Colan Totte.Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥6.92B
• Operating Income: ¥1.81B
• Net Income: ¥1.33B
• Earnings per Unit (EPU): ¥146.49

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: Strong finish to FY2025 with double-digit top-line growth translating into outsized bottom-line expansion, albeit with a flag on cash conversion quality. Revenue rose 16.4% YoY to 69.17, while operating income increased 20.6% YoY to 18.10 and net income climbed 29.7% YoY to 13.28, indicating solid operating leverage. Gross profit reached 39.68, implying a robust gross margin of 57.4%, and operating margin stood at 26.2%, showcasing a profitable model for a branded consumer-health product company. Net margin was 19.2%, supported by minimal non-operating items (non-op income 0.03, expenses 0.08). Ordinary income was 18.27, essentially aligned with operating income, confirming earnings are primarily operating in nature. ROE came in at 25.7%, driven largely by margin strength (19.2% net margin), moderate asset turnover (1.03x), and modest leverage (1.30x). Liquidity is very strong with a current ratio of 297% and net cash of 17.57, versus current liabilities of 13.12. Free cash flow was positive at 6.95 despite capex of 5.15, and financing outflows of -2.72 were manageable within FCF. However, OCF/Net Income was 0.75x, below the 0.8 threshold, indicating weaker cash conversion this period and likely working capital investment. Basis point comparisons of margins YoY cannot be precisely quantified due to lack of prior-year margin data, but faster profit growth than sales implies margin expansion. The effective tax rate was 30.9%, broadly normal for domestic profitability. Balance sheet quality is high, with equity of 51.67 and low leverage (reported D/E 0.26x), supporting sustainability of dividends; calculated payout ratio is a conservative 20.5%. ROIC at 36.7% signals strong capital efficiency, comfortably above typical consumer/healthcare benchmarks. Forward-looking, sustaining demand momentum while normalizing cash conversion and managing inventory will be key to maintaining high ROE and funding growth plus shareholder returns.

Profitability Analysis

ROE decomposition (DuPont): ROE 25.7% = Net Profit Margin 19.2% × Asset Turnover 1.03 × Financial Leverage 1.30x. The biggest driver of ROE is the high net profit margin, with asset turnover near 1x and only modest leverage. Operating leverage appears favorable as operating income (+20.6% YoY) outpaced revenue (+16.4% YoY), suggesting either SG&A discipline or improved gross margin. The business driver likely includes product mix/uppricing and scale benefits in SG&A (SG&A ratio ~35.7% of sales), though detailed SG&A by line item is unreported. This margin strength seems partly sustainable given brand positioning and direct cost control, but may normalize if promotional spend increases or input costs rise. Watch for any reversion if marketing investment is stepped up to support growth. No evidence of profit being flattered by non-operating or one-off gains; non-operating items are de minimis. A potential concern is that cash conversion lagged earnings (OCF/NI 0.75x), hinting at working capital draw, which could pressure near-term ROE if persistent.

Growth Assessment

Revenue growth of 16.4% YoY indicates strong demand momentum. Operating income growth of 20.6% and net income growth of 29.7% show positive operating leverage and disciplined cost structure. Current margins are high: gross margin 57.4%, operating margin 26.2%, net margin 19.2%. While exact bps change YoY is not calculable with disclosed data, faster profit growth than sales implies margin expansion. Non-operating contributions are minimal (non-operating income ratio 0.2%), indicating quality of profit is mainly operating. EBITDA of 18.94 (27.4% margin) provides healthy cash earnings, though conversion to cash was softer this year. Growth sustainability will hinge on maintaining brand strength, channel execution, and managing promotions while avoiding inventory build. Near-term outlook is constructive given balance sheet capacity and high ROIC (36.7%), but the company must improve OCF/NI back above 1.0x to underpin reinvestment and dividends without eroding cash.

Financial Health

Liquidity is strong: current ratio 297.2% and quick ratio 297.2%, with cash and deposits of 17.57 versus current liabilities of 13.12. No warning thresholds breached (Current Ratio well > 1.0; D/E well below 2.0). Solvency is conservative: total liabilities 13.22 against equity 51.67 (reported D/E 0.26x). Interest-bearing debt is unreported; given strong cash and lack of interest expense disclosure, leverage risk appears low. Maturity mismatch risk is limited: current assets 38.98 comfortably exceed current liabilities 13.12; accounts receivable 5.53 and significant cash buffer support obligations. Noncurrent liabilities are minimal at 0.10. No off-balance sheet obligations are disclosed in the provided data. Working capital is ample at 25.87, providing resilience against demand volatility.

Cash Flow Quality

OCF was 9.98 versus net income of 13.28, yielding OCF/NI of 0.75x, which flags weaker earnings quality this period and potential working capital investment or timing effects. Capex was 5.15, leading to positive FCF of 6.95; investing CF of -3.03 suggests some offsetting proceeds or lower net outflow relative to capex. Financing CF of -2.72 likely reflects shareholder returns and/or lease repayments; exact dividend cash paid is unreported. Despite the OCF/NI shortfall, cash on hand remains solid, and FCF covered estimated shareholder returns (FCF coverage 2.55x). Sustainability: if working capital normalizes, OCF should converge to earnings; if inventory or receivables continue to build, cash conversion could remain below-par. No obvious signs of aggressive working capital management are detectable given missing inventory details; however, the sub-0.8 conversion warrants monitoring.

Dividend Sustainability

Calculated payout ratio is 20.5% based on EPS 146.49, implying a modest dividend load relative to earnings; reported payout ratio (0.3%) appears to reflect a different basis and is not relied upon here. With FCF of 6.95 and FCF coverage of 2.55x, dividends appear well covered by free cash flow in this period. Balance sheet capacity (net cash and low leverage) further supports dividend continuity. Policy outlook: absent disclosed DPS, we infer a conservative stance aligned with reinvestment needs and cash generation. Key sensitivity is cash conversion; if OCF remains consistently below NI, future FCF coverage could tighten, but current cushion is adequate.

Risk Assessment

Business Risks:

• Demand volatility in consumer health/wellness products and potential dependence on flagship SKUs
• Marketing effectiveness and brand equity risk affecting pricing power and volumes
• Channel concentration or retailer negotiating power risk
• Regulatory and advertising claim scrutiny for health-related products
• Supply chain and procurement risk potentially impacting gross margin

Financial Risks:

• OCF/NI at 0.75x indicates weaker cash conversion and potential working capital build
• Small scale increases earnings volatility and sensitivity to fixed costs
• Inventory obsolescence or markdown risk (inventory not disclosed)
• Data gaps on interest-bearing debt and interest expense create uncertainty despite low reported leverage

Key Concerns:

• Earnings quality flag: OCF/NI < 0.8
• Sustainability of very high margins (26.2% operating) in a competitive consumer market
• Potential need for higher SG&A investment to sustain growth, which could compress margins

Investment Implications

Key Takeaways:

• Strong FY2025 finish with double-digit revenue growth translating to faster profit growth
• High-quality profit mix dominated by operating earnings; minimal non-operating impact
• ROE of 25.7% and ROIC of 36.7% underscore capital efficiency
• Balance sheet is robust with net cash and high liquidity
• Cash conversion lag is the main blemish; needs normalization to sustain FCF strength

Metrics to Watch:

• OCF/Net Income and working capital movements (receivables/inventory days)
• Gross margin trend and input cost pressures
• SG&A ratio vs revenue growth to gauge operating leverage sustainability
• Capex intensity and returns (ROIC maintenance above mid-teens)
• Dividend disclosures (DPS) and cash return policy
• Sales mix and channel performance supporting revenue durability

Relative Positioning: Within small-cap Japanese consumer/healthcare goods peers, the company exhibits superior margin profile, strong ROE/ROIC, and a conservative balance sheet, offset by weaker cash conversion in the period and data gaps on inventory and debt details.

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