| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥587.4B | ¥569.7B | +3.1% |
| Operating Income / Operating Profit | ¥413.8B | ¥419.7B | -1.4% |
| Ordinary Income | ¥465.5B | ¥445.2B | +4.6% |
| Net Income / Net Profit | ¥315.5B | ¥317.1B | -0.5% |
| ROE | 12.9% | 13.3% | - |
For the fiscal year ended March 2025, Revenue was ¥587.4B (YoY +¥17.7B, +3.1%), Operating Income was ¥413.8B (YoY -¥5.9B, -1.4%), Ordinary Income was ¥465.5B (YoY +¥20.4B, +4.6%), and Net Income attributable to owners of the parent was ¥315.5B (YoY -¥1.6B, -0.5%). While this represents a revenue increase with a decline in operating profit, non-operating income expanded due to higher interest income (¥39.7B → ¥47.3B), resulting in year-over-year improvement at the ordinary income level. Operating margin remained high at 70.5% (down 3.2pt from 73.7% a year earlier), but increased operating expenses and provisions for doubtful accounts compressed profitability. Operating Cash Flow (OCF) was ¥328.3B, 1.04x of Net Income, indicating healthy cash generation. Investing Cash Flow was an outflow of -¥423.6B, primarily due to allocations to investment securities and short-term investment securities. Free Cash Flow was negative at -¥95.2B, but capital expenditures for business operations were minimal at ¥0.74B; most cash was reallocated into financial assets.
[Revenue] Revenue of ¥587.4B represents a 3.1% YoY increase. The company reports a single segment of credit guarantee business; growth was driven by increased handling volume of mortgage loan guarantees and steady guarantee fee income. Within operating revenues, in addition to guarantee-related revenue, changes in working capital (increase in advances received of ¥19.4B) may have affected revenue recognition timing. Detailed breakdowns by region/segment are not disclosed; given the single-business nature, overall growth is closely linked to the domestic housing market and financial environment.
[Profitability] Operating Income was ¥413.8B, down 1.4% YoY. Operating expenses expanded to ¥173.6B (from ¥150.0B, +15.7%), notably due to an increase in provisions for doubtful accounts (provision expense ¥9.9B) and higher selling, general and administrative expenses. Operating margin fell 3.2pt to 70.5% from 73.7%. Ordinary Income rose 4.6% to ¥465.5B, as non-operating income offset the operating-level decline. Non-operating income increased to ¥63.2B (from ¥41.7B), primarily driven by interest income of ¥47.3B (up 19.1% from ¥39.7B). Equity-method investment gains of ¥11.9B also contributed. Non-operating expenses decreased to ¥11.4B (from ¥16.3B), and interest expense declined to ¥7.8B (from ¥8.5B). Extraordinary items were immaterial: extraordinary gains ¥0.3B (gain on sale of investment securities ¥0.3B, negative goodwill recognized ¥12.6B), extraordinary losses ¥0.2B. Income before income taxes was ¥465.8B; after income taxes of ¥140.6B (effective tax rate 30.2%), Net Income was ¥315.5B, a slight decrease of 0.5% YoY. In summary, despite higher revenue but lower operating profit, increased interest income drove higher ordinary income.
[Profitability] Operating margin of 70.5% contracted 3.2pt from 73.7% last year, but the guarantee business continues to maintain very high profitability. Net profit margin was 53.7%, down 2.0pt from 55.7%, while the ordinary income margin improved to 79.2% (up 1.1pt from 78.1%) due to expanded non-operating income. The increase in interest income has become apparent against a backdrop of rising interest rates. [Cash Quality] OCF of ¥328.3B is 1.04x of Net Income (¥315.5B), exceeding benchmark levels; the accrual ratio is -3.8%, indicating high cash backing of earnings. Working capital movements were limited, with provisions increased by ¥15.7B and advances received up ¥4.7B, but overall cash conversion is healthy. OCF/EBITDA (Operating Income + depreciation) is 0.77x, slightly below 0.9x, suggesting effects from interest/dividend classification and working capital. [Investment Efficiency] ROE at 12.9% declined 0.9pt from 13.8% last year but remains high compared to the company’s historical levels. Total asset turnover is 0.12x (unchanged), and investment securities—which comprise the majority of assets (61.7% of total assets)—support recurring income. [Financial Soundness] Equity Ratio is 48.9% (up 0.4pt from 48.5%), current ratio 319.0%, Debt/EBITDA 0.71x, and Interest Coverage 53.0x, reflecting an extremely healthy balance sheet. Against long-term borrowings of ¥300.0B, the company holds cash and deposits of ¥725.5B and short-term investment securities of ¥440.9B, indicating ample liquidity.
OCF was ¥328.3B, roughly flat YoY (-1.8%). Operating cash flow before working capital changes was ¥430.0B and, after payments of corporate taxes of ¥148.3B and receipts of interest/dividends of ¥54.4B, and reflecting working capital factors such as an increase in provisions of ¥15.7B and an increase in advances received of ¥4.7B, the final OCF was ¥328.3B. Investing Cash Flow was a significant outflow of -¥423.6B, primarily for acquisition of investment securities ¥480.7B and acquisition of short-term investment securities ¥199.6B. Partially offsetting these were term deposit withdrawals of ¥479.0B and recoveries of long-term loans receivable ¥98.6B. Capital expenditures were minimal at ¥0.74B, indicating limited capital spending for operations. Financing Cash Flow was an outflow of -¥273.4B, driven by dividend payments of ¥203.3B and share buybacks of ¥70.0B. Long-term borrowings raised ¥294.0B and repayments of ¥300.0B nearly offset each other. As a result, Free Cash Flow was negative at -¥95.2B; however, given the healthy OCF and the investing CF being driven by reallocation into financial assets, operational cash generation remains intact. Cash and deposits decreased to ¥725.5B (from ¥1,375.8B, -47.3%), reflecting a shift of funds into short-term investment securities and investment securities.
Quality of earnings is strong; the accrual ratio of -3.8% indicates the majority of earnings are backed by cash. Of Operating Income ¥413.8B, recurring guarantee-related revenue comprises the bulk, and extraordinary items are immaterial (extraordinary gains ¥0.3B; extraordinary losses ¥0.2B), so one-off impacts are limited. The difference between Ordinary Income ¥465.5B and Operating Income ¥413.8B (¥51.7B) is mainly composed of interest income ¥47.3B and equity-method investment gains ¥11.9B; increased non-operating income reflects a rising interest environment and expanded asset management. Comprehensive income of ¥337.9B exceeded Net Income by ¥22.4B, contributed by valuation differences on available-for-sale securities ¥11.8B and actuarial adjustment related to retirement benefits ¥0.8B. The sustainability of increased non-operating income depends on interest rate levels and portfolio scale. The increase in provisions for doubtful accounts of ¥15.7B reflects conservative credit cost management; provision balance of ¥99.1B (recorded as allowance for doubtful accounts) is high at 42.1% relative to long-term loans receivable of ¥235.4B, indicating substantial reserves against potential credit risk.
Full Year guidance projects Revenue ¥606.0B, Operating Income ¥420.0B (YoY +1.5%), Ordinary Income ¥472.0B (YoY +1.4%). Versus first-half results, achievement rates are 96.9% for Revenue, 98.5% for Operating Income, 98.6% for Ordinary Income, and 96.5% for Net Income, generally on track with the plan. For the remaining second half, incremental increases of Revenue ¥18.6B (+3.2%), Operating Income ¥6.2B (+1.5%), and Ordinary Income ¥6.5B (+1.4%) are required; controlling operating expenses and maintaining investment income will be key to achieving targets. Forecast EPS is ¥246.12 versus actual EPS ¥243.70, indicating a shortfall, but the dividend forecast of ¥50 (midterm ¥45 + year-end ¥75 actuals of ¥120 before the 1:2 stock split on April 1, 2025, adjusted pro forma) is expected to be maintained.
Interim dividend was ¥45 and year-end dividend ¥75, totaling ¥120 (pre-1:2 stock split amounts as of April 1, 2025). Payout Ratio is 44.8%, within an appropriate range; total dividends against Net Income ¥315.5B amount to ¥203.3B. Share buybacks of ¥70.0B (per cash flow statement) were conducted, bringing total shareholder return to ¥273.3B and Total Return Ratio to 86.6%. The total return relative to OCF is 0.83x, within the company’s operating cash generation capacity and sustainable. Although Free Cash Flow is negative at -¥95.2B, this primarily reflects increases in financial asset holdings; given current liquidity (current ratio 319.0% and cash/deposits ¥725.5B), continuation of dividends and share buybacks appears supported. Post-stock-split dividend guidance of ¥50 implies an effective increase of approximately +4.2%.
Credit cycle deterioration risk: Although provisions for doubtful accounts are conservatively built to ¥99.1B (provision rate 42.1% against long-term loans receivable ¥235.4B), if the mortgage market credit environment worsens or real estate prices decline leading to higher guarantee claims, additional provisions or loss recognition could pressure the operating margin (currently 70.5%). Provision expenses, currently ¥9.9B, may rise going forward.
Market value volatility of financial assets: The company holds investment securities ¥3,091.4B (61.7% of total assets) and short-term investment securities ¥440.9B, exposing it to valuation swings from interest rate increases or equity market declines. Valuation difference on available-for-sale securities ¥21.98B increased by ¥11.8B this period, but adverse market conditions could reduce comprehensive income and erode equity. Interest income of ¥47.3B would decline in a falling interest rate environment, reducing support for Ordinary Income ¥465.5B.
Risk of deterioration in operating cash conversion efficiency: OCF/EBITDA at 0.77x is below 0.9x; working capital movements and classification of interest/dividend items could dampen short-term cash generation. While increases in advances received and provisions appear temporary, persistent upfront provisioning of expenses could cause OCF growth to lag Net Income growth.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 70.5% | 8.8% (4.0%–20.0%) | +61.6pt |
| Net Profit Margin | 53.7% | 4.3% (0.6%–11.3%) | +49.4pt |
The company’s profitability is outstanding within the insurance/guarantee sector, reflecting the high-margin nature of the guarantee business.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 3.1% | 2.1% (-4.5%–6.9%) | +1.0pt |
Growth slightly exceeds the industry median, maintaining a steady growth trajectory.
※ Source: Company aggregation
Monitor the persistence of cost pressure indicated by the contraction in Operating Margin (73.7% → 70.5%, -3.2pt) and a 15.7% increase in operating expenses. The increase in provisions for doubtful accounts reflects conservative credit cost management, but the provision balance of ¥99.1B (42.1% of long-term loans receivable) suggests the potential for realized losses depending on future credit cycles. Conversely, interest income ¥47.3B (YoY +19.1%) and equity-method gains ¥11.9B supported improvements at the ordinary income level; expanded investment income in a rising rate environment underpins earnings.
Expansion of allocations to investment securities ¥3,091.4B (61.7% of total assets) is notable; Free Cash Flow negative ¥-95.2B stems from portfolio rebalancing into financial assets rather than operating investment. OCF of ¥328.3B and Net Income of ¥315.5B (1.04x cash generation) are healthy, and high current ratio 319.0% with cash/deposits ¥725.5B secure liquidity. Payout Ratio 44.8% and share buybacks ¥70.0B, resulting in Total Return Ratio 86.6%, are within OCF coverage, preserving capital allocation flexibility. Going forward, market volatility and credit cost trends will be the main drivers of margin sustainability and shareholder return continuity.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; please consult a professional advisor if necessary.