DAIICHI CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥58.57B
• Operating Income: ¥1.31B
• Net Income: ¥979M
• EPS: ¥86.85

Income Statement

Balance Sheet

Cash Flow Statement

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

Daiichi Co., Ltd. (7643) reported FY2025 Q4 (full-year) standalone results under JGAAP with strong top-line growth but significant margin compression. Revenue rose 13.0% year over year to ¥58.57bn, reflecting resilient consumer demand and likely price/mix tailwinds in a food retail format. Gross profit was ¥13.25bn, implying a gross margin of 22.6%, consistent with a low-margin grocery model but indicating elevated cost of goods pressure versus typical mid-20s ranges. Operating income declined 31.7% YoY to ¥1.31bn, compressing the operating margin to about 2.2%, suggesting inflationary cost passthrough lag, higher utilities/logistics, and/or increased personnel costs. Ordinary income was ¥1.29bn and net income fell 31.3% YoY to ¥0.98bn, with reported EPS of ¥86.85. Despite profit pressure, cash generation was solid: operating cash flow (OCF) reached ¥1.70bn, representing 1.74x net income, signaling good earnings quality. Free cash flow (FCF) was positive at ¥0.73bn after ¥0.98bn of net investing outflows, likely reflecting maintenance and selective growth capex. The balance sheet remains conservative with total assets of ¥27.34bn and total liabilities of ¥9.35bn, yielding a low liability-to-equity ratio of 0.54x and ample working capital of ¥4.52bn. Liquidity is robust with a current ratio of 173% and a quick ratio of 155%, indicating comfortable short-term coverage even without relying on inventory. Asset turnover of 2.14x underpins returns, while modest financial leverage (assets/equity ~1.59x) keeps solvency risk low. DuPont ROE calculates to 5.69% (net margin 1.67% × asset turnover 2.142 × leverage 1.59), aligning with the reported figure. Inventory of ¥1.14bn versus annual COGS implies very rapid turns and tight inventory management typical of grocery operators. Interest expense was de minimis at ¥0.44m, driving an extremely high interest coverage ratio, and reducing financial risk. The reported equity ratio and some dividend/share data show as zero, which should be interpreted as undisclosed rather than actual zero values. Overall, the company exhibits healthy growth and cash discipline, but profitability headwinds and margin compression are the key issues to monitor into the next fiscal year.

Profitability Analysis

ROE_decomposition: DuPont ROE is 5.69% = 1.67% net profit margin × 2.142x asset turnover × 1.59x financial leverage. The ROE profile is driven primarily by efficient asset turnover with restrained leverage; margin compression is the main drag year over year. margin_quality: Gross margin at 22.6% and operating margin at ~2.2% point to cost pressures in procurement, energy, logistics, and labor. Net margin at 1.67% is thin but in line with supermarket economics. Ordinary-to-operating income spread is small, indicating limited non-operating drag/benefit this year. operating_leverage: Revenue grew +13.0% YoY while operating income declined -31.7% YoY, implying negative operating leverage in the period (cost base grew faster than sales). D&A of ¥768m vs EBITDA of ¥2,076m suggests moderate fixed-cost intensity; however, inflationary costs likely offset scale benefits.

Growth Assessment

revenue_sustainability: Top-line growth of +13.0% likely reflects a mix of price inflation in food categories and possible store network or category expansion. Sustainability will depend on consumer traffic retention and competitive pricing in a deflation-prone macro backdrop. profit_quality: OCF/Net income at 1.74x indicates that earnings are well-backed by cash. Limited non-operating items (ordinary ≈ operating) support the quality of earnings, although lower margins reduce buffer. outlook: Key swing factors are cost normalization (procurement, utilities), wage trends, and the company’s ability to recalibrate price/mix and private-brand penetration. If cost pressures abate and pricing discipline holds, margins could mean-revert from FY2025’s compressed base.

Financial Health

liquidity: Current ratio 173.4% and quick ratio 154.9% indicate strong near-term liquidity. Working capital stands at ¥4.52bn, providing a healthy cushion. solvency: Total liabilities of ¥9.35bn vs equity of ¥17.21bn imply a liability-to-equity ratio of 0.54x and assets/equity leverage of ~1.59x, signaling conservative leverage. Interest expense is negligible (¥0.44m), supporting very high interest coverage. capital_structure: Low financial leverage with predominance of equity financing reduces refinancing risk. Equity ratio is shown as 0.0% in the feed but should be treated as undisclosed; based on assets and equity, the implied equity ratio would be approximately 63%.

Cash Flow Quality

earnings_quality: OCF of ¥1.70bn vs net income of ¥0.98bn (1.74x) indicates strong cash conversion, suggesting limited accrual buildup. The small gap between operating and ordinary income further supports quality. FCF_analysis: FCF was positive at ¥0.73bn after investing cash outflows of ¥0.98bn, likely capex for maintenance and selective store investments. This level of FCF provides internal funding capacity for modest growth or balance sheet strengthening. working_capital: Inventories at ¥1.14bn relative to COGS suggest fast turnover (rough estimate ~11 days on an ending-balance basis), consistent with grocery. This efficiency supports OCF resilience despite margin pressure.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and reported payout ratio are shown as zero in the dataset, which should be interpreted as undisclosed. Using EPS of ¥86.85 as an earnings base, there appears capacity for distributions; however, without disclosed DPS/policy, a payout assessment cannot be precisely quantified. FCF_coverage: With FCF of ¥0.73bn and low interest burden, internally generated cash could cover a moderate dividend if instituted, but exact coverage is unknowable absent the actual DPS. policy_outlook: Policy is unspecified in the provided data. Given stable cash generation and low leverage, the company has optionality, but management’s capital allocation stance (growth capex vs shareholder returns) remains a disclosure gap.

Risk Assessment

Business Risks:

• Margin pressure from procurement cost inflation and energy/logistics expenses
• Intense price competition in regional supermarket markets
• Wage inflation and tight labor markets impacting SG&A
• Consumer demand sensitivity to real income trends
• Execution risk in store operations, layout, and private-brand strategy

Financial Risks:

• Potential working capital swings impacting cash conversion
• Capex requirements for store refurbishments and IT could weigh on FCF in certain years
• Limited disclosure on cash balance and dividend policy increases uncertainty
• Exposure to credit terms with suppliers (not detailed in data)

Key Concerns:

• Operating margin contraction to ~2.2% despite double-digit sales growth
• Sustainability of OCF if cost pressures persist
• Visibility on capital allocation and shareholder return policy is low

Investment Implications

Key Takeaways:

• Strong top-line growth but negative operating leverage in FY2025
• Healthy cash conversion (OCF/NI 1.74x) and positive FCF of ¥0.73bn
• Conservative balance sheet with low leverage and very high interest coverage
• Core profitability (OPM ~2.2%) under pressure; margin recovery is the key driver of ROE improvement
• Data gaps on equity ratio, DPS, and share counts limit per-share and payout analysis

Metrics to Watch:

• Quarterly gross and operating margin progression
• Same-store sales growth vs ticket/traffic mix
• Energy, logistics, and labor cost trends
• Inventory days and payable days (working capital discipline)
• Capex intensity and FCF trajectory
• Any updates to dividend/capital allocation policy

Relative Positioning: Within domestic supermarket peers, Daiichi shows above-average asset turnover, conservative leverage, and solid cash conversion, but operating margins are compressed versus typical 2–4% ranges, placing it mid-to-lower on profitability while stronger on balance sheet quality.

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