SK-Electronics CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥29.19B
• Operating Income: ¥3.85B
• Net Income: ¥1.92B
• EPS: ¥263.00

Income Statement

Balance Sheet

Cash Flow Statement

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

SK-Electronics (TSE:6677) delivered solid FY2025 Q4 full-year results under JGAAP on a consolidated basis, with clear signs of operating leverage and robust cash generation from operations. Revenue rose 13.4% YoY to ¥29.2bn, while operating income grew faster at 26.0% YoY to ¥3.85bn, pointing to improving cost absorption and efficiency. Gross profit reached ¥5.94bn, implying a gross margin of 20.4%, and operating margin expanded to 13.2%, evidencing disciplined expense control. Net income increased 19.2% YoY to ¥2.73bn, translating to a net margin of 9.36%. DuPont analysis shows a calculated ROE of 7.9%, driven by a modest net margin, an asset turnover of 0.686x, and conservative leverage of 1.23x. Ordinary income (¥3.85bn) was essentially in line with operating income, indicating minimal non-operating distortions. Cash conversion was strong: operating cash flow of ¥5.13bn equated to 1.88x net income, underscoring high earnings quality. Free cash flow was negative (−¥1.01bn) due to elevated investing outflows (−¥6.14bn), consistent with growth-oriented capital expenditure. The balance sheet appears very conservative with total liabilities of ¥7.51bn against total equity of ¥34.59bn; the implied equity ratio is approximately 81%, despite the reported equity ratio field being unreported. Liquidity is ample, with a current ratio of 352% and a quick ratio of 350%, supported by minimal inventories (¥167m) relative to current assets. Interest burden is negligible (interest expense ¥9m), yielding an extraordinarily high interest coverage ratio of ~419x. The effective tax charge implied by disclosed income tax (¥761m) suggests a normalized tax rate near 20%, despite the unreported “effective tax rate” metric. Dividend payments were not disclosed for the year (DPS 0 reported as unreported), so payout metrics are not meaningful, but internally generated cash flow suggests capacity once capex normalizes. Overall, the company demonstrates improving profitability, strong operating cash flow, and a fortress balance sheet, albeit accompanied by near-term negative FCF from strategic investment. The outlook hinges on end-market demand in display/semiconductor-related photomasks, ramp timing of new capacity, and pricing/mix. Data limitations include several unreported items (equity ratio, cash balance, share data), but the available figures provide a consistent view of strengthening fundamentals. In sum, SK-Electronics exits FY2025 with momentum, prudent leverage, and improved margins, positioning it to benefit if demand remains resilient.

Profitability Analysis

roe_decomposition: ROE 7.90% = Net Profit Margin 9.36% × Asset Turnover 0.686 × Financial Leverage 1.23. The main driver is margin expansion alongside stable, modest leverage; asset turnover remains sub-1x reflecting a capital-intensive asset base. margin_quality: Gross margin 20.4%, operating margin 13.2%, net margin 9.36%. Ordinary income aligns with operating income, indicating limited non-operating noise. EBITDA margin at 22.9% reflects substantial non-cash D&A (¥2.84bn), typical for mask manufacturing. Implied tax rate near ~20% based on income tax expense, supportive of normalized after-tax profitability. operating_leverage: Revenue grew +13.4% YoY while operating income grew +26.0% YoY, evidencing positive operating leverage. Fixed-cost absorption and expense discipline likely drove the step-up in operating margin.

Growth Assessment

revenue_sustainability: Top-line growth of +13.4% YoY suggests improving demand and/or mix/pricing in core product lines. Sustainability hinges on semiconductor/display capex cycles and customer program ramps. profit_quality: Operating and ordinary income are closely aligned, and OCF/NI at 1.88x confirms high cash realization of earnings. Margin expansion indicates improving economics rather than one-off items. outlook: Investing cash outflow (−¥6.14bn) implies capacity or technology upgrades, supporting medium-term growth. Near-term trajectory will depend on utilization rates, order visibility, and ASP trends in advanced photomasks.

Financial Health

liquidity: Current ratio 351.9% and quick ratio 349.6% indicate very strong near-term liquidity; working capital of ¥17.80bn provides ample buffer. Inventories are minimal (¥167m), reducing obsolescence risk. solvency: Total liabilities ¥7.51bn vs total equity ¥34.59bn; implied equity ratio ~81% (despite the unreported metric). Interest coverage ~419x underscores very low financial risk. capital_structure: Debt-to-equity at 0.22x (interest-bearing portion) points to conservative leverage. Asset base of ¥42.52bn is funded predominantly by equity, preserving balance sheet flexibility.

Cash Flow Quality

earnings_quality: OCF of ¥5.13bn vs net income of ¥2.73bn (OCF/NI 1.88x) indicates strong earnings quality with supportive working capital dynamics and non-cash D&A. fcf_analysis: Free cash flow −¥1.01bn, driven by high investing outflows (likely capex). Given strong OCF, negative FCF appears investment-led rather than operational strain. working_capital: High quick ratio and low inventories suggest efficient working capital. The scale of OCF implies either collection discipline or favorable payables/receivables timing supporting cash conversion.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are unreported (shown as 0). On a pro forma basis, payout capacity exists given NI of ¥2.73bn and strong OCF, subject to capex needs. fcf_coverage: FCF is negative this year due to elevated capex, so immediate coverage of dividends by FCF would be limited if a distribution were made. policy_outlook: With low leverage and strong liquidity, the company retains optionality to initiate or increase dividends when investment intensity moderates; policy not disclosed in this dataset.

Risk Assessment

Business Risks:

• End-market cyclicality in semiconductor and display capex affecting photomask demand
• Customer concentration risk common in specialized mask supply chains
• Pricing pressure and product mix shifts impacting margins
• Technology transition risks (advanced nodes, EUV-related capabilities) requiring sustained R&D/capex
• Utilization risk if new capacity ramps slower than expected
• Foreign exchange volatility if revenues or inputs are non-JPY
• Supply chain and equipment lead-time constraints for specialty lithography tools

Financial Risks:

• Negative FCF in the period due to high capex, increasing reliance on cash reserves or financing for investments
• Potential asset impairment risk if demand weakens post-capex
• Interest rate and refinancing risks are low but non-zero given modest leverage
• Working capital timing swings could affect near-term OCF

Key Concerns:

• Visibility on the durability of double-digit revenue growth amid cyclical end-markets
• Execution on capacity/technology investments to achieve targeted returns
• Sustaining margin gains as utilization and mix evolve

Investment Implications

Key Takeaways:

• Solid top-line growth (+13.4% YoY) with stronger operating income growth (+26.0% YoY) evidences operating leverage
• Healthy margin profile (OPM 13.2%, EBITDA margin 22.9%) and strong earnings quality (OCF/NI 1.88x)
• Very conservative balance sheet (implied equity ratio ~81%, interest coverage ~419x)
• Negative FCF (−¥1.01bn) reflects growth capex rather than operational weakness
• Ordinary income closely tracks operating income, indicating limited non-operating distortions

Metrics to Watch:

• Order backlog and utilization rates for advanced photomasks
• Capex scale, timing, and ROI; trend in FCF as investments normalize
• Gross and operating margin trajectory amid ASP/mix changes
• OCF/NI ratio sustainability and working capital turns
• Leverage and interest coverage as investments proceed

Relative Positioning: Positioned as a specialized, capital-intensive supplier with improving profitability, strong cash conversion, and a highly conservative capital structure, enabling it to weather cyclical swings and invest through the cycle.

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