OPTORUN CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥23.71B
• Operating Income: ¥2.83B
• Net Income: ¥5.51B
• EPS: ¥50.92

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

Optorun Co., Ltd. (6235) reported FY2025 Q3 consolidated results under JGAAP showing top-line resilience but significant profit compression. Revenue was ¥23.71 billion, down 5.9% YoY, indicating a modest demand slowdown or order timing effects typical of capital equipment cycles. Gross profit of ¥12.18 billion implies a strong gross margin of 51.4%, underscoring differentiated technology and pricing power in its niche. Despite the solid gross margin, operating income declined 55.1% YoY to ¥2.835 billion, revealing pronounced negative operating leverage. The gap between gross profit and operating income suggests elevated SG&A of roughly ¥9.34 billion, or about 39.4% of revenue, materially higher than typical steady-state levels for equipment makers. Ordinary income of ¥2.587 billion sits below operating income, implying net non-operating losses despite a minimal interest burden. Net income fell 62.0% YoY to ¥2.064 billion, equating to a net margin of 8.71%, and EPS of ¥50.92, reflecting the sharper deterioration at the bottom line. DuPont analysis shows ROE of 3.84%, driven by a net margin of 8.71%, low asset turnover of 0.297, and modest financial leverage of 1.48x. This translates to ROA of about 2.6% and indicates balance-sheet strength but subdued capital efficiency. The balance sheet remains robust: total assets were ¥79.77 billion, liabilities ¥22.44 billion, and equity ¥53.81 billion, implying an equity ratio of approximately 67.4% despite a reported 0.0% equity ratio figure that likely reflects data unavailability rather than economics. Liquidity is ample, with a current ratio of 369.6% and working capital of ¥39.81 billion. Interest coverage is extremely high at approximately 1,091x, confirming negligible reliance on debt financing. Several items show as zero (e.g., depreciation, cash flow, inventories, DPS), which should be interpreted as not disclosed in the XBRL submission rather than actual zeros; hence certain metrics such as EBITDA, OCF/NI, inventory-related ratios, and FCF coverage cannot be reliably assessed this quarter. The earnings profile suggests that cost discipline and operating efficiency will be key to restoring profitability once demand normalizes or backlog converts. Overall, Optorun retains financial flexibility and strong gross margins, but the quarter underscores heightened earnings volatility and a need to manage SG&A and working capital tightly. Given the limitations in cash flow disclosures, monitoring order intake, backlog, and conversion to shipments remains critical to gauge near-term trajectory.

Profitability Analysis

• ROE decomposition: ROE 3.84% = Net margin 8.71% × Asset turnover 0.297 × Leverage 1.48x. ROA approximates 2.6%, reflecting low capital efficiency typical of capital equipment businesses. • Margin quality: Gross margin is robust at 51.4%, signaling product differentiation and favorable mix; however, operating margin compressed to 12.0% (¥2.835bn/¥23.71bn) due to elevated SG&A (¥9.34bn), likely reflecting fixed cost absorption pressure amid lower sales and/or increased R&D/commercial investments. Net margin of 8.71% benefited from a low interest burden but was still materially down YoY alongside net income. • Operating leverage: Revenue fell 5.9% YoY while operating income fell 55.1% YoY, evidencing strong negative operating leverage. This indicates a relatively high fixed-cost base and sensitivity of earnings to volume/mix. • Non-operating items: Ordinary income (¥2.587bn) below operating income suggests net non-operating expense; given interest expense is only ¥2.6m, the delta likely comes from other non-operating items (e.g., FX, valuation losses, or other expenses), though specific drivers are not disclosed here. • EBITDA and D&A: Depreciation is undisclosed (shows as zero), so EBITDA and related metrics are not meaningful in this dataset; underlying cash profitability requires cash flow statements for validation.

Growth Assessment

• Revenue trend: Sales declined 5.9% YoY to ¥23.71bn, consistent with softer capital spending or timing of system acceptances, which are common in the optical thin-film equipment cycle. • Profit trend: Operating income (-55.1% YoY) and net income (-62.0% YoY) deteriorated faster than revenue, underscoring cost rigidity and mix effects. • Sustainability: Strong gross margins (51.4%) suggest that the core value proposition remains intact; recovery depends on order intake, backlog conversion, and stabilization of customer capital expenditures. • Mix and pricing: The gross margin indicates pricing power or favorable product mix, but the current cost structure elevates breakeven levels; scope exists to recover margins with volume normalization and SG&A control. • Outlook considerations: Near-term growth hinges on capex cycles in end markets (e.g., optics, displays, advanced manufacturing), supply chain normalization, and acceptance timing. • Data limitations: Lack of order/backlog and cash flow data constrains assessment of demand visibility and conversion; thus, any forward view must be treated cautiously and anchored on external disclosures.

Financial Health

• Liquidity: Current assets ¥54.57bn vs. current liabilities ¥14.77bn yield a current ratio of 369.6%, indicating ample short-term coverage. Quick ratio equals current ratio in this dataset because inventories are undisclosed; actual quick ratio may be lower if inventories are material. Working capital stands at ¥39.81bn, providing a substantial buffer. • Solvency: Total liabilities ¥22.44bn vs. equity ¥53.81bn imply D/E of ~0.42x (as provided) and an implied equity ratio of ~67.4% (equity/asset), despite a reported 0.0% equity ratio likely due to non-disclosure formatting. Interest burden is de minimis with ~1,091x coverage, indicating strong debt service capacity. • Capital structure: Low leverage and high equity cushion provide resilience through cycles and capacity to invest; however, low asset turnover (0.297) depresses overall returns on capital.

Cash Flow Quality

• Earnings quality: OCF, investing CF, and financing CF show as zero, indicating these cash flow items were not disclosed in the provided data. Consequently, OCF/Net income (reported as 0.00) and free cash flow are not decision-useful here. • Working capital: Inventories are undisclosed, so inventory turns and cash conversion cycle cannot be assessed; given equipment acceptance timing, working capital swings can materially impact OCF. • Non-cash items: Depreciation is not reported in this dataset, so we cannot separate cash vs. non-cash earnings effects. • Assessment: With cash flow data unavailable, we cannot validate the conversion of earnings to cash. Monitoring OCF, changes in receivables, contract assets, and inventories in the full quarterly report is essential.

Dividend Sustainability

• Current payout: Annual DPS shows as 0.00 and payout ratio 0.0%, which likely reflects timing or non-disclosure rather than an explicit zero dividend policy in this dataset. • Coverage: FCF coverage is shown as 0.00x because FCF is undisclosed; hence dividend coverage cannot be evaluated from the provided data. • Capacity: Balance sheet strength (implied equity ratio ~67%, low leverage) suggests capacity, but the sharp decline in earnings (ROE 3.84%) argues for prudence until profit visibility improves. • Policy outlook: Without explicit guidance or historical payout information in this dataset, we cannot infer policy changes; investors should reference the company’s stated dividend framework and upcoming board resolutions.

Risk Assessment

Business Risks:

• Cyclical demand in capital equipment leading to volatile order intake and shipment timing
• High operating leverage amplifying earnings swings on relatively small revenue changes
• Product mix and acceptance timing risks affecting gross margin and revenue recognition
• Customer concentration or end-market exposure (e.g., optics/displays) potentially impacting volumes
• Supply chain and component availability affecting delivery schedules and costs
• Technology transition risk requiring ongoing R&D investment to maintain margin leadership

Financial Risks:

• Margin pressure from elevated SG&A and fixed cost absorption at lower volumes
• Working capital build and acceptance timing potentially depressing operating cash flow
• Foreign exchange exposure affecting non-operating income and order competitiveness
• Limited visibility into cash flows and depreciation in this dataset complicates earnings quality assessment

Key Concerns:

• Operating income down 55.1% YoY on a 5.9% revenue decline indicates strong negative operating leverage
• Net income down 62.0% YoY despite robust gross margin, highlighting cost control needs
• Absence of cash flow disclosure prevents validation of cash conversion and FCF
• Ordinary income below operating income implies non-operating headwinds beyond interest expense

Investment Implications

Key Takeaways:

• Solid gross margin (51.4%) but significantly compressed operating and net profits
• ROE of 3.84% reflects low asset turnover and subdued profitability despite a strong balance sheet
• Liquidity and solvency are strong, providing cyclical resilience
• Earnings are highly sensitive to volume/mix; SG&A discipline is pivotal for margin recovery
• Data limitations (OCF, D&A, inventories) constrain assessment of cash conversion and capital intensity

Metrics to Watch:

• Orders received and backlog, and their conversion to shipments
• Gross margin trajectory and product/mix contributions
• SG&A run-rate and operating expense efficiency
• Operating cash flow, changes in receivables/contract assets, and inventories
• Capital expenditures and depreciation once disclosed
• Book-to-bill ratio and acceptance timing
• FX impacts on non-operating income

Relative Positioning: Within Japanese precision/capital equipment peers, Optorun exhibits strong gross margins and a conservative balance sheet, but lower asset turnover and pronounced operating leverage drive higher earnings volatility in downshifts; near-term positioning hinges on order momentum and expense discipline.

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