Central Forest Group Co., Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥268.91B
• Operating Income: ¥1.69B
• Net Income: ¥1.27B
• EPS: ¥183.48

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

For FY2025 Q3 (consolidated, JGAAP), Central Forest Group Co., Ltd. delivered moderate top-line growth with revenue of ¥268.9bn (+5.5% YoY) and modest operating profit expansion, as operating income rose to ¥1.69bn (+2.8% YoY). Profitability remains thin, consistent with a high-turnover, low-margin model: gross margin was 8.9% and operating margin approximately 0.63%. Ordinary income of ¥1.96bn exceeded operating income, indicating positive non-operating contributions (e.g., financial income or ancillary gains) and/or mild non-operating expense burden. Net income increased 18.3% YoY to ¥1.50bn, outpacing operating profit growth, suggesting a favorable non-operating line and/or changes in taxes or minority interests. DuPont analysis highlights low net margin (0.56%) compensated by very strong asset turnover (2.404x) and moderate financial leverage (3.31x), resulting in an ROE of 4.44%. The interest burden is negligible (interest expense ¥6m) with robust interest coverage of 282x, indicating low financing cost pressure at present. Liquidity is adequate but not ample: the current ratio is 116% and the quick ratio is 100%, implying working capital is tightly managed and sensitive to inventory/receivables movements. Working capital stands at ¥13.88bn, anchored by current assets of ¥100.16bn versus current liabilities of ¥86.28bn; inventories are ¥13.52bn (about 13.5% of current assets). The balance sheet shows total assets of ¥111.86bn and total equity of ¥33.79bn, implying liabilities/equity of 2.66x and financial leverage of 3.31x. Reported equity ratio is listed as 0.0% in the dataset but this is clearly a placeholder (undisclosed format) given the stated equity and assets; the implied equity ratio is roughly 30.2%. Cash flow statements are unreported in this disclosure (values shown as zero denote non-disclosure), limiting assessment of earnings-to-cash conversion, capex intensity, and free cash flow. Dividend information is also unreported; DPS and payout are shown as 0.00, which should be interpreted as undisclosed for this period rather than an actual zero dividend. EPS is ¥183.48, and ROE at 4.44% is modest, reflecting thin margins despite efficient asset utilization. Overall, the company demonstrates stable operations with disciplined cost of sales control, but earnings quality, cash generation, and capital allocation clarity are constrained by the lack of cash flow and dividend data in this Q3 disclosure. The near-term outlook hinges on sustaining revenue growth, protecting gross margin against input cost volatility, and maintaining tight working capital cycles. Data limitations require caution in interpreting cash flow quality and dividend capacity, and monitoring subsequent full-year disclosures will be important.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 0.56% (NI ¥1,500m / Revenue ¥268,911m)
• asset_turnover: 2.404x (Revenue ¥268,911m / Assets ¥111,861m)
• financial_leverage: 3.31x (Assets ¥111,861m / Equity ¥33,786m)
• calculated_ROE: 4.44% (matches reported 4.44%) margin_quality:
• gross_margin: 8.9% (GP ¥24,055m / Revenue ¥268,911m)
• operating_margin: 0.63% (OI ¥1,694m / Revenue ¥268,911m)
• ordinary_income_margin: 0.73% (OIrd ¥1,959m / Revenue ¥268,911m)
• net_margin: 0.56% (NI ¥1,500m / Revenue ¥268,911m)
• commentary: Gross margin supports a low single-digit operating margin after SG&A. The spread between ordinary income and operating income implies favorable non-operating items. Net margin improvement vs. operating growth suggests either lower non-operating losses, higher non-operating gains, or tax/methodological effects. operating_leverage: Revenue grew +5.5% YoY while operating income grew +2.8% YoY, indicating limited operating leverage in the period; incremental margins appear modest, consistent with a high-turnover model and tight gross margin dynamics.

Growth Assessment

revenue_sustainability: Top-line growth of +5.5% YoY indicates steady demand and/or price/mix benefits. Given thin margins, sustained volume and efficient procurement are essential to maintain growth without diluting profitability. profit_quality: Operating profit growth lagged revenue growth, pointing to cost pressures or higher SG&A. The stronger net income growth (+18.3% YoY) relative to operating income suggests reliance on non-operating tailwinds this quarter. outlook: Near-term growth depends on maintaining turnover and protecting gross margin against input cost inflation and competitive pricing. With robust asset turnover, even small margin improvements can materially lift ROE; conversely, minor margin compression could pressure earnings.

Financial Health

liquidity:

• current_ratio: 116.1% (CA ¥100,160m / CL ¥86,284m)
• quick_ratio: 100.4% ((CA−Inventories) ¥86,639m / CL ¥86,284m)
• working_capital: ¥13,876m
• assessment: Adequate but tight liquidity; quick ratio near 1.0x implies sensitivity to receivables collection and payables terms. solvency_capital_structure:
• total_assets: ¥111,861m
• total_liabilities: ¥89,823m
• total_equity: ¥33,786m
• debt_to_equity: 2.66x (Liabilities/Equity)
• implied_equity_ratio: Approximately 30.2% (Equity/Assets); note the reported 0.0% equity ratio in the dataset is a non-disclosure placeholder.
• interest_coverage: 282.3x (Operating income ¥1,694m / Interest expense ¥6m)
• assessment: Balance sheet leverage is moderate-to-high but with minimal interest burden currently. Solvency appears sound given coverage, but working capital intensity requires ongoing funding discipline.

Cash Flow Quality

earnings_quality: OCF is undisclosed in this dataset (shown as 0 by convention for unreported). Therefore, OCF/NI and accrual intensity cannot be assessed this quarter. FCF_analysis: Investing and financing cash flows are also undisclosed; Free Cash Flow cannot be computed. Capex intensity and dividend coverage by FCF are therefore indeterminable. working_capital: With inventories at ¥13,521m and a quick ratio near 1.0x, earnings are sensitive to changes in receivables/payables cycles. The positive working capital (¥13,876m) indicates reliance on short-term liquidity management to support sales growth.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio appear as 0.00 due to non-disclosure; no conclusion on actual payout can be drawn from this dataset. FCF_coverage: Not assessable as OCF and capex are undisclosed; FCF coverage metric shown as 0.00x is a placeholder. policy_outlook: Without cash flow and explicit policy disclosure, sustainability and direction of distributions cannot be evaluated. With ROE at 4.44%, internal reinvestment returns appear modest; however, capital allocation posture remains unclear in this Q3 snapshot.

Risk Assessment

Business Risks:

• Margin compression risk from input cost inflation and competitive pricing.
• Volume sensitivity inherent in a low-margin, high-turnover model.
• Supply chain and procurement disruptions affecting cost of sales.
• Labor availability and wage inflation impacting SG&A.
• Customer concentration or channel mix shifts that pressure terms and pricing.

Financial Risks:

• Tight liquidity metrics (quick ratio ~1.0x) increasing sensitivity to working capital swings.
• Moderate-to-high leverage (Liabilities/Equity 2.66x) requiring disciplined funding of growth.
• Potential refinancing or covenant risk if operating performance weakens (though current interest burden is low).
• Earnings volatility from non-operating items given the spread between operating and ordinary/net income.

Key Concerns:

• Thin operating margin (~0.63%) leaves limited buffer against cost shocks.
• Cash flow non-disclosure prevents validation of earnings-to-cash conversion.
• Dependence on working capital efficiency to sustain liquidity.

Investment Implications

Key Takeaways:

• Steady revenue growth (+5.5% YoY) with modest operating profit growth (+2.8% YoY).
• Net income growth (+18.3% YoY) benefited from non-operating line items and/or tax effects.
• ROE of 4.44% is driven by strong asset turnover (2.404x) despite very thin margins (NPM 0.56%).
• Liquidity is adequate but tight (current ratio 1.16x; quick ratio 1.00x), necessitating rigorous working capital control.
• Leverage is moderate-to-high (2.66x liabilities/equity) but interest burden is minimal (coverage ~282x).
• Cash flow and dividend data are not disclosed in this Q3 report, limiting assessment of cash conversion and payout capacity.

Metrics to Watch:

• Gross margin trajectory and SG&A ratio to gauge operating leverage.
• Ordinary income versus operating income to assess sustainability of non-operating contributions.
• OCF/Net income and FCF once disclosed to validate earnings quality.
• Inventory days and receivables/payables days to monitor working capital discipline.
• Current ratio and short-term debt profile for liquidity resilience.
• Equity ratio (implied) and liabilities/equity to track solvency trends.

Relative Positioning: Operational profile suggests a low-margin, high-velocity distribution/trading model with superior asset turnover but modest ROE; maintaining margin discipline and working capital efficiency is key to competitiveness versus peers.

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
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