Tamron Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥63.10B
• Operating Income: ¥13.39B
• Net Income: ¥12.23B
• EPS: ¥62.20

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

Tamron (7740) reported FY2025 Q3 consolidated results under JGAAP showing topline softness and more pronounced profit compression, but with strong balance sheet resilience and solid structural profitability. Revenue declined 7.8% YoY to ¥63.1bn, indicating demand normalization and/or product mix headwinds. Gross profit was ¥31.1bn, implying a strong gross margin of 49.4%, which remains a key competitive strength. Operating income fell 20.0% YoY to ¥13.39bn, with operating margin at 21.2%, evidencing negative operating leverage as fixed costs pressured profitability on lower sales. Ordinary income was ¥13.47bn, broadly in line with operating income, reflecting limited non-operating drag. Net income came in at ¥10.06bn (−17.7% YoY), equating to a net margin of 15.94%, still robust for precision equipment. DuPont analysis indicates ROE of 12.37%, driven by healthy margins, moderate asset turnover (0.641x), and low financial leverage (1.21x). The balance sheet is strong, with total assets of ¥98.4bn and equity of ¥81.33bn, implying an equity ratio of approximately 82.6% despite the reported 0.0% placeholder. Liquidity is ample: current assets of ¥72.31bn and current liabilities of ¥16.61bn translate to a current ratio of 4.35x and working capital of ¥55.70bn. Interest expense is modest at ¥58m, resulting in an EBIT-based interest coverage of about 231x and underscoring minimal financial risk. The implied effective tax burden based on provided net income and tax expense is roughly 30–31% (¥4.44bn tax on ¥14.50bn pre-tax), even though the calculated metric shows 0.0% due to unreported fields. Cash flow statement items are unreported (zeros), limiting assessment of cash conversion and capex; accordingly, OCF/NI and FCF are not interpretable from the data provided. Dividend per share is unreported, so payout ratio and FCF coverage metrics are not meaningful in this disclosure. Overall, Tamron exhibits high-quality margins, conservative leverage, and adequate profitability, but faces near-term growth headwinds and operating leverage effects. Key questions relate to demand trajectory, product mix, pricing power, and currency impacts. Data gaps (cash flows, inventories, share counts) constrain some aspects of the analysis and should be monitored in subsequent disclosures.

Profitability Analysis

ROE of 12.37% decomposes into net margin of 15.94%, asset turnover of 0.641x, and financial leverage of 1.21x. The primary driver is margin strength: a gross margin of 49.4% and an operating margin of 21.2% underscore pricing power and manufacturing efficiency. Net margin at 15.94% remains high even after a meaningful YoY contraction in operating profit (−20%), suggesting good cost discipline below the operating line and limited non-operating drag. The ordinary income margin is 21.36% (¥13.47bn/¥63.10bn), close to the operating margin, highlighting low reliance on non-operating gains. Asset turnover at 0.641x indicates a moderately capital-intensive profile; improving turnover would enhance ROE given low leverage. Negative operating leverage is evident: revenue fell 7.8% while operating income fell 20.0%, implying a sensitivity of profits to volume/mix and fixed costs. Interest burden is negligible (¥58m), with EBIT/interest coverage ~230.8x, so profitability is operationally driven rather than financially engineered. Implied tax rate of about 30.6% (¥4.44bn/¥14.50bn pretax) is consistent with a normalized corporate tax environment under JGAAP. Overall, profitability quality is solid, but the quarter demonstrates that a modest sales decline can translate into a disproportionate profit contraction.

Growth Assessment

Revenue decreased 7.8% YoY to ¥63.10bn, signaling demand softness and/or unfavorable product mix or pricing normalization. Operating income declined 20.0% YoY to ¥13.39bn, outpacing the revenue decline and confirming negative operating leverage. Net income declined 17.7% to ¥10.06bn, with net margin still at 15.94%—healthy by sector standards—indicating that the core business remains fundamentally profitable. The gross margin of 49.4% suggests continued product differentiation, but sustaining this level amid lower volume will be a key challenge. With asset turnover at 0.641x, growth will likely hinge on both volume recovery and more efficient asset utilization (e.g., inventory and receivables management, though inventory data is unreported). Ordinary income closely tracks operating income, implying growth will primarily come from core operations rather than non-operating factors. Outlook considerations include end-market demand trends, the cadence of new product introductions, and FX translation effects, all of which can materially influence revenue sustainability and margins. Absent cash flow and inventory disclosures, it is difficult to gauge order momentum and channel inventory; subsequent updates will be important for assessing the durability of revenue and profit trends.

Financial Health

Tamron’s capital structure is very conservative. Total assets are ¥98.43bn and total equity is ¥81.33bn, implying an equity ratio near 82.6% (calculated from the provided balances), despite the reported equity ratio field showing 0.0% due to non-disclosure formatting. Total liabilities are ¥19.85bn, and current liabilities are ¥16.61bn, indicating limited leverage. The current ratio is 4.35x (¥72.31bn/¥16.61bn), and working capital is ¥55.70bn, supporting near-term obligations comfortably. The quick ratio is also shown as 4.35x, reflecting that inventory data is unreported; actual quick liquidity could be slightly lower if inventories are material. Debt-to-equity is listed at 0.24x, consistent with low financial risk. Interest expense is minimal at ¥58m, and interest coverage is ~230.8x on an EBIT basis, indicating strong capacity to service debt. Overall solvency and liquidity are robust, providing flexibility to manage cyclical demand fluctuations and invest in product development.

Cash Flow Quality

Cash flow statements (operating, investing, financing) are unreported in this dataset, so cash conversion and free cash flow cannot be assessed. The OCF/Net Income ratio shown as 0.00 and FCF of 0 are placeholders and not indicative of actual performance. Earnings quality from an accrual perspective appears solid given high margins and low interest burden, but without OCF and capex, we cannot corroborate the quality of earnings via cash conversion. Working capital dynamics cannot be fully analyzed due to unreported inventory and cash balances; however, the large working capital balance (¥55.70bn) suggests significant current assets relative to current liabilities. Key items to monitor when available: OCF vs. NI alignment, capex intensity, inventory turns, and receivables collection.

Dividend Sustainability

Dividend per share and payout ratio are unreported in this dataset, and FCF is also unreported; therefore, dividend sustainability cannot be quantified here. From an earnings capacity standpoint, net income of ¥10.06bn and low leverage suggest potential capacity to distribute dividends, but actual policy depends on cash generation, capex needs, and strategic priorities. Coverage by free cash flow cannot be assessed without OCF and capex disclosure. Historically typical considerations—target payout ratio, stability vs. flexibility, and balance between shareholder returns and growth investment—should be revisited once cash flow information is disclosed.

Risk Assessment

Business Risks:

• Demand volatility in end-markets leading to revenue swings (revenue −7.8% YoY).
• Negative operating leverage as fixed costs amplify profit declines (operating income −20.0% YoY).
• Product mix and pricing pressure risk despite currently high gross margin (49.4%).
• Currency fluctuations (e.g., USD/JPY, EUR/JPY) affecting revenue and margins.
• Supply chain constraints or component cost inflation impacting gross margin.
• Technological and product cycle risks in optical/precision equipment markets.

Financial Risks:

• Cash flow visibility is limited due to unreported OCF/FCF, creating uncertainty on cash conversion.
• Potential working capital build risk (inventory and receivables data not disclosed).
• Concentration risk if revenue relies on a narrow set of products or channels (not disclosed).
• Tax rate variability (implied ~30–31%) affecting net profitability.

Key Concerns:

• Top-line contraction with disproportionate profit decline indicates sensitivity to volume/mix.
• Absence of cash flow and inventory disclosures limits assessment of earnings quality and FCF.
• Sustaining a 49.4% gross margin amid softer sales may be challenging.
• Asset turnover at 0.641x suggests room for efficiency improvements to support ROE.

Investment Implications

Key Takeaways:

• Revenue down 7.8% YoY to ¥63.10bn; profit contraction outpaces sales decline.
• Margins remain strong: gross 49.4%, operating 21.2%, net 15.94%.
• ROE 12.37% supported by high margins and low leverage (assets/equity ~1.21x).
• Balance sheet strength: equity ~82.6% of assets; current ratio 4.35x; interest coverage ~231x.
• Cash flow data not disclosed; FCF and payout sustainability cannot be verified.
• Focus near term on demand trajectory, product mix, and cost discipline to mitigate operating leverage.

Metrics to Watch:

• Order intake, backlog, and book-to-bill.
• Gross margin trend and pricing/mix indicators.
• Operating expense run-rate and fixed-cost absorption.
• Asset turnover, inventory turns, and receivables DSO (when disclosed).
• OCF, capex, and FCF once cash flow statements are available.
• FX rates (USD/JPY, EUR/JPY) and hedging impacts.

Relative Positioning: Within Japan’s precision equipment/optical components cohort, Tamron exhibits above-average margins and a very conservative balance sheet, but current-period growth headwinds and negative operating leverage temper near-term momentum; sustained product differentiation and improved asset efficiency will be key to maintaining its advantageous profitability profile.

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