BROAD ENTERPRISE CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.71B
• Operating Income: ¥650M
• Net Income: ¥289M
• EPS: ¥47.28

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

Broad Enterprise (44150) reported robust top-line and operating profit growth for FY2025 Q3 on a standalone JGAAP basis, with revenue up 50.0% YoY to ¥4.715bn and operating income up 46.1% YoY to ¥650m. Net income rose 38.7% YoY to ¥289m, implying a net margin of 6.13%. Operating margin stands at a healthy 13.8%, indicating solid cost discipline and/or favorable mix despite rapid expansion. DuPont decomposition points to a 19.32% ROE, driven by 6.13% net margin, 0.524x asset turnover, and 6.01x financial leverage. Interest coverage is strong at 31.9x, suggesting current earnings comfortably service interest despite high leverage. Liquidity is adequate with a current ratio of 127.3% and working capital of approximately ¥1.47bn. The company reports zero dividends for the period, consistent with a reinvestment posture amid high growth. Several line items are not disclosed in XBRL (e.g., OCF, FCF, cash balance, depreciation), so cash flow quality cannot be assessed from reported figures. There is a notable inconsistency between reported cost of sales and the provided gross margin metric; we treat gross margin indications with caution and focus on operating-level profitability. Balance sheet totals also present a gap between assets and the sum of liabilities plus equity, likely due to unreported or differently named accounts in the XBRL mapping. Despite these data limitations, the trajectory of operating profit growth and coverage of interest suggest operational momentum. The elevated leverage (debt-to-equity of 4.51x, using total liabilities as a proxy) amplifies returns but also increases sensitivity to cash flow execution. The effective tax rate metric shown as 0.0% is clearly not representative given disclosed income tax expense; implied tax on ordinary income approximates the low-20% range. With DPS at zero, payout is effectively nil and cash retention remains high, though FCF coverage is unassessable due to undisclosed cash flows. Overall, the quarter reflects strong underlying growth and profitability, but investors should remain attentive to working capital discipline, cash realization, and the composition of liabilities under a leveraged capital structure.

Profitability Analysis

ROE_decomposition: ROE 19.32% = Net Margin 6.13% × Asset Turnover 0.524 × Financial Leverage 6.01. The ROE level is primarily supported by solid operating margins and high leverage; asset utilization is moderate for a service-oriented model. margin_quality: Operating margin ~13.8% (¥650m/¥4,715m) demonstrates scalability and expense control. Net margin at 6.13% reflects interest burden and taxes. Gross margin is indicated as 30.3% by provided metrics, but this conflicts with the reported cost of sales figure; interpret gross margin cautiously and prioritize operating margin for comparability. operating_leverage: Revenue growth of +50.0% YoY versus operating income growth of +46.1% YoY suggests near-proportional scaling, indicating stable operating leverage. Further detail on fixed vs. variable costs and depreciation is not available due to undisclosed D&A.

Growth Assessment

revenue_sustainability: Top-line growth of +50.0% YoY to ¥4.715bn indicates strong demand and/or successful expansion of core services. Sustainability will hinge on order intake, churn, and execution capacity. profit_quality: Operating profit grew +46.1% YoY to ¥650m, broadly aligned with revenue, implying maintained unit economics. However, lack of D&A disclosure and cash flow data prevents assessment of underlying cash profitability. outlook: With strong operating momentum and ample working capital, near-term growth appears supported. Key watchpoints are backlog, installation pipeline timing, and retention in recurring contracts, particularly under a leveraged balance sheet.

Financial Health

liquidity: Current assets ¥6,860.6m vs. current liabilities ¥5,390.9m yield a current ratio of 127.3% and quick ratio of 127.3% (inventories not disclosed). Working capital is ¥1,469.7m, providing a buffer for ongoing operations. solvency: Debt-to-equity (using total liabilities) is 4.51x, indicating high leverage. Interest coverage at 31.9x (EBIT approximated by operating income) is strong, but sustained coverage depends on continued earnings growth and cash conversion. capital_structure: Total assets ¥8,995m and equity ¥1,496m imply financial leverage of 6.01x (assets/equity). Some balance sheet subtotals appear incomplete in disclosed items; composition of interest-bearing debt vs. non-interest liabilities is not available.

Cash Flow Quality

earnings_quality: Operating CF and FCF are undisclosed in XBRL (reported as zero), preventing direct comparison to net income. As such, accrual intensity and cash conversion cannot be evaluated. FCF_analysis: Free cash flow is not reported; capex and working capital movements are unavailable. Given growth, working capital could be a use of cash; confirmation requires OCF/Capex details. working_capital: Working capital is positive at ~¥1.47bn, aiding liquidity. Receivables, contract assets, and payables breakdowns are not provided; monitor DSO/DPO trends when available.

Dividend Sustainability

payout_ratio_assessment: DPS is reported at ¥0.00 and payout ratio at 0.0%, consistent with earnings retention for growth. EPS is ¥47.28. FCF_coverage: FCF and OCF are undisclosed, so dividend coverage by cash flows cannot be assessed. Current stance appears to prioritize reinvestment. policy_outlook: Given high growth and leverage, a conservative dividend stance is plausible near term. Any initiation or increase would likely depend on demonstrable, sustained positive FCF and deleveraging.

Risk Assessment

Business Risks:

• Execution risk in scaling installations and service delivery amid rapid growth
• Customer concentration and contract renewal risk in recurring service lines
• Project timing/slippage affecting quarterly revenue recognition
• Input cost inflation (equipment, labor) compressing margins
• Competition in connectivity/proptech solutions eroding pricing power
• Regulatory or subsidy changes impacting housing/communications markets

Financial Risks:

• High leverage (D/E 4.51x) increases sensitivity to earnings volatility
• Cash conversion risk due to potential working capital needs during growth
• Refinancing and interest rate risk given rising rate environments
• Limited visibility on interest-bearing debt composition and covenants
• Absence of disclosed OCF/FCF impairs assessment of debt-servicing capacity

Key Concerns:

• Data inconsistencies between gross margin and cost of sales figures
• Undisclosed cash flow statements and cash balance
• Balance sheet subtotals not reconciling, indicating unreported accounts
• Dependence on high financial leverage to drive ROE

Investment Implications

Key Takeaways:

• Strong revenue (+50% YoY) and operating profit growth (+46.1% YoY) with OPM ~13.8%
• ROE 19.3% supported by margin and high leverage; asset turnover moderate
• Interest coverage robust at ~32x despite elevated leverage
• Liquidity adequate (current ratio ~127%), working capital ~¥1.47bn
• Cash flow metrics undisclosed; FCF and cash conversion remain key unknowns
• Gross margin data conflict necessitates caution in interpreting COGS dynamics

Metrics to Watch:

• Operating cash flow and FCF trends vs. net income
• Order backlog, churn, and customer acquisition costs
• Receivables days, payables days, and contract asset movements
• Capex needs and maintenance vs. growth investment split
• Net debt and interest-bearing debt composition; interest coverage sustainability
• Operating margin trajectory and any updates to cost structure disclosure

Relative Positioning: Within domestic small-cap growth peers in communications/proptech services, the company exhibits above-peer topline growth and mid-teens operating margins but operates with higher leverage and lower disclosure granularity on cash flows, positioning it as higher growth with elevated financial risk.

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