HATSUHO SHOUJI CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥26.18B
• Operating Income: ¥931M
• Net Income: ¥787M
• EPS: ¥186.40

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

Initial analysis of Hatsuho Shoji Co., Ltd. (7425) FY2025 Q3 (JGAAP, consolidated) indicates modest topline growth with slight profitability pressure and a conservative balance sheet. Revenue rose 2.6% YoY to ¥26.183bn, while operating income declined 1.1% YoY to ¥0.931bn, suggesting mild negative operating leverage in the period. Gross profit of ¥4.568bn implies a gross margin of 17.4%, consistent with a trading/distribution profile where margins are structurally thin. Operating margin stood at 3.6%, and ordinary income of ¥1.110bn (margin 4.2%) shows meaningful positive non-operating contributions (roughly ¥0.18bn) supporting earnings. Net income was ¥0.614bn, with a net margin of 2.35%, down 10.4% YoY, indicating pressure below the operating line and/or higher tax/minority interest effects. DuPont decomposition aligns with a reported ROE of 5.55%, driven by net margin of 2.35%, asset turnover of 1.24x, and financial leverage of 1.91x. ROA is approximately 2.9% (¥614m/¥21.108bn), consistent with an asset-light, turnover-driven model. Interest burden remains de minimis (interest expense ¥3.4m; coverage ~275x), underscoring low financial risk. Liquidity appears sound with a current ratio of 151% and working capital of approximately ¥5.21bn. The capital structure looks balanced, with liabilities of ¥11.28bn and equity of ¥11.06bn, implying total leverage near 1.0x equity and an inferred equity ratio around the low-50% range. Cash flow statements and certain balance sheet details (e.g., inventories, cash, DPS) are not disclosed in XBRL (displayed as zeros), limiting cash flow and dividend quality assessment. Reported equity ratio of 0.0% and cash flow metrics of 0 should be treated as undisclosed, not actual values. The combination of modest growth, slim but stable margins, and low interest burden suggests earnings resilience, but reliance on non-operating income and the dip in operating income highlight execution and cost-control sensitivities. Without operating cash flow, we cannot verify earnings-to-cash conversion or working capital dynamics this quarter. Overall, profitability is adequate but below high-ROE peers, with balance sheet strength a mitigating factor. Data limitations (notably cash flow and some line items) constrain the depth of assessment; conclusions focus on the disclosed non-zero items.

Profitability Analysis

ROE_decomposition: ROE 5.55% = Net margin 2.35% × Asset turnover 1.24× × Financial leverage 1.91× (calculated aligns with reported). ROA ≈ 2.9% (614/21,108). margin_quality: Gross margin 17.4% (¥4,568m/¥26,183m) reflects a low-margin distribution model. Operating margin 3.6% (¥931m) is modest; SG&A is inferred at ~¥3,637m (GP - OI), equating to ~13.9% of sales and 79.6% of gross profit, indicating limited room for error on costs. operating_leverage: Revenue +2.6% YoY versus operating income -1.1% YoY indicates negative operating leverage this quarter, likely from higher SG&A and/or slight gross margin compression. Ordinary income margin (4.2%) exceeds operating margin (3.6%), evidencing support from non-operating income (¥179m net). Interest burden is negligible (coverage ~275x), so operating results, not financing costs, drive earnings variability.

Growth Assessment

revenue_sustainability: Topline growth of 2.6% suggests stable demand, consistent with a mature trading franchise. Without segment or volume/price breakdown, sustainability cannot be fully verified. profit_quality: Net income -10.4% YoY versus operating income -1.1% suggests incremental headwinds below the operating line (e.g., taxation, minority interests, or non-recurring items). Non-operating income buoyed ordinary results, indicating some reliance on non-core earnings. outlook: Absent guidance, a base case is modest revenue growth with tight margin management. Key to restoring positive operating leverage will be SG&A discipline and gross margin stabilization. If non-operating gains normalize lower, ordinary income could converge toward operating income unless cost efficiencies offset.

Financial Health

liquidity: Current assets ¥15.502bn vs current liabilities ¥10.293bn; current ratio 151% and working capital ~¥5.21bn. Quick ratio is shown as 151% due to undisclosed inventories; true quick ratio may be lower once inventories are reported. solvency: Total liabilities ¥11.279bn and total equity ¥11.057bn imply a liabilities-to-equity ratio ~1.02x and financial leverage 1.91x (assets/equity). Interest expense is minimal (¥3.4m), with coverage ~275x, suggesting low refinancing risk. capital_structure: Based on totals, the inferred equity ratio is approximately 52% (¥11.057bn/¥21.108bn), despite a displayed 0.0% (undisclosed). Note: the sum of liabilities and equity exceeds assets by ~¥1.23bn, which may reflect classification differences or undisclosed components in the XBRL.

Cash Flow Quality

earnings_quality: Operating cash flow is undisclosed (displayed as 0), preventing validation of earnings-to-cash conversion. Given a trading model, working capital swings can materially affect OCF; this remains a key blind spot. FCF_analysis: Investing and financing cash flows are undisclosed. Consequently, FCF cannot be computed and FCF-based coverage tests are not assessable for this quarter. working_capital: Current assets are substantial at ¥15.5bn against current liabilities of ¥10.3bn. Inventories and cash are undisclosed; thus, we cannot analyze inventory days, receivable days, or cash conversion cycle. The inferred SG&A and thin margins increase sensitivity to any working capital build.

Dividend Sustainability

payout_ratio_assessment: EPS is ¥186.40. DPS and payout ratio display as 0.00 due to non-disclosure; actual payout cannot be assessed. Historical policy and cash flow data would be needed. FCF_coverage: Not assessable; OCF and capex/FCF are undisclosed for the period. policy_outlook: With ROE ~5.6% and a balance sheet that appears conservative, the company could sustain moderate distributions if cash generation is stable; however, absent cash flow and DPS disclosure, current policy and sustainability cannot be determined.

Risk Assessment

Business Risks:

• Margin compression risk in a low-margin distribution model (gross margin 17.4%, operating margin 3.6%).
• Negative operating leverage if SG&A grows faster than sales.
• Reliance on non-operating income to support ordinary profits (~¥179m).
• Demand cyclicality in end-markets; potential customer concentration (not disclosed).
• Input cost and procurement volatility; potential FX exposure on imports.
• Logistics and wage inflation pressures impacting SG&A.

Financial Risks:

• Working capital investment risk affecting OCF (cash flow data undisclosed).
• Potential inventory/receivable build in growth periods (inventories undisclosed).
• Tax and minority interest variability driving divergence between ordinary and net income.
• Data classification differences between liabilities/equity and assets introduce analytical uncertainty.
• Interest rate changes have limited near-term impact given low interest expense, but still a consideration.

Key Concerns:

• Operating income declined 1.1% YoY despite revenue growth, indicating cost pressure.
• Net income declined 10.4% YoY; sensitivity to below-the-line items.
• Cash flow statements undisclosed; earnings-to-cash conversion unverified.

Investment Implications

Key Takeaways:

• Stable topline growth (+2.6% YoY) with slight negative operating leverage (OI -1.1% YoY).
• ROE of 5.55% supported by 1.24x asset turnover and moderate leverage (1.91x).
• Margins are thin (OPM 3.6%), typical for the sector; SG&A consumes ~80% of gross profit.
• Ordinary income exceeds operating income, highlighting non-operating support (~¥179m).
• Balance sheet appears conservative: current ratio ~151%, inferred equity ratio ~52%, interest burden negligible.
• Cash flow and dividend data are undisclosed; FCF conversion and payout sustainability cannot be assessed.

Metrics to Watch:

• Gross margin and SG&A ratio trends to gauge operating leverage.
• Ordinary vs operating income gap to assess reliance on non-operating items.
• Disclosure of OCF, capex, and working capital (inventories/receivables/payables) to validate cash conversion.
• Effective tax rate and any minority interest impacts on net income.
• Equity ratio and debt levels as reported in the next filing for reconciliation.
• EPS trajectory relative to any announced DPS/payout policy.

Relative Positioning: Within Japanese trading/distribution peers, the company exhibits mid-single-digit ROE, thin but typical margins, strong interest coverage, and a seemingly conservative balance sheet; profitability trails higher-ROE peers that deliver stronger operating leverage or differentiated margins.

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