Shinnihonseiyaku Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥41.14B
• Operating Income: ¥4.78B
• Net Income: ¥2.55B
• EPS: ¥120.48

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 operational quarter with double-digit operating profit growth and margin expansion, offset by one-off items and a higher tax burden that pulled down bottom-line YoY. Revenue grew 2.7% YoY to 411.4, with gross profit of 328.9 and an 80.0% gross margin indicating resilient unit economics. Operating income rose 14.5% YoY to 47.8, outpacing sales and demonstrating cost discipline within SG&A. Ordinary income increased 19.1% YoY to 48.9, helped by modest non-operating gains (non-operating income 1.38 vs expenses 0.33). Despite stronger operations, net income declined 8.6% YoY to 25.5, as profit before tax was 41.2 (below ordinary income) and the effective tax rate elevated to 38.0%. Operating margin expanded to approximately 11.6%, up about 119 bps versus the prior year (calculated), while net margin compressed roughly 78 bps to 6.2% due to below-the-line factors. Cash conversion was strong, with operating cash flow of 46.9, yielding an OCF/NI ratio of 1.84x and underscoring healthy earnings quality. Free cash flow was robust at 29.0, comfortably funding shareholder returns including 9.5 of share repurchases and likely dividends (unreported) while still preserving net cash. The balance sheet is very conservative: cash and deposits of 181.2, current assets of 240.2, and total liabilities of just 54.4, driving a current ratio of 494% and negligible interest-bearing debt. Interest coverage is effectively unconstrained (≈4,782x), and working capital remains ample with 191.6 in surplus. SG&A totaled 281.1; with sales growth of 2.7% vs operating profit growth of 14.5%, operating leverage was positive despite limited topline expansion. The divergence between ordinary income and profit before tax suggests extraordinary losses or adjustments (not disclosed), combined with a high tax rate, as the primary drivers of the NI decline. DuPont indicates ROE of 11.2% supported by a 6.2% net margin, 1.456x asset turnover, and low leverage (1.24x), implying returns are quality-driven rather than leverage-dependent. Liquidity and solvency metrics point to very low financial risk and significant flexibility for continued shareholder returns and selective investment. Forward-looking, if extraordinary items normalize and the tax rate moderates, net income should re-align with operating profit trends. The key watchpoints are demand durability for core products, SG&A efficiency (especially marketing), and any recurrence of below-the-line charges.

Profitability Analysis

ROE decomposition: ROE (11.2%) = Net Profit Margin (6.2%) × Asset Turnover (1.456) × Financial Leverage (1.24x). The largest moving component this quarter versus topline growth is the improvement in operating margin (to ~11.6%), evidencing positive operating leverage within SG&A. However, net margin compressed YoY due to extraordinary items and a higher effective tax rate (38.0%), which offset operating gains when translating to ROE. Business drivers: gross margin stayed very high (~80%), indicating stable pricing/mix and controllable COGS; the operating leverage came from SG&A discipline relative to modest sales growth. The negative swing below operating income (ordinary income > PBT) likely stems from one-time losses or valuation adjustments not disclosed, and therefore not indicative of core profitability. Sustainability: gross margin quality appears durable for a D2C-oriented cosmetics/health product mix; SG&A leverage is sustainable if customer acquisition remains efficient, but could reverse if marketing intensity rises. Concerning trend flag: net income down 8.6% YoY despite OI up 14.5%—this divergence is a watchpoint tied to non-recurring items and tax; no evidence that SG&A growth exceeded revenue growth this period.

Growth Assessment

Revenue growth of 2.7% YoY indicates stable demand but limited expansion; the company achieved disproportionate operating profit growth (+14.5% YoY) via cost controls and mix/pricing. Gross margin at ~80% supports the view that the product portfolio retains strong pricing power and/or a high direct-sales mix. Ordinary income rose 19.1% YoY, but net income fell 8.6% due to below-the-line items and a 38% tax rate; excluding these, underlying growth looks stronger than reported NI. The operating margin expanded ~119 bps YoY to ~11.6%; however, net margin compressed ~78 bps to 6.2%. With positive OCF and FCF, the company retains capacity to invest in marketing, product launches, and channel initiatives to re-accelerate topline. Outlook: near-term profit trajectory should track operating income if extraordinary impacts abate; revenue growth likely mid-single digits barring new product catalysts, while maintaining double-digit OPM would support steady EPS. Key swing factors include marketing ROI, repeat purchase rates, and any changes in the effective tax rate.

Financial Health

Liquidity is exceptionally strong: current ratio 494.2% and quick ratio 450.3%; no warning for Current Ratio < 1.0. Solvency is conservative with total liabilities 54.4 against equity 228.1 (D/E ~0.24x) and de minimis loans (long-term loans 0.02), well below the 2.0 warning threshold. Maturity mismatch risk is low: current assets 240.2 comfortably exceed current liabilities 48.6, supported by 181.2 in cash and deposits alone. Interest-bearing debt is effectively negligible; interest coverage ~4,782x underscores minimal refinancing risk. No off-balance sheet obligations were disclosed in the provided data, though typical lease/contractual commitments may exist but are unreported.

Cash Flow Quality

OCF/Net Income of 1.84x indicates high earnings quality and good cash conversion. Working capital appears well-managed: sizable cash, receivables of 33.4, inventories of 21.3, and modest payables of 6.5; no signs of aggressive revenue recognition given OCF strength versus NI. Free Cash Flow of 29.0 (after modest capex of 0.63) comfortably supports shareholder returns and reinvestment. No red flags for working capital manipulation; the NI decline is tied to below-the-line items and taxes rather than cash erosion. FCF sustainability is high given gross margin resilience and low capex intensity.

Dividend Sustainability

Payout ratio (calculated) is 38.5%, within a conservative, sustainable range (<60%). FCF coverage of dividends is strong at 2.94x, even alongside 9.5 of share repurchases and financing CF outflows of 21.0. With net cash and minimal debt service needs, the company has ample capacity to maintain or modestly grow shareholder returns, subject to board policy and investment opportunities. DPS was unreported, and total dividends paid were not disclosed; assessment relies on the calculated payout ratio and FCF metrics. Policy outlook: steady to slightly progressive distributions appear feasible if operating margins remain around low-teens and extraordinary losses/taxes normalize.

Risk Assessment

Business Risks:

• Demand volatility in core cosmetics/health products impacting revenue growth (only +2.7% YoY this period).
• Rising customer acquisition costs and marketing intensity could erode SG&A leverage.
• Product concentration and brand fatigue risk in D2C-centric models.
• Regulatory and compliance risk around product claims and quality in the healthcare/beauty domain.
• Supply chain and raw material cost fluctuations impacting gross margin.

Financial Risks:

• Effective tax rate elevated at 38.0%, pressuring net margin.
• Potential for recurring extraordinary losses (ordinary income > PBT) reducing earnings visibility.
• FX exposure on imported inputs could affect COGS and margins (unquantified).
• Equity market valuation of investment securities (14.94) may introduce OCI volatility.

Key Concerns:

• Net income declined 8.6% YoY despite stronger operations due to below-the-line items and taxes.
• Sustaining operating margin gains with modest topline growth will require continued SG&A discipline.
• Limited disclosure granularity (e.g., SG&A breakdown, extraordinary items) constrains diagnostics of NI shortfall.

Investment Implications

Key Takeaways:

• Core operations strengthened: operating income +14.5% YoY with ~119 bps OPM expansion.
• High-quality earnings: OCF/NI 1.84x and FCF 29.0 support continued shareholder returns.
• Bottom line impacted by non-operating/extraordinary and tax factors; underlying trend healthier than NI.
• Balance sheet is net-cash with very low leverage, providing flexibility for buybacks/dividends and growth investment.
• Watch normalization of tax rate and any recurrence of extraordinary losses for EPS trajectory.

Metrics to Watch:

• Operating margin trend and SG&A as % of sales.
• Effective tax rate and reconciliation items below operating income.
• OCF/NI ratio and working capital turns (AR and inventory).
• Sales growth by channel/product (if disclosed) to assess demand and mix.
• Shareholder return cadence (buyback pace, payout ratio) relative to FCF.

Relative Positioning: Within Japan mid-cap consumer/beauty peers, the company exhibits superior liquidity, conservative leverage, high gross margins, and robust cash conversion; revenue growth is modest but profitability discipline and net-cash status compare favorably, with valuation sensitivity to the normalization of below-the-line items and tax.

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