DAYTONA CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥11.02B
• Operating Income: ¥1.28B
• Net Income: ¥938M
• EPS: ¥379.93

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: Solid top-line growth with slight margin compression; earnings resilient but not accelerating in FY2025 Q3. Revenue increased 3.4% YoY to 110.16, demonstrating steady demand in core motorcycle aftermarket categories. Operating income declined 2.5% YoY to 12.76, indicating modest operating deleverage. Ordinary income fell 2.7% YoY to 13.00, and net income decreased 3.1% YoY to 9.03. Gross profit reached 41.74 with a gross margin of 37.9%, consistent with a value-add product mix but lacking prior-year disclosure to assess trend. Operating margin was 11.6% (12.76/110.16), down about 70 bps from an estimated 12.3% in the prior-year period based on reported YoY changes. Net margin stood at 8.2%, broadly stable versus levels typical for the company’s profile. ROE was 9.8% (Net Margin 8.2% × Asset Turnover 0.961 × Leverage 1.25x), comfortably above cost of equity for a small-cap, with ROIC at 11.2% indicating efficient capital deployment. Non-operating items were modestly positive (income 0.37 vs expenses 0.10), contributing little to overall profit quality. Balance sheet strength is notable: equity ratio approximates 80.2% and D/E is a conservative 0.25x, providing downside protection. Liquidity is very strong with a current ratio of 430.6% and quick ratio of 202.9%, mitigating any near-term refinancing risk. Inventory remains sizeable at 47.81, which supports availability but introduces working capital and obsolescence risk if demand softens. Earnings quality cannot be verified due to unreported cash flows; OCF/NI is not calculable. The implied payout ratio is 51.5%, suggesting a balanced shareholder return stance within sustainable bounds, though FCF coverage is unknown. Forward-looking, continued modest growth with disciplined SG&A and inventory normalization would be needed to re-expand margins. Overall, the quarter underscores resilient fundamentals, minor margin pressure, and a fortress balance sheet, with the main watch items being gross margin trajectory and working capital efficiency.

Profitability Analysis

ROE decomposition: ROE 9.8% = Net Profit Margin 8.2% × Asset Turnover 0.961 × Financial Leverage 1.25x. The most notable change versus last year is the margin component: operating profit declined 2.5% despite 3.4% revenue growth, implying roughly 70 bps operating margin compression (from ~12.3% to ~11.6%). Business drivers likely include cost inflation (materials, logistics) and/or SG&A growth (personnel, marketing) outpacing revenue, or a slightly adverse product mix. Non-operating effects were small and do not explain the YoY decline. Asset turnover at ~0.96 is reasonable for a branded distributor/manufacturer model and appears stable, while financial leverage remains low at 1.25x, limiting leverage-driven ROE amplification. Sustainability: the margin headwind could be reversible if procurement and freight costs ease and SG&A growth normalizes; conversely, a persistently promotional environment or mix shift toward lower-margin SKUs would keep margins under pressure. Concerning trends: the combination of revenue growth with lower operating income suggests either SG&A growth outpacing revenue or some gross margin softness; absent SG&A detail, operating deleverage should be monitored.

Growth Assessment

Top-line growth of 3.4% YoY to 110.16 indicates steady demand in the motorcycle aftermarket. Operating income declined 2.5% to 12.76, signaling that cost controls did not fully offset inflationary or mix pressures. Ordinary income (-2.7%) and net income (-3.1%) moved in line with operating trends, with minimal non-operating distortion. Gross margin at 37.9% supports a value-added model; however, lack of prior-year gross profit data limits trend analysis. Revenue sustainability appears reasonable given product breadth and brand strength, but growth remains modest. Profit quality is solid in accounting terms (low reliance on non-operating income), though cash conversion cannot be assessed due to missing cash flow data. Near-term outlook hinges on margin management: stabilizing input costs, active price/mix management, and SG&A discipline will be key to re-accelerating profit growth.

Financial Health

Liquidity is strong: current ratio 430.6% and quick ratio 202.9%, with cash and deposits of 18.76 comfortably covering short-term loans of 5.50. No warning flags: Current Ratio >> 1.0 and D/E (0.25x) well below 2.0. Working capital is ample at 69.41, but inventories are high at 47.81, warranting monitoring for aging/obsolescence risk. Solvency is robust with total equity of 91.93 against total liabilities of 22.66; equity-to-asset ratio is approximately 80.2%. Interest-bearing debt is modest (short-term 5.50; long-term 1.20), and interest coverage is extremely strong at 215x. Maturity mismatch risk is low given current assets of 90.41 vs current liabilities of 20.99. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be calculated; earnings quality cannot be validated via cash conversion. Free cash flow is also unreported; therefore, we cannot assess FCF coverage of dividends or capex. Working capital appears inventory-heavy (47.81), which could depress OCF if inventory days extended; conversely, normalization would be a cash tailwind. No signs of aggressive working capital manipulation can be identified from the limited data, but the absence of cash flow statements is a key limitation.

Dividend Sustainability

The calculated payout ratio is 51.5%, within the <60% benchmark range and generally sustainable on a normalized earnings base. Although DPS is unreported, the implied payout suggests returns are balanced with reinvestment needs. FCF coverage cannot be assessed due to missing OCF and capex data. Balance sheet strength (low leverage, high liquidity) provides cushion to sustain ordinary dividends through cycles. Policy outlook appears conservative and sustainable assuming stable earnings and controlled working capital.

Risk Assessment

Business Risks:

• Margin pressure from input cost inflation and freight/logistics costs
• Inventory obsolescence and demand volatility risk given high inventory levels (47.81)
• Product mix shifts toward lower-margin SKUs
• Competitive intensity in motorcycle aftermarket leading to pricing pressure

Financial Risks:

• Cash flow conversion uncertainty due to unreported OCF
• FX exposure on imported components/products (yen volatility) affecting gross margins
• Concentration in discretionary consumer spending vulnerable to macro slowdown

Key Concerns:

• Operating margin compression of ~70 bps YoY despite revenue growth
• Lack of cash flow disclosure impedes assessment of earnings quality and dividend cover
• Reliance on inventory to support sales could elevate working capital risk if demand softens

Investment Implications

Key Takeaways:

• Steady revenue growth (+3.4% YoY) but slight operating deleverage (-2.5% OI)
• Operating margin estimated down ~70 bps to 11.6%; net margin stable at 8.2%
• ROE at 9.8% and ROIC at 11.2% indicate healthy capital efficiency with low leverage (D/E 0.25x)
• Balance sheet and liquidity are strong (current ratio 430.6%, equity ratio ~80%)
• Non-operating effects are minor; core operations drive earnings
• Dividend payout ratio at 51.5% appears sustainable absent cash flow stress
• Inventory level is elevated and a key lever for cash generation and margin protection

Metrics to Watch:

• Gross margin trend and pricing/mix actions
• SG&A growth vs revenue growth to gauge operating leverage
• Inventory turnover and OCF/Net Income once disclosed
• FX rates (USD/JPY, CNY/JPY) and sourcing cost trends
• Ordinary income margin and interest coverage sustainability

Relative Positioning: Within small-cap consumer discretionary/manufacturing peers, Daytona exhibits above-average balance sheet strength and solid ROE/ROIC with modest growth and slight margin pressure; execution on cost control and working capital could re-expand margins and lift earnings momentum.

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