I-ne CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥34.37B
• Operating Income: ¥2.21B
• Net Income: ¥1.58B
• EPS: ¥63.24

Income Statement

Balance Sheet

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 but materially weaker profitability in FY2025 Q3, with margin compression driving double-digit declines in operating and bottom-line earnings. Revenue rose 9.8% YoY to 343.65, demonstrating healthy demand momentum for the portfolio. Gross profit was 166.56 with a gross margin of 48.5%, indicating still-favorable product economics. However, operating income fell 25.4% YoY to 22.07, pulling operating margin down to 6.4%. Ordinary income declined 28.4% to 21.11 as non-operating items were small (net -0.06). Net income decreased 29.8% to 11.05, as the effective tax rate was elevated at 44.6%, further pressuring the bottom line. Operating margin compressed by approximately 303 bps YoY (from an estimated 9.5% to 6.4%). SG&A intensity appears high at 39.8% of sales (136.99/343.65), likely reflecting increased marketing, personnel, or channel investments to support growth. DuPont shows ROE at 5.8%, driven by a low net profit margin of 3.2%, asset turnover near 1.0x, and moderate financial leverage of 1.86x. ROIC is 4.4%, below the 5% warning threshold, signaling capital efficiency concerns amid a growing intangible base (intangibles 123.38 including goodwill 59.16). Liquidity remains strong with a current ratio of 249.7% and cash of 67.31; D/E is a moderate 0.86x. The quality of earnings cannot be fully assessed due to unreported cash flow data (OCF and FCF not disclosed), representing a key limitation. Tax headwinds and potential SG&A elevation overshadow the revenue growth, implying near-term margin normalization is necessary for earnings recovery. Forward-looking, sustaining growth while tightening SG&A and protecting gross margin will be critical to lift ROIC above cost of capital. Monitoring working capital discipline and the mix of short-term versus long-term debt is also important to mitigate refinancing and liquidity risks. Overall, management focus should be on margin restoration, cash conversion, and capital efficiency improvements to support sustainable dividends and reinvestment.

Profitability Analysis

ROE decomposition (DuPont): ROE 5.8% = Net Profit Margin (3.2%) × Asset Turnover (0.976x) × Financial Leverage (1.86x). The largest change driver YoY is the margin component: operating income fell 25.4% despite +9.8% revenue, implying significant operating margin compression (~303 bps YoY to 6.4%). Business rationale: elevated SG&A ratio (39.8% of sales) points to heavier advertising/promotion, channel expansion costs, and/or personnel expenses outpacing revenue; a high effective tax rate (44.6%) further depressed net margin. Asset turnover remains close to 1.0x, suggesting stable utilization of the asset base despite higher intangibles, while leverage at 1.86x is moderate and not the primary driver. Sustainability: the higher SG&A spend may be partly discretionary (brand building), implying some scope for normalization, but if competitive intensity requires sustained investment, margin recovery could be gradual; the tax rate may normalize if one-off effects are present, but details are unreported. Concerning trends: SG&A growth appears to exceed revenue growth (implied by margin compression), indicating negative operating leverage; ordinary income fell more than operating income, though non-operating items are small and not the key swing factor.

Growth Assessment

Top-line growth of 9.8% YoY to 343.65 indicates healthy brand and channel traction. The quality of growth is mixed: gross margin at 48.5% is solid, but operating profit declined 25.4% due to elevated SG&A, implying growth is currently investment-intensive. Ordinary income (-28.4%) and net income (-29.8%) underperformed revenue growth due to both operating deleverage and a high tax burden. With non-operating items minimal, the earnings shortfall is predominantly operational. Outlook hinges on the ability to moderate SG&A as a percentage of sales while maintaining gross margin; if promotional intensity remains high, near-term profit growth could lag sales. ROIC at 4.4% signals that current investment returns are below target ranges, emphasizing the need for margin improvement and disciplined capex/working capital to enhance capital efficiency. Given the sizeable intangible base (123.38), successful brand monetization and sustained sell-through are key to avoid impairment risk. Absent cash flow data, we cannot validate whether growth is translating into cash, representing a limitation to the growth quality assessment.

Financial Health

Liquidity appears strong: current ratio 249.7% and quick ratio 249.7% (inventories unreported) well exceed benchmarks. No warning on Current Ratio (<1.0) or D/E (>2.0); D/E is 0.86x, indicating moderate leverage. Cash and deposits of 67.31 plus receivables of 54.14 provide 121.45 of near-cash assets, offering coverage against short-term obligations. Short-term loans are listed at 100.00, while current liabilities are shown at 80.59; given this mismatch, line-item classifications may differ, but available liquid assets appear to cover the short-term debt. Noncurrent liabilities are 81.92, and long-term loans are 56.78, indicating a mix of tenors; maturity profile details are unreported, so refinancing risk cannot be fully assessed. Intangible assets (123.38) and goodwill (59.16) are material, increasing potential impairment sensitivity if performance weakens. Equity totals 189.71, providing a reasonable capital buffer. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

Operating cash flow, free cash flow, and working capital movements are unreported, so OCF/Net Income and FCF coverage cannot be calculated. As such, earnings quality cannot be validated; we cannot confirm whether revenue growth is supported by cash conversion or if working capital absorbed cash (e.g., receivables or inventory build). Given the margin compression and investment-heavy SG&A, there is a risk that OCF/Net Income could be below 1.0 if promotional terms or receivables extended; however, this is unverified due to data limitations. With capex unreported, FCF sustainability relative to dividends cannot be judged. We see no explicit signs of working capital manipulation in the disclosed figures, but the absence of inventory and cash flow detail limits detection.

Dividend Sustainability

The calculated payout ratio is 20.9%, which appears conservative on earnings, but FCF coverage is unreported and thus not assessable. With D/E at 0.86x and liquidity strong, current dividend capacity looks supported if earnings stabilize. However, margin pressure and an elevated tax rate reduce headroom; sustained profit recovery and cash generation would bolster sustainability. Dividend policy disclosure and DPS figures are unreported, limiting forward assessment. We would monitor OCF once reported and any guidance on payout targets.

Risk Assessment

Business Risks:

• Margin pressure from elevated SG&A (promotion, channel development) outpacing sales growth
• Gross margin sensitivity to input cost inflation and FX on imported materials
• Brand and SKU concentration risk typical of beauty/personal care categories
• Channel inventory and sell-through risk amid competitive promotions
• Potential impairment risk given sizable intangibles and goodwill (123.38 and 59.16)

Financial Risks:

• ROIC at 4.4% below 5% warning, indicating capital efficiency risk
• High effective tax rate (44.6%) depressing net income
• Refinancing/tenor risk due to significant short-term loans (100.00) despite ample liquidity
• Limited visibility on interest coverage and cash flows due to unreported items

Key Concerns:

• Operating margin compressed by ~303 bps YoY to 6.4%
• Net income down 29.8% YoY despite 9.8% revenue growth
• Cash flow data unreported, preventing verification of earnings quality
• Large intangible asset base heightens sensitivity to underperformance

Investment Implications

Key Takeaways:

• Strong revenue growth (+9.8%) but profit underperformance due to SG&A intensity
• Operating margin at 6.4% and ROE at 5.8% reflect subdued profitability
• ROIC at 4.4% below threshold signals need for margin and capital efficiency improvement
• Liquidity robust (current ratio ~250%) and leverage moderate (D/E 0.86x), providing balance sheet flexibility
• Tax rate of 44.6% is a notable drag on bottom line; normalization would materially help EPS

Metrics to Watch:

• SG&A ratio and advertising/promotional (A&P) efficiency
• Gross margin resilience amid input and FX fluctuations
• Operating cash flow, FCF, and working capital (receivables, inventories once disclosed)
• ROIC trajectory and capital allocation discipline
• Effective tax rate normalization and any one-off impacts
• Short-term versus long-term debt mix and refinancing plans

Relative Positioning: Versus domestic beauty/personal care peers, the company shows competitive sales growth but weaker profitability and capital efficiency in this quarter; balance sheet strength offers runway, but execution on SG&A discipline and cash conversion will determine relative improvement.

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