HAMAMATSU PHOTONICS K.K. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥212.05B
• Operating Income: ¥16.16B
• Net Income: ¥14.26B
• EPS: ¥47.32

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

Hamamatsu Photonics (6965) reported FY2025 consolidated results under JGAAP with revenue of ¥212.1bn (+4.0% YoY) and operating income of ¥16.2bn (-49.7% YoY), highlighting a sharp profit contraction despite modest topline growth. Gross profit was ¥103.9bn, implying a strong gross margin of 49.0%, but the operating margin compressed to 7.6%, signaling heavy operating cost pressure and/or strategic expense increases. Ordinary income was ¥18.8bn and net income ¥14.2bn (-43.5% YoY), with EPS at ¥47.32. DuPont analysis indicates ROE of 4.39%, decomposed into a 6.70% net margin, 0.466x asset turnover, and 1.41x financial leverage; profit margin deterioration is the primary driver of lower returns. EBITDA was ¥32.9bn (15.5% margin), and interest coverage remained very strong at 92.9x given minimal interest expense of ¥0.17bn, underscoring low financial risk. Liquidity is robust: current ratio 296%, quick ratio 276.9%, and working capital of ¥158.3bn, backed by modest leverage (liabilities/equity 0.31x). Operating cash flow of ¥37.8bn significantly exceeded net income (OCF/NI 2.66x), suggesting solid earnings quality and favorable non-cash or working capital dynamics. However, investing cash outflows of ¥42.2bn led to negative free cash flow of ¥4.4bn, reflecting continued capacity and R&D-related investment needs. Total assets were ¥455.0bn and equity ¥323.5bn, implying conservative capital structure and ample balance sheet resilience. Inventories stood at ¥15.5bn, relatively small versus sales scale, though classification differences under JGAAP may affect line-item comparability. Reported effective tax rate shows 0.0% in the metrics table, but income tax expense is ¥10.0bn; this suggests limitations in the reported ratio rather than an actual zero tax rate. Dividend per share is shown as ¥0.00 with a 0.0% payout, which likely reflects non-disclosure in this data set rather than a confirmed suspension; caution is warranted in interpretation. Cash and share count fields are reported as zero, indicating unreported items, not true zero values; this constrains per-share and equity ratio cross-checks. Overall, the quarter reflects resilient demand but significant profit headwinds from operating costs, with strong cash generation from operations offset by elevated investment. The investment phase appears intentional, positioning for medium-term growth but suppressing near-term FCF and ROE. Near-term earnings recovery will hinge on operating cost normalization, pricing actions, and utilization of new capacity.

Profitability Analysis

ROE of 4.39% is driven by net margin 6.70%, asset turnover 0.466x, and financial leverage 1.41x. The step-down in operating income (-49.7% YoY) against revenue growth (+4.0%) points to negative operating leverage this year, with opex increases outpacing gross profit growth. Gross margin is high at 49.0%, but operating margin compressed to 7.6%, implying a sizable increase in SG&A/R&D or mix effects. EBITDA margin of 15.5% indicates that non-cash depreciation/amortization (¥16.7bn) is meaningful, reflecting a capital-intensive profile. Interest burden is de minimis (¥0.17bn), and interest coverage is 92.9x, so financial costs are not the source of margin pressure. Ordinary income (¥18.8bn) above operating income suggests some non-operating gains (e.g., FX or financial income) partially offsetting weaker core profitability. Net income margin at 6.7% remains profitable but well below likely historical levels given the magnitude of the operating decline. Overall, the ROE shortfall is primarily margin-driven rather than balance sheet efficiency or leverage. Sustained profitability improvement will require restoring operating margin via pricing, product mix shift to higher-value photonics components/systems, and tighter cost control.

Growth Assessment

Revenue growth of +4.0% YoY to ¥212.1bn indicates resilient end-market demand despite macro and inventory digestion in portions of photonics/semiconductor supply chains. The steep decline in operating profit (-49.7% YoY) highlights unsustainable near-term cost dynamics, likely reflecting higher labor, R&D, depreciation from recent capex, and/or product mix shifts. Ordinary income outpacing operating income suggests some support from non-operating items, which may not be durable. The quality of growth is mixed: topline expansion is modest and broad-based resilience is implied, but profit conversion weakened materially. Investment intensity (investing CF -¥42.2bn) likely aims at capacity expansion and technology leadership, supporting medium-term growth prospects but pressuring near-term FCF. Outlook hinges on absorption of added fixed costs through volume recovery, normalization of cost inflation, and pricing power in high value-added segments. A rebound in operating leverage is possible if revenue growth accelerates and utilization rises, but near-term guidance visibility is limited in the provided data. Given OCF of ¥37.8bn and EBITDA of ¥32.9bn, internal cash generation remains adequate to fund growth, albeit with tighter FCF. Watch for stabilization in operating margin and evidence that incremental capex begins to yield revenue and margin uplift.

Financial Health

Balance sheet strength is solid with total assets of ¥455.0bn and equity of ¥323.5bn, implying modest leverage (liabilities/equity 0.31x; assets/equity 1.41x). Liquidity is strong: current assets ¥239.0bn vs. current liabilities ¥80.7bn yields a current ratio of 296% and quick ratio of 276.9%, providing ample near-term coverage. Working capital is ¥158.3bn, supporting operational flexibility. Interest expense is minimal at ¥0.17bn, and interest coverage is 92.9x, indicating negligible refinancing risk. The equity ratio field is shown as 0.0%, which reflects non-disclosure rather than true value; by calculation, equity/asset ratio approximates 71.1%. Cash and equivalents are shown as 0 in the dataset, also indicating non-disclosure; hence, net cash/debt cannot be reliably computed. Overall solvency is robust, and the company appears conservatively financed with substantial headroom to support ongoing investment cycles.

Cash Flow Quality

OCF of ¥37.8bn versus net income of ¥14.2bn (OCF/NI 2.66x) indicates strong cash conversion and limited reliance on accruals, a positive for earnings quality. EBITDA of ¥32.9bn aligns with cash generation capacity, and D&A (¥16.7bn) is consistent with a capital-intensive model. Free cash flow was negative at -¥4.4bn, driven by investing cash outflows of ¥42.2bn that likely include capex and technology investments; this is deliberate rather than symptomatic of weak cash earnings. Working capital specifics are not disclosed in detail, but given the high OCF/NI ratio, changes in receivables/payables/inventories likely supported cash flow during the period. Inventories are reported at ¥15.5bn, which appears low versus sales scale and may reflect classification differences under JGAAP; we refrain from drawing strong conclusions from this single line. Financing cash outflow of -¥2.84bn suggests modest shareholder returns and/or debt movements; dividend amounts are not disclosed in this dataset. Overall, cash flow quality is sound, with negative FCF driven by investment rather than poor cash earnings.

Dividend Sustainability

Dividend data show DPS of ¥0.00 and payout of 0.0%, which should be treated as undisclosed rather than actual zero distribution. Based on available figures, net income was ¥14.2bn and OCF ¥37.8bn, but FCF was -¥4.4bn due to heavy investing outflows. If dividends were paid, FCF coverage would likely have been tight or negative this year; absent disclosure, coverage cannot be confirmed. Balance sheet strength and low leverage suggest capacity to resume or maintain dividends over a cycle, but near-term distributions may be balanced against elevated capex needs. Without confirmed DPS and share count, payout ratio and yield cannot be reliably assessed. Policy outlook thus remains uncertain in this dataset; watch for management guidance on shareholder returns alongside capex plans.

Risk Assessment

Business Risks:

• Operating leverage risk: margin sensitivity to small changes in volume given high fixed cost base and rising D&A
• End-market cyclicality in semiconductors, industrial, and scientific instrumentation affecting order visibility
• Product mix shifts toward lower-margin offerings pressuring operating margin
• Supply chain and input cost inflation impacting gross-to-operating margin conversion
• Technology execution risk tied to ongoing R&D and capex programs

Financial Risks:

• Negative free cash flow in the period due to elevated investment outlays
• Potential mismatch between investment timing and revenue ramp, delaying return on capital
• Limited disclosure on cash and equity ratio in this dataset reduces visibility on net cash/liquidity buffers
• FX exposure in non-operating line items affecting earnings volatility

Key Concerns:

• Operating income down 49.7% YoY despite 4.0% revenue growth
• Operating margin compressed to ~7.6% from a high gross margin base, implying significant opex pressure
• Free cash flow negative ¥4.4bn due to heavy investing cash outflows
• ROE at 4.39% below likely cost of equity, driven by margin weakness
• Dividend visibility unclear due to non-disclosed DPS and share count

Investment Implications

Key Takeaways:

• Topline resilient (+4.0% YoY), but profit conversion weakened materially (OP -49.7% YoY)
• ROE 4.39% driven lower by margin compression; leverage remains conservative
• Strong liquidity (current ratio 296%) and minimal interest burden (coverage 92.9x)
• OCF robust (¥37.8bn, 2.66x NI) but FCF negative (-¥4.4bn) due to high investment
• Near-term earnings trajectory depends on cost normalization and pricing/mix improvement

Metrics to Watch:

• Operating margin recovery from 7.6% and trajectory of SG&A/R&D as % of sales
• Order intake and backlog supporting utilization of new capacity
• Capex intensity via investing CF and subsequent FCF inflection
• OCF/NI ratio sustainability and working capital movements
• Non-operating gains/losses impact on ordinary income and FX sensitivity

Relative Positioning: Financially conservative with strong liquidity and low leverage versus many capital goods/tech peers, but near-term profitability underperforming due to cost pressures and investment cycle; positioned for medium-term recovery contingent on utilization and pricing power.

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