CHIYODA INTEGRE CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥28.32B
• Operating Income: ¥2.25B
• Net Income: ¥2.32B
• EPS: ¥188.45

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

Verdict: FY2025 Q3 was a weaker quarter with revenues and profits declining year over year, pressured margins, and profit mix skewed by one-time gains. Revenue fell 9.3% YoY to 283.17, while operating income declined 23.2% YoY to 22.50 and net income fell 20.4% YoY to 18.44. Gross margin printed at 29.8% and operating margin at 7.9%, with ordinary income at 24.43 and profit before tax boosted to 33.09 by extraordinary items. Operating margin compressed by roughly 145 bps YoY (from about 9.4% to 7.9%). Net margin compressed by roughly 91 bps YoY (from about 7.4% to 6.5%). The gap between ordinary income (24.43) and PBT (33.09) indicates approximately 8.7 of extraordinary gains, which elevated bottom-line results this quarter. Non-operating income was 4.55 (notably interest income of 2.35 and dividends of 0.69) against non-operating expenses of 0.64, underscoring higher financial income amid a large cash balance. DuPont shows ROE of 4.8% driven by a modest 6.5% net margin, low asset turnover of 0.596, and low financial leverage of 1.25x. ROIC is estimated at 6.7%, modestly below the 7–8% benchmark for healthy value creation. Liquidity remains a clear strength with a current ratio of 3.88x and cash and deposits of 156.16 against current liabilities of 80.19. Interest coverage is very strong at ~161x, reflecting low financial risk. Earnings quality is difficult to judge because operating cash flow was not disclosed, and the bottom line includes material non-recurring gains, suggesting underlying earnings power is lower than reported PBT indicates. The calculated payout ratio is 100.9%, which, absent corroborating operating cash flow, could be unsustainably high if maintained. Forward-looking, cost rigidity and lower volumes are pressuring operating leverage, and a return to growth or further cost actions will be necessary to stabilize margins. With a robust balance sheet but compressed operating profitability, management’s ability to lift ROIC toward or above 8% and reduce reliance on non-operating/extraordinary items will be key. Near-term focus should be on demand recovery, product mix improvement, and tighter SG&A/overhead control.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.8% = Net Profit Margin 6.5% × Asset Turnover 0.596 × Financial Leverage 1.25x. Biggest driver of YoY deterioration appears to be margin compression (operating margin down ~145 bps; net margin down ~91 bps) exacerbated by negative operating leverage as sales declined 9.3%. Business reason: softer topline reduced fixed-cost absorption while SG&A at 19.5% of sales (55.18/283.17) remained sticky; gross margin pressure likely from weaker volumes and potential mix. Sustainability: the non-operating and extraordinary boost (PBT > ordinary income by ~8.7) is non-recurring; core margin recovery depends on demand and cost discipline—thus current profitability levels are not fully sustainable without underlying improvement. Concerning trends: operating income declined faster than revenue (-23.2% vs -9.3%), indicating adverse operating leverage; SG&A growth vs revenue is not disclosed, but the ratio indicates limited cost flexibility this quarter.

Growth Assessment

Revenue contracted 9.3% YoY to 283.17, indicating demand softness or customer/program timing impacts. Operating income fell 23.2% YoY, outpacing revenue decline, highlighting unfavorable operating leverage. Net income declined 20.4% YoY to 18.44, cushioned by higher non-operating income and extraordinary gains that lifted PBT. Recurring profit quality is mixed: ordinary income (24.43) trails PBT (33.09) by ~8.7, implying one-off items meaningfully supported the quarter. Revenue sustainability is uncertain absent visibility on backlog or segment trends; the company likely needs mix enhancement and cost containment to restore margins. Outlook hinge points: stabilization in key end-markets, FX tailwinds (given sizable cash generating interest income), and incremental efficiency gains to raise ROIC from 6.7% toward the 7–8% benchmark.

Financial Health

Liquidity is strong: current ratio 387.8% and quick ratio 364.7% (both well above healthy thresholds). No warning on current ratio (<1.0) or D/E (>2.0); D/E is a conservative 0.25x with total liabilities of 94.20 vs equity of 380.80. Cash and deposits of 156.16 comfortably exceed short-term loans of 10.20 and current liabilities of 80.19, indicating low near-term refinancing risk and minimal maturity mismatch. Interest coverage is very strong at ~160.7x (22.50/0.14). Off-balance sheet obligations are not reported in the provided data. Overall solvency is robust with ample working capital (230.79) and net cash positioning implied by large cash vs small borrowings.

Cash Flow Quality

Operating cash flow was not disclosed, so OCF/Net Income and FCF cannot be assessed. This is a key limitation for earnings quality analysis. The presence of ~8.7 in extraordinary gains suggests bottom-line support from non-recurring items, increasing the need to validate cash conversion once OCF is available. Working capital accounts show manageable levels (AR 99.44; inventories 18.51; AP 44.10), but without period-on-period movements, potential working capital timing effects cannot be diagnosed. Until OCF is disclosed, we cannot confirm whether earnings are cash-backed or influenced by accruals.

Dividend Sustainability

Dividend details (DPS, total dividends, FCF) are unreported; however, the calculated payout ratio is 100.9%, which is above the 60% sustainability benchmark. Without OCF and FCF, coverage cannot be validated, and a payout above 100% would typically be unsustainable unless supported by excess cash on the balance sheet. The sizable cash balance provides short-term flexibility, but sustaining a >100% payout would erode cash if not backed by recurring free cash flow. Policy outlook remains unclear from the data; future payouts should align with normalized earnings (excluding extraordinary gains) and cash generation.

Risk Assessment

Business Risks:

• Demand softness leading to negative operating leverage (revenue -9.3% YoY; OP -23.2% YoY)
• Margin compression from mix and fixed-cost absorption (OPM down ~145 bps YoY)
• Dependence on non-operating and extraordinary gains to support PBT (~8.7 extraordinary)
• Potential customer/program concentration (typical in electronic components/processing sectors)

Financial Risks:

• Dividend payout ratio at 100.9% may exceed sustainable free cash flow absent strong OCF
• Interest income tailwind could reverse if cash balance declines or interest rates fall
• Limited disclosure of long-term debt and capex could mask future cash commitments

Key Concerns:

• ROIC at 6.7% below 7–8% benchmark indicates suboptimal capital efficiency
• Asset turnover at 0.596 is low, constraining ROE despite low leverage
• Earnings quality uncertainty due to unreported OCF and material non-recurring gains

Investment Implications

Key Takeaways:

• Core profitability weakened with sharper OP decline than sales, indicating adverse operating leverage
• Extraordinary gains (~8.7) and higher financial income buoyed PBT/NI, masking weaker core trends
• Balance sheet strength (current ratio 3.88x; net cash implied) provides resilience and optionality
• ROE at 4.8% and ROIC at 6.7% suggest room for improvement via margin recovery and asset efficiency
• Payout above 100% appears aggressive without corroborating OCF

Metrics to Watch:

• Operating cash flow and free cash flow conversion vs net income
• Order trends/backlog and revenue trajectory into FY2025 Q4
• Gross and operating margin progression (bps change) and SG&A ratio
• Extraordinary items and other non-recurring gains/losses
• ROIC progress toward ≥8% and asset turnover improvement
• FX rates and interest income sustainability given large cash balance

Relative Positioning: Within Japanese electronic components/processing peers, the company exhibits superior liquidity and low leverage but middling profitability (ROE ~4.8%, ROIC ~6.7%) and elevated reliance on non-operating/extraordinary items this quarter; improving core margins and cash conversion is key to closing the gap with higher-ROIC peers.

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
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