JAPAN Creative Platform Group Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥62.27B
• Operating Income: ¥1.49B
• Net Income: ¥1.83B
• EPS: ¥31.63

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

Verdict: A mixed Q3 with solid top-line growth but sharp margin compression and elevated leverage, yielding weaker profitability despite positive net income. Revenue rose 8.9% YoY to 622.7, while operating income fell 45.5% YoY to 14.9, indicating operating deleverage. Gross profit reached 166.7 with a gross margin of 26.8%, but the operating margin compressed to 2.4%. Ordinary income declined 41.6% YoY to 15.8, and net income decreased 22.4% YoY to 14.8, translating to an EPS of 31.63 yen. On our estimates, operating margin contracted roughly 238 bps YoY (from ~4.8% to 2.4%), and net margin contracted about 96 bps (from ~3.3% to 2.4%). Non-operating items were material, with non-operating income at 7.35 and expenses at 7.56, effectively netting out and underscoring reliance on below-OP contributions (non-operating income equals ~49.6% of OP). Interest expense was 1.69, but interest coverage remained healthy at 8.8x due to still-positive operating earnings. Liquidity weakened, with current ratio at 0.92 and quick ratio at 0.85, and working capital negative (-32.2). Leverage is high: D/E is 3.64x, and total loans sum to 403 (short-term 220; long-term 183), signaling balance sheet risk if cash flows soften. DuPont decomposition yields ROE of 8.4% (Net margin 2.4% × Asset turnover 0.765 × Leverage 4.64x), with ROE sustained primarily by high leverage rather than margin strength. ROIC is low at 2.2%, well below a 5% warning threshold, implying value creation headwinds versus cost of capital. Dividend outlays appear conservative on earnings (calculated payout 22.4%), with interim DPS of 3.25 yen in Q1 and Q3; however, cash flow coverage is unassessable due to unreported OCF. Earnings quality can’t be validated as operating cash flow was not disclosed; given the tight liquidity profile, cash conversion will be critical in Q4. Forward-looking, sustaining revenue growth while restoring operating margin and improving working capital are essential to de-risk refinancing and support shareholder returns.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 2.4% × 0.765 × 4.64 ≈ 8.4%. The most significant driver of YoY change appears to be the net profit margin, given OP fell 45.5% while revenue rose 8.9% (operating margin compressed to 2.4%). Business reason: cost pressure (COGS and/or SG&A) outpaced revenue growth; SG&A at 139.3 implies an SG&A-to-sales ratio of ~22.4%, and non-operating items were sizable, diluting quality of earnings. Sustainability: margin compression stemming from cost inflation or mix is reversible but requires pricing discipline and cost control; absent structural actions, current margins may persist near the low-2% level. Asset turnover at 0.765 is moderate; improvement depends on accelerating sales without proportional asset growth or trimming underperforming assets. Financial leverage at 4.64x is high and is a key prop to ROE; this is not a sustainable lever if liquidity tightens or rates rise. Concerning trends: operating income down 45.5% against revenue up 8.9% indicates negative operating leverage; non-operating income equals ~50% of OP, raising dependence on below-OP items; and interest expense, while covered, could pressure earnings if rates or debt rise.

Growth Assessment

Revenue growth of 8.9% YoY to 622.7 indicates demand resilience, but mix or cost inflation drove operating income down 45.5%, signaling growth of lower-quality. Gross profit of 166.7 and OP of 14.9 suggest limited ability to pass through costs or elevated fixed costs. Ordinary income fell 41.6% and net income 22.4%, highlighting that non-operating factors cushioned the bottom line. With non-operating income at 7.35 and expenses at 7.56, below-OP contributions net to slightly negative, limiting downside protection. Given ROIC at 2.2%, incremental growth currently yields modest returns and may not exceed cost of capital. Outlook hinges on Q4 margin recovery via pricing and cost measures; if SG&A growth is restrained and procurement improves, OP leverage could return. Without operating cash flow disclosure, sustainability of growth investments and working capital needs remain uncertain.

Financial Health

Liquidity: Current ratio 0.92 and quick ratio 0.85 are below healthy thresholds; explicit warning as current ratio <1.0. Working capital is negative at -32.2, indicating tight short-term funding. Solvency: D/E is 3.64x (explicit warning as >2.0), with loans totaling 403 (short-term 220; long-term 183). Interest coverage at 8.81x is acceptable, but sensitivity to earnings declines is high given low margins. Maturity mismatch: Short-term loans (220) and total current liabilities (384) exceed cash (129) and receivables (124), though cash+AR (253) do cover short-term loans; reliance on continual rollovers appears significant. Off-balance sheet: No disclosures provided; potential unreported lease or guarantee exposures cannot be ruled out.

Cash Flow Quality

OCF was not reported; OCF/Net Income and FCF cannot be calculated, preventing a quality assessment against earnings. With negative working capital and heavy use of short-term loans, cash conversion risk is elevated if receivables collection slows or inventories rise from the current 25.8 level. Interest coverage is adequate, but any further OP compression would quickly erode cash interest headroom. No signs of explicit working capital manipulation can be concluded from available data; however, the reliance on short-term funding suggests close monitoring of AR aging and payable terms is warranted. Dividend and capex coverage by FCF cannot be assessed due to data gaps.

Dividend Sustainability

Calculated payout ratio is 22.4%, which is conservative on an earnings basis. Interim DPS of 3.25 yen in Q1 and Q3 indicates continued shareholder returns, but annual DPS is not disclosed. With OCF and capex unreported, FCF coverage of dividends is unknown; high leverage (D/E 3.64x) and sub-1.0 current ratio argue for prudence. Near-term maintenance of the current run-rate dividend appears supported by earnings if margins stabilize, but sustainability is contingent on cash generation and refinancing conditions. Policy outlook cannot be inferred from the filing; no buybacks disclosed.

Risk Assessment

Business Risks:

• Margin pressure from cost inflation and/or weak pricing power (OP margin 2.4%)
• Dependence on non-operating items (non-operating income ~49.6% of OP)
• Execution risk in cost control and mix optimization to restore margins
• Potential demand cyclicality in marketing/printing/creative-related end markets

Financial Risks:

• Low liquidity: current ratio 0.92, quick ratio 0.85, negative working capital (-32.2)
• High leverage: D/E 3.64x; total loans 403 with significant short-term component (220)
• Refinancing and interest rate risk given thin margins
• Cash flow visibility risk due to unreported OCF and capex

Key Concerns:

• ROIC at 2.2% (<5% warning), implying limited value creation
• Operating deleverage (OP -45.5% YoY vs sales +8.9%)
• Maturity mismatch potential with high short-term borrowings
• Lack of segment disclosure limits identification of underperforming areas

Investment Implications

Key Takeaways:

• Top-line growth of 8.9% YoY offset by sharp operating margin compression to 2.4%
• ROE of 8.4% is leverage-driven (4.64x) rather than margin or turnover strength
• Liquidity and leverage metrics are stretched (CR 0.92; D/E 3.64x)
• Non-operating items are large relative to OP, reducing earnings quality
• ROIC at 2.2% signals need for portfolio and cost optimization

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio
• Operating cash flow and working capital (AR days, inventory days)
• Short-term loan rollover and interest coverage
• ROIC improvement via capital discipline
• Net non-operating gains/losses and their volatility

Relative Positioning: Within Japan small/mid-cap printing/creative-services peers, the company shows above-peer leverage and lower ROIC, with comparable or lower operating margins; revenue growth is respectable but quality is tempered by non-operating reliance and tight liquidity.

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