Sincere Co.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥5.42B
• Operating Income: ¥395M
• Net Income: ¥229M
• EPS: ¥38.16

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

Cynthia Co., Ltd. (TSE: 7782) delivered solid top-line growth in FY2025 Q3, with revenue up 11.8% YoY to ¥5.419bn, while operating income rose 3.9% YoY to ¥395m. Net income increased 11.6% YoY to ¥247m, implying a net margin of 4.56% and EPS of ¥38.16. DuPont metrics indicate ROE of 8.87%, driven by a 4.56% net margin, asset turnover of 0.957x, and financial leverage of 2.03x. Operating margin of roughly 7.3% suggests modest pressure relative to revenue growth, likely from SG&A or product/channel mix, although full details are not disclosed. Gross profit is reported at ¥1.571bn (gross margin ~29.0%); however, the disclosed cost of sales (¥3.275bn) does not reconcile to the gross profit figure, so we anchor gross margin analysis to the reported gross profit. Ordinary income of ¥379m sits below operating income, reflecting modest non-operating costs (interest expense ¥11.8m). Using income tax expense (¥126.7m), the implied effective tax rate is approximately 34%, broadly consistent with Japan’s statutory range. The balance sheet shows total assets of ¥5.664bn and total equity of ¥2.784bn, implying an equity ratio of about 49% despite the table showing 0.0% (equity ratio not disclosed in XBRL). Liquidity appears strong with a current ratio of 229% and working capital of ¥2.596bn; the quick ratio matches because inventories were not disclosed, so the true quick ratio is likely lower. Leverage is moderate (liabilities-to-equity ~1.01x) and interest coverage is robust at ~33x, indicating adequate debt-servicing capacity. Cash flow data (OCF/FCF/Cash) were not disclosed, so earnings quality and cash conversion cannot be assessed for this period. Dividend data were not disclosed (DPS and payout ratio shown as 0.00 signify unreported), leaving distribution policy and sustainability unassessed this quarter. Overall, the company combines healthy top-line growth, mid-single-digit operating margins, and moderate leverage. The ROE of ~8.9% is respectable given the contact lens industry’s competitive dynamics, though further margin expansion and cash flow visibility would be needed to lift returns. Key watchpoints include SG&A discipline, channel/product mix effects on gross margin, and the reappearance of cash flow disclosures to validate earnings quality.

Profitability Analysis

ROE decomposition: ROE 8.87% = Net margin 4.56% x Asset turnover 0.957x x Financial leverage 2.03x. The margin is the primary constraint; asset efficiency is fair, and leverage is moderate. margin_quality: Revenue ¥5,419m; gross profit ¥1,570.7m (gross margin ~29.0% based on reported gross profit). Operating income ¥395m → operating margin ~7.3%; ordinary income ¥379m → ordinary margin ~7.0%; net income ¥247m → net margin 4.56%. The disclosed cost of sales (¥3,274.9m) does not reconcile to the reported gross profit, so we rely on the gross profit figure for margin assessment. operating_leverage: Revenue +11.8% YoY vs. operating income +3.9% YoY suggests limited operating leverage this quarter, likely due to higher SG&A or less favorable mix. Implied SG&A ~¥1,175.7m (~21.7% of sales) based on reported gross profit and operating income.

Growth Assessment

revenue_sustainability: Double-digit revenue growth (+11.8% YoY) indicates healthy demand. For a contact lens producer/distributor, growth may reflect product refreshes, expanded retail/EC channels, and recovery in store traffic; sustainability depends on channel mix and repeat purchase dynamics. profit_quality: Operating income growth (+3.9% YoY) lagged sales, implying cost or mix headwinds. Net income growth (+11.6% YoY) matched top-line growth, aided by stable non-operating items and a normalized tax rate. Without OCF data, profit convertibility to cash remains unverified. outlook: Near-term growth hinges on maintaining share in domestic channels, product differentiation (daily disposables, colored lenses), and pricing discipline. FX and input costs may influence gross margin; SG&A leverage will be pivotal for profit growth.

Financial Health

liquidity: Current assets ¥4,615.2m vs. current liabilities ¥2,019.6m → current ratio ~228.5%. Inventories were not disclosed; hence, the quick ratio equals the current ratio in the table, but the true quick ratio is likely lower. Working capital ≈ ¥2,595.6m indicates ample short-term buffer. solvency: Total liabilities ¥2,799.1m vs. equity ¥2,784.0m → liabilities-to-equity ~1.01x. Interest coverage ~33.4x (operating income ¥395m / interest ¥11.8m) suggests comfortable debt service capacity. capital_structure: Financial leverage of 2.03x (Assets/Equity) implies an equity ratio of ~49% (our inference: ¥2,784m / ¥5,664m), despite equity ratio not being disclosed in the table. Leverage appears moderate and appropriate for the business.

Cash Flow Quality

earnings_quality: Operating cash flow was not disclosed this quarter (OCF shown as 0 = unreported), so OCF/Net income cannot be assessed. Consequently, accrual intensity and cash conversion are unknown. FCF_analysis: Investing and financing cash flows also not disclosed; free cash flow cannot be derived. Capex and working capital swings remain opaque this quarter. working_capital: Receivables/payables/inventories breakdown not disclosed; thus, we cannot evaluate inventory turns or receivable days. Reported working capital is strong, but its composition is unknown.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio were not disclosed for this period. With EPS at ¥38.16, theoretical coverage would depend on actual cash generation and policy, both undisclosed. FCF_coverage: FCF unreported; coverage of any dividend commitment cannot be assessed this quarter. policy_outlook: No guidance on dividends was provided here. Absent visibility on OCF/FCF and capital needs, we cannot infer policy changes; monitor year-end disclosures for payout guidance.

Risk Assessment

Business Risks:

• Intense competition in contact lenses (domestic brands and global majors) pressuring price and margins
• Regulatory and quality-compliance risk (PMDA approvals, product safety, recalls)
• Channel concentration and bargaining power of retailers/EC platforms
• Product mix risk (daily vs. monthly, colored lenses) affecting gross margin
• FX and procurement risk if materials or finished goods are imported
• Demand sensitivity to consumer discretionary trends and healthcare reimbursement changes

Financial Risks:

• Margin compression risk from input costs and promotional activity
• Working capital build risk (if inventories or receivables rise when undisclosed)
• Refinancing and interest rate risk, albeit mitigated by strong coverage
• Cash flow visibility risk due to undisclosed OCF/FCF this period

Key Concerns:

• Non-reconciliation between reported cost of sales and gross profit; we rely on reported gross profit for analysis
• Lack of cash flow disclosure prevents assessment of earnings quality and FCF
• Inventories not disclosed, obscuring true quick ratio and inventory health

Investment Implications

Key Takeaways:

• Healthy top-line momentum (+11.8% YoY) with moderate operating profit growth (+3.9% YoY)
• ROE of ~8.9% supported by moderate leverage and decent asset turnover; margin is the key lever
• Strong liquidity (current ratio ~229%) and robust interest coverage (~33x) underpin balance sheet resilience
• Margin trajectory bears watching given muted operating leverage this quarter
• Cash flow disclosure gap is the main hurdle to assessing earnings quality

Metrics to Watch:

• Gross margin (vs. input costs and FX) and SG&A-to-sales ratio
• Operating margin and ordinary margin progression
• OCF/Net income and FCF once disclosed
• Inventory levels and turnover; receivables days (when available)
• Leverage (liabilities/equity) and interest coverage
• Channel mix (EC vs. physical retail) and ASP trends

Relative Positioning: Within Japan’s optical/contact lens space, Cynthia exhibits solid growth and moderate leverage with margins in the mid-to-high single digits; sustaining ROE near 9% will require improved operating leverage and confirmed cash conversion.

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