NICHIRIN CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥54.52B
• Operating Income: ¥6.94B
• Net Income: ¥5.37B
• EPS: ¥312.28

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Nichirin’s FY2025 Q3 consolidated results under JGAAP show steady top-line expansion with controlled costs and strong balance sheet health. Revenue grew 2.0% YoY to ¥54.5bn, while operating income rose 1.9% YoY to ¥6.94bn, indicating broadly stable operating leverage and disciplined cost control. Gross profit of ¥13.0bn implies a gross margin of 23.8%, consistent with a resilient product mix and procurement discipline despite automotive sector cost pressures. Operating margin stood at 12.7%, a robust level for an auto parts supplier, suggesting solid pricing, utilization, and cost pass-through. Ordinary income (¥6.55bn) trailed operating income, implying net non-operating expense—likely FX or other financial items—though interest burden is minimal. Net income declined 3.4% YoY to ¥4.12bn, pointing to pressure below the operating line and/or tax effects rather than core operating weakness. The implied effective tax rate based on disclosed line items is approximately 32% (income tax of ¥2.11bn versus ordinary income of ¥6.55bn as a proxy for pre-tax), within a normal range for Japan-based manufacturers. ROE is 6.44% on net profit margin of 7.55%, asset turnover of 0.655x, and financial leverage of 1.30x, indicating shareholder returns driven primarily by operating profitability rather than leverage. ROA is approximately 4.9%, consistent with the asset intensity of the business and moderate turnover. Liquidity is very strong, with current assets of ¥51.2bn vs. current liabilities of ¥13.5bn, yielding a current ratio of 3.79x and working capital of ¥37.6bn. The balance sheet is conservative: total liabilities are only ¥19.1bn against equity of ¥63.9bn (debt-to-equity ~0.30x; equity ratio implied at ~76.8%). Interest expense is just ¥57m and interest coverage is 121.8x, underscoring low financial risk. Cash flow statement items and D&A were not disclosed in the provided XBRL snapshot, so EBITDA and free cash flow cannot be assessed from this dataset; however, the strong working capital position and modest leverage suggest flexibility to absorb shocks. Dividend data are not disclosed here (DPS and payout shown as zero indicate non-reporting), but current profitability and the balance sheet imply capacity for distributions subject to policy and cash flow. Overall, Nichirin presents stable operating performance with minimal financial risk and modest growth, albeit with some drag below the operating line and data limitations on cash flows. Outlook hinges on auto production volumes, FX, and raw material trends, with the company well positioned from a liquidity and solvency standpoint.

Profitability Analysis

ROE decomposition (DuPont): Net margin 7.55% × Asset turnover 0.655 × Financial leverage 1.30 ≈ 6.44% ROE. Gross margin is 23.8% (¥12,992m/¥54,522m), operating margin 12.7% (¥6,942m/¥54,522m), and ordinary margin 12.0% (¥6,548m/¥54,522m), indicating a small non-operating drag. The implied effective tax rate, approximated as income tax (¥2,110m) over a pre-tax proxy (ordinary income ¥6,548m), is ~32.2%, explaining the gap from operating to net income alongside non-operating items. Operating leverage appears neutral to slightly positive: revenue +2.0% YoY and operating income +1.9% YoY suggest stable incremental margins. Interest burden is negligible (¥57m), supporting high interest coverage of 121.8x. Overall profitability quality is characterized by healthy core margins and low financial friction, with ROA ~4.9% and ROE ~6.4% primarily driven by operating performance rather than leverage expansion.

Growth Assessment

Top-line grew 2.0% YoY to ¥54.5bn, a modest pace consistent with global auto production normalization and stable demand in key regions. Operating income growth of 1.9% YoY indicates that cost control and pricing broadly matched top-line expansion, keeping operating margin stable at ~12.7%. Net income declined 3.4% YoY to ¥4.12bn, reflecting non-operating headwinds and/or tax impacts rather than deterioration in core operations. With ordinary income below operating income, FX or other financial items likely weighed on growth; interest costs were minimal, so the non-operating variance likely stems from items other than interest. Sustainability of revenue growth appears reasonable given exposure to OEM production trends, but visibility depends on regional mix and customer schedules. Profit quality is solid at the operating level, supported by a consistent gross margin profile; however, the volatility of non-operating items (e.g., FX) can influence the bottom line. Near-term outlook hinges on OEM build rates, raw material input costs, and currency movements; stable margins suggest the company can manage modest cost inflation if pricing mechanisms hold. Absent disclosed capex and D&A, assessing medium-term capacity-driven growth is constrained; retained earnings and balance sheet strength support investment capacity. Overall, growth is steady but not outsized, with exogenous factors (FX, materials) determining the slope of net profit trajectories.

Financial Health

Liquidity is strong: current assets ¥51,151m vs. current liabilities ¥13,507m yield a current ratio of 3.79x and working capital of ¥37,644m. Inventories are ¥14,310m; without receivable and cash disclosure here, the quick ratio provided (2.73x) still indicates ample short-term coverage. Solvency is robust with total liabilities of ¥19,120m versus equity of ¥63,935m, implying a debt-to-equity of ~0.30x and an equity ratio implied at ~76.8% (equity/total assets). Interest coverage is 121.8x (operating income/interest expense), reflecting very low financial risk. Asset base totals ¥83,291m; asset intensity is moderate with turnover of 0.655x. The capital structure is conservative, providing capacity for investment, working capital swings, or shareholder returns as policy permits.

Cash Flow Quality

Operating, investing, and financing cash flows, as well as D&A, were not disclosed in this dataset (zeros indicate non-reporting). As such, OCF/Net income, free cash flow, and EBITDA cannot be assessed from the provided data. Earnings quality can be partially inferred from margins and interest coverage: stable gross and operating margins and minimal interest burden indicate that reported earnings are supported by core operations. Working capital appears ample (¥37,644m), with inventories at ¥14,310m; however, without period-on-period cash flow details, we cannot gauge cash conversion or changes in working capital. Capital intensity and maintenance capex are not observable here; therefore, free cash flow sustainability cannot be quantified from this snapshot. Overall, qualitative indicators suggest sound earnings quality, but quantitative cash flow assessment remains limited pending disclosure of OCF and capex.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in this dataset (zeros represent non-reporting). Based on current profitability (net income ¥4,115m YTD) and a strong balance sheet (low leverage, high liquidity), capacity to fund dividends appears intact in principle. However, without OCF and capex data, free cash flow coverage of dividends cannot be evaluated. Historically, sustainability would be anchored by stable operating margins and low interest burden, but confirmation requires cash flow statements. Policy outlook will depend on management’s capital allocation priorities among investment, cash reserves, and shareholder returns; the conservative capital structure provides flexibility.

Risk Assessment

Business Risks:

• Cyclicality of global auto production affecting volume and mix
• OEM pricing pressure and periodic model re-sourcing
• Raw material and logistics cost volatility (rubber, petrochemicals, freight)
• Foreign exchange fluctuations impacting non-operating income and competitiveness
• Geopolitical and supply-chain disruptions (e.g., parts shortages, shipping constraints)
• Customer concentration risk typical of auto suppliers
• Regulatory and environmental requirements affecting materials and processes

Financial Risks:

• FX-related non-operating volatility affecting ordinary and net income
• Working capital swings tied to OEM schedules and inventory normalization
• Potential capex needs for new programs or regional capacity without disclosed cash flow buffer
• Tax rate variability across jurisdictions (~32% implied currently)

Key Concerns:

• Net income decline (-3.4% YoY) despite stable operating profit, implying non-operating headwinds
• Lack of disclosed cash flow data limits assessment of free cash flow and dividend coverage
• Ordinary income below operating income suggests FX or other non-operating losses that could persist with currency volatility

Investment Implications

Key Takeaways:

• Steady growth with resilient operating margins (OPM ~12.7%) and low financial leverage
• ROE of 6.44% is driven by solid margins and moderate asset turnover rather than leverage
• Exceptional liquidity (current ratio ~3.8x; working capital ~¥37.6bn) underpins resilience
• Non-operating items and taxes are the principal swing factors for bottom-line volatility
• Cash flow insights are constrained due to non-disclosure; balance sheet strength mitigates uncertainty

Metrics to Watch:

• FX rates and realized FX gains/losses impacting ordinary income
• Raw material cost trends and pass-through efficacy
• OEM production schedules and regional sales mix
• Inventory levels and turnover days as a proxy for cash conversion
• Capex and OCF disclosure to assess FCF and dividend capacity
• Operating margin trajectory versus peer auto parts suppliers

Relative Positioning: Versus Japanese auto parts peers, Nichirin exhibits above-average operating margins and markedly conservative leverage with strong liquidity, positioning it as a financially resilient supplier; growth is modest and bottom-line sensitivity to non-operating items (notably FX) is higher than operating sensitivity.

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