Capital Asset Planning,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥9.69B
• Operating Income: ¥530M
• Net Income: ¥399M
• EPS: ¥69.97

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: A strong FY2025 Q4 finish with double-digit top-line growth and disproportionately higher profit growth, underpinned by operating margin expansion and solid cash conversion. Revenue rose 18.5% YoY to 96.89, while operating income surged 78.4% YoY to 5.30, indicating effective operating leverage. Net income climbed 156.3% YoY to 4.01, with EPS at 69.97 JPY. Gross profit was 21.22, implying a gross margin of 21.9%, and SG&A was 15.91, or roughly 16.4% of sales. Operating margin improved to about 5.5% (5.30/96.89), from an estimated 3.6% last year, a roughly 184 bps expansion. Ordinary income reached 5.35 (+73.2% YoY), aided modestly by non-operating income of 0.28 (including 0.08 investment securities gain) and restrained non-operating expenses of 0.23. Cash generation was healthy: operating cash flow of 4.34 exceeded net income (OCF/NI 1.08x), and free cash flow was positive at 3.04. Liquidity is robust, with current ratio at 239% and cash of 17.69 versus short-term loans of 5.00, reducing near-term refinancing risk. Balance sheet remains conservative with D/E at 0.69x and interest coverage at approximately 25x, supporting financial flexibility. The effective tax rate was 26.8%, consistent with statutory norms and suggesting limited tax noise. ROE is a solid 10.2% (DuPont: NPM 4.1%, asset turnover 1.461, leverage 1.69x), while ROIC of 12.5% exceeds common 7–8% small-cap IT benchmarks, indicating value-accretive growth. Earnings quality appears sound, with positive working capital contribution implied by OCF > NI and limited reliance on non-operating gains. Investment intensity remained moderate (capex 0.51 within investing CF of -1.30), preserving FCF. While some disclosures (e.g., SG&A breakdown, R&D) are unreported, the available data point to improving profitability, healthy cash flows, and capacity to sustain dividends at a conservative payout. Forward-looking, the company appears well-positioned to continue margin improvement if revenue growth sustains and SG&A discipline holds, though execution risk in project delivery and potential wage inflation should be monitored.

Profitability Analysis

ROE decomposition (DuPont): ROE 10.2% = Net Profit Margin 4.1% × Asset Turnover 1.461 × Financial Leverage 1.69x. The largest improvement driver in FY2025 appears to be margin expansion (operating income +78.4% vs revenue +18.5%), implying improved operating leverage and better cost absorption. Business reasons likely include higher project utilization, mix shift to higher-value software/service deliveries, and SG&A discipline (SG&A ~16.4% of sales) relative to revenue growth. Asset turnover at 1.461 is healthy for an IT/services model and likely improved modestly as revenue scaled faster than assets, though prior-year balance data are not available to quantify. Financial leverage at 1.69x is moderate, contributing to ROE without excessive risk. Sustainability: Margin gains look partly structural (scale benefits) but may have a cyclical component tied to project timing; non-operating items were small (0.28), suggesting the core improvement is mostly recurring. Watch for any period-specific cost deferrals or bonus timing, as SG&A details are unreported. No evidence of adverse operating leverage (SG&A growth > revenue growth) this period; instead, operating leverage was positive.

Growth Assessment

Revenue growth of 18.5% YoY to 96.89 reflects solid demand, likely from financial/insurance systems where the company operates; sustainability hinges on backlog and renewal momentum, not disclosed here. Operating profit grew 78.4% to 5.30, outpacing sales, implying favorable mix and utilization. Net income rose 156.3% to 4.01, aided by operating improvements and stable non-operating items; tax rate at 26.8% suggests limited one-offs. Gross margin stands at 21.9%; with limited cost detail, we infer improved delivery efficiency and scale. ROIC of 12.5% indicates growth above cost of capital; sustaining >8% would support continued reinvestment and shareholder returns. Investment cash outflow (-1.30) and modest capex (0.51) point to capital-light growth; continued investment in productization/cloud tools (not disclosed) would help sustain margins. Outlook: If demand remains robust and SG&A discipline is maintained, low-to-mid single-digit operating margin could trend toward high single digits over time; risks include wage inflation, project slippage, and potential normalization after a strong year.

Financial Health

Liquidity is strong: current ratio 239% and quick ratio 239% (limited inventories disclosed) with cash of 17.69 versus current liabilities of 19.57 and short-term loans of 5.00. No warning flags: Current Ratio well above 1.0; D/E at 0.69x below the 2.0 risk threshold. Interest coverage is robust at ~25x (Operating income/Interest expense), indicating ample buffer. Maturity mismatch appears limited: current assets 46.78 substantially exceed current liabilities 19.57; cash alone covers ~90% of short-term loans. Noncurrent liabilities are 7.43, including long-term loans of 4.33, suggesting a balanced debt tenor profile. Equity base totals 39.30 (owners' equity 37.18), with retained earnings of 15.79 supporting future distributions. Off-balance sheet obligations are not reported; no guarantees or leases disclosed beyond standard rent (unreported), so we cannot assess hidden leverage. Overall solvency and liquidity support ongoing operations and investment needs.

Cash Flow Quality

Earnings quality is solid: OCF of 4.34 exceeds net income of 4.01 (OCF/NI 1.08x), indicating cash-backed earnings. Free cash flow of 3.04 (OCF + Investing CF) is positive despite investing outlays, underpinning balance sheet strength. Capex of 0.51 is modest, consistent with a capital-light software/services model; investing CF also includes other investments beyond capex. No signs of aggressive working capital tactics: cash conversion is healthy, though receivables/payables details are limited (some current asset/liability items unreported). With interest expense at 0.21 and strong coverage, financing cash needs are minimal; financing CF of 0.27 suggests net minor inflow (possibly borrowings vs dividends/repayments, details unreported). There is no red flag on OCF/NI (<0.8) and no evidence of dependency on non-operating gains to fund operations.

Dividend Sustainability

Calculated payout ratio at 22.9% suggests a conservative dividend policy relative to earnings capacity; reported payout ratio 0.6% likely reflects XBRL mapping differences. FCF coverage is robust at 3.31x, indicating dividends are well-covered by free cash generation even after investing activities. With ROE at 10.2% and ROIC at 12.5%, the company can both invest for growth and return cash, provided growth opportunities persist. Absent explicit DPS and total dividend data (unreported), we infer the current dividend is sustainable under base-case earnings and cash flow. Key sensitivities include revenue growth durability and cost inflation; under a moderate downturn, payout headroom remains given low leverage and healthy liquidity.

Risk Assessment

Business Risks:

• Execution risk in project-based deliveries (timeline slippage, scope changes) impacting margins
• Talent acquisition and wage inflation pressure in IT services reducing operating margin
• Customer concentration in financial/insurance sectors increasing cyclicality to sector capex
• Competitive pressure from larger SIers and SaaS vendors potentially compressing pricing
• Cybersecurity and service quality risks affecting reputation and remediation costs
• Regulatory/industry changes in financial planning/insurance impacting demand timing

Financial Risks:

• Moderate leverage (D/E 0.69x) introduces some interest rate exposure on floating-rate debt
• Working capital swings (receivables collection timing) could affect quarterly OCF
• Limited disclosure on off-balance commitments (leases/guarantees) may understate obligations
• Market risk on investment securities (9.21) could introduce valuation volatility

Key Concerns:

• Partial disclosure: SG&A and R&D breakdown unreported, limiting cost-structure visibility
• Non-operating gains (0.08) are small but can add volatility at current profit scale
• Sustainability of margin expansion depends on continued revenue growth and utilization
• Potential normalization after an outsized profit growth year (+78% OI, +156% NI)

Investment Implications

Key Takeaways:

• Strong revenue growth (+18.5%) with outsized operating profit growth (+78.4%) signals improving operating leverage
• Operating margin expanded to ~5.5% from ~3.6% YoY (~184 bps), driven by scale and SG&A discipline
• Cash conversion is healthy (OCF/NI 1.08x) and FCF positive (3.04), supporting balance sheet and dividends
• Liquidity and solvency are robust (CR 239%, D/E 0.69x, interest coverage ~25x)
• ROE 10.2% and ROIC 12.5% indicate value-accretive growth above cost of capital
• Dividend appears sustainable at a ~23% payout with 3.31x FCF coverage
• Data gaps (SG&A, R&D, segment detail) limit precision on margin drivers and sustainability

Metrics to Watch:

• Backlog and order intake to validate revenue visibility
• Utilization rate and headcount/wage trends to gauge margin sustainability
• SG&A growth vs revenue growth for signs of operating leverage persistence
• Receivables days and OCF/NI ratio to monitor cash conversion
• Capex and product investment intensity (qualitative R&D disclosure) for future growth
• Shareholder return policy (DPS trajectory, buybacks) relative to FCF

Relative Positioning: Versus Japan small/mid-cap IT services peers, the company shows above-peer revenue growth, mid-single-digit operating margins trending upward, solid ROE (~10%) with moderate leverage, and strong liquidity; continued execution could narrow the margin gap with higher-tier SIers, while maintaining a conservative payout and cash-backed earnings.

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