SUKEGAWA ELECTRIC CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥5.47B
• Operating Income: ¥1.17B
• Net Income: ¥794M
• EPS: ¥144.06

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

Verdict: A strong FY2025 Q4 finish with double-digit top-line growth and outsized operating leverage driving materially higher profitability and returns. Revenue rose 10.1% YoY to 54.67, while operating income advanced 27.1% to 11.65 and net income increased 24.5% to 7.94. Gross margin stood at 32.2% and operating margin at roughly 21.3%, reflecting effective cost control and scale benefits. Using implied prior-year figures, operating margin expanded by about 285 bps (from ~18.5% to ~21.3%), and net margin widened by roughly 170 bps (from ~12.8% to ~14.5%). EBITDA reached 13.44 with a 24.6% margin, underscoring a healthy earnings mix beyond accounting effects. Earnings quality is solid with OCF/NI at 1.04x and free cash flow of 6.20, indicating profits converting into cash. Liquidity is robust (current ratio 274%, quick ratio 263.6%) and leverage is conservative (D/E 0.58x; interest coverage 216x). ROE printed 16.2% via a mix of a 14.5% net margin, 0.724x asset turnover, and 1.54x leverage—healthy returns without excessive gearing. ROIC is reported at 17.2%, comfortably above common 7–8% targets, suggesting disciplined capital deployment. Cash on hand (2.30) is modest but balanced by low short-term borrowings (1.90) and strong working capital. The tax rate at 28.5% is within a normal range. Some XBRL-reported ratios (e.g., operating margin 0.2%) appear inconsistent with the financials; we rely on computed margins from disclosed figures. Dividend capacity looks ample with a 25.1% payout and 3.11x FCF coverage; however, DPS details are unreported. While ordinary income and profit-before-tax lines show some presentation anomalies, overall cash-backed profitability and balance sheet strength are clear. Forward-looking, the company enters the new fiscal year with improved margin footing, capacity to self-fund capex, and balance-sheet flexibility to support growth and stable shareholder returns.

Profitability Analysis

ROE decomposition (DuPont): ROE 16.2% = Net Profit Margin (14.5%) × Asset Turnover (0.724) × Financial Leverage (1.54x). The largest positive driver YoY is net profit margin, inferred from operating income growth (+27.1%) outpacing revenue growth (+10.1%), implying operating margin expansion of ~285 bps (to ~21.3%). This likely reflects operating leverage from higher volumes and improved cost discipline, with SG&A at 8.46 not rising excessively relative to sales (exact YoY SG&A not disclosed). Asset turnover at 0.724 is moderate for an industrial manufacturer and appears stable; leverage at 1.54x remains conservative, meaning return improvement is not debt-driven. The margin gains appear largely structural (mix/scale/efficiency) rather than one-off, as non-operating items are small (non-op income/expenses both 0.22) and EBITDA margin is a solid 24.6%. Sustainability: margin levels should be defendable if volume holds and cost controls persist; watch for input cost inflation or pricing pressure that could narrow the ~21% OPM. Potential red flags: we cannot confirm SG&A growth vs revenue due to missing YoY SG&A breakdown; if SG&A accelerates faster than sales in coming quarters, operating leverage could reverse.

Growth Assessment

Top line expanded 10.1% YoY to 54.67, with profit growth outpacing revenue: operating income +27.1%, ordinary income +28.5%, and net income +24.5%. Implied prior OPM ~18.5% vs current ~21.3% indicates healthy operating leverage. Non-operating items net out (0.22 income vs 0.22 expenses), so profit growth is primarily operating. EBITDA at 13.44 (24.6% margin) supports quality of earnings. With OCF 8.26 and FCF 6.20, growth appears cash-accretive. Outlook drivers include sustaining order momentum, maintaining pricing, and guarding against input cost and FX volatility; specific backlog or segment data are unreported. Given ROIC of 17.2% and low leverage, the company has room to invest in capacity/automation while maintaining returns. Lacking R&D and segment detail, we assume organic efficiency gains and mix were key contributors; confirmation via management guidance or order book would enhance visibility.

Financial Health

Liquidity is strong: current ratio 274% and quick ratio 263.6% signify ample short-term coverage. There is no warning trigger (Current Ratio well > 1.0, D/E 0.58x well < 2.0). Working capital is healthy with 28.02 of cushion; current assets 44.13 comfortably exceed current liabilities 16.11. Maturity mismatch risk appears low: short-term loans of 1.90 are well covered by cash (2.30) and overall current assets. Noncurrent liabilities total 12.09; long-term loan detail is unreported, but overall leverage remains modest (Debt/EBITDA ~0.14x inferred). Off-balance sheet obligations are not disclosed; no specific guarantees/commitments reported in the dataset. Interest coverage is exceptionally strong at 216x, indicating high resilience to rate increases.

Cash Flow Quality

OCF/Net Income is 1.04x, above the 0.8 threshold and indicative of solid earnings quality. Free cash flow of 6.20 comfortably covers typical needs after capex (-0.80), leaving room for dividends and balance sheet reinforcement. We do not see signs of aggressive working capital management; accounts receivable (9.32) and inventories (1.67) appear conservative relative to the revenue scale, though lacking prior-year comparison limits detection of changes. Financing CF is -3.36, consistent with debt reduction and/or distributions; dividends paid are unreported, so precise uses are unclear. Overall, cash generation supports ongoing investment and shareholder returns without stressing the balance sheet.

Dividend Sustainability

Based on calculated figures, the payout ratio is 25.1%, well below the 60% cautionary line. FCF coverage at 3.11x suggests dividends are comfortably funded by internally generated cash. DOE is reported at 0.3% in XBRL, but DPS and total dividends are unreported; we therefore rely on the calculated payout proxy. With ROE at 16.2% and low leverage, the company can sustain stable dividends while preserving reinvestment capacity. Absent explicit guidance or DPS, dividend growth visibility is limited; however, current cash flow and leverage metrics indicate room for gradual increases subject to capex opportunities.

Risk Assessment

Business Risks:

• Demand cyclicality and order timing volatility in industrial/thermal equipment markets (potential lumpiness in quarterly margins).
• Input cost inflation (metals, components) potentially compressing gross margin if not fully passed through.
• Pricing pressure from competitors affecting the recently improved operating margin.
• Execution risk on larger projects that can impact revenue recognition and working capital.

Financial Risks:

• Modest cash balance (2.30) relative to revenue scale, though mitigated by low short-term debt (1.90) and strong current ratio.
• Potential exposure to FX if export sales or imported components are material (not disclosed).
• Information gaps on long-term debt composition and covenants (long-term loans unreported).

Key Concerns:

• Data inconsistencies between ordinary income and profit before tax lines, and anomalous reported operating margin (0.2%) vs computed (~21.3%), which may reflect XBRL mapping or extraordinary items.
• Lack of disclosure on SG&A breakdown and R&D, limiting visibility into cost structure durability.
• Dividend details (DPS, total paid) absent, constraining precise payout policy assessment.

Investment Implications

Key Takeaways:

• Profits outpaced sales growth, driving margin expansion (~285 bps OPM; ~170 bps NPM).
• ROE is strong at 16.2% with conservative leverage (1.54x), supported by 17.2% ROIC.
• Earnings quality is solid (OCF/NI 1.04x) and FCF positive (6.20), enabling self-funded growth and dividends.
• Balance sheet resilience: current ratio 274%, interest coverage 216x, D/E 0.58x.
• Operational leverage is a key driver; maintaining volume and pricing is critical to sustain ~21% OPM.

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue visibility.
• Gross and operating margin trends vs input costs and pricing.
• SG&A ratio and absolute SG&A growth vs revenue.
• Working capital turns (AR days, inventory turns) and OCF/NI consistency.
• Capex plans vs ROIC, and any updates to dividend policy/DPS.
• Clarification of extraordinary items and reconciliation of ordinary income vs PBT.

Relative Positioning: Within small-cap Japanese industrial peers, the company exhibits above-average profitability (OPM ~21%, ROE 16%) and strong capital efficiency (ROIC ~17%) with a conservative balance sheet, positioning it favorably to fund growth while sustaining shareholder returns.

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