Koyou Rentia Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥25.39B
• Operating Income: ¥2.46B
• Net Income: ¥932M
• EPS: ¥129.78

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: A strong FY2025 Q3 with notable profit acceleration and margin expansion, underpinned by core operations. Revenue rose 7.4% YoY to 253.85, while operating income surged 49.4% YoY to 24.62, evidencing strong operating leverage. Gross profit reached 93.82, implying a gross margin of 37.0%. Operating margin improved to 9.7% (24.62/253.85). Ordinary income climbed 48.7% YoY to 24.97, while net income jumped 53.9% YoY to 14.34. We estimate prior-year revenue of roughly 236.3 and prior-year operating income of about 16.48, indicating material efficiency gains. Operating margin expanded by approximately 270 bps YoY (from ~7.0% to 9.7%). Net margin expanded by around 171 bps YoY (from ~3.9% to 5.7%). The effective tax rate is elevated at 44.4% (tax 7.45 on PBT 16.78), and the gap between ordinary income (24.97) and PBT (16.78) implies meaningful extraordinary losses this period. Non-operating items are small (non-op income 0.48; non-op expense 0.15), so the earnings inflection is primarily operational. Liquidity remains solid with a current ratio of 145% and quick ratio of 141%, and solvency conservative at D/E 0.59x. Interest coverage is very strong at ~178x, reflecting low financial risk. ROE stands at 11.9% (NPM 5.7% × AT 1.324 × leverage 1.59x), a healthy level for the sector. ROIC is reported at 13.0%, comfortably above the 8% excellence benchmark, reinforcing efficient capital deployment. Cash flow data are unreported, limiting assessment of earnings quality and dividend coverage despite a reasonable calculated payout ratio of 46.3%. Forward-looking, continued SG&A discipline and mix improvement should sustain mid-to-high single-digit revenue growth with further operating margin normalization, though elevated tax rate and one-off losses present near-term noise.

Profitability Analysis

ROE decomposition: 11.9% = Net Profit Margin (5.7%) × Asset Turnover (1.324x) × Financial Leverage (1.59x). The largest driver of YoY improvement is the Net Profit Margin due to a substantial operating margin expansion (~+270 bps YoY to 9.7%). Business drivers likely include improved utilization, pricing/mix in the rental portfolio, and SG&A efficiency (SG&A ratio ~30.5% of revenue), with limited reliance on non-operating items (non-op income ratio ~3.3%). Asset turnover at 1.324x is healthy and broadly consistent with a rental/service model; leverage at 1.59x remains conservative and not the source of ROE uplift. The PBT shortfall versus ordinary income suggests one-time extraordinary losses; thus, part of the gap between ordinary and net profit is non-recurring, while the operating margin gains appear more sustainable. Watch for SG&A growth outpacing revenue in future periods; currently, operating income growth (+49.4% YoY) outstrips revenue (+7.4%), indicating positive operating leverage rather than cost creep.

Growth Assessment

Revenue growth of 7.4% YoY to 253.85 indicates steady demand and likely improved utilization in core rental services. Operating income growth of 49.4% YoY materially outpaced sales, highlighting strong operating leverage and better mix/pricing. Net income grew 53.9% YoY despite a high effective tax rate and extraordinary losses implied between ordinary income and PBT. Non-operating contributions are modest, reinforcing that the growth is core-driven. With gross margin at ~37.0% and operating margin at ~9.7%, profitability trends are positive. Sustainability hinges on maintaining utilization rates, price discipline, and SG&A control; absent cash flow data, we cannot fully validate the durability of earnings. Near-term outlook is constructive if tax normalizes and extraordinary items fade; continued execution could keep operating margin near high single digits.

Financial Health

Liquidity is sound: current ratio 144.9% and quick ratio 141.0% (both above the 1.0 threshold; slightly below the 1.5 best-practice benchmark but adequate). Working capital totals 28.13. Cash and deposits of 25.54 provide 2.6x coverage of short-term loans (10.00), mitigating immediate refinancing risk. Solvency is conservative with total liabilities 70.89 vs equity 120.90 (D/E 0.59x). No explicit long-term loans are disclosed; noncurrent liabilities are 8.26, suggesting a largely short-term funding posture supported by robust current assets. No off-balance sheet obligations are reported in the provided data. No warning triggers: Current Ratio > 1.0 and D/E < 2.0.

Cash Flow Quality

Operating cash flow, investing cash flow, and capex are unreported; therefore, OCF/Net Income and FCF cannot be calculated and earnings quality cannot be directly validated. The strong interest coverage (~178x) and cash balance suggest adequate internal liquidity, but without working capital flow detail we cannot rule out timing effects. AR stands at 39.31; annualizing revenue to ~338.5 implies AR days of roughly 42–43, reasonable for the business. Inventory is minimal (2.46), limiting inventory-related manipulation risks. Overall, cash flow quality is indeterminable from disclosed data; monitor OCF/NI (target >1.0) and maintenance capex for rental assets.

Dividend Sustainability

The calculated payout ratio is 46.3%, comfortably within the sub-60% sustainability benchmark. DPS and total dividends paid are unreported, so FCF coverage cannot be assessed. With cash of 25.54 and low interest burden, near-term dividend capacity appears manageable, contingent on operating cash conversion and maintenance capex needs. Policy outlook: If ROE remains ~12% and ROIC ~13%, the company has room to maintain or moderately raise dividends, subject to reinvestment opportunities in rental assets. Confirmation requires OCF and capex disclosure.

Risk Assessment

Business Risks:

• Utilization and pricing risk in rental assets affecting gross and operating margins
• Project/seasonality exposure (events/construction) potentially driving revenue volatility
• Customer concentration risk (not disclosed but typical in B2B rental markets)
• Execution risk on SG&A discipline after a period of strong operating leverage

Financial Risks:

• Elevated effective tax rate (44.4%) pressuring net profit if it persists
• Extraordinary losses implied (ordinary income 24.97 vs PBT 16.78) creating earnings volatility
• Refinancing/interest rate risk on short-term loans (10.00), though currently mitigated by cash
• Limited transparency on capex and OCF, creating uncertainty around FCF

Key Concerns:

• Absence of cash flow statement obscures earnings quality and dividend coverage
• Potential one-off items between ordinary income and PBT may distort underlying trend
• Sensitivity to macro activity in construction/events sectors
• Tax normalization path unclear given current high rate

Investment Implications

Key Takeaways:

• Core-driven profit beat: operating income +49.4% on revenue +7.4%
• Operating margin expanded ~270 bps to 9.7%; net margin up ~170 bps to 5.7%
• ROE 11.9% and ROIC 13.0% indicate efficient capital use
• Balance sheet conservative (D/E 0.59x) with ample liquidity (CR ~145%)
• High tax rate and implied extraordinary losses are the main drags below the operating line

Metrics to Watch:

• OCF/Net Income (target >1.0) and Free Cash Flow after maintenance capex
• Operating margin trajectory and SG&A ratio
• Effective tax rate normalization and any further extraordinary items
• AR days and cash conversion cycle
• Leverage mix and maturity profile of borrowings

Relative Positioning: Among domestic rental/service peers, the company shows above-average profitability (ROE ~12%, ROIC ~13%) and improving operating margins with conservative leverage, positioning it favorably on quality and resilience, contingent on confirmation of cash flow conversion.

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