HIKARI BUSINESS FORM CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥5.72B
• Operating Income: ¥88M
• Net Income: ¥85M
• EPS: ¥15.55

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

Hikari Business Form Co., Ltd. (TSE 3948) reported FY2025 Q3 standalone results under JGAAP with revenue of ¥5.725bn, down 2.3% YoY, indicating continued top-line softness in core print/form demand. Despite the revenue decline, operating income rose 49.2% YoY to ¥88m, showing meaningful cost discipline and/or a better sales mix. Gross profit was ¥1.155bn, implying a gross margin of 20.2%, which is consistent with a stable-to-improving margin profile versus typical commodity pressure in printing materials. Operating margin reached 1.5% (¥88m/¥5,725m), still low in absolute terms but improving YoY given the revenue contraction. Ordinary income was ¥155m, materially above operating income, suggesting sizable non-operating income (e.g., interest/dividends, securities-related gains) offsetting a relatively thin core operating margin. Net income was ¥85m (up 64.8% YoY), with a net margin of 1.48%, demonstrating leverage from non-operating items and cost controls. The DuPont decomposition yields a ROE of 0.92% (net margin 1.48% × asset turnover 0.507 × financial leverage 1.23), which is modest but positive given the industry context. Asset turnover of 0.507x reflects a capital-light yet low-growth profile typical of mature print-related businesses. Financial leverage is conservative at around 1.23x (assets/equity), consistent with a net-cash or low-debt stance and low balance-sheet risk. Liquidity appears very strong, with a current ratio of ~405% and working capital of roughly ¥3.962bn, providing significant buffer against demand variability. Interest coverage is a comfortable 27.4x (operating income/interest expense), evidencing low financial risk and manageable interest obligations. Reported effective tax rate in the metrics table shows 0.0%, but the disclosed income tax expense of ¥44.846m versus net income of ¥85m implies an effective tax rate closer to the low-to-mid 30% range on our reconstruction; this discrepancy stems from data limitations. Cash flow statement items (OCF/FCF/Cash) are unreported in XBRL and shown as zeros; thus, cash flow quality cannot be directly assessed, and any conclusions must rely on the income statement and balance sheet. Dividend per share is shown as zero, which we treat as undisclosed rather than an explicit suspension, so dividend policy assessment is constrained. Overall, the company demonstrates resilient profitability in a contracting sales environment, supported by a strong balance sheet and non-operating income, but structurally low operating margins and secular industry headwinds cap return potential absent further productivity and product-mix improvements.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.48% (¥85m/¥5,725m)
• asset_turnover: 0.507x (¥5,725m/¥11,281m)
• financial_leverage: 1.23x (¥11,281m/¥9,194m)
• calculated_ROE: 0.92% (matches reported) margin_quality: - Gross margin: 20.2% (¥1,155m/¥5,725m), indicating reasonable value-add despite material cost pressures in paper/printing inputs.
• Operating margin: 1.5% (¥88m/¥5,725m), thin but improved YoY given operating income +49.2% vs revenue -2.3%.
• Ordinary margin: 2.7% (¥155m/¥5,725m), boosted by non-operating gains/income (~¥67m gap vs operating income).
• Net margin: 1.48%, supported by non-operating items but still modest in absolute terms. operating_leverage: Negative revenue growth (-2.3% YoY) alongside a +49.2% increase in operating income implies effective fixed-cost absorption and cost controls. This suggests positive operating leverage from SG&A efficiencies and/or improved product mix, though the level remains low given a 1.5% operating margin.

Growth Assessment

revenue_sustainability: Top-line decline of 2.3% reflects ongoing secular and competitive pressures in business forms/printing, likely tied to digitalization and weaker transactional print volumes. profit_quality: Earnings quality at the operating level improved due to cost control, but ordinary income reliance on non-operating gains (¥155m vs ¥88m operating) indicates profit mix sensitivity to financial income/one-offs. outlook: Absent evidence of demand recovery, revenue growth appears challenged near term. Margin resilience could persist if cost discipline continues and paper input pricing remains stable, but structural growth likely hinges on product diversification (security forms, on-demand print, niche value-add) and service-led offerings.

Financial Health

liquidity: Current ratio ~405% (¥5,260.7m CA / ¥1,298.9m CL) and working capital ~¥3,961.8m indicate ample short-term coverage. Quick ratio matches due to inventories shown as 0 (treated as undisclosed), implying sufficient liquid assets. solvency: Debt-to-equity ~0.19x (total liabilities/equity ¥1,763.3m/¥9,194m), with interest coverage 27.4x, reflecting low solvency risk. capital_structure: Equity represents the majority of capitalization (equity/asset ~82%), with modest leverage (assets/equity 1.23x). The conservative structure supports resilience but limits ROE without higher margins or turnover.

Cash Flow Quality

earnings_quality: OCF data not disclosed (shown as 0). Given the sizable ordinary income vs operating income, a portion of earnings may stem from financial/non-cash items; cash conversion cannot be verified. FCF_analysis: FCF is undisclosed; capex and depreciation are not reported in XBRL (both shown as 0). We cannot assess reinvestment needs or FCF coverage. working_capital: Strong net working capital (≈¥3.96bn) provides buffer. Without OCF detail, the direction of receivables/payables/inventory is unknown; however, the 0 inventory line is interpreted as undisclosed rather than nil.

Dividend Sustainability

payout_ratio_assessment: DPS reported as 0 and payout ratio as 0% are treated as undisclosed. With net income of ¥85m and strong liquidity, capacity may exist, but without OCF/FCF or policy disclosure, sustainability cannot be concluded. FCF_coverage: Not assessable; OCF and capex not disclosed. policy_outlook: Given conservative leverage and ample working capital, a stable or conservative dividend policy would be consistent with the balance sheet, but confirmation requires management guidance and historical payout data.

Risk Assessment

Business Risks:

• Secular decline in paper-based business forms due to digitalization/DX.
• Price competition and commoditization in printed materials.
• Input cost volatility (paper, pulp, energy) impacting gross margins.
• Customer concentration risk in large enterprise/public sector accounts.
• Execution risk in product mix shift toward higher value-added or services.

Financial Risks:

• Earnings reliance on non-operating income to bridge thin operating margins.
• Potential working-capital swings impacting cash conversion (undisclosed OCF).
• Limited operating margin cushion against revenue shocks.
• Tax rate variability given lack of disclosure on extraordinary items/credits.

Key Concerns:

• Low operating margin (1.5%) despite improved YoY performance.
• Absence of cash flow disclosure limits assessment of earnings quality and FCF.
• Ordinary income materially exceeds operating income, indicating non-operating dependence.
• Top-line contraction (-2.3% YoY) consistent with structural industry headwinds.

Investment Implications

Key Takeaways:

• Revenue declined 2.3% YoY to ¥5.725bn; demand remains soft.
• Operating income rose 49.2% to ¥88m; operating margin 1.5% on improved cost control.
• Ordinary income of ¥155m highlights non-operating income contribution.
• ROE at 0.92% reflects modest profitability with conservative leverage.
• Balance sheet is strong: current ratio ~405%, D/E ~0.19x, interest coverage 27.4x.

Metrics to Watch:

• Gross and operating margin trajectory (cost pass-through and mix).
• Gap between ordinary income and operating income (reliance on non-operating gains).
• Revenue trend vs digital substitution; order backlog and new solution wins.
• Paper/input cost indices and SG&A ratio.
• Working-capital days and OCF once disclosed.
• Capex and depreciation trends to gauge reinvestment needs.

Relative Positioning: Within domestic print/form peers, the company appears conservatively financed with strong liquidity but operates at structurally low margins and modest asset turnover; sustained outperformance will likely require continued cost discipline and a shift toward higher value-added offerings.

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