HAMAI INDUSTRIES LTD FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥9.14B
• Operating Income: ¥785M
• Net Income: ¥88M
• EPS: ¥89.70

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

Hamai Co., Ltd. (TSE: 6497) reported consolidated FY2025 Q3 results under JGAAP with solid top-line growth and stronger profit traction. Revenue rose 6.1% year over year to ¥9,144 million, indicating resilient demand through the period. Gross profit reached ¥1,600 million, translating to a gross margin of 17.5%, which is modest but consistent with capital equipment/precision machinery profiles. Operating income increased 9.7% YoY to ¥785 million, outpacing revenue growth and signaling positive operating leverage from cost discipline and/or an improving mix. Ordinary income of ¥853 million exceeded operating income, implying positive non-operating contributions (likely interest income, FX, or other financial items). Net income surged to ¥601 million (+580.2% YoY), reflecting a combination of operating improvements and a clean non-operating/extraordinary line compared to a weak prior-year base. The estimated operating margin is 8.6%, and the net margin is 6.6%, both supportive of improved earnings quality relative to last year. DuPont analysis yields a reported ROE of 3.56%, composed of a 6.57% net margin, 0.424x asset turnover, and 1.28x financial leverage—showing conservative leverage and moderate efficiency. On balance sheet strength, total assets were ¥21,575 million and total equity ¥16,859 million, implying low gearing (liabilities-to-equity ~0.33x) and a computed equity ratio around 78%, despite the equity ratio field being unreported in XBRL. Liquidity appears robust with current assets of ¥12,411 million against current liabilities of ¥3,488 million, yielding a current ratio of ~3.56x and ample working capital of ¥8,923 million. Ordinary income exceeding operating income points to benign financial items, while an estimated effective tax rate around the high-20% range appears normal. Cash flow statements were not disclosed in this snapshot, so operating cash flow and free cash flow cannot be assessed from the provided data. Dividend-related fields were also not disclosed; EPS was ¥89.70, but share count and DPS were not provided, limiting per-share capital return analysis. Overall, fundamentals this quarter suggest improving profitability on steady growth, strong balance sheet resilience, and conservative leverage. Key watchpoints include the sustainability of margin gains, the durability of order trends into FY2025 Q4 and FY2026, and confirmation of cash flow conversion once cash flow statements are available. Data limitations (several unreported items) temper the confidence level, but the available non-zero data support a constructive view of earnings quality momentum.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 6.57% × Asset turnover 0.424 × Financial leverage 1.28 = ROE 3.56% (matches reported). ROA (approx.) = Net income / Total assets = ¥601m / ¥21,575m ≈ 2.79%. Operating margin = Operating income / Revenue = ¥785m / ¥9,144m ≈ 8.6%. Ordinary income margin = ¥853m / ¥9,144m ≈ 9.3%, indicating positive non-operating contributions (~¥68m, ~0.7% of sales). Gross margin stands at 17.5%; the spread to operating margin (~9.0 ppt) reflects SG&A and R&D intensity typical of precision equipment. Margin quality appears to be improving YoY given operating income grew faster than revenue (+9.7% vs +6.1%). Degree of operating leverage (approx.) = 9.7% / 6.1% ≈ 1.6x, suggesting favorable cost absorption and mix. With modest financial leverage (assets/equity ~1.28x), returns are primarily driven by margins and asset efficiency rather than leverage. Asset turnover at 0.424x is in line with capital equipment suppliers where asset bases are heavier. Effective tax rate estimated around 27–28% (¥230m tax vs ≈¥831m pre-tax proxy), consistent with statutory norms; exact pre-tax not disclosed. Overall profitability rests on improving operating efficiency and benign non-operating items, with scope to lift ROE via better asset utilization and margin expansion rather than leverage.

Growth Assessment

Revenue growth of 6.1% YoY indicates steady demand, likely supported by recovering capital spending in end markets relevant to Hamai’s products. Operating income growth of 9.7% YoY outpaced sales, evidencing positive operating leverage from cost control, pricing, or mix improvements. Net income jumped 580.2% YoY, implying a weak prior-year comparison (potential one-offs or higher non-operating/extraordinary losses last year) and cleaner P&L this year. Ordinary income exceeding operating income suggests some tailwinds from financial income/FX; sustainability will depend on currency and interest rate dynamics. The 17.5% gross margin indicates modest pricing power; continued improvement likely hinges on product mix and scale efficiencies. Asset turnover at 0.424x is stable; incremental growth without heavy asset additions could drive higher ROA and ROE. Outlook considerations: watch order intake/backlog and book-to-bill ratios to validate demand through FY2025 Q4–FY2026. Given the conservative balance sheet, the company appears positioned to support growth investments, but the absence of disclosed cash flows tempers visibility on internal funding capacity. Without segment or geographic detail, we assume broad-based growth across core lines; confirmation via management commentary would enhance conviction. Overall growth quality looks reasonable with better conversion at the operating level; sustaining this will require maintaining gross margin discipline and SG&A efficiency.

Financial Health

Total assets ¥21,575m; total equity ¥16,859m; total liabilities ¥5,589m. Computed equity ratio ≈ 78.2% (based on disclosed assets and equity), indicating a very strong capital base, despite the equity ratio field being unreported. Debt-to-equity ratio (total liabilities/equity) ≈ 0.33x, evidencing low leverage. Current assets ¥12,411m vs current liabilities ¥3,488m yield a current ratio ≈ 3.56x and working capital of ¥8,923m, suggesting ample short-term liquidity. Quick ratio is shown equal to current ratio due to undisclosed inventories; true quick ratio may be lower if inventories are material. Ordinary income exceeding operating income indicates net positive non-operating effects; interest expense was not disclosed. Solvency appears strong with significant equity cushion and low gearing, affording flexibility for capex and cyclical swings. No maturities schedule or interest-bearing debt breakdown provided; however, overall liability levels appear manageable relative to equity.

Cash Flow Quality

Operating CF, investing CF, and financing CF were not disclosed in this dataset; hence OCF/Net Income and FCF figures shown as zero are placeholders rather than economic values. Earnings quality assessment must therefore rely on accrual metrics: operating income growth (+9.7%) outpacing sales (+6.1%) is a favorable sign. With inventories undisclosed, we cannot assess inventory normalization or working capital intensity. Positive ordinary income relative to operating income hints at supportive non-operating items; sustainability of cash conversion will depend on working capital discipline and capex cadence. Free cash flow cannot be evaluated without OCF and capex detail; given the strong balance sheet, near-term liquidity is likely adequate even if FCF is temporarily pressured by investment. Key items to review upon full disclosure: OCF vs NI conversion (>80% desirable through the cycle), capex relative to depreciation (growth vs maintenance), and changes in receivables/payables.

Dividend Sustainability

Dividend per share was not disclosed for the period; payout ratio and FCF coverage indicators shown as zero should be interpreted as undisclosed. With EPS at ¥89.70 and low leverage, the company appears to have capacity for shareholder returns; however, without DPS and cash flow data, sustainability cannot be quantitatively assessed. If a dividend is maintained or initiated, coverage should be evaluated against net income and, more importantly, free cash flow after maintenance capex. The strong equity base and liquidity provide flexibility, but policy clarity (target payout ratio, stability vs. variability) is needed. Monitor management guidance on capital allocation, especially balancing growth investments with dividends and potential buybacks once cash flows are available.

Risk Assessment

Business Risks:

• End-market cyclicality (capital equipment/precision machinery demand tied to investment cycles).
• Pricing pressure and product mix risk affecting the 17.5% gross margin.
• Supply chain and component availability potentially impacting delivery and costs.
• Foreign exchange volatility impacting revenue and non-operating items.
• Customer concentration risk typical in specialized equipment markets.
• Technology transition risk requiring ongoing R&D and capex.
• Geopolitical/trade restrictions affecting export markets.

Financial Risks:

• Cash flow visibility is limited due to undisclosed OCF/FCF in the period.
• Working capital swings could pressure cash conversion during upcycles.
• Non-operating income contribution may be volatile (FX/financial income).
• Potential capex needs could raise leverage if internally generated cash is insufficient.

Key Concerns:

• Sustainability of margin improvement given modest gross margin base.
• Lack of disclosed cash flow data to confirm earnings-to-cash conversion.
• Dependence on non-operating gains to lift ordinary income above operating income.

Investment Implications

Key Takeaways:

• Top-line grew 6.1% YoY with operating income up 9.7%, indicating positive operating leverage (~1.6x).
• Net income margin at 6.6% and ROE at 3.6% reflect conservative leverage and room for efficiency gains.
• Ordinary income exceeded operating income by ~¥68m (~0.7% of sales), aided by non-operating factors.
• Balance sheet is strong: liabilities/equity ~0.33x and computed equity ratio ~78%, providing resilience.
• Liquidity robust with current ratio ~3.56x and working capital ~¥8.9bn.
• Cash flow data not disclosed; confirmation of OCF and FCF is the main missing piece for full assessment.

Metrics to Watch:

• Order intake, backlog, and book-to-bill for demand visibility.
• Gross and operating margin trends, especially pricing/mix.
• OCF/Net income conversion and working capital days once disclosed.
• Capex vs depreciation to gauge growth investment intensity.
• FX rates (USD/JPY, EUR/JPY) and non-operating income sensitivity.
• ROE/ROA trajectory via asset turnover improvements.

Relative Positioning: The company appears financially conservative with strong liquidity and low leverage versus typical capital goods peers, with profitability improving but still leaving headroom on ROE through margin and asset efficiency gains; confirmation of cash flow conversion will be key to strengthening its relative profile.

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