CellSource Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥3.71B
• Operating Income: ¥166M
• Net Income: ¥11M
• EPS: ¥0.54

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

CellSource Co., Ltd. (48800) reported FY2025 Q4 consolidated results under JGAAP showing resilient cash generation despite earnings compression. Revenue was 37.11, down 7.9% YoY, indicating a soft topline environment. Gross profit was 20.87, with a robust gross margin of 56.3%, suggesting the core service/product mix retains pricing power and favorable unit economics. SG&A expenses were 19.21, consuming 92% of gross profit, leaving limited operating leverage and resulting in operating income of 1.66 (operating margin ~4.5%). Ordinary income was 1.67, but profit before tax dropped to 1.10, implying the recognition of extraordinary losses (~0.57) not detailed in the disclosure. Net income was only 0.10, translating to an EPS (basic) of 0.54 JPY, mainly impacted by a very high effective tax rate of 90.3% and the likely one-off items. The DuPont bridge points to a very low net margin (0.3%), modest asset turnover (0.528x), and low financial leverage (1.17x), culminating in a subdued ROE of 0.2%. Despite thin earnings, cash flow quality was strong: operating cash flow (OCF) was 3.33, exceeding operating income, and free cash flow (FCF) reached 3.30, aided by minimal investing cash outflow (-0.03) and modest capex (-0.43). The balance sheet is exceptionally liquid and conservative, with cash and deposits of 47.12 (about 67% of total assets), current assets of 54.88, and total liabilities of just 10.07. Liquidity ratios are very high (current ratio 1,239% and quick ratio 1,219%), while the debt-to-equity ratio stands at 0.17x based on total liabilities, indicating low balance-sheet risk. Interest coverage is ample at 126x, reflecting negligible interest expense (0.01) and no disclosed interest-bearing debt. Equity remains strong at 60.16, underpinned by retained earnings of 31.32 and limited intangibles (0.56), pointing to an asset-light profile. Dividend data are largely unreported; reported payout metrics are inconsistent (calculated payout ratio 991% vs reported 9.3%), hence dividend conclusions require caution. Overall, fundamentals reflect a cash-rich, low-leverage profile with solid gross margins but constrained operating leverage and one-off headwinds depressing bottom-line earnings. Near-term focus should be on revenue reacceleration, SG&A discipline, normalization of the effective tax rate, and clarity on extraordinary items. Data limitations (numerous unreported line items) restrict deeper attribution analysis, but the available figures support a view of high cash flow quality and strong financial health despite weak net profit.

Profitability Analysis

ROE decomposition: Net profit margin 0.3% x Asset turnover 0.528 x Financial leverage 1.17x = ROE ~0.2% (consistent with reported). Operating profitability: Operating income of 1.66 on revenue of 37.11 implies an operating margin of ~4.5%, underpinned by a healthy gross margin of 56.3% but largely offset by SG&A intensity (SG&A is 51.8% of sales and 92.1% of gross profit). EBITDA was 3.64, giving an EBITDA margin of 9.8%, indicating limited operating leverage at the current scale. The gap between ordinary income (1.67) and profit before tax (1.10) suggests extraordinary losses (~0.57) weighed on earnings quality this period. The effective tax rate was 90.3%, far above the statutory level, further compressing net margin; this appears non-recurring in nature but requires confirmation. Interest expense is minimal (0.01), and interest coverage is strong at 126x, confirming that financing costs are not a drag on profitability. Overall margin quality is mixed: gross margin remains strong, but high fixed/semi-fixed SG&A and one-off items reduce operating and net margins, leading to very low ROE despite low leverage.

Growth Assessment

Revenue declined 7.9% YoY to 37.11, signaling a near-term demand slowdown or normalization from prior levels. With limited disclosure on segment mix or pricing, the sustainability of revenue cannot be fully assessed; however, the maintained gross margin indicates no obvious pricing deterioration. Profit quality is impacted by extraordinary losses and a very high effective tax rate, which depressed net income to 0.10; excluding these, underlying operating earnings appear steadier (operating income 1.66). EBITDA of 3.64 versus depreciation/amortization of 1.98 shows modest capacity for operating cash generation relative to invested base. Outlook hinges on restoring topline growth and executing SG&A discipline to improve operating leverage; absent that, net profit growth will remain constrained despite solid gross margins. Given the cash-rich balance sheet and low leverage, the company is positioned to invest for growth, but specific drivers are not disclosed. We therefore treat current profit weakness as partly cyclical/one-off pending clarification of extraordinary items and tax normalization.

Financial Health

Liquidity is very strong: current ratio 1,239% and quick ratio 1,219%, supported by cash and deposits of 47.12 (≈67% of total assets) and modest current liabilities of 4.43. Working capital stands at 50.45, providing ample buffer for operations and investment. Solvency is sound with total liabilities of 10.07 and total equity of 60.16; debt-to-equity is 0.17x on a total-liabilities basis. Interest-bearing debt is not disclosed (N/A), but negligible interest expense (0.01) and high interest coverage (126x) indicate minimal financial risk from leverage. Noncurrent liabilities (5.64) may include leases/deferred taxes given the high tax expense, but details are unreported. Asset structure is conservative: low inventories (0.90) and receivables (3.38) limit working-capital risk, and intangibles are small (0.56). Overall, balance sheet strength is a key support while earnings normalize.

Cash Flow Quality

Earnings quality appears high from a cash perspective: OCF of 3.33 exceeds operating income of 1.66 and far exceeds net income of 0.10, yielding an OCF/Net Income ratio of 33.3x (inflated by one-offs and tax effects). Free cash flow was 3.30, as investing outflows were minimal (-0.03) and capex was restrained at -0.43, implying limited capital intensity. The divergence between ordinary income and profit before tax (and the 90.3% effective tax rate) likely depressed accrual earnings relative to cash; absent these effects, cash conversion looks robust. Working capital appears well managed given low receivables and inventories relative to sales and the strong cash generation; however, detailed WC movements are not disclosed. Overall, cash flow quality is strong, giving the company flexibility to fund operations and potential growth initiatives without external financing.

Dividend Sustainability

Dividend data are largely unreported (DPS, total dividends N/A). Reported payout ratios are inconsistent: a calculated payout ratio of 991% (likely distorted by very low net income) versus a reported payout ratio of 9.3%. FCF coverage is shown as 3.33x, suggesting that any dividend paid was modest relative to free cash flow; however, the absolute dividend amount is not disclosed. DOE is reported at 0.0%, which may indicate no DOE-based policy or no dividend in the period, but this cannot be confirmed from the provided data. Given strong cash and FCF but weak net income due to one-offs, near-term dividend capacity from cash flow appears adequate, yet actual policy and trajectory remain unclear due to disclosure gaps. Assessment should be revisited once DPS and full policy details are available.

Risk Assessment

Business Risks:

• Topline contraction (-7.9% YoY) indicating demand softness or normalization risk
• High SG&A intensity limiting operating leverage and margin expansion
• Dependence on a concentrated product/service mix implied by high gross margin but limited disclosure
• Potential pricing and volume volatility in core markets

Financial Risks:

• Earnings volatility from extraordinary items (gap between ordinary income and PBT of ~0.57)
• Tax rate volatility (effective tax rate 90.3%) depressing net income
• Data limitations on debt structure (interest-bearing debt N/A) despite negligible interest expense
• Potential future dilution risk given low net income and growth funding needs (no current indication, but a common risk in low-earnings phases)

Key Concerns:

• Sustainability of revenue amid recent decline
• Normalization of effective tax rate and resolution of extraordinary losses
• SG&A control to enhance operating leverage
• Clarity on dividend policy and capital allocation priorities

Investment Implications

Key Takeaways:

• Cash-rich, low-leverage balance sheet (cash 47.12; liabilities 10.07; D/E ~0.17x) provides resilience
• Solid gross margin (56.3%) but muted operating margin (~4.5%) due to elevated SG&A
• Earnings compressed by extraordinary items (~0.57) and a very high effective tax rate (90.3%), reducing net margin to 0.3%
• Strong cash generation (OCF 3.33; FCF 3.30) and high interest coverage (126x)
• ROE low at 0.2% given thin net income and low leverage

Metrics to Watch:

• Revenue trajectory and order intake to gauge rebound from -7.9% YoY
• SG&A-to-sales ratio and operating margin progression
• Extraordinary gains/losses and reconciliation between ordinary income and PBT
• Effective tax rate normalization and deferred tax movements
• Working capital turns (AR and inventory levels vs sales)
• Capital allocation: capex trend, M&A/securities investments, and any announced dividend/DPS

Relative Positioning: The company is positioned as financially conservative with substantial liquidity and minimal financing risk, but currently lags peers on profitability and ROE due to high SG&A and non-recurring charges; improvement depends on revenue recovery, cost discipline, and normalization of below-the-line items.

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