IC CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥10.14B
• Operating Income: ¥516M
• Net Income: ¥535M
• EPS: ¥65.31

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

IC Co., Ltd. (47690) reported FY2025 Q4 consolidated results under JGAAP with solid top-line and profit growth and a modest improvement in return metrics. Revenue rose 9.1% YoY to ¥10.136bn, supported by disciplined cost control that lifted operating income 16.5% YoY to ¥516m and net income 26.4% YoY to ¥485m. Gross margin was 19.0%, up modestly versus typical levels for services-oriented models, while operating margin reached 5.1%, indicating some operating leverage. Ordinary income of ¥605m outpaced operating income due to non-operating gains and very low interest burden, supporting a 5.97% ordinary margin. Net profit margin improved to 4.78%, aided by a normalized effective tax rate that we estimate at roughly 27.8% based on disclosed tax expense and net income. DuPont decomposition shows ROE at 7.55% driven by 4.78% net margin, 1.165x asset turnover, and 1.35x financial leverage, indicating a relatively asset-light profile with prudent balance sheet leverage. Liquidity is strong with a current ratio of 285% and working capital of ¥3.78bn, reflecting ample near-term funding capacity. Solvency appears conservative: liabilities-to-equity is approximately 0.32x and interest coverage is extremely high at ~1,583x, reducing refinancing and rate sensitivity risks. Cash conversion lagged earnings: operating cash flow was ¥144m (OCF/Net income of 0.30x), and free cash flow was slightly negative at -¥21m due to ¥165m investing outflows, implying heavier working capital usage or timing effects in the period. Dividend was not disclosed (annual DPS shown as zero, interpreted as undisclosed), and payout metrics are therefore not meaningful this period. Equity ratio was shown as 0.0% and several share-related metrics were zero; per instruction, these are treated as undisclosed rather than actual. Despite these disclosure gaps, the core income statement and balance sheet suggest a healthy financial stance with improving profitability. Sustaining margin gains while normalizing cash conversion is the key execution focus into the next fiscal year. If OCF recovers in line with earnings, free cash flow should turn positive given modest capital intensity implied by low depreciation. We note that inventories and cash balances are not disclosed; however, current assets are sizable, supporting the strong liquidity ratios. Overall, the company demonstrates improving fundamentals, conservative leverage, and solid earnings momentum, tempered by weaker near-term cash conversion and limited disclosure on dividends and share metrics.

Profitability Analysis

ROE of 7.55% decomposes into a 4.78% net margin, 1.165x asset turnover, and 1.35x financial leverage, indicating that profitability is primarily driven by operating margins and efficient asset use rather than leverage. Gross margin at 19.0% supports a 5.1% operating margin, suggesting reasonably controlled operating costs and some operating leverage YoY as operating income grew faster than revenue. The step-up from operating to ordinary income (¥516m to ¥605m) implies beneficial non-operating items (e.g., financial income or equity method gains) and minimal interest burden (interest expense ¥0.326m). Net income growth (+26.4% YoY) outpaced operating income growth, reflecting the above non-operating tailwinds and a normalized tax rate. EBITDA of ¥554m implies an EBITDA margin of approximately 5.5%, close to operating margin given low depreciation (¥38m), highlighting low capital intensity. Interest coverage of ~1,583x underscores negligible financing drag on profitability. Margin quality appears sound with a balanced contribution from gross to operating lines; sustaining the current gross margin while controlling SG&A will be central to further ROE improvement.

Growth Assessment

Revenue grew 9.1% YoY to ¥10.136bn, indicating healthy demand and/or improved pricing. Operating income rose 16.5% YoY, outpacing sales and signaling positive operating leverage and cost discipline. Net income increased 26.4% YoY, benefitting from both operating leverage and favorable non-operating results. Asset turnover at 1.165x suggests stable asset productivity; incremental growth appears achievable without significant balance sheet expansion. Depreciation remains low (¥38m), implying modest capital intensity and supporting scalable growth. However, OCF lagged earnings this period (OCF/Net income 0.30x), pointing to working capital absorption or timing effects that could dampen near-term cash growth. With strong liquidity and low leverage, the company appears positioned to fund organic initiatives; sustainability of the 9% revenue growth will depend on demand resilience and retention of margin gains. Outlook hinges on maintaining gross margin near 19% and keeping SG&A growth below revenue growth, while normalizing cash conversion to support reinvestment.

Financial Health

Liquidity is robust: current assets of ¥5.825bn exceed current liabilities of ¥2.042bn, yielding a current ratio of 285% and working capital of ¥3.783bn. Quick ratio equals the current ratio due to inventories showing as zero (treated as undisclosed), but the sizable current asset base nonetheless indicates ample short-term coverage. Solvency is conservative with total liabilities of ¥2.084bn versus equity of ¥6.428bn, translating to liabilities-to-equity of ~0.32x and financial leverage of 1.35x. Interest expense is minimal at ¥0.326m, and interest coverage is ~1,583x, suggesting minimal debt service risk. The reported equity ratio of 0.0% is not reflective of the provided balance sheet and is treated as undisclosed per instruction. Overall capital structure is strong, with capacity for selective investment without stressing the balance sheet.

Cash Flow Quality

Earnings quality shows a disconnect this period: OCF of ¥144m is only 0.30x net income of ¥485m, implying significant working capital usage or timing of receivables/payables. Free cash flow was slightly negative at -¥21m (OCF ¥144m minus investing CF ¥165m), despite low depreciation of ¥38m, indicating that cash conversion, not capital intensity, constrained FCF. The low D&A relative to EBITDA highlights an asset-light model; therefore, sustained negative FCF would likely reflect working capital cycles rather than structural capex needs. Without a cash and equivalents disclosure (shown as zero, treated as undisclosed), we infer liquidity adequacy from current assets and low leverage rather than cash balances. Monitoring receivables days and unbilled items (if applicable) will be key to assessing normalization of OCF in subsequent periods.

Dividend Sustainability

Annual DPS is shown as zero and treated as undisclosed; therefore, payout and coverage metrics are not meaningful this period. With net income of ¥485m and modest investing outflows, dividend capacity would depend on normalization of operating cash flow and board policy. The balance sheet leverage is low and liquidity is strong, which could accommodate distributions if policy permits, but current-period FCF was slightly negative. Absent a disclosed dividend policy or historical payout track, we cannot assess sustainability; future visibility will improve with disclosure of DPS and payout intentions. FCF coverage of dividends cannot be evaluated until DPS is disclosed.

Risk Assessment

Business Risks:

• Revenue growth durability amid macro slowdown or client budget constraints
• Margin pressure from wage inflation and competitive pricing
• Dependence on key customers or projects (concentration risk not disclosed)
• Execution risk in scaling while maintaining service quality
• Potential regulatory or industry-specific changes impacting demand

Financial Risks:

• Weak cash conversion this period (OCF/Net income 0.30x) indicating working capital risk
• Limited disclosure of cash balance and inventories complicates liquidity assessment
• Potential increase in capex or M&A outlays could pressure FCF
• Tax rate variability affecting net margins (estimated ~27.8% this period)

Key Concerns:

• OCF trailing earnings, resulting in slightly negative FCF
• Sustainability of margin gains if cost inflation accelerates
• Lack of dividend and share data limits capital return visibility

Investment Implications

Key Takeaways:

• Top-line grew 9.1% YoY with stronger operating leverage (OP +16.5% YoY)
• ROE improved to 7.55% on better margins and efficient asset use
• Balance sheet conservative: liabilities-to-equity ~0.32x, interest coverage ~1,583x
• Cash conversion weak this period (OCF/NI 0.30x), yielding slightly negative FCF
• Low depreciation indicates asset-light model and potential for cash inflection if WC normalizes

Metrics to Watch:

• OCF/Net income ratio and working capital movements (DSO/DPO)
• Gross and operating margins versus SG&A growth
• Free cash flow trajectory and capex requirements
• Tax rate normalization and its impact on net margin
• Disclosure of DPS/payout policy and share metrics

Relative Positioning: The company appears financially conservative with improving profitability and asset efficiency relative to typical mid-cap service-oriented peers, though current cash conversion is weaker; normalization of OCF would strengthen its relative standing.

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