NIPPON CERAMIC CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥20.79B
• Operating Income: ¥4.80B
• Net Income: ¥2.89B
• EPS: ¥258.17

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

Nippon Ceramic (6929) delivered strong FY2025 Q3 results, with revenue of ¥20.785bn up 12.5% YoY and operating income of ¥4.797bn up 32.3% YoY, indicating meaningful operating leverage. Gross profit reached ¥5.256bn, implying a gross margin of 25.3%, while operating margin expanded to 23.1%, reflecting tight cost control and/or favorable mix. Ordinary income of ¥5.088bn exceeded operating income by ¥0.291bn, suggesting positive non-operating contributions (e.g., financial income or FX). Net income surged 96.6% YoY to ¥5.588bn, materially outpacing operating profit growth; this likely reflects one-off or non-operating gains and a below-normal tax burden. Calculated pre-tax income (net income + income tax) implies an effective tax rate of roughly 17.6% for the period, lower than a typical domestic statutory rate. DuPont analysis shows ROE of 11.37%, driven primarily by a high net margin of 26.88%, modest asset turnover of 0.376x, and very low financial leverage (1.13x). The balance sheet is exceptionally conservative: equity of ¥49.127bn against total assets of ¥55.351bn implies an equity ratio of about 88.7%, with negligible interest expense. Liquidity is ample, with current assets of ¥45.772bn and current liabilities of ¥4.931bn (current ratio ~928%) and a quick ratio of ~818%, underscoring a substantial net cash/near-cash position even though cash and equivalents were not disclosed in the XBRL. Operating cash flow was solid at ¥4.885bn, equating to 0.87x of net income, broadly consistent with earnings quality though short of full conversion, partly reflecting working-capital dynamics. Financing cash outflows of ¥5.425bn indicate material shareholder returns or other financing actions, though the dividend per share was not disclosed; this likely includes share buybacks and/or dividends not captured in the DPS line. Investing cash flows were not disclosed, limiting visibility on capex and true free cash flow; as such, the reported FCF metric is not meaningful. Inventory stood at ¥5.417bn within a large current asset base, suggesting manageable inventory intensity. Overall, the company exhibits strong profitability, operating discipline, and a fortress balance sheet, but the outsized net income growth relative to operating income hints at non-recurring items. We highlight data limitations around cash balances, capex/investing flows, and dividend specifics, which constrain precision in FCF and payout analysis.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 26.88%
• asset_turnover: 0.376
• financial_leverage: 1.13
• calculated_ROE: 11.37%
• commentary: ROE is predominantly margin-driven, with low leverage and modest asset turnover. The margin uplift includes contributions from non-operating/extraordinary items, which may not be recurring. margin_quality:
• gross_margin: 25.3%
• operating_margin: 23.1%
• ordinary_margin: 24.5%
• net_margin: 26.9%
• insights: A narrow gap between gross and operating margins implies very low SG&A burden (~2.2% of sales) and/or sizable other operating income. Net margin exceeds operating margin materially, indicating non-operating and extraordinary tailwinds and a light tax rate in the period. operating_leverage:
• revenue_growth_YoY: 12.5%
• operating_income_growth_YoY: 32.3%
• interpretation: Operating profit grew ~2.6x faster than sales, evidencing positive operating leverage from scale and cost discipline. Sustainability depends on mix, pricing power, and normalization of non-recurring items.

Growth Assessment

revenue_sustainability: Top-line growth of 12.5% YoY suggests healthy demand in core sensor/ceramic components end-markets. Without segment disclosure, we infer contributions from automotive, industrial, and security applications; sustainability will depend on order trends and macro-sensitive capex cycles. profit_quality: Operating income growth (32.3% YoY) reflects genuine operating improvement, but the near-doubling of net income implies non-operating/one-time gains and a lower effective tax rate (~17.6%). Profit quality is solid at the operating level; at the net level it includes non-recurring elements. outlook: With high gross and operating margins and a debt-light structure, the company is well positioned to invest through cycles. Near-term outlook hinges on demand elasticity, FX (export exposure), and inventory normalization at customers. Normalization of non-operating gains and tax rate could temper net income growth versus operating trends.

Financial Health

liquidity:

• current_assets: 45772000000
• current_liabilities: 4931000000
• current_ratio: 928%
• quick_ratio: 818%
• working_capital: 40841000000
• commentary: Very strong liquidity; even excluding inventories, liquid assets comfortably cover short-term obligations many times over. solvency:
• total_assets: 55351000000
• total_liabilities: 6099000000
• total_equity: 49127000000
• equity_ratio_estimated: 88.7%
• interest_expense: 0
• assessment: Balance sheet is conservatively capitalized with negligible interest burden. Solvency risk is low. capital_structure:
• debt_to_equity_ratio_reported: 0.12x
• financial_leverage_dupont: 1.13
• insights: Minimal leverage enhances resilience but moderates ROE versus peers using debt. Capacity exists to deploy incremental capital if attractive opportunities arise.

Cash Flow Quality

earnings_quality:

• OCF: 4885000000
• net_income: 5588000000
• OCF_to_net_income: 0.87
• interpretation: Cash conversion is respectable but below 1.0x, indicating some working capital absorption or timing effects. Given strong operating margins, quality is acceptable; watch for sustained conversion >1.0x over time. FCF_analysis:
• capex_proxy: Investing CF not disclosed; D&A was ¥1.015bn as a rough maintenance proxy
• FCF: Not computable due to undisclosed investing cash flows
• commentary: True FCF cannot be assessed. If maintenance capex approximates D&A, underlying FCF would likely be positive given OCF of ¥4.885bn; however, growth capex cannot be ruled out. working_capital:
• inventories: 5417000000
• inventory_context: Inventories represent ~11.8% of sales for the period; manageable. Customer pre-buys or channel inventory shifts could influence cash conversion in subsequent quarters.
• notes: Absent detailed AR/AP data, we infer that most current assets are cash/receivables; exact composition is not disclosed.

Dividend Sustainability

payout_ratio_assessment: Payout ratio and DPS are not disclosed in the data provided (zeros indicate non-disclosure). EPS was ¥258.17; absent DPS, we cannot compute payout. FCF_coverage: Not assessable due to undisclosed investing cash flows and DPS. Operating cash flow coverage would likely be ample for a moderate dividend given low leverage. policy_outlook: The ¥5.425bn financing outflow suggests capital returns (dividends and/or buybacks), but the split is unknown. With an ~89% equity ratio and strong OCF, the balance sheet can support stable to rising shareholder returns, contingent on capex needs and order visibility.

Risk Assessment

Business Risks:

• Demand cyclicality in automotive, industrial, and consumer sensor end-markets
• Pricing pressure and competition in ceramic/sensor components
• FX volatility impacting export competitiveness and translation of overseas earnings
• Supply chain constraints for key raw materials (ceramics, rare metals) and components
• Customer concentration risk if large OEMs/tiers represent outsized revenue
• Technological substitution or design-out risk in key product lines

Financial Risks:

• Potential normalization of effective tax rate from ~17.6% toward statutory levels, reducing net income
• Non-operating/extraordinary gains may not recur, making net profit volatile
• Working capital swings affecting cash conversion (OCF/NI)
• Unspecified investing cash flows could elevate capex and depress free cash flow in growth phases

Key Concerns:

• Net income growth far exceeding operating income due to non-recurring items and low tax rate
• Lack of visibility on capex and cash balances due to undisclosed investing CF and cash & equivalents
• Potential margin mean reversion if mix/pricing tailwinds fade

Investment Implications

Key Takeaways:

• Robust operating performance with double-digit sales growth and strong operating leverage
• Exceptional balance sheet strength with an estimated ~89% equity ratio and negligible interest burden
• Solid cash generation at the operating level (OCF/NI ~0.87), though full FCF unknown
• Net profit buoyed by non-operating factors and a low effective tax rate, limiting comparability YoY
• Significant financing outflows imply active capital returns, but disclosure granularity is limited

Metrics to Watch:

• Order backlog and book-to-bill in core sensor/ceramic segments
• Gross and operating margin trajectory (to gauge mix and pricing sustainability)
• OCF/NI ratio and working capital turns (inventory and receivables days)
• Capex level and investing cash flows to assess true FCF and growth investments
• Effective tax rate normalization and magnitude of non-operating/extraordinary items
• FX sensitivity and hedging impact on ordinary income

Relative Positioning: Within Japanese electronic components and sensor peers, Nippon Ceramic exhibits above-average operating margins and a highly conservative capital structure, supporting resilience. ROE is healthy but primarily margin-driven given low leverage; peers employing more leverage may show higher ROE but with greater risk.

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