EIKEN INDUSTRIES CO.,LTD FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥8.10B
• Operating Income: ¥411M
• Net Income: ¥326M
• EPS: ¥319.31

Income Statement

Balance Sheet

Cash Flow Statement

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

For FY2025 Q4 (single-entity, JGAAP), Eiken Kogyo Co., Ltd. delivered solid topline growth and strong operating leverage. Revenue rose 11.2% year over year to ¥8.10bn, while operating income increased 47.0% to ¥411m, indicating meaningful margin expansion. Net income advanced 49.9% to ¥326m, translating to a net margin of 4.02%. DuPont analysis shows ROE of 5.38%, driven by a 4.02% net margin, 1.041x asset turnover, and modest financial leverage of 1.29x. Liquidity remains robust, with a current ratio of 349% and quick ratio of 292%, supported by ¥4.67bn in current assets versus ¥1.34bn in current liabilities. The balance sheet is conservative: total liabilities are ¥1.63bn against equity of ¥6.06bn (debt-to-equity of 0.27x), implying an equity ratio of roughly 77.9% on our calculation despite the reported 0.0% figure being non-disclosed. Cash generation was healthy, with operating cash flow of ¥762m and free cash flow of ¥440m, yielding an OCF/Net Income ratio of 2.34x, indicative of high earnings quality. EBITDA was ¥664m (8.2% margin), and interest coverage was very strong at ~184x given minimal interest expense of ¥2.24m. Ordinary income of ¥453m exceeded operating income, suggesting positive net non-operating contributions offsetting interest, and the effective tax rate is roughly 19.6% based on disclosed tax expense. Working capital is ample at ¥3.33bn, which alongside modest leverage supports financial flexibility. Dividend data were not disclosed (DPS and payout shown as zero), so we cannot infer a payout policy from this release; however, FCF generation suggests capacity for distributions if management elects. Notably, there is an internal discrepancy between the disclosed cost of sales and gross profit figures; we rely on the provided gross margin (12.6%) for margin commentary and treat the apparent mismatch as a disclosure classification difference. Cash and equivalents, share counts, and equity ratio were not disclosed in XBRL and appear as zero; we therefore avoid interpreting those zeros as actual values. Overall, the company’s performance reflects disciplined cost control and operating leverage on mid-teens revenue growth, underpinned by a strong balance sheet and robust cash conversion.

Profitability Analysis

ROE_decomposition: ROE 5.38% = Net margin 4.02% × Asset turnover 1.041 × Financial leverage 1.29. Tax burden ≈ 326/453 = 72.0%; interest/non-operating burden (EBT/EBIT) ≈ 453/411 = 1.10, indicating positive non-operating items net of interest; operating margin (EBIT/Revenue) ≈ 5.07%. margin_quality: Gross margin reported at 12.6% (implies ~¥1.02bn gross profit on ¥8.10bn revenue). Operating margin improved to ~5.1% with operating income up 47% versus revenue up 11.2%, evidencing cost discipline and operating efficiency. Net margin at 4.02% benefited from positive non-operating contributions and a ~19.6% effective tax rate. operating_leverage: Operating income growth (+47%) significantly outpaced revenue growth (+11.2%), indicating strong operating leverage. EBITDA margin of 8.2% versus operating margin of ~5.1% suggests reasonable fixed-cost absorption and depreciation intensity (~3.1% of sales).

Growth Assessment

revenue_sustainability: Revenue grew 11.2% YoY to ¥8.10bn. Sustainability will depend on order visibility, customer concentration, and pricing power; no guidance provided in the data, but the growth rate is consistent with a favorable demand environment. profit_quality: Net income growth (+49.9%) exceeded revenue growth due to margin expansion and helpful non-operating balance. Interest expense is de minimis, and the tax rate (~19.6%) appears normal, supporting the repeatability of earnings absent one-offs (none disclosed). outlook: With modest leverage and strong liquidity, the company is positioned to support growth through capex (Investing CF of -¥322m) without straining the balance sheet. Continuation of cost control and pricing discipline would be key to sustaining elevated operating margins.

Financial Health

liquidity: Current assets ¥4,671m vs current liabilities ¥1,339m → current ratio 348.9%; quick ratio 291.9%. Working capital is ¥3,332m, providing a substantial liquidity buffer. solvency: Total liabilities ¥1,626m vs equity ¥6,055m → debt-to-equity 0.27x. Implied equity ratio ≈ 77.9% (our calculation using period-end totals; the reported 0.0% is an undisclosed placeholder). Interest coverage ~184x underscores very low financial risk from debt servicing. capital_structure: Low leverage with ample equity funding. The company retains capacity to finance incremental investment internally; no immediate need for external financing is evident.

Cash Flow Quality

earnings_quality: OCF/Net Income = 2.34x (¥762m/¥326m), indicating strong cash conversion and limited accrual risk in the period. FCF_analysis: Free cash flow of ¥440m (OCF ¥762m minus Investing CF ~¥322m as a proxy for capex) was positive, supporting reinvestment and potential shareholder returns. EBITDA of ¥664m compares well with OCF, implying favorable working capital movements or low cash taxes/interest. working_capital: Working capital increased to ¥3,332m. The high liquidity ratios suggest either efficient receivables collection and/or manageable inventory levels (inventories ¥764m). Specific period-to-period swings are not available, but cash conversion appears strong.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are shown as zero due to non-disclosure; we cannot infer an active dividend policy from the provided data. EPS is ¥319.31, implying capacity for distributions if policy permits. FCF_coverage: With FCF of ¥440m and minimal interest burden, potential dividends (if any) would likely be well-covered by internally generated cash under current conditions. policy_outlook: Absent disclosed policy or historical payout, we assume a conservative stance focused on reinvestment, given positive capex (Investing CF) and strong balance sheet. Any initiation or increase would hinge on sustaining FCF and capex needs.

Risk Assessment

Business Risks:

• Demand cyclicality in core end-markets, which could pressure volumes and pricing.
• Customer concentration risk if sales are skewed to a few key clients (not disclosed).
• Input cost volatility (materials, energy) potentially compressing margins.
• Operational execution risk in scaling production and managing fixed costs.
• Supply chain disruptions affecting lead times and inventory management.

Financial Risks:

• Working capital swings that could dampen OCF in a downturn despite accounting profits.
• Potential capex uplift reducing near-term FCF if growth projects accelerate.
• FX exposure if procurement or sales have currency elements (not disclosed).
• Non-operating income variability affecting ordinary income versus operating income.

Key Concerns:

• Disclosure inconsistencies between cost of sales and gross profit require clarification for margin analysis.
• Key balance sheet items (cash, equity ratio) and share metrics are not disclosed, limiting per-share and capital allocation analysis.
• Visibility on dividend policy is lacking, making return-of-capital expectations uncertain.

Investment Implications

Key Takeaways:

• Revenue growth (+11.2% YoY) with outsized operating income growth (+47%) demonstrates strong operating leverage.
• ROE of 5.38% is primarily margin-driven with modest leverage and solid asset turnover.
• Balance sheet strength (debt-to-equity 0.27x; implied equity ratio ~78%) and ample liquidity (current ratio ~349%) reduce financial risk.
• High cash conversion (OCF/NI 2.34x) and positive FCF (¥440m) support strategic flexibility.
• Interest burden is negligible (coverage ~184x), leaving earnings largely operationally driven.
• Non-operating gains boosted ordinary income above operating income; sustainability of this tailwind should be monitored.

Metrics to Watch:

• Gross and operating margins, given disclosure inconsistencies; confirm cost of sales classification.
• Order backlog and revenue visibility to sustain double-digit growth.
• Working capital turns (receivables, inventories) to maintain high cash conversion.
• Capex trajectory versus Investing CF and its impact on future FCF.
• Non-operating income components and effective tax rate stability.
• Leverage metrics (debt-to-equity, interest coverage) for any shift in capital structure.

Relative Positioning: Within a manufacturing context, the company appears conservatively financed with above-average liquidity and improving operating margins; ROE is modest but supported by strong cash generation and low financial risk.

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