Odawara Engineering Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥12.22B
• Operating Income: ¥1.88B
• Net Income: ¥456M
• EPS: ¥237.87

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

Odawara Engineering (TSE: 6149) delivered a strong FY2025 Q3 performance with revenue of ¥12.22bn, up 22.9% YoY, highlighting robust demand and improved execution. Operating income rose 141.0% YoY to ¥1.88bn, indicating sizeable operating leverage and material margin expansion. Net income increased 198.2% YoY to ¥1.36bn, translating to an EPS of ¥237.87. Gross profit of ¥2.80bn implies a gross margin of 22.9%, broadly consistent with the topline mix and likely better pricing and utilization. Net profit margin reached 11.12%, supported by modest non-operating items and a low interest burden. Ordinary income of ¥1.93bn exceeded operating income slightly, evidencing limited but positive non-operating contributions. Interest expense was minimal at ¥0.44mn, resulting in an exceptionally high interest coverage of about 4,279x, reflecting a low-debt profile. Balance sheet strength is evident: total assets were ¥26.23bn and total equity ¥17.52bn, implying a calculated equity ratio of roughly 66.8% and financial leverage of 1.50x. Liquidity is sound with a current ratio of 193% and a quick ratio of 145%, supported by working capital of ¥10.45bn. Inventories stood at ¥5.41bn, a notable component of current assets and a key lever for cash conversion going forward. DuPont analysis yields an ROE of 7.76%, driven by an 11.12% net margin, 0.466x asset turnover, and 1.50x leverage—suggesting profit improvement more than balance-sheet gearing as the primary ROE driver. The YoY step-up in operating profit versus revenue underscores positive operating leverage and likely better cost absorption. Reported EBITDA and operating cash flow were not disclosed (shown as zero), limiting assessment of earnings-to-cash conversion; accordingly, EBITDA-based metrics cannot be relied upon this quarter. The reported equity ratio and cash flow figures show as zero because they were not disclosed in the data provided; analysis is therefore based on available non-zero items and reasonable calculations where possible. While dividend data are not disclosed (DPS shown as zero), the earnings base implies capacity for distributions subject to policy and cash generation. Overall, the company exhibits improving profitability, strong liquidity, and modest leverage, but visibility on cash flow quality and capital allocation remains limited due to undisclosed cash flow items.

Profitability Analysis

ROE_decomposition: ROE 7.76% = Net margin 11.12% × Asset turnover 0.466 × Leverage 1.50. ROE improvement this period is principally margin-driven rather than balance-sheet leverage, given a conservative capital structure. margin_quality: Gross margin 22.9% (¥2.80bn/¥12.22bn) indicates healthy manufacturing economics; operating income of ¥1.88bn implies an operating margin of approximately 15.4%. Net margin at 11.12% benefited from low interest costs (¥0.44mn). Using ordinary income (¥1.93bn) and income tax (¥390.96mn) implies an effective tax rate near 20%, consistent with domestic statutory ranges, even though the displayed metric shows 0.0% due to non-disclosure. operating_leverage: Revenue +22.9% YoY versus operating income +141.0% YoY demonstrates strong operating leverage from fixed-cost absorption and/or mix improvements. The spread between gross and operating margins suggests good SG&A discipline and cost control.

Growth Assessment

revenue_sustainability: Topline growth of 22.9% YoY indicates solid demand; sustainability will depend on order intake and backlog in core end-markets (e.g., motor/EV-related winding equipment). Mix and pricing appear supportive given the margin trajectory. profit_quality: Profit growth outpaced revenue growth, implying favorable operating leverage and possibly improved product mix. Limited non-operating gains (ordinary income slightly above operating income) suggests core operations are the main driver. outlook: With a calculated ROE of 7.76% and strong margins, the business is positioned to sustain earnings if order momentum continues. Monitoring order backlog, book-to-bill, and capacity utilization will be key to confirming ongoing growth. FX and capex cycles in customers’ industries remain important swing factors.

Financial Health

liquidity: Current ratio 193.3%, quick ratio 145.0%, and working capital of ¥10.45bn point to ample short-term liquidity. Inventories are ¥5.41bn; inventory management will influence future cash conversion. solvency: Total liabilities of ¥11.47bn versus equity of ¥17.52bn yield a debt-to-equity proxy of 0.65x (using total liabilities as a broad measure). Interest expense is de minimis (¥0.44mn) with coverage of ~4,279x, indicating very low financial risk. capital_structure: Calculated equity ratio ≈66.8% (¥17.52bn/¥26.23bn assets). Financial leverage at 1.50x assets-to-equity reflects a conservative balance sheet supportive of business stability.

Cash Flow Quality

earnings_quality: Operating cash flow was not disclosed this period (shown as zero), preventing direct assessment of cash earnings conversion. Given higher inventories and strong revenue growth, working capital may have absorbed cash. FCF_analysis: Free cash flow was not disclosed (shown as zero). Without OCF and capex data, FCF coverage of earnings cannot be evaluated for this quarter. working_capital: Current assets are ¥21.65bn with inventories at ¥5.41bn and current liabilities at ¥11.20bn. The scale of inventories relative to revenue warrants tracking inventory turns and receivables collection to gauge future OCF normalization.

Dividend Sustainability

payout_ratio_assessment: EPS is ¥237.87; DPS is not disclosed (shown as zero). Consequently, payout ratio cannot be assessed from disclosed data. FCF_coverage: FCF was not disclosed, so coverage of any potential dividend cannot be determined. Balance sheet strength suggests capacity, but visibility depends on OCF and capex trends. policy_outlook: Absent stated policy details, future distributions will likely hinge on cash generation, investment needs (capacity, R&D), and order visibility. Monitoring management guidance and historical payout tendencies is recommended.

Risk Assessment

Business Risks:

• Cyclical demand from automotive/EV and industrial motor end-markets affecting order intake and utilization
• Project timing and delivery risks that can shift revenue and margins across quarters
• Product mix and pricing pressure from competitors in precision machinery
• Supply chain constraints affecting lead times and cost of components
• Customer concentration risk common in specialized machinery

Financial Risks:

• Working capital swings (notably inventories and receivables) potentially dampening OCF
• FX volatility impacting export competitiveness and input costs
• Potential capex requirements to scale capacity or enhance technology
• Limited disclosure of cash flow details this period reduces visibility on cash conversion

Key Concerns:

• Undisclosed operating, investing, and financing cash flows limit assessment of earnings quality
• Inventory level of ¥5.41bn requires monitoring for turnover and obsolescence risk
• Sustainability of extraordinary operating leverage if demand normalizes

Investment Implications

Key Takeaways:

• Strong YoY revenue growth (+22.9%) and outsized operating profit growth (+141.0%) signal robust operating leverage
• Healthy profitability: gross margin 22.9%, operating margin ~15.4%, net margin 11.12%
• Conservative balance sheet with calculated equity ratio ~66.8% and minimal interest burden
• Cash conversion unclear due to undisclosed OCF/FCF; working capital dynamics are a near-term swing factor
• ROE at 7.76% driven mainly by margins rather than leverage

Metrics to Watch:

• Order backlog and book-to-bill ratio
• Operating cash flow and OCF/Net income conversion
• Inventory turns and receivables days
• Gross and operating margin trajectory
• FX exposure and hedging impact
• Capex intensity and R&D spend
• Tax rate normalization versus ~20% implied this period

Relative Positioning: Within Japanese precision machinery/specialized equipment peers, Odawara shows solid profitability and a conservative balance sheet, with performance leverage to demand in EV/motor manufacturing; disclosure gaps in cash flows temper near-term visibility compared to peers with fuller cash reporting.

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