SIIX CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥214.44B
• Operating Income: ¥6.81B
• Net Income: ¥3.37B
• EPS: ¥91.28

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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 earnings resilience in FY2025 Q3 with margin expansion and double-digit ordinary and net profit growth despite a revenue decline. Revenue fell 4.7% YoY to 2,144.35, but operating income rose 6.6% YoY to 68.08, demonstrating improved cost discipline and mix. Ordinary income increased 17.9% YoY to 69.15, outpacing operating profit growth, indicating favorable non-operating contributions on a YoY basis despite net non-operating costs this quarter. Net income rose 26.6% YoY to 43.00, lifting net margin to 2.0%. Gross profit reached 210.66 with a gross margin of 9.8%, while SG&A was 146.82, equal to 6.9% of sales. Operating margin improved to 3.17% from ~2.84% a year ago, a 33 bps expansion, reflecting operating leverage from lower SG&A ratio and stable gross spread. Ordinary margin was 3.22%, benefiting from 16.22 of non-operating income (notably 5.83 interest income) partially offset by 21.40 of non-operating expenses (including 12.70 interest expense). Effective tax rate was elevated at 40.8%, tempering bottom-line conversion. A notable red flag is total comprehensive income of just 4.07 vs net income of 43.00, implying large other comprehensive losses likely from FX translation given global operations. Balance sheet quality remains sound: current ratio 205.8%, quick ratio 172.8%, and interest coverage 5.36x indicate comfortable liquidity and serviceability. Leverage is moderate with D/E at 1.04x and assets/equity at 2.04x; cash and deposits of 251.01 roughly match total loans of 249.29, suggesting a near net-cash stance. ROE is 4.3% (DuPont: 2.0% margin × 1.059 turnover × 2.04x leverage), hampered mainly by thin margins; ROIC at 4.1% is below a 5% warning threshold. Cash flow data is unreported, so earnings quality cannot be corroborated via OCF; this is a key limitation. Dividend payout ratio is calculated at 56.3%, within a sustainable band, but FCF coverage is unknown. Forward-looking, cost control and disciplined SG&A should sustain improved operating margins, but high tax rate, FX-driven OCI volatility, and end-demand softness (revenue -4.7% YoY) are headwinds. Overall, the quarter shows operational improvement against a weaker top line, with healthy liquidity but capital efficiency below desirable levels.

Profitability Analysis

ROE decomposition: 4.3% = Net Profit Margin (2.0%) × Asset Turnover (1.059x) × Financial Leverage (2.04x). The binding constraint is the low net margin at 2.0%; asset turnover is reasonable for a trading/EMS-oriented model, and leverage is moderate. Compared with the prior year, operating margin expanded by ~33 bps (current 3.17% vs ~2.84%), implying SG&A efficiencies and/or better pricing/mix despite lower sales. Gross margin sits at 9.8%, consistent with a low-margin trading/EMS profile; thus incremental improvements in SG&A ratio (6.9% of sales) drove most of the margin gain. Ordinary income grew faster than operating income (+17.9% vs +6.6%), suggesting a favorable YoY swing in non-operating items (interest income, FX or other), though this quarter’s net non-operating result still appears modestly negative due to higher interest expense (12.70). The high effective tax rate (40.8%) compresses net margin and ROE, offsetting operating improvements. Sustainability: the operating margin uplift from SG&A discipline is relatively sustainable if volumes stabilize; however, non-operating contributions can be volatile, and the high tax rate may persist. Watch for any reversal of FX or one-off items, given comprehensive income was far below net income this quarter. No evidence that SG&A growth outpaced revenue this quarter; the margin expansion suggests the opposite, but detailed YoY SG&A data were unreported.

Growth Assessment

Top-line contraction of 4.7% YoY indicates softer end-demand or client inventory adjustments in key markets. Despite this, operating income rose 6.6%, evidencing operating leverage via cost controls and possibly a more profitable mix. Ordinary income strength (+17.9% YoY) further boosted bottom-line trajectory, though sustainability depends on non-operating item stability. Net income growth of 26.6% YoY benefited from operating and ordinary income gains but was partially clouded by a high tax burden. The 33 bps operating margin expansion is a tangible achievement in a declining sales environment. Gross margin at 9.8% remains thin but typical for the business model; incremental gains may be achievable through mix and procurement initiatives. ROIC at 4.1% signals returns still below cost-of-capital-like hurdles, suggesting the growth quality is not yet translating into strong capital efficiency. Given the absence of OCF/FCF data, we cannot confirm whether earnings growth is backed by cash generation; working capital swings could materially influence reported growth. Outlook hinges on normalization of customer inventories, FX trends, and interest rate dynamics impacting both interest income and expense. Absent new growth vectors, revenue recovery pace may be modest, but continued SG&A discipline could protect margins.

Financial Health

Liquidity is strong: current ratio 205.8% and quick ratio 172.8%, with working capital of 750.92 providing a substantial cushion. No warning on current ratio (<1.0) or excessive leverage (D/E is 1.04x; below a 2.0 warning). Maturity profile appears manageable: short-term loans (137.51) are well-covered by cash (251.01) and receivables (567.60), minimizing near-term refinancing risk. Long-term loans are 111.78, keeping overall debt moderate. Interest coverage at 5.36x is at the strong end of our benchmark, indicating adequate debt service capacity. Equity stands at 991.57 (owners’ equity 986.37), providing a solid buffer against shocks, though comprehensive income weakness this quarter may reduce equity via OCI. No off-balance sheet obligations were reported in the data provided; lack of disclosure prevents assessment of guarantees or contingent liabilities. Overall solvency is sound, with a near net-cash posture when comparing cash to total loans.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow were not disclosed, so OCF/Net Income and FCF sustainability cannot be calculated. Accordingly, we cannot confirm whether earnings are cash-backed (cannot apply the >1.0 OCF/NI benchmark). The sizable divergence between net income (43.00) and total comprehensive income (4.07) points to material FX or valuation impacts flowing through OCI; while not directly indicative of OCF issues, it highlights volatility that may obscure underlying cash generation. Working capital indicators (receivables 567.60, inventories 234.10, payables 412.36) look balanced, but without period-to-period movements we cannot detect potential working capital management effects. Dividend and capex cash commitments are unreported; thus, FCF coverage of shareholder returns cannot be assessed. In sum, earnings quality remains unverified due to missing cash flow disclosures.

Dividend Sustainability

The calculated payout ratio is 56.3%, which sits within a generally sustainable range (<60% benchmark). However, DPS and cash dividends were unreported, and FCF coverage is not calculable, limiting rigor. Liquidity is strong and leverage moderate, suggesting capacity to maintain dividends in the near term even amid volatility. Absent OCF/FCF data, sustainability relies on continued operating margin stability and disciplined working capital. Elevated tax rate and OCI volatility could reduce distributable resources or equity cushion, but near net-cash status mitigates immediate risk. Policy outlook remains uncertain without explicit guidance; watch for management commentary on payout targets or capital allocation priorities.

Risk Assessment

Business Risks:

• Demand softness evidenced by 4.7% YoY revenue decline
• Thin gross margin profile (9.8%) typical of EMS/trading, magnifying operating leverage to downturns
• FX exposure likely significant, as implied by large negative OCI (comprehensive income 4.07 vs NI 43.00)
• High effective tax rate (40.8%) dampening net profitability
• Potential customer concentration and supply chain disruptions (industry common)
• Pricing pressure from OEM/EMS clients amid competitive landscape

Financial Risks:

• Interest rate risk affecting both interest income and expense (interest expense 12.70; coverage 5.36x)
• Capital efficiency risk: ROIC at 4.1% below 5% warning threshold
• Equity volatility from OCI swings impacting net assets and covenants (if any)
• Cash flow visibility risk due to unreported OCF/FCF

Key Concerns:

• Sustainability of margin improvement amid declining sales
• Volatility in non-operating items influencing ordinary income
• High tax rate persistence
• Inability to verify dividend coverage without FCF data

Investment Implications

Key Takeaways:

• Operational execution improved: operating margin expanded ~33 bps despite a 4.7% sales decline
• Ordinary and net income grew strongly (+17.9% and +26.6% YoY), but tax rate was a drag
• Liquidity and solvency are robust; near net-cash relative to loans
• Capital efficiency remains weak with ROE 4.3% and ROIC 4.1%
• Large negative OCI indicates FX/valuation headwinds that could continue to affect equity

Metrics to Watch:

• OCF and FCF (when disclosed) and OCF/NI ratio
• Order trends and backlog to gauge revenue recovery
• SG&A ratio and gross margin to confirm margin sustainability
• Effective tax rate trajectory
• FX translation impacts on OCI and equity
• Interest coverage and net interest balance as rates evolve

Relative Positioning: Versus domestic electronics trading/EMS peers, the company shows commendable cost control and liquidity but remains average-to-weak on capital efficiency (ROIC <5%) and is exposed to FX-driven OCI volatility; it is not a sogo shosha, and equity-method dependency is limited in the reported data.

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