CE Holdings Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥15.83B
• Operating Income: ¥1.41B
• Net Income: ¥1.69B
• EPS: ¥98.85

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

CE Holdings reported FY2025 Q4 (full-year) consolidated results under JGAAP showing healthy top-line expansion and strong operating leverage, while bottom-line comparability is distorted by prior-year one-offs. Revenue increased 8.8% YoY to ¥15,831 million, reflecting solid demand momentum. Gross profit reached ¥3,365 million with a gross margin of 21.3%, indicative of stable project economics in system integration and healthcare IT solutions. Operating income grew 22.9% YoY to ¥1,411 million, outpacing revenue and signaling improved operating efficiency and cost control. Ordinary income of ¥1,426 million was close to operating income, showing limited financial income/expense drag and low interest costs. Net income was ¥1,557 million, but declined 82.0% YoY, which likely reflects a high base in the prior year due to non-recurring items rather than deterioration in underlying performance (given the strong operating trends this year). The computed net margin was 9.84%, supporting an ROE of 17.61% from DuPont: 9.84% margin × 1.242x asset turnover × 1.44x leverage. Liquidity is strong with a current ratio of 263% and working capital of ¥4,630 million, providing ample buffer for project execution and receivables cycles. Solvency appears sound; although an equity ratio of 0.0% is shown, this is an unreported placeholder—based on disclosed totals, equity/assets imply an equity ratio near 69–70% (¥8,842m/¥12,746m). Operating cash flow was ¥986 million, below net income (OCF/NI of 0.63), implying weaker conversion this year likely due to working capital movements. Free cash flow was robust at ¥1,379 million, supported by an investing cash inflow of ¥393 million (suggesting asset disposals or investment redemptions). Interest coverage was very strong at 116.3x, consistent with minimal financial risk from debt service. The company reported no dividends (DPS ¥0; payout 0%), retaining cash to support growth or balance sheet flexibility. Several items are unreported (D&A, EBITDA, cash balance, share count, book value per share), limiting some ratio quality and time-series comparability. Overall, the results indicate improving core profitability and a strong balance sheet, with cash conversion and the nature of investing inflows key areas to monitor.

Profitability Analysis

ROE for the period was 17.61%, decomposed via DuPont into a 9.84% net profit margin, 1.242x asset turnover, and 1.44x financial leverage (assets/equity ≈ ¥12,746m/¥8,842m). Operating margin implied by operating income is approximately 8.9% (¥1,411m/¥15,831m), indicating operating discipline and benefits from scale. Gross margin stood at 21.3%, consistent with SI/project delivery where direct costs remain a sizable portion; margin stability suggests manageable pricing and input costs. The 22.9% YoY increase in operating income versus 8.8% revenue growth points to positive operating leverage, likely from fixed-cost absorption and efficiency gains. Ordinary income only slightly exceeded operating income, confirming low financial friction; interest expense was just ¥12.1m. Net margin at 9.84% is strong on an absolute basis, but YoY comparability is impacted by prior-year non-recurring items; current-year tax expense of ¥528m implies an effective tax rate roughly in the mid-20%s on pre-tax income, not 0% as the metric listing suggests. EBITDA and D&A are unreported; thus, EBITDA margin shown as 0% is not decision-useful. Overall profitability quality appears solid, with the key watchpoints being mix (recurring vs. project revenue), project execution risk, and maintenance of gross margins amid wage inflation.

Growth Assessment

Revenue grew 8.8% YoY to ¥15.8bn, indicating sustained demand in healthcare IT/system integration. Operating income rose 22.9% YoY to ¥1.41bn, demonstrating healthy operating leverage and improving cost efficiency. Ordinary income tracked operating income closely, implying limited non-operating volatility. Net income declined 82.0% YoY despite stronger operating results; this likely reflects an unusually high prior-year bottom line (e.g., gains on sales, subsidies, or tax effects) rather than current-year deterioration. Current-year net margin of 9.84% is consistent with the strong ROE outcome, suggesting core profitability is intact. Sustainability of revenue growth hinges on order backlog, hospital/clinic IT investment cycles, and public sector digitization initiatives; none of these were disclosed in the dataset. Profit quality appears sound at the operating level; however, the OCF/NI ratio of 0.63 indicates profit-to-cash conversion lagged, likely from working capital (receivables or unbilled). Investing cash inflow (+¥393m) supported FCF but may be non-recurring (asset sales or redemption of deposits/securities). Outlook wise, if the company maintains mid-single to high-single digit top-line growth and protects gross margin, operating profit growth could continue, but normalized net profit growth will depend on one-off item comparability and tax rate stability.

Financial Health

Liquidity is strong: current assets ¥7,468m versus current liabilities ¥2,838m yields a current ratio of 263% and quick ratio of ~263% given negligible inventories (¥3.8m). Working capital is solid at ¥4,630m, providing cushion for project cycles and receivables collection. Solvency is conservative: total liabilities ¥4,652m vs. equity ¥8,842m; implied equity ratio ≈ 69.4% (the reported 0.0% is an unreported placeholder). Debt-to-equity is shown as 0.53x (likely using total liabilities); interest expense is only ¥12.1m, and interest coverage is very comfortable at 116.3x, indicating minimal refinancing risk. Asset turnover at 1.242x suggests efficient use of the asset base for a solutions/IT vendor. Cash and equivalents are unreported (listed as 0), so absolute liquidity headroom in cash terms cannot be verified; however, positive OCF and net investing inflow mitigate near-term concerns. Overall capital structure is robust with ample equity and low financial risk.

Cash Flow Quality

Operating cash flow was ¥986m versus net income of ¥1,557m, for an OCF/NI ratio of 0.63, below the ideal ~1.0, suggesting timing differences or working capital build (e.g., higher receivables or unbilled revenue). Free cash flow was ¥1,379m, aided by a positive investing cash flow of ¥393m, which does not appear to be recurring operating FCF; absent that inflow, underlying FCF would align more closely with OCF minus maintenance capex (capex not disclosed). Financing cash flow was -¥146m, likely reflecting debt repayments and/or modest shareholder returns (no dividend declared). D&A is unreported (shown as 0), preventing EBITDA-based cash conversion assessment. Without cash balance data, we cannot reconcile year-end liquidity, but the strong working capital position and positive OCF underpin cash generation capacity. Watch for normalization of OCF relative to NI as project milestones convert to cash and for any reversion in investing cash flows.

Dividend Sustainability

The company reported no dividend for the year (DPS ¥0; payout 0%). With free cash flow of ¥1,379m and very low interest burden, capacity to pay dividends exists; however, management appears to prioritize reinvestment or balance sheet strengthening. FCF coverage of dividends is effectively infinite this year given no payout, but the reported FCF benefits from a non-recurring investing inflow. Sustainable payout capacity should be assessed on normalized OCF (targeting OCF/NI closer to 1.0) and maintenance capex levels, which are undisclosed. Policy outlook cannot be inferred from the data provided; if growth investments or M&A are planned, continued retention would be consistent. Absent disclosure on shareholder return policy, we treat dividend sustainability as not determinable but near-term affordability as strong.

Risk Assessment

Business Risks:

• Project execution risk in fixed-price system integration impacting gross margins
• Timing risk of public-sector and healthcare IT procurement cycles
• Customer concentration in hospital/clinic networks and regional health systems
• Competitive pricing pressure from larger SIers and specialized healthcare IT vendors
• Talent retention and wage inflation for engineers affecting cost base
• Technology transition risk (cloud migration, interoperability standards) requiring ongoing investment
• Regulatory and reimbursement environment shifts influencing healthcare IT budgets
• Dependence on milestone acceptance leading to cash collection timing variability

Financial Risks:

• Lower-than-ideal OCF/NI (0.63) indicating working capital sensitivity
• Potential reliance on non-recurring investing inflows to bolster FCF
• Limited visibility on cash balance, D&A, and capex due to unreported items
• Possible receivables concentration and lengthening DSO during large projects
• Tax rate volatility affecting bottom-line comparability YoY

Key Concerns:

• Net income down 82% YoY likely due to prior-year one-offs, complicating earnings trend analysis
• Unreported D&A/EBITDA and cash position limit assessment of cash conversion and reinvestment needs
• Operating cash conversion below net income suggests working capital drag
• Investing cash inflow may be one-time, inflating FCF
• Equity ratio reported as 0% is not reflective of actual balance sheet strength and could confuse stakeholders

Investment Implications

Key Takeaways:

• Solid revenue growth (+8.8% YoY) and strong operating leverage (+22.9% YoY OI)
• Healthy profitability with net margin 9.84% and ROE 17.61% driven by stable margins and efficient asset use
• Balance sheet conservative with implied equity ratio ~69% and high interest coverage (116x)
• Cash conversion lagged (OCF/NI 0.63), a key metric to monitor for normalization
• FCF positive at ¥1.38bn but aided by investing inflow (+¥0.39bn), likely non-recurring
• Dividend suspended (DPS 0), implying cash retention for growth or prudence
• Data limitations (D&A, cash, shares) constrain deeper ratio analysis and per-share assessment

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue sustainability
• Gross margin by project mix and recurring revenue ratio
• OCF/NI and working capital metrics (DSO, unbilled receivables)
• Capex and D&A to assess maintenance vs. growth investment needs
• Tax rate normalization and non-operating/extraordinary items
• Return on invested capital (ROIC) once D&A and invested capital detail are available

Relative Positioning: Within Japan’s healthcare IT and mid-sized SI peer set, CE Holdings appears to combine above-average ROE and strong balance sheet conservatism with somewhat weaker cash conversion this year; maintaining gross margins and improving OCF consistency will be central to preserving its advantageous positioning.

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