EBARA JITSUGYO CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥29.26B
• Operating Income: ¥4.31B
• Net Income: ¥2.17B
• EPS: ¥255.32

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

Verdict: A strong FY2025 Q3 with double-digit topline growth and outsized operating leverage, yielding materially higher profitability. Revenue grew 10.0% YoY to 292.56, while operating income rose 42.1% YoY to 43.08, lifting ordinary income to 44.64 and net income to 30.37. Gross margin stood at 29.1%, and operating margin reached 14.7%, implying solid mix and cost discipline. We estimate operating margin expanded by roughly 329 bps YoY (current 14.7% vs. an implied 11.4% in the prior period based on growth rates), indicating robust operating leverage. Net margin was 10.4%, supported by minimal non-operating drag and negligible interest burden (interest expense 0.05; interest coverage 861.6x). SG&A was 54.76, implying an SG&A ratio of 18.7%, which did not prevent significant operating margin expansion due to stronger gross profit and execution. Ordinary income increased 40.6% YoY, and non-operating income (1.86) was modest, with dividend income at 0.90. Liquidity remains exceptional: current ratio 207.4%, quick ratio 198.1%, and cash and deposits of 152.23, providing ample flexibility for working capital and investment. The balance sheet is conservative with D/E of 0.65x and short-term loans of only 10.10 against large cash reserves. ROE is healthy at 11.6%, driven by 10.4% net margin, 0.676x asset turnover, and moderate 1.65x leverage. ROIC is reported at 24.6%, well above typical Japanese industrial benchmarks, suggesting efficient capital deployment. Earnings quality cannot be fully assessed as operating cash flow was not disclosed this quarter; hence OCF/NI and FCF coverage are not calculable. Taxation indicates an effective tax rate of 31.5% per the provided metric. The payout ratio is calculated at 40.4%, which appears sustainable given earnings momentum and cash levels, though FCF coverage is unreported. Forward-looking, strong margins, cash-rich balance sheet, and disciplined costs position the company well for continued earnings resilience, with execution on orders and working capital the key watchpoints.

Profitability Analysis

ROE decomposition (DuPont): ROE 11.6% = Net Profit Margin (10.4%) × Asset Turnover (0.676x) × Financial Leverage (1.65x). The largest YoY delta appears in net profit margin, inferred from operating margin expansion (approx. +329 bps YoY) and a stable non-operating profile, while leverage and asset turnover appear broadly steady. Business drivers include favorable mix and pricing in core equipment/engineering projects, disciplined SG&A, and minimal interest costs, enabling strong operating leverage. The margin expansion looks fundamentally driven (volume and mix) rather than one-off gains, given modest non-operating contribution (1.86) and negligible finance costs; sustainability will hinge on backlog quality and cost pass-through in future quarters. No signs of cost slippage are evident; however, we note that SG&A growth versus revenue growth cannot be confirmed due to lack of prior-period SG&A disclosure. Ordinary margin (ordinary income/revenue) is about 15.3%, comfortably above the operating margin, consistent with a small positive non-operating contribution. While depreciation and R&D are unreported, current results suggest solid core profitability with strong operating leverage that could normalize if order mix shifts.

Growth Assessment

Revenue increased 10.0% YoY to 292.56, indicating healthy demand across core businesses. Operating income rose 42.1% YoY to 43.08, materially outpacing revenue, confirming favorable mix and cost control. Net income increased 39.7% YoY to 30.37, with a net margin of 10.4%. Non-operating income (1.86) was supportive but not the main driver, implying growth is primarily operational. Gross margin at 29.1% suggests good pricing and project execution; continued improvement will depend on order intake composition and input cost stability. The implied prior-period reconstruction indicates operating margin expansion of ~329 bps YoY, underscoring operating leverage. With cash at 152.23 and low borrowing, the company has capacity to fund growth initiatives and buffer working capital swings. Reported ROIC of 24.6% signals efficient investment; sustaining this will require disciplined capital allocation and profitable order selection. Outlook: if order momentum and cost pass-through persist, earnings growth can continue; watch for public-sector budget timing, supply chain costs, and FX impacts on imported components. Lack of cash flow disclosure limits visibility into conversion of earnings to cash; monitoring OCF upon release will be key for assessing the durability of growth.

Financial Health

Liquidity is strong: current ratio 207.4% and quick ratio 198.1%, with working capital of 157.32, indicating ample short-term coverage. No warning triggers: Current Ratio is well above 1.0 and D/E at 0.65x is conservative. Cash and deposits of 152.23 exceed short-term loans of 10.10, suggesting minimal maturity mismatch risk. Total liabilities are 170.51 against equity of 262.19, and interest expense is de minimis, reflecting low financial risk. Noncurrent liabilities are modest at 23.99, and no off-balance sheet obligations were reported in the provided data. Equity base continues to grow, with retained earnings at 216.50 supporting balance sheet resilience. Overall solvency and liquidity positions are robust.

Cash Flow Quality

Operating cash flow, free cash flow, and capital expenditures were not disclosed, so OCF/Net Income and FCF coverage cannot be calculated this quarter. As a result, earnings quality cannot be validated via cash conversion metrics, and we cannot assess working capital intensity changes in the period. Balance sheet composition suggests manageable working capital: accounts receivable 122.96, inventories 13.64, and accounts payable 84.61 (net working capital excluding cash ~52), but without period flow data we cannot determine whether cash was consumed or generated. With cash at 152.23 and limited debt, liquidity buffers are strong even if working capital temporarily absorbs cash. No clear signs of working capital manipulation can be inferred given the lack of cash flow and turnover disclosures.

Dividend Sustainability

The calculated payout ratio is 40.4%, which is below the 60% benchmark and appears conservative relative to earnings. FCF coverage is not calculable due to unreported OCF and capex. However, the company’s cash position (152.23) and low leverage provide a cushion to sustain dividends through typical working capital cycles. Absent explicit guidance on DPS, we infer policy consistency given rising earnings and retained earnings of 216.50. Key to sustainability will be cash conversion in upcoming quarters and visibility on capital expenditures.

Risk Assessment

Business Risks:

• Project execution and delivery risk on engineered systems affecting gross margin realization
• Order timing and backlog mix volatility impacting quarterly margins
• Input cost inflation and supply chain disruptions affecting cost pass-through
• Customer concentration in public-sector and infrastructure-related demand cycles

Financial Risks:

• Limited visibility on cash conversion due to unreported OCF and capex
• Potential working capital swings tied to accounts receivable and project milestones
• Currency fluctuation risk on imported equipment/components despite low interest burden

Key Concerns:

• Margin normalization risk after a period of strong operating leverage
• Dependence on timely collections and milestone billing to sustain cash flows
• Data limitations (unreported cash flows, depreciation, capex) that obscure FCF and capital intensity trends

Investment Implications

Key Takeaways:

• Strong quarter with revenue +10.0% YoY and operating income +42.1% YoY, driving margin expansion
• Operating margin estimated at 14.7% vs implied ~11.4% last year (+~329 bps), reflecting favorable mix and cost control
• ROE 11.6% and reported ROIC 24.6% indicate high-quality returns with modest leverage (1.65x)
• Balance sheet strength (cash 152.23; current ratio 207%) lowers financial risk and supports strategic flexibility
• Earnings quality pending confirmation due to missing cash flow disclosure; monitor OCF and FCF upon release
• Payout ratio at 40.4% appears sustainable given earnings profile and cash reserves

Metrics to Watch:

• Operating cash flow/Net income ratio (target >1.0 once reported)
• Order intake, backlog, and project margin mix
• SG&A trajectory vs revenue growth to assess operating leverage persistence
• Accounts receivable days and milestone billing collections
• Capex and maintenance vs growth investment to validate ROIC durability
• Gross margin stability amid input cost and FX fluctuations

Relative Positioning: Within Japanese industrial equipment/engineering peers, the company exhibits superior liquidity, conservative leverage, and currently above-average margins and ROE, though validation of cash conversion is pending due to unreported cash flow data.

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