TOKYO OHKA KOGYO CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥172.78B
• Operating Income: ¥31.89B
• Net Income: ¥18.62B
• EPS: ¥184.28

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

Tokyo Ohka Kogyo (4186) delivered a strong FY2025 Q3 (consolidated, JGAAP) with clear margin expansion and robust earnings growth. Revenue rose 17.9% year over year to 172,779,000,000, outpacing typical industry averages and indicating healthy end-market demand and/or favorable pricing/mix. Operating income increased 37.2% to 31,893,000,000, evidencing significant operating leverage and cost discipline. Net income grew 41.1% to 22,064,000,000, with net margin improving to 12.77%. Gross margin stood at 30.7%, while operating margin reached approximately 18.45%, pointing to both manufacturing efficiency and disciplined SG&A. Ordinary income of 32,758,000,000 and minimal interest expense (64,000,000) underscore a low-leverage capital structure and strong interest coverage. Based on provided DuPont metrics, ROE is 9.79%, driven by a 12.77% net margin, 0.577x asset turnover, and modest financial leverage of 1.33x. Balance sheet strength is notable: total equity of 225,403,000,000 against total assets of 299,525,000,000 implies an equity ratio around 75%, despite the equity ratio field showing 0.0% (undisclosed). Liquidity appears strong with a current ratio of 280.5% and quick ratio of 257.2%, supported by working capital of 97,666,000,000. Inventory of 12,602,000,000 versus cost of sales of 93,575,000,000 suggests an annualized inventory turnover near 7.4x and days inventory around 49 days, which looks efficient for specialty materials. The effective tax outflow of 6,027,000,000 versus ordinary income implies an approximate effective tax rate in the high teens (~18%), despite a reported metric of 0.0% (undisclosed). Cash flow statement items (operating, investing, financing) and cash balances were not disclosed in the dataset provided, limiting direct assessment of cash conversion and free cash flow. Dividend data (DPS, payout ratio, FCF coverage) were also not disclosed; any dividend assessment must rely on earnings capacity and balance sheet strength. Overall, profitability momentum, cost control, and a conservative balance sheet position the company well, though the lack of cash flow disclosure warrants monitoring. The near-term outlook appears supported by favorable margins and demand, but sensitivity to end-market cycles (e.g., semiconductors and electronics) and FX remains relevant. Key monitorables include gross margin durability, working capital trends, capex intensity, and order visibility.

Profitability Analysis

ROE decomposition indicates a balanced profitability profile: Net margin of 12.77% × asset turnover of 0.577 × financial leverage of 1.33 yields a reported ROE of 9.79%. Operating margin is about 18.45% (31,893,000,000 ÷ 172,779,000,000), well above gross margin of 30.7%, pointing to disciplined operating expenses and positive operating leverage. The 37.2% YoY increase in operating income versus 17.9% revenue growth confirms strong incremental margins. Ordinary margin is approximately 18.96% (32,758,000,000 ÷ 172,779,000,000), reflecting negligible interest burden (64,000,000). The effective tax outflow of 6,027,000,000 implies an estimated tax rate near 18% on ordinary income, consistent with normalized levels. Asset efficiency is decent at 0.577x turnover, reasonable for a specialty chemicals/materials business with substantial fixed assets. Inventory efficiency appears solid with an estimated 7.4x turnover (93,575,000,000 ÷ 12,602,000,000). Overall margin quality appears high, supported by mix/pricing and cost control.

Growth Assessment

Top-line growth of 17.9% YoY indicates solid demand and/or pricing tailwinds. Operating income growth of 37.2% and net income growth of 41.1% reflect strong operating leverage and cost optimization. The expansion in operating margin to roughly 18.45% suggests improved scale benefits and potentially favorable product mix. Sustainability of revenue growth will hinge on end-market dynamics, particularly in electronics/semiconductor-linked applications, and macro/FX conditions. Profit quality appears robust given minimal finance costs and the ability to translate revenue growth into outsized operating profit gains. Near-term outlook is constructive provided demand remains intact; watch for normalization risks as customers adjust inventories. Without cash flow disclosure, validation of earnings-to-cash conversion is pending, but the balance sheet provides cushioning for growth investments. Continued focus on gross margin stability, utilization rates, and SG&A discipline will be key to sustaining elevated profitability.

Financial Health

The company maintains a conservative capital structure: total liabilities of 68,456,000,000 against equity of 225,403,000,000 (liabilities-to-equity ~0.30x). Implied equity ratio is about 75% (225,403,000,000 ÷ 299,525,000,000), indicating low leverage. Liquidity is strong with a current ratio of 280.5% and a quick ratio of 257.2%, supported by working capital of 97,666,000,000. Interest coverage is exceptionally high at 498.3x (operating income ÷ interest expense), implying negligible refinancing risk. The company appears well positioned to fund operations and withstand cyclical volatility. Absence of cash and cash equivalents disclosure in the provided data prevents direct assessment of cash buffers, but overall solvency metrics are robust.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed in the dataset (values shown as zero indicate unreported). As a result, the reported OCF/Net Income ratio and free cash flow are not available for analysis. Earnings quality must therefore be inferred from accrual-based profitability and working capital indicators. Strong profitability, modest interest expense, and healthy working capital levels suggest capacity to generate operating cash flow under normal conditions. Inventory appears well managed with an estimated 49 days of inventory, which supports cash conversion. However, confirmation of cash conversion cycle dynamics (receivables/payables turns) and capex intensity is not possible from the provided data. Monitoring OCF, capex, and FCF in subsequent disclosures will be critical to validate earnings-to-cash translation.

Dividend Sustainability

Dividend per share, payout ratio, and FCF coverage were not disclosed in the provided dataset. On an earnings basis, profitability is strong (EPS 184.28; net income 22,064,000,000), and the balance sheet is conservatively levered, which is supportive for dividends in principle. However, without OCF/FCF and cash balance disclosure, we cannot assess dividend coverage from cash flows. If the company adheres to a stable or progressive dividend policy, current earnings capacity suggests room to sustain or grow distributions, contingent on capex needs and cycle visibility. Policy clarity (target payout ratio, total return framework) and forthcoming cash flow disclosures will be key to assessing sustainability.

Risk Assessment

Business Risks:

• Cyclicality in semiconductor and electronics demand impacting order visibility and capacity utilization
• Customer concentration risk typical in advanced materials supply chains
• Pricing and mix volatility affecting gross margin
• Technology transition risk requiring sustained R&D and capex to meet advanced node/process requirements
• Raw material and energy cost fluctuations
• Foreign exchange volatility affecting revenues and margins

Financial Risks:

• Potential capex intensity for capacity and technology upgrades affecting FCF
• Working capital swings (inventory and receivables) during demand inflections
• FX translation and transaction exposure
• Limited visibility on cash balances and OCF/FCF due to undisclosed cash flow statements in the provided data

Key Concerns:

• Lack of disclosed cash flow data limits assessment of earnings-to-cash conversion
• Sustainability of elevated margins if pricing/mix tailwinds normalize
• Exposure to semiconductor inventory corrections or order pushouts

Investment Implications

Key Takeaways:

• Strong top-line growth (+17.9% YoY) with outsized operating and net profit growth (+37.2% and +41.1%)
• Margin expansion to ~18.45% operating margin and 12.77% net margin demonstrates effective operating leverage
• Low leverage and high liquidity (current ratio 280.5%, liabilities-to-equity ~0.30x) underpin financial resilience
• Interest coverage of ~498x reflects minimal financing risk
• Implied equity ratio ~75% indicates a robust balance sheet
• Inventory efficiency (~7.4x turnover; ~49 days) supports operations and cash conversion potential
• Cash flow and dividend data not disclosed; need confirmation of FCF generation and payout policy

Metrics to Watch:

• Gross margin trend and operating margin sustainability
• Order intake, backlog, and book-to-bill (if disclosed)
• Operating cash flow, capex, and free cash flow
• Inventory levels and receivables/payables turns (cash conversion cycle)
• FX rates and hedging impact on margins
• Capex-to-sales and ROIC
• Tax rate normalization versus ~18% implied level

Relative Positioning: Based on the provided period, the company appears to be executing well with superior margin expansion and conservative leverage versus typical peers in specialty materials for electronics, though confirmation via cash flow disclosures is pending.

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