BML (4694) FY2025 Q1 Earnings Report

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Executive Summary

The first quarter of FY2025 saw an increase in revenue but a decrease in profit, with the rise in the cost ratio putting pressure on profitability as the most important factor. Revenue edged up to ¥35.59B (¥35.27B in the same period of the previous year, YoY +0.9%), while Operating Income declined to ¥2.55B (¥2.67B in the same period of the previous year, YoY -4.5%), Ordinary Income to ¥2.65B (down 4.2%), and Net Income attributable to owners of the parent to ¥1.71B (¥1.796B in the same period of the previous year, YoY -5.0%). The primary reason for the decline in profit was that the increase in cost of sales (YoY +1.9%) exceeded revenue growth, while SG&A expenses remained broadly flat.

Factors Affecting Results

【Revenue】Revenue increased slightly by 0.9% year on year to ¥35.59B. The only reported segment is the “Testing Business,” while disclosure of other businesses has been omitted due to their lack of materiality; consequently, the factors behind changes by business remain only partially identifiable. Revenue growth is proceeding at a pace slightly below the full-year company forecast growth rate of +1.5%, while the Q1 progress rate of 25.4% is at a standard level.

【Profit and Loss】Operating Income was ¥2.55B (YoY -4.5%), and Ordinary Income was ¥2.65B (YoY -4.2%). The gross margin declined to 33.6% from 34.2% in the same period of the previous year, and the primary reason for the decline in profit was that the increase in cost of sales exceeded revenue growth. The SG&A ratio was 26.4%, broadly unchanged from the same period of the previous year. Thus, the structure was one in which deterioration in the cost ratio, rather than cost inflation, caused the decline in margins. Non-recurring gains and losses were minimal, consisting solely of a ¥0.001B loss on disposal of fixed assets. The gap between Ordinary Income and Net Income was attributable to income taxes of ¥0.86B and profit attributable to non-controlling interests of ¥0.07B, with limited impact from temporary factors. Accordingly, the current period is concluded to have been one of higher revenue but lower profit.

Key Financial Indicators

【Profitability】The Operating Income margin was 7.2%, down from approximately 7.6% in the same period of the previous year, while the Net Income margin remained at approximately 4.8%. The gross margin was 33.6%, approximately 0.6pt lower than the 34.2% recorded in the same period of the previous year, indicating that the primary cause of the deterioration in profitability was the increase in the cost ratio.【Cash Quality】Accounts receivable were ¥26.66B, up 6.8% year on year, increasing at a faster pace than revenue growth of +0.9%; therefore, monitoring of collection efficiency is necessary. Inventories were ¥0.42B, a small amount, and inventory risk was limited.【Investment Efficiency】Annualized ROE was 5.5%. Based on the combination of the Net Income margin, total asset turnover, and financial leverage, low asset turnover and conservative leverage are suppressing capital efficiency.【Financial Soundness】The Equity Ratio was 73.8%, and cash and deposits were substantial at ¥72.17B. Against current assets of ¥107.67B, current liabilities were ¥34.41B, resulting in a current ratio of approximately 313%. The debt-to-equity ratio was also low, indicating a strong financial foundation.

Cash Flow Analysis

Although individual data from the cash flow statement have not been disclosed, cash flow trends can be inferred from changes in the balance sheet. Cash and deposits were ¥72.17B, down from ¥74.11B in the same period of the previous year, while accounts receivable increased 6.8% year on year from ¥26.66B. This indicates that operating receivables are accumulating at a faster pace than revenue growth (+0.9%), suggesting that a portion of funds may be tied up in the collection cycle. Meanwhile, accounts payable were ¥19.60B and increased year on year, indicating that a certain degree of balance has been maintained on the payment side. Retained earnings continued to increase to ¥119.88B, indicating continued accumulation of internally generated funds.

Earnings Quality

The composition of current-period profit was centered on recurring operating results, with an extremely limited impact from non-recurring gains and losses. Non-recurring income was zero, while non-recurring losses consisted solely of a ¥0.001B loss on disposal of fixed assets. Accordingly, temporary factors accounted for only a negligible portion of pretax income of ¥2.64B. Of ¥0.14B in non-operating income, ¥0.09B consisted of dividend income, indicating limited dependence on income sources outside the core business. From the perspective of the impact on Net Income, the gap between Ordinary Income of ¥2.65B and Net Income of ¥1.78B was primarily attributable to income taxes of ¥0.86B and profit attributable to non-controlling interests of ¥0.07B, rather than unusual accounting factors. Comprehensive income was ¥1.72B, close to Net Income attributable to owners of the parent of ¥1.71B. The impact of valuation differences on available-for-sale securities and adjustments related to retirement benefits was small, and the gap between Net Income and comprehensive income was limited. Based on these factors, the quality of earnings in the current period can be assessed as relatively high, with little fluctuation attributable to temporary factors.

Earnings Forecasts and Guidance

The full-year company forecasts are revenue of ¥140.00B (YoY +1.5%), Operating Income of ¥9.20B (YoY +0.4%), and Ordinary Income of ¥9.70B (YoY +1.0%). There were no revisions to the earnings forecast or dividend forecast during the current quarter. Q1 progress rates were 25.4% for revenue, 27.7% for Operating Income, and 27.3% for Ordinary Income, all slightly exceeding the 25% level based on simple progress. However, the Q1 Operating Income margin of 7.2% exceeds the full-year planned Operating Income margin (approximately 6.6%, calculated as ¥9.20B ÷ ¥140.00B). If the cost ratio deteriorates toward the second half of the fiscal year, this could become a key inflection point for achieving the full-year plan.

Shareholder Returns

The full-year dividend forecast is ¥120.00 per share, and the Payout Ratio based on forecast full-year EPS of ¥156.47 is approximately 76.7%. This level exceeds the generally accepted sustainability benchmark of 60%; however, substantial internal funds, including retained earnings of ¥119.88B and cash and deposits of ¥72.17B, support the company’s ability to maintain dividends in the near term. No revision was made to the dividend forecast during the current quarter.

Risk Factors

1. Risk of declining profitability due to an increase in the cost ratio: Cost of sales increased 1.9% year on year, exceeding revenue growth of +0.9%. The gross margin declined by approximately 0.6pt to 33.6%, and trends in costs such as reagents, outsourcing expenses, and personnel expenses will influence the future Operating Income margin.

2. Risk related to the collection efficiency of trade receivables: Accounts receivable increased 6.8% year on year to ¥26.66B, expanding at a faster pace than revenue growth. Annualized DSO was approximately 68 days, exceeding 60 days, and trends in the collection cycle could result in working capital being tied up.

3. Risk of concentration in the business portfolio: The reported segment is centered on the “Testing Business,” while disclosure of other businesses has been omitted due to their lack of materiality. The business structure therefore has relatively high sensitivity to changes in testing fees, the medical fee reimbursement system, and the number of specimens.

Industry Benchmark (For Reference; Compiled by the Company)

Comparative data for the Company’s Operating Income margin and Net Income margin within the industry are limited.

Median data for the revenue growth rate are also limited, making it difficult to assess the Company’s position within the industry.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. Revenue increased 0.9% year on year, but Operating Income declined 4.5% year on year due to the increase in the cost ratio. Whether the downward trend in the gross margin continues beyond the second half of the fiscal year will be a key point to monitor in assessing achievement of the full-year plan.

2. The financial foundation is strong, with an Equity Ratio of 73.8% and cash and deposits of ¥72.17B, providing resilience to changes in the business environment. Meanwhile, annualized ROE of 5.5% indicates room for improvement in terms of capital efficiency.

3. Accounts receivable are increasing at a faster pace than revenue growth, and annualized DSO is above 60 days. It will be useful to monitor future trends to determine whether operating receivables are accumulating without corresponding revenue growth.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,834–¥2,991 at ±1% for the cost of equity, and ¥2,897–¥2,919 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing gap relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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