AIRTECH JAPAN,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥10.63B
• Operating Income: ¥947M
• Net Income: ¥953M
• EPS: ¥94.32

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

FY2025 Q3 was solid, with modest top-line growth translating into slightly faster operating profit growth but heavier reliance on non-operating income to lift ordinary profit. Revenue grew 7.9% YoY to 106.35, while operating income rose 11.6% YoY to 9.47 and net income increased 5.9% YoY to 9.53. Gross profit of 25.82 implies a gross margin of 24.3%, consistent with a stable cost structure. Operating margin was approximately 8.9% (9.47/106.35), indicating operating leverage as OI growth outpaced sales. Ordinary income reached 13.62 (+8.5% YoY), supported by sizeable non-operating income of 4.39, mainly dividend income of 3.98. The net margin printed around 9.0% (9.53/106.35), with an effective tax rate of 28.7%. Based on implied last-year figures, operating margin expanded by roughly 29 bps YoY, while net margin slightly compressed by about 17 bps, likely due to higher tax burden or a normalized non-operating contribution. Earnings quality cannot be verified as operating cash flow was not disclosed this quarter; this is a key limitation. The balance sheet remains conservative: current ratio 330%, quick ratio 283%, and D/E 0.29x, with interest coverage of 736x, indicating negligible financial stress. Asset turnover is 0.536 and financial leverage 1.34x, together with a 9.0% net margin yielding an ROE of 6.5%. ROIC is estimated at 5.4%, below typical 7–8% targets, suggesting room to improve capital efficiency. Non-operating income is material—net non-operating gain of approximately 4.07 represents about 30% of ordinary income—introducing some variability if dividend income fluctuates. Working capital is ample at 82.68, and short-term borrowings (3.80) are well covered by cash (27.49) and receivables (42.86). With a calculated payout ratio of 55.3%, dividends appear within a sustainable range, though lack of OCF data prevents full coverage analysis. Forward-looking, the company’s earnings trajectory depends on sustaining the improved operating margin while reducing dependence on dividend income. Monitoring order intake/backlog, cost discipline, and capital allocation (to lift ROIC) will be critical into FY2025 Q4 and beyond.

Profitability Analysis

Decomposing ROE: Net Profit Margin (9.0%) × Asset Turnover (0.536) × Financial Leverage (1.34x) = ~6.5% ROE, matching the reported figure. The most notable movement appears in operating margin (implied +29 bps YoY) given operating income growth (+11.6%) outpaced revenue (+7.9%), while the net margin saw a slight ~17 bps compression likely due to tax effects or a less favorable below-the-line mix compared to last year. Business drivers: revenue growth likely leveraged fixed costs, improving operating margin; however, a significant share of ordinary profit comes from non-operating dividend income (3.98), which does not enhance operating efficiency. Sustainability: modest operating margin gains could be sustainable if pricing and mix hold and SG&A remains controlled; reliance on dividend income introduces non-recurring risk if market conditions change. SG&A data is partially unreported, but total SG&A rose to 17.33; with revenue up 7.9%, we note no evidence SG&A growth exceeded sales growth (cannot confirm precisely due to missing prior-year SG&A), though the operating leverage suggests SG&A did not overrun revenue. Watch for the non-operating income ratio (net non-op ~4.07), which accounted for ~30% of ordinary income—this skews the quality of profit toward financial income rather than core operations.

Growth Assessment

Top-line growth of 7.9% YoY to 106.35 demonstrates steady demand. Operating profit rose 11.6% YoY to 9.47, indicating improving operational efficiency. Ordinary income growth (+8.5%) was supported by non-operating income, chiefly dividends (3.98), highlighting external income contribution. Net income grew 5.9% to 9.53, slightly lagging operating profit growth, likely due to tax normalization or changes in non-operating expense/income mix. Revenue sustainability will hinge on order intake and backlog in core markets (cleanroom/air tech), where capex cycles of electronics/pharma can swing orders. Profit quality tilts toward core improvement (OP up faster than sales), but the elevated dividend income contribution adds volatility. Near-term outlook: if demand remains stable and cost discipline persists, operating margins could hold near 9%, but bottom line may fluctuate with dividend receipts and market conditions. Medium term, raising ROIC from 5.4% toward 7–8% requires tighter capital deployment and potentially higher asset turnover through better inventory and receivables management.

Financial Health

Liquidity is strong: current ratio 329.8% and quick ratio 282.8% indicate ample short-term coverage; no warning triggers (both well above benchmarks). Solvency is conservative with D/E of 0.29x and interest coverage of 736x, reflecting minimal financial risk. Maturity mismatch risk is low: short-term loans (3.80) are dwarfed by cash (27.49) and receivables (42.86); current liabilities (35.98) are comfortably covered by current assets (118.66). Long-term loans are minimal at 1.01; total liabilities 42.11 vs equity 147.74 underscores a robust capital base. No off-balance sheet obligations were reported or disclosed in the dataset.

Cash Flow Quality

Operating cash flow was not disclosed; thus OCF/Net Income and free cash flow cannot be calculated this quarter. Without OCF, we cannot validate accrual quality or working capital impacts; this is a key limitation. Inventories (16.92) and receivables (42.86) look reasonable relative to sales, but without period cash flows or days metrics we cannot assess working capital stretch or potential manipulation. Given strong cash on hand (27.49) and low debt, near-term liquidity is not contingent on OCF this quarter, but recurring dividend and capex coverage should be evaluated once cash flow data becomes available.

Dividend Sustainability

The calculated payout ratio is 55.3%, within the <60% benchmark and ostensibly sustainable. However, DPS and total dividends paid were unreported, and OCF/FCF are unavailable; thus, true coverage cannot be confirmed. Balance-sheet strength (cash 27.49; low leverage) supports near-term dividend capacity even in a softer cash flow quarter. Medium term, sustainability hinges on consistent operating cash generation rather than non-operating dividend income; monitoring FCF after maintenance capex is essential.

Risk Assessment

Business Risks:

• Demand cyclicality in core end markets (e.g., electronics/semiconductors, pharma) affecting order intake and utilization.
• Dependency on non-operating dividend income (3.98) to lift ordinary profit, which may fluctuate with market conditions and investee performance.
• Potential pricing pressure or mix shifts that could reverse the recent operating margin expansion (~29 bps YoY).
• Execution risk in managing SG&A and cost base amid growth.

Financial Risks:

• Lack of disclosed operating cash flow obscures earnings quality and working capital movements.
• ROIC at 5.4% trails typical 7–8% targets, implying suboptimal capital efficiency.
• Market value volatility of investment securities could impact non-operating income and capital.

Key Concerns:

• Material contribution of non-operating income (~30% of ordinary profit from net non-op), elevating earnings variability.
• Limited disclosure on cash flows and SG&A components reduces transparency into cost drivers and cash conversion.
• Slight net margin compression (~17 bps YoY) despite higher operating margin suggests sensitivity to below-the-line items and taxes.

Investment Implications

Key Takeaways:

• Core profitability improved: operating margin ~8.9% with implied ~29 bps YoY expansion.
• Revenue grew 7.9% YoY; operating profit grew faster at 11.6% YoY.
• Net income up 5.9% with net margin ~9.0%; slight YoY compression likely due to tax/mix.
• Non-operating dividend income is large (3.98), driving about 30% of ordinary income via net non-op gains.
• Balance sheet is very strong: current ratio 330%, D/E 0.29x, interest coverage 736x.
• ROE is moderate at 6.5%; ROIC of 5.4% indicates room to enhance capital efficiency.
• Payout ratio ~55% looks manageable, but cash flow data is missing so coverage cannot be confirmed.

Metrics to Watch:

• Order intake and backlog trends for visibility into FY2025 Q4 and FY2026 revenue.
• Operating margin progression and SG&A efficiency.
• Operating cash flow and free cash flow once disclosed; OCF/NI >1.0 target.
• Composition and volatility of non-operating income, especially dividend income.
• ROIC trajectory and asset turnover improvements (inventory and receivables turns).

Relative Positioning: Versus typical small-cap industrial peers, the company exhibits stronger liquidity and lower leverage, with comparable operating margins but a higher reliance on non-operating income; capital efficiency (ROIC 5.4%) lags best-in-class benchmarks, presenting upside if asset utilization improves.

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