AUTOSERVER CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.88B
• Operating Income: ¥1.82B
• Net Income: ¥1.14B
• EPS: ¥159.67

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: A mixed Q3—top-line grew modestly but profitability compressed, leading to an 8% YoY decline in operating income and 7.3% decline in net income. Revenue rose 2.0% YoY to 48.84, while gross profit reached 35.43, yielding a strong 72.5% gross margin. Operating income fell to 18.16, and ordinary income to 18.25, indicating negative operating leverage despite modest sales growth. Net income declined to 11.44 with an effective tax rate of 37.3%, keeping the net margin at a still-solid 23.4%. Operating margin stood at 37.2% versus an estimated 41.2% a year ago, implying roughly 400 bps of margin compression. Ordinary income margin was about 37.4%, reflecting minimal non-operating contribution (non-operating income 0.07 vs expenses 0.13). Interest expense remained negligible at 0.13 with a very strong interest coverage ratio of 145.07x, underscoring robust earnings capacity against financing costs. Balance sheet strength is notable: cash and deposits are 119.21 with total current assets of 134.23 vs current liabilities of 59.18, producing a current ratio of 226.8% and substantial working capital of 75.05. Debt-to-equity is conservative at 0.49x, and the equity ratio is approximately 60.3% (126.78 / 210.12), supporting solvency. ROE is calculated at 9.0% via DuPont (23.4% margin × 0.232 turnover × 1.66x leverage), respectable for a cash-rich, asset-light platform model but pressured by lower margins. Earnings quality cannot be fully assessed due to unreported cash flow statements; OCF/NI is not calculable, which limits certainty on cash conversion. Intangibles are meaningful (goodwill 27.11; intangibles 30.07), creating medium-term impairment sensitivity if growth underperforms. With payout ratio estimated at 41.5%, dividends appear manageable against earnings, though FCF coverage cannot be confirmed. Forward-looking, restoring operating margin discipline and monitoring the high tax rate will be key to stabilizing ROE above 9% and sustaining dividend capacity. Overall, the company maintains strong liquidity and low financial risk, but near-term investor focus will be on reversing negative operating leverage and protecting margins.

Profitability Analysis

ROE decomposition (DuPont): ROE 9.0% = Net Profit Margin 23.4% × Asset Turnover 0.232 × Financial Leverage 1.66x. The most notable change appears to be margin compression: operating income fell 8% YoY despite 2% revenue growth, implying lower operating margin. Business drivers likely include higher SG&A intensity (SG&A of 15.67 equals 32.1% of sales) and/or mix effects and pricing in the core platform business, while non-operating items had minimal offset. Asset turnover remains low at 0.232, consistent with a cash-rich balance sheet and sizable intangibles, so turnover likely did not improve YoY. Financial leverage is modest at 1.66x (assets/equity), not a significant driver of ROE changes. The margin pressure looks partly cyclical/operational rather than structural given high gross margin (72.5%), but sustainability depends on cost control and volume recovery; without evidence of one-time costs, assume ongoing pressure until management actions are visible. A concerning trend is negative operating leverage (OI -8% vs sales +2%); this suggests fixed cost growth or investment ahead of revenue, and should be monitored.

Growth Assessment

Revenue grew 2.0% YoY to 48.84, indicating modest topline expansion. Operating income declined 8.0% YoY to 18.16, signaling margin compression and negative operating leverage. Ordinary income and net income each declined 7.3%, reflecting similar pressure below operating level with limited help from non-operating items. Gross margin remains very high at 72.5%, implying the core business retains pricing power or high-value service mix. However, operating margin of 37.2% vs an estimated 41.2% last year indicates roughly 400 bps compression, likely from higher SG&A intensity or mix. Interest expense is de minimis, so growth is not constrained by financing costs. Outlook hinges on restoring operating efficiency and managing the elevated tax rate (37.3%); if margins stabilize, the company can translate modest revenue growth into profit growth given its low financial burden. Near-term, the earnings trajectory appears flat-to-soft unless cost measures or stronger volume/mix improvements emerge.

Financial Health

Liquidity is strong with a current ratio of 226.8% and quick ratio identical at 226.8%, comfortably above benchmarks. Cash and deposits of 119.21 far exceed short-term loans of 22.70, suggesting a net cash position even though full interest-bearing debt details are unreported. Debt-to-equity is 0.49x, indicating conservative leverage; equity ratio is about 60.3% (126.78/210.12), a solid capital base. There is no explicit red flag on maturity mismatch: short-term debt is well covered by cash and current assets. Noncurrent liabilities are low at 2.56, reducing refinancing and covenant risk. No off-balance sheet obligations were disclosed in the provided data. Warning thresholds are not breached: Current Ratio >> 1.0 and D/E well below 2.0.

Cash Flow Quality

Operating cash flow data are unreported, so OCF/Net Income and FCF cannot be assessed; this is a key limitation for earnings quality analysis. With net income at 11.44 and interest expense minimal, operating cash generation would typically be expected to cover interest and a moderate dividend, but this cannot be confirmed. Working capital signs are neutral-to-positive: accounts receivable are very low (0.71), and cash is high, suggesting limited collection risk and potentially upfront cash generation; however, the absence of inventory and payables detail limits conclusions on working capital swings. No signs of non-operating reliance are evident given the small non-operating line (non-operating income ratio 0.6%). Until OCF is disclosed, treat cash conversion risk as unknown.

Dividend Sustainability

The calculated payout ratio is 41.5%, which is within the sustainable range (<60%) based on earnings. FCF coverage cannot be determined because OCF and capex are unreported; therefore, sustainability should be assessed with caution. The large cash balance (119.21) and low leverage provide a buffer to maintain dividends through modest downturns. Absent evidence of significant capex or acquisitions, near-term dividend capacity appears supported by earnings and liquidity. Policy outlook cannot be confirmed due to lack of disclosed dividend per share and cash flow guidance.

Risk Assessment

Business Risks:

• Negative operating leverage as SG&A intensity appears to have risen while revenue growth was modest (+2% YoY).
• Potential pricing or mix pressure in core services despite high gross margin, leading to ~400 bps operating margin compression YoY.
• Industry cyclicality in used car volumes and pricing, which can affect transaction-driven revenues and fees.
• Competitive pressure from other digital platforms or auction networks potentially impacting take rates.
• Regulatory changes in used vehicle transactions and data transparency that may alter operating practices or costs.

Financial Risks:

• Elevated effective tax rate (37.3%) dampening net profitability and cash available for reinvestment/dividends.
• Goodwill (27.11) and intangible assets (30.07) are meaningful, creating impairment risk if growth underperforms.
• Reliance on short-term loans (22.70), though mitigated by substantial cash; refinancing risk appears low but exists.
• Incomplete visibility on OCF and capex creates uncertainty around cash conversion and FCF sustainability.

Key Concerns:

• Operating income decline (-8% YoY) despite revenue growth, indicating cost pressure.
• Lack of cash flow disclosure prevents confirmation of earnings quality and dividend FCF coverage.
• Margin compression may persist if cost controls or mix improvements are not implemented.
• High tax rate may continue to cap net margin near current levels unless mitigated.

Investment Implications

Key Takeaways:

• Topline growth was positive but insufficient to prevent an 8% decline in operating profit.
• Operating margin compressed by roughly 400 bps YoY to 37.2%, driving net income down 7.3%.
• Balance sheet is strong: current ratio 227%, D/E 0.49x, equity ratio ~60%.
• ROE is 9.0% driven by strong net margin but hampered by low asset turnover (0.232).
• Non-operating items are negligible; core operations drive results.
• Dividend payout ratio (~41.5%) appears manageable, but FCF coverage is unverified.

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio for signs of cost discipline and operating leverage normalization.
• Effective tax rate trajectory and any tax planning measures.
• Cash flow from operations and free cash flow once disclosed.
• Goodwill/intangible impairment indicators relative to growth trends.
• Revenue growth rate and unit volumes/transaction metrics in the core platform.

Relative Positioning: Within its niche, the company exhibits superior liquidity and low leverage, but current-period operating efficiency worsened. The financial profile is conservative versus many peers, while profitability remains high in absolute margin terms despite recent compression.

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