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 Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

I-ne (49330) reported FY2025 Q3 consolidated results under JGAAP showing continued top-line growth but pronounced margin contraction. Revenue rose 9.8% YoY to ¥34.365bn, reflecting resilient demand and/or distribution expansion. Gross profit was ¥16.656bn, implying a gross margin of 48.5%, which remains robust for a beauty/consumer brand portfolio, though the margin appears lower than what a simple revenue–COGS subtraction would suggest; we rely on the disclosed gross profit for margin analysis. Operating income declined 25.4% YoY to ¥2.207bn, compressing the operating margin to roughly 6.4%, indicating negative operating leverage as SG&A outpaced sales growth (likely driven by marketing, channel costs, or logistics). Ordinary income was ¥2.111bn, slightly below operating income, indicating modest net non-operating expense. Net income fell 29.8% YoY to ¥1.105bn, for a net margin of 3.22%, underscoring pressure below the operating line as well. The DuPont bridge indicates an ROE of 5.82%, built from a 3.22% net margin, 0.976x asset turnover, and 1.86x financial leverage, implying earnings softness is the primary drag. The effective tax burden, inferred from net income and income tax expense, appears elevated at roughly 53–54%, which also contributes to lower bottom-line conversion. Liquidity is adequate, with a current ratio of 122.5% and working capital of ¥3.984bn. Solvency appears balanced: liabilities/equity is 1.08x and assets/equity (i.e., financial leverage) is 1.86x; by our calculation, the equity ratio approximates 54% (Total Equity/Total Assets), despite the reported equity ratio field being uninformative. Cash flow data (OCF/FCF) are not disclosed in the XBRL here, limiting earnings quality assessment; zero values should be treated as unavailable, not actual zero. Depreciation and interest expense are also undisclosed, rendering EBITDA and interest coverage metrics not meaningful in this dataset. EPS is ¥63.24, consistent with reported net income, implying a share count on the order of ~17.5 million shares (rough approximation). No dividend is indicated for the period (DPS = ¥0), and payout/FCF coverage metrics are therefore not interpretable from this extract. Overall, the quarter suggests healthy sales momentum with pressure from higher operating costs and a heavier tax burden, leaving returns moderate and below cost-of-equity benchmarks typical for the sector.

From Earnings Presentation: For Q3 FY December 2025, I-ne Co., Ltd. reported revenue of ¥34.36 billion (up 9.8% YoY), EBITDA of ¥3.50 billion (up 7.9%), and operating income of ¥2.20 billion (down 25.4%), showing revenue growth but a decline in operating income. The Skincare and Other category experienced significant growth of +434.9% YoY (including M&A effects), and online sales grew +53.6%, while Haircare and Beauty Appliances saw slight declines. The main factor in the operating income decrease was amortization expenses (approximately ¥900 million per year) from the acquisitions of Tout Vert Co. and Artemis Co. in October last year; excluding this, operating income would have increased 5.1% YoY. Cost of sales ratio improved significantly by 4.2 percentage points YoY (due to M&A effects, OEM partnerships, and increased online sales mix), showing progress in gross margin improvement. Advertising and promotion expense ratio increased by 1.6 percentage points YoY due to strategic investment reinforcement, and sales commission ratio also increased by 1.5 percentage points (due to online sales expansion). For the full-year outlook, while revenue faces downside risks due to temporary sluggishness in Haircare and Beauty Appliances, net income is expected to meet targets due to reduced tax burden from subsidiary integration. Shareholder returns were significantly expanded, with shareholder benefits of ¥10,000 worth of digital gifts for 100 shares and ¥20,000 for 500+ shares, plus an increased year-end dividend from ¥13.5 to ¥15.0, achieving a high total return ratio of 9.3%.

Financial Analysis

Profitability

ROE of 5.82% is driven by: net profit margin 3.22% × asset turnover 0.976 × leverage 1.86. The primary headwind is margin compression: operating income declined 25.4% YoY versus revenue up 9.8%, taking the operating margin to about 6.4%. Gross margin of 48.5% remains solid for a brand-led personal care portfolio, suggesting pricing power and/or favorable mix at the gross level. However, higher SG&A intensity likely offset gross margin strength; areas could include advertising/promotion to sustain shelf presence and D2C growth, freight/logistics, and possibly personnel or channel commissions. Ordinary income (¥2.111bn) slightly below operating income (¥2.207bn) suggests small non-operating drag; interest expense is undisclosed, so we cannot attribute precisely. The inferred effective tax rate is high (~53–54%), further depressing net margin to 3.22%. EBITDA and interest coverage are not assessable due to non-disclosure of depreciation/amortization and interest, so operating cash profitability cannot be triangulated via EBITDA. Overall, profitability quality is mixed: healthy gross margin but negative operating leverage and a heavier tax load suppress returns.

Growth

Revenue growth of 9.8% YoY to ¥34.365bn indicates demand resilience and likely distribution/channel gains. The sustainability of growth will hinge on brand vitality, marketing effectiveness, and category/channel mix (domestic drugstores, e-commerce, and overseas). Despite revenue growth, operating profit fell 25.4% YoY to ¥2.207bn, signaling near-term growth is being supported by higher spend, possibly to defend market share or to expand internationally. Net income fell 29.8% YoY to ¥1.105bn, reflecting both operating deleverage and elevated tax burden. Profit quality appears pressured: the spread between gross and operating margins has widened, implying SG&A intensity is high. Ordinary income tracking slightly below operating income suggests limited non-operating support. With asset turnover at 0.976, efficiency is reasonable, but improved utilization or tighter working capital would help support growth without excessive capital. Outlook hinges on the company’s ability to normalize SG&A (particularly advertising and logistics) while sustaining top-line momentum; if marketing is front-loaded, profitability could recover as cohorts mature, but if spend remains elevated, profit growth may lag revenue.

Financial Health

Liquidity: current assets ¥21.712bn vs. current liabilities ¥17.728bn yields a current ratio of 122.5%, providing a reasonable short-term cushion. Quick ratio equals current ratio due to undisclosed inventories; interpret cautiously. Working capital is ¥3.984bn, adequate but not excessive for a consumer company with likely meaningful payables/receivables cycles. Solvency: total liabilities ¥20.548bn versus equity ¥18.971bn imply a debt-to-equity of 1.08x. Financial leverage (assets/equity) is 1.86x, moderate. While the reported equity ratio field is 0.0%, our calculation indicates approximately 53.9% (¥18.971bn/¥35.224bn), suggesting a solid equity buffer. Interest expense is undisclosed; thus, coverage analysis is not available from this extract, but ordinary income being close to operating income suggests limited financing burden. Capital structure appears balanced with room to fund growth, provided working capital is contained.

Cash Flow

Operating cash flow, investing cash flow, and financing cash flow are undisclosed in this dataset (zeros indicate unreported, not actual zeros), preventing direct assessment of earnings-to-cash conversion. Consequently, the displayed OCF/Net Income ratio of 0.00 and FCF of 0 should not be interpreted literally. Depreciation and amortization are also undisclosed, so we cannot adjust earnings for non-cash charges to approximate cash earnings. Working capital details (inventories and other components) are not provided; however, the presence of ¥3.984bn in working capital implies some capital is tied up in the operating cycle. Given revenue growth alongside margin pressure, cash conversion could be sensitive to inventory planning, receivables collection, and payables terms; without OCF disclosure, we cannot validate accrual quality. Key watchpoint is whether OCF tracks net income over the next quarters and whether FCF remains positive after growth capex.

Dividend Sustainability

No dividend is indicated (DPS = ¥0) and the payout ratio is shown as 0.0%, likely reflecting a retained-earnings posture rather than policy specifics. With FCF undisclosed, FCF coverage cannot be assessed. Given net income of ¥1.105bn and moderate leverage, I-ne appears capable of sustaining a dividend if instituted, but current emphasis may be on reinvestment and brand building. Policy outlook will depend on growth opportunities, marketing intensity needs, and inventory normalization; absent explicit guidance and cash flow data, we cannot draw firm conclusions on dividend sustainability or future payout trajectory.

Business Outlook

The company explicitly stated risks in achieving full-year targets. Due to delayed recognition formation for YOLU renewal, delayed promotion of new Haircare products, and excessive investment restraint on standard Beauty Appliances products (concentration on mid-to-high price range), there is a possibility of revenue shortfall. However, net income is expected to meet targets (excluding benefit costs) due to tax expense reduction from subsidiary integration and wage increase promotion tax credits. For Q4 alone, significant revenue increase compared to Q3 is expected through enhanced investment in Haircare and Beauty Appliances and new product launches (7 products planned for Q4 alone, 5 products cumulative for Q1-Q3). In the mid-term, the company aims to transform its business portfolio through regrowth of Haircare and Beauty Appliances and further expansion of Skincare and Other, targeting ¥100 billion in revenue, 14% EBITDA margin, and 11% operating margin by 2028-30. The EBITDA margin target for existing businesses is approximately 15-17%, with a plan to achieve company-wide EBITDA margin of 14% after deducting M&A-related expenses and new business costs (total 4-6% of revenue).

Management Guidance

Management recognizes the issue that the 2024 organizational restructuring complicated decision-making processes, preventing IPTOS (proprietary brand management system) from functioning adequately. In 2025, the company is implementing a review of decision-making processes, organizational streamlining, and absorption merger of Endeavour Co., with full-scale new product launches under the completely new structure planned for H2 2026. For Haircare, online sales increased +19.5% YoY with revenue growth across all major brands, and BOTANIST showed solid growth of +4.8% in Q3 alone. BOTANIST SANTAL, launched in September, achieved 193% of plan with EC-led launch, winning a total of 10 rankings in EC platforms. YOLU recovered significantly with +71.4% QoQ in Q3 alone, despite -2.2% YoY. The skincare line launched in July achieved distribution in 11,000 offline stores and won 4 cumulative EC platform rankings. For Beauty Appliances, the mid-to-high price range (sales composition ratio increased from 33% to 45%) performed well with +16.8% revenue growth within the segment, but investment restraint on standard products impacted more than expected, resulting in overall revenue decline. For Q4 alone, significant revenue increase compared to Q3 is expected through enhanced investment in standard products and launch of 7 new products. PMI is progressing smoothly, with Tout Vert Co. achieving revenue growth and gross margin improvement, and Artemis Co. improving Beauty Appliances gross margin by an average of 8 percentage points. The mid-term policy is to acquire new strengths and expand business domains through M&A, executing investments with emphasis on financial discipline (consolidated EPS improvement, EBITDA multiple setting, Net Debt/EBITDA below 2x). For shareholder returns, while prioritizing growth investments, the company will implement measures considering cash balance and stock price; for 2025, significant expansion of shareholder benefits and dividend increase have been decided.

Strategic Initiatives

• Business portfolio transformation: Develop Skincare and Other category as a new growth pillar, raising sales composition ratio to approximately 20% by 2028-30 (Haircare approximately 40%, Beauty Appliances and Other approximately 40%)
• Promotion of M&A strategy: Strengthen dedicated M&A organization to enhance corporate value with financial discipline (EPS improvement, EBITDA multiple setting, Net Debt/EBITDA below 2x), pursue talent acquisition considering PMI and commitment from business managers
• Regrowth of existing core businesses: Reinforce IPTOS (decision-making process) for Haircare and Beauty Appliances, review development and investment decision-making processes (rebalancing art and science), enhance investment in core brands, and develop new products from in-house R&D organization 'JBIST'
• Online sales expansion: Q3 cumulative growth of +53.6% YoY, online sales ratio improved from approximately 32% to 44%. Expand reach to mass beauty consumers through fusion of digital marketing and offline distribution capabilities (OMO strategy)
• Continuous improvement of cost of sales ratio: Three consecutive periods of YoY improvement through M&A contributions, online sales expansion, and strengthened partnerships with OEM partners (Q3 FY24: 42.3%, down 4.2 percentage points YoY). Aim to maintain solid gross margin in the mid-to-long term
• Foundation building for global markets: Position foundation building in Southeast Asia, US, etc. as mid-term strategy, making global expansion a growth pillar in addition to domestic TAM of approximately ¥5.2 trillion
• Strengthening sustainability: Promote ESG initiatives including participation in Ministry of the Environment's carbon footprint model project, plant conservation activities through BOTANIST Foundation, and use of biomass PET and FSC-certified paper

Risk Assessment

Business Risks:

• Marketing spend effectiveness risk leading to sustained SG&A pressure and negative operating leverage
• Channel and mix shifts (e-commerce vs. brick-and-mortar, domestic vs. overseas) impacting gross and operating margins
• Competitive intensity in beauty/personal care compressing pricing power and requiring higher promotion
• Supply chain and logistics cost volatility affecting unit economics
• Brand concentration risk if a few hero SKUs drive a disproportionate share of sales
• Regulatory and product compliance risks across markets

Financial Risks:

• Potential working capital build (inventories/receivables) during growth phases straining OCF
• Tax burden volatility (effective tax rate implied ~53–54%) reducing net profitability
• Exposure to FX for imported materials and overseas sales impacting margins
• Limited visibility on interest expense and debt structure due to data unavailability

Key Concerns:

• Operating income down 25.4% YoY despite 9.8% revenue growth, indicating negative operating leverage
• Net margin at 3.22% and ROE at 5.82% are modest for the category
• Cash flow non-disclosure prevents validation of earnings quality and FCF generation
• Elevated inferred tax rate weighing on bottom line

Risk Factors from Presentation:

• IPTOS dysfunction occurred in 2024 in existing core businesses of Haircare and Beauty Appliances due to organizational restructuring, resulting in performance decline of new products and delayed decision-making
• Risk in achieving full-year revenue targets due to delayed market recognition formation for YOLU renewal and delayed promotion of new Haircare products
• Excessive investment restraint on standard Beauty Appliances products (concentration on mid-to-high price range) resulted in greater-than-expected revenue decline in standard products, with possibility that ROAS-focused investment led to brand equity deterioration
• Temporary revenue decline in Q2 alone due to withdrawal from Chinese market (Haircare)
• Strategic investment reinforcement in advertising and promotion expenses increased promotion expense ratio by 1.6 percentage points YoY, pressuring operating margin
• Sales commission ratio increased by 1.5 percentage points YoY (EC platform fees and payment processing fees) with increased online sales ratio
• Risk of market share decline due to external environment changes (diversification of consumer preferences, increase in competing emerging brands, delayed response to functional-focused trends)

Investment Implications

Key Takeaways:

• Top-line growth of 9.8% YoY is solid, but profitability lagged due to SG&A intensity
• Gross margin remains strong at 48.5%, underpinning brand economics
• ROE at 5.82% is constrained primarily by low net margin
• Liquidity and solvency appear sound; estimated equity ratio ~54%
• Cash flow visibility is limited in this dataset; monitor OCF and FCF trends closely

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio
• Gross margin stability amid input cost and channel mix changes
• OCF/Net income and FCF once disclosed
• Inventory days and receivable/payable turns (working capital efficiency)
• Effective tax rate normalization
• Ordinary income vs. operating income gap (non-operating gains/losses)

Relative Positioning: Within Japan beauty/personal care peers, I-ne demonstrates healthy gross margins and growth but currently trails on operating margin and ROE due to elevated SG&A and tax burden; balance sheet strength is competitive, offering flexibility to optimize spend and improve returns if operating leverage can be restored.

Supplementary Insights (Key Highlights)

• The Skincare and Other category grew +434.9% YoY, with its sales composition ratio increasing from approximately 5% in FY2023 to an expected 20% in FY2025, indicating smooth transformation of the business portfolio
• PMI for two M&A deals (Tout Vert Co. and Artemis Co.) progressing smoothly, achieving revenue growth and gross margin improvement. Beauty Appliances business improved gross margin by an average of 8 percentage points
• Cost of sales ratio improved YoY for three consecutive periods, declining to 42.3% in FY24/Q3 (down 4.2 percentage points YoY). M&A contributions, online sales expansion, and OEM partnerships proved effective
• Existing core businesses (Haircare and Beauty Appliances) faced challenges with IPTOS dysfunction due to complex decision-making processes; organizational reforms and decision-making process reviews are being implemented from 2025 onward. BOTANIST SANTAL and new YOLU products showed strong initial performance
• Significant expansion of shareholder benefits (¥10,000 worth of digital gifts for 100 shares, ¥20,000 for 500+ shares) achieved industry-leading shareholder returns with 8.1% benefit yield and 9.3% total return including dividends
• Toward the goal of ¥100 billion in revenue by 2028-30, the company plans to transform its business portfolio to approximately 40% Haircare and 60% Skincare/Other plus M&A. Target EBITDA margin of 14% and operating margin of 11%

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