TVE Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥10.18B
• Operating Income: ¥595M
• Net Income: ¥457M
• EPS: ¥254.85

Income Statement

Balance Sheet

Cash Flow Statement

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

TVE (64660) reported FY2025 Q4 consolidated results under JGAAP with revenue of ¥10,183 million, down 9.2% YoY, indicating a contraction in topline likely driven by softer orders or shipment timing. Gross profit was ¥3,169.9 million, implying a gross margin of 31.1%, which remains solid but was insufficient to prevent profit compression at lower tiers. Operating income fell 42.0% YoY to ¥595 million, taking the operating margin to 5.8%, reflecting higher SG&A burden or adverse mix/price-cost dynamics despite stable gross margin levels. Ordinary income was ¥724 million, suggesting non-operating gains helped cushion operating weakness, while net income reached ¥597 million (net margin 5.86%), down 17.2% YoY. DuPont analysis indicates ROE of 5.0%, driven by moderate net margin (5.86%), low asset turnover (0.639x), and conservative financial leverage (1.33x). EBITDA was ¥956 million (9.4% margin), with very strong interest coverage (126x) thanks to minimal interest expense (¥4.7 million) and low leverage. Liquidity is robust, with a current ratio of 362% and working capital of ¥7,539 million, underscoring a strong short-term solvency profile. Total liabilities are modest at ¥4,061 million against equity of ¥11,944 million (D/E 0.34x), indicating a conservative capital structure. Cash flow quality was weak this year: operating cash flow was only ¥27 million (OCF/NI of 0.05), and free cash flow was deeply negative at -¥3,139 million due to heavy investing cash outflows of ¥3,166 million, suggestive of stepped-up capex or strategic investments. The company paid no dividends (DPS ¥0; payout 0%), consistent with preserving cash amid negative FCF and growth investments. Several items are unreported (e.g., cash balance, equity ratio, share data), so interpretations rely on available non-zero figures. There appears to be a discrepancy between the disclosed income tax amount and the net vs. ordinary income relationship, which limits precise tax rate interpretation; we avoid drawing conclusions from the effective tax rate. Overall, TVE exhibits strong balance sheet resilience and coverage, but shows pressured operating profitability and very weak cash conversion due to working capital and elevated capex. Near-term focus should be on order inflow, backlog execution, normalization of working capital, and returns on the recent investment cycle.

Profitability Analysis

ROE_decomposition: - Net profit margin: 5.86% (¥597m/¥10,183m). Asset turnover: 0.639x (¥10,183m/¥15,931m). Financial leverage: 1.33x (¥15,931m/¥11,944m). Calculated ROE: ~5.0%, aligned with reported 5.0%. margin_quality: - Gross margin at 31.1% is healthy for industrial equipment and suggests pricing and direct cost control remain intact. Operating margin at 5.8% (¥595m/¥10,183m) is compressed versus prior year (given -42% YoY operating income on -9.2% revenue), implying deleverage in SG&A and/or adverse product mix. Ordinary margin at 7.1% benefits from non-operating items; net margin at 5.86% remains mid-single digit. EBITDA margin of 9.4% provides a cushion, but the gap to operating margin indicates sizable D&A (¥361m), reflecting a capital-intensive profile. operating_leverage: - Revenue decline of 9.2% translated into a much larger operating income decline (-42%), evidencing negative operating leverage. Fixed cost absorption likely weakened as volumes fell; SG&A rigidity and possibly lower-margin sales mix amplified the impact.

Growth Assessment

revenue_sustainability: - Revenue of ¥10.2bn declined 9.2% YoY, suggesting softer demand or shipment/postponement effects. Without order backlog data, sustainability is uncertain; industrial cycles and project timing likely influential. profit_quality: - Net margin resilience (5.86%) versus operating margin (5.8%) implies contribution from non-operating income; core profitability weakened YoY. EBITDA remains positive, but cash conversion was poor (OCF/NI 0.05), pointing to working capital drag. outlook: - Near-term growth depends on booking momentum, backlog conversion, and normalization of working capital. Returns from the heavy investing outflows (¥3.17bn) will be key to medium-term growth; if investments target capacity, productivity, or product upgrades, margin recovery could follow as utilization improves. Cost control and price discipline are necessary to restore operating leverage.

Financial Health

liquidity: - Current assets ¥10,414.5m vs current liabilities ¥2,875.2m -> current ratio 362%, quick ratio ~360% (inventories modest at ¥66.1m). Working capital of ¥7,539.3m provides a strong buffer. solvency: - Total liabilities ¥4,061.1m vs equity ¥11,944.0m -> D/E 0.34x. Interest expense ¥4.7m with EBIT ~¥595m yields interest coverage ~126x, indicating very low financial risk from debt. capital_structure: - Balance sheet is equity-heavy (financial leverage 1.33x), affording flexibility to fund operations and investments without stressing solvency. Reported equity ratio is unreported (0% placeholder); based on totals, equity/asset ratio is ~75%.

Cash Flow Quality

earnings_quality: - OCF/Net income is 0.05 (¥27m/¥597m), signaling weak earnings cash conversion, likely due to working capital build (receivables, contract assets, or prepayments) rather than profitability issues per se. FCF_analysis: - Free cash flow was -¥3,139m (¥27m OCF + -¥3,166m investing CF). Investing outflows appear elevated versus scale, suggesting capex or strategic investments; clarity on growth vs. maintenance capex is needed to assess long-term value creation. working_capital: - Inventories are small (¥66.1m), so the drag likely stems from receivables or other current assets. With current liabilities low, cash is tied up in the operating cycle; improvement in collections and billing milestones could quickly lift OCF.

Dividend Sustainability

payout_ratio_assessment: - DPS is ¥0 and payout ratio 0%. Given negative FCF and heavy investment, retaining earnings is consistent with balance sheet preservation and funding growth. FCF_coverage: - With FCF at -¥3,139m, dividends would not be covered by internal cash generation. The current zero dividend stance is financially prudent under these circumstances. policy_outlook: - Future distributions would hinge on OCF normalization and moderation of capex. Strong liquidity and low leverage provide optionality, but management likely prioritizes reinvestment until cash conversion improves.

Risk Assessment

Business Risks:

• Demand cyclicality in industrial and project-driven end markets impacting order intake and utilization.
• Negative operating leverage from volume declines and fixed cost base.
• Execution risk on large projects affecting margin realization and timing of revenue.
• Pricing pressure and input cost volatility affecting gross margin.
• Return-on-investment risk from elevated capex/investing outflows.

Financial Risks:

• Weak cash conversion (OCF/NI 0.05) leading to reliance on balance sheet for funding.
• Working capital swings (receivables/contract assets) stressing near-term cash flows.
• Potential mismatch between accounting profits and taxable income; tax line uncertainty.
• Concentration risk if a few customers dominate receivables (implied by low inventories and project nature).

Key Concerns:

• Sustained negative FCF due to heavy investing and low OCF.
• Visibility on order backlog and book-to-bill to assess revenue trajectory.
• Path to restore operating margin and operating leverage amid lower volumes.

Investment Implications

Key Takeaways:

• ROE at 5.0% reflects mid-single-digit margins, low asset turnover, and conservative leverage.
• Operating margin compressed to 5.8% on a 9.2% revenue decline, indicating negative operating leverage.
• Liquidity and solvency are strong (current ratio 362%, D/E 0.34x; interest coverage 126x).
• Cash conversion is weak (OCF/NI 0.05), driving negative FCF of ¥3.14bn amid heavy investment.
• Dividend suspended (DPS ¥0), consistent with preserving cash for operations/investment.

Metrics to Watch:

• Order intake and backlog/book-to-bill trends.
• OCF/Net income and working capital days (receivables/contract assets).
• Capex breakdown (growth vs maintenance) and returns on invested capital.
• Gross and operating margin trajectory; price-cost spread.
• Asset turnover improvement as investments ramp.

Relative Positioning: Versus TSE machinery/industrial peers, TVE exhibits a very conservative balance sheet and superior interest coverage but lags on cash flow conversion and currently shows lower operating leverage resilience; profitability is mid-pack on margins but below on ROE until asset turnover and margin recovery materialize.

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