THine Electronics,Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.61B
• Operating Income: ¥-470M
• Net Income: ¥-188M
• EPS: ¥-49.56

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

Zein Electronics (6769) reported FY2025 Q3 (cumulative) results under JGAAP on a consolidated basis showing a contraction in topline and continued operating losses. Revenue was ¥2.613bn, down 12.9% YoY, indicating demand softness and/or product mix shifts. The company posted an operating loss of ¥470m (flat YoY per disclosure) and a net loss of ¥529m (also flat YoY per disclosure), pointing to limited progress in narrowing losses despite cost control. Gross profit margin is presented at a high 63.7%, implying a relatively high value-add product mix or inclusion/classification effects; however, profitability at the operating level remains negative due to fixed cost burden and limited scale. DuPont metrics show a net margin of -20.24%, asset turnover of 0.268x, and low financial leverage of 1.10x, resulting in a calculated ROE of -5.94%. Liquidity is very strong with a current ratio of 1604% and quick ratio of 1521%, supported by substantial working capital of ¥8.962bn and modest liabilities of ¥737m. Leverage is low with a debt-to-equity ratio of 0.08x, suggesting ample solvency headroom and conservative capital structure. Operating cash flow was slightly positive at ¥2.4m, which is weak relative to the net loss and indicates limited cash conversion during the period. Investing cash flow is undisclosed (reported as zero) and cash/equivalents are also undisclosed, constraining a full cash position assessment. Financing cash flow was an outflow of ¥162m, likely reflecting debt repayment or other financing uses given DPS is zero. The company paid ¥45.7m in taxes despite a pre-tax loss, pointing to non-deductible items, timing differences, or subsidiary-level tax payments. Dividend remains suspended (DPS ¥0), consistent with negative earnings and unclear free cash flow coverage. On balance, the quarter reflects a volume-driven headwind and insufficient operating leverage to break even, offset by a very strong balance sheet and low financial risk. Near-term priorities are revenue stabilization, improved utilization, and fixed-cost absorption to close the operating loss. Data limitations (notably equity ratio, cash balance, capex, and share count unreported) require caution in interpreting some derived ratios and per-share analytics.

Profitability Analysis

ROE decomposition per DuPont shows: Net Profit Margin -20.24%, Asset Turnover 0.268x, and Financial Leverage 1.10x, yielding an ROE of -5.94%. The negative margin is the primary driver of weak ROE; leverage is intentionally low and does not amplify returns. Reported gross margin of 63.7% is high for electronics, suggesting either a licensing/IP-heavy mix, favorable product pricing, or classification effects; however, the high gross margin does not translate to operating profitability due to elevated operating expenses relative to scale. EBITDA is -¥397.7m and EBITDA margin -15.2%, underscoring insufficient operating leverage at current revenue levels. Interest expense is de minimis at ¥0.14m, and interest coverage is negative, driven by operating loss rather than financing burden. The ordinary loss of ¥621m exceeds the operating loss, implying non-operating headwinds (e.g., FX, equity method, or other non-operating expenses). The effective tax rate metric shows 0.0%, but cash taxes of ¥45.7m were paid despite losses, which depresses bottom-line cash generation. Overall, profitability is constrained by subscale operations and a decline in revenue, with cost base rigidity limiting rapid loss reduction.

Growth Assessment

Revenue declined 12.9% YoY to ¥2.613bn, signaling end-market softness or delayed customer programs. With operating loss flat YoY per disclosure, cost reductions have not yet offset the revenue decline, implying limited incremental efficiency gains. The high reported gross margin suggests the core offering retains pricing power or value-add, but volume deleverage and fixed costs inhibit profit recovery. Profit quality is weak given the gap between gross margin and operating losses, indicating high R&D/Sales and SG&A intensity for current scale. Without disclosed order backlog or segment detail, visibility on revenue sustainability is limited; however, the magnitude of YoY decline suggests cautious near-term outlook. Ordinary loss being larger than operating loss indicates exogenous factors (e.g., FX or non-operating items) could continue to pressure reported growth metrics. Near-term growth hinges on demand normalization in end-markets and improved utilization; any recovery in shipments would likely have a high flow-through to operating income given the high gross margin profile. Absent evidence of accelerating orders, a gradual and uneven recovery should be assumed.

Financial Health

Liquidity is very strong: current ratio 1604% and quick ratio 1521%, underpinned by ¥9.558bn in current assets vs. ¥596m in current liabilities and working capital of ¥8.962bn. Inventories stand at ¥492m; relative to disclosed COGS, implied turnover is modest but acceptable given the downturn (indicative turnover ~2.7x on point-in-time basis). Total liabilities are only ¥737m against total assets of ¥9.755bn and total equity of ¥8.908bn, evidencing a very conservative balance sheet. Debt-to-equity is 0.08x, and leverage in DuPont (1.10x) is low, implying strong solvency. The reported equity ratio is shown as 0.0% (undisclosed), but other balance sheet figures imply a high equity buffer. Interest expense is negligible, so refinancing risk appears low. Cash and equivalents are not disclosed, which limits assessment of immediate cash runway; however, the scale of current assets relative to current liabilities suggests substantial liquidity headroom.

Cash Flow Quality

Operating cash flow was ¥2.448m versus net income of -¥529m, resulting in an OCF/Net Income ratio presented as 0.00, indicative of weak cash conversion for the period. Given depreciation and amortization of ¥72.3m, one would expect a higher OCF absent working capital build or tax payments; the low OCF likely reflects working capital movements and the ¥45.7m tax cash outflow. Investing cash flow is undisclosed (reported as zero), so capital expenditure cannot be assessed; therefore, true free cash flow cannot be reliably computed. The reported Free Cash Flow metric is shown as zero (unavailable), and thus FCF coverage ratios are not meaningful. Financing cash flow was an outflow of ¥161.8m, suggesting debt repayment, lease payments, or other financing uses, despite no dividends. Overall, earnings quality is weak given negative EBIT/EBITDA and minimal OCF support; clarity on working capital drivers (receivables collection, inventory normalization, and payables) and capex is needed to judge sustainability.

Dividend Sustainability

DPS is ¥0.00 with a payout ratio of 0.0%, consistent with negative earnings and limited operating cash flow. With FCF not disclosed (and capex unknown), FCF coverage of dividends cannot be evaluated, but the absence of dividends avoids incremental cash drain. The strong balance sheet provides theoretical capacity for future distributions, but current loss-making profile makes near-term resumption unlikely without a clear path to operating profitability. Company policy cannot be inferred from the data provided; however, prudence suggests prioritizing reinvestment and breakeven over payouts. Any dividend outlook would hinge on revenue recovery, improved operating leverage, and demonstrated positive OCF.

Risk Assessment

Business Risks:

• End-market cyclicality in semiconductors/electronics leading to revenue volatility
• Customer concentration risk typical of small-cap component/IP suppliers
• Technology obsolescence and rapid product cycles requiring sustained R&D
• Inventory obsolescence risk amid demand softness
• FX exposure impacting ordinary income if sales/costs are foreign-denominated
• Supply chain disruptions affecting lead times and shipments

Financial Risks:

• Sustained operating losses with limited OCF conversion
• Potential working capital absorption if receivables stretch or inventories build
• Non-operating losses (ordinary loss > operating loss) introducing earnings volatility
• Limited visibility on cash and capex due to undisclosed items

Key Concerns:

• Negative EBITDA and operating losses despite high reported gross margin
• Revenue decline of 12.9% YoY suggesting weak demand momentum
• Minimal OCF relative to net loss indicating weak earnings quality
• Undisclosed cash balance and capex obscure true liquidity runway and FCF

Investment Implications

Key Takeaways:

• Topline contracted 12.9% YoY to ¥2.613bn; operating and net losses persisted.
• High reported gross margin (63.7%) but negative EBITDA (-¥398m) indicate insufficient operating leverage.
• Balance sheet is very strong: current ratio 1604%, D/E 0.08x, large working capital buffer.
• OCF was only ¥2.4m vs. net loss of ¥529m; FCF not disclosed, cash position undisclosed.
• Ordinary loss (-¥621m) exceeds operating loss, pointing to non-operating headwinds.

Metrics to Watch:

• Order intake/book-to-bill and quarterly revenue trajectory
• Operating expense run-rate and breakeven revenue level
• OCF trends and working capital movements (DSO, DIO, DPO)
• Capex outlays (once disclosed) and FCF generation
• Non-operating items (FX, investment gains/losses) driving ordinary income

Relative Positioning: Within TSE small-cap semiconductor/electronics design peers, the company exhibits weaker near-term profitability and cash conversion but stronger balance sheet resilience due to low leverage and ample current assets.

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