ORIGINAL ENGINEERING CONSULTANTS CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥6.19B
• Operating Income: ¥725M
• Net Income: ¥405M
• EPS: ¥68.55

Income Statement

Balance Sheet

Profitability Ratios

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

Original Sekkei Co., Ltd. (46420) reported FY2025 Q3 consolidated results under JGAAP showing stable topline and solid profitability with a conservative balance sheet. Revenue was ¥6,191 million, essentially flat YoY as disclosed (+0.0%), suggesting stable demand but limited momentum in the period. Gross profit was ¥2,141 million, implying a gross margin of 34.6%, consistent with a design/engineering services mix where labor utilization and pricing discipline drive margins. Operating income was ¥725 million, an operating margin of roughly 11.7%, indicating controlled SG&A (estimated at ~¥1,416 million) and manageable project execution costs. Ordinary income of ¥731 million modestly exceeded operating income, implying small net non-operating gains that more than offset ¥10.5 million of interest expense. Net income came in at ¥405 million (EPS ¥68.55), implying a net margin of 6.54% and an effective tax burden around the low-40% range using available line items. DuPont decomposition indicates ROE of 5.39%, driven by a 6.54% net margin, asset turnover of 0.526x, and financial leverage of 1.57x. Balance sheet strength is notable: total assets are ¥11,769 million and equity ¥7,518 million, implying an equity ratio around 63.9% (despite the equity ratio field showing 0.0% as undisclosed). Current assets of ¥7,339 million against current liabilities of ¥1,947 million produce a current ratio of 3.77x, highlighting ample short-term liquidity. Total liabilities are modest at ¥4,251 million, translating to a debt-to-equity ratio near 0.57x and very strong interest coverage (~69x). Cash flow figures were not disclosed (OCF/FCF shown as zero indicate unreported, not actual zeros), limiting assessment of earnings-to-cash conversion and working capital dynamics. Dividend fields (DPS, payout) were also undisclosed; therefore, dividend policy and sustainability cannot be inferred from this release. Overall, profitability appears resilient with disciplined cost control, while growth looks flat in the period; strategic visibility would benefit from backlog, order intake, and utilization disclosures. The company’s conservative capital structure provides resilience against cyclicality, but operating leverage to revenue growth is moderate, given the service-heavy cost base. Key uncertainties stem from unreported cash flow data, which constrains assessment of free cash flow generation and cash returns capacity. Near-term outlook hinges on order momentum, utilization rates, and pricing power amid labor cost pressures common in engineering/design service sectors.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 6.54%
• asset_turnover: 0.526x
• financial_leverage: 1.57x (Assets/Equity ≈ 11,769/7,518)
• calculated_ROE: 5.39%
• commentary: ROE is primarily margin-driven, with moderate asset turnover typical for a project-based services model and conservative leverage keeping financial risk low. margin_quality:
• gross_margin: 34.6% (GP ¥2,141m on revenue ¥6,191m)
• operating_margin: ≈11.7% (OP ¥725m on revenue ¥6,191m)
• ordinary_margin: ≈11.8% (Ordinary ¥731m)
• net_margin: 6.54% (Net ¥405m)
• drivers: ['SG&A estimated at ~¥1,416m (GP–OP), indicating disciplined overhead management.', 'Non-operating items net positive, offsetting interest expense of ¥10.5m.', 'Tax burden meaningful; see ETR discussion below.'] operating_leverage:
• assessment: Moderate
• signals: ['Stable revenue with double-digit operating margin suggests some flexibility in cost base but not high fixed-cost operating leverage.', 'Gross margin stability implies capacity utilization and pricing were reasonably maintained.']

Growth Assessment

revenue_sustainability: Revenue reported flat YoY (+0.0% as disclosed). Without backlog/order intake data, sustainability is inferred as stable but lacking visible acceleration. profit_quality: Operating margin around 11.7% and net margin 6.54% suggest resilient earnings quality, aided by small non-operating gains. outlook: Near-term growth will depend on order momentum, utilization rates, and ability to pass through wage inflation. Absence of disclosed cash flow and order/backlog metrics limits visibility.

Financial Health

liquidity:

• current_assets: ¥7,338,547,000
• current_liabilities: ¥1,947,045,000
• current_ratio: 3.77x (376.9%)
• quick_ratio: 3.77x (no inventories reported; inventory line undisclosed)
• working_capital: ¥5,391,502,000
• commentary: Robust liquidity buffer provides ample coverage for near-term obligations and project working capital needs. solvency:
• total_assets: ¥11,769,000,000
• total_liabilities: ¥4,250,800,000
• total_equity: ¥7,518,000,000
• equity_ratio: ≈63.9% (computed from assets and equity; the 0.0% field is undisclosed)
• debt_to_equity: 0.57x (liabilities/equity)
• interest_coverage: ≈69x (Operating income ¥725m / interest expense ¥10.5m)
• commentary: Low leverage and very strong coverage indicate conservative balance sheet management. capital_structure: Primarily equity-funded with modest liabilities; capacity for additional investment exists if growth opportunities arise.

Cash Flow Quality

earnings_quality: Cannot validate earnings-to-cash conversion as operating cash flow was undisclosed (reported as 0). Accounting profit quality appears sound given margins and limited non-operating reliance. free_cash_flow_analysis: FCF not disclosed. Capex/D&A also not disclosed, limiting visibility on maintenance vs. growth investment needs. working_capital: With high current ratio and significant working capital (¥5.39bn), the model likely involves material trade receivables. However, receivable/payable turns and cash conversion cycle cannot be assessed due to undisclosed CF details.

Dividend Sustainability

payout_ratio_assessment: Dividend data (DPS, payout) are undisclosed; EPS is ¥68.55. Without DPS and cash flow, payout ratio cannot be assessed. FCF_coverage: Not assessable as OCF and FCF were not disclosed. policy_outlook: No guidance on shareholder returns is inferable from the release. Balance sheet strength could support distributions, but sustainability depends on underlying OCF generation and capital needs.

Risk Assessment

Business Risks:

• Order intake and backlog visibility risk in project-based services.
• Labor market tightness and wage inflation affecting gross margin and utilization.
• Fixed-price contract execution risk (scope creep, rework, delivery timing).
• Client concentration or public-sector exposure (typical in design/engineering) potentially affecting revenue volatility.
• Pricing power pressure amid competitive bidding.

Financial Risks:

• Working capital intensity risk (receivable collection, milestone billing).
• Limited transparency on cash flow generation due to undisclosed CF statements in this period.
• Potential tax rate volatility (implied mid-40% effective rate).
• Interest rate risk is low given minimal interest burden, but not zero.

Key Concerns:

• Flat topline (+0.0% disclosed) suggests limited growth momentum in the quarter.
• Absence of OCF/FCF data constrains evaluation of cash conversion and dividend capacity.
• Lack of disclosure on order backlog and utilization limits forward visibility.

Investment Implications

Key Takeaways:

• Stable revenue with solid operating margin (~11.7%) and net margin (6.54%).
• ROE of 5.39% driven by healthy margins and conservative leverage (assets/equity ~1.57x).
• Very strong liquidity (current ratio 3.77x) and moderate leverage (D/E ~0.57x).
• Interest coverage extremely comfortable (~69x), indicating low financial risk.
• Visibility limited by undisclosed cash flow and dividend data.

Metrics to Watch:

• Order intake, book-to-bill, and backlog trajectory.
• Utilization rate and headcount capacity vs. demand.
• Gross margin and SG&A ratio as indicators of pricing and cost control.
• Receivable days, advance billings, and OCF to net income conversion.
• Capex intensity and any guidance on dividend policy/capital allocation.

Relative Positioning: Within Japan-listed engineering/design services peers, the company exhibits above-average balance sheet strength and solid mid-teens operating margin profile, but current period growth appears flat and forward visibility is hampered by limited disclosures.

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