TAMAGAWA HOLDINGS CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥6.27B
• Operating Income: ¥278M
• Net Income: ¥246M
• EPS: ¥36.14

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

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 mixed quarter with modest profitability but weak cash conversion and heavy investment outflows. Revenue was 62.70, generating gross profit of 16.93 (27.0% gross margin) and operating income of 2.78 (operating margin ~4.4%). Ordinary income came in at 2.31 after net non-operating expenses of 0.47, and net income was 2.38 (EPS basic 36.14 yen; diluted 40.84 yen). EBITDA was 6.26, implying a 10.0% EBITDA margin and providing an interest coverage of 4.76x (vs. interest expense 0.58). ROE based on DuPont was 4.3% (Net margin 3.8% × Asset turnover 0.556 × Leverage 2.06x), indicating modest equity returns supported more by leverage than by operating efficiency. Total comprehensive income was elevated at 7.85, significantly above net income due to positive OCI items (likely valuation gains on investment securities of 7.35 on the balance sheet), which are non-cash and potentially volatile. Liquidity is ample: current ratio 262.5% and quick ratio 248.6%, with cash and deposits of 13.43 against short-term loans of 4.71. Balance sheet solidity is reasonable with total equity of 54.71 against total assets of 112.76 (equity ratio ~48.5%) and a reported D/E ratio of 1.06x. Cash flow quality is weak this period: operating cash flow was -0.25 versus net income of 2.38 (OCF/NI -0.11x), and free cash flow was -4.97 driven by capex of -6.07. Margin trajectory in basis points cannot be assessed due to lack of prior-period disclosure; however, calculated operating margin of ~4.4% is materially higher than the XBRL-reported 0.1%, suggesting reliance on the calculable figure from provided line items. The effective tax rate was 25.6% (0.92 tax on 3.61 PBT), within a normal range. Working capital stood at a healthy 38.60, with inventories at 3.30 and accounts payable at 6.43; however, accounts receivable were unreported, limiting deeper working capital diagnostics. Financing cash flow was +0.76, indicating reliance on external funding amid negative FCF. Dividend data are largely unreported; the calculated payout ratio is 8.3%, but FCF coverage is deeply negative (-25.16x), signaling potential tension if capex intensity persists. Forward-looking, stabilization of operating cash flow, normalization of capex cadence, and visibility on receivables will be critical to support dividends and deleveraging.

Profitability Analysis

ROE decomposition: 4.3% = Net Profit Margin (3.8%) × Asset Turnover (0.556x) × Financial Leverage (2.06x). The ROE level is primarily constrained by low net margin and slow asset turnover; leverage provides the bulk of the lift to equity returns. Without prior-period comparatives, the change driver cannot be quantified, but the current mix implies: (1) margin compression/expansion sensitivity is high given modest operating margin (~4.4%), (2) asset turnover of 0.556 reflects a capital-intensive model (notably with noncurrent assets 50.39 and long-term loans 28.45), and (3) leverage at 2.06x is boosting ROE but introduces refinancing sensitivity. Business drivers: non-operating expenses (interest expense 0.58 exceeding non-operating income 0.22) suppressed ordinary income relative to operating income; OCI uplift inflated total comprehensive income but does not aid ROE directly. Sustainability: operating margin near mid-single digits can be sustained if cost discipline holds (SG&A 14.14 vs gross profit 16.93 leaves a narrow buffer), but leverage-assisted ROE is vulnerable to rate increases or earnings dips. Watch for SG&A growth relative to revenue; with no YoY data, we flag structurally high SG&A intensity (SG&A/gross profit ~84%) as a concern for operating leverage.

Growth Assessment

Revenue printed at 62.70, but YoY growth is unreported, preventing trend analysis. Profitability is positive across operating (2.78), ordinary (2.31), and net (2.38) lines; however, non-operating drag from interest limited ordinary margin. EBITDA of 6.26 (10.0% margin) provides some operating cushion. Total comprehensive income strength was OCI-driven and not a proxy for recurring earnings power. Given negative OCF (-0.25) and elevated capex (-6.07), current growth appears investment-driven; sustainability depends on converting this investment into higher revenue and better asset turns. Outlook hinges on improving working capital efficiency (receivables unreported) and maintaining gross margin at ~27% while containing SG&A.

Financial Health

Liquidity is strong: current ratio 262.5% and quick ratio 248.6%, with cash 13.43 exceeding short-term loans 4.71; no warning triggers (Current Ratio < 1.0) apply. Solvency: total liabilities 58.05 vs equity 54.71 (equity ratio ~48.5%); reported D/E 1.06x is within the conservative benchmark (<1.5). Interest coverage at 4.76x is moderate (below the 5x 'strong' threshold but well above the 2x warning). Maturity profile shows reliance on long-term debt (28.45) relative to short-term (4.71), reducing near-term refinancing pressure; current assets of 62.35 comfortably cover current liabilities of 23.75, suggesting low maturity mismatch risk. Off-balance sheet obligations were not disclosed.

Cash Flow Quality

Earnings quality is weak this period: OCF/Net Income is -0.11x (<0.8 threshold), with OCF of -0.25 against NI of 2.38, indicating poor cash conversion. Free cash flow is -4.97, primarily due to capex of -6.07; investing CF totaled -4.72, implying some offset from asset sales or investment securities flows. With financing CF of +0.76, the company partially funded the deficit externally. Working capital assessment is constrained by unreported receivables; inventories are modest at 3.30 and accounts payable at 6.43, offering limited insight into the OCF shortfall. No clear signs of working capital manipulation can be asserted, but the divergence between NI and OCF warrants monitoring of collection cycles and project billing.

Dividend Sustainability

Dividend disclosures are limited (DPS and total dividends unreported). The calculated payout ratio of 8.3% suggests a low distribution relative to net income, but FCF coverage is -25.16x this period, indicating dividends, if paid, were not covered by free cash flow due to negative OCF and high capex. DOE is reported at 0.0%. Sustainability will depend on the normalization of operating cash flow and a moderation of capex; under current cash flow dynamics, the capacity to increase dividends appears constrained despite accounting profit.

Risk Assessment

Business Risks:

• Margin pressure given high SG&A intensity (SG&A/gross profit ~84%), leaving a thin operating buffer.
• Execution risk on capital projects given capex of -6.07 driving negative FCF.
• Demand cyclicality in core end-markets (e.g., RF/telecom components and energy-related projects) impacting asset turnover (0.556).
• Reliance on non-operating OCI gains to boost comprehensive income, which are volatile and non-cash.

Financial Risks:

• Weak cash conversion (OCF/NI -0.11x) raises earnings quality concerns.
• Moderate interest coverage (4.76x) amid sizeable long-term loans (28.45) exposes the firm to interest rate and refinancing risk.
• Negative FCF (-4.97) necessitating external funding (Financing CF +0.76).
• Information gaps (receivables, DPS, dividend payments) limit visibility on liquidity dynamics and shareholder return commitments.

Key Concerns:

• Sustainability of current operating margin (~4.4%) without YoY evidence of improvement.
• Potential working capital build or collection delays contributing to negative OCF (receivables unreported).
• Capex burden versus near-term cash generation capacity.
• Discrepancy between calculated operating margin and XBRL-reported operating margin suggests reliance on calculable figures for analysis.

Investment Implications

Key Takeaways:

• Profitability positive but modest: operating margin ~4.4%, net margin 3.8%, ROE 4.3%.
• Cash flow is the weak link: OCF -0.25 vs NI 2.38; FCF -4.97 due to capex -6.07.
• Balance sheet liquidity is strong (current ratio 262.5%, cash 13.43 vs ST loans 4.71) with an equity ratio ~48.5%.
• Leverage (2.06x financial leverage; D/E 1.06x) supports ROE but adds rate/refinancing sensitivity.
• Total comprehensive income inflated by OCI (7.85), not indicative of core earnings power.

Metrics to Watch:

• OCF/Net income ratio (target >1.0) and working capital turns (especially receivables once disclosed).
• Capex run-rate versus growth conversion (revenue and asset turnover).
• Operating margin stability and SG&A efficiency.
• Interest coverage trend and debt maturity/refinancing profile.
• Dividend disclosures (actual DPS, payout, and FCF coverage).

Relative Positioning: Within TSE small/mid-cap electronics/energy solutions peers, the company shows adequate liquidity and balance sheet strength but lags on cash conversion and asset efficiency; ROE is mid-single-digit and supported by leverage rather than operating superiority.

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