KYOWA ELECTRONIC INSTRUMENTS CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥11.62B
• Operating Income: ¥896M
• Net Income: ¥656M
• EPS: ¥25.49

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

Kyowa Electronic Instruments (6853) reported FY2025 Q3 (cumulative) revenue of ¥11.622bn, up 4.4% YoY, indicating steady demand in its sensors and measurement systems businesses. Gross profit was ¥4.373bn, implying a solid gross margin of 37.6%, consistent with a value-added product mix. Operating income increased 1.6% YoY to ¥896m, growing slower than revenue, suggesting modest margin compression due to higher SG&A or an unfavorable mix. Ordinary income reached ¥927m, and net income was ¥676m, up 3.2% YoY, with a net margin of 5.82%. The DuPont decomposition points to a calculated ROE of 3.88%, driven by a 5.82% net margin, 0.506x asset turnover, and modest financial leverage of 1.32x. Operating margin stands at approximately 7.7% (operating income/revenue), indicating decent operating efficiency for a precision instrumentation manufacturer. Interest expense was minimal at ¥7.1m, resulting in a very high interest coverage ratio of 126.3x and limited interest burden. The balance sheet is robust, with total assets of ¥22.965bn and total equity of ¥17.411bn, implying an estimated equity ratio near 75.8% (despite the reported 0.0% figure being an undisclosed placeholder). Liquidity appears strong: current assets of ¥16.513bn against current liabilities of ¥4.078bn yield a current ratio of 404.9% and a quick ratio of 371.4%. Working capital is ample at ¥12.435bn, which should cushion project timing volatility and supply chain fluctuations. Inventory stood at ¥1.365bn; relative to cost of sales (¥6.756bn YTD), this suggests moderate turns and warrants monitoring for obsolescence risk typical of specialized components. Cash flow data (OCF/FCF) were not disclosed in this filing, so cash conversion and FCF coverage cannot be assessed from the provided figures. EPS was ¥25.49; dividend data were not disclosed (DPS and payout ratio shown as zero denote non-disclosure rather than actual zero). Overall profitability is stable, leverage is conservative, and liquidity is strong, but weaker operating leverage this period and the absence of cash flow and dividend disclosures temper visibility. The company’s fundamentals point to resilience, with key watch points around cost control, backlog/order momentum, and inventory normalization. Data limitations (notably OCF, FCF, cash balance, D&A, shares outstanding, and DPS) require caution when interpreting some derived metrics (e.g., reported effective tax rate and EBITDA).

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 5.82% (¥676m / ¥11,622m)
• asset_turnover: 0.506x (¥11,622m / ¥22,965m)
• financial_leverage: 1.32x (Assets/Equity = ¥22,965m / ¥17,411m)
• calculated_ROE: 3.88% (matches provided DuPont calculation) margin_quality:
• gross_margin: 37.6% (¥4,373m / ¥11,622m) reflecting value-added measurement solutions
• operating_margin: 7.7% (¥896m / ¥11,622m), up at a slower pace than sales YoY, indicating mild SG&A pressure or mix shift
• ordinary_margin: 8.0% (¥927m / ¥11,622m)
• net_margin: 5.82%, consistent with niche industrial equipment peers operating_leverage: Revenue up 4.4% YoY vs operating income up 1.6% YoY suggests limited positive operating leverage this period; cost discipline and mix will be key to restoring incremental margins. tax_and_interest: Interest burden is negligible (interest expense ¥7.1m; interest coverage 126.3x). While the calculated metrics list a 0.0% effective tax rate, using disclosed tax expense (¥315m) implies an effective tax rate of ~31.8% (¥315m / [¥676m + ¥315m]).

Growth Assessment

revenue_sustainability: The 4.4% YoY growth indicates steady, likely project-driven demand in industrial/civil measurement markets. Sustainability depends on public works, construction activity, and capital investment cycles in core end-markets. profit_quality: Gross margin at 37.6% is healthy, but slower operating income growth vs sales points to some SG&A absorption or pricing pressures. Ordinary income outpaced operating income due to low financial costs. outlook: With high liquidity and low leverage, the company is positioned to execute on backlog and navigate supply variability. Near-term growth hinges on orders for sensors/strain gauges and systems tied to infrastructure monitoring and industrial automation. Watch for order intake, backlog trends, and margin trajectory into FY2025 Q4.

Financial Health

liquidity:

• current_ratio: 404.9% (¥16,513m / ¥4,078m)
• quick_ratio: 371.4% (inventory-light current assets vs current liabilities)
• working_capital: ¥12,434,633,000
• cash_and_equivalents: Not disclosed in this filing (zeros denote non-disclosure), but current assets are ample. solvency_and_capital_structure:
• total_assets: ¥22,965,000,000
• total_equity: ¥17,411,000,000
• total_liabilities: ¥5,941,905,000
• equity_ratio_estimate: ≈75.8% (Equity/Assets), despite the reported 0.0% placeholder
• debt_to_equity: 0.34x (provided)
• interest_coverage: 126.3x (Operating income/Interest expense) assessment: The balance sheet is conservative with substantial equity and liquidity buffers, supporting resilience through cyclical swings.

Cash Flow Quality

earnings_quality: Net income of ¥676m alongside strong gross margin suggests underlying quality, but without OCF and D&A disclosures, accrual intensity cannot be validated. free_cash_flow: OCF and investing cash flows were not disclosed (reported as zero placeholders), so FCF cannot be assessed from this dataset. working_capital_dynamics: Inventory of ¥1.365bn vs YTD cost of sales of ¥6.756bn implies moderate turns; continued monitoring of inventory days and receivables is warranted given project-based sales. High working capital provides flexibility but could tie up cash if order timing extends.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are not disclosed for the period (zeros are placeholders). With EPS at ¥25.49 and low leverage, there is capacity for distributions in principle, but policy and actual cash generation are not observable here. FCF_coverage: Not assessable due to undisclosed OCF and capex; the reported 0.00x is not meaningful. policy_outlook: Absent dividend disclosure, infer policy from historical norms and upcoming full-year guidance; balance sheet strength supports optionality, but confirmation requires cash flow and board policy updates.

Risk Assessment

Business Risks:

• Cyclicality in public works, construction, and industrial capital spending impacting order intake
• Project timing risk causing quarter-to-quarter volatility in revenue and margins
• Pricing and mix risk in sensors/measurement systems affecting gross margin
• Supply chain and component availability constraints potentially delaying deliveries
• Technology obsolescence risk in specialized sensors and data acquisition equipment
• Customer concentration in infrastructure and specific industrial segments

Financial Risks:

• Working capital intensity and potential inventory obsolescence in niche components
• Foreign exchange exposure on imported components and overseas sales (if applicable)
• Limited operating leverage if SG&A grows faster than revenue
• Potential increases in input costs squeezing margins

Key Concerns:

• Operating income lagging revenue growth, indicating margin pressure
• Lack of disclosed operating cash flow and capex, limiting visibility on cash conversion
• Dividend policy not disclosed for the period, reducing income visibility

Investment Implications

Key Takeaways:

• Top-line growth of 4.4% YoY with stable gross margin underscores resilient demand.
• Operating margin compression vs sales growth points to the need for tighter cost control or improved mix.
• Strong balance sheet with an estimated ~76% equity ratio and minimal interest burden enhances resilience.
• Liquidity is ample (current ratio ~4.0x), supporting execution and buffer against timing volatility.
• Cash flow and dividend data are not disclosed, limiting assessment of payout capacity and cash conversion.

Metrics to Watch:

• Order intake and backlog/book-to-bill
• Gross margin and SG&A-to-sales ratio
• Operating cash flow, free cash flow, and working capital turns
• Inventory days and receivables collection
• Capex and D&A disclosures
• ROE trend and asset turnover
• Dividend announcements and payout policy updates

Relative Positioning: Within Japan’s measurement and industrial instrumentation space, the company exhibits above-average balance sheet strength and solid margins, though near-term operating leverage appears subdued; sustained order momentum and cash conversion will be key to maintaining its competitive footing.

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