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

Koyo Rentia Co., Ltd. (TSE:70810) reported solid FY2025 Q3 year-to-date performance under JGAAP on a consolidated basis, with revenue of ¥25.385 billion, up 7.4% YoY. Profitability expanded materially: operating income rose 49.4% YoY to ¥2.462 billion and net income grew 53.9% YoY to ¥1.434 billion, indicating effective operating leverage and/or improved mix and cost discipline. Gross margin stood at 37.0%, and operating margin improved to approximately 9.7%, both suggesting better margin capture versus the prior year despite cost pressures. Ordinary income reached ¥2.497 billion, slightly above operating income, implying a neutral-to-small positive non-operating result net of interest expense. Net margin was 5.65%, consistent with the reported DuPont inputs. DuPont decomposition indicates ROE of 11.86%, driven by a moderate asset turnover of 1.324 and conservative financial leverage of 1.59x, reflecting a balanced, quality-driven earnings profile. The calculated effective tax rate based on disclosed tax expense and net income is around 34.2%, indicating a normalized domestic tax burden; the “0.0%” effective tax rate shown in the calculated metrics is not reflective of the disclosed P&L line items. Liquidity appears adequate with a current ratio of 125.5% and quick ratio of 122.6%, supported by low inventory intensity (inventories ¥189.9 million). The capital structure remains prudent with total liabilities of ¥7.242 billion against equity of ¥12.090 billion (D/E ≈ 0.60x), and very strong interest coverage of roughly 178x, underscoring low financial risk. Working capital is positive at ¥1.676 billion, providing a buffer against near-term operating needs. Cash flow statement figures were not disclosed in the dataset (zeros denote unreported), so operating cash flow, free cash flow, and capex trends cannot be assessed here. Depreciation and amortization were also not disclosed; given the business model, non-zero D&A would typically be expected, so EBITDA metrics reported as zero are not interpretable. Dividend data were not provided in the extract; thus payout and FCF coverage cannot be analyzed for this period. Overall, fundamentals based on available data show healthy topline growth, robust margin expansion, and strengthened returns, balanced by data limitations on cash flow and capital expenditure disclosure. The outlook hinges on sustaining revenue growth while maintaining improved operating margin and disciplined leverage. Key watchpoints include the conversion of earnings to operating cash flow, working capital discipline as growth continues, and any changes in tax or non-operating items that could affect net margins.

Profitability Analysis

ROE is 11.86%, decomposed into a net profit margin of 5.65%, asset turnover of 1.324x, and financial leverage of 1.59x. Gross margin is 37.0% (gross profit ¥9.382b on revenue ¥25.385b), indicating solid value-add relative to cost of sales. Operating margin is about 9.7% (¥2.462b/¥25.385b), demonstrating significant YoY expansion given operating income grew 49.4% vs. revenue +7.4%. Ordinary margin is approximately 9.8% (¥2.497b/¥25.385b), implying non-operating items were modestly positive net of interest. Net margin at 5.65% reflects a normalized tax burden and limited financial drag due to low interest expense. Operating leverage appears favorable: a relatively small revenue increase yielded outsized operating income growth, suggesting effective cost control and/or scale benefits. Margin quality looks improved, with a large spread between gross and operating margins pointing to SG&A efficiency gains. Interest burden is de minimis (interest expense ¥13.8m; interest coverage ~177.9x), supporting stable ordinary profits. The calculated effective tax rate based on disclosed lines is ~34.2% (¥745.5m tax on pre-tax income approximated at ¥2.18b), consistent with domestic norms. Depreciation and amortization were not disclosed; hence EBITDA and EBITDA margin figures reported as zero are not meaningful for assessing underlying operating profitability.

Growth Assessment

Revenue grew 7.4% YoY to ¥25.385b, indicating steady demand. Profit growth outpaced sales: operating income +49.4% and net income +53.9% YoY, consistent with strong operating leverage and/or improved mix. Sustainability of revenue growth will depend on order momentum and client activity; the low inventory balance suggests the model is not inventory-intensive, but capacity and asset utilization (not disclosed) will matter. Profit quality appears solid at the P&L level, with gross-to-operating margin retention improving. Ordinary income slightly exceeded operating income, implying non-operating results are neutral to supportive, which aids consistency. The net margin of 5.65% benefited from low interest but faced a normal tax rate (~34%), reducing volatility risk from tax one-offs based on available data. Outlook hinges on continued SG&A discipline and maintaining pricing power to preserve the higher operating margin. Without cash flow data, we cannot confirm whether earnings growth is supported by cash conversion; monitoring OCF relative to net income will be key. No guidance or backlog information is provided in the dataset; thus, forward growth commentary is qualitative and contingent on maintaining current run-rate performance.

Financial Health

Total assets stand at ¥19.179b, funded by total liabilities of ¥7.242b and equity of ¥12.090b, yielding a liabilities-to-equity ratio of ~0.60x. The equity ratio shown as 0.0% is not informative in this dataset; using disclosed figures, equity/asset ratio approximates 63.1%. Liquidity is comfortable: current assets ¥8.242b vs. current liabilities ¥6.566b, producing a current ratio of 125.5% and quick ratio of 122.6%. Working capital is positive at ¥1.676b, suggesting headroom for operations. Interest expense is low at ¥13.8m, and interest coverage is very strong (~178x), indicating low refinancing or interest rate sensitivity based on current debt levels. Asset turnover of 1.324x denotes efficient use of the asset base to generate revenue. No maturity profile, covenant data, or detailed debt composition is provided; however, overall solvency appears solid given the sizeable equity buffer.

Cash Flow Quality

Cash flow statement figures (OCF, investing CF, financing CF) were not disclosed in the dataset; therefore, OCF/Net Income and FCF metrics shown as zero are not interpretable. As a result, we cannot assess cash conversion, capex intensity, or free cash flow generation for FY2025 Q3 YTD. Given the nature of the business, depreciation would typically be non-trivial, but D&A was not disclosed here; thus, accrual versus cash earnings quality cannot be reconciled. Working capital appears positive with low inventories, which can be supportive of cash flow, but the direction of receivables and payables is unknown. Key items to evaluate when available include OCF relative to net income, maintenance versus growth capex, and changes in working capital tied to growth.

Dividend Sustainability

Dividend per share and payout data were not disclosed in the dataset (values shown as zero are unreported). Therefore, payout ratio, FCF coverage, and adherence to any stated dividend policy cannot be evaluated for this period. From a capacity standpoint, current earnings and strong interest coverage would generally support dividend potential, but without OCF and capex data, cash coverage cannot be assessed. Any commentary on dividend outlook should await disclosure of actual DPS, OCF, and FCF figures.

Risk Assessment

Business Risks:

• Sensitivity of demand to macro conditions affecting clients, potentially moderating revenue growth from the current +7.4% YoY.
• Margin compression risk if input costs rise or pricing power weakens, jeopardizing the improved 9.7% operating margin.
• Execution risk in sustaining SG&A efficiency that drove outsized operating profit growth.
• Potential project timing or seasonality effects that could skew quarterly/9M margins.
• Customer concentration or contract renewal risks (not disclosed).

Financial Risks:

• Lack of disclosed cash flow data limits visibility on cash conversion and free cash flow.
• Potential capex requirements (D&A not disclosed) that could absorb cash and affect FCF.
• Working capital swings as growth continues, which could pressure liquidity despite current ratios >120%.
• Tax rate variability; current effective tax approximates 34%, but changes could affect net margins.
• Refinancing or interest rate risk appears low given strong coverage, but debt terms are not disclosed.

Key Concerns:

• Unreported cash flow statement and D&A prevent assessment of earnings quality and FCF.
• Equity ratio shown as 0.0% in calculated metrics is non-informative; reliance on reconstructed ratios is necessary.
• Dividend data not disclosed, leaving income return and policy considerations unclear.

Investment Implications

Key Takeaways:

• Revenue growth of 7.4% YoY with significant operating margin expansion to ~9.7%.
• ROE of 11.86% supported by healthy asset turnover (1.324x) and moderate leverage (1.59x).
• Strong balance sheet with liabilities/equity ~0.60x and interest coverage ~178x.
• Liquidity adequate: current ratio 125.5%, quick ratio 122.6%, working capital ¥1.676b.
• Data gaps in cash flow and D&A limit visibility on FCF and capital intensity.

Metrics to Watch:

• Operating cash flow vs. net income and FCF after capex when disclosed.
• Sustained operating margin at or above ~9–10% and drivers of margin mix.
• Asset turnover trend and capital efficiency as growth continues.
• Effective tax rate stability relative to ~34%.
• Working capital movements (receivables and payables days) and interest expense trajectory.

Relative Positioning: Based on available financials, the company exhibits improving profitability and disciplined leverage, suggesting competitive execution and cost control versus a typical mid-cap services/solutions peer set; however, lack of cash flow and D&A disclosure in this dataset constrains comparison of capital intensity and true FCF profile.

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