PARK24 Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥406.17B
• Operating Income: ¥37.56B
• Net Income: ¥15.92B
• EPS: ¥93.28

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

Verdict: Solid top-line growth with margin compression and elevated tax burden, but cash flow remains very strong and liquidity is healthy despite high leverage. Revenue grew 9.5% YoY to 4,061.68, while operating income declined 2.9% YoY to 375.61, and net income fell 14.5% YoY to 159.17. Calculated operating margin was 9.3% and net margin 3.9%, indicating profitability pressure despite scale benefits. Based on back-solved prior-period figures, operating margin compressed by roughly 118 bps YoY (from ~10.4% to 9.3%), and net margin compressed by ~110 bps (from ~5.0% to 3.9%). Gross margin held at 25.7%, suggesting cost of sales pressure was not the primary driver; instead, the drag came from higher non-operating costs and taxes. Ordinary income decreased 3.6% YoY to 341.57, with non-operating expenses of 43.13 (notably interest expense of 36.03) weighing on below-OP lines. The effective tax rate was elevated at 43.3%, well above Japan’s statutory level, further depressing net income. Earnings quality was strong: operating cash flow of 628.80 was 3.95x net income, and free cash flow was positive at 168.16 even after 405.91 of capex. Liquidity remained solid with a current ratio of 165.6% and cash/deposits of 804.70, providing ample short-term coverage. Leverage is high with a debt-to-equity ratio of 2.61x and financial leverage of 3.61x, warranting attention as rates rise. Interest coverage is comfortable at 10.42x, mitigating near-term solvency concerns. ROE was robust at 16.2%, driven by decent asset turnover (1.146) and high leverage, despite a thin net margin. Reported operating margin (0.1%) in XBRL appears inconsistent with the calculated 9.3%, likely due to tagging differences; we rely on calculated figures. Dividends are not fully disclosed, but a calculated payout ratio of 5.4% and FCF coverage of 19.66x suggest ample capacity. Forward-looking, the combination of healthy demand (revenue up), strong cash generation, and adequate liquidity supports investment capacity, but margin headwinds from interest costs and taxes, plus high leverage, temper earnings growth visibility. Key watch items are interest expense trajectory, tax normalization, and the sustainability of occupancy/rate improvements in the parking and mobility businesses.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 3.9% × Asset Turnover 1.146 × Financial Leverage 3.61x = ROE 16.2%. The most material change YoY appears in the net profit margin, which fell by an estimated ~110 bps given net income declined 14.5% against 9.5% revenue growth, while asset turnover and leverage likely moved modestly. Margin pressure stemmed from higher below-OP burdens: non-operating expenses (notably interest expense of 36.03) and an elevated effective tax rate of 43.3%. Operating margin also compressed by ~118 bps YoY (to 9.3%), suggesting cost inflation in SG&A or mix effects; however, SG&A YoY detail is not disclosed, limiting precision. The margin compression is partially cyclical (interest rate environment, cost inflation) and partially idiosyncratic (tax items), implying some normalization potential if tax rate reverts, but interest cost relief may be slower unless leverage declines. Operating leverage was negative this quarter (revenue +9.5% vs operating income -2.9%), indicating cost growth outpaced revenue growth. No SG&A breakdown is disclosed, so we cannot confirm if wage, rent, or other overheads were the main drivers, but sector dynamics (site rents, utility costs, depreciation) are plausible contributors.

Growth Assessment

Top-line growth of 9.5% indicates healthy demand and/or pricing in the parking/mobility portfolio. The decline in operating income (-2.9%) and net income (-14.5%) shows that growth did not translate to earnings due to cost and below-OP headwinds. Gross margin at 25.7% looks stable, implying the main drag was in overhead and non-operating lines rather than direct costs. With EBITDA of 729.44 (18.0% margin), the business maintains solid cash earnings capacity to fund reinvestment. Outlook hinges on the ability to offset cost inflation through pricing and utilization, while managing financing costs amid high leverage. If the effective tax rate normalizes closer to statutory levels, net income growth could outpace operating income. However, continued interest expense around current levels would cap the flow-through of operating improvements to the bottom line. Near-term growth sustainability appears reasonable given revenue momentum, but profitability recovery depends on cost control, mix, and financial expense management.

Financial Health

Liquidity is healthy: current assets 1,480.01 vs current liabilities 893.63 yield a current ratio of 165.6%, and the quick ratio is the same, supported by 804.70 in cash/deposits. No warning for current ratio (<1.0) is triggered. Solvency shows elevated leverage: D/E is 2.61x (warning threshold >2.0), and financial leverage is 3.61x; interest coverage is strong at 10.42x, mitigating immediate risk. Maturity profile looks manageable near term: short-term loans are 23.58 versus a strong cash balance, while long-term loans are 947.24 against noncurrent liabilities of 1,668.18, suggesting limited near-term refinancing pressure. There is no disclosed off-balance sheet obligation in the provided data. Working capital position is positive with 586.38, reducing liquidity stress. Overall, balance sheet capacity exists, but deleveraging would improve resilience as rates rise.

Cash Flow Quality

Earnings quality is strong: OCF/Net Income is 3.95x, indicating robust cash conversion. Free cash flow is positive at 168.16 after significant capex of 405.91, demonstrating self-funding capacity. Given the positive FCF and strong liquidity, funding for maintenance capex and modest growth investments is secure without reliance on incremental debt in the near term. Dividend data are not fully disclosed, but the calculated payout ratio of 5.4% and FCF coverage of 19.66x imply ample headroom for distributions. Without working capital detail, we cannot confirm drivers of the strong OCF (e.g., collections vs payables), but no signs of manipulation are evident from the high OCF relative to NI. Continued positive FCF while maintaining growth capex would support gradual deleveraging if prioritized.

Dividend Sustainability

Despite unreported DPS and total dividends, a calculated payout ratio of 5.4% suggests a conservative distribution policy in FY2025. With FCF of 168.16 and FCF coverage of 19.66x (relative to the implied dividend outflow), dividends appear well covered by ongoing cash generation. The balance sheet’s high leverage is the main strategic constraint; management may prefer FCF deployment toward debt reduction rather than higher payouts. Absent explicit guidance, our base case is for stable to modestly rising dividends, contingent on maintaining current OCF and capex discipline and assuming no step-up in financing costs.

Risk Assessment

Business Risks:

• Margin pressure from rising site rents, utilities, and labor costs impacting parking operations
• Utilization and pricing volatility in parking/mobility demand due to macro slowdowns or tourism swings
• Competition for attractive parking locations increasing acquisition and lease costs
• Regulatory/urban planning changes affecting parking supply and tariffs

Financial Risks:

• High leverage: D/E 2.61x and financial leverage 3.61x increase sensitivity to interest rates
• Elevated effective tax rate (43.3%) depressing net income and cash available for distributions
• Refinancing risk if credit conditions tighten, though current interest coverage is strong at 10.42x
• Potential asset impairment risk related to goodwill (163.50) and intangibles (312.27) if profitability weakens

Key Concerns:

• Operating and net margin compression despite 9.5% revenue growth
• Interest expense (36.03) and non-operating costs eroding below-OP earnings
• Data gaps in SG&A and dividend disclosures limit precision on cost drivers and payout policy

Investment Implications

Key Takeaways:

• Revenue growth is solid (+9.5%), but operating (-2.9%) and net income (-14.5%) declines indicate cost and below-OP headwinds
• ROE remains strong at 16.2%, powered by asset turnover and high leverage, but margin deterioration is a drag
• Cash generation is a standout: OCF 628.80 and FCF 168.16 provide strategic flexibility
• Leverage is high (D/E 2.61x); deleveraging would enhance resilience as rates rise
• Tax rate normalization is a potential earnings tailwind; interest costs are a structural headwind near term

Metrics to Watch:

• Operating margin trajectory (currently ~9.3%) and net margin (3.9%)
• Interest expense run-rate and average borrowing rate
• Effective tax rate vs statutory benchmark
• Same-store occupancy, number of spaces, and pricing mix in parking operations
• Capex intensity vs OCF to sustain positive FCF and capacity for deleveraging
• Leverage ratios (D/E, Net debt/EBITDA) and interest coverage

Relative Positioning: Within Japan’s parking and mobility services space, Park24 exhibits strong cash generation and ROE but carries higher financial leverage than conservative peers; execution on cost control and deleveraging will determine whether its growth converts into durable earnings expansion.

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