T&S Group Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥4.10B
• Operating Income: ¥756M
• Net Income: ¥321M
• EPS: ¥67.19

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

T&S Group Co., Ltd. (4055) delivered strong FY2025 Q4 results under JGAAP on a consolidated basis, with revenue of ¥4,103 million, up 37.7% year over year. Profitability improved meaningfully: operating income rose 45.5% to ¥756 million, indicating positive operating leverage and disciplined cost control amid rapid top-line expansion. Net income increased 58.5% to ¥509 million, lifting the reported net margin to 12.41%. Gross profit of ¥866 million implies a gross margin of 21.1%, consistent with an improving mix and scale benefits. EBITDA reached ¥760 million with an 18.5% EBITDA margin, supported by modest depreciation and amortization of ¥3.5 million. DuPont analysis shows ROE of 17.47%, driven by a 12.41% net margin, 1.12x asset turnover, and low financial leverage of 1.26x, reflecting efficient operations and a solid balance sheet. Liquidity is very strong with a current ratio of 653.8% and working capital of approximately ¥2,350 million, underpinned by current assets of ¥2,774 million versus current liabilities of ¥424 million. Total assets stand at ¥3,662 million with total liabilities of ¥485 million and total equity of ¥2,913 million; this implies an equity ratio around 79.6% (based on available balances), underscoring a conservative capital structure. Operating cash flow of ¥758 million exceeded net income by a factor of 1.49x, indicating high cash conversion and supportive working capital dynamics or prepayments. Free cash flow came in at ¥635 million after ¥123 million net investing outflows, providing ample self-funding capacity for growth initiatives. The effective tax rate, inferred from disclosed taxes and net income, is approximately 22.6% (¥148.7 million tax on about ¥657.7 million pre-tax income), rather than 0.0% as sometimes shown when items are undisclosed. No dividends were disclosed for the period; payout and coverage metrics are therefore not determinable from the provided data. Interest expense is undisclosed, and interest coverage ratios based on zero values should not be interpreted as actual zeros. Cash and deposits were not disclosed, but the net cash inflow implied by cash flows is roughly ¥575 million for the period. Overall, the company combines rapid growth, expanding margins, robust ROE, and strong free cash flow within a low-leverage framework. Data limitations include undisclosed cash balance, share count, interest-bearing debt details, and dividend policy specifics; the analysis focuses on available non-zero line items.

Profitability Analysis

ROE of 17.47% is decomposed into a 12.41% net margin, 1.12x asset turnover, and 1.26x financial leverage, indicating returns chiefly driven by healthy margins and efficient use of assets rather than leverage. Operating margin is approximately 18.4% (¥756m / ¥4,103m), showing strong operating efficiency relative to the 21.1% gross margin and limited overhead leakage. The 45.5% YoY growth in operating income versus 37.7% revenue growth evidences positive operating leverage, implying fixed cost dilution and/or better pricing/project mix. Ordinary income of ¥753m is close to operating income, suggesting limited non-operating drag. EBITDA margin of 18.5% closely tracks operating margin given low D&A (¥3.5m), implying a largely people- and service-driven model with light asset intensity. Net margin at 12.41% reflects solid after-tax profitability; based on net income (¥509m) and taxes (¥148.7m), the implied effective tax rate is about 22.6%. The small gap between operating and ordinary income points to minimal financial income/expense or non-operating items affecting run-rate profitability. Overall margin quality appears robust with scope for further scale benefits if revenue growth persists.

Growth Assessment

Revenue grew 37.7% YoY to ¥4,103m, a strong expansion indicative of robust demand and/or successful customer acquisition and project ramp-ups. Profit growth outpaced sales, with operating income up 45.5% and net income up 58.5%, implying margin expansion and improved cost absorption. Asset turnover at 1.12x suggests decent capital efficiency for a service-oriented business, and the low D&A supports a scalable, asset-light growth profile. The quality of growth is supported by OCF/NI of 1.49x, signaling that earnings are translating into cash, likely helped by favorable working capital or advance billing. Sustainability will hinge on maintaining utilization, managing wage inflation, and preserving project discipline in fixed-price contracts. With a strong balance sheet and positive FCF, the company appears well-positioned to fund organic growth and selective investments without external capital. Near-term outlook qualitatively benefits from operating leverage, but data on backlog, pipeline, and customer concentration are not provided; continuation of 30%+ growth is uncertain without visibility on order intake. The minimal non-operating income impact supports the view that growth is operationally driven rather than financial. Continued focus on high-margin segments and disciplined SG&A should sustain elevated operating margins if revenue momentum holds.

Financial Health

Liquidity is strong: current assets of ¥2,774m versus current liabilities of ¥424m yield a current ratio of 6.54x and working capital of about ¥2,350m. Quick ratio is shown equal to the current ratio due to undisclosed inventories; actual quick ratio may be lower if inventories exist, but the cushion remains substantial. Total assets of ¥3,662m are funded primarily by equity of ¥2,913m with total liabilities of ¥485m; the implied equity ratio is approximately 79.6%. The reported debt-to-equity ratio of 0.17x likely reflects total liabilities to equity; interest-bearing debt specifics are not disclosed. With low leverage and strong internal cash generation, solvency risk appears low. Interest coverage cannot be reliably computed due to undisclosed interest expense; however, the small gap between operating and ordinary income implies limited financial burden. The capital structure provides flexibility for investment and potential shareholder returns, subject to disclosure of actual cash and debt balances.

Cash Flow Quality

Operating cash flow of ¥758m exceeded net income of ¥509m (OCF/NI = 1.49x), indicating strong cash conversion and healthy earnings quality. D&A is modest at ¥3.5m, so the OCF uplift over NI likely stems from working capital movements (e.g., receivables, payables, or customer prepayments) rather than non-cash charges. Free cash flow of ¥635m (OCF ¥758m less investing CF of -¥123m) comfortably covers organic investment needs and underpins balance sheet strength. Investing cash outflows of ¥123m appear manageable; the composition (capex vs. intangibles/investments) is not detailed, but capex intensity seems low relative to revenue. Financing CF of -¥60m suggests modest outflows (e.g., lease/repayments or equity-related items), with no material reliance on external funding this period. Ending cash is undisclosed, but the net cash inflow implied by OCF+ICF+FCF totals about ¥575m, supporting improved liquidity. Working capital dynamics are a key driver of cash quality; absent line-item details, we view cash generation as robust but will watch receivable days and contract liabilities to confirm sustainability.

Dividend Sustainability

No dividend per share was disclosed (annual DPS shown as 0.00 reflects non-disclosure rather than confirmed zero). Consequently, payout ratio and FCF coverage for dividends cannot be assessed from the provided data. From a capacity standpoint, current free cash flow of ¥635m and low leverage indicate room to initiate or increase distributions if the company so chooses, without compromising growth investments. Any future policy would need to balance growth funding (human capital, R&D, M&A) with potential shareholder returns. We will monitor formal dividend policy guidance, historical payout practices, and cash balance disclosures to refine sustainability assessments.

Risk Assessment

Business Risks:

• Execution risk on rapid growth and utilization management in a human-capital intensive model
• Wage inflation and hiring constraints impacting margins and delivery capacity
• Fixed-price project and scope-creep risk affecting gross margins
• Customer concentration and renewal risk (disclosure not provided)
• Competitive pressure in systems integration/IT services potentially compressing pricing
• Dependence on key engineers and retention
• Macroeconomic slowdown reducing IT budgets and project deferrals

Financial Risks:

• Working capital swings affecting cash conversion despite strong OCF in the period
• Limited disclosure of interest-bearing debt and cash balances obscures true net cash position
• Potential increase in leasing or off-balance commitments not visible in the summary
• Tax rate variability from 22–30% range depending on credits and regional mix

Key Concerns:

• Sustainability of 30%+ revenue growth without disclosed backlog or order intake metrics
• Margin resilience amid labor cost inflation and competitive bidding
• Data gaps (cash, debt, dividend policy, share count) reducing transparency of capital allocation

Investment Implications

Key Takeaways:

• Strong top-line growth (+37.7% YoY) with even stronger profit growth (OP +45.5%, NI +58.5%) indicates positive operating leverage
• ROE at 17.47% is driven by solid margins and efficient asset use with low leverage
• High cash conversion (OCF/NI 1.49x) and positive FCF of ¥635m support self-funded growth
• Balance sheet is conservative with an implied equity ratio around 79.6% and low liabilities
• EBITDA margin of 18.5% and operating margin of ~18.4% suggest disciplined cost structure
• Data limitations remain around cash, debt, and dividend policy; monitoring disclosures is important

Metrics to Watch:

• Backlog/book-to-bill and large project pipeline visibility
• Utilization rates, headcount growth, and wage inflation
• AR days, contract assets/liabilities, and OCF/NI ratio sustainability
• Gross and operating margin trends and pricing power
• Capex/Investment outlays versus growth opportunities
• Effective tax rate normalization and any non-operating items

Relative Positioning: Within Japan’s IT services/systems integration peer set, the company currently exhibits above-average growth, healthy double-digit operating margins, strong cash conversion, and low leverage, positioning it favorably on quality and balance sheet strength, subject to confirmation with fuller disclosures.

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