KEIWA Incorporated FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥15.06B
• Operating Income: ¥3.28B
• Net Income: ¥1.16B
• EPS: ¥82.25

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

Keiwa Co., Ltd. (42510) reported steady profitability for FY2025 Q3 (consolidated, JGAAP), with revenue of ¥15.061bn (+1.4% YoY) and operating income of ¥3.283bn (+6.6% YoY), indicating positive operating leverage. Gross profit was ¥6.774bn, translating to a robust gross margin of 45.0%, suggesting favorable product mix and/or disciplined cost control. Operating margin stood at approximately 21.8%, which is strong for a functional materials/components supplier, and ordinary income of ¥3.099bn implies modest net non-operating expenses. Net income rose 31.7% YoY to ¥1.531bn, outpacing top-line growth and benefiting from improved operating efficiency and potentially lower below-the-line drags. DuPont analysis shows a net margin of 10.17%, asset turnover of 0.504x, and financial leverage of 1.31x, yielding an ROE of 6.72%, consistent with the reported figure. The company’s balance sheet is conservative, with total assets of ¥29.901bn and total equity of ¥22.796bn, implying an equity ratio around 76.3% (based on balance sheet values), despite the equity ratio field being unreported. Liquidity is strong: current assets of ¥18.903bn vs. current liabilities of ¥7.001bn yield a current ratio of 270% and quick ratio of 252%, and working capital of ¥11.902bn provides ample buffer for operations. Interest expense is low at ¥21.7mn, and interest coverage is very high at 151x on operating income, underscoring minimal financial risk from debt service. Ordinary income being slightly below operating income indicates limited headwinds from non-operating items (e.g., net financial or other expenses). While net margin and ROE are moderate, the quality of margins appears solid given the high gross margin and strong operating leverage in the quarter. Cash flow data (OCF/FCF), depreciation and EBITDA are not disclosed, limiting our ability to assess earnings-to-cash conversion and capital intensity; zeros in these fields should be treated as undisclosed rather than actual zero. The effective tax rate metric is also unreported; the presence of income tax expense (¥731mn) confirms taxation but prevents precise ETR calculation without pretax income. Dividend information is not provided (DPS and payout ratio fields are zero/unreported), so distribution policy and sustainability cannot be assessed directly from this dataset. Overall, fundamentals point to disciplined execution, a strong balance sheet, and improved profitability, but the absence of cash flow and dividend disclosures is a key limitation. We therefore focus on available profitability and balance sheet indicators while flagging the need to monitor cash conversion, capex, and policy disclosures in subsequent filings.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 10.17% × Asset turnover 0.504 × Financial leverage 1.31 = ROE 6.72%. The margin component is the largest driver, aided by a high gross margin of 45.0% and an operating margin of roughly 21.8% (¥3,283mn/¥15,061mn). Operating income growth of +6.6% YoY versus revenue growth of +1.4% indicates positive operating leverage, likely from improved utilization, mix, and cost control. Ordinary income (¥3,099mn) being below operating income suggests limited net non-operating expense; interest burden is immaterial (¥21.7mn) and coverage is 151x, so non-operating headwinds are not from interest. Net income growth (+31.7% YoY) outpaced operating growth, implying additional tailwinds below operating profit (e.g., lower minority interests or other items), though precise drivers cannot be parsed from the dataset. Asset turnover at 0.504x is modest, consistent with materials/components businesses that maintain substantial working capital; it constrains ROE despite healthy margins. Financial leverage at 1.31x is low, reflecting a conservative capital structure; while this caps ROE, it reduces financial risk. Overall profitability quality appears solid at the gross and operating levels, but the absence of depreciation/EBITDA data prevents deeper evaluation of underlying operating cash earnings.

Growth Assessment

Revenue grew 1.4% YoY to ¥15.061bn, indicating a modest top-line expansion likely driven by stable demand and/or product mix improvement. Operating income grew 6.6% YoY to ¥3.283bn, demonstrating positive operating leverage and cost discipline. Net income rose 31.7% YoY to ¥1.531bn, implying either improved non-operating results or tax effects alongside operating gains. Gross margin at 45.0% suggests favorable pricing/mix or material cost tailwinds; sustainability will depend on input prices, FX, and customer pricing. Ordinary income below operating income indicates small net non-operating headwinds, but the magnitude is limited and not a key determinant of YoY growth. Asset turnover at 0.504x points to a capital- and working-capital-intensive model; future growth will benefit from any initiatives that enhance throughput and inventory turns. Without segment disclosures, we cannot attribute growth to specific end-markets; however, the profile is consistent with steady demand in electronics/functional films. Outlook hinges on downstream electronics cycles, FX (yen), and raw material trends; given strong balance sheet capacity, the company is positioned to support growth investments if demand strengthens. Data limitations on cash flow and capex temper visibility on the durability of earnings growth.

Financial Health

Total assets are ¥29.901bn and total equity is ¥22.796bn, implying an equity ratio of approximately 76.3% (calculated), despite the equity ratio field being unreported. Total liabilities are ¥9.052bn, with current liabilities of ¥7.001bn, indicating low leverage and a conservative balance sheet. Liquidity is strong: current assets of ¥18.903bn yield a current ratio of 270% and quick ratio of 252%, supported by modest inventories of ¥1.231bn relative to current assets. Working capital is ample at ¥11.902bn, supporting operational flexibility and buffer against demand fluctuations. Interest expense is only ¥21.7mn, and interest coverage is very strong at 151x, minimizing refinancing or covenant risks. The reported debt-to-equity ratio is 0.40x; precise interest-bearing debt composition is not disclosed, but overall solvency appears sound given high equity and low interest burden.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed in this dataset (zeros should be treated as undisclosed), preventing direct analysis of earnings-to-cash conversion and free cash flow. Depreciation and amortization are also undisclosed, so EBITDA and non-cash expense analysis cannot be performed. In the absence of OCF/FCF, we cannot compute OCF/Net Income or FCF coverage metrics; the displayed figures of 0.00 should not be interpreted as actual results. Working capital resources are strong (current ratio 270%, quick ratio 252%, inventories ¥1.231bn), but we lack period-over-period movements in receivables, payables, and inventories to assess cash conversion cycle dynamics. Given the capital-intensive nature of materials/components, capex and depreciation can be meaningful; without these inputs, cash flow quality cannot be conclusively assessed. Future disclosures should be monitored for OCF, capex, and inventory/receivables turnover to validate earnings quality.

Dividend Sustainability

Dividend data are not disclosed in this dataset (DPS and payout ratio show as zero/unreported), so we cannot assess current payout ratios or FCF coverage. With net income of ¥1.531bn and a strong balance sheet, capacity for distributions may exist, but without OCF/FCF and stated policy we cannot judge sustainability. Key variables include operating cash generation, capex needs, and management’s capital allocation policy (growth investment vs. shareholder returns). Monitor forthcoming filings for DPS guidance, payout targets, and FCF trends to evaluate dividend durability.

Risk Assessment

Business Risks:

• End-market cyclicality in electronics/displays and potential exposure to consumer device demand swings
• Customer concentration risk common in materials/components supply chains
• Raw material price volatility (petrochemical-derived inputs) impacting gross margins
• Foreign exchange fluctuations (JPY vs. USD/CNY/KRW) affecting both input costs and export competitiveness
• Product mix and yield variability influencing margin stability
• Technological obsolescence and need for ongoing R&D to maintain performance specs

Financial Risks:

• Cash flow visibility is limited due to undisclosed OCF/FCF; earnings-to-cash conversion uncertain
• Potential capex requirements for capacity/technology upgrades could pressure FCF
• Working capital swings (receivables/inventories) could absorb cash in down-cycles
• Limited disclosure on interest-bearing debt structure despite low interest expense

Key Concerns:

• Absence of cash flow and depreciation disclosures restricts assessment of earnings quality
• Sustainability of high gross margin (45.0%) amid input cost and FX volatility
• Moderate ROE (6.72%) constrained by low asset turnover; improvement depends on utilization and asset efficiency

Investment Implications

Key Takeaways:

• Top-line growth was modest (+1.4% YoY) but operating income grew faster (+6.6%), evidencing positive operating leverage
• Gross margin is strong at 45.0%, supporting a healthy operating margin of ~21.8%
• Net income growth (+31.7% YoY) materially outpaced sales, aided by improved efficiency and limited non-operating drag
• Balance sheet is conservative with an estimated equity ratio ~76% and very high interest coverage (151x)
• ROE at 6.72% is driven by margins but constrained by modest asset turnover (0.504x)
• Key data gaps (OCF/FCF, depreciation, DPS/payout) limit visibility on cash conversion and shareholder returns

Metrics to Watch:

• Operating cash flow and capex to establish FCF and cash conversion
• Depreciation/EBITDA to gauge capital intensity and underlying cash earnings
• Inventory and receivables turns (working capital efficiency) and AR/AP days
• Gross margin trajectory vs. raw material costs and FX movements
• Segment/customer mix and utilization rates to track operating leverage
• Dividend policy disclosures (DPS, payout target) and FCF coverage
• Asset turnover and ROE progression as efficiency initiatives take hold

Relative Positioning: Financially conservative with strong liquidity and low leverage; profitability metrics (gross and operating margins) are solid relative to typical materials/components peers, but overall ROE trails best-in-class players due to lower asset turnover and limited leverage.

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