Seibu Giken Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥21.64B
• Operating Income: ¥3.25B
• Net Income: ¥2.44B
• EPS: ¥120.21

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 profitability amid top-line contraction; operating leverage and cost control drove margin expansion, but cash-flow visibility is absent. Revenue was 216.36 (−7.5% YoY), while operating income rose to 32.53 (+11.5% YoY) and ordinary income reached 32.12 (+5.8% YoY). Net income came in at 24.14 (−1.2% YoY), implying an 11.2% net margin. Gross profit margin is indicated at 36.7%, and operating margin stands at a robust 15.0% (32.53 / 216.36). Based on YoY movements, we estimate operating margin expanded by roughly 250 bps (from ~12.5% to 15.0%). Net margin appears to have expanded by about 70 bps YoY (from ~10.5% to ~11.2%) despite lower revenue. Effective tax rate is 20.6%, and interest coverage remains exceptionally strong at ~181x, underscoring low financial risk. Liquidity is solid with a current ratio of 205% and quick ratio of 153%, backed by cash and deposits of 136.37 and modest debt (short-term 18.00, long-term 6.17). Balance sheet strength translates to a net cash position of roughly 112 (cash minus interest-bearing loans), supporting resilience and optionality. ROE is 8.1%, driven by 11.2% net margin, asset turnover of 0.463, and financial leverage of 1.56x. ROIC is strong at 13.8%, comfortably above a typical 7–8% target. Earnings quality cannot be verified as operating cash flow and free cash flow were not disclosed; this is a key limitation. Working capital is sizable (165.62), with inventories at 81.62 and receivables at 75.65; execution on conversion to cash will be important into Q4. The payout ratio is indicated at 59.4%, hovering near the upper bound of a conservative range, but coverage by FCF cannot be assessed. Forward-looking, sustaining the improved cost/mix dynamics while stabilizing demand will be critical; absent OCF data, we remain cautious on cash conversion risk, especially with inventories elevated relative to YTD sales.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 11.2% × 0.463 × 1.56 ≈ 8.1%. The most notable change vs. last year is the improvement in margin: operating income grew 11.5% with revenue down 7.5%, implying operating leverage and/or favorable mix/price contributed to margin gains. Asset turnover likely declined YoY given the revenue contraction against a relatively stable asset base (assets 466.96), partially offsetting the margin improvement. Financial leverage appears conservative at 1.56x and likely stable; leverage did not drive the ROE change. Business drivers: lower SG&A intensity and better gross-to-operating conversion (operating margin ~15%) suggest disciplined cost control and mix benefits; ordinary income also benefited slightly from non-operating gains (2.29) versus minimal non-operating expenses (1.10). Sustainability: margin uplift from structural cost control could persist, but if mix/price or project timing effects were one-off, margins could normalize with volume. Watch for SG&A growth relative to revenue; current SG&A ratio is ~23.3% (50.33 / 216.36).

Growth Assessment

Top line declined 7.5% YoY to 216.36, indicating softer demand and/or project timing effects. Despite this, operating income rose 11.5% YoY to 32.53, showcasing strong operating leverage and cost discipline. Ordinary income increased 5.8% to 32.12, with limited contribution from non-operating items (net +1.19). Net income slipped 1.2% to 24.14, partly reflecting a normalized tax rate (20.6%). The profitability profile strengthened: operating margin ~15.0% and net margin ~11.2%. Revenue sustainability remains uncertain without order/backlog disclosure; inventories of 81.62 and receivables of 75.65 suggest continued delivery pipeline but raise execution risk on cash conversion if demand wavers. Outlook hinges on maintaining price/mix and SG&A efficiency while stabilizing volumes; a modest recovery in demand would leverage the leaner cost base. With ROIC at 13.8%, incremental growth investments appear value-accretive if pipeline visibility supports them.

Financial Health

Liquidity is strong: current ratio 205.2% and quick ratio 153.4%. No warning flags (current ratio well above 1.0). Solvency is conservative: liabilities/equity (reported D/E proxy) at 0.56x, and interest coverage ~181x. Interest-bearing loans total ~24.17 against cash of 136.37, implying net cash of ~112, lowering refinancing risk. Maturity mismatch risk appears low given current assets (323.04) comfortably exceed current liabilities (157.42); short-term loans (18.00) are readily covered by cash. No off-balance sheet obligations were disclosed in the data provided. Equity is 299.07 versus assets 466.96 (equity ratio ~64% by calculation), indicating a solid capital base.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are unreported, so earnings-to-cash conversion cannot be assessed (OCF/NI not calculable). Given higher inventories (81.62) and sizable receivables (75.65), working capital could be a drag if conversion slows; this is a risk to cash flow quality. With no capex data, we cannot judge maintenance vs. growth investment intensity or FCF sustainability. There are no clear signs of working capital manipulation from the limited data, but the absence of OCF and capex disclosure is a key limitation.

Dividend Sustainability

Payout ratio is indicated at 59.4%, near the top of a generally sustainable range (<60%). With net cash of ~112 and strong margins, the balance sheet supports near-term dividends. However, FCF coverage cannot be evaluated due to unreported OCF and capex. If working capital remains elevated or capex steps up, cash coverage could tighten. Policy outlook appears manageable given profitability and low leverage, but improved disclosure on OCF/FCF would increase confidence.

Risk Assessment

Business Risks:

• Revenue contraction (−7.5% YoY) indicating demand softness and/or project timing risk
• Potential margin normalization if favorable mix/price proves transitory
• Execution risk around inventory and receivables conversion amid macro uncertainty
• Supply chain and input cost volatility impacting gross margin
• FX exposure if exports or overseas subsidiaries are material (not disclosed here)

Financial Risks:

• Cash flow visibility risk due to unreported OCF/FCF and capex
• Working capital absorption risk (inventories 81.62, receivables 75.65) pressuring near-term cash
• Dividend sustainability risk if FCF underperforms given ~59% payout ratio

Key Concerns:

• Top-line decline alongside margin expansion—sustainability depends on mix and cost control persisting
• Absence of cash flow data obscures earnings quality assessment
• Ordinary income dependency on non-operating items is low this quarter, but variability remains a factor

Investment Implications

Key Takeaways:

• Strong operating leverage: operating income +11.5% YoY on −7.5% revenue, operating margin ~15.0%
• ROE at 8.1% with robust ROIC of 13.8% signals attractive capital efficiency
• Net cash position (~112) and high liquidity reduce financial risk
• Cash-flow disclosure gap is the main analytical constraint and risk to confidence
• Payout ratio ~59% is near the upper end of comfort without FCF data

Metrics to Watch:

• Order intake/backlog to validate revenue trajectory into FY-end
• Operating cash flow and free cash flow (when disclosed), especially working capital trends
• SG&A ratio and gross-to-operating profit conversion to confirm structural margin gains
• Inventory and receivables turnover to assess cash conversion
• Capex levels versus growth pipeline to gauge FCF headroom for dividends

Relative Positioning: Within capital goods/industrial peers, Seibu Giken exhibits stronger-than-average margins and a clean balance sheet (net cash, high interest coverage). The main differentiator is robust ROIC, while the key handicap versus best-in-class peers is the current lack of cash-flow transparency and recent top-line contraction.

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