NIX,INC. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥4.40B
• Operating Income: ¥213M
• Net Income: ¥64M
• EPS: ¥83.56

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

NICS Co., Ltd. (TSE: 42430) reported FY2025 Q4 (full-year) consolidated results under JGAAP with flat top-line and mixed profitability. Revenue was ¥4,403m (+0.4% YoY), indicating stable demand but limited volume/price growth. Gross profit of ¥1,949m implies a robust gross margin of 44.3%, suggesting resilient pricing and/or product mix. Operating income was ¥213m (-1.5% YoY), with an operating margin of 4.8%, reflecting modest operating leverage and some cost pressure below gross profit. Ordinary income of ¥250m outpaced operating income, implying small net non-operating gains and very low interest burden. Net income rose to ¥194m (+6.5% YoY), aided by limited finance costs and a standard tax load, driving a reported net margin of 4.41%. DuPont analysis shows ROE of 4.34%, driven by modest margins (4.41% net margin), moderate asset turnover (0.736x), and conservative leverage (assets/equity 1.34x). Liquidity is strong with a current ratio of 366% and a quick ratio of 331%, underpinned by working capital of ¥2,753m. The balance sheet is conservative: liabilities of ¥1,634m versus equity of ¥4,470m (implied equity ratio ~74.7%), producing a low debt-to-equity ratio of 0.37x and very high interest coverage of ~190x. Operating cash flow was ¥291m, 1.5x net income, indicating solid earnings quality and cash conversion. Free cash flow was slightly negative (¥-44m) due to ¥-335m investing CF, suggesting ongoing growth or maintenance capex exceeding operating cash generation. EPS was ¥83.56; however, share count and book value per share were not disclosed in the provided data. Dividend information was not disclosed (DPS and payout ratio shown as zero should be treated as non-disclosed), so policy and sustainability cannot be directly assessed, though internal capacity appears adequate for modest distributions absent large capex. Notably, the provided “effective tax rate 0.0%” is inconsistent with disclosed income tax of ¥74.6m; our recalculation implies ~28% tax rate. Overall, NICS exhibits a solid financial base, adequate profitability, healthy cash conversion, and an investment phase weighing on FCF, with ROE constrained by low leverage and modest margins.

Profitability Analysis

ROE_decomposition: ROE 4.34% = Net margin 4.41% × Asset turnover 0.736 × Financial leverage 1.34. Margin is the primary constraint; asset use is moderate; leverage is conservative, limiting ROE amplification. margin_quality: Gross margin 44.3% is strong versus operating margin 4.8%, indicating sizable SG&A/R&D and other operating costs. Ordinary margin 5.7% (¥250m/¥4,403m) exceeded operating margin due to minor net non-operating income and minimal interest expense (¥1.1m). Net margin 4.41% aligns with a normalized tax rate (~28% recalculated). operating_leverage: Revenue grew +0.4% YoY, while operating income fell -1.5% YoY, indicating negative operating leverage in FY2025, likely from cost inflation or higher fixed costs outpacing the small revenue lift. EBITDA margin is 9.1% (EBITDA ¥399m), leaving limited buffer to absorb cost increases.

Growth Assessment

revenue_sustainability: Flat growth (+0.4% YoY) suggests stable but non-accelerating end-market conditions; mix/pricing likely offset volume softness. No segment detail provided to assess contribution by product or geography. profit_quality: Net income rose +6.5% YoY despite lower operating income, supported by low finance costs and ordinary income stability. OCF/NI of 1.50 indicates earnings are cash-backed, with limited accrual strain. outlook: With strong gross margin and investment spending (negative investing CF), management appears to be supporting future growth or renewal capex. Near-term earnings trajectory will hinge on the company’s ability to pass through costs, realize returns on recent investments, and maintain SG&A discipline amid stable demand.

Financial Health

liquidity: Current ratio 366% and quick ratio 331% reflect very strong liquidity. Working capital is ¥2,753m, supported by low inventories (¥367m) relative to current assets (¥3,788m). Cash and equivalents were not disclosed; however, liquidity appears ample given current assets versus current liabilities. solvency: Total liabilities ¥1,634m vs equity ¥4,470m yields debt-to-equity of 0.37x and an implied equity ratio of ~74.7% (computed), indicating a conservative capital structure. capital_structure: Interest expense is minimal (¥1.1m) and interest coverage is ~190x (operating income/interest), underscoring low financial risk and substantial headroom for financing if needed.

Cash Flow Quality

earnings_quality: OCF of ¥291m vs NI of ¥194m (OCF/NI 1.50) indicates robust cash conversion and limited reliance on accruals or one-offs. FCF_analysis: Free cash flow is approximately ¥-44m (OCF ¥291m minus investing CF ¥335m). The negative FCF is modest and likely reflects growth/maintenance capex; sustainability depends on future returns from these investments. working_capital: With inventories at ¥367m and strong quick ratio, working capital appears well managed. The positive OCF suggests working capital was not a major drag in aggregate; detailed drivers were not disclosed.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio were reported as zero but should be treated as not disclosed. Based on EPS ¥83.56 and positive NI, there is theoretical capacity for distributions; however, no policy or historical payout data were provided. FCF_coverage: With FCF at ¥-44m, coverage of any prospective dividend from free cash flow in FY2025 would have been limited due to elevated investing outflows. Future coverage will depend on capex normalization and OCF growth. policy_outlook: Absent disclosed policy, sustainability cannot be assessed definitively. A conservative balance sheet supports optionality, but ongoing investment priorities may take precedence near term.

Risk Assessment

Business Risks:

• Muted top-line growth (+0.4% YoY) indicating demand elasticity or competitive pricing pressure.
• Cost inflation and fixed-cost absorption leading to negative operating leverage.
• Execution risk on recent capex; delay in investment returns could prolong negative FCF.
• Customer concentration or end-market cyclicality (details not disclosed).
• Supply chain and raw material price volatility affecting gross margins.

Financial Risks:

• Near-neutral to slightly negative FCF driven by higher investing CF.
• Potential OCF volatility if working capital needs rise with growth.
• Small absolute earnings base susceptible to shocks despite low leverage.
• Disclosure gaps (cash balance, dividend policy, shares outstanding) complicate analysis.

Key Concerns:

• ROE of 4.34% is below typical Japanese small-cap industrial norms due to modest margins and low leverage.
• Operating income declined despite revenue growth, highlighting the need for tighter cost control or pricing power.
• Sustained capex without clear revenue acceleration could weigh on FCF and returns.

Investment Implications

Key Takeaways:

• Stable revenue with margin resilience at gross level but softer operating leverage.
• Strong balance sheet and liquidity; low financial risk profile.
• Healthy cash conversion (OCF/NI 1.50) supports earnings quality.
• Slightly negative FCF due to elevated investing outflows points to an investment phase.
• ROE constrained by conservative leverage and modest net margin.

Metrics to Watch:

• Revenue growth rate and order backlog (if disclosed) to confirm demand inflection.
• Operating margin trajectory and SG&A ratio to gauge operating leverage.
• Capex levels and returns (incremental EBIT/Capex) to validate investment efficacy.
• Working capital turns (inventory and receivables days) for cash conversion durability.
• ROE and ROIC progression relative to WACC.
• Dividend policy disclosures and FCF coverage.

Relative Positioning: Relative to domestic small-cap industrial/materials peers, NICS appears financially conservative with superior liquidity and low leverage, but exhibits below-average growth and ROE; investment-led FCF pressure suggests a transition phase where execution on new projects will be critical to close the returns gap.

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