveraged balance sheet and sub-target ROIC. Revenue rose 13.1% YoY to 32.54, while operating income increased 25.8% YoY to 8.74 and net income climbed 34.3% YoY to 4.59. Operating margin is approximately 26.9% (8.74/32.54), up materially from an estimated 24.2% last year, implying c. +270 bps expansion. Gross margin is reported at 36.4%, and EBITDA margin at 34.1%, both indicating healthy cost control and operating leverage. Ordinary income of 6.65 shows a non-operating drag versus operating income, mainly due to interest expense of 1.13, but still up 27.2% YoY. Cash generation was excellent: operating cash flow of 15.95 was 3.47x net income, and free cash flow was solidly positive at 8.00 after 12.71 of capex. Interest coverage of 7.71x suggests adequate buffer against current financing costs. The balance sheet is liquid (current ratio 196%) but highly leveraged (D/E 3.04x; Debt/EBITDA 7.55x), concentrating risk in a higher-rate environment. ROE is calculated at 9.6% via DuPont (NPM 14.1%, asset turnover 0.173x, leverage 3.94x), with ROE buoyed by leverage and margin improvements, while low asset turnover weighs on capital efficiency. ROIC is 4.9%, below the 7–8% Japanese corporate target range and even below a 5% warning threshold, underscoring a need to improve capital allocation or asset productivity. Earnings quality appears high this quarter given OCF materially exceeding net income and positive FCF despite elevated capex. Non-operating income was modest (0.20) and ordinary income was impacted by non-operating expenses (1.92), indicating financing cost remains a key headwind. Dividend payout looks conservative (calculated payout ~9.1%) and well-covered by FCF (FCF coverage ~19x), although actual DPS is unreported. Forward-looking, sustaining margin gains while deleveraging to lift ROIC above the cost of capital is the core challenge. The combination of strong operating performance and healthy cash generation positions the company to address leverage, but execution on capital efficiency and interest cost management will be critical in FY2026.

Profitability Analysis

ROE (9.6%) = Net Profit Margin (14.1%) × Asset Turnover (0.173x) × Financial Leverage (3.94x). The component that changed most YoY appears to be margin, as operating income growth (+25.8%) outpaced revenue growth (+13.1%), implying operating margin expansion of roughly +270 bps (to ~26.9% from ~24.2%). The likely business driver is operating leverage from higher volumes and tighter cost control (SG&A growth appears contained relative to revenue), coupled with stable gross profitability. The sustainability of margin gains will depend on demand momentum and the ability to maintain SG&A discipline; while some leverage is repeatable, the step-up may moderate if revenue growth normalizes. Asset turnover remains low at 0.173x, suggesting a capital-heavy model; without portfolio optimization or asset recycling, AT improvement will be gradual. Leverage (A/E 3.94x) is high and materially contributes to ROE; relying on leverage to drive ROE is riskier amid rising rates and could compress ordinary income through higher interest expenses. Watch for any trend where SG&A growth outpaces revenue; current data suggest positive operating leverage, but granularity is limited due to unreported SG&A line items.

Growth Assessment

Top-line growth was solid at +13.1% YoY to 32.54, with stronger operating profit growth (+25.8%) and net income growth (+34.3%) demonstrating operating leverage. Operating margin improved to ~26.9%, and EBITDA margin of 34.1% reinforces improved efficiency. Ordinary income grew 27.2% YoY despite a notable non-operating expense burden (1.92), highlighting that core operations were the main driver. Revenue sustainability appears reasonable given the breadth of margin improvement; however, the low asset turnover points to a capital-intensive base that could limit growth without additional investment or asset rotation. Non-operating earnings are modest; profit quality is primarily operating-driven rather than from one-time gains. Outlook hinges on maintaining cost discipline, managing interest costs, and executing capex with clear returns to lift ROIC above WACC.

Financial Health

Liquidity is sound with a current ratio of 196% and quick ratio of 196%, indicating ample coverage of current liabilities (16.70) by current assets (32.74). Solvency is a concern: D/E is 3.04x (warning threshold >2.0) and Debt/EBITDA is 7.55x, reflecting high leverage. Total liabilities (144.92) are heavily long-term (128.23), broadly matched by noncurrent assets (155.49), which mitigates near-term refinancing pressure but embeds interest-rate sensitivity. Short-term loans are 7.53 vs cash and deposits of 14.81, suggesting manageable near-term maturities; maturity mismatch risk is moderate given liquidity coverage. Interest coverage at 7.71x is adequate currently, but rising rates could reduce headroom. No off-balance sheet obligations are disclosed in the provided data; absence of disclosure limits assessment.

Cash Flow Quality

OCF/Net Income is 3.47x (>1.0), indicating strong earnings quality with cash conversion well above net profit. Free cash flow is positive at 8.00 after significant capex of 12.71, showing that organic investment was comfortably funded by internal cash. With financing outflows of -4.78, cash generation still appears robust; the mix implies some deleveraging capacity if sustained. Working capital details are limited (AR/inventory unreported), but high OCF alongside rising profits suggests no obvious working-capital-driven boost; nonetheless, the lack of line-item disclosure prevents ruling out timing effects. Overall cash flow supports dividends and selective reinvestment.

Dividend Sustainability

Payout ratio (calculated) is a conservative ~9.1%, with DPS unreported, implying ample buffer against earnings volatility. FCF coverage of dividends is very strong at ~19.2x, suggesting sustainability even with continued capex. Given leverage, management could prioritize debt reduction over higher payouts; absent an explicit policy disclosure, a stable or modestly progressive dividend appears supportable from cash flows. Key watchpoints are interest cost trends and maintaining positive FCF post-capex.

Risk Assessment

Business Risks:

• Execution risk in sustaining margin gains as revenue growth normalizes
• Operational leverage sensitivity if demand softens
• Low asset turnover (0.173x) indicating capital intensity and slower capital recycling
• ROIC at 4.9% below target range, risking value dilution if investments under-earn

Financial Risks:

• High leverage (D/E 3.04x; Debt/EBITDA 7.55x) increases sensitivity to interest rates
• Non-operating expense burden (1.92) dominated by interest expense (1.13) pressures ordinary income
• Refinancing risk over the medium term if credit conditions tighten

Key Concerns:

• Sub-target capital efficiency (ROIC <5%) despite strong margins
• Dependence on leverage to sustain ROE (A/E 3.94x)
• Limited disclosure granularity in SG&A and working capital lines may mask cost or timing volatility

Investment Implications

Key Takeaways:

• Strong FY2025 Q4 with double-digit revenue and profit growth and ~270 bps operating margin expansion
• High-quality earnings as OCF far exceeds net income and FCF remains positive post-capex
• Balance sheet liquidity is adequate, but leverage is elevated and a key constraint
• ROE of 9.6% supported by margin and leverage; asset turnover remains a drag
• ROIC at 4.9% underscores need for improved capital allocation or asset productivity

Metrics to Watch:

• Operating margin trajectory and SG&A intensity
• Interest expense run-rate and interest coverage
• Asset turnover and ROIC uplift from new capex
• Debt/EBITDA and D/E progress (deleveraging pace)
• OCF sustainability and working capital movements

Relative Positioning: Operationally strong with improving margins and cash conversion, but positioned on the higher end of leverage within its peer set, leaving returns (ROIC) below typical corporate targets and making rate sensitivity a more material overhang.

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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