MTG Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥98.81B
• Operating Income: ¥10.66B
• Net Income: ¥8.37B
• EPS: ¥201.68

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

MTG reported a very strong FY2025 Q4 (full-year) performance with revenue of ¥98.81bn, up 37.5% YoY, demonstrating robust topline momentum. Operating income surged to ¥10.67bn (+225.4% YoY), highlighting substantial operating leverage as fixed costs were absorbed over a larger revenue base. Net income reached ¥7.93bn (+248.0% YoY), with EPS of ¥201.68, evidencing strong bottom-line recovery. Profitability was solid across the board: gross margin is indicated at 43.6%, operating margin at approximately 10.8%, and net margin at 8.03%. DuPont decomposition yields ROE of 15.56% (net margin 8.03%, asset turnover 1.314x, financial leverage 1.47x), a healthy level for a branded consumer/beauty devices business. Ordinary income (¥10.73bn) slightly exceeded operating income, implying modest net non-operating gains and minimal financing burden. Cash generation was sound, with operating cash flow of ¥7.83bn closely tracking net income (OCF/NI of 0.99), suggesting good earnings quality and limited accrual risk. Free cash flow was negative at ¥-3.50bn due to substantial investing outflows (¥-11.34bn), pointing to growth investments or strategic asset deployment. The balance sheet appears conservative: total assets of ¥75.20bn against total liabilities of ¥13.96bn and total equity of ¥51.00bn, implying low leverage and ample solvency headroom. Liquidity is strong with a current ratio of 288.9% and a quick ratio of 187.0%, supported by sizable current assets of ¥38.18bn. Inventories stand at ¥13.47bn, which is meaningful within current assets, warranting monitoring for sell-through and obsolescence. Interest expense is negligible (¥2m) and the interest coverage is extremely high at 5,332x, reflecting minimal debt-service risk. Tax cash expense disclosed (¥1.28bn) suggests an implied effective tax rate around the low teens on ordinary income, though reported metrics show 0.0% and may reflect disclosure treatment. The company paid no dividend (DPS ¥0), with a payout ratio of 0%, prioritizing reinvestment and balance sheet strength. Overall, MTG’s FY2025 performance shows a compelling combination of accelerated growth, expanding profitability, healthy ROE, strong liquidity, and disciplined leverage, offset by negative FCF from elevated investments. Some line-item disclosures are limited or presented under different labels, so interpretations rely on the provided non-zero items and calculated metrics.

Profitability Analysis

ROE of 15.56% is driven primarily by a solid net margin (8.03%) and respectable asset turnover (1.314x), with moderate leverage (assets/equity of 1.47x) amplifying returns without creating solvency concerns. Operating margin is approximately 10.8% (¥10.67bn OI on ¥98.81bn revenue), indicating effective cost control and favorable mix. Gross margin is cited at 43.6%, consistent with brand-driven pricing power and value-added product positioning. EBITDA of ¥12.32bn translates to a 12.5% margin, suggesting limited non-cash charges (D&A ¥1.65bn) and good cash earnings capacity. Ordinary income (¥10.73bn) just above operating income implies slightly positive non-operating contributions and minimal financial drag. The YoY spread between revenue (+37.5%) and operating income (+225.4%) highlights strong operating leverage; SG&A efficiency improvements and scale benefits likely drove the disproportionate profit growth. Margin quality appears supported by OCF/NI of 0.99, implying realized cash profitability rather than accrual-heavy earnings. Interest expense of ¥2m is immaterial, reinforcing that profitability is not flattered by leverage but rather by core operations. Continued monitoring of gross margin resilience versus input costs, FX, and channel incentives is important to gauge sustainability.

Growth Assessment

Topline growth of 37.5% YoY to ¥98.81bn indicates demand strength, successful product launches/mix, and potentially stronger overseas traction. The outsized increase in operating income (+225.4% YoY) suggests MTG is exiting a prior period of sub-scale profitability into a higher-margin regime. Profit quality is supported by cash conversion (OCF/NI ~0.99) and minimal financial income/expense distortion. Investing CF was ¥-11.34bn, which likely reflects capacity expansion, product development, or strategic investments; if deployed wisely, this underpins medium-term growth. The net margin of 8.03% indicates improved operating discipline and scale benefits, giving room for reinvestment. With inventories at ¥13.47bn, sell-through and channel health will be key to sustaining growth without margin erosion. Asset turnover of 1.314x is healthy for a branded consumer company, reflecting improved utilization; sustaining this as the balance sheet expands will be important. Ordinary income slightly above operating income signals no deterioration from non-operating items, preserving growth quality. Outlook-wise, the combination of strong demand, operating leverage, and continued investment suggests potential for continued revenue and profit expansion, contingent on execution in product pipeline, channel management (domestic/overseas), and inventory discipline.

Financial Health

Liquidity is strong: current ratio 288.9% and quick ratio 187.0% indicate ample short-term coverage. Working capital stands at ¥24.97bn, providing flexibility for procurement cycles and launches. Total liabilities are ¥13.96bn versus equity of ¥51.00bn, implying low leverage; debt-to-equity ratio is 0.27x. Interest coverage is extremely high at 5,332x, suggesting minimal debt-service burden. Based on the balance sheet totals, the implied equity ratio (equity/assets) is approximately 68%, pointing to a conservative capital structure. Inventories of ¥13.47bn represent a sizable portion of current assets; while not inherently problematic, they merit monitoring for turns and obsolescence risk. Overall solvency is robust, with room to fund growth and absorb shocks without stressing the balance sheet.

Cash Flow Quality

OCF of ¥7.83bn is nearly equal to net income of ¥7.93bn, yielding an OCF/NI ratio of 0.99—indicative of high earnings quality with limited accrual dependence. EBITDA of ¥12.32bn versus OCF suggests reasonably efficient cash conversion after working capital movements and taxes. Free cash flow is negative at ¥-3.50bn, driven by significant investing outflows of ¥-11.34bn; this appears to reflect growth or strategic investments rather than cash burn from operations. Working capital appears manageable given strong liquidity; however, inventories at ¥13.47bn should be watched for turns to maintain OCF resilience. The minimal interest expense (¥2m) means OCF is not burdened by financing costs. Sustaining OCF at or above net income while investments persist will be key to normalizing FCF over time.

Dividend Sustainability

The company declared no dividend (DPS ¥0), resulting in a 0% payout and an FCF coverage metric that is not meaningful this period. From a capacity standpoint, earnings and OCF are robust, but negative FCF—due to elevated investing outflows—suggests a reinvestment phase. Given low leverage and strong liquidity, the balance sheet could accommodate dividends in principle, but policy appears oriented toward growth funding. Sustainability of any future payout would hinge on the pace of investment, OCF consistency, and inventory discipline that supports cash conversion. For now, retained earnings deployment into growth seems the prevailing stance under JGAAP reporting.

Risk Assessment

Business Risks:

• Product concentration and lifecycle risk in beauty/health devices and related categories
• Channel risk including dependence on specific distributors/e-commerce platforms and overseas partners
• Inventory obsolescence risk amid rapid product cycles and promotional intensity
• Brand and marketing execution risk affecting pricing power and gross margins
• Regulatory and quality-compliance risk for health/beauty devices across markets
• FX volatility impacting import costs and overseas profitability
• Competitive intensity from domestic and global brands, including private labels

Financial Risks:

• Negative free cash flow due to elevated investing outflows pressuring near-term cash balance
• Working capital swings (especially inventories) affecting OCF consistency
• Potential currency translation effects on equity and income
• Concentration of earnings leverage on high gross margins amplifying downside if mix deteriorates

Key Concerns:

• Sustaining gross margin at 43.6% amid input cost and promotional pressures
• Converting earnings to cash while funding sizable investments (¥-11.34bn investing CF)
• Managing inventory levels (¥13.47bn) to protect cash flow and avoid markdowns

Investment Implications

Key Takeaways:

• Strong topline momentum (+37.5% YoY) with outsized operating income growth (+225.4% YoY) evidences powerful operating leverage
• Healthy ROE at 15.56% supported by 8.03% net margin, 1.314x asset turnover, and moderate leverage (1.47x)
• High earnings quality with OCF/NI of 0.99, though FCF negative due to heavy investment (¥-11.34bn)
• Very strong liquidity (current ratio 289%, quick ratio 187%) and low financing risk (interest coverage 5,332x)
• Focus areas: gross margin durability, inventory turns, and the trajectory of investment-driven FCF normalization

Metrics to Watch:

• Gross margin and SG&A ratio to gauge operating leverage sustainability
• Inventory turnover and sell-through to support OCF
• OCF/NI and FCF trajectory as investments season
• Revenue growth by channel/region and product mix contribution
• ROE drivers: asset turnover and margin evolution
• CAPEX/strategic investment levels and expected returns

Relative Positioning: Within Japan-listed branded consumer/beauty device peers, MTG combines above-peer growth with improving profitability and a conservative balance sheet; near-term FCF is constrained by proactive investment, but earnings quality and liquidity position the company favorably for continued execution.

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