Peers Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥6.10B
• Operating Income: ¥559M
• Net Income: ¥432M
• EPS: ¥47.08

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

FY2025 Q4 results show resilient operational improvement with margin expansion at the operating level despite a modest revenue decline and a net income drop driven by below-the-line items. Revenue fell 1.7% YoY to 61.03, while operating income rose 16.4% YoY to 5.59. Operating margin improved to 9.2% (5.59/61.03), with operating margin expanding by roughly 143 bps YoY (from ~7.7% to ~9.2%). Ordinary income increased 9.9% YoY to 4.97, with ordinary margin up about 86 bps to 8.1%. Net income declined 26.1% YoY to 4.32, driving net margin down to 7.1% and compressing by approximately 235 bps YoY (from ~9.4% to 7.1%). The main drag below operating level was net non-operating expense of about 0.62 (non-op income 0.13 vs non-op expense 0.75), despite a 0.27 gain on investment securities. Cost discipline was evident as SG&A of 11.80 held firm against gross profit of 17.39, yielding solid operating leverage in a down-revenue environment. Cash flow quality was strong with OCF of 7.03, 1.63x net income, and FCF of 6.52 after modest capex of 0.13. Liquidity remains robust (current ratio 220%, quick ratio 220%) supported by cash and deposits of 17.63 against current liabilities of 12.82. Leverage is conservative with D/E at 0.62x and interest coverage at 37.3x, while equity ratio (calculated) is approximately 61.9%. ROE is healthy at 15.7% on DuPont metrics (NPM 7.1%, asset turnover 1.37x, leverage 1.62x), aided by strong asset productivity. ROIC at 33.0% signals high capital efficiency, though it may reflect light asset intensity and could be sensitive to earnings normalization. Shareholder returns were active, with 4.00 spent on buybacks and a calculated payout ratio of 36.9%, both comfortably covered by FCF (FCF coverage 4.09x). Earnings quality is favorable this period, but the contrast between improving operating metrics and declining net income suggests monitoring non-operating volatility and tax effects. Forward-looking, maintaining the enhanced operating margin amid flat-to-down topline will be key, with a focus on sustaining cash conversion, guarding against goodwill impairment risk, and calibrating capital returns to preserve balance sheet strength.

Profitability Analysis

ROE decomposition (DuPont): ROE 15.7% = Net Profit Margin 7.1% × Asset Turnover 1.370 × Financial Leverage 1.62x. The largest YoY change appears in the Net Profit Margin, which compressed (235 bps) despite operating margin expansion (+143 bps) because non-operating expense outweighed non-operating income and the tax burden normalized. Business drivers: mix and cost control lifted operating margin (SG&A discipline vs flat-to-down revenue), while non-operating drag (net -0.62) and taxes (effective rate 17.7%) weighed on bottom-line. Sustainability: operating margin gains look more sustainable given structural SG&A control and gross profit resilience; non-operating items (investment gains, other expenses) are inherently volatile and unlikely to be consistent tailwinds. Operating leverage was positive as operating income rose 16.4% on a 1.7% revenue decline, indicating cost containment and mix improvement. Watchpoints: if SG&A growth outpaces revenue in future periods, the operating leverage benefit could reverse; also, reliance on investment securities gains (0.27) is non-recurring in nature.

Growth Assessment

Revenue declined 1.7% YoY to 61.03, suggesting softer demand or project timing, but the company offset this via mix improvement and cost control to grow operating income 16.4% YoY. Gross profit of 17.39 yielded a 28.5% gross margin; with SG&A at 11.80, operating margin rose to ~9.2% (from ~7.7% prior). Ordinary income growth (+9.9% YoY) was tempered by net non-operating expenses of 0.62, while net income fell 26.1% YoY due to below-the-line headwinds and the absence of prior-year tailwinds. EBITDA reached 6.48 with a 10.6% margin, supporting healthy cash generation. ROIC of 33.0% indicates strong capital efficiency, although durability depends on sustaining margins and asset turnover as the business scales. Near term, growth appears more margin-led than volume-led; maintaining pricing/mix and SG&A discipline will be key if end-market demand remains tepid. Outlook hinges on stabilizing non-operating items and continuing high OCF conversion to reinvest or support shareholder returns.

Financial Health

Liquidity is strong: current ratio 220.1% and quick ratio 220.1% (cash 17.63 and receivables 9.22 vs current liabilities 12.82). No warning triggers (Current Ratio <1.0) or high leverage (D/E >2.0). Calculated equity ratio is ~61.9% (27.59/44.56), indicating a solid capital base. Interest-bearing debt detail is partially unreported, but long-term loans are 4.00 and interest expense is modest at 0.15 with coverage at 37.31x, implying low solvency risk. Maturity mismatch risk appears limited: cash on hand (17.63) exceeds current liabilities (12.82), and receivables provide an additional buffer. Off-balance sheet obligations are not disclosed in the provided data; no specific commitments reported. Goodwill and intangibles total 9.80 (including goodwill 6.69), representing a meaningful share of equity and warranting impairment monitoring.

Cash Flow Quality

OCF of 7.03 is 1.63x net income (4.32), clearing the >1.0 threshold and indicating high earnings quality. FCF was 6.52 after low capex of 0.13, showing ample coverage for shareholder returns and debt service. Financing CF was -8.47, driven by share repurchases of -4.00 and other financing outflows (likely debt repayments/dividends; specific dividends unreported). Working capital detail is not provided, but strong OCF versus NI suggests either stable or favorable working capital movements; no signs of manipulation can be inferred from the data. With cash 17.63 and manageable debt service (interest 0.15), cash flow sustainability appears solid absent a sharp earnings decline.

Dividend Sustainability

Reported DPS is unreported; calculated payout ratio is 36.9%, within a typically sustainable range (<60%). FCF coverage of the payout is strong at 4.09x, and even after share repurchases of 4.00, FCF remains positive. Treasury shares total ~10.0% of outstanding (1,002,957/10,025,600), indicating ongoing buyback flexibility, though continuation should be balanced against maintaining liquidity. With robust OCF and modest capex, the company has room to sustain ordinary dividends and selective buybacks, provided non-operating volatility does not materially compress net income.

Risk Assessment

Business Risks:

• Topline softness (-1.7% YoY) indicating potential demand or project timing risk
• Margin sustainability risk if SG&A creeps up faster than gross profit
• Goodwill/intangible concentration (goodwill 6.69; total intangibles 9.80) creating impairment risk
• Dependence on non-operating items (e.g., investment securities gain 0.27) that are non-recurring

Financial Risks:

• Potential exposure to higher interest costs over time, albeit currently mitigated by low interest expense and high coverage
• Capital return intensity (4.00 buybacks) could reduce cash buffers if earnings weaken
• Limited visibility on short-term borrowing and other interest-bearing debt due to partial disclosure

Key Concerns:

• Net income decline (-26.1% YoY) despite improved operating performance, driven by below-the-line headwinds
• Non-operating expense load (0.75) exceeding non-operating income (0.13), pressuring ordinary profit conversion
• Sustainability of ROIC at 33.0% if asset base grows or margins normalize

Investment Implications

Key Takeaways:

• Operating margin expanded ~143 bps YoY to ~9.2% on cost control and mix despite a 1.7% revenue decline
• Net income fell 26.1% YoY on non-operating drag and tax, compressing net margin ~235 bps
• Cash generation is strong (OCF 1.63x NI; FCF 6.52), supporting ongoing capital returns
• Balance sheet is conservative (current ratio 220%, D/E 0.62x, interest coverage 37x)
• ROE 15.7% and ROIC 33.0% reflect strong efficiency, but may moderate if non-operating headwinds persist

Metrics to Watch:

• Operating margin sustainability and SG&A-to-sales ratio
• Net non-operating result (gains/losses, interest expense) and effective tax rate
• OCF/NI ratio and working capital movements
• Goodwill and intangible impairment indicators
• Capital allocation mix between buybacks, dividends, and growth capex

Relative Positioning: Within small-cap service/solution peers, the company exhibits above-average operating margin improvement, strong cash conversion, and conservative leverage, offset by higher sensitivity to non-operating volatility and notable intangible asset exposure.

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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